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EXHIBIT 10.1

EXECUTION COPY

February 3, 2004

SECURITIES PURCHASE AGREEMENT

   This Securities Purchase Agreement (this "Agreement") is dated as of February
3, 2004 among StockerYale, Inc., a Massachusetts corporation (the "Company"),
and the purchasers identified on the signature pages hereto (each, a "Purchaser"
and collectively, the "Purchasers").

   WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), the Company desires to issue and sell to the Purchasers, and
the Purchasers, severally and not jointly, desire to purchase from the Company,
securities of the Company as more fully described in this Agreement.

   NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
 

ARTICLE I
DEFINITIONS

    1.1 Definitions.  In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:

"Additional Investment Rights" means, collectively, the Additional Investment
Rights issued and sold under this Agreement, in the form of Exhibit A.

"Affiliate" means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
another Person, as such terms are used in and construed under Rule 144 under the
Securities Act.

"Business Day" means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.

"Change of Control" means the occurrence of any of the following in one or a
series of related transactions: (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1) under
the Exchange Act) of more than one-half of the voting rights or equity interests
in the Company; (ii) a replacement of more than one-half of the members of the
Company's board of directors that is not approved by those individuals who are
members of the board of directors on the date hereof (or other directors
previously approved by such individuals); (iii) a merger or consolidation of the
Company or any significant Subsidiary or a sale of more than one-half of the
assets of the Company in one or a series of related transactions, unless
following such transaction or series of transactions, the holders of the
Company's securities prior to the first such transaction continue to hold at
least a majority of the voting rights and equity interests in the surviving
entity or acquirer of such assets; (iv) a recapitalization, reorganization or
other transaction involving the Company or any significant Subsidiary that
constitutes or results in a transfer of more than one-half of the voting rights
or equity interests in the Company; (v) consummation of a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act with respect to the
Company, or (vi) the execution by the Company or its controlling shareholders of
a definitive agreement providing for any of the foregoing events.

"Closing" means the closing of the purchase and sale of the Shares, the
Additional Investment Rights and the Warrants pursuant to Section 2.1.

"Closing Date" means the date of the Closing.

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"Closing Price" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on an Eligible Market or any other national securities exchange, the closing
price per share of the Common Stock for such date (or the nearest preceding
date) on the primary Eligible Market or exchange on which the Common Stock is
then listed or quoted; (b) if prices for the Common Stock are then quoted on the
OTC Bulletin Board, the closing bid price per share of the Common Stock for such
date (or the nearest preceding date) so quoted; (c) if prices for the Common
Stock are then reported in the "Pink Sheets" published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent closing bid price per share of
the Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in
good faith by Purchasers holding a majority of the Securities.

"Commission" means the Securities and Exchange Commission.

"Common Stock" means the common stock of the Company, par value $0.001 per
share.

"Common Stock Equivalents" means, collectively, Options and Convertible
Securities.

"Company Counsel" means Goodwin Procter LLP, counsel to the Company.

"Convertible Securities" means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.

"Effective Date" means the date that the Registration Statement is first
declared effective by the Commission.

"Eligible Market" means any of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market or the Nasdaq
OTC Bulletin Board.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Excluded Stock" means the issuance of Common Stock (A) upon exercise or
conversion of any options or other securities described in Schedule 3.1(f)
(provided that such exercise or conversion occurs in accordance with the terms
thereof, without amendment or modification, and that the applicable exercise or
conversion price or ratio is described in such schedule) or otherwise pursuant
to any employee benefit plan described in Schedule 3.1(f) or hereafter adopted
by the Company and approved by its stockholders, or (B) in connection with any
issuance of shares or grant of options to employees, officers, directors or
consultants of the Company pursuant to a stock option plan or other incentive
stock plan duly adopted by the Company's board of directors or in respect of the
issuance of Common Stock upon exercise of any such options, (C) pursuant to a
bona fide firm commitment underwritten public offering with a nationally
recognized underwriter (excluding any equity line) in an aggregate offering
amount greater than $20,000,000, (D) in connection with a bona fide joint
venture or development agreement or strategic partnership, the primary purpose
of which is not to raise equity capital or (E) in connection with a financing
currently contemplated by the Company for the primary purpose of replacing the
mortgage on the Company's New Hampshire real property, which financing is likely
to include convertible debt and warrants and would be expected to raise no more
than approximately $4 million.

"Filing Date" means March 19, 2004.

"Lien" means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.

"Losses" means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, costs of preparation and
reasonable attorneys' fees.

"Options" means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.

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"Person" means any individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or any court or
other federal, state, local or other governmental authority or other entity of
any kind.

"Per Unit Purchase Price" means $1.15.

"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus including post effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.

"Purchaser Counsel" has the meaning set forth in Section 6.2(a).

"Registrable Securities" means any Common Stock (including the Shares and
Underlying Shares) issued or issuable pursuant to the Transaction Documents,
together with any securities issued or issuable upon any stock split, dividend
or other distribution, recapitalization or similar event with respect to the
foregoing.

"Registration Statement" means each registration statement required to be filed
under Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.

"Required Effectiveness Date" means May 4, 2004.

"Rule 144," "Rule 415," and "Rule 424" means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the Commission pursuant to the Securities Act, as
such Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule.

"Securities" means the Shares, the Additional Investment Rights, the Warrants
and the Underlying Shares.

"Shares" means an aggregate of 1,706,304 shares of Common Stock, which are being
issued and sold to the Purchasers at the Closing.

"Subsidiary" means any Person in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest.

"Trading Day" means (a) any day on which the Common Stock is listed or quoted
and traded on its primary Trading Market, (b) if the Common Stock is not then
listed or quoted and traded on any Eligible Market, then a day on which trading
occurs on the NASDAQ National Market (or any successor thereto), or (c) if
trading ceases to occur on the NASDAQ National Market (or any successor
thereto), any Business Day.

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"Trading Market" means the Nasdaq National Market or any other Eligible Market,
or any national securities exchange, market or trading or quotation facility on
which the Common Stock is then listed or quoted.

"Transaction Documents" means this Agreement, the Additional Investment Rights,
the Warrants, the Transfer Agent Instructions and any other documents or
agreements executed in connection with the transactions contemplated hereunder.

"Transfer Agent Instructions" means the Irrevocable Transfer Agent Instructions,
in the form of Exhibit E, executed by the Company and delivered to and
acknowledged in writing by the Company's transfer agent.

"Underlying Shares" means the shares of Common Stock issuable upon exercise of
the Additional Investment Rights and the Warrants.

"Unit" means one Share and an Additional Investment Right to acquire 0.20 of a
share of Common Stock.

"Warrants" means, collectively, the Common Stock purchase warrants issued and
sold under this Agreement, in the form of Exhibit B, and any warrants or
replacement warrants issued upon exercise transfer, exchange or partial exercise
of such warrants.

ARTICLE II
PURCHASE AND SALE

    2.1 Closing.  Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Units indicated below such Purchaser's name on the signature page
of this Agreement at the Per Unit Purchase Price. The Closing shall take place
at the offices of Purchaser Counsel immediately following the execution hereof,
or at such other location or time as the parties may agree.

    2.2  Closing Deliveries

        (a)   At the Closing, the Company shall deliver or cause to be delivered
to each Purchaser the following:

(i) one or more stock certificates, free and clear of all restrictive and other
legends (except as expressly provided in Section 4.1(b) hereof), evidencing such
number of Shares equal to the number of Units indicated below such Purchaser's
name on the signature page of this Agreement, registered in the name of such
Purchaser;

(ii) an Additional Investment Right, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire such number of
Underlying Shares indicated below such Purchaser's name on the signature page of
this Agreement, on the terms set forth therein;

(iii) a Warrant, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire such number of Underlying Shares
indicated below such Purchaser's name on the signature page of this Agreement,
on the terms set forth therein;

(iv) a legal opinion of Company Counsel, in the form of Exhibit C, executed by
such counsel and delivered to the Purchasers; and

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(v) duly executed Transfer Agent Instructions acknowledged by the Company's
transfer agent.

        (b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company an amount equal to the Per Unit Purchase Price
multiplied by the number of Units indicated below such Purchaser's name on the
signature page of this Agreement, in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing to such
Purchaser by the Company for such purpose.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

    3.1 Representations and Warranties of the Company

(a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than
those listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the
Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any Lien and all the
issued and outstanding shares of capital stock or comparable equity interest of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.

(b) Organization and Qualification. Each of the Company and the Subsidiaries is
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified to
do business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not reasonably be
expected to, individually or in the aggregate, (i) adversely affect the
legality, validity or enforceability of any Transaction Document, (ii) have or
result in a material adverse effect on the results of operations, assets,
prospects, business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole on a consolidated basis, or (iii) adversely
impair the Company's ability to perform fully on a timely basis its obligations
under any of the Transaction Documents (any of (i), (ii) or (iii), a "Material
Adverse Effect").

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further consent or action is required
by the Company, its Board of Directors or its stockholders. Each of the
Transaction Documents has been (or upon delivery will be) duly executed by the
Company and is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms (except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium and similar laws,
both state and federal, affecting the enforcement of creditors' rights or
remedies in general as from time to time in effect and the exercise by courts of
equity powers).

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(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are
subject), or by which any property or asset of the Company or a Subsidiary is
bound or affected other than, in the case of clauses (ii) and (iii) above, such
events as would not reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect.

(e) Issuance of the Securities. The Securities (including the Underlying Shares)
are duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens and shall not be subject to
preemptive rights or similar rights of stockholders. The Company has reserved
from its duly authorized capital stock the maximum number of shares of Common
Stock issuable upon exercise of the Additional Investment Rights and the
Warrants.

(f) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock, options and other securities of the Company (whether
or not presently convertible into or exercisable or exchangeable for shares of
capital stock of the Company) is set forth in Schedule 3.1(f). All outstanding
shares of capital stock are duly authorized, validly issued, fully paid and
nonassessable and have been issued in compliance with all applicable securities
laws. Except as disclosed in Schedule 3.1(f), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. There are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) and the
issue and sale of the Securities (including the Underlying Shares) will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under such securities. To the knowledge of the Company, except as
specifically disclosed in Schedule 3.1(f), no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act),
or has the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of 5% of the outstanding Common
Stock, ignoring for such purposes any limitation on the number of shares of
Common Stock that may be owned at any single time.

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(g) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the one year preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials (together with any materials filed by the Company under the
Exchange Act, whether or not required) being collectively referred to herein as
the "SEC Reports" and, together with this Agreement and the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to each Purchaser
true, correct and complete copies of all SEC Reports filed within the 10 days
preceding the date hereof. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified in
such financial statements or the notes thereto (subject to normal year-end
adjustments), and fairly present in all material respects the financial position
of the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments. All material agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject are included as part of or specifically identified in the
SEC Reports.

(h) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC
Reports or in Schedule 3.1(h), (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not altered
its method of accounting or the identity of its auditors, except as disclosed in
its SEC Reports, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock-based plans.

(i) Absence of Litigation. Other than as set forth on Schedule 3.1(i), there is
no action, suit, claim, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries that could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

(j) Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.

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(k) Title to Assets. Except as set forth on Schedule 3.1(k), the Company and the
Subsidiaries have good and marketable title in fee simple to all real property
owned by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable
leases of which, to the Company's knowledge, the Company and the Subsidiaries
are in compliance.

(l) Certain Fees. Except for the fees described in Schedule 3.1(l), all of which
are payable to entities that the Purchasers have represented to be registered
broker-dealers, no brokerage or finder's fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement, and the Company has not taken any
action that would cause any Purchaser to be liable for any such fees or
commissions.

(m) Private Placement. Neither the Company nor any Person acting on the
Company's behalf has sold or offered to sell or solicited any offer to buy the
Securities by means of any form of general solicitation or advertising. Neither
the Company nor any of its Affiliates nor any person acting on the Company's
behalf has, directly or indirectly, at any time within the past six months, made
any offer or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability of the
exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Securities as contemplated hereby or
(ii) cause the offering of the Securities pursuant to the Transaction Documents
to be integrated with prior offerings by the Company for purposes of any
applicable law, regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of any Trading Market. The
Company is not, and is not an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company is not a
United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980.

(n) Form S-3 Eligibility. The Company is eligible to register its Common Stock
for resale by the Purchasers using Form S-3 promulgated under the Securities
Act.

(o) Listing and Maintenance Requirements. Other than as set forth on Schedule
3.1(o), the  Company has not, in the two years preceding the date hereof,
received notice (written or oral) from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market .
The Company is currently in compliance with all such listing and maintenance
requirements.

(p) Registration Rights. Except as described in Schedule 3.1(p), the Company has
not granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority that have not been satisfied.

(q) Application of Takeover Protections. There is no control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's charter
documents or the laws of its state of incorporation that is or could become
applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.

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(r) Disclosure. The Company confirms that neither it nor any other Person acting
on its behalf has provided any of the Purchasers or their agents or counsel with
any information that constitutes or might constitute material, nonpublic
information. The Company understands and confirms that each of the Purchasers
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure materials provided to the Purchasers
under this Agreement regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by the
Company are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed or will not be so disclosed following the press
release and Form 8-K required by Section 4.6 hereof. The Company acknowledges
and agrees that no Purchaser makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2.

(s) Acknowledgment Regarding Purchasers' Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm's length purchaser with respect to the Company and to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.

(t) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could reasonably be expected to have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). Neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.

(u) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.

(v) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, reasonably
be expected to have or result in a Material Adverse Effect ("Material Permits"),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.

(w) Transactions With Affiliates and Employees. Except as set forth in SEC
Reports filed at least ten days prior to the date hereof, none of the officers
or directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

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(x) Solvency. After taking into account the proceeds received by the Company
from this transaction and the proceeds from planned additional financing
transactions and the proposed sale of the Company's New Hampshire real estate,
based on the financial condition of the Company as of the Closing Date, (i) the
Company's fair saleable value of its assets (assuming an orderly liquidation)
exceeds the amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets (in an orderly liquidation), after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The Company does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).

(y) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

   3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby,
as to itself only and for no other Purchaser, represents and warrants to the
Company as follows:

(a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The purchase by such Purchaser of the Shares, the Additional Investment Rights
and the Warrants hereunder has been duly authorized by all necessary action on
the part of such Purchaser. This Agreement has been duly executed and delivered
by such Purchaser and constitutes the valid and binding obligation of such
Purchaser, enforceable against it in accordance with its terms.

(b) Investment Intent. Such Purchaser is acquiring the Securities as principal
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement, at all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the Securities
Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold Securities for any
specific period of time.

(c) Purchaser Status. At the time such Purchaser was offered the Shares, the
Additional Investment Rights and the Warrants, it was, and at the date hereof it
is, an "accredited investor" as defined in Rule 501(a) under the Securities Act.

(d) Experience of such Purchaser. Such Purchaser, either alone or together with
its representatives has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

   4.1 Transfer Restrictions.

(a) Securities may only be disposed of pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company or
pursuant to Rule 144(k), except as otherwise set forth herein, the Company may
require the transferor to provide to the Company an opinion of counsel selected
by the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, any transfer of
Securities by a Purchaser to an Affiliate of such Purchaser, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and such transferee executes a
joinder to this Agreement.

(b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on any certificate evidencing
Securities:

[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES [AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, or (ii) following any
sale of such Securities pursuant to Rule 144, or (iii) if such Securities are
eligible for sale under Rule 144(k). The Company shall cause its counsel to
issue the legal opinion included in the Transfer Agent Instructions to the
Company's transfer agent on the Effective Date. Following the Effective Date or
at such earlier time as a legend is no longer required for certain Securities,
the Company will no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a legended
certificate representing such Securities, deliver or cause to be delivered to
such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section, except as required by
law, regulation or the requirements of the applicable Trading Market. Each
Purchaser, individually as to itself only, agrees to indemnify the Company or
any of its officers or directors from any Losses and any reasonable legal and
other expenses (including the costs of any investigation, preparation and
travel) arising solely out of such Purchaser's failure to (i) comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of the Registrable Securities pursuant to the Registration
Statement, or (ii) sell such Registrable Securities in a manner described in the
Registration Statement. The indemnification obligations under this paragraph
shall be in addition to any liability that the Purchaser may otherwise have and
shall be binding upon and inure to the benefit of any successors or assigns of
the Company.

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(c) The Company acknowledges and agrees that a Purchaser may from time to time
pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser's expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.

(d) Certain Trading Limitations. Each Purchaser agrees that beginning on the
date hereof until the earlier to occur of (a) 120 days from the Closing Date and
(b) the Effective Date of the Registration Statement, it will not enter into any
Short Sales. For purposes of this Section 4.1(d), a "Short Sale" by a Purchaser
means a sale of Common Stock that is marked as a short sale and that is executed
at a time when such Purchaser has no equivalent offsetting long position in the
Common Stock. For purposes of determining whether a Purchaser has an equivalent
offsetting long position in the Common Stock, all Common Stock and all Common
Stock that would be issuable upon conversion or exercise in full of all Options
then held by such Purchaser (assuming that such Options were then fully
convertible or exercisable, notwithstanding any provisions to the contrary, and
giving effect to any conversion or exercise price adjustments scheduled to take
effect in the future) shall be deemed to be held long by such Purchaser.

   4.2  Furnishing of Information.  As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. Upon the request
of any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers to
sell the Securities under Rule 144. The Company further covenants that it will
take such further action as any holder of Securities may reasonably request to
satisfy the provisions of Rule 144 applicable to the issuer of securities
relating to transactions for the sale of securities pursuant to Rule 144.

   4.3 Integration. The Company shall not, and shall use commercially reasonable
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.

   4.4 Reservation of Securities. The Company shall maintain a reserve from its
duly authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may be required to fulfill its obligations in full
under the Transaction Documents. In the event that at any time the then
authorized shares of Common Stock are insufficient for the Company to satisfy
its obligations in full under the Transaction Documents, the Company shall
promptly take such actions as may be required to increase the number of
authorized shares.

   4.5 Subsequent Placements.

(a) From the date hereof until the Effective Date, the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition of) any of its or the Subsidiaries' equity or equity
equivalent securities, including without limitation any debt, preferred stock or
other instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for Common Stock
or Common Stock Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a "Subsequent Placement").

(b) From the Effective Date until 30 Trading Days after the Effective Date (the
"Blockout Period"), the Company will not, directly or indirectly, effect any
Subsequent Placement except as set forth in Section 4.5(e).

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(c) The Blockout Period set forth in Section 4.5(b) above shall be extended for
the number of Trading Days during such period in which (i) trading in the Common
Stock is suspended by any Trading Market, (excluding general suspensions of
trading in such Trading Market), (ii) the Registration Statement is not
effective after the Required Effectiveness Date, or (iii) the prospectus
included in the Registration Statement may not be used by the Purchasers for the
resale of Registrable Securities thereunder.

(d) From the end of the Blockout Period until the one year anniversary thereof,
the Company will not, directly or indirectly, effect any Subsequent Placement
unless the Company shall have first complied with this Section 4.5(d).

(i) The Company shall deliver to each Purchaser a written notice (the "Offer")
of any proposed or intended issuance or sale or exchange of the securities being
offered (the "Offered Securities") in a Subsequent Placement, which Offer shall
(w) identify and describe the Offered Securities, (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number
or amount of the Offered Securities to be issued, sold or exchanged, (y)
identify the persons or entities to which or with which the Offered Securities
are to be offered, issued, sold or exchanged and (z) offer to issue and sell to
or exchange with each Purchaser (A) a pro rata portion of the Offered Securities
based on such Purchaser's pro rata portion of the aggregate purchase price paid
by the Purchasers for all of the Shares purchased hereunder (the "Basic
Amount"), and (B) with respect to each Purchaser that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to
the Basic Amounts of other Purchasers as such Purchaser shall indicate it will
purchase or acquire should the other Purchasers subscribe for less than their
Basic Amounts (the "Undersubscription Amount").

(ii) To accept an Offer, in whole or in part, a Purchaser must deliver a written
notice to the Company prior to the end of the ten (10) Trading Day period of the
Offer, setting forth the portion of the Purchaser's Basic Amount that such
Purchaser elects to purchase and, if such Purchaser shall elect to purchase all
of its Basic Amount, the Undersubscription Amount, if any, that such Purchaser
elects to purchase (in either case, the "Notice of Acceptance"). If the Basic
Amounts subscribed for by all Purchasers are less than the total of all of the
Basic Amounts, then each Purchaser who has set forth an Undersubcription Amount
in its Notice of Acceptance shall be entitled to purchase, in addition to the
Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided, however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic Amounts and the Basic
Amounts subscribed for (the "Available Undersubscription Amount"), each
Purchaser who has subscribed for any Undersubscription Amount shall be entitled
to purchase on that portion of the Available Undersubscription Amount as the
Basic Amount of such Purchaser bears to the total Basic Amounts of all
Purchasers that have subscribed for Undersubscription Amounts, subject to
rounding by the Board of Directors to the extent its deems reasonably necessary.

(iii) The Company shall have ten (10) Trading Days from the expiration of the
period set forth in Section 4.5(d)(ii) above to issue, sell or exchange (or any
binding commitments thereto) all or any part of such Offered Securities as to
which a Notice of Acceptance has not been given by the Purchasers (the "Refused
Securities"), but only to the offerees described in the Offer and only upon
terms and conditions (including, without limitation, unit prices and interest
rates) that are not more favorable to the acquiring person or persons or less
favorable to the Company than those set forth in the Offer.

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(iv) In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4.5(d)(iii) above), then each Purchaser may, at its sole option and in
its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that the Purchaser elected to
purchase pursuant to Section 4.5(d)(ii) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Purchasers pursuant to Section 4.5(c)(ii)
above prior to such reduction) and (ii) the denominator of which shall be the
original amount of the Offered Securities. In the event that any Purchaser so
elects to reduce the number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in accordance with Section
4.5(d)(i) above.

(v) Upon the closing of the issuance, sale or exchange of all or less than all
of the Refused Securities, the Purchasers shall acquire from the Company, and
the Company shall issue to the Purchasers, the number or amount of Offered
Securities specified in the Notices of Acceptance, as reduced pursuant to
Section 4.5(d)(iv) above if the Purchasers have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Purchasers of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Purchasers of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Purchasers and
their respective counsel.

(e) The restrictions contained in paragraphs (a), (b) and (d) of this Section
4.5 shall not apply to Excluded Stock.

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   4.6 Securities Laws Disclosure; Publicity. The Company shall, on or before
8:30 a.m., New York City time, on February 4, 2004, issue a press release
reasonably acceptable to the Purchasers disclosing all material terms of the
transactions contemplated hereby. On the first Trading Day following the Closing
Date, the Company shall file a Current Report on Form 8-K with the Commission
(the "8-K Filing") describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement and the form of both the Additional Investment Rights and the
Warrants, in the form required by the Exchange Act. Thereafter, the Company
shall timely file any filings and notices required by the Commission or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Purchasers at least two days prior to such filing or
dissemination. The Company and the Purchasers shall consult with each other in
issuing any press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or Trading
Market with respect to the transactions contemplated hereby, and neither party
shall issue any such press release or otherwise make any such public statement,
filing or other communication concerning the transaction contemplated hereby
without the prior consent of the other (which shall not be unreasonably withheld
or delayed), except if such disclosure is required by law, regulation or
requirement of a Trading Market, in which case the disclosing party shall use
commercially reasonable efforts to promptly provide the other party with prior
notice of such public statement, filing or other communication. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser (which shall not be unreasonably withheld), except to
the extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations or requested by the
Trading Markets, in which case the Company shall provide the Purchasers with
prior notice of such disclosure. The Purchasers hereby consent to the inclusion
of their names in the registration statement filed pursuant to Article VI hereof
and acknowledge that the Company's Trading Market has requested disclosure of
such Purchaser's name and details of their purchase. The Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents not to, provide any Purchaser with any
material nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the 8-K Filing without the express written consent
of such Purchaser. In the event of a breach of the foregoing covenant by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided herein
or in the Transaction Documents, a Purchaser shall have the right to make a
public disclosure, in the form of a press release, public advertisement or
otherwise, of such material nonpublic information without the prior approval by
the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents, provided that such Purchaser shall use
commercially reasonably efforts to notify the Company a reasonable period of
time prior to publicly disclosing such information. No Purchaser shall have any
liability to the Company, its Subsidiaries, or any of its or their respective
officers, directors, employees, shareholders or agents for any such disclosure,
except in the case of gross negligence or willful misconduct by the Purchaser.
Subject to the foregoing, neither the Company nor any Purchaser shall issue any
press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Purchaser, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).

   4.7 Use of Proceeds. Except as set forth on Schedule 4.7, the Company shall
use the net proceeds from the sale of the Securities hereunder for working
capital purposes and not (i) for the satisfaction of any portion of the
Company's debt (other than payment of trade payables, and accrued expenses in
the ordinary course of the Company's business and prior practices), (ii) to
redeem any Company equity or equity-equivalent securities, or (iii) to settle
any outstanding litigation.

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   4.8 Reimbursement. If any Purchaser or any of its Affiliates or any officer,
director, partner, controlling person, employee or agent of a Purchaser or any
of its Affiliates (a "Related Person") becomes involved in any capacity in any
Proceeding brought by or against any Person in connection with or as a result of
the transactions contemplated by the Transaction Documents, the Company will
indemnify and hold harmless such Purchaser or Related Person for its reasonable
legal and other expenses (including the costs of any investigation, preparation
and travel) and for any Losses incurred in connection therewith, as such
expenses or Losses are incurred, excluding only Losses that result directly from
such Purchaser's or Related Person's gross negligence or willful misconduct. In
addition, the Company shall indemnify and hold harmless each Purchaser and
Related Person from and against any and all Losses, as incurred, arising out of
or relating to any breach by the Company of any of the representations,
warranties or covenants made by the Company in this Agreement or any other
Transaction Document, or any allegation by a third party that, if true, would
constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. The Company also agrees that neither the Purchasers nor any
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents, except to the
extent that any Losses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or Related Person in
connection with such transactions. If the Company breaches its obligations under
any Transaction Document, then, in addition to any other liabilities the Company
may have under any Transaction Document or applicable law, the Company shall pay
or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses). Without limiting
the generality of the foregoing, the Company specifically agrees to reimburse
the Purchasers on demand for all reasonable costs of enforcing the
indemnification obligations in this paragraph.

ARTICLE V
CONDITIONS

   5.1 Conditions Precedent to the Obligations of the Purchasers. The obligation
of each Purchaser to acquire Securities at the Closing is subject to the
satisfaction or waiver by such Purchaser, at or before the Closing, of each of
the following conditions:

(a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing as though made on and as of such
date; and

(b) Performance. The Company and each other Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing.

   5.2 Conditions Precedent to the Obligations of the Company. The obligation of
the Company to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company, at or before the Closing, of each of the following
conditions:

(a) Representations and Warranties. The representations and warranties of the
Purchasers contained herein shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made on and as of
such date; and

(b) Performance. The Purchasers shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Purchasers at or prior to the Closing.

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ARTICLE VI
REGISTRATION RIGHTS

   6.1 Shelf Registration

(a) As promptly as possible, and in any event on or prior to the Filing Date,
the Company shall prepare and file with the Commission a "Shelf" Registration
Statement covering the resale of all Registrable Securities for an offering to
be made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on another appropriate form in accordance herewith as the Purchasers
may consent) and shall contain (except if otherwise directed by the Purchasers)
the "Plan of Distribution" attached hereto as Exhibit D.

(b) The Company shall use its best efforts to cause the Registration Statement
to be declared effective by the Commission as promptly as possible after the
filing thereof, but in any event prior to the Required Effectiveness Date, and
shall use its best efforts to keep the Registration Statement continuously
effective under the Securities Act until the fifth anniversary of the Effective
Date or such earlier date when all Registrable Securities covered by such
Registration Statement have been sold publicly or may be sold pursuant to
paragraph (k) of Rule 144 (the "Effectiveness Period").

(c) The Company shall notify each Purchaser in writing promptly (and in any
event within one business day) after receiving notification from the Commission
that the Registration Statement has been declared effective.

(d) (d) Subject to Section 6.1(e) below, upon the occurrence of any Event (as
defined below) and on every monthly anniversary thereof until the applicable
Event is cured, as partial relief for the damages suffered therefrom by the
Purchasers (which remedy shall not be exclusive of any other remedies available
under this Agreement, at law or in equity), the Company shall pay to each
Purchaser an amount in cash, as liquidated damages and not as a penalty, equal
to 1.0% of the aggregate purchase price paid by such Purchaser hereunder for the
first month and 1.5% for each month thereafter, prorated for any partial month.
The payments to which a Purchaser shall be entitled pursuant to this Section
6.1(d) are referred to herein as "Event Payments". Any Event Payments payable
pursuant to the terms hereof shall apply on a pro-rata basis for any portion of
a month prior to the cure of an Event. In the event the Company fails to make
Event Payments in a timely manner, such Event Payments shall bear interest at
the rate of 1.5% per month (prorated for partial months) until paid in full.

For such purposes, each of the following shall constitute an "Event":

(i) the Registration Statement is not filed on or prior to the Filing Date or is
not declared effective on or prior to the Required Effectiveness Date; provided,
however, that for the purposes of the Event Payment under this Section 6.1(d)
only, the Company shall have an additional 13 days to cure the failure to file
on the Filing Date before such Event Payment is due to the Purchasers under this
Section 6.1(d);

(ii) after the Effective Date, a Purchaser is not permitted to sell Registrable
Securities under the Registration Statement (or a subsequent Registration
Statement filed in replacement thereof) for any reason for five or more Trading
Days;

(iii) the Common Stock is not listed or quoted, or is suspended from trading, on
an Eligible Market for a period of five Trading Days (which need not be
consecutive Trading Days);

(iv) the Company fails for any reason to deliver a certificate evidencing any
Securities to a Purchaser within five Trading Days after delivery of such
certificate is required pursuant to any Transaction Document or the exercise
rights of the Purchasers pursuant to the Transaction Documents are otherwise
suspended for any reason; or

(v) the Company fails to have available a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock available to issue
Underlying Shares upon any exercise of the Additional Investment Rights or the
Warrants or, at any time following the Effective Date, any Shares or Underlying
Shares are not listed on an Eligible Market.

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(e) Notwithstanding anything in this Agreement to the contrary, the Company may,
by written notice to the Purchasers, suspend sales under a Registration
Statement after the Effective Date thereof and/or require that the Purchasers
immediately cease the sale of shares of Common Stock pursuant thereto and/or
defer the filing of any subsequent Registration Statement if at any time the
Company determines in good faith that such Registration Statement contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading and cannot be
utilized in connection with the sale of shares of Common Stock until it has been
appropriately amended. Upon receipt of such notice, each Purchaser shall
immediately discontinue any sales of Registrable Securities pursuant to such
registration until such Purchaser has received copies of a supplemented or
amended Prospectus or until such Purchaser is advised in writing by the Company
that the then-current Prospectus may be used and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such Prospectus. In no event, however, shall this right be
exercised to suspend sales beyond the period during which (in the good faith
determination of the Company) the failure to require such suspension would be
materially detrimental to the Company. Furthermore, in no event may the Company
exercise its rights hereunder more than two times or for a period of more than
30 days in any twelve month period. Immediately after the end of any suspension
period under this Section 6.1(e), the Company shall take all necessary actions
(including filing any required supplemental prospectus) to restore the
effectiveness of the applicable Registration Statement and the ability of the
Purchasers to publicly resell their Registrable Securities pursuant to such
effective Registration Statement.

(f) The Company shall not, prior to the Effective Date of the Registration
Statement, prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities. 

   6.2 Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:

(a) (a) Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment, or not less than one
Trading Day for any supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall (i) furnish to each Purchaser and any counsel designated by any Purchaser
(each, a "Purchaser Counsel", and Vertical Ventures, LLC, a Purchaser, has
initially designated Proskauer Rose LLP as its Purchaser Counsel) copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of each Purchaser and Purchaser Counsel, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such reasonable inquiries as shall be necessary, in the reasonable opinion of
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file a Registration Statement or any
such Prospectus or any amendments or supplements thereto to which Purchasers
holding a majority of the Registrable Securities shall reasonably object in
writing within three Trading Days of receiving (or one Trading Day in the case
of supplements).

(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as to the applicable Registrable Securities for
the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and promptly provide the Purchasers true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Purchasers thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented

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(c) Notify the Purchasers of Registrable Securities to be sold and each
Purchaser Counsel as promptly as reasonably possible, and (if requested by any
such Person) confirm such notice in writing no later than one Trading Day
thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (ii) the
Commission comments in writing on any Registration Statement (in which case the
Company shall deliver to each Purchaser a copy of such comments and of all
written responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made in any
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

(d) Use its best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, as soon as possible.

(e) Furnish to each Purchaser and Purchaser Counsel, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.

(f) Promptly deliver to each Purchaser and Purchaser Counsel, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.

(g) (i) In the time and manner required by each Trading Market, prepare and file
with such Trading Market an additional shares listing application covering all
of the Registrable Securities; (ii) take all steps necessary to cause such
Registrable Securities to be approved for listing on each Trading Market as soon
as possible thereafter; (iii) provide to the Purchasers evidence of such listing
(if applicable); and (iv) maintain the listing of such Registrable Securities on
each such Trading Market or another Eligible Market.

(h) Prior to any public offering of Registrable Securities, use commercially
reasonable efforts to register or qualify or cooperate with the selling
Purchasers and respective Purchaser Counsel in connection with the registration
or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Purchaser requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement.

(i) Cooperate with the Purchasers to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement, of all restrictive legends, and
to enable such Registrable Securities to be in such denominations and registered
in such names as any such Purchasers may request.

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(j) Upon the occurrence of any event described in Section 6.2(c)(vii), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

(k) Cooperate with any due diligence investigation undertaken by the Purchasers
in connection with the sale of Registrable Securities, including, without
limitation, by making available any documents and information; provided that the
Company will not deliver or make available to any Purchaser material, nonpublic
information unless such Purchaser specifically requests in advance to receive
material, nonpublic information in writing.

(l) Comply with all applicable rules and regulations of the Commission. 

   6.3 Registration Expenses. The Company shall pay (or reimburse the Purchasers
for) all fees and expenses incident to the performance of or compliance with
this Agreement by the Company, including without limitation (a) all registration
and filing fees and expenses, including without limitation those related to
filings with the Commission, any Trading Market and in connection with
applicable state securities or Blue Sky laws, (b) printing expenses (including
without limitation expenses of printing certificates for Registrable Securities
and of printing prospectuses requested by the Purchasers), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel for the
Company, (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the Trading
Market.

   6.4 Indemnification

(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Purchaser, the
officers, directors, partners, members, agents, brokers, investment advisors and
employees of each of them, each Person who controls any such Purchaser (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, partners, members, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all Losses, as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (i) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based solely upon information
regarding such Purchaser furnished in writing to the Company by such Purchaser
expressly for use therein, or to the extent that such information relates to
such Purchaser or such Purchaser's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Purchaser expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto or (ii) in
the case of an occurrence of an event of the type specified in Section
6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing that the
Prospectus is outdated or defective and prior to the receipt by such Purchaser
of the Advice contemplated in Section 6.5. The Company shall notify the
Purchasers promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.

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(b) Indemnification by Purchasers. Each Purchaser shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.

(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an "Indemnified
Party"), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (iii) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised in writing by counsel that a conflict of interest is likely to exist if
the same counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense thereof and such counsel shall be at the expense of the Indemnifying
Party provided that such separate counsel shall be reasonably satisfactory to
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld or delayed. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld or delayed), effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.

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All fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section) shall be
paid to the Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party, together with reasonable documentation
of such expenses, (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).

(d) Contribution. If a claim for indemnification under Section 6.4(a) or (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 6.4(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6.4(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties. 

   6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.

   6.6 No Piggyback on Registrations. Except as set forth in Schedule 6.6,
neither  the Company nor any of its security holders (other than the Purchasers
in such capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right to any of its security holders.

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   6.7 Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.; provided that, if the managing underwriter
or underwriters of any such offering have informed the company, that it is their
opinion that the total number of shares which the Company (such shares, "Primary
Shares"), holders of Registrable shares and any other Person participating in
such registration (such shares, "Other Shares") intend to include in such
offering would interfere with the successful marketing (including pricing) of
such offering, then the number of Primary Shares, Registrable Shares and Other
Shares proposed to be included in such registration shall be included in the
following order: (i) first, the Primary shares; and (ii) second, the Registrable
Shares and the Other Shares, pro rata among holders of Registrable Shares and
the holders of Other Shares that have requested that their Registrable Shares or
Other Shares, as applicable, be included in such registration based upon the
number of Registrable Shares or Other Shares, as applicable, that each such
holder of Registrable Shares or Other Shares has requested to be registered.

ARTICLE VII
MISCELLANEOUS

   7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Business Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).

   7.2 Fees and Expenses. At the Closing, the Company shall pay to Vertical
Ventures, LLC an aggregate of $15,000 for their legal fees and expenses incurred
in connection with its due diligence and the preparation and negotiation of the
Transaction Documents, of which amount $5,000 has been previously paid by the
Company to the Purchaser Counsel. In lieu of the foregoing payment, Vertical
Ventures, LLC may retain such amount at the Closing or require the Company to
pay such amount directly to Purchaser Counsel. Except as expressly set forth in
the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of the Securities.

   7.3 Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.

   7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The
addresses and facsimile numbers for such notices and communications are those
set forth on the signature pages hereof, or such other address or facsimile
number as may be designated in writing hereafter, in the same manner, by any
such Person.

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7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI and
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.

   7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

   7.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers." Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.

   7.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective successors and permitted assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.

   7.9 Governing Law; Venue; Waiver Of Jury Trial. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT. THE
COMPANY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE
ADJUDICATION OF ANY DISPUTE BROUGHT BY ANY PURCHASER HEREUNDER, IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN
(INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS),
AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR
PROCEEDING BROUGHT BY ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PURCHASER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN DELAWARE, FOR THE
ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY HEREUNDER, IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN
(INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS),
AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR
PROCEEDING BROUGHT BY THE COMPANY, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

   7.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and/or exercise of
the Securities, as applicable.

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   7.11 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

   7.12 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

   7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights unless the Company
has proceeded and is continuing to proceed in a diligent and good faith fashion.

   7.14 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

   7.15 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.

   7.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to either the Additional
Investment Rights or the Warrants, or any Purchaser enforces or exercises its
rights hereunder or thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company
by a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

   7.17 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.

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   7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

[SIGNATURE PAGES TO FOLLOW]  

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2004 Form 8-K

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            IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

STOCKERYALE, INC..

By: /s/ Mark W. Blodgett

Name: Mark W. Blodgett

Title: Chief Executive Officer

Address for Notice:

32 Hampshire Road

Salem, NH 03079

Phone: 603-893-8778

Fax: 603-898-8851

Attn: Mark W. Blodgett

With a copy to: Goodwin Procter LLP

Exchange Place

Boston, MA 02109

Facsimile No.: 617-523-1231

Telephone No.: 617-570-1000

Attn: John Haggerty

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]

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VERTICAL VENTURES, LLC

By: /s/ Joshua Silverman

Name: Joshua Silverman

Title: Partner

Number of Units: 626,087

Underlying Shares subject to

Additional Investment Rights: 156,522

Underlying Shares

subject to Warrants: 156,522

Address for Notice:

Vertical Ventures, LLC

6641 Lexington Ave, 26th Floor

New York, NY 10022

Facsimile No.: (212) 207-3452

Telephone No.: (212) 974-3070

Attn: Joshua Silverman

With a copy to: Proskauer Rose LLP

1585 Broadway

New York, New York 10036-8299

Facsimile No.: (212) 969-2900

Telephone No.: (212) 969-3000

Attn: Adam J. Kansler, Esq.

 

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Purchaser: SMITHFIELD FIDUCIARY LLC

By: /s/ Adam J. Chill

Name: Adam J. Chill

Title: Authorized Signatory

Number of Units: 217,391

Underlying Shares subject to

Additional Investment Rights: 54,348

Underlying Shares

subject to Warrants: 54,348

Address for Notice:

c/o Highbridge Capital Management, LLC

9 West 57th Street, 27th Floor

New York, NY 10019

Facsimile No.: (212) 751-0755

Telephone No.: (212) 287-4720

Attn: Ari J. Storch / Adam J. Chill

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Purchaser: OMICRON MASTER TRUST

By: /s/ Bruce Bernstein

Name: Bruce Bernstein

Title: Managing Partner

Number of Units: 173,913

Underlying Shares subject to

Additional Investment Rights: 43,478

Underlying Shares

subject to Warrants: 43,478

 

Address for Notice:

810 7th Avenue, 39th Floor

New York, NY 10019

Facsimile No.: (212) 803-5269

Telephone No.: (212) 803-5263

Attn: Brian Daly

 

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Purchaser: OTAPE INVESTMENTS LLC

By: /s/ Richard M. Cayne

Name: Richard M. Cayne

Title: General Counsel

Number of Units: 173,913

Underlying Shares subject to

Additional Investment Rights: 43,478

Underlying Shares

subject to Warrants: 43,478

 

Address for Notice:

One Manhattanville Road

Purchase, NY 10577

Facsimile No.: (914) 694-6335

Telephone No.: (914) 694-5887

Attn: Rick Bourdon / Paul Masters

 

Exhibit 10.1   /  STKR
END
2004 Form 8-K