Form of Common Stock Purchase Warrant


THIS WARRANT AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO STOCKERYALE, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED. 


                                                     		
                                                         
                                                         Right to Purchase 95,000 Shares of Common Stock of StockerYale,  Inc.  (subject to
                                                     adjustment as provided herein)


                                                         



COMMON STOCK PURCHASE
WARRANT 


	No. __________	
    Issue Date: December ___, 2004


    



STOCKERYALE,
INC., a corporation organized under the laws of the State of Massachusetts (the
“Company”), hereby certifies that, for value received, LAURUS MASTER FUND, LTD.,
or assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company from and after the Issue Date of this Warrant and at any time or
from time to time before 5:00 p.m., New York time, through seven (7) years after such date
(the “Expiration Date”), up to 95,000 fully paid and nonassessable shares of
Common Stock (as hereinafter defined), $.001 par value, of the Company, at the Exercise
Price (as defined below). The number and character of such shares of Common Stock and the
Exercise Price are subject to adjustment as provided herein. 



As
used herein the following terms, unless the context otherwise requires, have the following
respective meanings: (a) The term “Company” shall include StockerYale, Inc. and
any corporation which shall succeed or assume the obligations of StockerYale, Inc.
hereunder. 



     (b)
          The term “Common Stock” includes (a) the Company’s Common Stock,
          par value $.001 per share, and (b) any other securities into which or for which
          any of the securities described in (a) may be converted or exchanged pursuant to
          a plan of recapitalization, reorganization, merger, sale of assets or otherwise. 



     (c) The term "Other
     Securities" refers to any stock (other than Common Stock) and other
     securities of the Company or any other person (corporate or otherwise)
     which the holder of the Warrant at any time shall be entitled to receive,
     or shall have received, on the exercise of the Warrant, in lieu of or in
     addition to Common Stock, or which at any time shall be issuable or shall
     have been issued in exchange for or in replacement of Common Stock or Other
     Securities pursuant to Section 4 or otherwise. 


     (d) The term "Exercise Price" shall be as
     follows: 



     a. 50,000 shares at $1.38 per share; 


     b. 33,000 shares at $1.60 per share; and 


     c. 12,000 shares at $1.71 per share. 


      1. Exercise of Warrant. 



1.1 Number of Shares Issuable upon
Exercise. From and after the date hereof through and including the Expiration Date,
the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in
part, by delivery of an original or fax copy of the exercise notice attached hereto as
Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4. 



1.2 Fair Market Value. Fair
Market Value of a share of Common Stock as of a particular date (the “Determination
Date”) shall mean: 


(a) If the Company’s Common Stock is traded on an exchange or
is quoted on the National or SmallCap Market of The Nasdaq Stock Market,
Inc.(“Nasdaq”), then the closing or last sale price, respectively, reported for
the last business day immediately preceding the Determination Date. 



     (b)
          If the Company’s Common Stock is not traded on an exchange or on the Nasdaq
          but is traded on the NASD OTC Bulletin Board or BBX Exchange, then the mean of
          the average of the closing bid and asked prices reported for the last business
          day immediately preceding the Determination Date. 



     (c)
          Except as provided in clause (d) below, if the Company’s Common Stock is
          not publicly traded, then as the Holder and the Company agree or in the absence
          of agreement by arbitration in accordance with the rules then in effect of the
          American Arbitration Association, before a single arbitrator to be chosen from a
          panel of persons qualified by education and training to pass on the matter to be
          decided. 



     (d)
          If the Determination Date is the date of a liquidation, dissolution or winding
          up, or any event deemed to be a liquidation, dissolution or winding up pursuant
          to the Company’s charter, then all amounts to be payable per share to
          holders of the Common Stock pursuant to the charter in the event of such
          liquidation, dissolution or winding up, plus all other amounts to be payable per
          share in respect of the Common Stock in liquidation under the charter, assuming
          for the purposes of this clause (d) that all of the shares of Common Stock then
          issuable upon exercise of the Warrant are outstanding at the Determination Date. 


     
          2. Procedure for Exercise. 



2.1 Delivery of Stock
Certificates, etc. on Exercise. The Company agrees that the shares of Common Stock
purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any event within
3 business days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to the
Holder, or as such Holder (upon payment by such holder of any applicable transfer taxes)
may direct in compliance with applicable securities laws, a certificate or certificates
for the number of duly and validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such holder would otherwise be entitled, cash
equal to such fraction multiplied by the then Fair Market Value of one full share,
together with any other stock or other securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or
otherwise. 




2.2      Exercise.

     
     

     (a)
          Payment may be made either in (i) cash or by certified or official bank check
          payable to the order of the Company equal to the applicable aggregate Exercise
          Price, (ii) by delivery of the Warrant, Common Stock and/or Common Stock
          receivable upon exercise of the Warrant in accordance with Section (b) below, or
          (iii) by a combination of any of the foregoing methods, for the number of Common
          Shares specified in such form (as such exercise number shall be adjusted to
          reflect any adjustment in the total number of shares of Common Stock issuable to
          the holder per the terms of this Warrant) and the Holder shall thereupon be
          entitled to receive the number of duly authorized, validly issued, fully-paid
          and non-assessable shares of Common Stock (or Other Securities) determined as
          provided herein. 



     (b)
          Notwithstanding any provisions herein to the contrary, if the Fair Market Value
          of one share of Common Stock is greater than the Exercise Price (at the date of
          calculation as set forth below), in lieu of exercising this Warrant for cash,
          the Holder may elect to receive shares equal to the value (as determined below)
          of this Warrant (or the portion thereof being exercised) by surrender of this
          Warrant at the principal office of the Company together with the properly
          endorsed Exercise Notice in which event the Company shall issue to the Holder a
          number of shares of Common Stock computed using the following formula: 








X=Y (A-B) 

                  A 




	
    Where 
	
    X=
	
    
    the number of shares of
    Common Stock to be issued to the Holder 
    

	
    
	
    Y=
	
    
    the number of shares of Common Stock purchasable under the Warrant or, if
    only a portion of the Warrant is being exercised, the portion of the Warrant
    being exercised (at the date of such calculation)

	
    
	
    A=
	
    
    the Fair Market Value of one share of the Company's Common Stock (at the
    date of such calculation)

	
    
	
    B=
	


    Exercise Price (as adjusted to the date of such calculation)

    





3. Effect of Reorganization,
etc.; Adjustment of Exercise Price.


3.1 Reorganization, Consolidation,
Merger, etc. In case at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c) transfer all
or substantially all of its properties or assets to any other person under any plan or
arrangement contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate provision shall
be made by the Company whereby the Holder of this Warrant, on the exercise hereof as
provided in Section 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case may be,
shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise
prior to such consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such Holder
had so exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4. 



3.2 Dissolution. In the event
of any dissolution of the Company following the transfer of all or substantially all of
its properties or assets, the Company, prior to such dissolution, shall at its expense
deliver or cause to be delivered the stock and other securities and property (including
cash, where applicable) receivable by the Holder of the Warrant after the effective date
of such dissolution pursuant to Section 3.1 to a bank or trust company having its
principal office in New York, NY, as trustee for the Holder of the Warrant. 



3.3 Continuation of Terms.
Upon any reorganization, consolidation, merger or transfer (and any dissolution following
any transfer) referred to in this Section 3, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the consummation
of such reorganization, consolidation or merger or the effective date of dissolution
following any such transfer, as the case may be, and shall be binding upon the issuer of
any such stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the Company,
whether or not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force and
effect after the consummation of the transactions described in this Section 3, then only
in such event will the Company’s securities and property (including cash, where
applicable) receivable by the holders of the Warrant be delivered to the Trustee as
contemplated by Section 3.2. 



     4.
          Extraordinary Events Regarding Common Stock. In the event that the
          Company shall (a) issue additional shares of the Common Stock as a dividend or
          other distribution on outstanding Common Stock, (b) subdivide its outstanding
          shares of Common Stock, or (c) combine its outstanding shares of the Common
          Stock into a smaller number of shares of the Common Stock, then, in each such
          event, the Exercise Price shall, simultaneously with the happening of such
          event, be adjusted by multiplying the then Exercise Price by a fraction, the
          numerator of which shall be the number of shares of Common Stock outstanding
          immediately prior to such event and the denominator of which shall be the number
          of shares of Common Stock outstanding immediately after such event, and the
          product so obtained shall thereafter be the Exercise Price then in effect. The
          Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
          happening of any successive event or events described herein in this Section 4.
          The number of shares of Common Stock that the holder of this Warrant shall
          thereafter, on the exercise hereof as provided in Section 1, be entitled to
          receive shall be increased to a number determined by multiplying the number of
          shares of Common Stock that would otherwise (but for the provisions of this
          Section 4) be issuable on such exercise by a fraction of which (a) the numerator
          is the Exercise Price that would otherwise (but for the provisions of this
          Section 4) be in effect, and (b) the denominator is the Exercise Price in effect
          on the date of such exercise. 



     5.
          Certificate as to Adjustments. In each case of any adjustment or
          readjustment in the shares of Common Stock (or Other Securities) issuable on the
          exercise of the Warrant, the Company at its expense will promptly cause its
          Chief Financial Officer or other appropriate designee to compute such adjustment
          or readjustment in accordance with the terms of the Warrant and prepare a
          certificate setting forth such adjustment or readjustment and showing in detail
          the facts upon which such adjustment or readjustment is based, including a
          statement of (a) the consideration received or receivable by the Company for any
          additional shares of Common Stock (or Other Securities) issued or sold or deemed
          to have been issued or sold, (b) the number of shares of Common Stock (or Other
          Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
          and the number of shares of Common Stock to be received upon exercise of this
          Warrant, in effect immediately prior to such adjustment or readjustment and as
          adjusted or readjusted as provided in this Warrant. The Company will forthwith
          mail a copy of each such certificate to the holder of the Warrant and any
          Warrant agent of the Company (appointed pursuant to Section 11 hereof). 



     6.
          Reservation of Stock, etc. Issuable on Exercise of Warrant. The Company
          will at all times reserve and keep available, solely for issuance and delivery
          on the exercise of the Warrant, shares of Common Stock (or Other Securities)
          from time to time issuable on the exercise of the Warrant. 



     7.
          Assignment; Exchange of Warrant. Subject to compliance with applicable
          securities laws, this Warrant, and the rights evidenced hereby, may be
          transferred by any registered holder hereof (a “Transferor”) with
          respect to any or all of the Shares. On the surrender for exchange of this
          Warrant, with the Transferor’s endorsement in the form of Exhibit B
          attached hereto (the “Transferor Endorsement Form”) and together with
          evidence reasonably satisfactory to the Company demonstrating compliance with
          applicable securities laws, which shall include, without limitation, a legal
          opinion from the Transferor’s counsel that such transfer is exempt from the
          registration requirements of applicable securities laws, the Company at its
          expense but with payment by the Transferor of any applicable transfer taxes)
          will issue and deliver to or on the order of the Transferor thereof a new
          Warrant of like tenor, in the name of the Transferor and/or the transferee(s)
          specified in such Transferor Endorsement Form (each a “Transferee”),
          calling in the aggregate on the face or faces thereof for the number of shares
          of Common Stock called for on the face or faces of the Warrant so surrendered by
          the Transferor. 



     8.
          Replacement of Warrant. On receipt of evidence reasonably satisfactory to
          the Company of the loss, theft, destruction or mutilation of this Warrant and,
          in the case of any such loss, theft or destruction of this Warrant, on delivery
          of an indemnity agreement or security reasonably satisfactory in form and amount
          to the Company or, in the case of any such mutilation, on surrender and
          cancellation of this Warrant, the Company at its expense will execute and
          deliver, in lieu thereof, a new Warrant of like tenor. 


      9. Registration
          Rights. The Holder of this Warrant has been granted certain registration
          rights by the Company. These registration rights are set forth in a Registration
          Rights Agreement entered into by the Company and Purchaser of the Company’s
          Convertible Note (the “Note”) at or prior to the issue date of this
          Warrant. 



     10.
          Maximum Exercise. The Holder shall not be entitled to exercise this
          Warrant on an exercise date, in connection with that number of shares of Common
          Stock which would be in excess of the sum of (i) the number of shares of Common
          Stock beneficially owned by the Holder and its affiliates on an exercise date,
          and (ii) the number of shares of Common Stock issuable upon the exercise of this
          Warrant with respect to which the determination of this proviso is being made on
          an exercise date, which would result in beneficial ownership by the Holder and
          its affiliates of more than 4.99% of the outstanding shares of Common Stock of
          the Company on such date. For the purposes of the proviso to the immediately
          preceding sentence, beneficial ownership shall be determined in accordance with
          Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3
          thereunder. Subject to the foregoing, the Holder shall not be limited to
          aggregate exercises which would result in the issuance of more than 4.99%. The
          restriction described in this paragraph may be revoked upon 75 days prior notice
          from the Holder to the Company and is automatically null and void upon an Event
          of Default under the Note. Notwithstanding the foregoing, to the extent required
          by the Nasdaq Marketplace Rules, at no time may the Holder exercise all or part
          of this Warrant to acquire a number of shares of Common Stock that, together
          with any shares of Common Stock acquired upon conversion of all or any part of
          the Note or the interest payable thereon, would in the aggregate exceed 19.99%
          of the outstanding shares of the Company’s Common Stock, determined as of
          the date hereof, without first obtaining stockholder approval of such issuance
          of Common Stock (the “Conversion Limitations”). In obtaining
          stockholder approval, stockholders shall not be entitled to vote shares of
          Common Stock acquired upon exercise of this Warrant and/or conversion of the
          Note on such matter. In the event such approval is so required, then the Company
          shall (i) within fifteen (15) days following notice by the Holder to convert an
          amount in excess of the Conversion Limitations file proxy materials relating to
          such stockholder approval with the Securities and Exchange Commission and (ii)
          use its best efforts to obtain as promptly as possible such stockholder
          approval. 



     11.
          Warrant Agent. The Company may, by written notice to the each holder of
          the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
          Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
          this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
          Section 8, or any of the foregoing, and thereafter any such issuance, exchange
          or replacement, as the case may be, shall be made at such office by such agent. 



     12.
          Transfer on the Company’s Books. Until this Warrant is transferred
          on the books of the Company, the Company may treat the registered holder hereof
          as the absolute owner hereof for all purposes, notwithstanding any notice to the
          contrary. 13. Notices, etc. All notices and other communications
          from the Company to the Holder of this Warrant shall be mailed by first class
          registered or certified mail, postage prepaid, at such address as may have been
          furnished to the Company in writing by such holder or, until any such Holder
          furnishes to the Company an address, then to, and at the address of, the last
          Holder of this Warrant who has so furnished an address to the Company. 



     14.
          Voluntary Adjustment by the Company. The Company may at any time during
          the term of this Warrant reduce the then current Exercise Price to any amount
          and for any period of time deemed appropriate by the Board of Directors of the
          Company. 


      15. Miscellaneous. This Warrant and any term hereof may
          be changed, waived, discharged or terminated only by an instrument in writing
          signed by the party against which enforcement of such change, waiver, discharge
          or termination is sought. This Warrant shall be governed by and construed in
          accordance with the laws of State of New York without regard to principles of
          conflicts of laws. Any action brought concerning the transactions contemplated
          by this Warrant shall be brought only in the state courts of New York or in the
          federal courts located in the state of New York; provided, however, that the
          Holder may choose to waive this provision and bring an action outside the state
          of New York. The individuals executing this Warrant on behalf of the Company
          agree to submit to the jurisdiction of such courts and waive trial by jury. The
          prevailing party shall be entitled to recover from the other party its
          reasonable attorney’s fees and costs. In the event that any provision of
          this Warrant is invalid or unenforceable under any applicable statute or rule of
          law, then such provision shall be deemed inoperative to the extent that it may
          conflict therewith and shall be deemed modified to conform with such statute or
          rule of law. Any such provision which may prove invalid or unenforceable under
          any law shall not affect the validity or enforceability of any other provision
          of this Warrant. The headings in this Warrant are for purposes of reference
          only, and shall not limit or otherwise affect any of the terms hereof. The
          invalidity or unenforceability of any provision hereof shall in no way affect
          the validity or enforceability of any other provision. The Company acknowledges
          that legal counsel participated in the preparation of this Warrant and,
          therefore, stipulates that the rule of construction that ambiguities are to be
          resolved against the drafting party shall not be applied in the interpretation
          of this Warrant to favor any party against the other party. 



IN WITNESS WHEREOF, the
Company has executed this Warrant under seal as of the date first written above. 



         




            STOCKERYALE, INC. 

By: 
/s/                                                        



Witness: 


  ______________________________________













Exhibit A 






FORM OF SUBSCRIPTION 






(To be signed only on
exercise of Warrant) 






TO: StockerYale, Inc. 



The undersigned, pursuant to the
provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to
purchase (check applicable box): 


___      ________ shares of the Common Stock covered by such Warrant; or



___ the maximum number of shares of
Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth
in Section 2. 



The undersigned herewith makes
payment of the full Exercise Price for such shares at the price per share provided for in
such Warrant, which is $___________. Such payment takes the form of (check applicable box
or boxes): 


___      $__________ in lawful money of the United States; and/or

___      the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock
(using a Fair Market Value of $_______ per share for purposes of this calculation); and/or



___ the cancellation of such number
of shares of Common Stock as is necessary, in accordance with the formula set forth in
Section 2, to exercise this Warrant with respect to the maximum number of shares of Common
Stock purchaseable pursuant to the cashless exercise procedure set forth in Section 2. 


The undersigned requests that the certificates for such shares be issued in the name of, and delivered to  ____________________ whose
address is ______________________________



_________________  



The undersigned represents and
warrants that all offers and sales by the undersigned of the securities issuable upon
exercise of the within Warrant shall be made pursuant to registration of the Common Stock
under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant
to an exemption from registration under the Securities Act. 


Dated:___________________           _______________________________________


	 	
(Signature
must conform to name of holder as specified on the face of the Warrant) 







     
     






(Address) 













Exhibit B 




FORM OF TRANSFEROR
ENDORSEMENT 






(To be signed only on
transfer of Warrant) 




For value received, the undersigned hereby sells, assigns, and transfers unto the person(s)
named below under the heading "Transferees" the right represented by the within Warrant to
purchase the percentage and number of shares of Common Stock of StockerYale, Inc. to which
the within Warrant relates specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its
respective right on the books of StockerYale, Inc. with full power of substitution in the premises. 

	
    Transferees
     
	
    Percentage Transferred
     
	
    Number Transferred
     

	
    
     
	
    
     
	
    
     

	
    
     
	
    
     
	
    
     

	
    
     
	
    
     
	
    
     

	
    
     
	
    
     
	
    
     






Dated:___________________ ____________________________________________________________________ 

(Signature must conform to name of holder as specified on the face of the Warrant)
 



Signed in the presence of: ______________________________ 

(Name) ______________________________________________

(Address) ____________________________________________ 

(City, State, Zip)_______________________________________

ACCEPTED AND AGREED:
 

[TRANSFEREE] _______________________________________ 

(Name) _______________________________________________ 

(Address) _____________________________________________ 

(City, State, Zip)________________________________________