COMMON STOCK PURCHASE WARRANT



 Exhibit 10.5 
 THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS 
 EXERCISE ARE SUBJECT TO THE
RESTRICTIONS ON 
 TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
  

			
		  	Number of Shares: 2,375,000
	 Date of Issuance: October 31, 2006
	  	(subject to adjustment)

 StockerYale, Inc. 
 Common Stock Purchase Warrant 
 (Void after October 31, 2016 (the
“Expiration Date”)) 
 StockerYale, Inc., a Massachusetts corporation (the “Company”), for value received, hereby
certifies that The Eureka Interactive Fund Limited, or its registered assigns (the “Registered Holder”), is entitled, subject to the terms and conditions set forth below, to purchase from the Company, at any time or from time to time on or
after the date of issuance and on or before 5:00 p.m. (Boston time) on October 31, 2016, an aggregate of 2,375,000 nonassessable shares of Common Stock, $0.001 par value per share, of the Company, at a purchase price of $1.15 per share. The
shares purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and the “Purchase
Price,” respectively. 
 1. Exercise. 
 (a) This Warrant may be exercised by the Registered Holder, in whole or in part, by surrendering this Warrant, with the purchase form
appended hereto as Exhibit I duly executed by the Registered Holder or by the Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate,
accompanied by payment in full, in lawful money of the United States, of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such exercise. 
 (b) The Registered Holder may, at its option, elect to pay some or all of the Purchase Price payable upon an exercise of this Warrant by
cancelling a portion of this Warrant exercisable for such number of Warrant Shares as is determined by dividing (i) the total Purchase Price payable in respect of the number of Warrant Shares being purchased upon such exercise by (ii) the
excess of the Fair Market Value per share of Common Stock (as defined below) as of the Exercise Date (as defined in subsection 1(c) below) over the Purchase Price per share. If the Registered Holder wishes to exercise this Warrant pursuant to this
method of payment with respect to the maximum number of Warrant Shares purchasable pursuant to this method, then the number of Warrant Shares so purchasable shall be equal to the total number of Warrant Shares, minus the product obtained by
multiplying (x) the total number of Warrant Shares by (y) a fraction, the numerator of which shall be the Purchase Price per share and the denominator of 








 
which shall be the Fair Market Value per share of Common Stock as of the Exercise Date. The Fair Market Value per share of Common Stock shall be determined
as follows: 
 (i) If the Common Stock is listed on a national securities exchange, the Nasdaq Global Market or another
nationally recognized trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the average of the high and low reported sale prices per share of Common Stock thereon on the trading day immediately
preceding the Exercise Date (provided that if no such price is reported on such day, the Fair Market Value per share of Common Stock shall be determined pursuant to clause (ii)). 
 (ii) If the Common Stock is not listed on a national securities exchange, the Nasdaq Global Market or another nationally recognized
trading system as of the Exercise Date, the Fair Market Value per share of Common Stock shall be deemed to be the amount most recently determined by the Board of Directors to represent the fair market value per share of the Common Stock (including
without limitation a determination for purposes of granting Common Stock options or issuing Common Stock under an employee benefit plan of the Company); and, upon request of the Registered Holder, the Board of Directors (or a representative thereof)
shall promptly notify the Registered Holder of the Fair Market Value per share of Common Stock. Notwithstanding the foregoing, if the Board of Directors has not made such a determination within the three-month period prior to the Exercise Date, then
(A) the Board of Directors shall make a determination of the Fair Market Value per share of the Common Stock within 15 days of a request by the Registered Holder that it do so, and (B) the exercise of this Warrant pursuant to this
subsection 1(b) shall be delayed until such determination is made. 
 (c) Notwithstanding anything to the contrary herein,
each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on such day which is 61 days subsequent to the date on which this Warrant shall have been surrendered to the Company as provided in
subsection 1(a) above (such subsequent day the “Exercise Date”). On the Exercise Date and not before, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in
subsection 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates. Prior to the Exercise Date such person or persons shall continue to be deemed to be owners of this Warrant
and not of any corresponding underlying Warrant Shares. Provided this Warrant is surrendered on or prior to the Expiration Date, this Warrant may be exercised in accordance with the terms and conditions herein notwithstanding the fact that the
Exercise Date may be later than the Expiration Date. This Section 1(c) shall survive the termination or voiding of this Warrant and continue in full force and effect. 
 (d) As soon as practicable after the exercise of this Warrant in full or in part on the Exercise Date, and in any event within 3 business
days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct: 
 (i) a certificate or certificates for the number of full Warrant Shares to which the Registered Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to 

  

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which the Registered Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and 
 (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of Warrant Shares equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the sum of (a) the number of such shares purchased by
the Registered Holder upon such exercise and paid for in cash pursuant to subsection 1(a) (if any) plus (b) the number of Warrant Shares (if any) covered by the portion of this Warrant cancelled in payment of the Purchase Price payable upon
such exercise pursuant to subsection 1(b) above. 
 2. Adjustments. 
 (a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the date on which
this Warrant was first issued (the “Original Issue Date”) effect a subdivision of the outstanding Common Stock, the Purchase Price then in effect immediately before that subdivision shall be proportionately decreased. If the Company shall
at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. 
 (b)
Adjustment for Certain Dividends and Distributions. In the event the Company at any time, or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Purchase Price then in effect immediately before such event shall be decreased as of the time of such issuance or, in the
event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Purchase Price then in effect by a fraction: 
 (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and 
 (2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; 
 provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor,
the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Purchase Price shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions.

  

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 (c) Adjustment in Number of Warrant Shares. When any adjustment is required to be
made in the Purchase Price pursuant to subsections 2(a) or 2(b), the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment.

 (d) Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time
after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company (other than shares of Common Stock)
or in cash or other property (other than cash out of earnings or earned surplus, determined in accordance with generally accepted accounting principles), then and in each such event provision shall be made so that the Registered Holder shall receive
upon exercise hereof, in addition to the number of shares of Common Stock issuable hereunder, the kind and amount of securities of the Company and/or cash and other property which the Registered Holder would have been entitled to receive had this
Warrant been exercised into Common Stock on the date of such event and had the Registered Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained any such securities receivable, giving
application to all adjustments called for during such period under this Section 2 with respect to the rights of the Registered Holder. 
 (e) Adjustment for Mergers or Reorganizations, etc. If there shall occur any reorganization, recapitalization, consolidation or merger involving the Company in which the Common Stock is converted into or
exchanged for securities, cash or other property (other than a transaction covered by subsections 2(a), 2(b) or 2(d)), or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, following any such reorganization, recapitalization, consolidation or merger, the Registered Holder shall receive upon
exercise hereof the kind and amount of securities, cash or other property which the Registered Holder would have been entitled to receive if, immediately prior to such reorganization, recapitalization, consolidation or merger, the Registered Holder
had held the number of shares of Common Stock subject to this Warrant. In any such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Registered Holder, to the end that the provisions set forth in this Section 2 (including provisions with respect to changes in and other adjustments of the Purchase Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any securities, cash or other property thereafter deliverable upon the exercise of this Warrant. The Company will not effect any consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume, by written instrument executed and mailed or delivered to the Holder
at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets (including cash) as, in accordance with the foregoing provisions, the Holder may be
entitled to receive. 
  

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 (f) Adjustments for Prepayment of 10% Senior Fixed Rate Secured Bond.
Simultaneously with the issuance of this Warrant, StockerYale (UK) Limited, a direct subsidiary of the Company issued a 10% Senior Fixed Rate Secured Bond (the “Bond”) to the Registered Holder in the original principal amount of
US$4,750,000. If StockerYale (UK) Limited shall prepay all amounts outstanding under the Bond prior to the third anniversary of the date hereof, then the number of Warrant Shares purchasable upon exercise of this Warrant shall be changed to the
following numbers: (i) 1,900,000 if the Bond is repaid in full prior to the first anniversary of the date hereof; (ii) 2,018,750 if the Bond is repaid in full prior to the second anniversary of the date hereof; and (iii) 2,137,500 if
the Bond is repaid in full prior to the third anniversary of the date hereof. 
 (g) Certificate as to Adjustments.
Upon the occurrence of each adjustment or readjustment of the Purchase Price pursuant to this Section 2, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the
Registered Holder a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property for which this Warrant shall be exercisable and the Purchase Price) and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Registered Holder, furnish or cause to be furnished to the Registered Holder a certificate setting forth (i) the Purchase Price
then in effect and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the exercise of this Warrant. 
 3. Fractional Shares. The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value per share of Common Stock, as determined pursuant to subsection 1(b) above. 
 4. Requirements for Transfer. 
 (a) This Warrant and the Warrant Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities Act of 1933, as amended (the “Act”), or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to
the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Act. 
 (b)
Notwithstanding the foregoing, no registration or opinion of counsel shall be required for (i) a transfer by a Registered Holder which is a corporation to a wholly owned subsidiary of such corporation, a transfer by a Registered Holder which is
a partnership to a partner of such partnership or a retired partner of such partnership or to the estate of any such partner or retired partner, or a transfer by a Registered Holder which is a limited liability company to a member of such limited
liability company or a retired member or to the estate of any such member or retired member, provided that the transferee in each case agrees in writing to be subject to the terms of this Section 4, or (ii) a transfer made in accordance
with Rule 144 under the Act. 
  

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 (c) Each certificate representing Warrant Shares shall bear a legend substantially in the
following form: 
 “The securities represented by this certificate have not been registered under the Securities Act of 1933, as
amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until such securities are registered under such Act or an opinion of counsel satisfactory to the Company is obtained to the effect that such
registration is not required.” 
 The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the
request of the holder thereof, at such time as they become eligible for resale pursuant to Rule 144(k) under the Act. 
 5. No
Impairment. The Company will not, by amendment of its charter or through reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment. 
 6. Notices of Record Date, etc. In the event: 
 (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any
other right; or 
 (b) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company,
any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity and its Common Stock is not converted into or exchanged for any other securities or
property), or any transfer of all or substantially all of the assets of the Company; or 
 (c) of the voluntary or involuntary
dissolution, liquidation or winding-up of the Company, 
 then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder a
notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time
deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such 

  

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reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten days
prior to the record date or effective date for the event specified in such notice. 
 7. Reservation of Stock. The Company will at all
times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares and other securities, cash and/or property, as from time to time shall be issuable upon the exercise of this Warrant.

 8. Exchange of Warrants. Upon the surrender by the Registered Holder, properly endorsed, to the Company at the principal office of
the Company, the Company will, subject to the provisions of Section 4 hereof, issue and deliver to or upon the order of such Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of the Registered Holder or
as the Registered Holder (upon payment by the Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock (or other securities, cash and/or property)
then issuable upon exercise of this Warrant. 
 9. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company,
or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor. 
 10. Transfers, etc. 
 (a) The Company will maintain a register containing the name and
address of the Registered Holder of this Warrant. The Registered Holder may change its or his address as shown on the warrant register by written notice to the Company requesting such change. 
 (b) Subject to the provisions of Section 4 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in the form of Exhibit II hereto) at the principal office of the Company. 
 (c) Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder as the absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 
 11. Mailing of Notices, etc. All notices and other communications from the Company to the Registered Holder shall be mailed by first-class
certified or registered mail, postage prepaid, to the address last furnished to the Company in writing by the Registered Holder. All notices and other communications from the Registered Holder or in connection herewith to the Company shall be mailed
by first-class certified or registered mail, postage prepaid, to the Company at its principal office at 32 Hampshire Road, Salem, New Hampshire 03079, Attn: Chief Financial Officer. If the Company should at any time change the location of its
principal 

  

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office to a place other than as set forth above, it shall give prompt written notice to the Registered Holder and thereafter all references in this Warrant
to the location of its principal office at the particular time shall be as so specified in such notice. 
 12. No Rights as
Stockholder. Until the exercise of this Warrant, the Registered Holder shall not have or exercise any rights by virtue hereof as a stockholder of the Company. Notwithstanding the foregoing, in the event (i) the Company effects a split of
the Common Stock by means of a stock dividend and the Purchase Price of and the number of Warrant Shares are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), and (ii) the
Registered Holder exercises this Warrant between the record date and the distribution date for such stock dividend, the Registered Holder shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend. 
 13. Change or Waiver. Any term of this Warrant may be changed or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought. 
 14. Section Headings. The section headings in this Warrant are for the convenience of the parties and in no way alter, modify, amend, limit or
restrict the contractual obligations of the parties. 
 15. Governing Law. This Warrant will be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts (without reference to the conflicts of law provisions thereof). 
  

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 EXECUTED as of the Date of Issuance indicated above. 
  

			
	 STOCKERYALE, INC.

		
	 By:
	 	 /s/ Mark Blodgett

	 Title:
	 	 Chairman & CEO