Document:

StockerYale Exhibit C

EXHIBIT B

 EXHIBIT B

 NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
  EXERCISABLE HAVE 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. 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 SECURED BY SUCH SECURITIES.

 StockerYale, Inc.

WARRANT

	
  Warrant No. [                         
  ]         
  	
  Dated: February 3, 2004

StockerYale, Inc., a Massachusetts corporation (the "Company"), hereby certifies
 that, for value received, [Name of Holder] or its registered assigns (the "Holder"), is entitled to
 purchase from the Company up to a total of [ ] shares of common stock, $0.001 par value per share
 (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the
 "Warrant Shares") at an exercise price equal to $1.50 per Share (as adjusted from time to time as
 provided in Section 9, the "Exercise Price"), at any time and from time to time from and after the
 date hereof and through and including the date that is five years from the date of issuance hereof
 (the "Expiration Date"), and subject to the following terms and conditions. This Warrant (this
 "Warrant") is one of a series of similar warrants issued pursuant to that certain Securities
 Purchase Agreement, dated as of the date hereof, by and among the Company and the Purchasers
 identified therein (the "Purchase Agreement"). All such warrants are referred to herein,
 collectively, as the "Warrants."

 
    1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given
  to such terms in the Purchase Agreement.

_____________________

 [1]25% warrant coverage

     	
     	
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    2. Registration of Warrant. The Company shall register this Warrant, upon records
  to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the
  record Holder hereof from time to time. The Company may deem and treat the registered Holder of
  this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any
  distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
  
 3. Registration of Transfers. The Company shall register the transfer of any portion of this
 Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment
 attached hereto duly completed and signed, to the Company at its address specified herein (or to
 any third party designated by the Company to act as a transfer agent for the Warrants). Upon any
 such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of
 this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so
 transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of
 this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance
 of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of
 all of the rights and obligations of a holder of a Warrant.
  
  4. Exercise and Duration of Warrants.

 
  
   (a) This Warrant shall be exercisable by the registered Holder at any time and from time to time
   on or after the six month anniversary of the date hereof to and including the Expiration Date. At
   6:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised
   prior thereto shall be and become void and of no value; provided that, if the average of the
   Closing Prices for the five Trading Days immediately prior to (but not including) the Expiration
   Date exceeds the Exercise Price on the Expiration Date, then this Warrant shall be deemed to have
   been exercised in full (to the extent not previously exercised) on a "cashless exercise" basis at
   6:30 P.M. New York City time on the Expiration Date if a "cashless exercise" may occur at such
   time pursuant to Section 10 below. Notwithstanding anything to the contrary herein, the
   Expiration Date shall be extended for each day following the Effective Date that the Registration
   Statement is not effective. 

   (b) A Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in
   the form attached hereto (the "Exercise Notice"), appropriately completed and duly signed,
   and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant
   is being exercised (which may take the form of a "cashless exercise" if so indicated in the
   Exercise Notice and if a "cashless exercise" may occur at such time pursuant to this Section 10
   below), and the date such items are delivered to the Company (as determined in accordance with
   the notice provisions hereof) is an "Exercise Date." The Holder shall not be required to
   deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of
   the Exercise Notice shall have the same effect as cancellation of the original Warrant and
   issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant
   Shares. The Holder shall deliver the Warrant to the Company within a reasonable time after
   exercise of the Warrant or an affidavit of loss with customary indemnification provisions.

  
  5. Delivery of Warrant Shares. 

 
  (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than three
   Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or
   upon the written order of the Holder and in such name or names as the Holder may designate, a
   certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends
   unless a registration statement covering the resale of the Warrant Shares and naming the Holder
   as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely
   transferable without volume restrictions pursuant to Rule 144(k) under the Securities Act. The
   Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to
   have become holder of record of such Warrant Shares as of the Exercise Date. The Company shall,
   upon request of the Holder, use commercially reasonable efforts to deliver Warrant Shares, if
   delivered without a restrictive legend, hereunder electronically through the Depository Trust
   Corporation or another established clearing corporation performing similar functions.
(b)
   This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the
   number of Warrant Shares. Upon surrender of this Warrant following one or more partial exercises,
   the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right
   to purchase the remaining number of Warrant Shares.

    	
     	
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  (c) The Company's obligations to issue and deliver Warrant Shares in accordance with the terms
   hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to
   enforce the same, the recovery of any judgment against any Person or any action to enforce the
   same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or
   alleged breach by the Holder or any other Person of any obligation to the Company or any
   violation or alleged violation of law by the Holder or any other Person, and irrespective of any
   other circumstance which might otherwise limit such obligation of the Company to the Holder in
   connection with the issuance of Warrant Shares. Nothing herein shall limit a Holder's right to
   pursue any other remedies available to it hereunder, at law or in equity including, without
   limitation, a decree of specific performance and/or injunctive relief with respect to the
   Company's failure to timely deliver certificates representing shares of Common Stock upon
   exercise of the Warrant as required pursuant to the terms hereof.

   6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
 shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for
 any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense
 in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by
 the Company; provided, however, that the Company shall not be required to pay any tax which may be
 payable in respect of any transfer involved in the registration of any certificates for Warrant
 Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all
 other tax liability that may arise as a result of holding or transferring this Warrant or receiving
 Warrant Shares upon exercise hereof.
  
  7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the
 Company shall issue or cause to be issued in exchange and substitution for and upon cancellation
 hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of
 evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary
 and reasonable bond or indemnity, if requested. Applicants for a New Warrant under such
 circumstances shall also comply with such other reasonable regulations and procedures and pay such
 other reasonable third-party costs as the Company may prescribe.
  
  8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve
 and keep available out of the aggregate of its authorized but unissued and otherwise unreserved
 Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this
 Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable
 upon the exercise of this entire Warrant, free from preemptive rights or any other contingent
 purchase rights of persons other than the Holder (after giving effect to the adjustments and
 restrictions of Section 9, if any). The Company covenants that all Warrant Shares so
 issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in
 accordance with the terms hereof, be duly and validly authorized, issued and fully paid and
 nonassessable. The Company will take all such action as may be necessary to assure that such shares
 of Common Stock may be issued as provided herein without violation of any applicable law or
 regulation, or of any requirements of any securities exchange or automated quotation system upon
 which the Common Stock may be listed.

    	
     	
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  9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of
  this Warrant are subject to adjustment from time to time as set forth in this Section 9.

 
  (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
   outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on
   any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding
   shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of
   Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be
   multiplied by a fraction of which the numerator shall be the number of shares of Common Stock
   outstanding immediately before such event and of which the denominator shall be the number of
   shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to
   clause (i) of this paragraph shall become effective immediately after the record date for the
   determination of stockholders entitled to receive such dividend or distribution (subject to such
   stock dividend actually being paid), and any adjustment pursuant to clause (ii) or (iii) of this
   paragraph shall become effective immediately after the effective date of such subdivision or
   combination.

   (b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding,
   distributes to holders of Common Stock (i) evidences of its indebtedness, (ii) any security
   (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or
   warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed
   Property"), then in each such case the Exercise Price in effect immediately prior to the
   record date fixed for determination of stockholders entitled to receive such distribution shall
   be adjusted (effective on such record date) to equal the product of such Exercise Price times a
   fraction of which the denominator shall be the average of the Closing Prices for the five Trading
   Days immediately prior to (but not including) such record date and of which the numerator shall
   be such average less the then fair market value of the Distributed Property distributed in
   respect of one outstanding share of Common Stock, as determined by the Company's independent
   certified public accountants that regularly examine the financial statements of the Company, (an
   "Appraiser"). In such event, the Holder, after receipt of the determination by the
   Appraiser, shall have the right to select an additional appraiser (which shall be a nationally
   recognized accounting firm), in which case such fair market value shall be deemed to equal the
   average of the values determined by each of the Appraiser and such appraiser. As an alternative
   to the foregoing adjustment to the Exercise Price, at the request of the Holder delivered before
   the 90th day after such record date, the Company will deliver to such Holder, within five Trading
   Days after such request (or, if later, on the effective date of such distribution), the
   Distributed Property that such Holder would have been entitled to receive in respect of the
   Warrant Shares for which this Warrant could have been exercised immediately prior to such record
   date. If such Distributed Property is not delivered to a Holder pursuant to the preceding
   sentence, then upon expiration of or any exercise of the Warrant that occurs after such record
   date, such Holder shall remain entitled to receive, in addition to the Warrant Shares otherwise
   issuable upon such exercise (if applicable), such Distributed Property.

    	
     	
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  (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the
   Company effects any merger or consolidation of the Company with or into another Person, (ii) the
   Company effects any sale of all or substantially all of its assets in one or a series of related
   transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person)
   is completed pursuant to which holders of Common Stock are permitted to tender or exchange their
   shares for other securities, cash or property, or (iv) the Company effects any reclassification
   of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
   effectively converted into or exchanged for other securities, cash or property (other than as a
   result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above)
   (in any such case, a "Fundamental Transaction"), then the Holder shall have the right
   thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities,
   cash or property as it would have been entitled to receive upon the occurrence of such
   Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the
   holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate
   Consideration"). The aggregate Exercise Price for this Warrant will not be affected by any
   such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among
   the Alternate Consideration in a reasonable manner reflecting the relative value of any different
   components of the Alternate Consideration. If holders of Common Stock are given any choice as to
   the securities, cash or property to be received in a Fundamental Transaction, then the Holder
   shall be given the same choice as to the Alternate Consideration it receives upon any exercise of
   this Warrant following such Fundamental Transaction. At the Holder's request, any successor to
   the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new
   warrant consistent with the foregoing provisions and evidencing the Holder's right to purchase
   the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of
   any agreement pursuant to which a Fundamental Transaction is effected shall include terms
   requiring any such successor or surviving entity to comply with the provisions of this paragraph
   (c) and insuring that the Warrant (or any such replacement security) will be similarly adjusted
   upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental
   Transaction constitutes or results in a "going private" transaction as defined in Rule 13e-3
   under the Exchange Act, then the Company (or any such successor or surviving entity) will redeem
   this Warrant from the Holder for a purchase price, payable in cash on the closing date of such
   "going private" transaction, equal to the Black Scholes value of the remaining unexercised
   portion of this Warrant on the closing date of such "going private" transaction. 
(d) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to
  paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be purchased upon
  exercise of this Warrant shall be increased or decreased proportionately, so that after such
  adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of
  Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to
  such adjustment.
(d) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the
  nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any
  given time shall not include shares owned or held by or for the account of the Company, and the
  disposition of any such shares shall be considered an issue or sale of Common Stock.
(d) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the
  Company at its expense will promptly compute such adjustment in accordance with the terms of this
  Warrant and prepare a certificate setting forth such adjustment, including a statement of the
  adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable
  upon exercise of this Warrant (as applicable), describing the transactions giving rise to such
  adjustments and showing in detail the facts upon which such adjustment is based. Upon written
  request, the Company will promptly deliver a copy of each such certificate to the Holder and to
  the Company's Transfer Agent.

    	
     	
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  (g) Notice of Corporate Events. If the Company (i) declares a dividend or any other
   distribution of cash, securities or other property in respect of its Common Stock, including
   without limitation, any granting of rights or warrants to subscribe for or purchase any capital
   stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement
   contemplating or solicits stockholder approval for any Fundamental Transaction or (iii)
   authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company,
   then the Company shall deliver to the Holder a notice describing the material terms and
   conditions of such transaction, at least 20 calendar days prior to the applicable record or
   effective date on which a Person would need to hold Common Stock in order to participate in or
   vote with respect to such transaction, and the Company will take all steps reasonably necessary
   in order to insure that the Holder is given the practical opportunity to exercise this Warrant
   prior to such time so as to participate in or vote with respect to such transaction; provided,
   however, that the failure to deliver such notice or any defect therein shall not affect the
   validity of the corporate action required to be described in such notice. 

  
  10. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately available
  funds; provided, however, that the Holder may satisfy its obligation to pay the Exercise Price
  through a "cashless exercise," in which event the Company shall issue to the Holder the number of
  Warrant Shares determined as follows:

 
  	
 	
 	
    
  X = Y [(A-B)/A]
	
    where: 
    
	
 	
 
	
 	
 	
    
  X = the number of Warrant Shares to be issued to the Holder.
	
 	
 	
    
  Y = the number of Warrant Shares with respect to which this Warrant is being exercised.
	
 	
 	
    
  A = the average of the Closing Prices for the five Trading Days immediately prior to (but not
  including) the Exercise Date.
	
 	
 	
    
  B = the Exercise Price.

  For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and
  acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to
  have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to
  have commenced, on the date this Warrant was originally issued pursuant to the Purchase Agreement.
  
  11. Limitation on Exercise. Notwithstanding anything to the contrary contained herein, the
 number of shares of Common Stock that may be acquired by the Holder upon any exercise of this
 Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that,
 following such exercise (or other issuance), the total number of shares of Common Stock then
 beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial
 ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of
 the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of
 issued and outstanding shares of Common Stock (including for such purpose the shares of Common
 Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in
 accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
 thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the
 Holder that it has evaluated the limitation set forth in this paragraph and determined that
 issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under
 this paragraph. The Company's obligation to issue shares of Common Stock in excess of the
 limitation referred to in this Section shall be suspended (and shall not terminate or expire
 notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common
 Stock may be issued in compliance with such limitation, but in no event later than the Expiration
 Date. By written notice to the Company, the Holder may waive the provisions of this Section or
 increase or decrease the Maximum Percentage to any other percentage specified in such notice, but
 (i) any such waiver or increase will not be effective until the 61st day after such notice is
 delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the
 Holder and not to any other holder of Warrants.

     	
     	
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  (b) Notwithstanding anything to the contrary contained herein, if the Trading Market is the NASDAQ
  National Market, or any other market or exchange with similar applicable rules, then the maximum
  number of shares of Common Stock that the Company may issue pursuant to the Transaction Documents
  at an effective purchase price less than the Closing Price on the Trading Day immediately
  preceding the Closing Date (or, if greater, the book value per share of Common Stock calculated in
  accordance with the Company's most recently filed periodic report with the Commission) equals
  2,982,829 shares (the "Issuable Maximum"), unless the Company obtains stockholder approval in
  accordance with the rules and regulations of such Trading Market. If, at the time any Holder
  requests an exercise of any of the Warrants, the Actual Minimum (excluding any shares issued or
  issuable at an effective purchase price in excess of the Closing Price on the Trading Day
  immediately preceding the Closing Date (or, if greater, the book value per share of Common Stock
  calculated in accordance with the Company's most recently filed SEC periodic report)) exceeds the
  Issuable Maximum (and if the Company has not previously obtained the required stockholder
  approval), then the Company shall issue to the Holder requesting such exercise a number of shares
  of Common Stock not exceeding such Holder's pro rata portion of the Issuable Maximum (based on
  such Holder's share (vis-a-vis other Holders) of the aggregate purchase price paid under the
  Purchase Agreement and taking into account any Warrant Shares previously issued to such Holder).
  For the purposes hereof, "Actual Minimum" shall mean, as of any date, the maximum aggregate number
  of shares of Common Stock then issued or potentially issuable in the future pursuant to the
  Transaction Documents, including any Underlying Shares issuable upon exercise in full of all
  Warrants, without giving effect to (x) any limits on the number of shares of Common Stock that may
  be owned by a Holder at any one time, or (y) any additional Underlying Shares that could be
  issuable as a result of any future possible adjustments made under Section 9(d).

    
  12. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional
  Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except
  for the provisions of this Section, be issuable upon exercise of this Warrant, the number of
  Warrant Shares to be issued will be rounded up to the nearest whole share.
  
  13. Notices. Any and all notices or other communications or deliveries hereunder (including
  without limitation any Exercise Notice) shall be in writing and shall be deemed given and
  effective on the earliest of (i) 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, (ii) 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, (iii) the Trading Day following the date of mailing, if sent by nationally recognized
  overnight courier service, or (iv) upon actual receipt by the party to whom such notice is
  required to be given. The address for such notices or communications shall be as set forth in the
  Purchase Agreement.
  
  14. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days'
  notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the
  Company or any new warrant agent may be merged or any corporation resulting from any consolidation
  to which the Company or any new warrant agent shall be a party or any corporation to which the
  Company or any new warrant agent transfers substantially all of its corporate trust or
  stockholders services business shall be a successor warrant agent under this Warrant without any
  further act. Any such successor warrant agent shall promptly cause notice of its succession as
  warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's
  last address as shown on the Warrant Register.
  
  15. Miscellaneous.

 
  
  (a) Subject to the restrictions on transfer set forth on the first page hereof, this Warrant may
  be assigned by the Holder. This Warrant may not be assigned by the Company except to a successor
  in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the
  benefit of the parties hereto and their respective successors and assigns. Subject to the
  preceding sentence, nothing in this Warrant shall be construed to give to any Person other than
  the Company and the Holder any legal or equitable right, remedy or cause of action under this
  Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and
  their successors and assigns.

     	
     	
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  (b) The Company will not, by amendment of its governing documents or through any 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 reasonably necessary or appropriate in order to protect the rights of
  the Holder against impairment. Without limiting the generality of the foregoing, the Company (i)
  will not increase the par value of any Warrant Shares above the amount payable therefor on such
  exercise, (ii) will take all such action as may be reasonably necessary or appropriate in order
  that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the
  exercise of this Warrant, and (iii) will not close its stockholder books or records in any manner
  which interferes with the timely exercise of this Warrant.

  (c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
  VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
  ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH PARTY 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 HEREUNDER OR 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, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO
  THE JURISDICTION OF ANY SUCH COURT, 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.

  (d) The headings herein are for convenience only, do not constitute a part of this Warrant and
  shall not be deemed to limit or affect any of the provisions hereof.

  (e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in
  any respect, the validity and enforceability of the remaining terms and provisions of this Warrant
  shall not in any way be affected or impaired thereby and the parties will attempt in good faith to
  agree upon a valid and enforceable provision which shall be a commercially reasonable substitute
  therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

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     	   2004 Form 8-K 
     	

 
  IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized
  officer as of the date first indicated above.

  

	
  
  STOCKERYALE, INC.
	
 
	
  By: _______________________________________
	
  Name: ____________________________________
	
  Title: ______________________________________

   

  

    

  

     	
     	
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     	   2004 Form 8-K 
     	

 
  FORM OF EXERCISE NOTICE

  (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the
  foregoing Warrant)

  To: STOCKERYALE, INC.

  The undersigned is the Holder of Warrant No. _______ (the "Warrant") issued by StockerYale, Inc.,
  a Delaware corporation (the "Company"). Capitalized terms used herein and not otherwise defined
  have the respective meanings set forth in the Warrant.

 
  
  1. The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares.

  2. The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares
  pursuant to the Warrant.

  3. The Holder intends that payment of the Exercise Price shall be made as (check one):

   
     
      
  ____ "Cash Exercise" under Section 10

  ____ "Cashless Exercise" under Section 10

    

  

  
  4. If the holder has elected a Cash Exercise, the holder shall pay the sum of $____________ to the
  Company in accordance with the terms of the Warrant.

  5. Pursuant to this exercise, the Company shall deliver to the holder _______________ Warrant
  Shares in accordance with the terms of the Warrant.

  6. Following this exercise, the Warrant shall be exercisable to purchase a total of ______________
  Warrant Shares.

  

 
   

	
 	
 	
 
	
  Dated: ________________________, _______	
 	
  Name of Holder: ______________________________________
	
 	
 	
 
	
 	
 	
  (Print) ______________________________________________
	
 	
 	
 
	
 	
 	
  By: ________________________________________________
	
 	
 	
  Name: _____________________________________________
	
 	
 	
  Title: _______________________________________________
	
 	
 	
 
	
 	
 	
  (Signature must conform in all respects to name of holder as specified on the face
  of the Additional Investment Right)

 

     	
     	
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     	   2004 Form 8-K 
     	

    
  FORM OF ASSIGNMENT

  [To be completed and signed only upon transfer of Warrant]

  FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
  ________________________________ the right represented by the within Warrant to purchase
  ____________ shares of Common Stock of StockerYale, Inc. to which the within Warrant relates and
  appoints ________________ attorney to transfer said right on the books of StockerYale, Inc. with
  full power of substitution in the premises.

 

	

	
 	
 	
 
	
  Dated: ___________________, ______	
 	
  Signature: ________________________________
	
 	
 	
 
	
 	
 	
  
 (Signature must conform in all respects to name of holder as specified on the face of the
 Additional Investment Right)
	
 	
 	
 
	
 	
 	
  Street: ___________________________________
	
 	
 	
  Street 2: _________________________________
	
 	
 	
  City: ____________________________________
	
 	
 	
  State: ___________________________________
	
 	
 	
  Zip/Postal Code: __________________________
	
 	
 	
  Country: _________________________________
	
 	
 	
 
	
  In the presence of:	
 	
 
	
  _______________________________________	
 	
 

   

   	
     	
     	   Exhibit C   /  STKR 
     	
	
     	
     	   END
	
     	
     	   2004 Form 8-KStockerYale Exhibit C

EXHIBIT C

 EXHIBIT C

 NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
  EXERCISABLE HAVE 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. 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 SECURED BY SUCH SECURITIES. 

 StockerYale, Inc.

ADDITIONAL INVESTMENT RIGHT

	
  Warrant No. [                         
  ]         
  	
  Dated: February 3, 2004

StockerYale, Inc., a Massachusetts corporation (the "Company"), hereby certifies
 that, for value received, [Name of Holder] or its registered assigns (the "Holder"), is entitled to
 purchase from the Company up to a total of [ ] shares of common stock, $0.001 par value per share
 (the "Common Stock"), of the Company (each such share, a "Additional Investment Right Share" and
 all such shares, the "Additional Investment Right Shares") at an exercise price equal to $1.15 per
 share (as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time
 and from time to time from and after the date hereof and through and including the 90th Trading Day
 from the Effective Date (the "Expiration Date"), and subject to the following terms and conditions.
 This Additional Investment Right (this "Additional Investment Right") is one of a series of similar
 Additional Investment Rights issued pursuant to that certain Securities Purchase Agreement, dated
 as of the date hereof, by and among the Company and the Purchasers identified therein (the
 "Purchase Agreement"). All such Additional Investment Rights are referred to herein, collectively,
 as the "Additional Investment Rights."

 
 

 

    1. Definitions. In addition to the terms defined elsewhere in this Additional
  Investment Right, capitalized terms that are not otherwise defined herein have the meanings given
  to such terms in the Purchase Agreement.

     	
     	
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     	   2004 Form 8-K 
     	

    2. Registration of Additional Investment Right. The Company shall register
  this Additional Investment Right, upon records to be maintained by the Company for that purpose
  (the "Additional Investment Right Register"), in the name of the record Holder hereof from
  time to time. The Company may deem and treat the registered Holder of this Additional Investment
  Right as the absolute owner hereof for the purpose of any exercise hereof or any distribution to
  the Holder, and for all other purposes, absent actual notice to the contrary.

   3. Registration of Transfers. The Company shall register the transfer of any
 portion of this Additional Investment Right in the Additional Investment Right Register, upon
 surrender of this Additional Investment Right, with the Form of Assignment attached hereto duly
 completed and signed, to the Transfer Agent or to the Company at its address specified herein. Upon
 any such registration or transfer, a new warrant to purchase Common Stock, in substantially the
 form of this Additional Investment Right (any such new warrant, a "New Additional Investment
 Right"), evidencing the portion of this Additional Investment Right so transferred shall be
 issued to the transferee and a New Additional Investment Right evidencing the remaining portion of
 this Additional Investment Right not so transferred, if any, shall be issued to the transferring
 Holder. The acceptance of the New Additional Investment Right by the transferee thereof shall be
 deemed the acceptance by such transferee of all of the rights and obligations of a holder of a
 Additional Investment Right.

   4. Exercise and Duration of Additional Investment Rights.

 
  (a) This Additional Investment Right shall be exercisable by the registered Holder at any time
   and from time to time on or after the date hereof to and including the Expiration Date. At 5:30
   P.M., New York City time on the Expiration Date, the portion of this Additional Investment Right
   not exercised prior thereto shall be and become void and of no value. 

   (b) The Holder may exercise this Additional Investment Right by delivering to the Company (i) an
   exercise notice, in the form attached hereto (the "Exercise Notice"), appropriately
   completed and duly signed, and (ii) payment of the Exercise Price for the number of Additional
   Investment Right Shares as to which this Additional Investment Right is being exercised (which
   may take the form of a "cashless exercise" if so indicated in the Exercise Notice and if a
   "cashless exercise" may occur at such time pursuant to Section 10 below), and the date such items
   are delivered to the Company (as determined in accordance with the notice provisions hereof) is
   an "Exercise Date." The Holder shall not be required to deliver the original Additional
   Investment Right in order to effect an exercise hereunder. Execution and delivery of the Exercise
   Notice shall have the same effect as cancellation of the original Additional Investment Right and
   issuance of a New Additional Investment Right evidencing the right to purchase the remaining
   number of Additional Investment Right Shares.

   5. Delivery of Additional Investment Right Shares. 

 
  (a) Upon exercise of this Additional Investment Right, the Company shall promptly (but in no
   event later than three Trading Days after the Exercise Date) issue or cause to be issued and
   cause to be delivered to or upon the written order of the Holder and in such name or names as the
   Holder may designate, a certificate for the Additional Investment Right Shares issuable upon such
   exercise, free of restrictive legends unless a registration statement covering the resale of the
   Additional Investment Right Shares and naming the Holder as a selling stockholder thereunder is
   not then effective and the Additional Investment Right Shares are not freely transferable without
   volume restrictions pursuant to Rule 144 under the Securities Act. The Holder, or any Person so
   designated by the Holder to receive Additional Investment Right Shares, shall be deemed to have
   become holder of record of such Additional Investment Right Shares as of the Exercise Date. The
   Company shall, upon request of the Holder, use its best efforts to deliver Additional Investment
   Right Shares hereunder electronically through the Depository Trust Corporation or another
   established clearing corporation performing similar functions.

   (b) This Additional Investment Right is exercisable, either in its entirety or, from time to
   time, for a portion of the number of Additional Investment Right Shares. Upon surrender of this
   Additional Investment Right following one or more partial exercises, the Company shall issue or
   cause to be issued, at its expense, a New Additional Investment Right evidencing the right to
   purchase the remaining number of Additional Investment Right Shares.

    	
     	
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     	   2004 Form 8-K 
     	

 

 
  
   (c) The Company's obligations to issue and deliver Additional Investment Right Shares in
   accordance with the terms hereof are absolute and unconditional, irrespective of any action or
   inaction by the Holder to enforce the same the recovery of any judgment against any Person or any
   action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination,
   or any breach or alleged breach by the Holder or any other Person of any obligation to the
   Company or any violation or alleged violation of law by the Holder or any other Person, and
   irrespective of any other circumstance which might otherwise limit such obligation of the Company
   to the Holder in connection with the issuance of Additional Investment Right Shares. Nothing
   herein shall limit a Holder's right to pursue any other remedies available to it hereunder, at
   law or in equity including, without limitation, a decree of specific performance and/or
   injunctive relief with respect to the Company's failure to timely deliver certificates
   representing shares of Common Stock upon exercise of the Additional Investment Right as required
   pursuant to the terms hereof.

    6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
  shares of Common Stock upon exercise of this Additional Investment Right shall be made without
  charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other
  incidental tax or expense in respect of the issuance of such certificates, all of which taxes and
  expenses shall be paid by the Company; provided, however, that the Company shall not be required
  to pay any tax which may be payable in respect of any transfer involved in the registration of any
  certificates for Additional Investment Right Shares or Additional Investment Rights in a name
  other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all
  other tax liability that may arise as a result of holding or transferring this Additional
  Investment Right or receiving Additional Investment Right Shares upon exercise hereof.
  
 7. Replacement of Additional Investment Right. If this Additional Investment Right is
 mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and
 substitution for and upon cancellation hereof, or in lieu of and substitution for this Additional
 Investment Right, a New Additional Investment Right, but only upon receipt of evidence reasonably
 satisfactory to the Company of such loss, theft or destruction and customary and reasonable bond or
 indemnity, if requested. Applicants for a New Additional Investment Right under such circumstances
 shall also comply with such other reasonable regulations and procedures and pay such other
 reasonable third-party costs as the Company may prescribe.
   8. Reservation of
 Additional Investment Right Shares. The Company covenants that it will at all times reserve and
 keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common
 Stock, solely for the purpose of enabling it to issue Additional Investment Right Shares upon
 exercise of this Additional Investment Right as herein provided, the number of Additional
 Investment Right Shares which are then issuable and deliverable upon the exercise of this entire
 Additional Investment Right, free from preemptive rights or any other contingent purchase rights of
 persons other than the Holder (after giving effect to the adjustments and restrictions of Section
 9, if any). The Company covenants that all Additional Investment Right Shares so issuable and
 deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance
 with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The
 Company will take all such action as may be necessary to assure that such shares of Common Stock
 may be issued as provided herein without violation of any applicable law or regulation, or of any
 requirements of any securities exchange or automated quotation system upon which the Common Stock
 may be listed.

    	
     	
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     	   2004 Form 8-K 
     	

 

    9. Certain Adjustments. The Exercise Price and number of
 Additional Investment Right Shares issuable upon exercise of this Additional Investment Right are
 subject to adjustment from time to time as set forth in this Section 9.

 
 (a) Stock Dividends and Splits. If the Company, at any time while this Additional
  Investment Right is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes
  a distribution on any class of capital stock that is payable in shares of Common Stock, (ii)
  subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines
  outstanding shares of Common Stock into a smaller number of shares, then in each such case the
  Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of
  shares of Common Stock outstanding immediately before such event and of which the denominator
  shall be the number of shares of Common Stock outstanding immediately after such event. Any
  adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after
  the record date for the determination of stockholders entitled to receive such dividend or
  distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
  effective immediately after the effective date of such subdivision or combination.

  (b) Pro Rata Distributions. If the Company, at any time while this Additional Investment
  Right is outstanding, distributes to holders of Common Stock (i) evidences of its indebtedness,
  (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph),
  (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in
  each case, "Distributed Property"), then in each such case the Exercise Price in effect
  immediately prior to the record date fixed for determination of stockholders entitled to receive
  such distribution shall be adjusted (effective on such record date) to equal the product of such
  Exercise Price times a fraction of which the denominator shall be the average of the Closing
  Prices for the five Trading Days immediately prior to (but not including) such record date and of
  which the numerator shall be such average less the then fair market value of the Distributed
  Property distributed in respect of one outstanding share of Common Stock, as determined by the
  Company's independent certified public accountants that regularly examine the financial statements
  of the Company, (an "Appraiser"). In such event, the Holder, after receipt of the
  determination by the Appraiser, shall have the right to select an additional appraiser (which
  shall be a nationally recognized accounting firm), in which case such fair market value shall be
  deemed to equal the average of the values determined by each of the Appraiser and such appraiser.
  As an alternative to the foregoing adjustment to the Exercise Price, at the request of the Holder
  delivered before the 90th day after such record date, the Company will deliver to such Holder,
  within five Trading Days after such request (or, if later, on the effective date of such
  distribution), the Distributed Property that such Holder would have been entitled to receive in
  respect of the Additional Investment Right Shares for which this Additional Investment Right could
  have been exercised immediately prior to such record date. If such Distributed Property is not
  delivered to a Holder pursuant to the preceding sentence, then upon expiration of or any exercise
  of the Additional Investment Right that occurs after such record date, such Holder shall remain
  entitled to receive, in addition to the Additional Investment Right Shares otherwise issuable upon
  such exercise (if applicable), such Distributed Property.

 

    	
     	
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     	   2004 Form 8-K 
     	

 

 
 
  (c) Fundamental Transactions. If, at any time while this Additional Investment Right is
  outstanding, (i) the Company effects any merger or consolidation of the Company with or into
  another Person, (ii) the Company effects any sale of all or substantially all of its assets in one
  or a series of related transactions, (iii) any tender offer or exchange offer (whether by the
  Company or another Person) is completed pursuant to which holders of Common Stock are permitted to
  tender or exchange their shares for other securities, cash or property, or (iv) the Company
  effects any reclassification of the Common Stock or any compulsory share exchange pursuant to
  which the Common Stock is effectively converted into or exchanged for other securities, cash or
  property (other than as a result of a subdivision or combination of shares of Common Stock covered
  by Section 9(a) above) (in any such case, a "Fundamental Transaction"), then the Holder
  shall have the right thereafter to receive, upon exercise of this Additional Investment Right, the
  same amount and kind of securities, cash or property as it would have been entitled to receive
  upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such
  Fundamental Transaction, the holder of the number of Additional Investment Right Shares then
  issuable upon exercise in full of this Additional Investment Right (the "Alternate
  Consideration"). The aggregate Exercise Price for this Additional Investment Right will not be
  affected by any such Fundamental Transaction, but the Company shall apportion such aggregate
  Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative
  value of any different components of the Alternate Consideration. If holders of Common Stock are
  given any choice as to the securities, cash or property to be received in a Fundamental
  Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it
  receives upon any exercise of this Additional Investment Right following such Fundamental
  Transaction. At the Holder's request, any successor to the Company or surviving entity in such
  Fundamental Transaction shall issue to the Holder a new Additional Investment Right consistent
  with the foregoing provisions and evidencing the Holder's right to purchase the Alternate
  Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement
  pursuant to which a Fundamental Transaction is effected shall include terms requiring any such
  successor or surviving entity to comply with the provisions of this paragraph (c) and insuring
  that the Additional Investment Right (or any such replacement security) will be similarly adjusted
  upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental
  Transaction constitutes or results in a "going private" transaction as defined in Rule 13e-3 under
  the Exchange Act, then the Company (or any such successor or surviving entity) will redeem this
  Warrant from the Holder for a purchase price, payable in cash on the closing date of such "going
  private" transaction, equal to the Black Scholes value of the remaining unexercised portion of
  this Warrant on the closing date of such "going private" transaction.

  (d) Subsequent Equity Sales.

  (i)  If, at any time while this Additional Investment Right is outstanding, the Company or
  any Subsidiary issues additional shares of Common Stock or rights, Additional Investment Rights,
  options or other securities or debt convertible, exercisable or exchangeable for shares of Common
  Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common
  Stock Equivalents") at an effective net price to the Company per share of Common Stock (the "Effective
  Price") less than the Exercise Price (as adjusted hereunder to such date), then the Exercise
  Price shall be reduced to equal the Effective Price. If, at any time while this Additional
  Investment Right is outstanding, the Company or any Subsidiary issues Common Stock or Common Stock
  Equivalents at an Effective Price greater than the Exercise Price (as adjusted hereunder to such
  date) but less than the average Closing Price over the five Business Days prior to such issuance
  (the "Adjustment Price"), then the Exercise Price shall be reduced to equal the product of
  (A) the Exercise Price in effect immediately prior to such issuance of Common Stock or Common
  Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of
  shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of
  shares of Common Stock which the aggregate Effective Price of the Common Stock issued (or deemed
  to be issued) would purchase at the Adjustment Price, and the denominator of which is the
  aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately
  after such issuance. For purposes of this paragraph, in connection with any issuance of any Common
  Stock Equivalents, (A) the maximum number of shares of Common Stock potentially issuable at any
  time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number")
  shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (B) the
  Effective Price applicable to such Common Stock shall equal the minimum dollar value of
  consideration payable to the Company to purchase such Common Stock Equivalents and to convert,
  exercise or exchange them into Common Stock (net of any discounts, fees, commissions and other
  expenses), divided by the Deemed Number, and (C) no further adjustment shall be made to the
  Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of
  such Common Stock Equivalents.

 
 (ii) If, at any time while this Additional Investment Right is outstanding, the Company or any
  Subsidiary issues Common Stock Equivalents with an Effective Price or a number of underlying
  shares that floats or resets or otherwise varies or is subject to adjustment based (directly or
  indirectly) on market prices of the Common Stock (a "Floating Price Security"), then for purposes
  of applying the preceding paragraph in connection with any subsequent exercise, the Effective
  Price will be determined separately on each Exercise Date and will be deemed to equal the lowest
  Effective Price at which any holder of such Floating Price Security is entitled to acquire Common
  Stock on such Exercise Date (regardless of whether any such holder actually acquires any shares on
  such date).

  (iii) Notwithstanding the foregoing, no adjustment will be made under this paragraph (d) in
  respect to any Excluded Stock.

  (e) Number of Additional Investment Right Shares. Simultaneously with any adjustment to the
  Exercise Price pursuant to paragraphs (a) or (b) of this Section, the number of Additional
  Investment Right Shares that may be purchased upon exercise of this Additional Investment Right
  shall be increased or decreased proportionately, so that after such adjustment the aggregate
  Exercise Price payable hereunder for the increased or decreased number of Additional Investment
  Right Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such
  adjustment.

  (f) Calculations. All calculations under this Section 9 shall be made to the nearest
  cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock
  outstanding at any given time shall not include shares owned or held by or for the account of the
  Company, and the disposition of any such shares shall be considered an issue or sale of Common
  Stock.

  (g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this 
  Section 9, the Company at its expense will promptly compute such adjustment in accordance with
  the terms of this Additional Investment Right and prepare a certificate setting forth such
  adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of
  Additional Investment Right Shares or other securities issuable upon exercise of this Additional
  Investment Right (as applicable), describing the transactions giving rise to such adjustments and
  showing in detail the facts upon which such adjustment is based. Upon written request, the Company
  will promptly deliver a copy of each such certificate to the Holder and to the Company's Transfer
  Agent.

  (h) Notice of Corporate Events. If the Company (i) declares a dividend or any other
  distribution of cash, securities or other property in respect of its Common Stock, including
  without limitation any granting of rights or warrants to subscribe for or purchase any capital
  stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement
  contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes
  the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the
  Company shall deliver to the Holder a notice describing the material terms and conditions of such
  transaction, at least 20 calendar days prior to the applicable record or effective date on which a
  Person would need to hold Common Stock in order to participate in or vote with respect to such
  transaction, and the Company will take all steps reasonably necessary in order to insure that the
  Holder is given the practical opportunity to exercise this Additional Investment Right prior to
  such time so as to participate in or vote with respect to such transaction; provided, however,
  that the failure to deliver such notice or any defect therein shall not affect the validity of the
  corporate action required to be described in such notice. 

 

    	
     	
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    10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
  immediately available funds; provided, however, if the Registration Statement did not become
  effective on or before Required Effectiveness Date and is not continuously effective through the
  Expiration Date, the Holder may satisfy its obligation to pay the Exercise Price through a
  "cashless exercise," in which event the Company shall issue to the Holder the number of Additional
  Investment Right Shares determined as follows:

 	
 	
 	
   
   X = Y [(A-B)/A]
	
   
  where:

   
	
 	
 
	
 	
 	
   
   X = the number of Additional Investment Right Shares to be issued to the Holder.
	
 	
 	
   
   Y = the number of Additional Investment Right Shares with respect to which this Additional
   Investment Right is being exercised.
	
 	
 	
   
   A = the average of the Closing Prices for the five Trading Days immediately prior to (but not
   including) the Exercise Date.
	
 	
 	
   
   B = the Exercise Price.

        For purposes of Rule 144 promulgated under the Securities Act, it is intended,
      understood and acknowledged that the Additional Investment Right Shares issued in a cashless
      exercise transaction shall be deemed to have been acquired by the Holder, and the holding
      period for the Additional Investment Right Shares shall be deemed to have commenced, on the
      date this Additional Investment Right was originally issued pursuant to the Purchase
      Agreement.

11. Limitation on Exercise. 

 
 (a)  Notwithstanding anything to the contrary contained herein, the number of shares of
  Common Stock that may be acquired by the Holder upon any exercise of this Additional Investment
  Right (or otherwise in respect hereof) shall be limited to the extent necessary to insure that,
  following such exercise (or other issuance), the total number of shares of Common Stock then
  beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial
  ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of
  the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of
  issued and outstanding shares of Common Stock (including for such purpose the shares of Common
  Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in
  accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
  thereunder. The Company's obligation to issue shares of Common Stock in excess of the limitation
  referred to in this Section shall be suspended (and shall not terminate or expire notwithstanding
  any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be
  issued in compliance with such limitation, but in no event later than the Expiration Date.
  Additionally, by written notice to the Company, the Holder may waive the provisions of this
  Section 11 or increase or decrease the Maximum Percentage to any other percentage specified in
  such notice, but (i) any such waiver or increase will not be effective until the 61st day after
  such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will
  apply only to the Holder and not to any other holder of Additional Investment Rights.

 

     	
     	
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  (b) Notwithstanding anything to the contrary contained herein, if the Trading Market is the NASDAQ
  National Market, or any other market or exchange with similar applicable rules, then the maximum
  number of shares of Common Stock that the Company may issue pursuant to the Transaction Documents
  at an effective purchase price less than the Closing Price on the Trading Day immediately
  preceding the Closing Date (or, if greater, the book value per share of Common Stock calculated in
  accordance with the Company's most recently filed periodic report with the Commission) equals
  2,982,829 shares (the "Issuable Maximum"), unless the Company obtains the necessary
  stockholder approvals required by the rules and regulations of the Trading Market. If, at the time
  any Holder requests an exercise of any of the Additional Investment Rights, the Actual Minimum
  (excluding any shares issued or issuable at an effective purchase price in excess of the Closing
  Price on the Trading Day immediately preceding the Closing Date (or, if greater, the book value
  per share of Common Stock calculated in accordance with the Company's most recently filed periodic
  report with the Commission)) exceeds the Issuable Maximum (and if the Company has not previously
  obtained the required stockholder approval), then the Company shall issue to the Holder requesting
  such exercise a number of shares of Common Stock not exceeding such Holder's pro rata portion of
  the Issuable Maximum (based on such Holder's share (vis-a-vis other Holders) of the aggregate
  purchase price paid under the Purchase Agreement and taking into account any Additional Investment
  Right Shares previously issued to such Holder). For the purposes hereof, "Actual Minimum"
  shall mean, as of any date, the maximum aggregate number of shares of Common Stock then issued or
  potentially issuable in the future pursuant to the Transaction Documents, including any Underlying
  Shares issuable upon exercise in full of all Additional Investment Rights, without giving effect
  to any limits on the number of shares of Common Stock that may be owned by a Holder at any one
  time.

 

    12. Fractional Shares. The Company shall not be required to issue or cause
  to be issued fractional Additional Investment Right Shares on the exercise of this Additional
  Investment Right. If any fraction of a Additional Investment Right Share would, except for the
  provisions of this Section, be issuable upon exercise of this Additional Investment Right, the
  number of Additional Investment Right Shares to be issued will be rounded up to the nearest whole
  share.

    13. Notices. Any and all notices or other communications or deliveries
  hereunder (including without limitation any Exercise Notice) shall be in writing and shall be
  deemed given and effective on the earliest of (i) the date of transmission, if such notice or
  communication is delivered via facsimile at the facsimile number specified in this Section prior
  to 5:30 p.m. (New York City time) on a Trading Day, (ii) 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 5:30 p.m. (New York
  City time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by
  nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom
  such notice is required to be given. The address for such notices or communications shall be as
  set forth in the Purchase Agreement.

    14. Additional Investment Right Agent. The Company shall serve as Additional
  Investment Right agent under this Additional Investment Right. Upon 30 days' notice to the Holder,
  the Company may appoint a new Additional Investment Right agent. Any corporation into which the
  Company or any new Additional Investment Right agent may be merged or any corporation resulting
  from any consolidation to which the Company or any new Additional Investment Right agent shall be
  a party or any corporation to which the Company or any new Additional Investment Right agent
  transfers substantially all of its corporate trust or stockholders services business shall be a
  successor Additional Investment Right agent under this Additional Investment Right without any
  further act. Any such successor Additional Investment Right agent shall promptly cause notice of
  its succession as Additional Investment Right agent to be mailed (by first class mail, postage
  prepaid) to the Holder at the Holder's last address as shown on the Additional Investment Right
  Register.

   15. Miscellaneous

 
 (a) Subject to the restrictions on transfer set forth on the first page hereof, this Additional
  Investment Right may be assigned by the Holder. This Additional Investment Right may not be
  assigned by the Company except to a successor in the event of a Fundamental Transaction. This
  Additional Investment Right shall be binding on and inure to the benefit of the parties hereto and
  their respective successors and assigns. Subject to the preceding sentence, nothing in this
  Additional Investment Right shall be construed to give to any Person other than the Company and
  the Holder any legal or equitable right, remedy or cause of action under this Additional
  Investment Right. This Additional Investment Right may be amended only in writing signed by the
  Company and the Holder and their successors and assigns.

 

     	
     	
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     	   2004 Form 8-K 
     	

 
 
  (b) The Company will not, by amendment of its governing documents or through any 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
  Additional Investment Right, 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 against impairment. Without limiting the generality of the
  foregoing, the Company (i) will not increase the par value of any Additional Investment Right
  Shares above the amount payable therefor on such exercise, (ii) will take all such action as may
  be reasonably necessary or appropriate in order that the Company may validly and legally issue
  fully paid and nonassessable Additional Investment Right Shares on the exercise of this Additional
  Investment Right, and (iii) will not close its stockholder books or records in any manner which
  interferes with the timely exercise of this Additional Investment Right.

  (c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
  VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS ADDITIONAL INVESTMENT RIGHT SHALL BE GOVERNED BY
  AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH PARTY 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 HEREUNDER OR 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, ANY CLAIM THAT IT IS NOT
  PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, 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.

  (d) The headings herein are for convenience only, do not constitute a part of this Additional
  Investment Right and shall not be deemed to limit or affect any of the provisions hereof.

  (e) In case any one or more of the provisions of this Additional Investment Right shall be invalid
  or unenforceable in any respect, the validity and enforceability of the remaining terms and
  provisions of this Additional Investment Right shall not in any way be affected or impaired
  thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision
  which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall
  incorporate such substitute provision in this Additional Investment Right.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

 SIGNATURE PAGE FOLLOWS]

 

 

                

 	
     	
     	   9  /  STKR 
     	
	
     	
     	      
     	
	
     	
     	   2004 Form 8-K 
     	

 IN WITNESS WHEREOF, the Company has caused this Additional Investment Right to be duly executed
  by its authorized officer as of the date first indicated above.

	
  
  STOCKERYALE, INC.
	
 
	
  By: _______________________________________
	
  Name: ____________________________________
	
  Title: ______________________________________

   

  

    

  

 [SIGNATURE PAGES TO FOLLOW]

    	
     	
     	   10  /  STKR 
     	
	
     	
     	      
     	
	
     	
     	   2004 Form 8-K 
     	

 FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of
 Common Stock under the foregoing Additional Investment Right)

To:  STOCKERYALE, INC.

The undersigned is the Holder of Additional Investment Right No. _______ (the "Additional
 Investment Right") issued by StockerYale, Inc., a Delaware corporation (the "b"). Capitalized
 terms used herein and not otherwise defined have the respective meanings set forth in the
 Additional Investment Right.

 
  1. The Additional Investment Right is currently exercisable to purchase a total of
   ______________ Additional Investment Right Shares.

   2. The undersigned Holder hereby exercises its right to purchase _________________ Additional
   Investment Right Shares pursuant to the Additional Investment Right.

   3. The Holder intends that payment of the Exercise Price shall be made as (check one):

  
    
      
   ____ "Cash Exercise" under Section 10

   ____ "Cashless Exercise" under Section 10

    

  

  
   4. If the holder has elected a Cash Exercise, the holder shall pay the sum of $____________ to
   the Company in accordance with the terms of the Additional Investment Right.

   5. Pursuant to this exercise, the Company shall deliver to the holder _______________ Additional
   Investment Right Shares in accordance with the terms of the Additional Investment Right.

   6. Following this exercise, the Additional Investment Right shall be exercisable to purchase a
   total of ______________ Additional Investment Right Shares. 

	
 	
 	
 
	
  Dated: ________________________, _______	
 	
  Name of Holder: ______________________________________
	
 	
 	
 
	
 	
 	
  (Print) ______________________________________________
	
 	
 	
 
	
 	
 	
  By: ________________________________________________
	
 	
 	
  Name: _____________________________________________
	
 	
 	
  Title: _______________________________________________
	
 	
 	
 
	
 	
 	
  (Signature must conform in all respects to name of holder as specified on the face
  of the Additional Investment Right)
	
 	
 	
   

    	
     	
     	   11  /  STKR 
     	
	
     	
     	      
     	
	
     	
     	   2004 Form 8-K 
     	

            

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Additional Investment Right]

   FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
 ________________________________ the right represented by the within Additional Investment Right to
 purchase ____________ shares of Common Stock of StockerYale, Inc. to which the within Additional
 Investment Right relates and appoints ________________ attorney to transfer said right on the books
 of StockerYale, Inc. with full power of substitution in the premises.

	

	
 	
 	
 
	
  Dated: ___________________, ______	
 	
  Signature: ________________________________
	
 	
 	
 
	
 	
 	
  
 (Signature must conform in all respects to name of holder as specified on the face of the
 Additional Investment Right)
	
 	
 	
 
	
 	
 	
  Street: ___________________________________
	
 	
 	
  Street 2: _________________________________
	
 	
 	
  City: ____________________________________
	
 	
 	
  State: ___________________________________
	
 	
 	
  Zip/Postal Code: __________________________
	
 	
 	
  Country: _________________________________
	
 	
 	
 
	
  In the presence of:	
 	
 
	
  _______________________________________	
 	
 

 

   	
     	
     	   Exhibit B   /  STKR 
     	
	
     	
     	   END
	
     	
     	   2004 Form 8-K

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