Document:

REGISTRATION RIGHTS AGREEMENT

 Exhibit 10.2 
  
 REGISTRATION RIGHTS AGREEMENT 
  
 This Registration Rights Agreement (this “Agreement”) is made and entered into as of December 30, 2005, by and between StockerYale, Inc., a
Massachusetts corporation (the “Company”), and Laurus Master Fund, Ltd., a Cayman Islands company (the “Purchaser”). 
  
 This Agreement is being entered into in connection with a Securities Purchase Agreement dated as of the date hereof by and between the Purchaser and the
Company (the “Purchase Agreement”). 
  
 The Company and
the Purchaser hereby agree as follows: 
  
 1. Definitions.
Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

  
 “Effectiveness Date” means
the 90th day following the Closing Date. 
  
 “Effectiveness Period” shall have the meaning set forth in Section 2(a). 
  
 “Filing Date” means, with respect to the Registration Statement required to be filed hereunder, the 30th day following
the Closing Date. 
  
 “Holder”
or “Holders” means the Purchaser or any of its affiliates or transferees to the extent any of them hold Registrable Securities. 
  
 “Indemnified Party” shall have the meaning set forth in Section 5(c). 
  
 “Indemnifying Party” shall have the meaning
set forth in Section 5(c). 
  
 “Losses” shall have the meaning set forth in Section 5(a). 
  
 “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation
or partial proceeding, such as a deposition), whether commenced or threatened. 
  
 “Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that
includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus. 
  
 “Registrable Securities” means the Closing Shares. 

 “Registration Statement” means the registration statement required to be
filed hereunder, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement. 
  
 “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule. 
  
 “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule. 
  
 “Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule. 
  
 2. Registration. 
  
 (a) On or
prior to the Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of the Registrable Securities in an offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith). The Company shall
use its reasonable commercial efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date, and shall use its
reasonable commercial efforts to keep the Registration Statement continuously effective under the Securities Act until the date which is the earliest date of when (i) all Registrable Securities have been sold or (ii) all Registrable
Securities may be sold immediately without registration under the Securities Act and without volume restrictions pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company’s transfer agent and the affected Holders, (iii) four years after the Closing Date (the “Effectiveness Period”). 
  

(b) If: (i) any Registration Statement is not filed on or prior to the Filing Date; (ii) a Registration Statement filed
hereunder is not declared effective by the Commission by the Effectiveness Date; (iii) after a Registration Statement is filed with and declared effective by the Commission, such Registration Statement ceases to be effective (by suspension or
otherwise) as to all Registrable Securities to which it is required to relate at any time prior to the expiration of the Effectiveness Period (without being succeeded as promptly as practicable by an additional registration statement filed and
declared effective), for a period of time which shall exceed 60 days in the aggregate per year or more than 30 consecutive calendar days (defined as a period of 365 days commencing on the date the Registration Statement is declared effective); or
(iv) the Common Stock is not listed or quoted, or is suspended from trading on any Trading Market for a period of three (3) consecutive Trading Days (provided the Company shall not have been able to 

  

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cure such trading suspension within 30 days of the notice thereof or list the Common Stock on any of the NASD OTC Bulletin Board, BBX Exchange, NASDAQ
SmallCap Market, the Nasdaq National Market, American Stock Exchange or New York Stock Exchange (the “Trading Market”))(any such failure or breach being referred to as an “Event,” and for purposes of clause (i) or
(ii) the date on which such Event occurs, or for purposes of clause (iii) the date which such 60 day or 30 consecutive day period (as the case may be) is exceeded, or for purposes of clause (iv) the date on which such three
(3) Trading Day period is exceeded, being referred to as “Event Date”), then until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty, equal to 1.0% for
each thirty (30) day period (prorated on a daily basis for partial periods) of the original principal amount of the Note. Such liquidation damages shall be paid not less than each thirty (30) days during an Event and within three
(3) business days following the date on which such Event has been cured by the Company. 
  
 3. Registration Procedures. If and whenever the Company is required by the provisions hereof to effect the registration of the Registrable Securities under the Act, the Company will, as expeditiously as
possible: 
  
 (a) prepare and file with the SEC a
registration statement with respect to such securities, promptly as possible respond to any comments received from the SEC and use its best efforts to cause such registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and promptly provide to the Purchaser copies of all filings and SEC letters of comment; 
  
 (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the registration statement and to keep such registration statement effective until the expiration of the
Effectiveness Period; 
  
 (c) furnish to the
Purchaser such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as the Purchaser reasonably may request to facilitate the public sale or disposition of the securities covered
by such registration statement; 
  
 (d) use its
commercially reasonable efforts to register or qualify the Purchaser’s Registrable Securities covered by such registration statement under the securities or “blue sky” laws of such jurisdictions as the Purchaser, provided, however,
that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;

  
 (e) list the Registrable Securities covered
by such registration statement with any securities exchange on which the Common Stock of the Company is then listed; 
  
 (f) immediately notify the Purchaser at any time when a prospectus relating thereto is required to be delivered under the Securities Act,
of the happening of any event of 

  

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which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; and 
  
 (g) make available on reasonable notice for inspection
during normal business hours by the Purchaser and any attorney, accountant or other agent retained by the Purchaser, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company,
and cause the Company’s officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the attorney, accountant or agent of the Purchaser for the purpose of effecting the registration of
the Registrable Securities pursuant to this Agreement. 
  
 4.
Registration Expenses. All expenses relating to the Company’s compliance with Sections 2 and 3 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the NASD, transfer taxes, fees of transfer agents and
registrars, reasonable fees of, and reasonable disbursements incurred by, one counsel for the Holders, and costs of insurance are called “Registration Expenses”. All selling commissions applicable to the sale of Registrable Securities,
including any fees and disbursements of any special counsel to the Holders beyond those included in Registration Expenses, are called “Selling Expenses” and are the responsibility of the Sellers The Company shall be responsible for all
Registration Expenses. 
  
 5. Indemnification. 

 
 (a) In the event of a registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the Purchaser, and its officers, directors and each other person, if any, who controls the Purchaser within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to which the Purchaser, or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities were registered under the Securities Act pursuant
to this Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will reimburse the Purchaser, and each such person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability (i) arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with information furnished by the Purchaser or any such person in writing specifically for use in any such document, or (ii) contained in a Registration Statement or
Prospectus if a corrected version of the Registration Statement or Prospectus was delivered to the Purchaser on a timely basis. 
  

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 (b) In the event of a registration of the Registrable Securities under the Securities Act
pursuant to this Agreement, the Purchaser will indemnify and hold harmless the Company, and its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act, against all losses, claims, damages
or liabilities, joint or several, to which the Company or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact which was made in conformity with information furnished in writing by the Purchaser to the Company specifically for use in (and such information is contained in) the registration
statement under which such Registrable Securities were registered under the Securities Act pursuant to this Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are
based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such person for any reasonable legal or
other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action. Notwithstanding the provisions of this paragraph, the Purchaser shall not be required to indemnify any person or entity
in excess of the amount of the aggregate proceeds received by the Purchaser of Registrable Securities in connection with any such registration under the Securities Act. 
  
 (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this Section 5(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 5(c) if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to
the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party under this Section 5(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof; if the indemnified party
retains its own counsel, then the indemnified party shall pay all fees, costs and expenses of such counsel, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the indemnified parties shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. 
  

(d) In order to provide for just and equitable contribution in the event of joint liability under the Securities Act in any case in
which either (i) the Purchaser, or any controlling 

  

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person of the Purchaser, makes a claim for indemnification pursuant to this Section 5(c) but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 5(c)
provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of the Purchaser or controlling person of the Purchaser in circumstances for which indemnification is provided under this
Section 5(c); then, and in each such case, the Company and the Purchaser will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the
Purchaser is responsible only for the portion represented by the percentage that the public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration
statement, provided, however, that, in any such case, (A) the Purchaser will not be required to contribute any amount in excess of the public offering price of all such securities offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

  
 6. Intentionally Omitted. 
  
 7. Miscellaneous. 
  
 (a) Remedies. In the event of a breach by the Company
or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement; provided, however, so long as the Holder shall have received liquidated damages in accordance with the terms of Section 2(b) hereof, then the Holder shall not be
entitled to specific performance of its rights under Section 2(b) arising from the occurrence of an Event specifically relating to the payment of such liquidated damages. 
  
 (b) No Piggyback on Registrations. Except as and to the extent specified in Schedule 7(b) hereto,
neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the Registration Statement other than the Registrable Securities, and the Company shall not after
the date hereof enter into any agreement providing any such right for inclusion of shares in the Registration Statement to any of its security holders. Except as and to the extent specified in Schedule 7(b) hereto, the Company has not previously
entered into any agreement granting any registration rights with respect to any of its securities to any Person that has not been fully satisfied. 
  
 (c) Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities
Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement. 
  
 (d) Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice
from the Company of the occurrence of a Discontinuation Event, such Holder will forthwith discontinue disposition of such Registrable 

  

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Securities under the Registration Statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company may provide appropriate stop-transfer orders to enforce the provisions of this paragraph. For purposes of this Section 7(d), a
“Discontinuation Event” shall mean when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (the
Company shall provide true and complete copies thereof and all written responses thereto to each of the Holders); (iii) any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iv) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (v) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (vi) the occurrence of any event or passage of time that makes the financial statements included in the Registration Statement ineligible for inclusion
therein or any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 
  
 (e) Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to each Holder written notice of such determination and, if within fifteen days after receipt of such notice, any such Holder shall so
request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration
rights and subject to the consent of any selling stockholder(s) under such registration statement. 
  
 (f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of certain Holders and that 

  

 7 

 
does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. 
  
 (g) Notices. Any notice or request hereunder may be
given to the Company or Purchaser at the respective addresses set forth below or as may hereafter be specified in a notice designated as a change of address under this Section 7(g). Any notice or request hereunder shall be given by registered
or certified mail, return receipt requested, hand delivery, overnight mail or telecopy (confirmed by mail). Notices and requests shall be, in the case of those by hand delivery, deemed to have been given when delivered to any officer of the party to
whom it is addressed, in the case of those by mail or overnight mail, deemed to have been given when deposited in the mail or with the overnight mail carrier, and, in the case of a telecopy, when confirmed. The address for such notices and
communications shall be as follows: 
  

			
	If to the Company:	  	StockerYale, Inc.
	 	  	32 Hampshire Road
	 	  	Salem, NH 03079
	 	  	Attention: Mark W. Blodgett
	 	  	Facsimile: (603) 898-8851
		
	With a copy to:	  	 
	 	  	BRL Law Group LLC
	 	  	31 St. James Avenue, Suite #850
	 	  	Boston, MA 02116
	 	  	Attention: Thomas B. Rosedale
	 	  	Facsimile: (617) 399-6930
		
	If to a Purchaser:	  	To the address set forth under
	 	  	such Purchaser name on the
	 	  	signature pages hereto.
	
	If to any other Person who is then the registered Holder:
		
	 	  	 To the address of such Holder as it
 appears in the stock
transfer books
 of the Company

  
 or such other address as may be
designated in writing hereafter, in the same manner, by such Person. 
  
 (h) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The
Company may not assign its rights or obligations hereunder without the prior written consent of each Holder. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Note. 
  

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 (i) Execution and Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. 
  
 (j) Governing Law. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.
Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough
of Manhattan. Each party hereto 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, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Proceeding is
improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such 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. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall commence a Proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such Proceeding shall be reimbursed by the other party for its
reasonable attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding. 
  
 (k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. 

 
 (l) Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable. 
  
 (m) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 
  

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 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first
written above. 
  

			
	STOCKERYALE, INC.
		
	By:	 	/s/    MARIANNE MOLLEUR        
	Name:	 	Marianne Molleur
	 Title:
	 	Senior Vice President and Chief Financial Officer
	
	LAURUS MASTER FUND, LTD.
		
	By:	 	/s/    DAVID GRIN        
	Name:	 	David Grin
	 Title:
	 	Director

  

			
	 Address for Notice:

	
	 c/o Laurus Capital Management, LLC
 825 Third
Avenue, 14th Floor
 New
York, New York 10022
 Attention: David Grin

  

 10SECURED TERM NOTE

 Exhibit 10.3 
  
 SECURED TERM NOTE 
  
 FOR VALUE RECEIVED, STOCKERYALE, INC., a Massachusetts corporation (the “Borrower”), hereby promises to pay to LAURUS MASTER FUND, LTD.,
c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or its registered assigns or successors in interest, without
demand, the sum of Four Million Dollars ($4,000,000) (the “Principal Amount”), together with any accrued and unpaid interest, on December 30, 2008 (the “Maturity Date”), if not sooner paid. 
  
 The following terms shall apply to this Note: 
  
 ARTICLE I 
  
 INTEREST 
  
 1.1 Interest Rate. Interest payable on this Note shall accrue at the annual rate of Prime Rate plus two percent (2%) (but in no event less
than eight percent (8%) per annum) and be payable in arrears commencing one month from the date hereof and on the first business day of each consecutive calendar month thereafter, and on the Maturity Date, accelerated or otherwise, due and
payable as described below (the “Interest Rate”). Interest shall be computed on the basis of actual days elapsed in a year of 360 days. “Prime Rate” means the “base rate” or “prime rate”
published in the Wall Street Journal from time to time. The Prime Rate shall be increased or decreased as the case may be for each increase or decrease in the Prime Rate in an amount equal to such increase or decrease in the Prime Rate; each change
to be effective as of the day of the change in such rate. 
  
 ARTICLE II 
  
 PAYMENTS OF PRINCIPAL AND
INTEREST 
  
 2.1 Monthly Payments. Subject to the terms
of this Article II, the Borrower shall make monthly payments to the Holder in the principal amount of $121,212 (the “Monthly Principal Amount”), together with interest accrued to date on such portion of the Principal Amount plus any
and all other amounts owing under this Note but not previously paid (the “Monthly Interest Amount and, together with the Monthly Principal Amount and all other amounts owing under this Note, collectively, the “Monthly
Amount”), on April 1, 2006 and on the first business day of each consecutive calendar month thereafter (each, a “Repayment Date”). 
  
 2.2 Optional Prepayments. In the event Borrower wishes to prepay all or a portion of the Principal Amount or any and
all other amounts owing under this Note (collectively, the “Obligations”), Borrower shall deliver to the Holder written notice indicating the amount intended to be so prepaid (the “Prepayment Amount”) and the date
on which such prepayment shall be made (the “Prepayment Date”). Such notice shall be delivered to the Holder at least five (5) Business Days’ prior to the Prepayment Date. On the Prepayment Date, 

 
Borrower shall pay to the Holder the Applicable Percentage of the Prepayment Amount in satisfaction of the Prepayment Amount. All such prepayments shall be
(a) applied to the Obligations in such order as the Holder shall elect and (b) credited (conditional upon final collection) to the Obligations three (3) Business Days after receipt of such amounts by Holder in good funds in dollars of
the United States of America. Any amount received by Holder after 12:00 noon (New York time) on any business day shall be deemed received on the next business day. For purposes of this Section 2.2, the term “Applicable
Percentage” means (1) 115% for the period commencing on the date hereof (the “Closing Date”) and ending on the first anniversary of the Closing Date, (2) 110% for the period commencing on the first day following
the first anniversary of the Closing Date and ending on the second anniversary of the Closing Date and (3) 105% for the period commencing on the first day following the second anniversary of the Closing Date and ending on the day immediately
preceding the Maturity Date. 
  
 ARTICLE III 
  
 EVENT OF DEFAULT 
  
 The occurrence of any of the following events is an Event of Default
(“Event of Default”): 
  
 3.1 Failure to Pay
Principal, Interest or other Fees. The Borrower fails to pay any installment of principal, interest or other fees hereon or in respect of any other promissory note issued pursuant to the Purchase Agreement when due. 
  
 3.2 Breach of Covenant. The Borrower breaches any covenant or other
term or condition of this Note or the Purchase Agreement (as hereafter defined) in any material respect and such breach, if subject to cure, continues for a period of five (5) business days after the occurrence thereof. 
  
 3.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Purchase Agreement, or in any agreement, statement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading. 
  
 3.4 Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 
  
 3.5 Judgments. Any money judgment, writ or similar final process shall
be entered or filed against the Borrower or any of its property or other assets for more than $250,000 (to the extent not covered by independent third-party insurance as to which the Holder is a lender’s loss payee and a named additional
insured and the insurer has been notified of such judgment and has not denied coverage), and shall remain unvacated, unbonded or unstayed for a period of ninety (90) days. 
  

 2 

 3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower. 
  
 3.7 Stop Trade; Delisting. (a) An SEC stop trade order or Principal Market trading suspension of the Common Stock for 5 consecutive days or 5
days during a period of 10 consecutive days, excluding in all cases a suspension of all trading on a Principal Market or (b) Borrower’s Common Stock shall fail to be listed on a Principal Market or any securities exchange or other
securities market (including the Nasdaq OTC Bulletin Board, but excluding the pink and yellow sheets). 
  
 3.8 Guaranty. (a) Any guarantor of all or any part of the obligations owing under this Note (each, a “Guarantor”) attempts to
terminate, challenges the validity of, or its liability under any guaranty agreement made in favor of the Holder (each, a “Guaranty”), (b) any Guarantor shall default under any Guaranty or any guaranty security agreement made in favor
of the Holder (each a “Guaranty Security Agreement”), which such default is not cured within any applicable cure or grace period or (c) any Guaranty or Guaranty Security Agreement shall cease to be valid, binding and enforceable in
accordance with its terms. 
  
 3.9 Further Encumbrance. The
Borrower shall not encumber, mortgage, pledge, assign or grant any lien or security interest in any or all of its assets to any person or entity other than those liens and security interests set forth on Schedule 3.9 hereof. 
  
 3.10 Security Agreement. An Event of Default shall have occurred under
and as defined in the Security Agreement dated as of the date hereof between Borrower and Holder, as the same may be amended, modified and supplemented from time to time. 
  
 ARTICLE IV 
  
 DEFAULT PAYMENT 
  
 4.1 Default Rate. Upon the occurrence and during the continuance of an Event of Default, a default interest rate of five percent (5%) per
annum above the Interest Rate shall apply to the amounts owed hereunder. 
  
 4.2 Cumulative Remedies. The remedies under this Note shall be cumulative. 
  
 ARTICLE V 
  
 MISCELLANEOUS 
  
 5.1 Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 
  

 3 

 5.2 Notices. Any notice herein required or permitted to be given shall be in writing and shall be
deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days
after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.
All communications shall be sent to the Borrower at the address as set forth on the signature page to the Purchase Agreement executed in connection herewith and to the Holder at the address set forth on the signature page to the Purchase Agreement
for such Holder, with a copy to Scott J. Giordano, Esq., Loeb & Loeb LLP, 345 Park Avenue, New York, New York 10154, facsimile number (212) 407-4990, or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall be deemed given when made to the Borrower pursuant to the Purchase Agreement. 
  

5.3 Amendment Provision. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. 
  
 5.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and
its successors and assigns, and may be assigned by the Holder. 
  
 5.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees. 
  
 5.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state
courts of New York or in the federal courts located in the state of New York. Both parties and the individual signing this Note on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to
recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other
provision of this Note. 
  
 5.7 Maximum Payments. Nothing
contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 
  

 4 

 5.8 Construction. Each party acknowledges that its legal counsel participated in the preparation
of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other. 
  
 5.9 Management Fee. Simultaneously with the execution of this Note,
the Borrower shall pay to Laurus Capital Management, LLC a management fee in an amount equal to two percent (2%) of the Principal Amount, which such amount at the Holder’s option may be deducted from funds made available by the Holder to
the Borrower hereunder. 
  
 5.10 Security Interest. The
Holder has been granted a security interest in certain assets of the Company under the Security Agreement. 
  
 5.11 Registered Obligation. This Note is intended to be a registered obligation within the meaning of Treasury Regulation
Section 1.871-14(c)(1)(i) and the Borrower (or its agent) shall register the Note (and thereafter shall maintain such registration) as to both principal and any stated interest. Notwithstanding any document, instrument or agreement relating to
this Note to the contrary, transfer of this Note (or the right to any payments of principal or stated interest thereunder) may only be effected by (i) surrender of this Note and either the reissuance by the Borrower of this Note to the new
holder or the issuance by the Borrower of a new instrument to the new holder, or (ii) transfer through a book entry system maintained by the Borrower (or its agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

  
 [Balance of page intentionally left blank; signature page
follows] 
  

 5 

 IN WITNESS WHEREOF, the Borrower has caused this Secured Term Note to be signed in its name
effective as of this 30th day of December, 2005. 
  

			
	 STOCKERYALE, INC.

		
	By:	 	/s/    MARIANNE MOLLEUR        
	 Name:
	 	Marianne Molleur
	 Title:
	 	Senior Vice President and Chief Financial Officer

  

	
	 WITNESS:

	
	/s/    DONNA F. HOWARD

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