Document:

Subcontract for TESA Services

 Exhibit 10.12 
 SUBCONTRACT FOR TESA SERVICES 
 SUBCONTRACT FOR TESA SERVICES, dated as of October 1, 2002, by
and between Canyon National Bank, a national banking association with offices at 1711 E. Palm Canyon Drive, Palm Springs, California (the “Bank”) and the Agua Caliente Band of Cahuilla Indians, a federally-recognized Indian tribe with
offices at 600 East Tahquitz Canyon Way, Palm Springs, California (the “Tribe”): 
 WITNESSETH: 
 WHEREAS, the Tribe has been authorized through a series of Memoranda of Understanding, beginning on March 9, 1987, between the Tribe and the Palm
Springs Field Office of the Bureau of Indian Affairs (“BIA”), to perform certain real estate related services (“TESA Services”) regarding the allotted trust lands of the Agua Caliente Indian Reservation (“Allotted
Reservation Land”), which services are the statutory obligation of the BIA; 
 WHEREAS, The Tribe is a party to a Memorandum of
Understanding with the Palm Springs Field Office of the Bureau of Indian Affairs (“BIA”) dated September 3, 2002 (the “MOU”), pursuant to which the BIA has agreed that the Tribe may, by means of a subcontract with the Bank,
engage the Bank to perform such TESA Services on behalf of the Tribe, which services were previously performed by the Tribe, as such services are set forth below; 
 WHEREAS, by letter dated January 9, 2002 from the Comptroller of the Currency, the Comptroller of the Currency has determined that federal law permits the Bank to perform the TESA Services as described herein;

 WHEREAS, the Bank and the Tribe desire to enter into this Subcontract with respect to the Bank performing the TESA Services set forth
below on the terms and conditions set forth herein; 
 NOW, THEREFORE, the parties hereto agree as follows. 
 1. Services to be Performed by Bank. During the term of this Subcontract the Bank shall (i) perform the documentation processing services
with respect to transfer of residential Allotted Reservation Land, as such services are more particularly set forth in Exhibit A annexed hereto (“Document Processing Services”), and (ii) provide certain check payment accounting
services with respect to accounting for lease payments on behalf of landlords with respect to certain Allotted Reservation Land, as such services are more particularly described in item #8 and #9 in Exhibit B annexed hereto. (“Check
Collection Accounting Services”). 
 2. Compensation. As compensation for its provision of the Document Processing Services and
the Check Collection Accounting Services, the Bank will receive the compensation as set forth in Exhibit C hereto. 
 3. Term of
this Subcontract. This Subcontract shall commence as of October 1, 2002 and continue in full force and effect through September 30, 2003, provided, however, 

  

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should the term of the MOU be renewed or extended beyond September 30, 2003, this Subcontract shall automatically be renewed or extended, and shall
extend through the extended date of the MOU. 
 4. Amendment. The Subcontract shall not be changed, modified or amended except by a
writing signed by each of the parties hereto. 
 5. Limited Waiver of Sovereign Immunity. By executing this Subcontract for TESA
Services, the Tribe does not waive or limit its sovereign immunity from unconsented suit or other judicial process, except as specifically provided herein. The Tribe does hereby waive that immunity but only for the enforcement of the specific
obligations expressly undertaken by it in this Subcontract for TESA Services, and only to the extent, and subject to all of the conditions, set forth below: 
  

	 	a)	Such enforcement must be brought by the Bank. 

  

	 	b)	Such enforcement must seek either monetary relief or injunctive relief. If monetary relief is sought, such relief is limited to payment of the amounts expressly stated in the
Subcontract for TESA Services to be payable to the Tribe. If injunctive relief is sought, such injunctive relief is limited to requiring the Tribe to take some action that it has expressly agreed to take by the explicit language of the Subcontract
for TESA Services, or requiring the Tribe to refrain from conduct which is expressly promised not to take in the explicit language of the Subcontract for TESA Services. 

  

	 	c)	Before any action is filed, the party bringing the claim must first provide a short written statement of the nature and basis for the claim to the Tribe, and thereafter, within 10
days, an authorized representative of the claimant must be available to meet in person with Tribe in an effort to resolve the dispute or claim informally. 

  

	 	d)	The action must be brought in the Superior Court of California for the County of Riverside. 

 By this Agreement Tribe does not waive, limit or modify its sovereign immunity from unconsented suit except as specifically provided herein. Tribe hereby
agrees to waive its sovereign immunity solely for the limited purpose of authorizing the Bank, or any assignee of Bank, to bring an action against Tribe seeking to enforce all rights granted to Bank, or any assignee of the Bank under this Agreement.

  

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 IN WITNESS WHEREOF, the undersigned have set their hands as of the date first above-written. 

 

			
	AGUA CALIENTE BAND OF CAHUILLA INDIANS (the “Tribe”)
	
	 /s/ Richard M. Milanovich

	By:	 	

  

			
	CANYON NATIONAL BANK
	
	 /s/ Stephen G. Hoffman

	By:	 	

  

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 EXHIBIT A 
 Document Processing Services* 
 Title transfer documents (Assignment, Acceptance and Agreement, and
Consent) and Deeds of Trust will be received by TESA (Bank) daily and a summary of the process is as follows: 
  

	1.	TESA (Bank) date and time stamps documents. 

  

	2.	TESA (Bank) logs documents into computer mail log. 

  

	3.	Documents are logged in DTL (Chain of Title computer program) by TESA (Bank) and required approvals, receipts, or other documents are printed. 

  

	4.	TESA (Bank) prepares receipt for Administrative fee submitted. Check is logged in and each afternoon the checks for the day are picked up by a messenger and delivered to Canyon
National Bank for processing. 

  

	5.	Documents and files are distributed to TESA (Bank) staff member for review. 

  

	6.	Documents are reviewed in accordance with the chain of title documents in the possession of TESA (Bank). After reviewing documents the file and documents are submitted to the TESA
(Bank) supervisor for approval. 

  

	7.	Documents requiring the signature of an authorized BIA staff member are hand delivered to BIA for signature. 

  

	8.	TESA (Bank) hand delivers to BIA recorder for stamping with BIA series number. BIA recorder retains the certified copies for filming. 

  

	9.	BIA recorded original documents are then picked up by TESA (Bank) staff and returned to TESA for distribution and pick up by transfer agents (i.e. escrow companies, title companies,
lenders, law offices, and individuals) usually via a title company messenger service. Approved original documents are then to be recorded in the Office of the County Recorder of Riverside, California, by the transfer agent. 

 

	10.	After filming, the BIA recorder returns recorded certified copies to TESA (Bank). TESA (Bank) then enters the information shown on the transfer documents into one of the eight
ledger books (referred to as title Bibles), the BIA recorded date is entered in the DTL system and then files documents into appropriate file. 

  

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 EXHIBIT C 
 FEE SCHEDULE 
 Administrative Fees with Respect to Document Processing Services (Residential Subleases, including TimeShare*

  

				
	 a.      Sublease
	  	$	150.00
	 b.      Assignment
	  	$	150.00
	 c.      Termination
	  	$	150.00
	 d.      Modification/Amendment
	  	$	150.00
	          Separate Approval
	  	$	300.00
	 e.      Deed of Trust (24 hour turnaround)
	  	$	150.00
	          (same day service)
	  	$	300.00

 Fees with Respect to Check Collection Services 

	*	Document processing services relate solely to the transfer of residential subleases and do not involve master leases or transfers of commercial leases. 

 INDEMNIFICATION AGREEMENT 
 INDEMNIFICATION AGREEMENT made as of this 1st day of October, 2002 by and between The Agua Caliente Band of Cahuilla Indians (“ACBCI”) and Canyon National Bank, a national banking association (the “Bank”). 
 WITNESSETH: 
 WHEREAS, the
Bank has agreed to assume certain administrative services with respect to transfers of Allotted Reservation Land held in trust for Allottees of the ACBCI’s reservation, which services are currently performed for individual members of the ACBCI
(“ACBCI Members”) by the ACBCI’s office of Trust Enforcement Support Activities (“TESA”); 
 WHEREAS, to induce the
Bank to assume the services currently performed by TESA, the ACBCI desires to indemnify and hold harmless the Bank for any acts or omissions of TESA prior to the date hereof; 
 NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

 1. Indemnification. ACBCI covenants and agrees to indemnify and to hold Bank and its officers, and directors, employees and agents
(“Bank Indemnitees”) harmless against any costs, expenses (including reasonable fees of its legal counsel), liabilities, losses or damages, which may be paid, incurred or suffered by Bank Indemnitees or to which Bank Indemnitees may become
subject, resulting or arising from or out of, or in connection with, directly or indirectly, any claims or liability resulting from any act or omission of TESA prior to the date hereof, including, without limitation, any claims (i) of any ACBCI
Member arising out of any act or omission of TESA prior to the date hereof and (ii) of any employee of TESA arising out of such employee’s employment with TESA prior to the date hereof. 
 2. Claims for Indemnification. Whenever any claim shall arise for indemnification hereunder, the Bank shall promptly notify the ACBCI of the claim
and, when known, the facts constituting the basis for such claim. In the event of any claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third party, the notice to the ACBCI shall specify, if
known, the amount or estimate of the amount of the liability arising pursuant hereto. The Bank Indemnitee shall not settle or compromise any claim by a third party for which it or he is entitled to indemnification hereunder, without the prior
written consent of the ACBCI (which shall not be unreasonably withheld), unless suit shall have been instituted against the Bank Indemnitee and the ACBCI shall not have taken control of such suit after notification hereof as provided in
Section 3 below. 
 3. Defense by ACBCI. In connection with any claim giving rise to indemnity hereunder, the ACBCI at its sole
cost and expense may, upon written notice to the Bank Indemnitee, assume the defense of any such claim or legal proceeding. The Bank Indemnitee shall be entitled to participate in (but not control) the defense of any such action, with its counsel

 
and at its own expense. If the ACBCI does not assume the defense of any such claim or litigation resulting therefrom (a) the Bank Indemnitee may defend
against such claim or litigation in such manner as it may deem appropriate, including, but not limited to, settling such claim or litigation, after giving notice of the same to the ACBCI, on such terms as the Bank Indemnitee may deem appropriate,
and (b) the ACBCI shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. 
 4. Miscellaneous. 
 4.1 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 
 4.2
Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns, including such parties’ legal representatives, heirs, legatees,
distributes, assigns and transfers by operation of law, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms and conditions hereof. 
 4.3 Limited Waiver of Sovereign Immunity. By executing this Indemnification Agreement, the ACBCI does not waive or limit its
sovereign immunity from unconsented suit or other judicial process, except as specifically provided herein. The ACBCI does hereby waive that immunity but only for the enforcement of the specific obligations expressly undertaken by it in this
Indemnification Agreement, and only to the extent, and subject to all of the conditions, set forth below: 
  

	 	a)	Such enforcement must be brought by the Bank. 

  

	 	b)	Such enforcement must seek either monetary relief or injunctive relief. If monetary relief is sought, such relief is limited to payment of the amounts expressly stated in the
Indemnification Agreement to be payable to the ACBCI. If injunctive relief is sought, such injunctive relief is limited to requiring the ACBCI to take some action that it has expressly agreed to take by the explicit language of the Indemnification
Agreement, or requiring the ACBCI to refrain from conduct which is expressly promised not to take in the explicit language of the Indemnification Agreement. 

  

	 	c)	Before any action is filed, the party bringing the claim must first provide a short written statement of the nature and basis for the claim to the ACBCI, and thereafter, within 10
days, an authorized representative of the claimant must be available to meet in person with the ACBCI in an effort to resolve the dispute or claim informally. 

  

	 	d)	The action must be brought in the Superior Court of California for the County of Riverside. 

 By this Agreement, the ACBCI does not waive, limit or modify its sovereign immunity from unconsented suit except as specifically provided herein. The
ACBCI hereby 
  

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agrees to waive its sovereign immunity solely for the limited purpose of authorizing the Bank, or any assignee of Bank, to bring an action against ACBCI
seeking to enforce all rights granted to Bank, or any assignee of the Bank under this Agreement. 
 IN WITNESS WHEREOF, each of the
undersigned has set his hand as of the date first above-written. 
  

			
	AGUA CALIENTE BAND OF CAHUILLA INDIANS
		
	 By:
	 	 /s/ Richard M. Milanovich

	
	 CANYON NATIONAL BANK

		
	 By:
	 	 /s/ Stephen G. Hoffman

  

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 BILL OF SALE 
 BILL OF SALE, dated as of October 1, 2002, by The Agua Caliente Band of Cahuilla Indians (the “Seller”) to Canyon National Bank, a national banking association, with its principal office in Palm
Springs, California (“Purchaser”). 
 W I T N E S S E T H: 
 WHEREAS, Purchaser has agreed to assume certain administrative services with respect to transfers of Allotted Reservation Land held in trust for the Allottees of the Seller’s reservation, currently performed by
Seller’s office of Trust Enforcement Support Activities (“TBSA”), and Seller has agreed to transfer assets of TESA used in the performance of these administrative services to the Purchaser; 
 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller does hereby convey, grant,
bargain, sell, transfer, set over, assign, alienate, demise, release, deliver and confirm unto Purchaser, its successors and assigns, forever, all of Seller’s right, title, interest and claim in and to the furniture, fixtures, and equipment
described in Attachment A hereto, as of 12:01 a.m., California time, the day hereof. 
 TO HAVE AND TO HOLD all and singular of the
foregoing (the “Transferred Properties”) unto Purchaser, its successors and assigns, to its and their own use and enjoyment forever. 
 SELLER FURTHER COVENANTS AND AGREES AS FOLLOWS: 
 1. This instrument shall not constitute an assignment of any covenant,
obligation, liability, contract, agreement, license,, lease or commitment pertaining to the Transferred Properties if an attempted assignment thereof without the consent of any other party thereto or with an interest therein would constitute a
breach thereof or would materially and adversely affect the rights of Seller thereunder. If any such consent is not obtained with respect to any such covenant, obligation, liability, contract, agreement, license, lease or commitment, or if an
attempted assignment with respect thereto would be ineffective or would impair the rights of Seller thereunder so that Purchaser would not in fact receive the benefit of all such rights, then Seller, its successors and assigns shall act as
Purchaser’s agent in order to obtain for Purchaser, its successors and assigns the benefit thereunder, and Seller will cooperate with Purchaser in any other reasonable arrangement designed to provide such benefit for Purchaser. 
 2. The Transferred Properties are being delivered “AS IS,” “WHERE IS” and with all faults. 
 3. From time to time, Seller, its successors and assigns, shall execute and deliver all such further bills of sale, assignments or other instruments of
conveyance and transfer as Purchaser, its successors or assigns may reasonably request more effectively to transfer to and vest in Purchaser all of Seller’s interest in the Transferred Properties. 

 4. Limited Waiver of Sovereign Immunity. By executing this Bill of Sale, the Seller does not waive or
limit its sovereign immunity from unconsented suit or other judicial process, except as specifically provided herein. Seller does hereby waive that immunity but only for the enforcement of the specific obligations expressly undertaken by it in this
Bill of Sale; and only to the extent, and subject to all of the conditions, set forth below: 
  

	 	a)	Such enforcement must be brought by Purchaser. 

  

	 	b)	Such enforcement must seek either monetary relief or injunctive relief. If monetary relief is sought, such relief is limited to payment of the amounts expressly stated in the Bill
of Sale to be payable to the Seller. If injunctive relief is sought, such injunctive relief is limited to requiring the Seller to take some action that it has expressly agreed to take by the explicit language of the Bill of Sale, or requiring the
Seller to refrain from conduct which is expressly promised not to take in the explicit language of the Bill of Sale. 

  

	 	c)	Before any action is filed, the party bringing the claim must first provide a short written statement of the nature and basis for the claim to Seller, and thereafter, within 10
days, an authorized representative of the claimant must be available to meet in person with Seller in an effort to resolve the dispute or claim informally. 

  

	 	d)	The action must be brought in the Superior Court of California for the County of Riverside. 

 By this Agreement, Seller does not waive, limit or modify its sovereign immunity from unconsented suit except as specifically provided herein. Seller
hereby agrees to waive its sovereign immunity solely for the limited purpose of authorizing the Bank, or any assignee of Bank, to bring an action against Seller seeking to enforce all rights granted to Bank, or any assignee of the Bank under this
Agreement. 
 IN WITNESS WHEREOF, Seller has duly executed and delivered this Bill of Sale as of the day and year first above written.

  

					
	 The Agua Caliente Band of Cahuilla Indians

		
	By	 	 /s/ Richard M. Milanovich

		 	 Its
	 	 Chairman -
 Tribal Council

  

 2Security and Purchase Agreement

 Exhibit 10.1 
 SECURITY AND PURCHASE AGREEMENT 
 LAURUS MASTER FUND, LTD. 
 STOCKERYALE, INC. 
 and 
 EACH ELIGIBLE SUBSIDIARY NAMED HEREIN 
 Dated:
June 28, 2006 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page
	1.	  	General Definitions and Terms; Rules of Construction.	  	1
			
	2.	  	Loan Facility	  	2
			
	3.	  	Repayment of the Loans	  	3
			
	4.	  	Procedure for Loans	  	3
			
	5.	  	Interest and Payments.	  	4
			
	6.	  	Security Interest.	  	5
			
	7.	  	Representations, Warranties and Covenants Concerning the Collateral	  	6
			
	8.	  	Payment of Accounts.	  	8
			
	9.	  	Collection and Maintenance of Collateral.	  	9
			
	10.	  	Inspections and Appraisals	  	10
			
	11.	  	Financial Reporting	  	10
			
	12.	  	Additional Representations and Warranties	  	11
			
	13.	  	Covenants	  	22
			
	14.	  	Further Assurances	  	27
			
	15.	  	Representations, Warranties and Covenants of Laurus	  	27
			
	16.	  	Power of Attorney	  	30
			
	17.	  	Term of Agreement	  	30
			
	18.	  	Termination of Lien	  	30
			
	19.	  	Events of Default	  	30
			
	20.	  	Remedies	  	33
			
	21.	  	Waivers	  	33
			
	22.	  	Expenses	  	34
			
	23.	  	Assignment By Laurus	  	34
			
	24.	  	No Waiver; Cumulative Remedies	  	35

  

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	 	  	 	  	Page
	25.	  	Application of Payments	  	35
			
	26.	  	Indemnity	  	35
			
	27.	  	Revival	  	36
			
	28.	  	Borrowing Agency Provisions.	  	36
			
	29.	  	Notices	  	37
			
	30.	  	Governing Law, Jurisdiction and Waiver of Jury Trial.	  	38
			
	31.	  	Limitation of Liability	  	40
			
	32.	  	Entire Understanding; Maximum Interest	  	40
			
	33.	  	Severability	  	40
			
	34.	  	Survival	  	40
			
	35.	  	Captions	  	40
			
	36.	  	Counterparts; Telecopier Signatures	  	40
			
	37.	  	Construction	  	41
			
	38.	  	Publicity	  	41
			
	39.	  	Joinder	  	41
			
	40.	  	Legends	  	42

  

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 SECURITY AND PURCHASE AGREEMENT 
 This Security and Purchase Agreement is made as of June 28, 2006 by and among LAURUS MASTER FUND, LTD., a Cayman Islands company
(“Laurus”), STOCKERYALE, INC., a Massachusetts corporation (“Parent”), and each party listed on Exhibit A attached hereto (each an “Eligible Subsidiary” and collectively, the
“Eligible Subsidiaries”) (the Parent and each Eligible Subsidiary, each a “Company” and collectively, the “Companies”). 
 BACKGROUND 
 The Companies have requested that Laurus make advances available to the
Companies; and 
 Laurus has agreed to make such advances on the terms and conditions set forth in this Agreement. 
 AGREEMENT 
 NOW, THEREFORE, in
consideration of the mutual covenants and undertakings and the terms and conditions contained herein, the parties hereto agree as follows: 
 1. General Definitions and Terms; Rules of Construction. 
 (a) General Definitions. Capitalized terms
used in this Agreement shall have the meanings assigned to them in Annex A. 
 (b) Accounting Terms. Any accounting terms used
in this Agreement which are not specifically defined shall have the meanings customarily given them in accordance with GAAP and all financial computations shall be computed, unless specifically provided herein, in accordance with GAAP consistently
applied. 
 (c) Other Terms. All other terms used in this Agreement and defined in the UCC, shall have the meaning given therein
unless otherwise defined herein. 
 (d) Rules of Construction. All Schedules, Addenda, Annexes and Exhibits hereto or expressly
identified to this Agreement are incorporated herein by reference and taken together with this Agreement constitute but a single agreement. The words “herein”, “hereof” and “hereunder” or other words of similar import
refer to this Agreement as a whole, including the Exhibits, Addenda, Annexes and Schedules thereto, as the same may be from time to time amended, modified, restated or supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter. The term “or” is not exclusive. The term “including” (or any form thereof) shall not be limiting or exclusive. All references to statutes and related regulations shall include any

 amendments of same and any successor statutes and regulations. All references in this Agreement or in the Schedules,
Addenda, Annexes and Exhibits to this Agreement to sections, schedules, disclosure schedules, exhibits, and attachments shall refer to the corresponding sections, schedules, disclosure schedules, exhibits, and attachments of or to this Agreement.
All references to any instruments or agreements, including references to any of this Agreement or the Ancillary Agreements shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof. 
 2. Loan Facility. 
 (a) Loans and
Closing Shares. 
 (i) Subject to the terms and conditions set forth herein and in the Ancillary Agreements, Laurus may make loans (the
“Loans”) to Companies from time to time during the Term which, in the aggregate at any time outstanding, will not exceed the lesser of (x) (I) the Capital Availability Amount minus (II) such reserves as Laurus may reasonably in
its good faith judgment deem proper and necessary from time to time (the “Reserves”) and (y) an amount equal to (I) the Accounts Availability plus (II) the Inventory Availability, minus (III) the Reserves. The amount
derived at any time from Section 2(a)(i)(y)(I) plus Section 2(a)(i)(y)(II) minus 2(a)(i)(y)(III) shall be referred to as the “Formula Amount.” On the Closing Date, the Companies shall, jointly and severally, execute and
deliver to Laurus the Note. Each Company hereby acknowledges and agrees that Laurus’ obligation to make Loans hereunder to the Companies on the Closing Date shall be contingent upon the satisfaction (or waiver by Laurus) of the items and
matters set forth in the closing checklist attached hereto as Exhibit C. 
 (ii) Notwithstanding the limitations set forth above, if
requested by any Company, Laurus retains the right to lend to such Company from time to time such amounts in excess of such limitations as Laurus may determine in its sole discretion. 
 (iii) Each Company acknowledges that the exercise of Laurus’ discretionary rights hereunder may result during the Term in one or more increases or
decreases in the advance percentages used in determining Accounts Availability and/or Inventory Availability and each Company hereby consents to any such increases or decreases which may limit or restrict advances requested by the Companies.

 (iv) If any interest, fees, costs or charges payable to Laurus hereunder are not paid when due, each Company shall thereby be deemed to
have requested, and Laurus is hereby authorized at its discretion to make and charge to the Companies’ account, a Loan as of such date in an amount equal to such unpaid interest, fees, costs or charges. 
 (v) If any Company at any time fails to perform or observe any of the covenants contained in this Agreement or any Ancillary Agreement, Laurus may, but
need not, perform or observe such covenant on behalf and in the name, place and stead of such Company (or, at Laurus’ option, in Laurus’ name) and may, but need not, take any and all other actions which Laurus may deem necessary to cure or
correct such failure (including the payment of taxes, the satisfaction of Liens, the performance of obligations owed to Account Debtors, lessors or other obligors, the procurement and maintenance of insurance, the execution of assignments,

  

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 security agreements and financing statements, and the endorsement of instruments). The amount of all monies expended and
all costs and expenses (including attorneys’ fees and legal expenses) incurred by Laurus in connection with or as a result of the performance or observance of such agreements or the taking of such action by Laurus shall be charged to the
Companies’ account as a Loan and added to the Obligations. To facilitate Laurus’ performance or observance of such covenants by each Company, each Company hereby irrevocably appoints Laurus, or Laurus’ delegate, acting alone, as such
Company’s attorney in fact (which appointment is coupled with an interest) with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file in the name and on behalf of such Company any and all
instruments, documents, assignments, security agreements, financing statements, applications for insurance and other agreements and writings required to be obtained, executed, delivered or endorsed by such Company. 
 (vi) Laurus will account to Company Agent monthly with a statement of all Loans and other advances, charges and payments made pursuant to this
Agreement, and such account rendered by Laurus shall be deemed final, binding and conclusive unless Laurus is notified by Company Agent in writing to the contrary within thirty (30) days of the date each account was rendered specifying the item
or items to which objection is made. 
 (vii) During the Term, the Companies may borrow and prepay Loans in accordance with the terms and
conditions hereof. 
 (b) Closing Shares. Subject to the terms and conditions set forth herein, on the Closing Date, the Parent agrees
to sell to Laurus, and Laurus hereby agrees to purchase from the Parent, the Closing Shares. The purchase price for the Closing Shares shall be $642.86. On the Closing Date, the Parent shall deliver to Laurus the stock certificates evidencing the
Closing Shares registered in Laurus’ name and Laurus shall deliver to the Parent the purchase price for the Closing Shares. 
 3.
Repayment of the Loans. The Companies (a) may prepay the Obligations from time to time in accordance with the terms and provisions of the Note (and Section 17 hereof if such prepayment is due to a termination of this Agreement);
(b) shall repay on the expiration of the Term (i) the then aggregate outstanding principal balance of the Loans together with accrued and unpaid interest, fees and charges and; (ii) all other amounts owed Laurus under this Agreement
and the Ancillary Agreements; and (c) subject to Section 2(a)(ii), shall repay on any day on which the then aggregate outstanding principal balance of the Loans are in excess of the Formula Amount at such time, Loans in an amount equal to
such excess. Any payments of principal, interest, fees or any other amounts payable hereunder or under any Ancillary Agreement shall be made prior to 12:00 noon (New York time) on the due date thereof in immediately available funds. 
 4. Procedure for Loans. Company Agent may by written notice request a borrowing of Loans prior to 12:00 noon (New York time) on the Business Day
of its request to incur, on the next Business Day, a Loan. Together with each request for a Loan (or at such other intervals as Laurus may request), Company Agent shall deliver to Laurus a Borrowing Base Certificate in the form of Exhibit B
attached hereto, which shall be certified as true and correct by the Chief Executive Officer or Chief Financial Officer of Company Agent together with all 
  

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 supporting documentation relating thereto. All Loans shall be disbursed from whichever office or other place Laurus may
designate from time to time and shall be charged to the Companies’ account on Laurus’ books. The proceeds of each Loan made by Laurus shall be made available to Company Agent on the Business Day following the Business Day so requested in
accordance with the terms of this Section 4 by way of credit to the applicable Company’s operating account maintained with such bank as Company Agent designated to Laurus. Any and all Obligations due and owing hereunder may be charged to
the Companies’ account and shall constitute Loans. 
 5. Interest and Payments. 
 (a) Interest. 
 (i) Except as modified
by Section 5(a)(iii) below, the Companies shall jointly and severally pay interest at the Contract Rate on the unpaid principal balance of each Loan until such time as such Loan is collected in full in good funds in dollars of the United States
of America. 
 (ii) Interest and payments shall be computed on the basis of actual days elapsed in a year of 360 days. At Laurus’
option, Laurus may charge the Companies’ account for said interest. 
 (iii) Effective upon the occurrence of any Event of Default and
for so long as any Event of Default shall be continuing, the Contract Rate shall automatically be increased as set forth in the Note (such increased rate, the “Default Rate”), and all outstanding Obligations, including unpaid
interest, shall continue to accrue interest from the date of such Event of Default at the Default Rate applicable to such Obligations. 
 (iv) In no event shall the aggregate interest payable hereunder or under the Note exceed the maximum rate permitted under any applicable law or regulation, as in effect from time to time (the “Maximum Legal Rate”), and if
any provision of this Agreement or any Ancillary Agreement is in contravention of any such law or regulation, interest payable under this Agreement and each Ancillary Agreement shall be computed on the basis of the Maximum Legal Rate (so that such
interest will not exceed the Maximum Legal Rate). 
 (v) The Companies shall jointly and severally pay principal, interest and all other
amounts payable hereunder, or under any Ancillary Agreement, without any deduction whatsoever, including any deduction for any set-off or counterclaim. 
 (b) Payments; Certain Closing Conditions. 
 (i) Closing Payment. Upon execution of this
Agreement by each Company and Laurus, the Companies shall jointly and severally pay to Laurus Capital Management, LLC a closing payment in an amount equal to three and one-half percent (3.50%) of the Capital Availability Amount. Such payment
shall be deemed fully earned on the Closing Date and shall not be subject to rebate or proration for any reason. 
 (ii) Overadvance
Payment. Without affecting Laurus’ rights hereunder in the event the Loans exceed the Formula Amount (each such event, an “Overadvance”), all 
  

 4 

 such Overadvances shall bear additional interest at a rate equal to one percent (1%) per month of the amount of such
Overadvances for all times such amounts shall be in excess of the Formula Amount. All amounts that are incurred pursuant to this Section 5(b)(ii) shall be due and payable by the Companies monthly, in arrears, on the first business day of each
calendar month and upon expiration of the Term. 
 (iii) Financial Information Default. Without affecting Laurus’ other rights
and remedies, in the event any Company fails to deliver the financial information required by Section 11 on or before the date required by this Agreement, the Companies shall jointly and severally pay Laurus an aggregate fee in the amount of
$500.00 per week (or portion thereof) for each such failure until such failure is cured to Laurus’ satisfaction or waived in writing by Laurus. All amounts that are incurred pursuant to this Section 5(b)(iii) shall be due and payable by
the Companies monthly, in arrears, on the first business of each calendar month and upon expiration of the Term. 
 (iv) Expenses.
The Companies shall jointly and severally reimburse Laurus for its expenses (including reasonable legal fees and expenses) incurred in connection with the preparation and negotiation of this Agreement and the Ancillary Agreements, and expenses
incurred in connection with Laurus’ due diligence review of each Company and its Subsidiaries and all related matters. Amounts required to be paid under this Section 5(b)(iv) shall be paid on the Closing Date. 
 6. Security Interest. 
 (a) To secure
the prompt payment to Laurus of the Obligations, each Company hereby assigns, pledges and grants to Laurus a continuing security interest in and Lien upon all of the Collateral. All of each Company’s Books and Records relating to the Collateral
shall, until delivered to or removed by Laurus, be kept by such Company in trust for Laurus until all Obligations have been paid in full. Each confirmatory assignment schedule or other form of assignment hereafter executed by each Company shall be
deemed to include the foregoing grant, whether or not the same appears therein. 
 (b) Each Company hereby (i) authorizes Laurus to file
any financing statements, continuation statements or amendments thereto that (x) indicate the Collateral (1) as all assets and personal property of such Company or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the UCC of such jurisdiction, or (2) as being of an equal or lesser scope or with greater detail, and (y) contain any other information required by Part 5 of Article 9 of
the UCC for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment and (ii) ratifies its authorization for Laurus to have filed any initial financial statements, or amendments thereto if
filed prior to the date hereof. Each Company acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of Laurus and agrees
that it will not do so without the prior written consent of Laurus, subject to such Company’s rights under Section 9-509(d)(2) of the UCC. 
  

 5 

 (c) Each Company hereby grants to Laurus an irrevocable, non-exclusive license (exercisable upon the
termination of this Agreement due to an occurrence and during the continuance of an Event of Default without payment of royalty or other compensation to such Company) to use, transfer, license or sublicense any Intellectual Property now owned,
licensed to, or hereafter acquired by such Company, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer and automatic machinery
software and programs used for the compilation or printout thereof, and represents, promises and agrees that any such license or sublicense is not and will not be in conflict with the contractual or commercial rights of any third Person; provided,
that such license will terminate on the termination of this Agreement and the payment in full of all Obligations. 
 7. Representations,
Warranties and Covenants Concerning the Collateral. Each Company represents, warrants (each of which such representations and warranties shall be deemed repeated upon the making of each request for a Loan and made as of the time of each and
every Loan hereunder) and covenants as follows: 
 (a) all of the Collateral (i) is owned by it free and clear of all Liens (including
any claims of infringement) except those in Laurus’ favor and Permitted Liens and (ii) is not subject to any agreement prohibiting the granting of a Lien or requiring notice of or consent to the granting of a Lien. 
 (b) it shall not encumber, mortgage, pledge, assign or grant any Lien in any Collateral or any other assets to anyone other than Laurus and except for
Permitted Liens. 
 (c) the Liens granted pursuant to this Agreement, upon completion of the filings and other actions listed on Schedule
7(c) (which, in the case of all filings and other documents referred to in said Schedule, have been delivered to Laurus in duly executed form) constitute valid perfected security interests in all of the Collateral in favor of Laurus as security
for the prompt and complete payment and performance of the Obligations, enforceable in accordance with the terms hereof against any and all of its creditors and purchasers and such security interest is prior to all other Liens in existence on the
date hereof. 
 (d) no effective security agreement, mortgage, deed of trust, financing statement, equivalent security or Lien instrument or
continuation statement covering all or any part of the Collateral is or will be on file or of record in any public office, except those relating to Permitted Liens. 
 (e) it shall not dispose of any of the Collateral whether by sale, lease or otherwise except for the sale of Inventory in the ordinary course of business and for the disposition or transfer in the ordinary course of
business during any fiscal year of obsolete and worn-out Equipment having an aggregate fair market value of not more than $25,000 and only to the extent that (i) the proceeds of any such disposition are used to acquire replacement Equipment
which is subject to Laurus’ first priority security interest or are used to repay Loans or to pay general corporate expenses, or (ii) following the occurrence of an Event of Default which continues to exist the proceeds of which are
remitted to Laurus to be held as cash collateral for the Obligations. 
  

 6 

 (f) it shall defend the right, title and interest of Laurus in and to the Collateral against the claims
and demands of all Persons whomsoever, and take such actions, including (i) all actions necessary to grant Laurus “control” of any Investment Property, Deposit Accounts, Letter-of-Credit Rights or electronic Chattel Paper owned by it,
with any agreements establishing control to be in form and substance satisfactory to Laurus, (ii) the prompt (but in no event later than five (5) Business Days following Laurus’ request therefor) delivery to Laurus of all original
Instruments, Chattel Paper, negotiable Documents and certificated Stock owned by it (in each case, accompanied by stock powers, allonges or other instruments of transfer executed in blank), (iii) notification of Laurus’ interest in
Collateral at Laurus’ request, and (iv) the institution of litigation against third parties as shall be prudent in order to protect and preserve its and/or Laurus’ respective and several interests in the Collateral. 
 (g) it shall promptly, and in any event within five (5) Business Days after the same is acquired by it, notify Laurus of any commercial tort claim
(as defined in the UCC) acquired by it and unless otherwise consented by Laurus, it shall enter into a supplement to this Agreement granting to Laurus a Lien in such commercial tort claim. 
 (h) it shall place notations upon its Books and Records and any of its financial statements to disclose Laurus’ Lien in the Collateral. 

(i) if it retains possession of any Chattel Paper or Instrument with Laurus’ consent, upon Laurus’ request such Chattel Paper and
Instruments shall be marked with the following legend: “This writing and obligations evidenced or secured hereby are subject to the security interest of Laurus Master Fund, Ltd.” Notwithstanding the foregoing, upon the reasonable request
of Laurus, such Chattel Paper and Instruments shall be delivered to Laurus. 
 (j) it shall perform in a reasonable time all other steps
requested by Laurus to create and maintain in Laurus’ favor a valid perfected first Lien in all Collateral subject only to Permitted Liens. 
 (k) it shall notify Laurus promptly and in any event within three (3) Business Days after obtaining knowledge thereof (i) of any event or circumstance that, to its knowledge, would cause Laurus to consider any then existing
Account and/or Inventory as no longer constituting an Eligible Account or Eligible Inventory, as the case may be; (ii) of any material delay in its performance of any of its obligations to any Account Debtor; (iii) of any assertion by any
Account Debtor of any material claims, offsets or counterclaims; (iv) of any allowances, credits and/or monies granted by it to any Account Debtor; (v) of all material adverse information relating to the financial condition of an Account
Debtor; (vi) of any material return of goods; and (vii) of any loss, damage or destruction of any of the Collateral. 
 (l) all
Eligible Accounts (i) represent complete bona fide transactions which require no further act under any circumstances on its part to make such Accounts payable by the Account Debtors, (ii) are not subject to any present, future contingent
offsets or counterclaims, and (iii) do not represent bill and hold sales, consignment sales, guaranteed sales, sale or return or other similar understandings or obligations of any Affiliate or Subsidiary of such Company. It has not made, nor
will it make, any agreement with any Account Debtor for any extension of time for the payment of any Account, any compromise or settlement for less than the full amount 
  

 7 

 thereof, any release of any Account Debtor from liability therefor, or any deduction therefrom except a discount or
allowance for prompt or early payment allowed by it in the ordinary course of its business consistent with historical practice and as previously disclosed to Laurus in writing. 
 (m) it shall keep and maintain its Equipment in good operating condition, except for ordinary wear and tear, and shall make all necessary repairs and
replacements thereof so that the value and operating efficiency shall at all times be maintained and preserved. It shall not permit any such items to become a Fixture to real estate or accessions to other personal property. 
 (n) it shall maintain and keep all of its Books and Records concerning the Collateral at its executive offices listed in Schedule 12(aa).

 (o) it shall maintain and keep the tangible Collateral at the addresses listed in Schedule 12(bb), provided, that it may change
such locations or open a new location, provided that it provides Laurus at least thirty (30) days prior written notice of such changes or new location and (ii) prior to such change or opening of a new location where Collateral having a
value of more than $50,000 will be located, it executes and delivers to Laurus such agreements deemed reasonably necessary or prudent by Laurus, including landlord agreements, mortgagee agreements and warehouse agreements, each in form and substance
satisfactory to Laurus, to adequately protect and maintain Laurus’ security interest in such Collateral. 
 (p) Schedule 7(p)
lists all banks and other financial institutions at which it maintains deposits and/or other accounts, and such Schedule correctly identifies the name, address and telephone number of each such depository, the name in which the account is held, a
description of the purpose of the account, and the complete account number. It shall not establish any depository or other bank account with any financial institution (other than the accounts set forth on Schedule 7(p)) without Laurus’
prior written consent. 
 (q) All Inventory manufactured by it in the United States of America shall be produced in accordance with the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto or promulgated thereunder. 
 8. Payment of Accounts. 
 (a) Not later than July 31, 2006, Company shall, and shall cause
Stockeryale Canada to, irrevocably direct all of its present and future Account Debtors and other Persons obligated to make payments constituting Collateral (for the purposes of this Section 8, the term “Collateral” shall also be
deemed to include all of Stockeryale Canada’s property and assets and, for greater certainty, shall include all of Stockeryale Canada’s “Property” as defined in the General Hypothecation) to make such payments directly to the
lockboxes maintained by such Company or Stockeryale Canada (the “Lockboxes”) with a financial institution accepted by Laurus in writing as may be selected by such Company or Stockeryale Canada (the “Lockbox Bank”)
pursuant to the terms of the certain agreements among one or more Companies or Stockeryale Canada, as applicable, Laurus and/or the Lockbox Bank. Simultaneously with the establishment of the aforementioned Lockbox arrangement, each Company shall,
and shall cause 
  

 8 

 Stockeryale Canada to, cause the Lockbox Bank to enter into all such documentation acceptable to Laurus pursuant to
which, among other things, the Lockbox Bank agrees to: (a) sweep the Lockbox on a daily basis and deposit all checks received therein to an account designated by Laurus in writing and (b) comply only with the instructions or other
directions of Laurus concerning the Lockbox. All of each Company’s and Stockeryale Canada’s invoices, account statements and other written or oral communications directing, instructing, demanding or requesting payment of any Account of any
Company or Stockeryale Canada or any other amount constituting Collateral shall conspicuously direct that all payments be made to the Lockbox or such other address as Laurus may direct in writing. If, notwithstanding the instructions to Account
Debtors, any Company or Stockeryale Canada receives any payments, such Company shall immediately remit or cause Stockeryale Canada to remit, as applicable, such payments to Laurus in their original form with all necessary endorsements. Until so
remitted, such Company shall, and shall cause Stockeryale Canada to, hold all such payments in trust for and as the property of Laurus and shall not commingle such payments with any of its other funds or property. 
 (b) At Laurus’ election, following the occurrence of an Event of Default which is continuing, Laurus may notify each Company’s and Stockeryale
Canada’s Account Debtors of Laurus’ security interest in the Accounts of such Company and Stockeryale Canada, collect them directly and charge the collection costs and expenses thereof to the Companies’ joint and several account.

 9. Collection and Maintenance of Collateral. 
 (a) Laurus may verify each Company’s and Stockeryale Canada’s Accounts from time to time, but not more often than once every three (3) months, unless an Event of Default has occurred and is continuing,
utilizing an audit control company or any other agent of Laurus. 
 (b) Proceeds of Accounts received by Laurus will be deemed received on
the Business Day after Laurus’ receipt of such proceeds in good funds in dollars of the United States of America to an account designated by Laurus. Any amount received by Laurus after 12:00 noon (New York time) on any Business Day shall
be deemed received on the next Business Day. 
 (c) As Laurus receives the proceeds of Accounts of any Company and/or Stockeryale Canada, it
shall (i) apply such proceeds, as required, to amounts outstanding under the Note, and (ii) remit all such remaining proceeds (net of interest, fees and other amounts then due and owing to Laurus hereunder) to Company Agent (for the
benefit of the applicable Companies) upon request (but no more often than twice a week). Notwithstanding the foregoing, following the occurrence and during the continuance of an Event of Default, Laurus, at its option, may (a) apply such
proceeds to the Obligations in such order as Laurus shall elect, (b) hold all such proceeds as cash collateral for the Obligations and each Company hereby grants to Laurus a security interest in such cash collateral amounts as security for the
Obligations and/or (c) do any combination of the foregoing. 
  

 9 

 10. Inspections and Appraisals. At all times during normal business hours, Laurus, and/or any
agent of Laurus shall have the right to (a) have access to, visit, inspect, review, evaluate and make physical verification and appraisals of each Company’s properties and the Collateral, (b) inspect, audit and copy (or take originals
if necessary) and make extracts from each Company’s Books and Records, including management letters prepared by the Accountants, and (c) discuss with each Company’s directors, principal officers, and independent accountants, each
Company’s business, assets, liabilities, financial condition, results of operations and business prospects. Each Company will deliver to Laurus any instrument necessary for Laurus to obtain records from any service bureau maintaining records
for such Company. If any internally prepared financial information, including that required under this Section is unsatisfactory in any manner to Laurus, Laurus may request that the Accountants review the same. 
 11. Financial Reporting. Company Agent will deliver, or cause to be delivered, to Laurus each of the following, which shall be in form and detail
acceptable to Laurus: 
 (a) As soon as available, and in any event within ninety (90) days after the end of each fiscal year of the
Parent, each Company’s audited financial statements with a report of Vitale, Caturano & Company, Ltd. or any other independent certified public accountants of recognized standing selected by the Parent and acceptable to Laurus (the
“Accountants”), which annual financial statements shall be without qualification and shall include each of the Parent’s and each of its Subsidiaries’ balance sheet as at the end of such fiscal year and the related
statements of each of the Parent’s and each of its Subsidiaries’ income, retained earnings and cash flows for the fiscal year then ended, prepared on a consolidated basis to include the Parent and each Subsidiary of the Parent, all in
reasonable detail and prepared in accordance with GAAP, together with (i) if and when available, copies of any management letters prepared by the Accountants; and (ii) a certificate of the Parent’s President, Chief Executive Officer
or Chief Financial Officer stating that such financial statements have been prepared in accordance with GAAP and whether or not such officer has knowledge of the occurrence of any Default or Event of Default hereunder and, if so, stating in
reasonable detail the facts with respect thereto; 
 (b) As soon as available and in any event within forty five (45) days after the end
of each fiscal quarter of the Parent, an unaudited/internal balance sheet and statements of income, retained earnings and cash flows of each of the Parent’s and each of its Subsidiaries’ as at the end of and for such quarter and for the
year to date period then ended, prepared on a consolidating and consolidated basis to include the Parent and each Subsidiary of the Parent, in reasonable detail and stating in comparative form the figures for the corresponding date and periods in
the previous year, all prepared in accordance with GAAP, subject to year-end adjustments and accompanied by a certificate of the Parent’s President, Chief Executive Officer or Chief Financial Officer, stating (i) that such financial
statements have been prepared in accordance with GAAP, subject to year-end audit adjustments, and (ii) whether or not such officer has knowledge of the occurrence of any Default or Event of Default hereunder not theretofore reported and
remedied and, if so, stating in reasonable detail the facts with respect thereto; 
  

 10 

 (c) As soon as available and in any event within fifteen (15) days after the end of each calendar
month, an unaudited/internal balance sheet and statements of income, retained earnings and cash flows of each of the Parent and its Subsidiaries as at the end of and for such month and for the year to date period then ended, prepared on a
consolidating and consolidated basis to include the Parent and each Subsidiary of the Parent, in reasonable detail and stating in comparative form the figures for the corresponding date and periods in the previous year, all prepared in accordance
with GAAP, subject to year-end adjustments and accompanied by a certificate of the Parent’s President, Chief Executive Officer or Chief Financial Officer, stating (i) that such financial statements have been prepared in accordance with
GAAP, subject to year-end audit adjustments, and (ii) whether or not such officer has knowledge of the occurrence of any Default or Event of Default hereunder not theretofore reported and remedied and, if so, stating in reasonable detail the
facts with respect thereto; 
 (d) Within fifteen (15) days after the end of each month (or more frequently if Laurus so requests),
agings of each Company’s and Stockeryale Canada’s Accounts, unaudited trial balances and their accounts payable and a calculation of each Company’s and Stockeryale Canada’s Accounts, Eligible Accounts, Inventory and/or Eligible
Inventory, provided, however, that if Laurus shall request the foregoing information more often than as set forth in the immediately preceding clause, each Company shall have fifteen (15) days from each such request to comply with Laurus’
demand; 
 (e) Promptly after (i) the filing thereof, copies of the Parent’s most recent registration statements and annual,
quarterly, monthly or other regular reports which the Parent files with the Securities and Exchange Commission (the “SEC”), and (ii) the issuance thereof, copies of such financial statements, reports and proxy statements as the
Parent shall send to its stockholders. 
 (f) The Parent shall deliver, or cause the applicable Subsidiary of the Parent to deliver, such
other information as the Purchaser shall reasonably request. 
 12. Additional Representations and Warranties. Each Company hereby
represents and warrants to Laurus as follows: 
 (a) Organization, Good Standing and Qualification. It and each of its Subsidiaries is
a corporation, partnership or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. It and each of its Subsidiaries has the corporate, limited
liability company or partnership, as the case may be, power and authority to own and operate its properties and assets and, insofar as it is or shall be a party thereto, to (i) execute and deliver this Agreement and the Ancillary Agreements,
(ii) to issue the Note, (iii) to issue the Closing Shares and (iv) to carry out the provisions of this Agreement and the Ancillary Agreements and to carry on its business as presently conducted. It and each of its Subsidiaries is duly
qualified and is authorized to do business and is in good standing as a foreign corporation, partnership or limited liability company, as the case may be, in all jurisdictions in which the nature or location of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so has not had, or could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 

 

 11 

 (b) Subsidiaries. Each of its direct and indirect Subsidiaries, the direct owner of each such
Subsidiary and its percentage ownership thereof, is set forth on Schedule 12(b). 
 (c) Capitalization; Voting Rights.

 (i) The authorized capital stock of the Parent, as of the date hereof consists of 100,000,000 of Common Stock, par value $0.001 per share,
29,065,152 shares of which are issued and outstanding. The authorized, issued and outstanding capital stock of each Subsidiary of each Company is set forth on Schedule 12(c). 
 (ii) Except as disclosed on Schedule 12(c), other than: (i) the shares reserved for issuance under the Parent’s stock option plans; and
(ii) shares which may be issued pursuant to this Agreement and the Ancillary Agreements, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder
agreements, or arrangements or agreements of any kind for the purchase or acquisition from the Parent of any of its securities. Except as disclosed on Schedule 12(c), neither the offer or issuance of the Note, the issuance of the Closing
Shares, nor the consummation of any transaction contemplated hereby will result in a change in the price or number of any securities of the Parent outstanding, under anti-dilution or other similar provisions contained in or affecting any such
securities. 
 (iii) All issued and outstanding shares of the Parent’s Common Stock: (i) have been duly authorized and validly
issued and are fully paid and nonassessable; and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. 
 (iv) The rights, preferences, privileges and restrictions of the shares of the Common Stock are as stated in the Parent’s Certificate of Incorporation (the “Charter”). The Closing Shares have
been duly and validly issued. When issued in compliance with the provisions of this Agreement and the Parent’s Charter, the Securities will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances;
provided, however, that the Securities may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed. 
 (d) Authorization; Binding Obligations. All corporate, partnership or limited liability company, as the case may be, action on its and its
Subsidiaries’ part (including their respective officers and directors) necessary for the authorization of this Agreement and the Ancillary Agreements, the performance of all of its and its Subsidiaries’ obligations hereunder and under the
Ancillary Agreements on the Closing Date and, the authorization, issuance and delivery of the Note and the Closing Shares has been taken or will be taken prior to the Closing Date. This Agreement and the Ancillary Agreements, when executed and
delivered and to the extent it is a party thereto, will be its and its Subsidiaries’ valid and binding obligations enforceable against each such Person in accordance with their terms, except: 
 (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of
creditors’ rights; and 
  

 12 

 (ii) general principles of equity that restrict the availability of equitable or legal remedies.

 The issuance of the Note is not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied
with. The issuance of the Closing Shares is not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with. 
 (e) Liabilities. Neither it nor any of its Subsidiaries has any liabilities, except current liabilities incurred in the ordinary course of
business and liabilities disclosed in any Exchange Act Filings. 
 (f) Agreements; Action. Except as set forth on Schedule
12(f) or as disclosed in any Exchange Act Filings: 
 (i) All of the agreements, understandings, instruments, contracts and proposed
transactions, to which the Parent is a party or by which it is bound, that are required to be filed under Item 601 of Regulation SB promulgated under the Exchange Act have been so filed by the Parent with the SEC. All material judgments,
orders, writs or decrees to which the Parent is a party or to its knowledge by which it is bound, have been disclosed by the Parent on a current report on Form 8-K pursuant to the Exchange Act. Notwithstanding the foregoing, there are no agreements,
understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which it or any of its Subsidiaries is a party or to its knowledge by which it is bound which may involve: (i) the transfer or license of any
patent, copyright, trade secret or other proprietary right to or from it (other than licenses arising from the purchase of “off the shelf” or other standard products); (ii) provisions restricting the development, manufacture or
distribution of its or any of its Subsidiaries’ products or services; or (iii) indemnification by it or any of its Subsidiaries with respect to infringements of proprietary rights. 
 (ii) Since March 31, 2006 (the “Balance Sheet Date”), neither it nor any of its Subsidiaries has: (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock; (ii) incurred any indebtedness for money borrowed or any other liabilities (other than ordinary course obligations) individually
in excess of $250,000 or, in the case of indebtedness and/or liabilities individually less than $50,000, in excess of $150,000 in the aggregate; (iii) made any loans or advances to any Person not in excess, individually or in the aggregate, of
$100,000, other than ordinary advances for travel expenses; or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its Inventory in the ordinary course of business. 
 (iii) For the purposes of subsections (i) and (ii) of this Section 12(f), all indebtedness, liabilities, agreements, understandings,
instruments, contracts and proposed transactions involving the same Person (including Persons it or any of its applicable Subsidiaries has reason to believe are affiliated therewith or with any Subsidiary thereof) shall be aggregated for the purpose
of meeting the individual minimum dollar amounts of such subsections. 
  

 13 

 (iv) the Parent maintains disclosure controls and procedures (“Disclosure Controls”)
designed to ensure that information required to be disclosed by the Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the rules and forms of
the SEC. 
 (v) The Parent makes and keeps books, records, and accounts, that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of its assets. It maintains internal control over financial reporting (“Financial Reporting Controls”) designed by, or under the supervision of, its principal executive and principal financial officers,
and effected by its board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP,
including that: 
 (1) transactions are executed in accordance with management’s general or specific authorization; 
 (2) unauthorized acquisition, use, or disposition of the Parent’s assets that could have a material effect on the financial statements are
prevented or timely detected; 
 (3) transactions are recorded as necessary to permit preparation of financial statements in accordance with
GAAP, and that its receipts and expenditures are being made only in accordance with authorizations of the Parent’s management and board of directors; 
 (4) transactions are recorded as necessary to maintain accountability for assets; and 
 (5) the recorded
accountability for assets is compared with the existing assets at reasonable intervals, and appropriate action is taken with respect to any differences. 
 (g) Obligations to Related Parties. Except as set forth on Schedule 12(g), neither it nor any of its Subsidiaries has any obligations to their respective officers, directors, stockholders or employees
other than: 
 (i) for payment of salary for services rendered and for bonus payments; 
 (ii) reimbursement for reasonable expenses incurred on its or its Subsidiaries’ behalf; 
 (iii) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock
option plan approved by its and its Subsidiaries’ Board of Directors, as applicable); and 
 (iv) obligations listed in its and each of
its Subsidiary’s financial statements or disclosed in any of the Parent’s Exchange Act Filings. 
  

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 Except as described above or set forth on Schedule 12(g), none of its officers, directors or, to the best of its
knowledge, key employees or stockholders, any of its Subsidiaries or any members of their immediate families, are indebted to it or any of its Subsidiaries, individually or in the aggregate, in excess of $50,000 or have any direct or indirect
ownership interest in any Person with which it or any of its Subsidiaries is affiliated or with which it or any of its Subsidiaries has a business relationship, or any Person which competes with it or any of its Subsidiaries, other than passive
investments in publicly traded companies (representing less than one percent (1%) of such company) which may compete with it or any of its Subsidiaries. Except as described above, none of its officers, directors or stockholders, or any member
of their immediate families, is, directly or indirectly, interested in any material contract with it or any of its Subsidiaries and no agreements, understandings or proposed transactions are contemplated between it or any of its Subsidiaries and any
such Person. Except as set forth on Schedule 12(g), neither it nor any of its Subsidiaries is a guarantor or indemnitor of any indebtedness of any other Person. 
 (h) Changes. Since the Balance Sheet Date, except as disclosed in any Exchange Act Filing or in any Schedule to this Agreement or to any of the Ancillary Agreements, there has not been: 
 (i) any change in its or any of its Subsidiaries’ business, assets, liabilities, condition (financial or otherwise), properties or operations, which,
individually or in the aggregate, has had, or could reasonably be expected to have, a Material Adverse Effect; 
 (i) any resignation or
termination of any of its or its Subsidiaries’ officers, key employees or groups of employees; 
 (ii) any material change, except in
the ordinary course of business, in its or any of its Subsidiaries’ contingent obligations by way of guaranty, endorsement, indemnity, warranty or otherwise; 
 (iii) any damage, destruction or loss, whether or not covered by insurance, which has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; 
 (iv) any waiver by it or any of its Subsidiaries of a valuable right or of a material debt owed to it; 
 (v) any direct or indirect material loans made by it or any of its Subsidiaries to any of its or any of its Subsidiaries’ stockholders, employees,
officers or directors, other than advances made in the ordinary course of business; 
 (vi) any material change in any compensation
arrangement or agreement with any employee, officer, director or stockholder; 
 (vii) any declaration or payment of any dividend or other
distribution of its or any of its Subsidiaries’ assets; 
 (viii) any labor organization activity related to it or any of its
Subsidiaries; 
  

 15 

 (ix) any debt, obligation or liability incurred, assumed or guaranteed by it or any of its Subsidiaries,
except those for immaterial amounts and for current liabilities incurred in the ordinary course of business; 
 (x) any sale, assignment or
transfer of any Intellectual Property or other intangible assets; 
 (xi) any change in any material agreement to which it or any of its
Subsidiaries is a party or by which either it or any of its Subsidiaries is bound which, either individually or in the aggregate, has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

 (xii) any other event or condition of the character that, either individually or in the aggregate, has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect; or 
 (xiii) any arrangement or commitment by it or any of
its Subsidiaries to do any of the acts described in subsection (i) through (xiii) of this Section 12(h). 
 (xiv) Title to
Properties and Assets; Liens, Etc. Except as set forth on Schedule 12(i), it and each of its Subsidiaries has good and marketable title to their respective properties and assets, and good title to its leasehold interests, in each
case subject to no Lien, other than Permitted Liens. 
 All facilities, Equipment, Fixtures, vehicles and other properties owned, leased or used by it or any
of its Subsidiaries are in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used. Except as set forth on Schedule 12(i), it and each of its Subsidiaries is in compliance with all
material terms of each lease to which it is a party or is otherwise bound. 
 (j) Intellectual Property. 
 (i) It and each of its Subsidiaries owns or possesses sufficient legal rights to all Intellectual Property necessary for their respective businesses as
now conducted and, to its knowledge as presently proposed to be conducted, without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to its or any of its Subsidiary’s
Intellectual Property, nor is it or any of its Subsidiaries bound by or a party to any options, licenses or agreements of any kind with respect to the Intellectual Property of any other Person other than such licenses or agreements arising from the
purchase of “off the shelf” or standard products. 
 (ii) Neither it nor any of its Subsidiaries has received any communications
alleging that it or any of its Subsidiaries has violated any of the Intellectual Property or other proprietary rights of any other Person, nor is it or any of its Subsidiaries aware of any basis therefor. 
 (iii) Neither it nor any of its Subsidiaries believes it is or will be necessary to utilize any inventions, trade secrets or proprietary information of
any of its 
  

 16 

 employees made prior to their employment by it or any of its Subsidiaries, except for inventions, trade secrets or
proprietary information that have been rightfully assigned to it or any of its Subsidiaries. 
 (k) Compliance with Other Instruments.
Neither it nor any of its Subsidiaries is in violation or default of (x) any term of its Charter or Bylaws, or (y) any provision of any indebtedness, mortgage, indenture, contract, agreement or instrument to which it is party or by which
it is bound or of any judgment, decree, order or writ, which violation or default, in the case of this clause (y), has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. The execution,
delivery and performance of and compliance with this Agreement and the Ancillary Agreements to which it is a party, and the issuance of the Note and the other Securities each pursuant hereto and thereto, will not, with or without the passage of time
or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term or provision, or result in the creation of any Lien upon any of its or any of its Subsidiary’s properties or assets
or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to it or any of its Subsidiaries, their businesses or operations or any of their assets or properties. 
 (l) Litigation. Except as set forth on Schedule 12(l), there is no action, suit, proceeding or investigation pending or, to its knowledge,
currently threatened against it or any of its Subsidiaries that prevents it or any of its Subsidiaries from entering into this Agreement or the Ancillary Agreements, or from consummating the transactions contemplated hereby or thereby, or which has
had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, or could result in any change in its or any of its Subsidiaries’ current equity ownership, nor is it aware that there is any basis
to assert any of the foregoing. Neither it nor any of its Subsidiaries is a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by it or any of its Subsidiaries currently pending or which it or any of its Subsidiaries intends to initiate. 
 (m) Tax Returns and Payments. It and each of its Subsidiaries has timely filed all tax returns (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and
all other taxes due and payable by it and each of its Subsidiaries on or before the Closing Date, have been paid or will be paid prior to the time they become delinquent. Except as set forth on Schedule 12(m), neither it nor any of its
Subsidiaries has been advised: 
 (i) that any of its returns, federal, state or other, have been or are being audited as of the date hereof;
or 
 (ii) of any adjustment, deficiency, assessment or court decision in respect of its federal, state or other taxes. 
 Neither it nor any of its Subsidiaries has any knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is
not adequately provided for. 
  

 17 

 (n) Employees. Except as set forth on Schedule 12(n), neither it nor any of its
Subsidiaries has any collective bargaining agreements with any of its employees. There is no labor union organizing activity pending or, to its knowledge, threatened with respect to it or any of its Subsidiaries. Except as disclosed in the Exchange
Act Filings or on Schedule 12(n), neither it nor any of its Subsidiaries is a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement
agreement or other employee compensation plan or agreement. To its knowledge, none of its or any of its Subsidiaries’ employees, nor any consultant with whom it or any of its Subsidiaries has contracted, is in violation of any term of any
employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, it or any of its Subsidiaries because of the nature of the business to be conducted by
it or any of its Subsidiaries; and to its knowledge the continued employment by it and its Subsidiaries of their present employees, and the performance of its and its Subsidiaries contracts with its independent contractors, will not result in any
such violation. Neither it nor any of its Subsidiaries is aware that any of its or any of its Subsidiaries’ employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to
any judgment, decree or order of any court or administrative agency that would interfere with their duties to it or any of its Subsidiaries. Neither it nor any of its Subsidiaries has received any notice alleging that any such violation has
occurred. Except for employees who have a current effective employment agreement with it or any of its Subsidiaries, none of its or any of its Subsidiaries’ employees has been granted the right to continued employment by it or any of its
Subsidiaries or to any material compensation following termination of employment with it or any of its Subsidiaries. Except as set forth on Schedule 12(n), neither it nor any of its Subsidiaries is aware that any officer, key employee or
group of employees intends to terminate his, her or their employment with it or any of its Subsidiaries, as applicable, nor does it or any of its Subsidiaries have a present intention to terminate the employment of any officer, key employee or group
of employees. 
 (o) Registration Rights and Voting Rights. Except as set forth on Schedule 12(o) and except as disclosed
in Exchange Act Filings, neither it nor any of its Subsidiaries is presently under any obligation, and neither it nor any of its Subsidiaries has granted any rights, to register any of its or any of its Subsidiaries’ presently outstanding
securities or any of its securities that may hereafter be issued that have not been satisfied. Except as set forth on Schedule 12(o) and except as disclosed in Exchange Act Filings, to its knowledge, none of its or any of its
Subsidiaries’ stockholders has entered into any agreement with respect to its or any of its Subsidiaries’ voting of equity securities. 
 (p) Compliance with Laws; Permits. Neither it nor any of its Subsidiaries is in violation of the Sarbanes-Oxley Act of 2002 or any SEC related regulation or rule or any rule of the Principal Market promulgated thereunder or any other
applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which has had, or could reasonably
be expected to have, either individually or in the aggregate, a Material Adverse Effect. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement or any Ancillary Agreement and the issuance of any of the Securities, except such as have been duly and validly obtained or filed, or with 
  

 18 

 respect to any filings that must be made after the Closing Date, as will be filed in a timely manner. It and each of its
Subsidiaries has all material franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. 
 (q) Environmental and Safety Laws. Except as set forth on Schedule 12(q), (a) neither
it nor any of its Subsidiaries is in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with
any such existing statute, law or regulation and (b) no Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by it or any of its Subsidiaries or, to its knowledge, by any other Person on any property owned,
leased or used by it or any of its Subsidiaries. For the purposes of the preceding sentence, “Hazardous Materials” shall mean: 
 (i) materials which are listed or otherwise defined as “hazardous” or “toxic” under any applicable local, state, federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous substances, including building materials; and 
 (ii) any petroleum products or nuclear materials. 
 (r) Valid Offering. Assuming the accuracy of the representations and warranties of Laurus contained in this Agreement, the offer and issuance of the Securities will be exempt from the registration requirements of the Securities Act
of 1933, as amended (the “Securities Act”), and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state
securities laws. 
 (s) Full Disclosure. It and each of its Subsidiaries has provided Laurus with all information requested by Laurus
in connection with Laurus’ decision to enter into this Agreement, including all information each Company and its Subsidiaries believe is reasonably necessary to make such investment decision. Neither this Agreement, the Ancillary Agreements nor
the exhibits and schedules hereto and thereto nor any other document delivered by it or any of its Subsidiaries to Laurus or its attorneys or agents in connection herewith or therewith or with the transactions contemplated hereby or thereby, contain
any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they are made, not misleading. Any financial projections and
other estimates provided to Laurus by it or any of its Subsidiaries were based on its and its Subsidiaries’ experience in the industry and on assumptions of fact and opinion as to future events which it or any of its Subsidiaries, at the date
of the issuance of such projections or estimates, believed to be reasonable. 
 (t) Insurance. It and each of its Subsidiaries has
general commercial, product liability, fire and casualty insurance policies with coverages which it believes are customary for companies similarly situated to it and its Subsidiaries in the same or similar business. 
  

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 (u) SEC Reports and Financial Statements. Except as set forth on Schedule 12(u), it
and each of its Subsidiaries has filed all proxy statements, reports and other documents required to be filed by it under the Exchange Act. The Parent has furnished Laurus with copies of: (i) its Annual Report on Form 10-KSB for its fiscal
years ended December 31, 2005; and (ii) its Quarterly Report on Form 10-QSB for its fiscal quarter ended March 31, 2006, and the Form 8-K filings which it has made during its fiscal year 2006 to date (collectively, the “SEC
Reports”). Except as set forth on Schedule 12(u), each SEC Report was, at the time of its filing, in substantial compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements (and
the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to state a 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. Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed) and fairly present in all material respects the financial condition, the
results of operations and cash flows of the Parent and its Subsidiaries, on a consolidated basis, as of, and for, the periods presented in each such SEC Report. 
 (v) Listing. The Parent’s Common Stock is listed or quoted, as applicable, on the Principal Market and satisfies all requirements for the continuation of such listing or quotation, as applicable, and the
Parent shall do all things necessary for the continuation of such listing or quotation, as applicable. Except as set forth on Schedule 12(v), the Parent has not received any written notice that its Common Stock will be delisted from, or no
longer quoted on, as applicable, the Principal Market or that its Common Stock does not meet all requirements for such listing or quotation, as applicable. 
 (w) No Integrated Offering. Neither it, nor any of its Subsidiaries nor any of its Affiliates, nor any Person acting on its or their behalf, has directly or indirectly made any offers or sales of any security
or solicited any offers to buy any security under circumstances that would cause the offering of the Securities pursuant to this Agreement or any Ancillary Agreement to be integrated with prior offerings by it for purposes of the Securities Act
which would prevent it from issuing the Securities pursuant to Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will it or any of its Affiliates or Subsidiaries take any action or steps that
would cause the offering of the Securities to be integrated with other offerings. 
 (x) Stop Transfer. The Closing Shares are
restricted securities as of the date of this Agreement. Parent agrees to promptly cause to be removed any stop transfer order or other order impeding the sale and delivery of any of the Closing Shares at such time as the Closing Shares are
registered for public sale or an exemption from registration is available and the conditions for use thereof are satisfied, except as required by state and federal securities laws. 
 (y) Intentionally Omitted. 
 (z)
Patriot Act. It certifies that, to the best of its knowledge, neither it nor any of its Subsidiaries has been designated, nor is or shall be owned or controlled, by a “suspected 
  

 20 

 terrorist” as defined in Executive Order 13224. It hereby acknowledges that Laurus seeks to comply with all
applicable laws concerning money laundering and related activities. In furtherance of those efforts, it hereby represents, warrants and covenants that: (i) none of the cash or property that it or any of its Subsidiaries will pay or will
contribute to Laurus has been or shall be derived from, or related to, any activity that is deemed criminal under United States law; and (ii) no contribution or payment by it or any of its Subsidiaries to Laurus, to the extent that they are
within its or any such Subsidiary’s control shall cause Laurus to be in violation of the United States Bank Secrecy Act, the United States International Money Laundering Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. It shall promptly notify Laurus if any of these representations, warranties and covenants ceases to be true and accurate regarding it or any of its Subsidiaries. It shall provide Laurus with any
additional information regarding it and each Subsidiary thereof that Laurus deems necessary or convenient to ensure compliance with all applicable laws concerning money laundering and similar activities. It understands and agrees that if at any time
it is discovered that any of the foregoing representations, warranties and covenants are incorrect, or if otherwise required by applicable law or regulation related to money laundering or similar activities, Laurus may undertake appropriate actions
to ensure compliance with applicable law or regulation, including but not limited to segregation and/or redemption of Laurus’ investment in it. It further understands that Laurus may release confidential information about it and its
Subsidiaries and, if applicable, any underlying beneficial owners, to proper authorities if Laurus, in its sole discretion, determines that it is in the best interests of Laurus in light of relevant rules and regulations under the laws set forth in
subsection (ii) above. 
 (aa) Company Name; Locations of Offices, Records and Collateral. Schedule 12(aa) sets forth
each Company’s name as it appears in official filings in the state of its organization, the type of entity of each Company, the organizational identification number issued by each Company’s state of organization or a statement that no such
number has been issued, each Company’s state of organization, and the location of each Company’s chief executive office, corporate offices, warehouses, other locations of Collateral and locations where records with respect to Collateral
are kept (including in each case the county of such locations) and, except as set forth in such Schedule 12(aa), such locations have not changed during the preceding twelve months. As of the Closing Date, during the prior five years, except
as set forth in Schedule 12(aa), no Company has been known as or conducted business in any other name (including trade names). Each Company has only one state of organization. 
 (bb) ERISA. Based upon the Employee Retirement Income Security Act of 1974 (“ERISA”), and the regulations and published
interpretations thereunder: (i) neither it nor any of its Subsidiaries has engaged in any Prohibited Transactions (as defined in Section 406 of ERISA and Section 4975 of the Code); (ii) it and each of its Subsidiaries has met all
applicable minimum funding requirements under Section 302 of ERISA in respect of its plans; (iii) neither it nor any of its Subsidiaries has any knowledge of any event or occurrence which would cause the Pension Benefit Guaranty
Corporation to institute proceedings under Title IV of ERISA to terminate any employee benefit plan(s); (iv) neither it nor any of its Subsidiaries has any fiduciary responsibility for investments with respect to any plan existing for the
benefit of persons other than its or such Subsidiary’s employees; and (v) neither it nor any of its Subsidiaries has withdrawn, completely or partially, from any multi-employer pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980. 
  

 21 

 (cc) Form S-3 Eligibility. The Parent is eligible to register the Closing Shares for resale by
Laurus using Form S-3 promulgated under the Securities Act. 
 (dd) Lasiris. Lasiris does not engage in any business of a material
nature or own any assets other than (i) all of the capital stock of Stockeryale Canada and (ii) promissory note(s) made by Stockeryale Canada to Lasiris evidencing intercompany advances made by Lasiris to Stockeryale Canada prior to the
date hereof. 
 13. Covenants. Each Company, as applicable, covenants and agrees with Laurus as follows: 
 (a) Stop-Orders. It shall advise Laurus, promptly after it receives notice of issuance by the SEC, any state securities commission or any other
regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Parent, or of the suspension of the qualification of the Common Stock of the Parent for offering or sale in any jurisdiction, or
the initiation of any proceeding for any such purpose. 
 (b) Listing. The Parent will use commercially reasonable efforts to maintain
the listing or quotation, as applicable, of its Common Stock on the Principal Market, and will comply in all material respects with the Parent’s reporting, filing and other obligations under the bylaws or rules of the National Association of
Securities Dealers (“NASD”) and such exchanges, as applicable. 
 (c) Market Regulations. It shall notify the SEC,
NASD and applicable state authorities, in accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to Laurus and promptly provide copies thereof to Laurus. 
 (d) Reporting
Requirements. It shall timely file with the SEC all reports required to be filed pursuant to the Exchange Act and refrain from terminating its status as an issuer required by the Exchange Act to file reports thereunder even if the Exchange Act
or the rules or regulations thereunder would permit such termination. 
 (e) Use of Funds. It shall use the proceeds of the Loans
solely to repay all the obligations and liabilities of Stockeryale Canada due and owing to National Bank of Canada and for its and Stockeryale Canada’s general working capital purposes. 
 (f) Access to Facilities. It shall, and shall cause each of its Subsidiaries to, permit any representatives designated by Laurus (or any successor
of Laurus), upon reasonable notice and during normal business hours, at Company’s expense and accompanied by a representative of Company Agent (provided that no such prior notice shall be required to be given and no such representative shall be
required to accompany Laurus in the event Laurus believes such access is necessary to preserve or protect the Collateral or following the occurrence and during the continuance of an Event of Default), to: 
 (i) visit and inspect any of its or any such Subsidiary’s properties; 
  

 22 

 (ii) examine its or any such Subsidiary’s corporate and financial records (unless such examination
is not permitted by federal, state or local law or by contract) and make copies thereof or extracts therefrom; and 
 (iii) discuss its or
any such Subsidiary’s affairs, finances and accounts with its or any such Subsidiary’s directors, officers and Accountants. 
 (g)
Taxes. It shall, and shall cause each of its Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon it and its
Subsidiaries’ income, profits, property or business, as the case may be; provided, however, that any such tax, assessment, charge or levy need not be paid currently if (i) the validity thereof shall currently and diligently be contested in
good faith by appropriate proceedings, (ii) such tax, assessment, charge or levy shall have no effect on the Lien priority of Laurus in the Collateral, and (iii) if it and/or such Subsidiary, as applicable, shall have set aside on its
and/or such Subsidiary’s books adequate reserves with respect thereto in accordance with GAAP; and provided, further, that it shall, and shall cause each of its Subsidiaries to, pay all such taxes, assessments, charges or levies forthwith upon
the commencement of proceedings to foreclose any lien which may have attached as security therefor. 
 (h) Insurance. It shall bear
the full risk of loss from any loss of any nature whatsoever with respect to the Collateral. It and each of its Subsidiaries shall keep its assets which are of an insurable character insured by financially sound and reputable insurers against loss
or damage by fire, explosion and other risks customarily insured against by companies in similar business similarly situated as it and its Subsidiaries; and it and its Subsidiaries shall maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property to the extent and in the manner which it and/or such Subsidiary thereof reasonably believes is customary for companies in similar business similarly situated as it and
its Subsidiaries and to the extent available on commercially reasonable terms. It and each of its Subsidiaries will jointly and severally bear the full risk of loss from any loss of any nature whatsoever with respect to the assets pledged to Laurus
as security for its obligations hereunder and under the Ancillary Agreements. At its own cost and expense in amounts and with carriers reasonably acceptable to Laurus, it and each of its Subsidiaries shall (i) keep all their insurable
properties and properties in which they have an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and for such amounts, as is customary in the case of
companies engaged in businesses similar to it or the respective Subsidiary’s including business interruption insurance; (ii) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to it and
its Subsidiaries’ insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have access to its or any of its Subsidiaries assets
or funds either directly or through governmental authority to draw upon such funds or to direct generally the disposition of such assets; (iii) maintain public and product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it or any of its Subsidiaries is engaged in business; and
(v) furnish Laurus with (x) copies of all policies and evidence of the maintenance of such policies at least thirty (30)
  

 23 

 days before any expiration date, (y) excepting its and its Subsidiaries’ workers’ compensation policy,
endorsements to such policies naming Laurus as “co-insured” or “additional insured” and appropriate loss payable endorsements in form and substance satisfactory to Laurus, naming Laurus as lenders loss payee, and
(z) evidence that as to Laurus the insurance coverage shall not be impaired or invalidated by any act or neglect of any Company or any of its Subsidiaries and the insurer will provide Laurus with at least thirty (30) days notice prior to
cancellation. It shall instruct the insurance carriers that in the event of any loss thereunder, the carriers shall make payment for such loss to Laurus and not to any Company or any of its Subsidiaries and Laurus jointly. If any insurance losses
are paid by check, draft or other instrument payable to any Company and/or any of its Subsidiaries and Laurus jointly, Laurus may endorse, as applicable, such Company’s and/or any of its Subsidiaries’ name thereon and do such other things
as Laurus may deem advisable to reduce the same to cash. Laurus is hereby authorized to adjust and compromise claims. All loss recoveries received by Laurus upon any such insurance may be applied to the Obligations, in such order as Laurus in its
sole discretion shall determine or shall otherwise be delivered to Company Agent for the benefit of the applicable Company and/or its Subsidiaries. Any surplus shall be paid by Laurus to Company Agent for the benefit of the applicable Company and/or
its Subsidiaries, or applied as may be otherwise required by law. Any deficiency thereon shall be paid, as applicable, by Companies and their Subsidiaries to Laurus, on demand. 
 (i) Intellectual Property. It shall, and shall cause each of its Subsidiaries to, maintain in full force and effect its corporate existence,
rights and franchises and all licenses and other rights to use Intellectual Property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business. 
 (j) Properties. It shall, and shall cause each of its Subsidiaries to, keep its properties in good repair, working order and condition, reasonable
wear and tear excepted, and from time to time make all needful and proper repairs, renewals, replacements, additions and improvements thereto; and it shall, and shall cause each of its Subsidiaries to, at all times comply with each provision of all
leases to which it is a party or under which it occupies property if the breach of such provision could reasonably be expected to have a Material Adverse Effect. 
 (k) Confidentiality. It shall not, and shall not permit any of its Subsidiaries to, disclose, and will not include in any public announcement, the name of Laurus, unless expressly agreed to by Laurus or unless
and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. Notwithstanding the foregoing, each Company and its Subsidiaries may disclose Laurus’ identity and the terms of this
Agreement to its current and prospective debt and equity financing sources. 
 (l) Required Approvals. It shall not, and shall not
permit any of its Subsidiaries to, without the prior written consent of Laurus, (i) create, incur, assume or suffer to exist any indebtedness (exclusive of trade debt) whether secured or unsecured other than each Company’s indebtedness to
Laurus and as set forth on Schedule 13(l)(i) attached hereto and made a part hereof; (ii) cancel any debt owing to it in excess of $50,000 in the aggregate during any 12 month period; (iii) assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any obligations of any other Person, except the endorsement of negotiable instruments by it or its Subsidiaries for deposit or collection or similar 
  

 24 

 transactions in the ordinary course of business; (iv) directly or indirectly declare, pay or make any dividend or
distribution on any class of its Stock or apply any of its funds, property or assets to the purchase, redemption or other retirement of any of its or its Subsidiaries’ Stock outstanding on the date hereof, or issue any preferred stock;
(v) purchase or hold beneficially any Stock or other securities or evidences of indebtedness of, make or permit to exist any loans or advances to, or make any investment or acquire any interest whatsoever in, any other Person, including any
partnership or joint venture, except (x) travel advances, (y) loans to its and its Subsidiaries’ officers and employees not exceeding at any one time an aggregate of $10,000, and (z) loans to its existing Subsidiaries so long as
such Subsidiaries are designated as either a co-borrower hereunder or has entered into such guaranty and security documentation required by Laurus, including, without limitation, to grant to Laurus a first priority perfected security interest in
substantially all of such Subsidiary’s assets to secure the Obligations; (vi) create or permit to exist any Subsidiary, other than any Subsidiary in existence on the date hereof and listed in Schedule 12(b) unless such new
Subsidiary is a wholly-owned Subsidiary and is designated by Laurus as either a co-borrower or guarantor hereunder and such Subsidiary shall have entered into all such documentation required by Laurus, including, without limitation, to grant to
Laurus a first priority perfected security interest in substantially all of such Subsidiary’s assets to secure the Obligations; (vii) directly or indirectly, prepay any indebtedness (other than to Laurus and in the ordinary course of
business), or repurchase, redeem, retire or otherwise acquire any indebtedness (other than to Laurus and in the ordinary course of business) except to make scheduled payments of principal and interest thereof; (viii) enter into any merger,
consolidation or other reorganization with or into any other Person or acquire all or a portion of the assets or Stock of any Person or permit any other Person to consolidate with or merge with it, unless (1) such Company is the surviving
entity of such merger or consolidation, (2) no Event of Default shall exist immediately prior to and after giving effect to such merger or consolidation, (3) such Company shall have provided Laurus copies of all documentation relating to
such merger or consolidation and (4) such Company shall have provided Laurus with at least thirty (30) days’ prior written notice of such merger or consolidation; (ix) materially change the nature of the business in which it is
presently engaged; (x) become subject to (including, without limitation, by way of amendment to or modification of) any agreement or instrument which by its terms would (under any circumstances) restrict its or any of its Subsidiaries’
right to perform the provisions of this Agreement or any of the Ancillary Agreements; (xi) change its fiscal year or make any changes in accounting treatment and reporting practices without prior written notice to Laurus except as required by
GAAP or in the tax reporting treatment or except as required by law; (xii) enter into any transaction with any employee, director or Affiliate, except in the ordinary course on arms-length terms; (xiii) bill Accounts under any name except
the present name of such Company; or (xiv) sell, lease, transfer or otherwise dispose of any of its properties or assets, or any of the properties or assets of its Subsidiaries, except for (1) sales, leases, transfer or dispositions by any
Company to any other Company, (2) the sale of Inventory in the ordinary course of business and (3) the disposition or transfer in the ordinary course of business during any fiscal year of obsolete and worn-out Equipment and only to the
extent that (x) the proceeds of any such disposition are used to acquire replacement Equipment which is subject to Laurus’ first priority security interest or are used to repay Loans or to pay general corporate expenses, or
(y) following the occurrence of an Event of Default which continues to exist, the proceeds of which are remitted to Laurus to be held as cash collateral for the Obligations. 
  

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 (m) Reissuance of Securities. Promptly (but in no event less than three (3) Business Days)
following the written request of Laurus, the Parent shall reissue certificates representing the Securities without the legends set forth in Section 39 below at such time as: 
 (i) the holder thereof is permitted to dispose of such Securities pursuant to Rule 144(k) under the Securities Act; or 
 (ii) upon resale subject to an effective registration statement after such Securities are registered under the Securities Act. 
 The Parent agrees to cooperate with Laurus in connection with all resales pursuant to Rule 144(d) and Rule 144(k) and, subject to satisfaction of all requirements of
such rules, to provide legal opinions necessary to allow such resales provided the Parent and its counsel receive reasonably requested representations from Laurus and broker, if any. 
 (n) Opinion. On the Closing Date, it shall deliver to Laurus an opinion acceptable to Laurus from each Company’s and Stockeryale
Canada’s legal counsel. 
 (o) Legal Name, etc. It shall not, without providing Laurus with 30 days prior written notice, change
(i) its name as it appears in the official filings in the state of its organization, (ii) the type of legal entity it is, (iii) its organization identification number, if any, issued by its state of organization, (iv) its state
of organization or (v) amend its certificate of incorporation, by-laws or other organizational document. 
 (p) Compliance with
Laws. The operation of each of its and each of its Subsidiaries’ business is and shall continue to be in compliance in all material respects with all applicable federal, state and local laws, rules and ordinances, including to all laws,
rules, regulations and orders relating to taxes, payment and withholding of payroll taxes, employer and employee contributions and similar items, securities, employee retirement and welfare benefits, employee health and safety and environmental
matters. 
 (q) Notices. It and each of its Subsidiaries shall promptly inform Laurus in writing of: (i) the commencement of all
proceedings and investigations by or before and/or the receipt of any notices from, any governmental or nongovernmental body and all actions and proceedings in any court or before any arbitrator against or in any way concerning any event which could
reasonably be expected to have singly or in the aggregate, a Material Adverse Effect; (ii) any change which has had, or could reasonably be expected to have, a Material Adverse Effect; (iii) any Event of Default or Default; and
(iv) any default or any event which with the passage of time or giving of notice or both would constitute a default under any agreement for the payment of money to which it or any of its Subsidiaries is a party or by which it or any of its
Subsidiaries or any of its or any such Subsidiary’s properties may be bound the breach of which would have a Material Adverse Effect. 
 (r) Margin Stock. It shall not permit any of the proceeds of the Loans made hereunder to be used directly or indirectly to “purchase” or “carry” “margin stock” or to repay indebtedness incurred to
“purchase” or “carry” “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in
effect. 
  

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 (s) Lasiris. It shall not (i) permit Lasiris to engage in any business of a material nature
or own any assets other than (A) the capital stock of Stockeryale Canada and (B) promissory note(s) made by Stockeryale Canada to Lasiris evidencing intercompany advances made by Lasiris to Stockeryale Canada, or (ii) transfer, sell
or assign any of its assets to Lasiris; provided, however, it may make intercompany advances to Lasiris with the proceeds of Loans hereunder so long as (A) the full amount of any intercompany advance made to Lasiris with the
proceeds of Loans hereunder are immediately advanced by Lasiris to Stockeryale Canada and (B) prior to the date any intercompany advance is made to Lasiris with the proceeds of Loans hereunder, Laurus has received, each in form and substance
satisfactory to Laurus, (1) the Lasiris Guarantee, (2) the Lasiris Security Agreement and all such other documentation as Laurus shall require to perfect its first priority charge in all of the assets of Lasiris, (3) the Lasiris
Pledge Agreement along with the original share certificate representing all of the issued and outstanding shares in the capital stock of Stockeryale Canada endorsed in blank for transfer and a stock power of attorney with respect to such
certificate, (4) a certificate from Lasiris signed by an officer thereof certifying (x) that the attached copies of its certificate of incorporation, articles of incorporation and by-laws (including borrowing by-laws) are all true,
complete and correct and remain unamended and in full force and effect, (y) that the attached resolutions of its board of directors approving the transactions contemplated by the Lasiris Documentation are all true, complete and correct and
remain unamended and in full force and effect and (z) as to the incumbency and specimen signature of each officer thereof executing the Lasiris Documentation and (5) a certificate of good standing for Lasiris from the province of New
Brunswick. 
 14. Further Assurances. At any time and from time to time, upon the written request of Laurus and at the sole expense of
Companies, each Company shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as Laurus may request (a) to obtain the full benefits of this Agreement and the Ancillary
Agreements, (b) to protect, preserve and maintain Laurus’ rights in the Collateral and under this Agreement or any Ancillary Agreement, and/or (c) to enable Laurus to exercise all or any of the rights and powers herein granted or any
Ancillary Agreement. 
 15. Representations, Warranties and Covenants of Laurus. Laurus hereby represents, warrants and covenants to
each Company as follows: 
 (a) Requisite Power and Authority. Laurus has all necessary power and authority under all applicable
provisions of law to execute and deliver this Agreement and the Ancillary Agreements and to carry out their provisions. All corporate action on Laurus’ part required for the lawful execution and delivery of this Agreement and the Ancillary
Agreements have been or will be effectively taken prior to the Closing Date. Upon their execution and delivery, this Agreement and the Ancillary Agreements shall be valid and binding obligations of Laurus, enforceable in accordance with their terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, and (b) as limited by general principles of equity that restrict
the availability of equitable and legal remedies. 
 (b) Investment Representations. Laurus understands that the Securities are being
offered pursuant to an exemption from registration contained in the Securities Act based in part upon Laurus’ representations contained in this Agreement, including, without limitation, that 
  

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 Laurus is an “accredited investor” within the meaning of Regulation D under the Securities Act. Laurus has
received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Note and the Closing Shares to be issued to it under this Agreement. 
 (c) Laurus Bears Economic Risk. Laurus has substantial experience in evaluating and investing in private placement transactions of securities in
companies similar to the Parent so that it is capable of evaluating the merits and risks of its investment in the Parent and has the capacity to protect its own interests. Laurus must bear the economic risk of this investment until the Securities
are sold pursuant to (i) an effective registration statement under the Securities Act, or (ii) an exemption from registration is available. 
 (d) Investment for Own Account. The Securities are being issued to Laurus for its own account for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with
their distribution. 
 (e) Laurus Can Protect Its Interest. Laurus represents that by reason of its, or of its management’s,
business and financial experience, Laurus has the capacity to evaluate the merits and risks of its investment in the Note, and the Securities and to protect its own interests in connection with the transactions contemplated in this Agreement, and
the Ancillary Agreements. Further, Laurus is aware of no publication of any advertisement in connection with the transactions contemplated in the Agreement or the Ancillary Agreements. 
 (f) Accredited Investor. Laurus represents that it is an accredited investor within the meaning of Regulation D under the Securities Act.

 (g) Shorting. Neither Laurus nor any of its Affiliates or investment partners has, will, or will cause any Person, to directly
engage in “short sales” of the Parent’s Common Stock so long as any amounts under the Note shall be outstanding. 
 (h)
Patriot Act. Laurus certifies that, to the best of Laurus’ knowledge, Laurus has not been designated, and is not owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224. Laurus seeks to comply with
all applicable laws concerning money laundering and related activities. In furtherance of those efforts, Laurus hereby represents, warrants and covenants that: (i) none of the cash or property that Laurus will use to make the Loans has been or
shall be derived from, or related to, any activity that is deemed criminal under United States law; and (ii) no disbursement by Laurus to any Company to the extent within Laurus’ control, shall cause Laurus to be in violation of the United
States Bank Secrecy Act, the United States International Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. Laurus shall promptly notify the Company Agent if
any of these representations ceases to be true and accurate regarding Laurus. Laurus agrees to provide the Company any additional information regarding Laurus that the Company deems necessary or convenient to ensure compliance with all applicable
laws concerning money laundering and similar activities. Laurus understands and agrees that if at any time it is discovered that any of the foregoing representations are incorrect, or if otherwise required by applicable law or regulation related to
money laundering similar activities, Laurus may undertake appropriate actions to ensure 
  

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 compliance with applicable law or regulation, including but not limited to segregation and/or redemption of Laurus’
investment in the Parent. Laurus further understands that the Parent may release information about Laurus and, if applicable, any underlying beneficial owners, to proper authorities if the Parent, in its sole discretion, determines that it is in the
best interests of the Parent in light of relevant rules and regulations under the laws set forth in subsection (ii) above. 
 (i)
Limitation on Acquisition of Common Stock. Notwithstanding anything to the contrary contained in this Agreement, any Ancillary Agreement, or any document, instrument or agreement entered into in connection with any other transaction entered
into by and between Laurus and any Company (and/or Subsidiaries or Affiliates of any Company), Laurus shall not acquire stock in the Parent (including, without limitation, pursuant to a contract to purchase, by exercising an option or warrant, by
converting any other security or instrument, by acquiring or exercising any other right to acquire, shares of stock or other security convertible into shares of stock in the Parent, or otherwise, and such options, warrants, conversion or other
rights shall not be exercisable) to the extent such stock acquisition would cause any interest (including any original issue discount) payable by any Company to Laurus not to qualify as portfolio interest, within the meaning of
Section 881(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) by reason of Section 881(c)(3) of the Code, taking into account the constructive ownership rules under Section 871(h)(3)(C) of the Code
(the “Stock Acquisition Limitation”). The Stock Acquisition Limitation shall automatically become null and void without any notice to any Company upon the existence of an Event of Default. 
 (j) Market Manipulation. Laurus has not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of the Common Stock of the Parent to facilitate the sale or resale of any of the Closing Shares or affect the price at which any of the Closing Shares being offered hereby
may be issued. Notwithstanding the foregoing, nothing contained herein shall limit or be deemed in any manner whatsoever to limit Laurus hedging transactions following payment in full of the Note. 
  

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 16. Power of Attorney. Each Company hereby appoints Laurus, or any other Person whom Laurus may
designate as such Company’s attorney, with power to: (i) endorse such Company’s name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into Laurus’ possession;
(ii) sign such Company’s name on any invoice or bill of lading relating to any Accounts, drafts against Account Debtors, schedules and assignments of Accounts, notices of assignment, financing statements and other public records,
verifications of Account and notices to or from Account Debtors; (iii) verify the validity, amount or any other matter relating to any Account by mail, telephone, telegraph or otherwise with Account Debtors; (iv) do all things necessary to
carry out this Agreement, any Ancillary Agreement and all related documents; and (v) on or after the occurrence and during the continuation of an Event of Default, notify the post office authorities to change the address for delivery of such
Company’s mail to an address designated by Laurus, and to receive, open and dispose of all mail addressed to such Company. Each Company hereby ratifies and approves all acts of the attorney. Neither Laurus, nor the attorney will be liable for
any acts or omissions or for any error of judgment or mistake of fact or law, except for gross negligence or willful misconduct. This power, being coupled with an interest, is irrevocable so long as Laurus has a security interest and until the
Obligations have been fully satisfied. 
 17. Term of Agreement. Laurus’ agreement to make Loans and extend financial
accommodations under and in accordance with the terms of this Agreement or any Ancillary Agreement shall continue in full force and effect until the expiration of the Term. At Laurus’ election following the occurrence of an Event of Default,
Laurus may terminate this Agreement. The termination of the Agreement shall not affect any of Laurus’ rights hereunder or any Ancillary Agreement and the provisions hereof and thereof shall continue to be fully operative until all transactions
entered into, rights or interests created and the Obligations have been irrevocably disposed of, concluded or liquidated. 
 18.
Termination of Lien. The Liens and rights granted to Laurus hereunder and any Ancillary Agreements and the financing statements filed in connection herewith or therewith shall continue in full force and effect, notwithstanding the termination
of this Agreement or the fact that any Company’s account may from time to time be temporarily in a zero or credit position, until all of the Obligations have been indefeasibly paid or performed in full after the termination of this Agreement.
Laurus shall not be required to send termination statements to any Company, or to file them with any filing office, unless and until this Agreement and the Ancillary Agreements shall have been terminated in accordance with their terms and all
Obligations indefeasibly paid in full in immediately available funds. 
 19. Events of Default. The occurrence of any of the following
shall constitute an “Event of Default”: 
 (a) failure to make payment of any of the Obligations when required hereunder,
and, in any such case, such failure shall continue for a period of three (3) days following the date upon which any such payment was due; 
 (b) failure by any Company or any of its Subsidiaries to pay any taxes when due unless such taxes are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been provided on such
Company’s and/or such Subsidiary’s books; 
  

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 (c) failure to perform under, and/or committing any breach of, in any material respect, this Agreement or
any covenant contained herein, which failure or breach shall continue without remedy for a period of fifteen (15) days after the occurrence thereof, other than any breach of the terms of Section 8(a) which shall not be subject to any cure
or grace period; 
 (d) any representation, warranty or statement made by any Company or any of its Subsidiaries hereunder, in any Ancillary
Agreement, any certificate, statement or document delivered pursuant to the terms hereof, or in connection with the transactions contemplated by this Agreement should prove to be false or misleading in any material respect on the date as of which
made or deemed made; 
 (e) the occurrence of any default (or similar term) in the observance or performance of any other agreement or
condition relating to any indebtedness or contingent obligation of any Company or any of its Subsidiaries beyond the period of grace (if any), the effect of which default is to cause, or permit the holder or holders of such indebtedness or
beneficiary or beneficiaries of such contingent obligation to cause, such indebtedness to become due prior to its stated maturity or such contingent obligation to become payable; 
 (f) attachments or levies in excess of $50,000 in the aggregate are made upon any Company’s assets or a judgment is rendered against any
Company’s property involving a liability of more than $50,000 which shall not have been vacated, discharged, stayed or bonded within thirty (30) days from the entry thereof; 
 (g) any change in any Company’s or any of its Subsidiary’s condition or affairs (financial or otherwise) which in Laurus’ reasonable, good
faith opinion, could reasonably be expected to have a Material Adverse Effect; 
 (h) any Lien created hereunder or under any Ancillary
Agreement for any reason ceases to be or is not a valid and perfected Lien having a first priority interest; 
 (i) any Company or any of its
Subsidiaries shall (i) apply for, consent to or suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of
any other law providing for the relief of debtors, (vi) acquiesce to without challenge within ten (10) days of the filing thereof, or failure to have dismissed within thirty (30) days, any petition filed against it in any involuntary
case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing; 
 (j) any Company or any
of its Subsidiaries shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business; 
  

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 (k) any Company or any of its Subsidiaries directly or indirectly sells, assigns, transfers, conveys, or
suffers or permits to occur any sale, assignment, transfer or conveyance of any assets of such Company or any interest therein, except as permitted herein; 
 (l) any “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof), other than the Holder, is or becomes the “beneficial
owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 35% or more on a fully diluted basis of the then outstanding voting equity interest of the Parent (other than a “Person” or
“group” that beneficially owns 35% or more of such outstanding voting equity interests of the Parent on the date hereof), (ii) the Board of Directors of the Parent shall cease to consist of a majority of the Board of Directors of the
Parent on the date hereof (or directors appointed by a majority of the board of directors in effect immediately prior to such appointment) or (iii) the Parent or any of its Subsidiaries merges or consolidates with, or sells all or substantially
all of its assets to, any other person or entity, except as permitted in Section 13(l)(viii) hereof; 
 (m) the indictment or threatened
indictment of any Company or any of its Subsidiaries or any executive officer of any Company or any of its Subsidiaries under any criminal statute, or commencement or threatened commencement of criminal or civil proceeding against any Company or any
of its Subsidiaries or any executive officer of any Company or any of its Subsidiaries pursuant to which statute or proceeding penalties or remedies sought or available include forfeiture of any of the property of any Company or any of its
Subsidiaries; 
 (n) an Event of Default shall occur under and as defined in the Note or in any other Ancillary Agreement; 
 (o) an Event of Default shall occur under and as defined in the December 2005 Note; 
 (p) any Company or any of its Subsidiaries shall breach any term or provision of any Ancillary Agreement to which it is a party (including, without
limitation, Section 7(e) of the Registration Rights Agreement), in any material respect which breach is not cured within any applicable cure or grace period provided in respect thereof (if any); 
 (q) any Company or any of its Subsidiaries attempts to terminate, challenges the validity of, or its liability under this Agreement or any Ancillary
Agreement, or any proceeding shall be brought to challenge the validity, binding effect of any Ancillary Agreement or any Ancillary Agreement ceases to be a valid, binding and enforceable obligation of such Company or any of its Subsidiaries (to the
extent such Persons are a party thereto); 
 (r) an SEC stop trade order or Principal Market trading suspension of the Common Stock shall be
in effect for five (5) consecutive days or five (5) days during a period of ten (10) consecutive days, excluding in all cases a suspension of all trading on a Principal Market, provided that the Parent shall not have been able to cure
such trading suspension within thirty (30) days of the notice thereof or list the Common Stock on another Principal Market within sixty (60) days of such notice; or 
  

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 (s) the failure of any Company, if required by Laurus, to issue a replacement Note to Laurus within seven
(7) Business Days. 
 20. Remedies. Following the occurrence of an Event of Default, Laurus shall have the right to demand
repayment in full of all Obligations, whether or not otherwise due. Until all Obligations have been fully and indefeasibly satisfied, Laurus shall retain its Lien in all Collateral. Laurus shall have, in addition to all other rights provided herein
and in each Ancillary Agreement, the rights and remedies of a secured party under the UCC, and under other applicable law, all other legal and equitable rights to which Laurus may be entitled, including the right to take immediate possession of the
Collateral, to require each Company to assemble the Collateral, at Companies’ joint and several expense, and to make it available to Laurus at a place designated by Laurus which is reasonably convenient to both parties and to enter any of the
premises of any Company or wherever the Collateral shall be located, with or without force or process of law, and to keep and store the same on said premises until sold (and if said premises be the property of any Company, such Company agrees not to
charge Laurus for storage thereof), and the right to apply for the appointment of a receiver for such Company’s property. Further, Laurus may, at any time or times after the occurrence of an Event of Default, sell and deliver all Collateral
held by or for Laurus at public or private sale for cash, upon credit or otherwise, at such prices and upon such terms as Laurus, in Laurus’ sole discretion, deems advisable or Laurus may otherwise recover upon the Collateral in any
commercially reasonable manner as Laurus, in its sole discretion, deems advisable. The requirement of reasonable notice shall be met if such notice is mailed postage prepaid to Company Agent at Company Agent’s address as shown in Laurus’
records, at least ten (10) days before the time of the event of which notice is being given. Laurus may be the purchaser at any sale, if it is public. In connection with the exercise of the foregoing remedies, Laurus is granted permission to
use all of each Company’s Intellectual Property. The proceeds of sale shall be applied first to all costs and expenses of sale, including attorneys’ fees, and second to the payment (in whatever order Laurus elects) of all Obligations.
After the indefeasible payment and satisfaction in full of all of the Obligations, and after the payment by Laurus of any other amount required by any provision of law, including Section 9-608(a)(1) of the UCC (but only after Laurus has
received what Laurus considers reasonable proof of a subordinate party’s security interest), the surplus, if any, shall be paid to Company Agent (for the benefit of the applicable Companies) or its representatives or to whosoever may be
lawfully entitled to receive the same, or as a court of competent jurisdiction may direct. The Companies shall remain jointly and severally liable to Laurus for any deficiency. The parties hereto each hereby agree that the exercise by any party
hereto of any right granted to it or the exercise by any party hereto of any remedy available to it (including, without limitation, the issuance of a notice of redemption, a borrowing request and/or a notice of default), in each
case, hereunder or under any Ancillary Agreement which has been publicly filed with the SEC shall not constitute confidential information and no party shall have any duty to the other party to maintain such
information as confidential. 
 21. Waivers. To the full extent permitted by applicable law, each Company hereby waives
(a) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all of this Agreement and the
Ancillary Agreements or any other notes, commercial paper, Accounts, contracts, Documents, Instruments, Chattel Paper and guaranties at any time held by Laurus on which such Company may in any way be liable, 
  

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 and hereby ratifies and confirms whatever Laurus may do in this regard; (b) all rights to notice and a hearing prior
to Laurus’ taking possession or control of, or to Laurus’ replevy, attachment or levy upon, any Collateral or any bond or security that might be required by any court prior to allowing Laurus to exercise any of its remedies; and
(c) the benefit of all valuation, appraisal and exemption laws. Each Company acknowledges that it has been advised by counsel of its choices and decisions with respect to this Agreement, the Ancillary Agreements and the transactions evidenced
hereby and thereby. 
 22. Expenses. The Companies shall jointly and severally pay all of Laurus’ out-of-pocket costs and
expenses, including reasonable fees and disbursements of in-house or outside counsel and appraisers, in connection with the preparation, execution and delivery of this Agreement and the Ancillary Agreements, and in connection with the prosecution or
defense of any action, contest, dispute, suit or proceeding concerning any matter in any way arising out of, related to or connected with this Agreement or any Ancillary Agreement. The Companies shall also jointly and severally pay all of
Laurus’ reasonable fees, charges, out-of-pocket costs and expenses, including fees and disbursements of counsel and appraisers, in connection with (a) the preparation, execution and delivery of any waiver, any amendment thereto or consent
proposed or executed in connection with the transactions contemplated by this Agreement or the Ancillary Agreements, (b) Laurus’ obtaining performance of the Obligations under this Agreement and any Ancillary Agreements, including, but not
limited to, the enforcement or defense of Laurus’ security interests, assignments of rights and Liens hereunder as valid perfected security interests, (c) any attempt to inspect, verify, protect, collect, sell, liquidate or otherwise
dispose of any Collateral, (d) any appraisals or re-appraisals of any property (real or personal) pledged to Laurus by any Company or any of its Subsidiaries as Collateral for, or any other Person as security for, the Obligations hereunder and
(e) any consultations in connection with any of the foregoing. The Companies shall also jointly and severally pay Laurus’ customary bank charges for all bank services (including wire transfers) performed or caused to be performed by Laurus
for any Company or any of its Subsidiaries at any Company’s or such Subsidiary’s request or in connection with any Company’s loan account with Laurus. All such costs and expenses together with all filing, recording and search fees,
taxes and interest payable by the Companies to Laurus shall be payable on demand and shall be secured by the Collateral. If any tax by any Governmental Authority is or may be imposed on or as a result of any transaction between any Company and/or
any Subsidiary thereof, on the one hand, and Laurus on the other hand, which Laurus is or may be required to withhold or pay, the Companies hereby jointly and severally indemnifies and holds Laurus harmless in respect of such taxes, and the
Companies will repay to Laurus the amount of any such taxes which shall be charged to the Companies’ account; and until the Companies shall furnish Laurus with indemnity therefor (or supply Laurus with evidence satisfactory to it that due
provision for the payment thereof has been made), Laurus may hold without interest any balance standing to each Company’s credit and Laurus shall retain its Liens in any and all Collateral. 
 23. Assignment By Laurus. Laurus may assign any or all of the Obligations together with any or all of the security therefor to any Person and any
such assignee shall succeed to all of Laurus’ rights with respect thereto; provided that Laurus shall not be permitted to effect any such assignment to a competitor of any Company unless an Event of Default has occurred and is continuing. Upon
such assignment, Laurus shall be released from all responsibility for the Collateral to the extent same is assigned to any transferee. Laurus may 
  

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 from time to time sell or otherwise grant participations in any of the Obligations and the holder of any such
participation shall, subject to the terms of any agreement between Laurus and such holder, be entitled to the same benefits as Laurus with respect to any security for the Obligations in which such holder is a participant. Each Company agrees that
each such holder may exercise any and all rights of banker’s lien, set-off and counterclaim with respect to its participation in the Obligations as fully as though such Company were directly indebted to such holder in the amount of such
participation. 
 24. No Waiver; Cumulative Remedies. Failure by Laurus to exercise any right, remedy or option under this Agreement,
any Ancillary Agreement or any supplement hereto or thereto or any other agreement between or among any Company and Laurus or delay by Laurus in exercising the same, will not operate as a waiver; no waiver by Laurus will be effective unless it is in
writing and then only to the extent specifically stated. Laurus’ rights and remedies under this Agreement and the Ancillary Agreements will be cumulative and not exclusive of any other right or remedy which Laurus may have. 
 25. Application of Payments. Each Company irrevocably waives the right to direct the application of any and all payments at any time or times
hereafter received by Laurus from or on such Company’s behalf and each Company hereby irrevocably agrees that Laurus shall have the continuing exclusive right to apply and reapply any and all payments received at any time or times hereafter
against the Obligations hereunder in such manner as Laurus may deem advisable notwithstanding any entry by Laurus upon any of Laurus’ books and records. 
 26. Indemnity. Each Company hereby jointly and severally indemnifies and holds Laurus, and its respective affiliates, employees, attorneys and agents (each, an “Indemnified Person”), harmless
from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses of any kind or nature whatsoever (including attorneys’ fees and disbursements and other costs of investigation or defense, including
those incurred upon any appeal) which may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement or any of the Ancillary Agreements or
with respect to the execution, delivery, enforcement, performance and administration of, or in any other way arising out of or relating to, this Agreement, the Ancillary Agreements or any other documents or transactions contemplated by or referred
to herein or therein and any actions or failures to act with respect to any of the foregoing, except to the extent that any such indemnified liability is finally determined by a court of competent jurisdiction to have resulted solely from such
Indemnified Person’s gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR AS A RESULT OF
ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. 
  

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 27. Revival. The Companies further agree that to the extent any Company makes a payment or
payments to Laurus, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy act,
state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been
made. 
 28. Borrowing Agency Provisions. 
 (a) Each Company hereby irrevocably designates Company Agent to be its attorney and agent and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of such Company, and hereby authorizes Laurus to pay over or credit all loan proceeds hereunder in accordance with the request of Company Agent. 
 (b) The handling of this credit facility as a co-borrowing facility with a borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to the Companies and at their request. Laurus shall not incur any liability to any Company as a result thereof. To induce Laurus to do so and in consideration thereof, each Company hereby indemnifies Laurus and holds Laurus harmless
from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Laurus by any Person arising from or incurred by reason of the handling of the financing arrangements of the Companies as provided
herein, reliance by Laurus on any request or instruction from Company Agent or any other action taken by Laurus with respect to this Section 28. 
 (c) All Obligations shall be joint and several, and the Companies shall make payment upon the maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the part of the Companies
shall in no way be affected by any extensions, renewals and forbearance granted by Laurus to any Company, failure of Laurus to give any Company notice of borrowing or any other notice, any failure of Laurus to pursue to preserve its rights against
any Company, the release by Laurus of any Collateral now or thereafter acquired from any Company, and such agreement by any Company to pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by Laurus to any
Company or any Collateral for such Company’s Obligations or the lack thereof. 
 (d) Each Company expressly waives any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which such Company may now or hereafter have against the other or other Person directly or contingently liable for the Obligations, or against or with respect to any
other’s property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or performance of this Agreement, until all Obligations have been indefeasibly paid in full and this Agreement
has been irrevocably terminated. 
 (e) Each Company represents and warrants to Laurus that (i) Companies have one or more common
shareholders, directors and officers, (ii) the businesses and corporate activities of Companies are closely related to, and substantially benefit, the business and 
  

 36 

 corporate activities of Companies, (iii) the financial and other operations of Companies are performed on a combined
basis as if Companies constituted a consolidated corporate group, (iv) Companies will receive a substantial economic benefit from entering into this Agreement and will receive a substantial economic benefit from the application of each Loan
hereunder, in each case, whether or not such amount is used directly by any Company and (v) all requests for Loans hereunder by the Company Agent are for the exclusive and indivisible benefit of the Companies as though, for purposes of this
Agreement, the Companies constituted a single entity. 
 29. Notices. Any notice or request hereunder may be given to any Company,
Company Agent or Laurus 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. 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 three (3) Business Days after the date when deposited in the mail or with the overnight mail carrier, and, in the case of a telecopy, when confirmed.

 Notices shall be provided as follows: 
  

					
	If to Laurus:	  	 Laurus Master Fund, Ltd.
 c/o Laurus Capital
Management, LLC
 825 Third Avenue, 14th Fl.
 New York, New York 10022

		  	Attention:	  	John E. Tucker, Esq.
		  	Telephone:	  	(212) 541-4434
		  	Facsimile:	  	(212) 541-5800
		
	With a copy to:	  	 Loeb & Loeb LLP
 345 Park
Avenue
 New York, New York 10154

		  	Attention:	  	Scott J. Giordano, Esq.
		  	Telephone:	  	(212) 407-4000
		  	Facsimile:	  	(212) 407-4990
		
	If to any Company, or Company Agent:	  	 StockerYale, Inc.
 32 Hampshire
Road
 Salem, New Hampshire 03079

		  	Attention:	  	Marianne Molleur
		  	Telephone:	  	(603) 870-8245
		  	Facsimile:	  	(603) 898-8851
		
	With a copy to:	  	 BRL Law Group LLC
 31 St. James Avenue, Suite
850
 Boston, Massachusetts 02116

		  	Attention:	  	Thomas B. Rosedale, Esq.
		  	Telephone:	  	(617) 399-6931
		  	Facsimile:	  	(617) 399-6930

  

 37 

 or such other address as may be designated in writing hereafter in accordance with this Section 29 by such Person.

 30. Governing Law, Jurisdiction and Waiver of Jury Trial. 
 (a) THIS AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 
 (b) EACH COMPANY HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND, AND LAURUS, ON THE OTHER
HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS; PROVIDED, THAT LAURUS AND EACH COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LAURUS. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH COMPANY
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO COMPANY AGENT
AT THE ADDRESS SET FORTH IN SECTION 29 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF COMPANY AGENT’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. 
 (c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, 
  

 38 

 WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH,
RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO. 
  

 39 

 31. Limitation of Liability. Each Company acknowledges and understands that in order to assure
repayment of the Obligations hereunder Laurus may be required to exercise any and all of Laurus’ rights and remedies hereunder and agrees that, except as limited by applicable law, neither Laurus nor any of Laurus’ agents shall be liable
for acts taken or omissions made in connection herewith or therewith except for actual bad faith. 
 32. Entire Understanding; Maximum
Interest. This Agreement and the Ancillary Agreements contain the entire understanding among each Company and Laurus as to the subject matter hereof and thereof and any promises, representations, warranties or guarantees not herein contained
shall have no force and effect unless in writing, signed by each Company’s and Laurus’ respective officers. Neither this Agreement, the Ancillary Agreements, nor any portion or provisions thereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party to be charged. Nothing contained in this Agreement, any Ancillary Agreement or in any
document referred to herein or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum rate permitted by applicable law. In the event that the rate of
interest or dividends required to be paid or other charges hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Companies to Laurus and thus refunded to the
Companies. 
 33. Severability. Wherever possible each provision of this Agreement or the Ancillary Agreements shall be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this Agreement or the Ancillary Agreements shall be prohibited by or invalid under applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions thereof. 
 34. Survival.
The representations, warranties, covenants and agreements made herein shall survive any investigation made by Laurus and the closing of the transactions contemplated hereby to the extent provided therein. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of the Companies pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Companies hereunder
solely as of the date of such certificate or instrument. All indemnities set forth herein shall survive the execution, delivery and termination of this Agreement and the Ancillary Agreements and the making and repaying of the Obligations.

 35. Captions. All captions are and shall be without substantive meaning or content of any kind whatsoever. 
 36. Counterparts; Telecopier Signatures. This Agreement may be executed in one or more counterparts, each of which shall constitute an original
and all of which taken together shall constitute one and the same agreement. Any signature delivered by a party via telecopier transmission shall be deemed to be any original signature hereto. 
  

 40 

 37. Construction. The parties acknowledge that each party and its counsel have reviewed this
Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments, schedules or exhibits thereto.

 38. Publicity; Confidentiality. 
 (a) Each Company hereby authorizes Laurus to make appropriate announcements of the financial arrangement entered into by and among each Company and Laurus, including, without limitation, announcements which are
commonly known as tombstones, in such publications and to such selected parties as Laurus shall in its sole and absolute discretion deem appropriate, or as required by applicable law. 
 (b) Laurus agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, fund managers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or any Ancillary Agreement,
(g) with the consent of any Company, or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to Laurus on a nonconfidential basis from a
source other than a Company; provided, however, to the extent practicable, Laurus shall endeavor to give the Company Agent notice prior to disclosing any Information under subsections (c), (d) and (f) of this Section. For the purposes of
this Section, “Information” shall mean all information received from any Company relating to any Company or their business, other than any such information that is available to Laurus on a nonconfidential basis prior to disclosure by such
Company; provided, that, in the case of information received from any Company after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own
confidential information. 
 39. Joinder. It is understood and agreed that any Person that desires to become a Company hereunder, or
is required to execute a counterpart of this Agreement after the date hereof pursuant to the requirements of this Agreement or any Ancillary Agreement, shall become a Company hereunder by (a) executing a Joinder Agreement in form and substance
satisfactory to Laurus, (b) delivering supplements to such exhibits and annexes to this Agreement and the Ancillary Agreements as Laurus shall reasonably request and (c) taking all actions as specified in this Agreement as would have been
taken by such Company had it been an original party to this Agreement, in each case with all documents required above to be delivered to Laurus and with all documents and actions required above to be taken to the reasonable satisfaction of Laurus.

  

 41 

 40. Legends. The Securities shall bear legends as follows: 
  

	 	(a)	The Note shall bear substantially the following legend: 

 “THIS SECURED NON-CONVERTIBLE REVOLVING NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS SECURED NON-CONVERTIBLE REVOLVING NOTE MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS SECURED NON-CONVERTIBLE REVOLVING NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO STOCKERYALE, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED.” 
  

	 	(b)	The Closing Shares shall bear substantially the following legend: 

 “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO STOCKERYALE, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.” 
 [Balance of page intentionally left blank; signature page follows] 
  

 42 

 IN WITNESS WHEREOF, the parties have executed this Security and Purchase Agreement as of the date first
written above. 
  

			
	STOCKERYALE, INC.
		
	By:	 	 /s/ M. Molleur

	Name:	 	M. Molleur
	Title:	 	CFO & SRVP
	
	LAURUS MASTER FUND, LTD.
		
	By:	 	 /s/ David Grin

	Name:	 	David Grin
	Title:	 	Director

 SECURITY AND PURCHASE AGREEMENT 

 Annex A - Definitions 
 “Account Debtor” means any Person who is or may be obligated with respect to, or on account of, an Account. 
 “Accountants” has the meaning given to such term in Section 11(a). 
 “Accounts” means all “accounts”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, including:
(a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper or Instruments) (including any such obligations that may be characterized as an account or
contract right under the UCC); (b) all of such Person’s rights in, to and under all purchase orders or receipts for goods or services; (c) all of such Person’s rights to any goods represented by any of the foregoing (including
unpaid sellers’ rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods); (d) all rights to payment due to such Person for Goods or other property sold, leased, licensed,
assigned or otherwise disposed of, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract,
arising out of the use of a credit card or charge card, or for services rendered or to be rendered by such Person or in connection with any other transaction (whether or not yet earned by performance on the part of such Person); and (e) all
collateral security of any kind given by any Account Debtor or any other Person with respect to any of the foregoing. 
 “Accounts
Availability” means up to ninety percent (90%) of the net face amount of Eligible Accounts. 
 “Affiliate”
means, with respect to any Person, (a) any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person or (b) any other Person who is a director or
officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above. For the purposes of this definition, control of a Person shall mean the power (direct or indirect) to direct
or cause the direction of the management and policies of such Person whether by contract or otherwise. 
 “Ancillary
Agreements” means the Note, the Registration Rights Agreements, the Security Documents, the Canadian Documentation and all other agreements, instruments, documents, mortgages, pledges, powers of attorney, consents, assignments, contracts,
notices, security agreements, trust agreements and guarantees whether heretofore, concurrently, or hereafter executed by or on behalf of any Company, any of its Subsidiaries or any other Person or delivered to Laurus, relating to this Agreement or
to the transactions contemplated by this Agreement or otherwise relating to the relationship between or among any Company and Laurus, as each of the same may be amended, supplemented, restated or otherwise modified from time to time. 
 “Balance Sheet Date” has the meaning given such term in Section 12(f)(ii). 

 “Books and Records” means all books, records, board minutes, contracts, licenses,
insurance policies, environmental audits, business plans, files, computer files, computer discs and other data and software storage and media devices, accounting books and records, financial statements (actual and pro forma), filings with
Governmental Authorities and any and all records and instruments relating to the Collateral or otherwise necessary or helpful in the collection thereof or the realization thereupon. 
 “Business Day” means a day on which Laurus is open for business and that is not a Saturday, a Sunday or other day on which banks are
required or permitted to be closed in the State of New York. 
 “Canadian Documentation” means, collectively, (a) the
General Hypothecation, (b) the Guarantee dated as of the Closing Date made by Stockeryale Canada in favor of Laurus, (c) the Lasiris Documentation and (d) any and all other agreements, instruments and documents executed in connection
therewith, as each of the same may be amended, restated, modified and/or supplemented from time to time. 
 “Capital Availability
Amount” means $4,000,000. 
 “Charter” has the meaning given such term in Section 12(c)(iv). 
 “Chattel Paper” means all “chattel paper,” as such term is defined in the UCC, including electronic chattel paper, now owned
or hereafter acquired by any Person. 
 “Closing Date” means the date on which any Company shall first receive proceeds of
the initial Loans or the date hereof, if no Loan is made under the facility on the date hereof. 
 “Closing Shares” means
the 642,857 shares of Common Stock issued to Laurus pursuant to Section 2(b). 
 “Code” has the meaning given such term
in Section 15(i). 
 “Collateral” means all of each Company’s property and assets, whether real or personal,
tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title or interests including all of the following property in which it now has or at any time in the
future may acquire any right, title or interest: 
 (a) all Inventory; 
 (b) all Equipment; 
 (c) all Fixtures;

 (d) all Goods; 
 (e) all
General Intangibles; 
  

 2 

 (f) all Accounts; 
 (g) all Deposit Accounts, other bank accounts and all funds on deposit therein; 
 (h) all Investment
Property; 
 (i) all Stock; 
 (j) all Chattel Paper; 
 (k) all Letter-of-Credit Rights; 
 (l) all Instruments; 
 (m) all commercial
tort claims set forth on Schedule 1(A); 
 (n) all Books and Records; 
 (o) all Intellectual Property; 
 (p) all
Supporting Obligations including letters of credit and guarantees issued in support of Accounts, Chattel Paper, General Intangibles and Investment Property; 
 (q) (i) all money, cash and cash equivalents and (ii) all cash held as cash collateral to the extent not otherwise constituting Collateral, all other cash or property at any time on deposit with or held by
Laurus for the account of any Company (whether for safekeeping, custody, pledge, transmission or otherwise); and 
 (r) all products and
Proceeds of all or any of the foregoing, tort claims and all claims and other rights to payment including (i) insurance claims against third parties for loss of, damage to, or destruction of, the foregoing Collateral and (ii) payments due
or to become due under leases, rentals and hires of any or all of the foregoing and Proceeds payable under, or unearned premiums with respect to policies of insurance in whatever form. 
 “Common Stock” means the shares of stock representing the Parent’s common equity interests. 
 “Company Agent” means the Parent. 
 “Contract Rate” has the meaning given such term in the Note. 
 “December 2005 Agreements” shall
mean, collectively, (a) the December 2005 SPA, (b) the December 2005 Note and (c) the Related Agreements (as defined in the December 2005 SPA), as each of the same may be amended, restated, modified and/or supplemented from time to
time. 
 “December 2005 Note” shall mean that certain Secured Term Note dated as of December 30, 2005 made by the
Parent in favor of Laurus in the original principal amount of $4,000,000, as the same may be amended, restated, modified and/or supplemented from time to time. 
  

 3 

 “December 2005 SPA” shall mean the Securities Purchase Agreement dated as of
December 30, 2005 by and between the Parent and Laurus 
 “Default” means any act or event which, with the giving of
notice or passage of time or both, would constitute an Event of Default. 
 “Deposit Accounts” means all “deposit
accounts” as such term is defined in the UCC, now or hereafter held in the name of any Person, including, without limitation, the Lockboxes. 
 “Disclosure Controls” has the meaning given such term in Section 12(f)(iv). 
 “Documents”
means all “documents”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including all bills of lading, dock warrants, dock receipts, warehouse receipts, and other documents of title,
whether negotiable or non-negotiable. 
 “Eligible Accounts” means each Account of each Company and Stockeryale Canada which
conforms to the following criteria: (a) shipment of the merchandise or the rendition of services has been completed; (b) no return, rejection or repossession of the merchandise has occurred; (c) merchandise or services shall not have
been rejected or disputed by the Account Debtor and there shall not have been asserted any offset, defense or counterclaim; (d) continues to be in full conformity with the representations and warranties made by such Company and Stockeryale
Canada to Laurus with respect thereto; (e) Laurus is, and continues to be, satisfied with the credit standing of the Account Debtor in relation to the amount of credit extended; (f) there are no facts existing or threatened which are
likely to result in any adverse change in an Account Debtor’s financial condition; (g) is documented by an invoice in a form approved by Laurus and shall not be unpaid more than ninety (90) days from invoice date; (h) not more
than twenty-five percent (25%) of the unpaid amount of invoices due from such Account Debtor remains unpaid more than ninety (90) days from invoice date; (i) is not evidenced by chattel paper or an instrument of any kind with respect
to or in payment of the Account unless such instrument is duly endorsed to and in possession of Laurus or represents a check in payment of an Account; (j) the Account Debtor is located in the United States or Canada; provided,
however, Laurus may, from time to time, in the exercise of its sole discretion and based upon satisfaction of certain conditions to be determined at such time by Laurus, deem certain Accounts as Eligible Accounts notwithstanding that such
Account is due from an Account Debtor located outside of the United States; (k) Laurus has a first priority perfected Lien in such Account and such Account is not subject to any Lien other than Permitted Liens; (l) does not arise out of
transactions with any employee, officer, director, stockholder or Affiliate of any Company or Stockeryale Canada; (m) is payable to such Company or Stockeryale Canada; (n) does not arise out of a bill and hold sale prior to shipment and
does not arise out of a sale to any Person to which such Company or Stockeryale Canada is indebted; (o) is net of any returns, discounts, claims, credits and allowances; (p) if the Account arises out of contracts between such Company
and/or Stockeryale Canada, on the one hand, and the United States, on 
  

 4 

 the other hand, any state, or any department, agency or instrumentality of any of them, such Company and/or Stockeryale
Canada, as the case may be, has so notified Laurus, in writing, prior to the creation of such Account, and there has been compliance with any governmental notice or approval requirements, including compliance with the Federal Assignment of Claims
Act; (q) is a good and valid account representing an undisputed bona fide indebtedness incurred by the Account Debtor therein named, for a fixed sum as set forth in the invoice relating thereto with respect to an unconditional sale and delivery
upon the stated terms of goods sold by such Company or Stockeryale Canada or work, labor and/or services rendered by such Company or Stockeryale Canada; (r) does not arise out of progress billings prior to completion of the order; (s) the
total unpaid Accounts from such Account Debtor does not exceed twenty-five percent (25%) of all Eligible Accounts; (t) the right of such Company or Stockeryale Canada, as the case may be, to payment is absolute and not contingent upon the
fulfillment of any condition whatsoever; (u) such Company or Stockeryale Canada, as the case may be, is able to bring suit and enforce its remedies against the Account Debtor through judicial process; (v) does not represent interest
payments, late or finance charges owing to such Company, and (w) is otherwise satisfactory to Laurus as determined by Laurus in the exercise of its sole discretion. In the event any Company requests that Laurus include within Eligible Accounts
certain Accounts of one or more of such Company’s acquisition targets, Laurus shall at the time of such request consider such inclusion, but any such inclusion shall be at the sole option of Laurus and shall at all times be subject to the
execution and delivery to Laurus of all such documentation (including, without limitation, guaranty and security documentation) as Laurus may require in its sole discretion. 
 “Eligible Inventory” means Inventory owned by a Company and/or Stockeryale Canada which Laurus, in its sole and absolute discretion,
determines: (a) is subject to a first priority perfected Lien in favor of Laurus and is subject to no other Liens whatsoever (other than Permitted Liens); (b) is located on premises with respect to which Laurus has received a landlord or
mortgagee waiver acceptable in form and substance to Laurus; (c) is not in transit; (d) is in good condition and meets all standards imposed by any governmental agency, or department or division thereof having regulatory Governmental
Authority over such Inventory, its use or sale including the Federal Fair Labor Standards Act of 1938 as amended, and all rules, regulations and orders thereunder; (e) is currently either usable or salable in the normal course of such
Company’s and/or Stockeryale Canada’s business; (f) is not placed by such Company and/or Stockeryale Canada on consignment or held by such Company and/or Stockeryale Canada on consignment from another Person; (g) is in conformity
with the representations and warranties made by such Company and/or Stockeryale Canada to Laurus with respect thereto; (h) is not subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third parties;
(i) does not require the consent of any Person for the completion of manufacture, sale or other disposition of such Inventory and such completion, manufacture or sale does not constitute a breach or default under any contract or agreement to
which such Company and/or Stockeryale Canada is a party or to which such Inventory is or may be subject; (j) is not work-in-process; (k) is covered by casualty insurance acceptable to Laurus and under which Laurus has been named as a
lender’s loss payee and additional insured; and (l) not to be ineligible for any other reason. 
 “Eligible
Subsidiary” means each Subsidiary of the Parent set forth on Exhibit A hereto, as the same may be updated from time to time with Laurus’ written consent. 
  

 5 

 “Equipment” means all “equipment” as such term is defined in the UCC, now
owned or hereafter acquired by any Person, wherever located, including any and all machinery, apparatus, equipment, fittings, furniture, Fixtures, motor vehicles and other tangible personal property (other than Inventory) of every kind and
description that may be now or hereafter used in such Person’s operations or that are owned by such Person or in which such Person may have an interest, and all parts, accessories and accessions thereto and substitute ons and replacements
therefor. 
 “ERISA” has the meaning given such term in Section 12(bb). 
 “Event of Default” means the occurrence of any of the events set forth in Section 19. 
 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 “Exchange Act Filings” means the Parent’s filings under the Exchange Act made prior to the date of this Agreement. 
 “Financial Reporting Controls” has the meaning given such term in Section 12(f)(v). 
 “Fixtures” means all “fixtures” as such term is defined in the UCC, now owned or hereafter acquired by any Person. 

“Formula Amount” has the meaning given such term in Section 2(a)(i). 
 “GAAP” means generally accepted accounting principles, practices and procedures in effect from time to time in the United States of
America. 
 “General Hypothecation” means the General Hypothecation of Movables dated as of the Closing Date by and between
Stockeryale Canada and Laurus, as same may be amended, supplemented, restated and/or otherwise modified from time to time. 
 “General Intangibles” means all “general intangibles” as such term is defined in the UCC, now owned or hereafter acquired by any Person including all right, title and interest that such Person may now or hereafter
have in or under any contract, all Payment Intangibles, customer lists, Licenses, Intellectual Property, interests in partnerships, joint ventures and other business associations, permits, proprietary or confidential information, inventions (whether
or not patented or patentable), technical information, procedures, designs, knowledge, know-how, Software, data bases, data, skill, expertise, experience, processes, models, drawings, materials, Books and Records, Goodwill (including the Goodwill
associated with any Intellectual Property), all rights and claims in or under insurance policies (including insurance for fire, damage, loss, and casualty, whether covering personal property, real property, tangible rights or intangible rights, all
liability, life, key-person, and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit accounts, rights to receive tax refunds and other payments, rights to received dividends,
distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, and rights of indemnification. 
  

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 “Goods” means all “goods”, as such term is defined in the UCC, now owned or
hereafter acquired by any Person, wherever located, including embedded software to the extent included in “goods” as defined in the UCC, manufactured homes, fixtures, standing timber that is cut and removed for sale and unborn young of
animals. 
 “Goodwill” means all goodwill, trade secrets, proprietary or confidential information, technical information,
procedures, formulae, quality control standards, designs, operating and training manuals, customer lists, and distribution agreements now owned or hereafter acquired by any Person. 
 “Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 
 “Instruments” means all “instruments”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever located, including all certificated securities and all promissory notes and other
evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. 
 “Intellectual Property” means any and all patents, trademarks, service marks, trade names, copyrights, trade secrets, Licenses, information and other proprietary rights and processes. 
 “Inventory” means all “inventory”, as such term is defined in the UCC, now owned or hereafter acquired by any Person, wherever
located, including all inventory, merchandise, goods and other personal property that are held by or on behalf of such Person for sale or lease or are furnished or are to be furnished under a contract of service or that constitute raw materials,
work in process, finished goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in such Person’s business or in the processing, production, packaging, promotion, delivery
or shipping of the same, including all supplies and embedded software. 
 “Inventory Availability” means up to the lesser of
(a) fifty percent (50%) of the value of each Company’s and Stockeryale Canada’s Eligible Inventory (calculated on the basis of the lower of cost or market, on a first-in first-out basis) and (b) $1,500,000. 
 “Investment Property” means all “investment property”, as such term is defined in the UCC, now owned or hereafter acquired by
any Person, wherever located. 
 “Lasiris” means Lasiris Holdings, Inc., a corporation organized under the laws of Canada.

 “Lasiris Documentation” means, collectively, (a) the Lasiris Guarantee, (b) the Lasiris Security Agreement,
(c) the Lasiris Pledge Agreement and (d) any and all other agreements, instruments and documents executed in connection therewith, as each of the same may be amended, restated, modified and/or supplemented from time to time. 
  

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 “Lasiris Guarantee” means the Guarantee made by Lasiris in favor of Laurus pursuant to
which Lasiris guarantees all of the Obligations. 
 “Lasiris Pledge Agreement” means the Stock Pledge Agreement by and
between Lasiris and Laurus pursuant to which Lasiris pledges to Laurus all of the capital stock of Stockeryale Canada to secure all of its obligations and liabilities under the Lasiris Guarantee. 
 “Lasiris Security Agreement” means the General Security Agreement by and between Lasiris and Laurus pursuant to which Lasiris grants
Laurus a first-priority charge in all of its assets to secure all of its obligations and liabilities under the Lasiris Guarantee. 
 “Letter-of-Credit Rights” means “letter-of-credit rights” as such term is defined in the UCC, now owned or hereafter acquired by any Person, including rights to payment or performance under a letter of credit,
whether or not such Person, as beneficiary, has demanded or is entitled to demand payment or performance. 
 “License” means
any rights under any written agreement now or hereafter acquired by any Person to use any trademark, trademark registration, copyright, copyright registration or invention for which a patent is in existence or other license of rights or interests
now held or hereafter acquired by any Person. 
 “Lien” means any mortgage, security deed, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or otherwise), charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind
or nature whatsoever including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the UCC
or comparable law of any jurisdiction. 
 “Loans” has the meaning given such term in Section 2(a)(i) and shall include
all other extensions of credit hereunder and under any Ancillary Agreement. 
 “Lockboxes” has the meaning given such term
in Section 8(a). 
 “Material Adverse Effect” means a material adverse effect on (a) the business, assets,
liabilities, condition (financial or otherwise), properties or operations of any Company or any of its Subsidiaries (taken individually and as a whole), (b) any Company’s or any of its Subsidiary’s ability to pay or perform the
Obligations in accordance with the terms hereof or any Ancillary Agreement, (c) the value of the Collateral, the Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Laurus’
rights and remedies under this Agreement and the Ancillary Agreements. 
 “NASD” has the meaning given such term in
Section 13(b). 
 “Note” means that certain Secured Non-Convertible Revolving Note dated as of the Closing Date made by
the Companies in favor of Laurus in the original face amount of $4,000,000, as the same may be amended, supplemented, restated and/or otherwise modified from time to time. 
  

 8 

 “Obligations” means all Loans, all obligations and liabilities under the December 2005
Agreements and all other advances, debts, liabilities, obligations, covenants and duties owing by each Company and each of its Subsidiaries to Laurus (or any corporation that directly or indirectly controls or is controlled by or is under common
control with Laurus) of every kind and description (whether or not evidenced by any note or other instrument and whether or not for the payment of money or the performance or non-performance of any act), direct or indirect, absolute or contingent,
due or to become due, contractual or tortious, liquidated or unliquidated, whether existing by operation of law or otherwise now existing or hereafter arising including any debt, liability or obligation owing from any Company and/or each of its
Subsidiaries to others which Laurus may have obtained by assignment or otherwise and further including all interest (including interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and interest
accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition
interest is allowed or allowable in such proceeding), charges or any other payments each Company and each of its Subsidiaries is required to make by law or otherwise arising under or as a result of this Agreement, the Ancillary Agreements or
otherwise, together with all reasonable expenses and reasonable attorneys’ fees chargeable to the Companies’ or any of their Subsidiaries’ accounts or incurred by Laurus in connection therewith. 
 “Payment Intangibles” means all “payment intangibles” as such term is defined in the UCC, now owned or hereafter acquired by
any Person, including, a General Intangible under which the Account Debtor’s principal obligation is a monetary obligation. 
 “Permitted Liens” means (a) Liens of carriers, warehousemen, artisans, bailees, mechanics and materialmen incurred in the ordinary course of business securing sums not overdue; (b) Liens incurred in the ordinary
course of business in connection with worker’s compensation, unemployment insurance or other forms of governmental insurance or benefits, relating to employees, securing sums (i) not overdue or (ii) being diligently contested in good
faith provided that adequate reserves with respect thereto are maintained on the books of the Companies and their Subsidiaries, as applicable, in conformity with GAAP; (c) Liens in favor of Laurus; (d) Liens for taxes (i) not yet due
or (ii) being diligently contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Companies and their Subsidiaries, as applicable, in conformity with GAAP; and
which have no effect on the priority of Liens in favor of Laurus or the value of the assets in which Laurus has a Lien; (e) Purchase Money Liens securing Purchase Money Indebtedness to the extent permitted in this Agreement and (f) Liens
specified on Schedule 2 hereto. 
 “Person” means any individual, sole proprietorship, partnership, limited liability
partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof), and shall include such Person’s successors and assigns. 
 “Principal Market” means the NASD Over The Counter Bulletin Board, NASDAQ Capital Market, NASDAQ National Market System, American Stock Exchange or New York Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock). 
  

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 “Proceeds” means “proceeds”, as such term is defined in the UCC and, in any
event, shall include: (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Company or any other Person from time to time with respect to any Collateral; (b) any and all payments (in any form whatsoever)
made or due and payable to any Company from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any Collateral by any governmental body, governmental authority, bureau or agency (or any person acting
under color of governmental authority); (c) any claim of any Company against third parties (i) for past, present or future infringement of any Intellectual Property or (ii) for past, present or future infringement or dilution of any
trademark or trademark license or for injury to the goodwill associated with any trademark, trademark registration or trademark licensed under any trademark License; (d) any recoveries by any Company against third parties with respect to any
litigation or dispute concerning any Collateral, including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral; (e) all amounts collected on, or
distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock; and (f) any and all other amounts, rights to payment or other property acquired
upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral. 
 “Purchase
Money Indebtedness” means (a) any indebtedness incurred for the payment of all or any part of the purchase price of any fixed asset, including indebtedness under capitalized leases, (b) any indebtedness incurred for the sole
purpose of financing or refinancing all or any part of the purchase price of any fixed asset, and (c) any renewals, extensions or refinancings thereof (but not any increases in the principal amounts thereof outstanding at that time).

 “Purchase Money Lien” means any Lien upon any fixed assets that secures the Purchase Money Indebtedness related thereto
but only if such Lien shall at all times be confined solely to the asset the purchase price of which was financed or refinanced through the incurrence of the Purchase Money Indebtedness secured by such Lien and only if such Lien secures only such
Purchase Money Indebtedness. 
 “Registration Rights Agreements” means that certain Registration Rights Agreement dated as
of the Closing Date by and between the Parent and Laurus and each other registration rights agreement by and between the Parent and Laurus, as each of the same may be amended, modified and supplemented from time to time. 
 “SEC” means the Securities and Exchange Commission. 
 “SEC Reports” has the meaning given such term in Section 12(u). 
 “Securities” means the Note and the Closing Shares. 
 “Securities Act” has the meaning given such
term in Section 12(r). 
  

 10 

 “Security Documents” means all security agreements, mortgages, cash collateral deposit
letters, pledges and other agreements which are executed by any Company or any of its Subsidiaries in favor of Laurus. 
 “Software” means all “software” as such term is defined in the UCC, now owned or hereafter acquired by any Person, including all computer programs and all supporting information provided in connection with a
transaction related to any program. 
 “Stock” means all certificated and uncertificated shares, options, warrants,
membership interests, general or limited partnership interests, participation or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting,
including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Securities Exchange Act of 1934). 
 “Stockeryale Canada” means StockerYale Canada Inc., a corporation organized under the laws of Canada. 
 “Subsidiary” means, with respect to any Person, (i) any other Person whose shares of stock or other ownership interests having
ordinary voting power (other than stock or other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the directors or other governing body of such other Person, are owned, directly or
indirectly, by such Person or (ii) any other Person in which such Person owns, directly or indirectly, more than 50% of the equity interests at such time. 
 “Supporting Obligations” means all “supporting obligations” as such term is defined in the UCC. 
 “Term” means the Closing Date through the close of business on the day immediately preceding the third anniversary of the Closing Date, subject to acceleration at the option of Laurus upon the
occurrence of an Event of Default hereunder or other termination hereunder. 
 “UCC” means the Uniform Commercial Code as
the same may, from time to time be in effect in the State of New York; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Laurus’
Lien on any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions of this Agreement relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions; provided further, that to the extent that UCC is used to define any term herein or in any
Ancillary Agreement and such term is defined differently in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern. 
  

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