Document:

Digital Music Group 2005 Amended and Restated Stock Plan

 Exhibit 10.2 
  
 Digital Music Group, Inc. 
 Amended and Restated 
 2005 Stock Plan 
  
 Article 1 
 Purpose 
  
 The purpose of this plan is to recognize and reward participants for their efforts on the Company’s behalf, to motivate participants by appropriate incentives to contribute to the Company’s attainment of its long-term performance
objectives, and to align participants’ interests with those of the Company’s other stockholders through compensation based on the performance of the Company’s common stock over a long-term period. 
  
 Article 2 
 Definitions 
  
 Award means an Option, SAR Award or Restricted Stock under the Plan. 
  
 Award Agreement means a written or electronic agreement between the Company and a Participant incorporating the terms of an Award to the Participant. 
  
 Board means the Company’s Board of Directors. 
  
 Change of Control is defined in Article 6. 
  
 Common Stock means the Company’s common stock, par value $.01 per
share. 
  
 Committee is defined in Paragraph 3.1. Unless
the Board designates a different committee, the Compensation Committee of the Board shall serve as the Committee. 
  
 Company means Digital Music Group, Inc., a Delaware corporation. 
  
 Consultant means any individual serving as a consultant, advisor or vendor rendering services to the Company or a
Subsidiary. 
  
 Director means a member of the Board of
Directors of the Company. 
  
 Eligible Person means, in
respect of all types of Awards except ISOs, any Employee, Director or Consultant and, in respect of ISOs, any Employee. 
  
 Employee means a full-time employee of the Company or a Subsidiary. 
  
 Exchange Act means the Securities Exchange Act of 1934, as amended. 
  
 Expiration Date means the last day on which an Option or SAR may be
exercised. 

 Fair Market Value means, for a given day, the value of a share of Common Stock determined as
follows: 
  
 (i) if the Common Stock is listed on any established
stock exchange or a national market system, the last reported sales price of a share of Common Stock on such exchange or market system on the date of determination; and 
  
 (ii) if the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the mean
between the high bid and low asked prices for the Common Stock on the date of determination. 
  
 For purposes of any Award granted on the date of the initial public offering of shares of Common Stock of the Company, the Fair Market Value will be the initial price to the public as set forth in the final prospectus
included within the Registration Statement on Form S-1 filed with the Securities and Exchange Commission. 
  
 Grant Date means, in respect of an Award, the date that the Committee grants the Award or any later date that the Committee specifies as the
effective date of the Award. 
  
 IRC means the Internal
Revenue Code of 1986, as amended. 
  
 ISO means an
incentive stock option described in § 422 of the IRC. 
  
 NSO means a nonstatutory stock option (i.e., a stock option that is not an ISO). 
  
 Option means an option to purchase shares of Common Stock granted to an Eligible Person under Article 5. An Option shall be either an ISO or a NSO
as the Committee designates. 
  
 Participant means any
Eligible Person who holds an Award under the Plan. 
  
 Plan
means this plan, as it may be amended. The name of this Plan is the “Digital Music Group, Inc. Amended and Restated 2005 Stock Plan.” 
  
 Restricted Stock means shares of Common Stock issued to an Eligible Person under Article 5. 
  
 SAR, or stock appreciation right, means a contractual right to receive
a payment representing the excess of the Fair Market Value of a share of Common Stock on the date that the right is exercised over the base price per share of the right. 
  
 SAR Award means an award of a Stand-Alone SAR or Tandem SAR to an Eligible Person under Article 5. 
  
 Stand-Alone SAR means an SAR that is not related to an Option.

  
 Subsidiary means a “subsidiary corporation”
as defined in § 424(f) of the IRC. 
  

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 Tandem SAR means an SAR that is related to an Option. 
  
 Termination Date means the date of termination of employment of an
Employee by the Company or a Subsidiary. A transfer of employment from the Company to a Subsidiary, or from a Subsidiary to the Company or to another Subsidiary, shall not be considered a termination of employment, nor will transfer from full-time
employment to a consulting agreement, provided that the terms of the consulting agreement are set forth in writing and such agreement is for one year or less (including all option periods). 
  
 Article 3 
 Administration 
  
 3.1 Committee 
  
 The
Board of Directors shall designate a committee of the Board (the “Committee”) to administer the Plan. The Committee shall consist of two or more directors, all of whom shall be (i) “non-employee directors” as defined in Rule
16b-3 under the Exchange Act, (ii) “independent directors” under the applicable listing standards of the primary exchange or market on which the Company’s Common Stock is listed for trading, and (iii) “outside directors”
under § 162(m) of the IRC. Unless otherwise determined by the Board, the members of the Compensation Committee of the Board shall constitute the Committee for purposes of this Plan. 
  
 3.2 Authority 
  
 Subject to the terms of the Plan, the Committee shall have the authority to select the Eligible Persons to whom Awards are to be granted and to determine
the time, type, number of shares, restrictions, limitations and other terms and conditions of each Award. 
  
 The Committee may interpret the Plan, adopt, revise and rescind policies and procedures to administer the Plan, and make all factual and other
determinations required for the Plan’s administration. 
  
 Awards under the Plan need not be uniform in respect of different Eligible Persons, whether or not similarly situated. The Committee may consider such factors as it deems relevant in selecting Eligible Persons for Awards and in determining
their Awards. 
  
 The Committee’s determinations,
interpretations and other actions shall be final and binding. No member of the Committee shall be liable for any action of the Committee undertaken in good faith. 
  
 3.3 Procedures 
  
 The Board shall elect a chairman for the Committee, and the Committee shall meet as necessary at the call of the chairman or any two members of the
Committee or the Chairman of the Board of the Company. A majority of the members of the Committee shall constitute a quorum, and all actions of the Committee at a meeting at which a quorum is present shall be taken by majority vote. 
  

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 A member of the Committee may participate in any meeting of the Committee by a conference telephone call
or other means that enable all persons participating in the meeting to hear one another, and participation in this manner shall constitute his or her presence in person at the meeting. The Committee also may act by the unanimous written consent of
its members. 
  
 Article 4 
 Plan Operation 
  
 4.1 Effective Date 
  
 This Plan shall become effective if and when it is approved by both the Board and the Company’s stockholders (the “Effective Date”). Awards
may not be granted under the Plan prior to stockholder approval. 
  
 4.2 Term 
  
 This Plan shall have a term of 10
years, expiring on the tenth anniversary of the Effective Date (but remaining in effect, however, for Awards outstanding as of that date). No Award may be granted under the Plan after its expiration. 
  
 4.3 Maximum Number of Shares 
  
 The maximum total number of shares of Common Stock for which Awards may be
granted under this Plan is 1,200,000 shares, plus an annual increase to be added on the first day of the Company’s fiscal year beginning in 2007, equal to the lesser of (a) 400,000 shares, (b) 5% of the outstanding shares of Common Stock on
such date or (c) an amount determined by the Board. 
  
 The shares
for which Awards may be granted shall be shares of Common Stock currently authorized but unissued or shares that the Company currently holds or subsequently acquires as treasury shares, including shares purchased in the open market or in private
transactions. 
  
 4.4 Shares Available for Awards

  
 The determination of the number of shares of Common Stock
available for Awards under the Plan shall take into account the following: 
  
 (a) If an Option or SAR lapses or expires unexercised, the number of shares in respect of which the Option or SAR lapsed or expired shall be added back to the available number of shares of Common Stock for which
Awards may be granted. 
  
 (b) If shares of
Restricted Stock are repurchased by the Company pursuant to the terms of the Award, such repurchased shares shall be added back to the available number of shares of Common Stock for which Awards may be granted. 
  
 (c) If a SAR is settled in cash, the number of shares in
respect of which the SAR was settled in cash shall not be added back to the available number of shares of Common Stock for which Awards may be granted. 
  

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 (d) If the exercise price of an Option is paid by delivery of shares of Common Stock
pursuant to Paragraph 5.8, the number of shares of Common Stock issued upon exercise of Option, without netting of the shares of Common Stock delivered in payment of the exercise price, shall be taken into account for purposes of determining the
available number of shares of Common Stock for which Awards may be granted. 
  
 4.5 Individual Limit on Awards 
  
 The maximum number of shares of Common Stock for which Awards may be granted to any Eligible Person in a calendar year shall not exceed 200,000 shares, taking into account all grants and awards under other stock option and equity
compensation plans of the Company. 
  
 4.6 Capitalization
Adjustments 
  
 All share numbers included herein shall be
adjusted for any stock split, stock dividend, recapitalization or the like. 
  
 In the event of a change in the number of outstanding shares of Common Stock of the Company by reason of a stock dividend, stock split, recapitalization, reorganization and the like, the number of shares of Common
Stock for which Awards may be granted under the Plan as stated above in Articles 4.3, 4.4 and 4.5, the aggregate number of shares of Common Stock in respect of each outstanding Award, and the exercise price of each outstanding Option and SAR shall
automatically be adjusted pro-rata and accordingly under the circumstances, with the Committee to use its discretion and judgment where necessary to interpret the Company action and determine the appropriate adjustments to be made in this regard,
with the Committee’s decisions to be final and binding. 
  
 Article 5 
 Stock Options, SARs and Restricted Stock 
  
 5.1 Grant 
  
 The Committee may grant an Option or SAR or shares of Restricted Stock to any Eligible Person. Subject to the terms of this Plan, the Committee shall
determine the restrictions, limitations and other terms and conditions of each Option, SAR Award and Restricted Stock Award. 
  
 The Committee shall designate each Option as either an ISO or NSO, and shall designate each SAR Award as either a Stand-Alone SAR or a Tandem SAR. A
Tandem SAR may not be granted later than when its related Option is granted. 
  
 5.2 Exercise Price 
  
 The
Committee shall determine the exercise price of each Option and the base price of each SAR. The exercise or base price per share may not be less than the Fair Market Value on the Grant Date of the Option or SAR. 
  

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 5.3 Vesting and Term 
  
 The Committee shall determine the time or times at which each Option, Stand-Alone SAR and Restricted Grant Award becomes
vested. Vesting may be based on continuous service or on the satisfaction of specified performance goals or other conditions. A Tandem SAR shall vest if and to the extent that its related Option vests, and shall expire or be cancelled when its
related Option expires or is cancelled. No Option or SAR may have an Expiration Date more than 10 years from its Grant Date. 
  
 Vesting of Awards granted hereunder will be suspended during any paid or unpaid leave of absence by an Employee. For purposes of ISOs, no such leave may
exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three months following the
91st day of such leave, any ISO held by the Employee will cease to be treated as an ISO and will be treated for tax
purposes as a NSO. Upon reemployment following a leave of absence, vesting will recommence as of the date of reemployment, and the term of all Awards will be extended by the number of days under the leave of absence, unless such extension would
cause the Award to be outstanding for longer than 10 years. After 270 consecutive days under a leave of absence, an Employee will be treated as terminated for purposes of applying the provisions of Article 5.4(c) below with respect to any vested
Options and SARs, with the 271st day considered to be the Termination Date. 
  
 Notwithstanding anything to the contrary in the underlying Award Agreement,
each outstanding Option and SAR and shares of Restricted Stock held by a Participant shall become fully vested as of his or her Termination Date if the Participant’s relationship with the Company terminates by reason of his or her death.

  
 The Company or its designee shall hold, as escrow agent, all
shares of Restricted Stock until all restrictions on such shares have lapsed. Notwithstanding the foregoing, the person to whom such shares have been awarded may exercise full voting rights with respect to such shares and will be entitled to receive
all dividends and other distributions paid with respect to such Restricted Stock unless otherwise provided in the Award Agreement. 
  
 5.4 Termination of Employment 
  
 In the case of an Option or SAR or shares of Restricted Stock held by an Employee whose employment terminates: 
  
 (a) if and to the extent that an Option or SAR is unvested
as of the Employee’s Termination Date, the Option or SAR shall lapse on the Termination Date; 
  
 (b) if and to the extent any shares of Restricted Stock are unvested as of the Employee’s Termination Date, the Company shall have
the right to repurchase such shares on such terms as shall be specified in the underlying Award Agreement; and 
  

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 (c) if and to the extent that an Option or SAR is vested as of the Employee’s
Termination Date, the Option or SAR shall expire (i) on the earlier of (A) 90 days after the Employee’s Termination Date or (B) the expiration date of the Option or SAR, or (ii) if the Employee’s employment terminated by reason of his or
her death, on the earlier of (A) the first anniversary of the Employee’s death or (B) the expiration date of the Option or SAR. 
  
 Neither the Company nor the Committee shall be under any duty to provide notification to the Participant of the specific terms of this Article 5.4 upon
the termination of an Employee or at any other time. 
  
 5.5
Transferability 
  
 Except as provided in the underlying
Award Agreement or as permitted by the Committee, no Option, SAR or shares of Restricted Stock may be transferred, assigned or pledged, whether by operation of law or otherwise, except as provided by will or the applicable laws of intestacy. No
Option, SAR or shares of Restricted Stock shall be subject to execution, attachment or similar process. An Option or SAR may be exercised only by the Participant, except in the case of his or her death, when the Option or SAR may be exercised by the
person or persons to whom it passes by will or the applicable laws of intestacy. 
  
 5.6 Additional ISO Rules 
  
 To the extent that the aggregate fair market value (determined in respect of each ISO on the basis of the Fair Market Value of a share of Common Stock on the ISO’s Grant Date) of the underlying shares of all ISOs that become
exercisable by an Employee for the first time in any calendar year exceeds $100,000, the Options shall be treated as NSOs. This limitation shall be applied by taking ISOs into account in the order in which they were granted. 
  
 The Award Agreement underlying an Option that the Committee designates as an
ISO shall contain any additional terms, beyond those of this Plan, that the Committee considers necessary or desirable to include to assure that the Option complies with the requirements of § 422 of the IRC. 
  
 5.7 Manner of Exercise 
  
 A vested Option or SAR may be exercised in full or in part (but only in
respect of a whole number of shares) by (i) written notice to the Committee (or to its designee) stating the number of shares in respect of which the Option or SAR is being exercised and, in the case of an Option, (ii) full payment of the exercise
price of those shares. 
  
 5.8 Payment of Exercise Price

  
 Payment of the exercise price of an Option shall be made
by check or, if permitted by the Committee in the underlying Award Agreement, by: (i) delivery of shares of Common Stock having a Fair Market Value on the date of exercise equal to the exercise price; (ii) directing the Company to withhold, from the
shares otherwise issuable upon exercise of the Option, shares 
  

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 having a Fair Market Value on the date of exercise equal to the exercise price; (iii) by an open-market broker-assisted
sale pursuant to which the Company is promptly delivered the portion of the sales proceeds necessary to pay the exercise price; or (iv) any combination of these methods of payment. 
  
 5.9 Tandem SARs 
  
 A Tandem SAR shall entitle the Participant to elect to exercise either the SAR or the related Option as to all or any portion of the shares subject to the
SAR and Option. The exercise of a Tandem SAR shall cause the immediate and automatic cancellation of its related Option with respect to the same number of shares, and the exercise, expiration or cancellation of the related Option (other than by
reason of the exercise of the Tandem SAR) shall cause the automatic and immediate cancellation of the Tandem SAR with respect to the same number of shares. 
  
 5.10 Settlement of SARs 
  
 Settlement of a SAR may be made, in the Committee’s discretion at the time the Award is granted, in shares of Common Stock or in cash, or in a
combination of the two, subject to applicable tax withholding requirements. The settlement of a SAR shall be made on the basis of the Fair Market Value of a share of Common Stock on the date that the SAR is exercised. 
  
 5.11 No Repricing 
  
 The Committee may not amend, substitute or cancel an Option or SAR in a
manner that has the effect of reducing the exercise price of the Option or the base price of the SAR unless the repricing is approved by the Company’s stockholders. 
  
 5.12 Formula Option Grants to Non-Employee Directors 
  
 All grants of Options to non-Employee Directors pursuant to this Section 5.12 will be automatic and nondiscretionary, except
as otherwise provided herein, and will be made in accordance with the following provisions: 
  
 (a) Type of Option. All Options granted pursuant to this Section will be NSOs and, except as otherwise provided herein, will be subject to the other terms and conditions of the Plan. 
  
 (b) No Discretion. No person will have any discretion to select which
non-Employee Directors will be granted Options under this Section or to determine the number of Shares to be covered by such Options (except as provided in Section 4.6). 
  
 (c) IPO and Initial Option. Each person named as a Director nominee or as a non-Employee Director in the prospectus
for the initial public offering of shares of Common Stock of the Company who becomes or continues to serve as a non-Employee Director upon or shortly after the consummation of the offering will be automatically granted an Option to purchase 24,000
shares of Common Stock (the “IPO Option”), effective at the first meeting of 
  

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 the Board following the initial public offering. Thereafter, each person who first becomes a non-Employee Director will
be automatically granted an Option to purchase 12,000 shares of Common Stock (the “Initial Option”) on or about the date on which such person first becomes a non-Employee Director, whether through election by the stockholders of the
Company or appointment by the Board to fill a vacancy; provided, however, that an Employee Director who ceases to be an Employee, but who remains a Director, will not receive an Initial Option. 
  
 (d) Annual Option. Each non-Employee Director will be automatically
granted an Option to purchase 6,000 shares of Common Stock (an “Annual Option”) on each date of the annual meeting of the stockholders of the Company beginning in 2006, if as of such date, he or she will have served on the Board for
at least the preceding six (6) months. 
  
 (e) Terms. The
terms of each Option granted pursuant to this Section 5.12 will be as follows: 
  
 i. The term of the Option will be ten (10) years. 
  
 ii. The exercise price per Share for the IPO Option will be the initial price to the public as set forth in the final prospectus included within the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission. The exercise price for the Initial Option and the Annual Option will be 100% of the Fair Market Value per share of Common Stock on the date of grant of the Option. 
  
 iii. The IPO Option will vest and become exercisable as to one-twenty-fourth (1/24th) of the Shares each month following the date of grant, provided that the Participant continues to serve as a Director through each such vesting date.

  
 iv. The Initial Option and the Annual Option will vest and
become exercisable as to one-twelfth (1/12th) of the shares of Common Stock each month following the date of grant,
provided that the Participant continues to serve as a Director through each such vesting date. 
  
 v. If and to the extent that any Option is vested as of the date that the Director ceases to serve on the Board, the Option shall expire (i) on the
earlier of (A) 90 days after the date that the Director ceases to be a member of the Board or (B) the expiration date of the Option, or (ii) if the Director’s service is terminated by reason of his or her death, on the earlier of (A) the first
anniversary of the Director’s death or (B) the expiration date of the Option. 
  
 Article 6 
 Change of Control 
  
 Upon a Change of Control, as defined below, all outstanding Awards shall become fully vested and exercisable and all
restrictions on shares underlying any Restricted Stock Awards shall lapse (subject to the consummation of such Change of Control). The Company shall notify each Participant in writing or electronically not less than fifteen days prior to a Change of
Control, which notice shall advise the Participants as to the vesting of and lapse of restrictions on 
  

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 their Awards in connection with such contemplated Change of Control. Such notice shall also include either (a) a
statement that all Awards will be assumed or substituted with equivalent options or rights in the Change of Control transaction, or (b) if no such assumption or substitution will take place, the specific steps that Participants will need to take if
they intend to exercise Options and/or SARs immediately prior to and contingent upon the consummation of the Change of Control. If any Options or SARs are not assumed in a Change of Control or exercised pursuant to the required notice being provided
to Participants, such Options and SARs shall terminate immediately upon the consummation of the Change of Control. 
  
 A “Change of Control” means an event or the last of a series of related events by which: 
  
 (a) any Person directly or indirectly acquires or otherwise
becomes entitled to vote stock having 51% or more of the voting power in elections for Directors; or 
  
 (b) the Company merges or consolidates with another corporation, and holders of outstanding shares of the Company’s Common Stock
immediately prior to the merger or consolidation do not own stock in the survivor of the merger or consolidation having more than 50% of the voting power in elections for directors; or 
  
 (c) the Company sells all or a substantial portion of the consolidated assets of the Company and its
Subsidiaries, and the Company does not own stock in the purchaser having more than 50% of the voting power in elections for directors. 
  
 As used in this Article 6, a “Person” means any “person” as that term is used in sections 13(d) and 14(d) of the Exchange Act,
together with all of that person’s “affiliates” and “associates” as those terms are defined in Rule 12b-2 under the Exchange Act. 
  
 Article 7 
 Miscellaneous Provisions

  
 7.1 Award Agreement 
  
 Each Award under the Plan shall be evidenced by an Award Agreement, which
shall be subject to and incorporate the terms of the Plan. Such Award Agreement must be signed and returned to the Company Secretary (or other such designated person) by the recipient within 30 days of receipt for such recipient to become a
Participant. 
  
 7.2 Tax Withholding 
  
 The Company shall withhold or collect from the Participant an amount
sufficient to satisfy its withholding tax obligations, if any, in connection with any Award under the Plan, and the Company may defer making any payment or delivery of shares pursuant to an Award unless and until the Participant pays such
withholding tax or indemnifies the Company to the Committee’s satisfaction. The amount of the withholding requirement shall be calculated to include any amount which the Committee believes should be withheld to satisfy federal, state, local and
any other taxing jurisdictions at the time the election is made. 
  

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 7.3 Amendment and Termination 
  
 The Board may amend, suspend or terminate the Plan at any time. The Company’s stockholders shall be required to approve
any amendment that would materially increase the number of shares of Common Stock for which Awards may be granted or that would increase the number of shares of Common Stock for which ISOs may be granted (other than an amendment authorized under
Paragraph 4.6). If the Plan is terminated, the Plan shall remain in effect for Awards outstanding as of its termination. No amendment, suspension or termination of the Plan shall adversely affect the rights of the holder of any outstanding Award
without his or her consent. 
  
 7.4 Foreign Jurisdictions

  
 The Committee may adopt, amend and terminate a supplement
to the Plan to permit Employees in another country to receive Awards under the supplement (on terms not inconsistent with the terms of Awards under the Plan) in compliance with that country’s securities, tax and other laws. 
  
 7.5 No Right To Employment 
  
 Nothing in this Plan or in any Award Agreement shall confer on any person
the right to continue in the employ of the Company or any Subsidiary or limit the right of the Company or Subsidiary to terminate his or her employment. 
  
 7.6 Notices 
  
 Notices required or permitted under this Plan shall be considered to have been duly given if sent by certified or registered mail addressed to the
Committee at the Company’s principal office or to any other person at his or her address as it appears on the Company’s payroll or other records. 
  
 7.7 Severability 
  
 If any provision of this Plan is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions, and the
Plan shall be construed and administered as if the illegal or invalid provision had not been included. 
  
 7.8 Governing Law 
  
 This Plan and all Award Agreements shall be governed in accordance with the laws of the State of California. 
  

 - 11 -SECURITIES PURCHASE AGREEMENT

 Exhibit 10.1 
  
 STOCKERYALE, INC. 
  
 SECURITIES PURCHASE AGREEMENT 
  
 THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of December 30, 2005, by and between
StockerYale, Inc., a Massachusetts corporation (the “Company”), and Laurus Master Fund, Ltd. (the “Purchaser”). 
  
 RECITALS 
  
 Whereas, the Company and the Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”); 
  
 Whereas, the Company desires to sell
and the Purchaser desires to purchase, upon the terms and conditions stated in this Agreement, (i) a secured term note of the Company substantially in the form attached as Exhibit A in the principal amount of $4,000,000 (together with
any secured notes issued in exchange therefor or replacement thereof in accordance with the terms thereof, the “Note”) and (ii) 750,000 shares of the Company’s common stock (the “Closing Shares”) (the Note and
the Closing Shares are referred to herein collectively as the “Securities”); and 
  
 Whereas, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached as Exhibit
B (the “Registration Rights Agreement”) pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities
laws. 
  
 AGREEMENT 
  
 NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
  
 1. PURCHASE AND SALE OF NOTE AND CLOSING SHARES. 
  
 1.1 Purchase of Note and Closing Shares.
Subject to the satisfaction (or waiver) of the conditions set forth in Sections 5 and 6 below, the Company shall issue and sell to the Purchaser and the Purchaser agrees to purchase from the Company the Note and the Closing Shares. The purchase
price (the “Purchase Price”) of (a) the Note at the closing (the “Closing”) shall be equal to $1.00 for each $1.00 of principal amount of the Note purchased (representing an aggregate Purchase Price of
$4,000,000 with respect to the Note) and (b) the Closing Shares at the Closing shall be equal to the product of (i) the amount of Closing Shares issued to the Purchaser hereunder, multiplied by (ii) $.01 (representing an aggregate
Purchase Price of $7,500 with respect to the Closing Shares). 

 1.2 The Closing Date. The date and time of the Closing (the
“Closing Date”) shall be at such time and place as is mutually agreed to by the Company and the Purchaser, subject to the satisfaction (or waiver) of all of the conditions to the Closing set forth in Sections 5 and 6. 
  
 1.3 Form of Payment. Pursuant to a Funds
Escrow Agreement (the “Funds Escrow Agreement”), on the Closing Date, (i) the Purchaser shall pay the Purchase Price to the Company for the Note and the Closing Shares by wire transfer of immediately available funds in
accordance with the Company’s written wire instructions, less any amount withheld for expenses and other payments pursuant to Section 4.16, (ii) the Company shall deliver to the Purchaser, the Note representing the principal amount of
the Note that the Purchaser is then purchasing hereunder, duly executed on behalf of the Company and registered in the name of the Purchaser or its designee and (iii) the Company shall deliver to the Purchaser the stock certificates evidencing
the Closing Shares registered in the Purchaser’s name. 
  
 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 
  
 The Company hereby represents and warrants to the Purchaser as of the date of this Agreement as set forth below except as disclosed in the Company’s filings under the Securities Exchange Act of 1934 (collectively, the “Exchange
Act Filings”), or the Schedules hereto. 
  
 2.1 Organization, Good Standing and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is qualified to do business
and in good standing in each other jurisdiction in which the ownership or leasing of its properties or the nature of its business requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations or financial condition of the Company, or
on the transactions contemplated hereby, or by the other Offering Documents or the agreements and instruments to be entered into in connection herewith or therewith, or on the authority or ability of the Company to perform its obligations under the
Offering Documents. 
  
 2.2
Subsidiaries. Schedule 2.2 hereto sets forth each subsidiary of the Company, showing the jurisdiction of its incorporation or organization and showing the percentage of each person’s ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this Agreement, “subsidiary” shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other subsidiaries. All of the outstanding shares of capital stock of each
subsidiary (that is a corporation) have been duly authorized and validly issued, and are fully paid and nonassessable. There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding
upon any subsidiary for the purchase or acquisition of any shares of capital stock of any subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock. Neither the
Company nor any subsidiary is subject to any obligation (contingent or otherwise) to 

  

 2 

 
repurchase or otherwise acquire or retire any shares of the capital stock of any subsidiary or any convertible securities, rights, warrants or options of the
type described in the preceding sentence. Neither the Company nor any subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of any subsidiary. 
  
 2.3 Capitalization; Voting Rights. 
  
 (a) The authorized capital stock of the Company on
the Closing Date, consists of (i) no shares of preferred stock, and (ii) 100,000,000 shares of common stock, par value $.01 per share (the “Common Stock”), 28,377,965.80 shares of which are issued and outstanding.

  
 (b) Except as disclosed on Schedule
2.3, other than (i) the shares reserved for issuance under the Company’s stock option plans; and (ii) shares which may be granted pursuant to this Agreement and the Transaction Documents, there are no outstanding options,
warrants, rights (including preemptive rights and rights of first refusal) to subscribe to, call or commitment of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company (such
Schedule 2.3 shall provide the exercise or conversion term, exercise or conversion price, vesting period, holders of such options, warrants or convertible securities and the amount granted or issued to each holder). There exists no proxy or
stockholder agreements, or arrangements or agreements of any kind for the purchase or acquisition from the Company of any of its securities. Neither the offer, issuance or sale of any of the Note or 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 Company outstanding, under anti-dilution or other similar provisions contained in or affecting any such securities. 
  
 (c) All issued and outstanding shares of the
Company’s Common Stock (i) have been duly authorized and validly issued and are fully paid and nonassessable and (ii) together with the offer and sale of all convertible securities, rights, warrants, or options of the Company were
issued in compliance with all applicable state and federal laws concerning the issuance of securities, and no stockholder has a right of rescission or damages against the Company with respect thereto. 
  
 (d) The rights, preferences, privileges and
restrictions of the shares of the Common Stock are as stated in the Articles of Organization, as amended to date (the “Charter”). The Closing Shares have been duly and validly reserved for issuance. When issued in compliance with
the provisions of this Agreement and the Company’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, except to the extent that such restrictions shall be eliminated by virtue of the
Registration Rights Agreement. 
  
 (e) No
stock plan, stock purchase, stock option or other agreement or understanding between the Company and any holder of any equity securities of the Company or rights to purchase equity securities of the Company provides for acceleration or other changes
in the vesting provisions or other terms of such agreement or understanding as the result of any 

  

 3 

 
merger, consolidated sale of stock or assets, change in control or any other transaction(s) by the Company, including the transactions contemplated
hereunder. 
  
 2.4 Authorization;
Binding Obligations. All corporate action on the part of the Company necessary for the authorization of this Agreement, the Note, the Registration Rights Agreement, the Funds Escrow Agreement and the Amendment and Reaffirmation of Security
Agreement (collectively, the “Transaction Documents”), the performance of all obligations of the Company hereunder at the applicable Closing and, the authorization, sale, issuance and delivery of the Note and the Closing Shares has
been taken or will be taken prior to the Closing and no further consent or authorization of the Company, its board of directors or stockholders is required. This Agreement and the other Transaction Documents, when executed and delivered and to the
extent that the Company is a party thereto, will be valid and binding obligations of the Company 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) general principles of equity that restrict the availability of equitable or legal remedies. The sale of the Note and the issuance of the Closing Shares are 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 Note, when executed and delivered in accordance with the terms of this Agreement, will be valid and binding obligations
of the Company, enforceable in accordance with their respective terms. 
  
 2.5 Liabilities. The Company has no material liabilities and, to the best of its knowledge, knows of no material contingent liabilities, except current liabilities incurred in the ordinary course of
business and liabilities disclosed in the Company’s Exchange Act Filings (collectively, the “Exchange Act Filings”) made prior to the date of this Agreement. 
  
 2.6 Agreements; Action. Except as set forth on Schedule 2.6: 
  
 (a) All of the agreements, understandings,
instruments, contracts and proposed transactions, to which the Company is a party or by which it is bound, that are required to be filed under Item 601 of Regulation SB promulgated under the Securities Exchange Act of 1934 (the
“Exchange Act”) have been so filed by the Company with the SEC. All material judgments, orders, writs or decrees to which the Company is a party or to its knowledge by which it is bound, have been disclosed by the Company 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 the Company 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 the Company (other than licenses arising from the purchase of “off the
shelf” or other standard products), or (ii) provisions restricting the development, manufacture or distribution of the Company’s products or services, or (iii) indemnification by the Company with respect to infringements of
proprietary rights. 
  
 (b) The Company
has not (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) since December 31, 2004, incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $250,000 or, in the case of indebtedness and/or liabilities 

  

 4 

 
individually less than $50,000, in excess of $150,000 in the aggregate, (iii) made any loans or advances to any person or entity 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. Neither
the Company nor any subsidiary is in default with respect to any indebtedness. 
  
 (c) For the purposes of subsections (a) and (b) above, all indebtedness, liabilities, agreements, understandings,
instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections. 
  
 2.7 Obligations to Related Parties. There are no obligations of the Company to officers, directors, stockholders or employees of the Company other than (a) for payment of salary for services rendered,
(b) reimbursement for reasonable expenses incurred on behalf of the Company, (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company) and (d) obligations listed in the Company’s financial statements or disclosed in any of its Exchange Act Filings. Except as described above or set forth on Schedule 2.7, none of the
officers, directors or, to the best of the Company’s knowledge, key employees or stockholders of the Company or any members of their immediate families, are indebted to the Company, individually or in the aggregate, in excess of $50,000 or have
any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company, other than passive
investments in publicly traded companies (representing less than 1% of such company) which may compete with the Company. Except as described above, no officer, director or stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company and no agreements, understandings or proposed transactions are contemplated between the Company and any such person. Except as set forth on Schedule 2.7, the Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or corporation. 
  
 2.8 Changes. Since September 30, 2005, except as disclosed in any Schedule to this Agreement or to any of the other
Transaction Documents, there has not been: 
  
 (a) Any change in the assets, liabilities, financial condition, or operations of the Company, other than changes in the ordinary course of business, none of which individually or in the aggregate has had or is reasonably expected to
have a material adverse effect on such assets, liabilities, financial condition or operations of the Company; 
  
 (b) Any resignation or termination of any officer, key employee or group of employees of the Company; 
  
 (c) Any material change, except in the ordinary
course of business, in the contingent obligations of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise; 
  

 5 

 (d) Any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, business or financial condition of the Company; 
  
 (e) Any waiver by the Company of a valuable right or of a material debt owed to it; 
  
 (f) Any direct or indirect material loans made by the
Company to any stockholder, employee, officer or director of the Company, other than advances made in the ordinary course of business; 
  
 (g) Any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

  
 (h) Any declaration or payment of any
dividend or other distribution of the assets of the Company; 
  
 (i) Any labor organization activity related to the Company; 
  
 (j) Any debt, obligation or liability incurred, assumed or guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business; 
  
 (k) Any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; 
  

(l) Any change in any material agreement to which the Company is a party or by which it is bound which may materially and
adversely affect the business, assets, liabilities, financial condition or operations of the Company; 
  
 (m) Any other event or condition of the character that, either individually or cumulatively, has or could reasonably be expected to
materially and adversely affect the business, assets, liabilities, financial condition or operations of the Company; or 
  
 (n) Any arrangement or commitment by the Company to do any of the acts described in subsection (a) through (m) above.

  
 2.9 Title to Properties and Assets;
Liens, Etc. The Company has good and marketable title to its properties and assets, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company, (c) those that
have otherwise arisen in the ordinary course of business and (d) those set forth on Schedule 2.9. All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company are in good operating
condition and repair and are reasonably fit and usable for the purposes for which they are being used. The Company is in compliance with all material terms of each lease to which it is a party or is otherwise bound. 
  

 6 

 2.10 Intellectual Property. 
  
 (a) The Company owns or possesses sufficient legal
rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its business as now conducted and to the Company’s knowledge as presently
proposed to be conducted (the “Intellectual Property”), without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing proprietary rights, nor
is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of
any other person or entity other than such licenses or agreements arising from the purchase of “off the shelf” or standard products. 
  
 (b) Except as set forth on Schedule 2.10(b), the Company has not received any communications alleging that the Company has
violated any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity, nor is the Company aware of any basis therefor. 
  
 (c) The Company does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company, except for inventions, trade secrets or proprietary information that have been rightfully assigned
to the Company. 
  
 2.11 Compliance
with Other Instruments. The Company is not in violation or default of any term of its Charter or its bylaws as currently in effect (the “Bylaws”), or of any material provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is party or by which it is bound or of any judgment, decree, order or writ. The execution, delivery and performance of and compliance with this Agreement and the other Transaction Documents to which it is a party,
and the issuance and sale of the Note and the Closing Shares by the Company and the other Securities by the Company 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 mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties. 
  
 2.12 Litigation. There is no action, suit,
proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company or any subsidiary that prevents the Company from entering into this Agreement or the other Transaction Documents, or from consummating
the transactions contemplated hereby or thereby. Except as set forth on Schedule 2.12 hereto, there is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, threatened, against or involving the Company, any
subsidiary of the Company or any of their respective properties or assets which individually or in the aggregate would have a Material Adverse Effect. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency 

  

 7 

 
or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate.

  
 2.13 Tax Returns and Payments.
The Company has timely filed all tax returns (federal, state and local) required to be filed by it of which the failure to file would have a material adverse effect. All taxes shown to be due and payable on such returns, any assessments imposed, and
to the Company’s knowledge all other taxes due and payable by the Company on or before the Closing, have been paid or will be paid prior to the time they become delinquent. The Company has not been advised (a) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof, or (b) of any deficiency in assessment or proposed judgment to its federal, state or other taxes. The Company has no 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. 
  
 2.14 Employees. The Company has no collective bargaining agreements with any of its employees. There is no labor union
organizing activity pending or, to the Company’s knowledge, threatened with respect to the Company. The Company is not 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 the Company’s knowledge, no employee of the Company, nor any consultant with whom the Company 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, the Company because of the nature of the business to be conducted by the Company;
and to the Company’s knowledge the continued employment by the Company of its present employees, and the performance of the Company’s contracts with its independent contractors, will not result in any such violation. The Company is not
aware that any of its 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 the Company. The Company has not received any notice alleging that any such violation has occurred. Except for employees who have a current effective employment agreement with the Company, no employee of the Company has been
granted the right to continued employment by the Company or to any material compensation following termination of employment with the Company. The Company is not aware that any officer, key employee or group of employees intends to terminate his,
her or their employment with the Company, nor does the Company have a present intention to terminate the employment of any officer, key employee or group of employees. 
  
 2.15 Registration Rights and Voting Rights. Except as listed on Schedule 2.15, the
Company is presently not under any obligation, and has not granted any rights, or a party to any agreement, to register any of the Company’s presently outstanding securities or any of its securities that may hereafter be issued that have not
been satisfied. To the Company’s knowledge, no stockholder of the Company has entered into any agreement with respect to the voting or transfer of any equity securities of the Company. 
  
 2.16 Compliance with Laws; Permits. To its
knowledge, the Company is not in violation in any material respect of any applicable statute, rule, regulation, order or restriction 

  

 8 

 
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 violation would materially and adversely affect the business, assets, liabilities, financial condition or operations of the Company. 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 and the issuance of any of the Securities, except such as has been duly and validly obtained or filed, or with respect to any
filings that must be made after the Closing, as will be filed in a timely manner. The Company 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 would materially and adversely affect the business, properties or financial condition of the Company. 
  
 2.17 Environmental and Safety Laws. Except as described on Schedule 2.17, (a) the Company is not 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 the Company or, to the Company’s knowledge, by any other person or entity on any property owned, leased or used by the Company. For the
purposes of the preceding sentence, “Hazardous Materials” shall mean (a) 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, or (b) any petroleum products or nuclear materials. 
  
 2.18 Valid Offering. Assuming the accuracy of the representations and warranties of the Purchaser contained in this
Agreement, the offer, sale and issuance of the Securities will be exempt from the registration requirements of the 1933 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. Neither the Company nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with the offer or sale of the Securities. 
  
 2.19 Full Disclosure. The Company has provided the Purchaser with all information requested by the Purchaser in connection
with its decision to purchase the Note and the Closing Shares. Neither this Agreement, the exhibits and schedules hereto, the other Transaction Documents nor any other document delivered by the Company to Purchaser 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 the Purchaser by the Company were based on the Company’s experience in the industry and on assumptions of fact and
opinion as to future events which the Company, at the date of the issuance of such projections or estimates, believed to be reasonable. As of the date hereof no facts have come to the attention of the Company that would, in its opinion, require

  

 9 

 
the Company to revise or amplify in any material respect the assumptions underlying such projections and other estimates or the conclusions derived
therefrom. 
  
 2.20 Insurance. The
Company has general commercial, product liability, fire and casualty insurance policies with coverage customary for companies similarly situated to the Company in the same or similar business. 
  
 2.21 SEC Reports. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and the Company has timely filed all proxy statements, reports, schedules, forms, statements and other documents required to be filed by it under the Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, (ii) its Form 10-QSB for the fiscal quarters ended March 31, 2005, June 30, 2005 and
September 30, 2005 and (iii) its Form 8-K filings which it has made during the fiscal year 2005 to date (collectively, the “SEC Reports”). The Company is eligible to file a registration statement on Form S-3 with the SEC
for the purpose of registering the resale of its securities. 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. The financial statements of the Company included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles (“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 position of the Company and its subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). 
  
 2.22 No Market Manipulation. The Company 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 Company 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. 
  
 2.23 Listing. The Company’s Common Stock
is listed for trading on the Nasdaq National Market and satisfies all requirements for the continuation of such listing. Except as set forth on Schedule 2.23, the Company has not received any written notice that its Common Stock will be delisted
from the Nasdaq National Market or that the Common Stock and the Company do not meet all requirements for the continuation of such listing. 
  
 2.24 No Integrated Offering. Neither the Company, 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 

  

 10 

 
offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act which would prevent
the Company from selling the Securities pursuant to Rule 506 under the 1933 Act, or any applicable exchange-related stockholder approval provisions, nor will the Company 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. 
  
 2.25 Stop Transfer. The Securities are restricted securities as of the date of this Agreement. The Company will agree 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 resold if such securities are registered for public sale, whether as a result of the Registration Rights Agreement or otherwise, or an exemption from registration is
available and the conditions for use thereof are satisfied, except as required by federal securities laws. 
  
 2.26 Dilution. The Company understands the nature of the Securities being sold hereby and recognizes that they may have a potential
dilutive effect. The Company specifically acknowledges that its obligation to issue the Closing Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of
the Company. 
  
 2.27 Material Agreements.
There is no agreement that has not been filed with the SEC as an exhibit to a registration statement or other applicable form the breach of which could reasonably be expected to have a material adverse effect as to the Company and its subsidiaries,
or would prohibit or otherwise interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement in any material respect. 
  
 2.28 ERISA. Based upon the Employee Retirement Income Security Act of 1974
(“ERISA”), and the regulations and published interpretations thereunder: (i) the Company has not engaged in any Prohibited Transactions as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code,
as amended (the “Code”); (ii) the Company has met all applicable minimum funding requirements under Section 302 of ERISA in respect of its plans; (iii) the Company does not have 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) the Company does not have any fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than Companies’ employees; and (v) the Company has not withdrawn, completely or partially, from any multi-employer pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980. 
  
 2.29
Solvency. The Company is solvent, able to pay its debts as they mature, has capital sufficient to carry on its business and all businesses in which such Company is about to engage and the fair saleable value of its assets (calculated on a going
concern basis) is in excess of the amount of its liabilities. 
  
 2.30 Form S-3 Eligibility. The Company is eligible to register the Closing Shares for resale by the Purchaser using Form S-3 promulgated under the 1933 Act. 
  

 11 

 2.31 Patriot Act. The Company certifies that, to the best of Company’s
knowledge, the Company nor any of its Subsidiaries has been designated, nor is or shall be owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224. The Company hereby acknowledges that the Purchaser seeks to
comply with all applicable laws concerning money laundering and related activities. In furtherance of those efforts, the Company hereby represents, warrants and covenants that: (i) none of the cash or property that the Company or any of its
Subsidiaries will pay or will contribute to the Purchaser 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 the Company or any of its
Subsidiaries to the Purchaser, to the extent that they are within the Company’s and/or its Subsidiaries’ control shall cause the Purchaser 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. The Company shall promptly notify the Purchaser if any of these representations, warranties or covenants ceases to
be true and accurate regarding the Company or any of its Subsidiaries. The Company shall provide the Purchaser all additional information regarding the Company or any of its Subsidiaries that the Purchaser deems necessary or convenient to ensure
compliance with all applicable laws concerning money laundering and similar activities. The Company understands and agrees that if at any time it is discovered that any of the foregoing representations, warranties or covenants are incorrect, or if
otherwise required by applicable law or regulation related to money laundering or similar activities, the Purchaser may undertake appropriate actions to ensure compliance with applicable law or regulation, including but not limited to segregation
and/or redemption of the Purchaser’s investment in the Company. The Company further understands that the Purchaser may release confidential information about the Company and its Subsidiaries and, if applicable, any underlying beneficial owners,
to proper authorities if the Purchaser, in its sole discretion, determines that it is in the best interests of the Purchaser in light of relevant rules and regulations under the laws set forth in subsection (ii) above. 
  
 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. 
  
 The Purchaser hereby represents and warrants to the Company as follows:

  
 3.1 Requisite Power and Authority. The
Purchaser has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and the Transaction Documents and to carry out their provisions. All corporate action on Purchaser’s part required for
the lawful execution and delivery of this Agreement and the Transaction Documents have been or will be effectively taken prior to the Closing. Upon their execution and delivery, this Agreement and the other Transaction Documents will be valid and
binding obligations of the Purchaser, 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. 
  
 3.2 Investment Representations. The Purchaser understands that the Securities are being offered and sold pursuant to an exemption
from registration contained in the 1933 Act based in part upon the Purchaser’s representations contained in this Agreement, including, without limitation, that the Purchaser is an “accredited investor” within the meaning 

  

 12 

 
of Regulation D. The Purchaser has had an opportunity to ask questions and receive answers from the Company regarding the Company’s business, management
and financial affairs and the terms and conditions of the offering and the Securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to
verify any information furnished to the Purchaser or to which the Purchaser had access. 
  
 3.3 Purchaser Bears Economic Risk. The Purchaser has substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Purchaser must bear the economic risk of
this investment until the Securities are sold pursuant to (i) an effective registration statement under the 1933 Act, or (ii) an exemption from registration is available. 
  
 3.4 Acquisition for Own Account. The Purchaser is acquiring the Note and the Closing Shares for its
own account and for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with their distribution. 
  
 3.5 Purchaser Can Protect Its Interest. The Purchaser represents that by reason of its, or of its management’s, business and
financial experience, the Purchaser has the capacity to evaluate the merits and risks of its investment in the Securities and to protect its own interests in connection with the transactions contemplated in this Agreement, and the other Transaction
Documents. Further, the Purchaser is aware of no publication of any advertisement in connection with the transactions contemplated in the Agreement or the other Transaction Documents. 
  
 3.6 Accredited Investor. The Purchaser represents that it is an accredited investor within the
meaning of Regulation D. 
  
 3.7 Legends.
The Closing Shares, except as provided in Section 4.17, shall bear a legend which shall be in substantially the following form: 
  
 “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IF 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 LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO STOCKERYALE,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED.” 
  
 3.8 Market Manipulation. The Purchaser 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 Company to facilitate the sale or resale of any of the Closing Shares or affect the price at which any of the 

  

 13 

 
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 any Purchaser hedging transactions following payment in full of the Note. 
  
 4. COVENANTS OF THE COMPANY. 
  
 The Company covenants and agrees with the Purchaser as follows: 
  
 4.1 Stop-Orders. The Company will advise the Purchaser, 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 Company, or of the suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such
purpose. 
  
 4.2 Listing. The Company will
use commercially reasonable efforts to maintain the listing of its Common Stock on the Nasdaq Stock Market (including the Nasdaq Capital Market and the Nasdaq OTC Bulletin Board, but excluding the pink and yellow sheets), American Stock Exchange or
New York Stock Exchange (a “Principal Market”), and will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the National Association of Securities Dealers
(“NASD”) and such exchanges, as applicable. The Company will provide the Purchaser copies of all notices it receives notifying the Company of the threatened and actual delisting of the Common Stock from any Principal Market.

  
 4.3 Market Regulations. The Company
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 the Purchaser and promptly provide copies thereof to the Purchaser. 
  

4.4 Reporting Requirements. The Company will 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. Within fifteen (15) days after the
end of each month, the Company will deliver to the Purchaser unaudited trial balances as at the end of such month. 
  
 4.5 Use of Funds. The Company agrees that it will use the proceeds of the sale of the Note and the Closing Shares for general
corporate purposes, to repay in full all obligations under that Secured Convertible Note dated as of June 10, 2004 made by the Company in favor of the Purchaser in the original principal amount of $5,000,000 and will not use any of such
proceeds to repay any indebtedness of the Company (other than trade payables in the ordinary course and such obligations to the Purchaser) to any current executive officers, directors or principal stockholders of the Company. 
  
 4.6 Access to Facilities. The Company will permit any
representatives designated by the Purchaser (or any transferee of the Purchaser), upon reasonable notice and 

  

 14 

 
during normal business hours, at such person’s expense and accompanied by a representative of the Company, to (a) visit and inspect any of the
properties of the Company, (b) examine the corporate and financial records of the Company (unless such examination is not permitted by federal, state or local law or by contract) and make copies thereof or extracts therefrom and
(c) discuss the affairs, finances and accounts of any such corporations with the directors, officers and independent accountants of the Company. 
  
 4.7 Intentionally Omitted. 
  
 4.8 Insurance. The Company will 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 the Company; and the Company will 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 customary for companies in similar business similarly situated as the Company and to the extent available on commercially reasonable
terms. 
  
 4.9 Intellectual Property;
Corporate Existence. The Company shall 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. 
  
 4.10
Financial Information. The Company agrees to send the following to the Purchaser: (i) unless the following are filed with the SEC through EDGAR and are available to the public through EDGAR, within one (1) day after the filing thereof
with the SEC, a copy of its Annual Report on Form 10-KSB, its Quarterly Reports on Form 10-QSB, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act; (ii) on the
same day as the release thereof, facsimile copies of all press releases issued by the Company or any of its Subsidiaries, unless available through Bloomberg Financial Markets (or any successor thereto) contemporaneously with the release; and
(iii) copies of any notices and other information made available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof to the stockholders. 
  
 4.11 Intentionally Omitted. 
  
 4.12 Confidentiality. The Company agrees that it will
not disclose, and will not include in any public announcement, the name of the Purchaser, unless expressly agreed to by the Purchaser or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of
such requirement. 
  
 4.13 Corporate
Existence. So long as the Purchaser beneficially owns any of the Securities, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or
consolidation or sale or transfer of all or substantially all of the Company’s assets where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and the Transaction Documents and
(ii) is a publicly traded company whose common stock is quoted or listed on a Principal Market. 
  

 15 

 4.14 Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Section 5.7 above at such time as (a) the holder thereof is permitted to dispose of such Securities pursuant to Rule 144(k) under the 1933 Act, or (b) upon resale subject to
an effective registration statement after such Securities are registered under the 1933 Act. The Company agrees to cooperate with the Purchaser 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 or such transfer agent instructions necessary to allow such resales provided the Company and its counsel receive reasonably requested representations from the selling Purchaser and broker, if
any. 
  
 4.15 Priority of Notes. Except as
set forth on Schedule 4.15 hereto, for so long as the Note is outstanding, in the event that the Company or any of its Subsidiaries issues or incurs any indebtedness, it shall, or it shall cause any Subsidiary to, first enter into, and cause
the lender to enter into, a Subordination Agreement, containing terms and conditions acceptable to the Purchaser. 
  
 4.16 Expenses and Other Payments. The Company shall reimburse the Purchaser for its reasonable legal fees for services rendered to
the Purchaser in preparation of this Agreement and the other Transaction Documents, and expenses in connection with the Purchaser’s due diligence review of the Company and relevant matters, subject to reasonable documentation of such expenses.
Amounts payable hereunder and under Section 6.10 of the Note shall be withheld by the Purchaser from the Purchase Price to be paid at Closing. 
  
 4.17 Transfer and Depositary Agent Instructions. Other than as provided below, all certificates issued the Closing Shares shall
bear the restrictive legend specified in Section 3.7. The Company warrants that the Closing Shares shall be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights
Agreement, other than in accordance with applicable securities laws. If the Purchaser provides the Company with an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that a public sale, assignment or transfer of the
Closing Shares may be made without registration under the 1933 Act or the Purchaser provides the Company with reasonable assurances that the Closing Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company shall permit the transfer, and promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by the
Purchaser and without any restrictive legend. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchaser by vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 4.17 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this
Section 4.17, that the Purchaser shall be entitled, in addition to all other available remedies but subject to applicable securities laws, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other security being required. 
  

 16 

 5. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. 
  
 The obligation of the Company to issue and sell the Note and the Closing
Shares to the Purchaser at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any
time in its sole discretion by providing the Purchaser with prior written notice thereof: 
  
 5.1 Execution. The Purchaser shall have executed each of the Transaction Documents to which it is a party and delivered the same to
the Company. 
  
 5.2 Payment. The
Purchaser shall have delivered to the Company the Purchase Price (less the amounts withheld pursuant to Section 4.16) by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company. 
  
 5.3 Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be
true and correct as of such date), and the Purchaser shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Purchaser at or
prior to the Closing Date. 
  
 6. CONDITIONS TO THE
PURCHASER’S OBLIGATION TO PURCHASE. 
  
 The obligation
of the Purchaser hereunder to purchase the Note and the Closing Shares from the Company at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the
Purchaser’s sole benefit and may be waived by the Purchaser at any time in its sole discretion by providing the Company with prior written notice thereof: 
  

6.1 Execution. The Company shall have executed each of the Transaction Documents and delivered the same to the Purchaser.

  
 6.2 Exchange Listing. The Common Stock
(x) shall be designated for quotation or listed on the Principal Market and (y) shall not have been suspended by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market
have been threatened either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market; and the Closing Shares shall be listed upon the Principal Market.

  
 6.3 Representations and Warranties.
The representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be
true and correct as of such date) and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. The Purchaser shall have received a certificate, executed by either the Chief 

  

 17 

 
Executive Officer or the Chief Financial Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by the Purchaser. 
  
 6.4
Legal Opinion. The Purchaser shall have received (a) a legal opinion, dated as of the Closing Date, in form, scope and substance reasonably satisfactory to the Purchaser and in substantially the form of Exhibit C attached hereto and
(b) a legal opinion of Company’s Canadian counsel, dated as of the Closing Date, in form, scope and substance reasonably satisfactory to Purchaser. 
  

6.5 Delivery of Securities. At the Closing, the Company shall have executed and delivered to the Purchaser the Note and
delivered to the Purchaser the Closing Shares. 
  
 6.6 Board Resolutions. The Board of Directors of the Company shall have adopted resolutions consistent with Section 2.4 above and in a form reasonably acceptable to the Purchaser (the “Resolutions”). 
  
 6.7 Reservation of Shares. As of the Closing Date,
the Company shall have reserved out of its authorized and unissued Common Stock, solely for the purpose of issuing the Closing Shares. 
  
 6.8 Intentionally Omitted. 
  
 6.9 Good Standing Certificates. The Company shall have delivered to the Purchaser a certificate evidencing the incorporation and
good standing of the Company and each Subsidiary in such entity’s state of incorporation or organization issued by the Secretary of State of such state of incorporation or organization as of the Closing Date. 
  
 6.10 Secretary’s Certificate. The Company shall
have delivered to the Purchaser a secretary’s certificate, dated as of the Closing Date, certifying as to (A) the Resolutions, (B) the Charter, certified as of the Closing Date, by the Secretary of State of the State of Massachusetts
and (C) the Bylaws, each as in effect at the Closing. 
  
 6.11 Filings. The Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance of the Securities pursuant to this Agreement in compliance with
such laws. 
  
 6.12 Security Agreement.
The Company shall have delivered to the Purchaser an executed copy of the Amendment and Reaffirmation of Security Agreement. 
  
 6.13 Other Transaction Documents. The Company shall have delivered to the Purchaser such other documents relating to the
transactions contemplated by this Agreement as the Purchaser or its counsel may reasonably request, including, without limitation, all documents, instruments and agreements relating to the Canadian component to the transaction contemplated hereby.

  

 18 

 7. COVENANTS OF THE COMPANY AND THE PURCHASER REGARDING INDEMNIFICATION. 
  
 7.1 Company Indemnification. The Company agrees to
indemnify, hold harmless, reimburse and defend the Purchaser, each of the Purchaser’s officers, directors, agents, affiliates, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the Purchaser which results, arises out of or is based upon the negotiation, execution or performance of this Agreement including but not limited to (i) any
misrepresentation by Company or breach of any warranty by Company in this Agreement or in any exhibits or schedules attached hereto or any Transaction Document, or (ii) any breach or default in performance by Company of any covenant or
undertaking to be performed by Company hereunder, or any other agreement entered into by the Company and the Purchaser relating hereto. 
  
 7.2 Purchaser’s Indemnification. The Purchaser agrees to indemnify, hold harmless, reimburse and defend the Company and each
of the Company’s officers, directors, agents, affiliates, control persons and principal shareholders, at all times against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees incurred in the defense
thereof) of any nature, incurred by or imposed upon the Company which results, arises out of or is based upon any breach of the representations of the Purchaser contained in Section 3 of this Agreement. 
  
 7.3 Procedures. Promptly after receipt by an
indemnified party pursuant to the provisions of Section 7.1 or 7.2 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions such indemnified party will, if a claim thereof is to be made
against the indemnifying party pursuant to the provisions of Section 7.1 or 7.2, promptly notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise under this Section except to the extent the defense of the claim is prejudiced. In case such action is brought against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, provided, however, if counsel for the indemnifying party concludes that a single counsel cannot under applicable legal and ethical considerations, represent both the indemnifying party and the indemnified
party, the indemnified party or parties have the right to select separate counsel to participate in the defense of such action on behalf of such indemnified party or parties; provided that there shall be no more than one such separate counsel. After
notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of said Section 7.1 or 7.2 for any
legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless (i) the indemnified party shall have employed counsel in accordance with the
provisions of the preceding sentence, (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement
of the action or (iii) the indemnifying 

  

 19 

 
party has, in its sole discretion, authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. 
  
 7.4 Limitation on Acquisition of Common Stock of the
Company. Notwithstanding anything to the contrary contained in this Agreement, any Transaction Document or any document, instrument or agreement entered into in connection with any other transactions between the Purchaser and the Company, the
Purchaser may not acquire stock in the Company (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 Company, or otherwise, and such contracts, options, warrants, conversion or other rights shall not be enforceable or exercisable) to the extent such stock acquisition
would cause any interest (including any original issue discount) payable by the Company to the Purchaser not to qualify as “portfolio interest” within the meaning of Section 881(c)(2) of 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 the Company upon the existence of an Event of Default (as defined in the Note). 
  
 8. MISCELLANEOUS. 
  
 8.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York; provided, however that the Purchaser may choose to waive
this provision and bring an action outside the state of New York. Both parties and the individuals executing this Agreement and other agreements on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. In
the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any
agreement. 
  
 8.2 Survival. The
representations, warranties, indemnities, agreements, covenants and other statements of the Company made herein shall survive execution of this Agreement and delivery of the Note and the Closing Shares. All statements as to factual matters contained
in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company hereunder solely as of the
date of such certificate or instrument. 
  
 8.3 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be 

  

 20 

 
enforceable by each person who shall be a holder of the Securities from time to time, other than the holders of Common Stock which has been sold by the
Purchaser pursuant to Rule 144 or an effective registration statement. The Purchaser may assign and/or grant participations (in whole or in part) in this Agreement and the other Transaction Documents. 
  
 8.4 Entire Agreement; Survival. This
Agreement, the exhibits and schedules hereto, the other Transaction Documents and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof,
including, but not limited to, the purchase and sale of the Note and the Closing Shares. No party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth
herein and therein. The Purchaser shall not be deemed to have made any representation or warranty to the Company other than as expressly made by the Purchaser in Section 3 hereof. Without limiting the generality of the foregoing, and
notwithstanding any otherwise express representations and warranties made by the Purchaser in Section 3 hereof, the Purchaser makes no representation or warranty to the Company with respect to the timing or the manner in which the
Company’s Common Stock will be sold. Nothing contained in this Agreement, any Transaction Document 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 Company to the Purchaser and thus refunded to the Company. 
  
 8.5 Severability. In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 
  
 8.6 Amendment and Waiver. 
  
 (a) This Agreement may be amended or modified only upon the written consent of the Company and the Purchaser. 
  
 (b) The obligations of the Company and the rights of
the Purchaser under this Agreement may be waived only with the written consent of the Purchaser. 
  
 8.7 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon
any breach, default or non-compliance by another party under this Agreement or the Transaction Documents, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. All remedies, either under this Agreement, the Note or the other Transaction Documents, by law or otherwise afforded to any party, shall be
cumulative and not alternative. 
  
 8.8
Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b)

  

 21 

 
when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after
having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All
communications shall be sent to the Company at the address as set forth on the signature page hereof, with a copy to Thomas B. Rosedale, c/o BRL Law Group LLC, 31 St. James Avenue, Suite #850, Boston, Massachusetts 02116, facsimile number
(617) 399-6930, and to the Purchaser at the address set forth on the signature page hereto for such Purchaser, with a copy in the case of the Purchaser to Scott J. Giordano, Esq., Loeb & Loeb, LLP, 345 Park Avenue, New York, NY 10154,
facsimile number (212) 407-4990, or at such other address as the Company or the Purchaser may designate by ten days advance written notice to the other parties hereto. 
  
 8.9 Titles and Subtitles. The titles of the sections and subsections of the Agreement are for
convenience of reference only and are not to be considered in construing this Agreement. 
  
 8.10 Facsimile Signatures; Counterparts. This Agreement may be executed by facsimile signatures and in any number of counterparts,
each of which shall be an original, but all of which together shall constitute one instrument. 
  
 8.11 Broker’s Fees. Each party hereto represents and warrants that, except as each party may have notified the other in
writing on or prior to the date hereof, no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission
directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this
Section 8.11 being untrue. 
  
 8.12
Construction. Each party acknowledges that its legal counsel participated in the preparation of this Agreement and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be
applied in the interpretation of this Agreement to favor any party against the other. 
  
 [Balance of page intentionally left blank; signature page follows] 
  

 22 

 IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase Agreement as of the
date set forth in the first paragraph hereof. 
  

									
	COMPANY:	 	 	 	PURCHASER:
			
	 STOCKERYALE, INC.
	 	 	 	 LAURUS MASTER FUND, LTD.

					
	 By:
	 	/s/    MARIANNE MOLLEUR         	 	 	 	By:	 	/s/    DAVID GRIN        
	 Name:
	 	Marianne Molleur	 	 	 	 Name:
	 	David Grin
	 Title:
	 	Senior Vice President and Chief Financial Officer	 	 	 	 Title:
	 	Director
	 Address:
	 	 	 	 	 	 Address:
	 	 
	 32 Hampshire Road
 Salem, New Hampshire 03079
	 	 	 	 c/o M&C Corporate Services Limited
 P.O. Box 309 GT, Ugland House, South
 Church Street
 George Town, Grand Cayman
 Cayman Islands

  

 23 

 LIST OF EXHIBITS 
  

			
	 Form of Note
	  	Exhibit A
		
	 Form of Registration Rights Agreement
	  	Exhibit B
		
	 Form of Opinion
	  	Exhibit C

  

 24 

 STOCKERYALE, INC. 
  
 SECURITIES PURCHASE AGREEMENT 
  

December 30, 2005 

 TABLE OF CONTENTS 
  

							
	 	 	 	  	 	  	Page

	1.	 	PURCHASE AND SALE OF NOTE AND CLOSING SHARES	  	1
	 	 	1.1	  	 Purchase of Note and Closing Shares
	  	1
	 	 	1.2	  	 The Closing Date
	  	2
	 	 	1.3	  	 Form of Payment
	  	2
			
	2.	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	  	2
	 	 	2.1	  	 Organization, Good Standing and Qualification
	  	2
	 	 	2.2	  	 Subsidiaries
	  	2
	 	 	2.3	  	 Capitalization; Voting Rights
	  	3
	 	 	2.4	  	 Authorization; Binding Obligations
	  	4
	 	 	2.5	  	 Liabilities
	  	4
	 	 	2.6	  	 Agreements; Action
	  	4
	 	 	2.7	  	 Obligations to Related Parties
	  	5
	 	 	2.8	  	 Changes
	  	5
	 	 	2.9	  	 Title to Properties and Assets; Liens, Etc.
	  	6
	 	 	2.10	  	 Intellectual Property
	  	7
	 	 	2.11	  	 Compliance with Other Instruments
	  	7
	 	 	2.12	  	 Litigation
	  	7
	 	 	2.13	  	 Tax Returns and Payments
	  	8
	 	 	2.14	  	 Employees
	  	8
	 	 	2.15	  	 Registration Rights and Voting Rights
	  	8
	 	 	2.16	  	 Compliance with Laws; Permits
	  	8
	 	 	2.17	  	 Environmental and Safety Laws
	  	9
	 	 	2.18	  	 Valid Offering
	  	9
	 	 	2.19	  	 Full Disclosure
	  	9
	 	 	2.20	  	 Insurance
	  	10
	 	 	2.21	  	 SEC Reports
	  	10
	 	 	2.22	  	 No Market Manipulation
	  	10
	 	 	2.23	  	 Listing
	  	10
	 	 	2.24	  	 No Integrated Offering
	  	10
	 	 	2.25	  	 Stop Transfer
	  	11
	 	 	2.26	  	 Dilution
	  	11
	 	 	2.27	  	 Material Agreements
	  	11
	 	 	2.28	  	 ERISA
	  	11
	 	 	2.29	  	 Solvency
	  	11
	 	 	2.30	  	 Form S-3 Eligibility
	  	11
	 	 	2.31	  	 Patriot Act
	  	12
			
	3.	 	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER	  	12
	 	 	3.1	  	 Requisite Power and Authority
	  	12
	 	 	3.2	  	 Investment Representations
	  	12

							
	 	 	 	  	 	  	Page(s)

	 	 	3.3	  	 Purchaser Bears Economic Risk
	  	13
	 	 	3.4	  	 Acquisition for Own Account
	  	13
	 	 	3.5	  	 Purchaser Can Protect Its Interest
	  	13
	 	 	3.6	  	 Accredited Investor
	  	13
	 	 	3.7	  	 Legends
	  	13
	 	 	3.8	  	 Market Manipulation
	  	13
			
	4.	 	COVENANTS OF THE COMPANY	  	14
	 	 	4.1	  	 Stop-Orders
	  	14
	 	 	4.2	  	 Listing
	  	14
	 	 	4.3	  	 Market Regulations
	  	14
	 	 	4.4	  	 Reporting Requirements
	  	14
	 	 	4.5	  	 Use of Funds
	  	14
	 	 	4.6	  	 Access to Facilities
	  	14
	 	 	4.7	  	 Intentionally Omitted
	  	15
	 	 	4.8	  	 Insurance
	  	15
	 	 	4.9	  	 Intellectual Property; Corporate Existence
	  	15
	 	 	4.10	  	 Financial Information
	  	15
	 	 	4.11	  	 Intentionally Omitted
	  	15
	 	 	4.12	  	 Confidentiality
	  	15
	 	 	4.13	  	 Corporate Existence
	  	15
	 	 	4.14	  	 Reissuance of Securities
	  	16
	 	 	4.15	  	 Priority of Notes
	  	16
	 	 	4.16	  	 Expenses and Other Payments
	  	16
	 	 	4.17	  	 Transfer and Depositary Agent Instructions
	  	16
			
	5.	 	CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL	  	17
	 	 	5.1	  	 Execution
	  	17
	 	 	5.2	  	 Payment
	  	17
	 	 	5.3	  	 Representations and Warranties
	  	17
			
	6.	 	CONDITIONS TO THE PURCHASER’S OBLIGATION TO PURCHASE	  	17
	 	 	6.1	  	 Execution
	  	17
	 	 	6.2	  	 Exchange Listing
	  	17
	 	 	6.3	  	 Representations and Warranties
	  	17
	 	 	6.4	  	 Legal Opinion
	  	18
	 	 	6.5	  	 Delivery of Securities
	  	18
	 	 	6.6	  	 Board Resolutions
	  	18
	 	 	6.7	  	 Reservation of Shares
	  	18
	 	 	6.8	  	 Intentionally Omitted
	  	18
	 	 	6.9	  	 Good Standing Certificates
	  	18
	 	 	6.10	  	 Secretary’s Certificate
	  	18
	 	 	6.11	  	 Filings
	  	18
	 	 	6.12	  	 Security Agreement
	  	18
	 	 	6.13	  	 Other Transaction Documents
	  	18

							
	 	 	 	  	 	  	Page(s)

	7.	 	COVENANTS OF THE COMPANY AND THE PURCHASER REGARDING INDEMNIFICATION	  	19
	 	 	7.1	  	 Company Indemnification
	  	19
	 	 	7.2	  	 Purchaser’s Indemnification
	  	19
	 	 	7.3	  	 Procedures
	  	19
	 	 	7.4	  	 Limitation on Acquisition of Common Stock of the Company
	  	20
			
	8.	 	MISCELLANEOUS	  	20
	 	 	8.1	  	 Governing Law
	  	20
	 	 	8.2	  	 Survival
	  	20
	 	 	8.3	  	 Successors and Assigns
	  	20
	 	 	8.4	  	 Entire Agreement; Survival
	  	21
	 	 	8.5	  	 Severability
	  	21
	 	 	8.6	  	 Amendment and Waiver
	  	21
	 	 	8.7	  	 Delays or Omissions
	  	21
	 	 	8.8	  	 Notices
	  	21
	 	 	8.9	  	 Titles and Subtitles
	  	22
	 	 	8.10	  	 Facsimile Signatures; Counterparts
	  	22
	 	 	8.11	  	 Broker’s Fees
	  	22
	 	 	8.12	  	 Construction
	  	22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}]]