STOCKERYALE INC
FORM OF STOCK PURCHASE WARRANT
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>7
<FILENAME>warrant.htm
<DESCRIPTION>FORM OF STOCK PURCHASE WARRANT
<TEXT>
<HTML>
<HEAD>
<TITLE>Form of Stock Purchase Warrant</TITLE>
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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>THIS WARRANT AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO STOCKERYALE, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED. </FONT></P>

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<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
Right
to Purchase 400,000 Shares of Common Stock of StockerYale, Inc. (subject to adjustment as
provided herein) </FONT></TD>
</TR>
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<BR>

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<H1 ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>COMMON STOCK PURCHASE
WARRANT </FONT></H1>

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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>No.&nbsp;&nbsp;&nbsp;&nbsp;
          2003-1 Issue Date: June 10, 2004</FONT></P>


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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;STOCKERYALE,
INC., a corporation organized under the laws of the State of Massachusetts (the
"Company"), hereby certifies that, for value received, LAURUS MASTER FUND, LTD.,
or assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company from and after the Issue Date of this Warrant and at any time or
from time to time before 5:00 p.m., New York time, through seven (7) years after such date
(the "Expiration Date"), up to 400,000 fully paid and nonassessable shares of
Common Stock (as hereinafter defined), $.001 par value, of the Company, at the Exercise
Price (as defined below). The number and character of such shares of Common Stock and the
Exercise Price are subject to adjustment as provided herein. </FONT></P>

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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
used herein the following terms, unless the context otherwise requires, have the following
respective meanings: (a) The term "Company" shall include StockerYale, Inc. and
any corporation which shall succeed or assume the obligations of StockerYale, Inc.
hereunder. </FONT></P>

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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;
          The term "Common Stock" includes (a) the Company's Common Stock,
          par value $.001 per share, and (b) any other securities into which or for which
          any of the securities described in (a) may be converted or exchanged pursuant to
          a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
          (c) The term "Other Securities" refers to any stock (other than Common
          Stock) and other securities of the Company or any other person (corporate or
          otherwise) which the holder of the Warrant at any time shall be entitled to
          receive, or shall have received, on the exercise of the Warrant, in lieu of or
          in addition to Common Stock, or which at any time shall be issuable or shall
          have been issued in exchange for or in replacement of Common Stock or Other
          Securities pursuant to Section 4 or otherwise.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;
          The term "Exercise Price" shall be as follows:</FONT></P>


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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;400,000
shares at $3.12 per share. </FONT></P>

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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>2.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Exercise of Warrant</B>.</FONT></P>


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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2.1 <U>Number of Shares Issuable upon
Exercise</U>. From and after the date hereof through and including the Expiration Date,
the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in
part, by delivery of an original or fax copy of the exercise notice attached hereto as
Exhibit A (the "Exercise Notice"), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4. </FONT></P>

<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>2.2 <U>Fair Market Value</U>. Fair Market
Value of a share of Common Stock as of a particular date (the "Determination
Date") shall mean: </FONT></P>

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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;
          If the Company's Common Stock is traded on an exchange or is quoted on the
          National or SmallCap Market of The Nasdaq Stock Market,
          Inc.("Nasdaq"), then the closing or last sale price, respectively,
          reported for the last business day immediately preceding the Determination Date.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;
          If the Company's Common Stock is not traded on an exchange or on the Nasdaq
          but is traded on the NASD OTC Bulletin Board or BBX Exchange, then the mean of
          the average of the closing bid and asked prices reported for the last business
          day immediately preceding the Determination Date.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;
          Except as provided in clause (d) below, if the Company's Common Stock is
          not publicly traded, then as the Holder and the Company agree or in the absence
          of agreement by arbitration in accordance with the rules then in effect of the
          American Arbitration Association, before a single arbitrator to be chosen from a
          panel of persons qualified by education and training to pass on the matter to be
          decided.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;
          If the Determination Date is the date of a liquidation, dissolution or winding
          up, or any event deemed to be a liquidation, dissolution or winding up pursuant
          to the Company's charter, then all amounts to be payable per share to
          holders of the Common Stock pursuant to the charter in the event of such
          liquidation, dissolution or winding up, plus all other amounts to be payable per
          share in respect of the Common Stock in liquidation under the charter, assuming
          for the purposes of this clause (d) that all of the shares of Common Stock then
          issuable upon exercise of the Warrant are outstanding at the Determination Date.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>3.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Procedure for Exercise</B>.</FONT></P>


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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>3.1 <U>Delivery of Stock Certificates,
etc. on Exercise</U>. The Company agrees that the shares of Common Stock purchased upon
exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of
such shares as of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as practicable after
the exercise of this Warrant in full or in part, and in any event within 3 business days
thereafter, the Company at its expense (including the payment by it of any applicable
issue taxes) will cause to be issued in the name of and delivered to the Holder, or as
such Holder (upon payment by such holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for the number
of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any
fractional share to which such holder would otherwise be entitled, cash equal to such
fraction multiplied by the then Fair Market Value of one full share, together with any
other stock or other securities and property (including cash, where applicable) to which
such Holder is entitled upon such exercise pursuant to Section 1 or otherwise. </FONT></P>

<font face="Arial, Helvetica, Sans-Serif" size="2">3.2      Exercise.
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     </font>
     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;
          Payment may be made either in (i) cash or by certified or official bank check
          payable to the order of the Company equal to the applicable aggregate Exercise
          Price, (ii) by delivery of the Warrant, Common Stock and/or Common Stock
          receivable upon exercise of the Warrant in accordance with Section (b) below, or
          (iii) by a combination of any of the foregoing methods, for the number of Common
          Shares specified in such form (as such exercise number shall be adjusted to
          reflect any adjustment in the total number of shares of Common Stock issuable to
          the holder per the terms of this Warrant) and the Holder shall thereupon be
          entitled to receive the number of duly authorized, validly issued, fully-paid
          and non-assessable shares of Common Stock (or Other Securities) determined as
          provided herein.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;
          Notwithstanding any provisions herein to the contrary, if the Fair Market Value
          of one share of Common Stock is greater than the Exercise Price (at the date of
          calculation as set forth below), in lieu of exercising this Warrant for cash,
          the Holder may elect to receive shares equal to the value (as determined below)
          of this Warrant (or the portion thereof being exercised) by surrender of this
          Warrant at the principal office of the Company together with the properly
          endorsed Exercise Notice in which event the Company shall issue to the Holder a
          number of shares of Common Stock computed using the following formula:</FONT></P>


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<div style="text-indent: 5%">
<font face="Arial, Helvetica, Sans-Serif" size="2">X=Y <u>(A-B) </u> </font></div>
<div style="text-indent: 8%">
<font face="Arial, Helvetica, Sans-Serif" size="2"> A <br>
&nbsp; </font>

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    <td width="6%"><font size="2" face="Arial, Helvetica, Sans-Serif">Where </font></td>
    <td width="5%"><font size="2" face="Arial, Helvetica, Sans-Serif">X=</font></td>
    <td width="89%">
    <p style="text-indent: 0">
    <font size="2" face="Arial, Helvetica, Sans-Serif">the number of shares of Common Stock to be
    issued to the Holder </font>
    </td>
  </tr>
  <tr>
    <td width="6%">&nbsp;</td>
    <td width="5%"><font size="2" face="Arial, Helvetica, Sans-Serif">Y=</font></td>
    <td width="89%">
    <p style="text-indent: 0"><FONT SIZE=2 face="Arial, Helvetica, Sans-Serif">
the number of shares of Common Stock purchasable under the Warrant or, if only a portion
of the Warrant is being exercised, the portion of the Warrant being exercised (at the date
of such calculation)</FONT></td>
  </tr>
  <tr>
    <td width="6%">&nbsp;</td>
    <td width="5%"><font size="2" face="Arial, Helvetica, Sans-Serif">A=</font></td>
    <td width="89%">
    <p style="text-indent: 0"><FONT SIZE=2 face="Arial, Helvetica, Sans-Serif">
the Fair Market Value of one share of the Company's Common Stock (at the date of such
calculation)</FONT></td>
  </tr>
  <tr>
    <td width="6%">&nbsp;</td>
    <td width="5%"><font size="2" face="Arial, Helvetica, Sans-Serif">B=</font></td>
    <td width="89%">
<p style="text-indent: 0">
<font size="2" face="Arial, Helvetica, Sans-Serif">
    Exercise Price (as adjusted to the date of such calculation)
</font>
    </td>
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<p>
<font face="Arial, Helvetica, Sans-Serif" size="2">
4. Effect of Reorganization, etc.; Adjustment of Exercise Price.
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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>4.1 <U>Reorganization, Consolidation,
Merger, etc.</U> In case at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or (c) transfer all
or substantially all of its properties or assets to any other person under any plan or
arrangement contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate provision shall
be made by the Company whereby the Holder of this Warrant, on the exercise hereof as
provided in Section 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case may be,
shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise
prior to such consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such Holder
had so exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4. 4.2 <U>Dissolution</U>. In the event of
any dissolution of the Company following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution, shall at its expense deliver
or cause to be delivered the stock and other securities and property (including cash,
where applicable) receivable by the Holder of the Warrant after the effective date of such
dissolution pursuant to Section 3.1 to a bank or trust company having its principal office
in New York, NY, as trustee for the Holder of the Warrant. 4.3 <U>Continuation of
Terms</U>. Upon any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3, this Warrant shall continue in full
force and effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the consummation
of such reorganization, consolidation or merger or the effective date of dissolution
following any such transfer, as the case may be, and shall be binding upon the issuer of
any such stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the Company,
whether or not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force and
effect after the consummation of the transactions described in this Section 3, then only
in such event will the Company's securities and property (including cash, where
applicable) receivable by the holders of the Warrant be delivered to the Trustee as
contemplated by Section 3.2. </FONT></P>

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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>5.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Extraordinary Events Regarding Common Stock</B>. In the event that the
          Company shall (a) issue additional shares of the Common Stock as a dividend or
          other distribution on outstanding Common Stock, (b) subdivide its outstanding
          shares of Common Stock, or (c) combine its outstanding shares of the Common
          Stock into a smaller number of shares of the Common Stock, then, in each such
          event, the Exercise Price shall, simultaneously with the happening of such
          event, be adjusted by multiplying the then Exercise Price by a fraction, the
          numerator of which shall be the number of shares of Common Stock outstanding
          immediately prior to such event and the denominator of which shall be the number
          of shares of Common Stock outstanding immediately after such event, and the
          product so obtained shall thereafter be the Exercise Price then in effect. The
          Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
          happening of any successive event or events described herein in this Section 4.
          The number of shares of Common Stock that the holder of this Warrant shall
          thereafter, on the exercise hereof as provided in Section 1, be entitled to
          receive shall be increased to a number determined by multiplying the number of
          shares of Common Stock that would otherwise (but for the provisions of this
          Section 4) be issuable on such exercise by a fraction of which (a) the numerator
          is the Exercise Price that would otherwise (but for the provisions of this
          Section 4) be in effect, and (b) the denominator is the Exercise Price in effect
          on the date of such exercise.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>6.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Certificate as to Adjustments</B>. In each case of any adjustment or
          readjustment in the shares of Common Stock (or Other Securities) issuable on the
          exercise of the Warrant, the Company at its expense will promptly cause its
          Chief Financial Officer or other appropriate designee to compute such adjustment
          or readjustment in accordance with the terms of the Warrant and prepare a
          certificate setting forth such adjustment or readjustment and showing in detail
          the facts upon which such adjustment or readjustment is based, including a
          statement of (a) the consideration received or receivable by the Company for any
          additional shares of Common Stock (or Other Securities) issued or sold or deemed
          to have been issued or sold, (b) the number of shares of Common Stock (or Other
          Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
          and the number of shares of Common Stock to be received upon exercise of this
          Warrant, in effect immediately prior to such adjustment or readjustment and as
          adjusted or readjusted as provided in this Warrant. The Company will forthwith
          mail a copy of each such certificate to the holder of the Warrant and any
          Warrant agent of the Company (appointed pursuant to Section 11 hereof).</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>7.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Reservation of Stock, etc. Issuable on Exercise of Warrant</B>. The Company
          will at all times reserve and keep available, solely for issuance and delivery
          on the exercise of the Warrant, shares of Common Stock (or Other Securities)
          from time to time issuable on the exercise of the Warrant.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>8.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Assignment; Exchange of Warrant</B>. Subject to compliance with applicable
          securities laws, this Warrant, and the rights evidenced hereby, may be
          transferred by any registered holder hereof (a "Transferor") with
          respect to any or all of the Shares. On the surrender for exchange of this
          Warrant, with the Transferor's endorsement in the form of Exhibit B
          attached hereto (the "Transferor Endorsement Form") and together with
          evidence reasonably satisfactory to the Company demonstrating compliance with
          applicable securities laws, which shall include, without limitation, a legal
          opinion from the Transferor's counsel that such transfer is exempt from the
          registration requirements of applicable securities laws, the Company at its
          expense but with payment by the Transferor of any applicable transfer taxes)
          will issue and deliver to or on the order of the Transferor thereof a new
          Warrant of like tenor, in the name of the Transferor and/or the transferee(s)
          specified in such Transferor Endorsement Form (each a "Transferee"),
          calling in the aggregate on the face or faces thereof for the number of shares
          of Common Stock called for on the face or faces of the Warrant so surrendered by
          the Transferor. <B>9.</B> <B>Replacement of Warrant</B>. On receipt of evidence
          reasonably satisfactory to the Company of the loss, theft, destruction or
          mutilation of this Warrant and, in the case of any such loss, theft or
          destruction of this Warrant, on delivery of an indemnity agreement or security
          reasonably satisfactory in form and amount to the Company or, in the case of any
          such mutilation, on surrender and cancellation of this Warrant, the Company at
          its expense will execute and deliver, in lieu thereof, a new Warrant of like
          tenor.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>10.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Registration Rights</B>. The Holder of this Warrant has been granted certain
          registration rights by the Company. These registration rights are set forth in a
          Registration Rights Agreement entered into by the Company and Purchaser of the
          Company's Convertible Note (the "Note") at or prior to the issue
          date of this Warrant. <B>11.</B> <B>Maximum Exercise</B>. The Holder shall not
          be entitled to exercise this Warrant on an exercise date, in connection with
          that number of shares of Common Stock which would be in excess of the sum of (i)
          the number of shares of Common Stock beneficially owned by the Holder and its
          affiliates on an exercise date, and (ii) the number of shares of Common Stock
          issuable upon the exercise of this Warrant with respect to which the
          determination of this proviso is being made on an exercise date, which would
          result in beneficial ownership by the Holder and its affiliates of more than
          4.99% of the outstanding shares of Common Stock of the Company on such date. For
          the purposes of the proviso to the immediately preceding sentence, beneficial
          ownership shall be determined in accordance with Section 13(d) of the Securities
          Exchange Act of 1934, as amended, and Rule 13d-3 thereunder. Subject to the
          foregoing, the Holder shall not be limited to aggregate exercises which would
          result in the issuance of more than 4.99%. The restriction described in this
          paragraph may be revoked upon 75 days prior notice from the Holder to the
          Company and is automatically null and void upon an Event of Default under the
          Note. Notwithstanding the foregoing, to the extent required by the Nasdaq
          Marketplace Rules, at no time may the Holder exercise all or part of this
          Warrant to acquire a number of shares of Common Stock that, together with any
          shares of Common Stock acquired upon conversion of all or any part of the Note
          or the interest payable thereon, would in the aggregate exceed 19.99% of the
          outstanding shares of the Company's Common Stock, determined as of the date
          hereof, without first obtaining stockholder approval of such issuance of Common
          Stock (the "Conversion Limitations"). In obtaining stockholder
          approval, stockholders shall not be entitled to vote shares of Common Stock
          acquired upon exercise of this Warrant and/or conversion of the Note on such
          matter. In the event such approval is so required, then the Company shall (i)
          within fifteen (15) days following notice by the Holder to convert an amount in
          excess of the Conversion Limitations file proxy materials relating to such
          stockholder approval with the Securities and Exchange Commission and (ii) use
          its best efforts to obtain as promptly as possible such stockholder approval.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>12.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Warrant Agent</B>. The Company may, by written notice to the each holder of
          the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
          Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
          this Warrant pursuant to Section 7, and replacing this Warrant pursuant to
          Section 8, or any of the foregoing, and thereafter any such issuance, exchange
          or replacement, as the case may be, shall be made at such office by such agent.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>13.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Transfer on the Company's Books</B>. Until this Warrant is transferred
          on the books of the Company, the Company may treat the registered holder hereof
          as the absolute owner hereof for all purposes, notwithstanding any notice to the
          contrary.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>14.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Notices, etc</B>. All notices and other communications from the Company to
          the Holder of this Warrant shall be mailed by first class registered or
          certified mail, postage prepaid, at such address as may have been furnished to
          the Company in writing by such holder or, until any such Holder furnishes to the
          Company an address, then to, and at the address of, the last Holder of this
          Warrant who has so furnished an address to the Company. <B>15.</B> <B>Voluntary
          Adjustment by the Company</B>. The Company may at any time during the term of
          this Warrant reduce the then current Exercise Price to any amount and for any
          period of time deemed appropriate by the Board of Directors of the Company.</FONT></P>


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     <P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><B>16.</B>&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Miscellaneous</B>. This Warrant and any term hereof may be changed, waived,
          discharged or terminated only by an instrument in writing signed by the party
          against which enforcement of such change, waiver, discharge or termination is
          sought. This Warrant shall be governed by and construed in accordance with the
          laws of State of New York without regard to principles of conflicts of laws. Any
          action brought concerning the transactions contemplated by this Warrant 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 Holder may choose to waive
          this provision and bring an action outside the state of New York. The
          individuals executing this Warrant on behalf of the Company agree to submit to
          the jurisdiction of such courts and waive trial by jury. The prevailing party
          shall be entitled to recover from the other party its reasonable attorney's
          fees and costs. In the event that any provision of this Warrant 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 this Warrant.
          The headings in this Warrant are for purposes of reference only, and shall not
          limit or otherwise affect any of the terms hereof. The invalidity or
          unenforceability of any provision hereof shall in no way affect the validity or
          enforceability of any other provision. The Company acknowledges that legal
          counsel participated in the preparation of this Warrant 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
          Warrant to favor any party against the other party.</FONT></P>


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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the Company has executed this Warrant under seal as of the date first
written above. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT></P>


<p style="text-indent:40%"><font size=2 face="Arial, Helvetica, Sans-Serif">
            STOCKERYALE, INC. </font></p>
<p style="text-indent: 40%"><font face="Arial, Helvetica, Sans-Serif" size="2">By: </font>
<u><font face="Arial, Helvetica, Sans-Serif" size="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</font></u></p>

<p><font size=2 face="Arial, Helvetica, Sans-Serif">Witness: </font></p>

  <p><font size=2 face="Arial, Helvetica, Sans-Serif">______________________________________</font></p>


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     <HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE>


<PAGE>



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<H1 ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Exhibit A </FONT></H1>

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<P ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>FORM OF SUBSCRIPTION </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-Arial" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(To be signed only on
exercise of Warrant) </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-Arial" FSL="Project" -->
<P ALIGN=LEFT><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>TO: StockerYale, Inc. </FONT></P>

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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>The undersigned, pursuant to the
provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to
purchase (check applicable box): </FONT></P>

<font face="Arial, Helvetica, Sans-Serif" size="2">___&nbsp;&nbsp;&nbsp;
________ shares of the Common Stock covered by such Warrant; or

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</font>
<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>___&nbsp;&nbsp;&nbsp;&nbsp;
________ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2. </FONT></P>

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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>The undersigned herewith makes payment
of the full Exercise Price for such shares at the price per share provided for in such
Warrant, which is $___________. Such payment takes the form of (check applicable box or
boxes): </FONT></P>

<font face="Arial, Helvetica, Sans-Serif" size="2">___&nbsp;&nbsp;&nbsp;&nbsp; $__________ in lawful money of the United States; and/or

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</font>
<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>___&nbsp;&nbsp;&nbsp;&nbsp; the cancellation of such portion
of the attached Warrant as is exercisable for a total of _______ shares of Common Stock
(using a Fair Market Value of $_______ per share for purposes of this calculation); and/or </FONT></P>

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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>___&nbsp;&nbsp;&nbsp;&nbsp; the cancellation of such number of
shares of Common Stock as is necessary, in accordance with the formula set forth in
Section 2, to exercise this Warrant with respect to the maximum number of shares of Common
Stock purchaseable pursuant to the cashless exercise procedure set forth in Section 2. </FONT></P>

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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>The undersigned requests that the
certificates for such shares be issued in the name of, and delivered to
____________________ whose address is ______________________________ </FONT></P>



<P><font face="Arial, Helvetica, Sans-Serif" size="2">____________________________________________________________________________.</font></P>


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<P><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>The undersigned represents and
warrants that all offers and sales by the undersigned of the securities issuable upon
exercise of the within Warrant shall be made pursuant to registration of the Common Stock
under the Securities Act of 1933, as amended (the "Securities Act") or pursuant
to an exemption from registration under the Securities Act. </FONT></P>

<font face="Arial, Helvetica, Sans-Serif" size="2">Dated:___________________&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; _______________________________________
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</font>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>&nbsp;</TD>
<TD WIDTH=85%><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;
(Signature
must conform to name of holder as specified on the face of the Warrant) </FONT></TD>
</TR>
</TABLE>
&nbsp;<HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE>

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<PAGE>



<!-- MARKER FORMAT-SHEET="Head Right-Arial" FSL="Project" -->
<P ALIGN=center><b><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>Exhibit B </FONT>
</b></P>

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<P ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>FORM OF TRANSFEROR
ENDORSEMENT </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-Arial" FSL="Project" -->
<P ALIGN=CENTER><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>(To be signed only on
transfer of Warrant) </FONT></P>

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<p style="text-indent: 2%"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE=2>
For value received, the undersigned hereby sells, assigns, and transfers unto the person(s)
named below under the heading "Transferees" the right represented by the within Warrant to
purchase the percentage and number of shares of Common Stock of StockerYale, Inc. to which
the within Warrant relates specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its
respective right on the books of StockerYale, Inc. with full power of substitution in the premises. </font></p>
<table cellspacing="0" cellpadding="0" width="100%" border="0" style="border-collapse: collapse">
  <tr>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">Transferees
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">Percentage Transferred
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">Number Transferred
    </font> </p></td>
  </tr>
  <tr>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
  </tr>
  <tr>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
  </tr>
  <tr>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
  </tr>
  <tr>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
    <td width="213" valign="top" class="style1"><p>
    <font face="Arial, Helvetica, Sans-Serif" size="2">&nbsp;
    </font> </p></td>
  </tr>
</table>



<p><font size=2 face="Arial, Helvetica, Sans-Serif">Dated:___________________ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;____________________________________________________________________ </font></p>
<p style="text-indent: 50%"><font face="Arial, Helvetica, Sans-Serif" size="2">(Signature must conform to name of holder as specified on the face of the Warrant)
</font> </p>


<p><font face="Arial, Helvetica, Sans-Serif" size="2">Signed in the presence of: ______________________________ <br>
(Name) ______________________________________________ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>
(Address) ____________________________________________ <br>
(City, State, Zip)_______________________________________</font></p>
<p><font face="Arial, Helvetica, Sans-Serif" size="2">ACCEPTED AND AGREED:
</font> </p>
<p><font face="Arial, Helvetica, Sans-Serif" size="2">[TRANSFEREE] _______________________________________ <br>
(Name) _______________________________________________ <br>
(Address) _____________________________________________ <br>
(City, State, Zip)_______________________________________</font></p>




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