Exhibit 10.3

 

THIS WARRANT AND THE COMMON STOCK ISSUABLE PURUSUANT TO THIS WARRANT HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE
PURSUANT TO THE SECURITIES ACT AND SUCH REGISTRATION STATEMENT REMAINS
EFFECTIVE, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144, OR (III)
COMPANY COUNSEL HAS OPINED THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT.

 

SUBJECT TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL VEST ON
OCTOBER 2, 2017 (THE “VESTING DATE”) AND SHALL EXPIRE ON OCTOBER 16, 2017, AT
5:00 P.M. EASTERN TIME (THE “EXPIRATION DATE”).

 

No. [●]

 

PRECISION OPTICS CORPORATION, INC.

 

WARRANT TO PURCHASE [____] SHARES OF

 

COMMON STOCK, PAR VALUE $0.01 PER SHARE

 

For VALUE RECEIVED, [___] (the “Holder”), is entitled to purchase, subject to
the provisions of this Warrant, from Precision Optics Corporation, Inc., a
Massachusetts corporation (“Company”), at any time not later than 5:00 P.M.,
Eastern time, on the Expiration Date (as defined above), at a variable exercise
price per share as defined in Section 3(b) herein (the exercise price in effect
being herein called the “Warrant Price”), [___] shares (“Warrant Shares”) of the
Company’s common stock, par value $0.01 (“Common Stock”). The number of Warrant
Shares purchasable upon exercise of this Warrant and the Warrant Price shall be
subject to adjustment from time to time as described herein. This Warrant is
being issued pursuant to the Securities Purchase Agreement, dated as of November
22, 2016 (the “Purchase Agreement”), among the Company and the initial holders
of the Company Warrants (as defined in Section 20 of this Warrant). Capitalized
terms used herein have the respective meanings ascribed thereto in the Purchase
Agreement unless otherwise defined herein. The Company may, in its sole
discretion, decrease the Warrant Price or extend the expiration date of this
Warrant.

 

Section 1.       Registration. The Company shall maintain books for the transfer
and registration of this Warrant. Upon the initial issuance of this Warrant, the
Company shall issue and register this Warrant in the name of the Holder.

 

Section 2.       Transfers. As provided herein, this Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act or an
exemption from such registration. Subject to such restrictions, the Company
shall transfer this Warrant from time to time upon the books to be maintained by
the Company for that purpose, upon surrender hereof for transfer, properly
endorsed or accompanied by appropriate instructions for transfer and such other
documents as may be reasonably required by the Company, including, if required
by the Company, an opinion of its counsel to the effect that such transfer is
exempt from the registration requirements of the Securities Act, to establish
that such transfer is being made in accordance with the terms hereof, and a new
Warrant shall be issued to the transferee and the surrendered Warrant shall be
canceled by the Company.

 

Section 3.       Exercise of Warrant. (a) Subject to the provisions hereof, the
Holder may exercise this Warrant, in whole or in part, at any time during the
period from the Vesting Date to the Expiration Date upon surrender of the
Warrant, together with delivery of a duly executed Warrant Exercise Form, in the
form attached hereto as Appendix A (the “Exercise Agreement”), and payment by
cash, certified check or wire transfer of funds of the aggregate Warrant Price
for that number of Warrant Shares then being purchased, to the Company during
normal business hours on any Business Day (as defined below) at the Company’s
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Holder). The Warrant Shares so purchased shall be
deemed to be issued to the Holder or the Holder’s designee, as the record owner
of such shares, as of the close of business on the date on which this Warrant
shall have been surrendered (or the date evidence of loss, theft or destruction
thereof and security or indemnity satisfactory to the Company has been provided
to the Company), the Warrant Price shall have been paid and the completed
Exercise Agreement shall have been delivered. Certificates for the Warrant
Shares so purchased shall be delivered to the Holder within a reasonable time,
not exceeding three (3) Business Days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as may
be requested by the Holder and shall be registered in the name of the Holder or
such other name as shall be designated by the Holder, as specified in the
Exercise Agreement. If this Warrant shall have been exercised only in part,
then, unless this Warrant has expired, the Company shall, at its expense, at the
time of delivery of such certificates, deliver to the Holder a new Warrant
representing the right to purchase the number of shares with respect to which
this Warrant shall not then have been exercised. As used herein, “Business Day”
means a day, other than a Saturday or Sunday, on which banks in the Commonwealth
of Massachusetts are open for the general transaction of business. Each exercise
hereof shall constitute the re-affirmation by the Holder that the
representations and warranties contained in Section 5 of the Purchase Agreement
are true and correct in all material respects with respect to the Holder as of
the time of such exercise.

 

 

 

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(b)        Subject to adjustment pursuant to Section 8, the variable Warrant
Price for which the Warrant may be exercised shall be determined as follows:

 

(i) The Warrant Price shall be $0.40 per share of Common Stock if the Company
achieves both of the following performance criteria:

 

The Company achieves at least $1.85 million of revenue in any one (1) quarter
during the fiscal year ending June 30, 2017 (the “Revenue Criterion”) as
determined under U.S. Generally Accepted Accounting Principles (“GAAP”) and as
shown by the Company’s audited consolidated financial statements on Form 10-K
and its quarterly financial statements on Form 10-Q periodically filed with the
U.S. Securities and Exchange Commission; and

 

The Company achieves positive net income in any two (2) quarters (which quarters
do not have to be successive) during the fiscal year ending June 30, 2017 (the
“Income Criterion”) as determined under GAAP and as shown by the Company’s
audited consolidated financial statements on Form 10-K and its quarterly
financial statements on Form 10-Q periodically filed with the U.S. Securities
and Exchange Commission.

 

The Revenue Criterion and the Income Criterion shall not include revenue from
extraordinary non-recurring events such as proceeds from strategic agreements
that are not tied directly to the delivery of goods and services.

 

(ii) The Warrant price shall be $0.20 per share of Common Stock if the Company
achieves either the Revenue Criterion or the Income Criterion..

 

(iii)       The Warrant Price shall be $0.01 per share of Common Stock if the
Company does not achieve either the Revenue Criterion or the Income Criterion.

 

Section 4.       Compliance with the Securities Act. Except as provided in the
Purchase Agreement, the Company may cause the legend set forth on the first page
of this Warrant to be set forth on each Warrant, and a similar legend on any
security issued or issuable upon exercise of this Warrant, unless counsel for
the Company is of the opinion as to any such security that such legend is
unnecessary.

 

Section 5.       Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the Holder in respect of which such shares are issued,
and in such case, the Company shall not be required to issue or deliver any
certificate for Warrant Shares or any Warrant until the person requesting the
same has paid to the Company the amount of such tax or has established to the
Company’s reasonable satisfaction that such tax has been paid. The Holder shall
be responsible for income taxes due under federal, state or other law, if any
such tax is due.

 

Section 6.       Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon surrender and cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and for the purchase of a like number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond with respect thereto, if
requested by the Company.

 

Section 7.       Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved until issued (if necessary) as contemplated by this Section
7, out of the authorized and unissued shares of Common Stock, sufficient shares
to provide for the exercise of the rights of purchase represented by this
Warrant. The Company agrees that all Warrant Shares issued upon due exercise of
the Warrant in accordance with the terms hereof shall be, at the time of
delivery of the certificates for such Warrant Shares, duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock of the Company.

 

 

 

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Section 8.       Adjustments. Subject and pursuant to the provisions of this
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.

 

(a)       If the Company shall, at any time or from time to time while this
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares of
Common Stock into a smaller number of shares or issue by reclassification of its
outstanding shares of Common Stock any shares of its capital stock, then (i) the
Warrant Price in effect immediately prior to the date on which such change shall
become effective shall be adjusted by multiplying such Warrant Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such change and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after giving
effect to such change and (ii) the number of Warrant Shares purchasable upon
exercise of this Warrant shall be adjusted by multiplying the number of Warrant
Shares purchasable upon exercise of this Warrant immediately prior to the date
on which such change shall become effective by a fraction, the numerator of
which is shall be the Warrant Price in effect immediately prior to the date on
which such change shall become effective and the denominator of which shall be
the Warrant Price in effect immediately after giving effect to such change,
calculated in accordance with clause (i) above. Such adjustments shall be made
successively whenever any event listed above shall occur.

 

(b)       If any capital reorganization, reclassification of the capital stock
of the Company, consolidation or merger of the Company with another corporation
in which the Company is not the survivor, or sale, transfer or other disposition
of all or substantially all of the Company’s assets to another corporation shall
be effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and adequate
provision shall be made whereby each Holder shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions herein
specified and in lieu of the Warrant Shares immediately theretofore issuable
upon exercise of the Warrant, such shares of stock, securities or assets as
would have been issuable or payable with respect to or in exchange for a number
of Warrant Shares equal to the number of Warrant Shares immediately theretofore
issuable upon exercise of the Warrant, had such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of each Holder to the end that the
provisions hereof (including, without limitation, provision for adjustment of
the Warrant Price) shall thereafter be applicable, as nearly equivalent as may
be practicable in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company shall not effect
any such consolidation, merger, sale, transfer or other disposition unless it
complies with the notice provisions of Section 12(b) hereof. For avoidance of
doubt, notice made pursuant to the immediately preceding sentence shall only be
made with respect to public information. The provisions of this paragraph (b)
shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions. Notwithstanding
the foregoing, (i) if the Company enters into an agreement to sell all or
substantially all of the assets of the Company; and (ii) the Warrant has not
vested, then the Holder will not have any rights described in this paragraph
above, but this Warrant becomes exercisable and the Holder may exercise the
Warrant at the Warrant Price as determined on the date the Company enters into a
binding sales agreement. If the Company, on that date, has met, or could still
meet the Revenue Criterion and/or the Income Criterion in the future if it were
to continue as an independent company, then the Revenue Criterion and/or the
Income Criterion will be considered achieved for purposes of determining the
Warrant Price according to section 3b.

 

(c)       An adjustment to the Warrant Price shall become effective immediately
after the payment date in the case of each dividend or distribution and
immediately after the effective date of each other event which requires an
adjustment.

 

(d)       In the event that, as a result of an adjustment made pursuant to this
Section 8, the Holder shall become entitled to receive any shares of capital
stock of the Company other than shares of Common Stock, the number of such other
shares so receivable upon exercise of this Warrant shall be subject thereafter
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
this Warrant.

 

 

 

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Section 9.       Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of this Warrant. If any fractional
share of Common Stock would, except for the provisions of the first sentence of
this Section 9, be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the exercising Holder an amount
in cash equal to the Market Price of such fractional share of Common Stock on
the date of exercise.

 

Section 10.       Vesting and Expiration Date. The Expiration Date of this
Warrant is as set forth on the first page of this Warrant. The Company may, in
its sole discretion, extend the expiration date of this Warrant. If such
extension requires additional consideration or additional transactions, then the
Company undertakes to offer the same terms to all Holders. The Company may, in
its sole discretion, accelerate the vesting date of the Warrant. However, if the
Company makes this election, the exercise price will be determined according to
the criteria in section 3b evaluated as of the accelerated vesting date and the
Holder will have 14 calendar days after the accelerated vesting date to exercise
the Warrant or the Warrant will expire.

 

Section 11.       Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Holder) any
legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the Holder and
its successors.

 

Section 12.       Dividends and Other Distributions; Notices to Holder of
certain Events.

 

(a)       Upon the happening of any event requiring an adjustment of the Warrant
Price, the Company shall promptly give written notice thereof to the Holder at
the address appearing in the records of the Company, stating the adjusted
Warrant Price and the adjusted number of Warrant Shares resulting from such
event and setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Failure to give such notice to the
Holder or any defect therein shall not affect the legality or validity of the
subject adjustment.

 

(b) In case at any time (i) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or a consolidation or
merger of the Company with, or a sale of all or substantially all of its assets
to, another corporation; or there shall be any voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in any one or more
of such cases, the Company shall give, by first class mail, postage prepaid,
addressed to each Holder at the address of such Holder as shown on the books of
the Company, (A) at least five (5) days’ prior written notice of the date on
which the books of the Company shall close or a record shall be taken for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (B) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
five (5) days’ prior written notice of the date when the same shall take place.
Such notice shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be.

 

Section 13.       Identity of Transfer Agent. The Transfer Agent for the Common
Stock is Computershare, located at 250 Royall Street, Canton, MA 02021.

 

Section 14.       Notices. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given as hereinafter described (a) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (b) if given by telex
or facsimile, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (c) if given by mail, then such notice
shall be deemed given upon the earlier of (i) receipt of such notice by the
recipient or (ii) three (3) days after such notice is deposited in first class
mail, postage prepaid, and (d) if given by an internationally recognized
overnight air courier, then such notice shall be deemed given one (1) Business
Day after delivery to such carrier. All notices shall be addressed as follows:
if to the Holder, at its address as set forth in the Company’s books and records
and, if to the Company, at the address as follows, or at such other address as
the Holder or the Company may designate by ten days’ advance written notice to
the other:

 

If to the Company:

 

Precision Optics Corporation, Inc.

22 East Broadway

Gardner, Massachusetts 01440-3338

Attention: Joseph N. Forkey,

President and Chief Executive Officer

Fax: (978) 630-1487

 

 

 

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With a copy to (which shall not constitute notice):

 

Amy Trombly, Esq.

Trombly Business Law, PC

1314 Main St., Suite 102

Louisville, CO 80027

Fax: (617) 243-0066

 

Section 15.       Registration Rights. The Holder is entitled to the benefit of
certain registration rights with respect to the shares of Common Stock issuable
upon the exercise of this Warrant as provided in the Registration Rights
Agreement dated as of the same date as this Agreement (the “Registration Rights
Agreement”), among the Company and the initial holders of the Company Warrants.

 

Section 16.       Successors. All the covenants and provisions hereof by or for
the benefit of the Holder, including without limitation all rights under the
Registration Rights Agreement, shall bind and inure to the benefit of Holder’s
respective successors and assigns.

 

Section 17.       Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
This Warrant shall be governed by, and construed in accordance with, the
internal laws of the State of New York applicable to agreements made and to be
performed entirely within the State of New York. The Company and, by accepting
this Warrant, the Holder, each irrevocably submits to the exclusive jurisdiction
of the courts of the State of New York located in New York County and the United
States District Court for the Southern District of New York for the purpose of
any suit, action, proceeding or judgment relating to or arising out of this
Warrant and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Warrant. The Company and, by accepting this Warrant, the
Holder, each irrevocably consents to the jurisdiction of any such court in any
such suit, action or proceeding and to the laying of venue in such court. The
Company and, by accepting this Warrant, the Holder, each irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
TO THE EXTENT ALLOWABLE UNDER APPLICABLE LAW, EACH OF THE COMPANY AND, BY ITS
ACCEPTANCE HEREOF, THE HOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY
IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS
BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

Section 18.       No Rights as Stockholder. Prior to the exercise of this
Warrant, the Holder shall not have or exercise any rights as a stockholder of
the Company by virtue of its ownership of this Warrant.

 

Section 19.       Amendment; Waiver. This Warrant is one of a series of Warrants
of like tenor issued by the Company pursuant to the Purchase Agreement and
initially covering an aggregate of [___] shares of Common Stock (collectively,
the “Company Warrants”). Any term of this Warrant may be amended or waived
(including the adjustment provisions included in Section 8 hereof) upon the
written consent of the Company and the holders of Company Warrants representing
more than fifty (50) percent of the number of shares of Common Stock then
subject to all outstanding Company Warrants provided, however, that any such
amendment or waiver must apply to all Company Warrants.

 

Section 20.       Section Headings. The section headings in this Warrant are for
the convenience of the Company and the Holder and in no way alter, modify,
amend, limit or restrict the provisions hereof.

 

[Signature page follows.]

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as
of the ___ day of November, 2016.

 

  PRECISION OPTICS CORPORATION, INC.               By: /s/ Joseph N. Forkey  
Name: Joseph N. Forkey   Title: President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

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APPENDIX A

 

PRECISION OPTICS CORPORATION, INC.

 

WARRANT EXERCISE FORM

 

 

To Precision Optics Corporation, Inc.:

 

 

PORTION OF WARRANT BEING EXERCISED:

 

    Entire Warrant ☐                   _________ Warrant Shares    

 

 

ISSUE TO:     (Name)               (Address, including Zip Code)              
(Social Security or Tax Identification Number)         DELIVER TO:     (Name)  
            (Address, including Zip Code)

 

 

In payment of the purchase price with respect to this Warrant exercised, the
undersigned hereby (check applicable box) ☐tenders payment of $___________ by
(i) certified or bank cashier’s check payable to the order of the Company; or
(ii) ☐a wire transfer of such funds to an account designated by the Company.

 

If the number of Warrant Shares hereby exercised is fewer than all the Warrant
Shares represented by this Warrant, the undersigned requests that a new Warrant
representing the number of full Warrant Shares not exercised to be issued and
delivered as set forth below:

 

 

Name of Holder or Assignee:     (Please Print)         Address, including Zip
Code:              

 

 

 

 

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The Warrant Shares shall be delivered to the following DWAC Account Number:

 

 

_______________________________

 

 

_______________________________

 

 

Name of Holder:
______________________________________________________________________

 

Signature of Authorized Signatory of Holder:
_______________________________________________

 

Name of Authorized Signatory:
__________________________________________________________

 

Title of Authorized Signatory:
___________________________________________________________

 

Date:
_______________________________________________________________________________

 

 

 

 

 

 

 

 

 

 

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