EXHIBIT
      4.1

    REGISTRATION
      RIGHTS AGREEMENT

    


    This
      Registration Rights Agreement (the “Agreement”) is made and entered into as of
      this 25th day of June, 2008 by and among Precision Optics Corporation, Inc.,
      a
      Massachusetts corporation (the “Company”), and the “Investors” named in that
      certain Purchase Agreement by and among the Company and the Investors (the
      “Purchase Agreement”). Capitalized terms used herein have the respective
      meanings ascribed thereto in the Purchase Agreement unless otherwise defined
      herein.

     

    The
      parties hereby agree as follows:

     

    1. Certain
      Definitions.

     

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    “Antidilution
      Shares”
means
      additional shares of Common Stock that may become issuable in accordance with
      the terms of any securities of the Company outstanding as of the Closing Date
      solely as a result of the transactions contemplated by the Purchase
      Agreement.

     

    “Common
      Stock”
means
      the Company’s common stock, par value $0.01 per share, and any securities into
      which such shares may hereinafter be reclassified.

     

    “Conversion
      Shares”
means
      the shares of Common Stock issuable at the given time upon conversion of the
      Notes.

     

    “Interest
      Shares”
means
      the shares of Common Stock issuable in lieu of cash interest on the
      Notes.

     

    “Investors”
means
      the Investors identified in the Purchase Agreement and any Affiliate or
      permitted transferee of any Investor who is a subsequent holder of any Warrants
      or Registrable Securities.

     

    “Notes”
means
      the 10% Senior Secured Convertible Notes issued by the Company to the Investors
      pursuant to the Purchase Agreement, the form of which is attached to the
      Purchase Agreement as Exhibit
      A.

     

    “Prospectus”
means
      (i) the prospectus included in any Registration Statement, as amended or
      supplemented by any prospectus supplement, with respect to the terms of the
      offering of any portion of the Registrable Securities covered by such
      Registration Statement and by all other amendments and supplements to the
      prospectus, including post-effective amendments and all material incorporated
      by
      reference in such prospectus, and (ii) any “free writing prospectus” as defined
      in Rule 405 under the 1933 Act.

     

    “Register,”
      “registered”
and
      “registration”
refer
      to a registration made by preparing and filing a Registration Statement or
      similar document in compliance with the 1933 Act (as defined below) which is
      declared effective by the SEC.

     

    “Registrable
      Securities”
means
      (i) the Conversion Shares, (ii) the Interest Shares, (iii) the Warrant Shares
      and (iv) any other securities issued or issuable with respect to or in exchange
      for Registrable Securities; provided, that, a security shall cease to be a
      Registrable Security upon (A) sale pursuant to a Registration Statement or
      Rule
      144 under the 1933 Act, or (B) such security becoming eligible for sale without
      restriction by the Investors pursuant to Rule 144.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Registration
      Statement”
shall
      mean any registration statement of the Company filed under the 1933 Act that
      covers the resale of any of the Registrable Securities pursuant to the
      provisions of this Agreement, amendments and supplements to such Registration
      Statement, including post-effective amendments, all exhibits and all material
      incorporated by reference in such Registration Statement.

     

    “Required
      Investors”
means
      the Investors holding a majority of the Registrable Securities.

     

    “SEC”
means
      the U.S. Securities and Exchange Commission.

     

    “SSF”
means
      the Investors affiliated with AWM Investment Company, Inc.

     

    “1933
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    “1934
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Warrants”
means,
      the warrants to purchase shares of Common Stock issued to the Investors pursuant
      to the Purchase Agreement, the form of which is attached to the Purchase
      Agreement as Exhibit
      B.

     

    “Warrant
      Shares”
means
      the shares of Common Stock issuable upon the exercise of the
      Warrants.

     

    2. Registration.

     

    (a)  Registration
      Statements.

     

    (i) No
      later
      than the earlier of (i) two (2) Business Days after the Amendment Effective
      Date
      and (ii) December 15, 2008 (the earlier of such dates, the “Filing Deadline”),
      the Company shall prepare and file with the SEC one Registration Statement
      on
      Form S-1 (or, if Form S-1 is not then available to the Company, on such form
      of
      registration statement as is then available to the Company to effect a
      registration for resale of the Registrable Securities), covering the resale
      of
      the Registrable Securities in an amount at least equal to the Conversion Shares,
      the Interest Shares (assuming that all interest on the Notes is paid in Interest
      Shares) and the Warrant Shares. Subject to any SEC comments, such Registration
      Statement shall include the plan of distribution substantially in the form
      attached hereto as Exhibit
      A;
      provided, however, that no Investor shall be named as an “underwriter” in the
      Registration Statement without the Investor’s prior written consent. Such
      Registration Statement also shall cover, to the extent allowable under the
      1933
      Act and the rules promulgated thereunder (including Rule 416), such
      indeterminate number of additional shares of Common Stock resulting from stock
      splits, stock dividends or similar transactions with respect to the Registrable
      Securities. Such Registration Statement shall not include any shares of Common
      Stock or other securities for the account of any other holder without the prior
      written consent of the Required Investors; provided, however, that the
      Registration Statement may include the Antidilution Shares. The Registration
      Statement (and each amendment or supplement thereto, and each request for
      acceleration of effectiveness thereof) shall be provided in accordance with
      Section 3(c) to the Investors and their counsel prior to its filing or other
      submission. If a Registration Statement covering the Registrable Securities
      is
      not filed with the SEC on or prior to the Filing Deadline, the Company will
      make
      pro rata payments to each Investor, as liquidated damages and not as a penalty,
      in an amount equal to 1.0% of the aggregate amount invested by such Investor
      for
      each 30-day period or pro rata for any portion thereof following the Filing
      Deadline for which no Registration Statement is filed with respect to the
      Registrable Securities. Such payments shall constitute the Investors’ exclusive
      monetary remedy for such events, but shall not affect the right of the Investors
      to seek injunctive relief. Such payments shall be made to each Investor in
      cash.


     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    (ii) Additional
      Registrable Securities.
      At any
      time after the Amendment Effective Date, upon the written demand of any Investor
      and upon any change in the Conversion Price (as defined in the Notes) or in
      the
      Warrant Price (as defined in the Warrant) such that additional shares of Common
      Stock become issuable upon the due conversion of the Notes or the due exercise
      of the Warrants (the “Additional Shares”), the Company shall prepare and file
      with the SEC one or more Registration Statements on Form S-1 or amend the
      Registration Statement filed pursuant to clause (i) above, if such Registration
      Statement has not previously been declared effective (or, if Form S-1 is not
      then available to the Company, on such form of registration statement as is
      then
      available to the Company to effect a registration for resale of the Additional
      Shares) covering the resale of the Additional Shares, but only to the extent
      the
      Additional Shares are not at the time covered by an effective Registration
      Statement. Subject to any SEC comments, such Registration Statement shall
      include the plan of distribution substantially in the form attached hereto
      as
Exhibit
      A;
      provided, however, that no Investor shall be named as an “underwriter” in the
      Registration Statement without the Investor’s prior written consent. Such
      Registration Statement also shall cover, to the extent allowable under the
      1933
      Act and the rules promulgated thereunder (including Rule 416), such
      indeterminate number of additional shares of Common Stock resulting from stock
      splits, stock dividends or similar transactions with respect to the Additional
      Shares. Such Registration Statement shall not include any shares of Common
      Stock
      or other securities for the account of any other holder without the prior
      written consent of the Required Investors. The Registration Statement (and
      each
      amendment or supplement thereto, and each request for acceleration of
      effectiveness thereof) shall be provided in accordance with Section 3(c) to
      the
      Investors and their counsel prior to its filing or other submission. If a
      Registration Statement covering the Additional Shares is required to be filed
      under this Section 2(a)(ii) and is not filed with the SEC within thirty (30)
      days of the request of any Investor or upon the occurrence of any of the events
      specified in this Section 2(a)(ii), the Company will make pro rata payments
      to
      each Investor, as liquidated damages and not as a penalty, in an amount equal
      to
      1.0% of the aggregate amount invested by such Investor for each 30-day period
      or
      pro rata for any portion thereof following the date by which such Registration
      Statement should have been filed for which no Registration Statement is filed
      with respect to the Additional Shares. Such payments shall constitute the
      Investors’ exclusive monetary remedy for such events, but shall not affect the
      right of the Investors to seek injunctive relief. Such payments shall be made
      to
      each Investor in cash.

     

    (iii) S-3
      Qualification.
      At any
      time after the Amendment Effective Date and promptly following the date (the
      “Qualification Date”) upon which the Company becomes eligible to use a
      registration statement on Form S-3 to register the Registrable Securities or
      Additional Shares, as applicable, for resale, but in no event more than thirty
      (30) days after the Qualification Date (the “Qualification Deadline”), the
      Company shall file a registration statement on Form S-3 covering the Registrable
      Securities or Additional Shares, as applicable (or a post-effective amendment
      on
      Form S-3 to the registration statement on Form S-1) (a “Shelf Registration
      Statement”) and shall use commercially reasonable efforts to cause such Shelf
      Registration Statement to be declared effective as promptly as practicable
      thereafter. If a Shelf Registration Statement covering the Registrable
      Securities is not filed with the SEC on or prior to the Qualification Deadline,
      the Company will make pro rata payments to each Investor, as liquidated damages
      and not as a penalty, in an amount equal to 1.0% of the aggregate purchase
      price
      paid by such Investor pursuant to the Purchase Agreement attributable to those
      Registrable Securities that remain unsold at that time for each 30-day period
      or
      pro rata for any portion thereof following the date by which such Shelf
      Registration Statement should have been filed for which no such Shelf
      Registration Statement is filed with respect to the Registrable Securities
      or
      Additional Shares, as applicable. Such payments shall constitute the Investors’
exclusive monetary remedy for such events, but shall not affect the right of
      the
      Investors to seek injunctive relief. Such payments shall be made to each
      Investor in cash.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    (b)  Expenses.
      Except
      as expressly provided in Section 2(d), the Company will pay all expenses
      associated with each registration, including filing and printing fees, the
      Company’s counsel and accounting fees and expenses, costs associated with
      clearing the Registrable Securities for sale under applicable state securities
      laws, listing fees, fees and expenses of one counsel to the Investors and the
      Investors’ reasonable expenses in connection with the registration, but
      excluding discounts, commissions, fees of underwriters, selling brokers, dealer
      managers or similar securities industry professionals with respect to the
      Registrable Securities being sold.

     

    (c)  Effectiveness.

     

    (i) The
      Company shall use commercially reasonable efforts to have the Registration
      Statement declared effective as soon as practicable after filing. The Company
      shall notify the Investors by facsimile or e-mail as promptly as practicable,
      and in any event, within twenty-four (24) hours, after any Registration
      Statement is declared effective and shall simultaneously provide the Investors
      with copies of any related Prospectus to be used in connection with the sale
      or
      other disposition of the securities covered thereby. If (A)(x) except to the
      extent provided in Section 2(d), a Registration Statement covering the
      Registrable Securities is not declared effective by the SEC prior to the earlier
      of (i) five (5) Business Days after the SEC shall have informed the Company
      that
      no review of the Registration Statement will be made or that the SEC has no
      further comments on the Registration Statement or (ii) the 60th
      day
      after the Filing Deadline (the 90th
      day if
      the SEC comments on the Registration Statement), (y) except to the extent
      provided in Section 2(d), a Registration Statement covering Additional Shares
      is
      not declared effective by the SEC within 120 days following the time such
      Registration Statement was required to be filed pursuant to Section 2(a)(ii)
      or
      (z) except to the extent provided in Section 2(d), a Shelf Registration
      Statement is not declared effective by the SEC within 120 days after the
      Qualification Deadline, or
      (B)
      after a Registration Statement has been declared effective by the SEC, sales
      cannot be made pursuant to such Registration Statement for any reason (including
      without limitation by reason of a stop order, or the Company’s failure to update
      the Registration Statement), but excluding any Allowed Delay (as defined below)
      or the inability of any Investor to sell the Registrable Securities covered
      thereby due to market conditions or
      its
      receipt of material nonpublic information at its request in accordance with
      Section 4 hereof, then
      the
      Company will make pro rata payments to each Investor, as liquidated damages
      and
      not as a penalty, in an amount equal to 1.0% of the aggregate amount invested
      by
      such Investor for each 30- day period or pro rata for any portion thereof
      following the date by which such Registration Statement should have been
      effective (the “Blackout Period”). Such payments shall constitute the Investors’
exclusive monetary remedy for such events, but shall not affect the right of
      the
      Investors to seek injunctive relief. The amounts payable as liquidated damages
      pursuant to this paragraph shall be paid monthly within three (3) Business
      Days
      of the last day of each month following the commencement of the Blackout Period
      until the termination of the Blackout Period. Such payments shall be made to
      each Investor in cash.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    (ii) For
      not
      more than twenty (20) consecutive days or for a total of not more than
      forty-five (45) days in any twelve (12) month period, the Company may delay
      the
      disclosure of material non-public information concerning the Company, by
      suspending the use of any Prospectus included in any Registration Statement
      contemplated by this Section containing such information, the disclosure of
      which at the time is not, in the good faith opinion of the Company, in the
      best
      interests of the Company (an “Allowed Delay”); provided, that the Company shall
      promptly (a) notify the Investors in writing of the existence of (but in no
      event, without the prior written consent of an Investor, shall the Company
      disclose to such Investor any of the facts or circumstances regarding) material
      non-public information giving rise to an Allowed Delay, (b) advise the Investors
      in writing to cease all sales under the Registration Statement until the end
      of
      the Allowed Delay and (c) use commercially reasonable efforts to terminate
      an
      Allowed Delay as promptly as practicable.

     

    (d)  Rule
      415.

     

    (i) If
      at any
      time the staff of the SEC (the “Staff”) takes the position that the offering of
      some or all of the Registrable Securities in a Registration Statement is not
      eligible to be made on a delayed or continuous basis under the provisions of
      Rule 415 under the 1933 Act or requires any Investor to be named as an
“underwriter” (the “Staff Interpretation”), the Company shall use its
      commercially reasonable efforts to persuade the Staff that the offering
      contemplated by the Registration Statement is a valid secondary offering and
      not
      an offering “by or on behalf of the issuer” as defined in Rule 415 and that none
      of the Investors is an “underwriter”. The date on which the Staff informs the
      Company that the Staff Interpretation applies to the Registrable Securities
      is
      hereinafter referred to as the “Interpretation Date.”

     

    (ii) In
      the
      event that, despite the Company’s commercially reasonable efforts and compliance
      with the terms of this Section 2(d), the Staff refuses to allow all of the
      Registrable Securities to be included in the Registration Statement and/or
      insists that one or more of the Investors must be named as an “underwriter”, the
      Company shall (i) use commercially reasonable efforts to resolve any other
      remaining Staff comments as promptly as possible and, in any event, no later
      than the 30th
      day
      following the Interpretation Date (the “Interpretation Deadline Date”) and, (ii)
      within two Business Days of the earlier of the Interpretation Deadline Date
      or
      the resolution of any other Staff comments, file with the SEC a request for
      acceleration of the effectiveness of the Registration Statement as then on
      file
      with the SEC (which shall not include any changes requested or required by
      the
      Staff pursuant to the Staff Interpretation unless the Investors and the Company
      mutually agree otherwise) to a date and time not more than two Business Days
      after the date such request is filed (the “Acceleration Date”).

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    (iii) If
      the
      amended Registration Statement is not declared effective on or prior to 5:30
      p.m., New York time, on the second Business Day following the Acceleration
      Date
      (the “Acceleration Deadline”), then no later than 5:30 p.m., New York time, on
      the Business Day immediately following the Acceleration Deadline, the Company
      shall file with the SEC an amendment to the Registration Statement (the “Section
      8 Amendment”) to remove the delaying legend placed on the Registration Statement
      pursuant to Rule 473(a), which Section 8 Amendment shall include the legend
      specified in Rule 473(b) to the effect that the amended Registration Statement
      shall thereafter become effective in accordance with the provisions of Section
      8(a) of the 1933 Act.

     

    (iv) In
      the
      event that the SEC commences an investigation, examination or other proceeding
      with respect to the Registration Statement pursuant to Section 8(e) of the
      1933
      Act, the Company and, if required, the Investors, shall cooperate therewith
      in
      good faith and shall take such action as shall be necessary to prohibit the
      issuance of a stop order pursuant to Section 8(d) of the 1933 Act on the grounds
      that any of them have failed to cooperate with any such investigation,
      examination or other proceeding; provided, however, that no party shall be
      required to waive any attorney-client privilege or attorney work product
      privilege in connection therewith.

     

    (v) In
      the
      event that the SEC commences (i) a refusal order proceeding pursuant to Section
      8(b) of the 1933 Act with respect to the Registration Statement or (ii) a stop
      order proceeding pursuant to Section 8(d) of the 1933 Act with respect to the
      Registration Statement, the Company shall diligently oppose any such proceedings
      unless (A) SSF, (B) the Company and (C) any other Investor who is required
      to be
      named an underwriter in the Registration Statement or whose Registrable
      Securities are required to be cut back in the Registration Statement as a result
      of the Staff Interpretation and who agrees to participate in the costs thereof
      as provided below (a “Participating Investor”), mutually agree at any time not
      to oppose such proceedings or to continue such opposition. The costs of such
      opposition shall be borne by SSF and each Participating Investor on a pro rata
      basis calculated based on the number of Registrable Securities held by SSF
      or a
      Participating Investor compared to the total number of Registrable Securities
      held by SSF and all Participating Investors. SSF and each Participating Investor
      shall have the right to participate in such proceedings. In connection with
      its
      opposition of such proceedings, the Company shall retain counsel reasonably
      satisfactory to SSF and each Participating Investor (which shall be SSF’s
      counsel unless SSF otherwise agrees). The Company shall not agree to any
      settlement or compromise of any proceeding without the prior written consent
      of
      SSF and each Participating Investors, which shall not be unreasonably withheld
      or delayed.

     

    (vi) In
      the
      event that the SEC issues (i) a refusal order pursuant to Section 8(b) of the
      1933 Act refusing to declare the Registration Statement effective or (ii) a
      stop
      order pursuant to Section 8(d) of the 1933 Act with respect to the Registration
      Statement, the Company shall file with the United States Court of Appeals for
      the District of Columbia Circuit and diligently prosecute through appropriate
      proceedings a petition for judicial review of any such order in a timely fashion
      in accordance with the provisions of Section 9(a) of the 1933 Act to a final,
      nonappealable determination unless SSF, the Company and any Participating
      Investor mutually agree otherwise. The costs of prosecuting such petition shall
      be borne by SSF and each Participating Investor on the basis specified in clause
      (v) above. SSF and each Participating Investor shall have the right to
      participate in such proceedings. In connection with such proceedings, the
      Company shall retain counsel reasonably satisfactory to SSF and each
      Participating Investor (which shall be SSF’s counsel unless SSF otherwise
      agrees). The Company shall not agree to any settlement or compromise of any
      proceeding without the prior written consent of SSF and each Participating
      Investors, which shall not be unreasonably withheld or delayed.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    (vii) SSF
      and
      each Participating Investors shall have the right to participate or have its
      counsel participate in any meetings or discussions with the Staff or the SEC
      regarding the Staff Interpretation and to comment or have their counsel comment
      on any written submission made to the Staff, the SEC or any court with respect
      thereto. No such written submission shall be made by the Company to which
      counsel to SSF or a Participating Investor reasonably objects.

     

    (viii) So
      long
      as the Company is in compliance with the terms of this Section 2(d), all time
      periods specified in Section 2(c)(i) shall be tolled and no liquidated damages
      shall accrue or be payable pursuant to Section 2(c)(i) of this Agreement solely
      as a result of the failure of the amended Registration Statement to become
      effective due to the Staff Interpretation, in each case until the earliest
      of
      (i) the date that the Registration Statement (as amended, if necessary, by
      the
      Section 8 Amendment) is declared effective by the SEC; provided, however, that
      if the Registration Statement becomes effective automatically pursuant to
      Section 8(a) of the 1933 Act after the Company has received written notice
      that
      the SEC has ordered an examination, investigation or other proceeding pursuant
      to Section 8(e) of the 1933 Act, the Registration Statement shall not be deemed
      to have become effective until such time as sales may be made thereunder
      pursuant to Section 5(c) of the 1933 Act, (ii) the date which is 10 days after
      receipt by the Company of written notice from SSF or any Participating Investor
      that the Company is in material breach of this Section 2(d) if such breach
      is
      not cured to the reasonable satisfaction of such Investor prior thereto, or
      (iii) the date on which a court of competent jurisdiction upholds the Staff
      Interpretation (or modifies the Staff Interpretation in such a manner that
      either (i) all of the Registrable Securities are not able to be included in
      the
      Registration Statement or (ii) one or more of the Investors are required to
      be
      named as an “underwriter” therein) by a final and nonappealable judgment. The
      period specified in this Section 2(d)(viii) is hereinafter referred to as the
      “Tolling Period.”

     

    (ix) In
      the
      event that the Staff Interpretation is not contested by the Company in
      compliance with the terms of this Section 2(d) or is upheld (or modified in
      a
      such a manner that either (i) all of the Registrable Securities are not able
      to
      be included in the Registration Statement or (ii) one or more of the Investors
      are required to be named as an “underwriter” therein) by a final and
      nonappealable judgment of a court of competent jurisdiction, the Company shall
      (i) remove from the Registration Statement such portion of the Registrable
      Securities and the Antidilution Shares, if applicable, that are not able to
      be
      included in the Registration Statement (which may be all of such securities)
      (the “Cut Back Shares”) and/or (ii) agree to such restrictions and limitations
      on the registration and resale of the Registrable Securities and the
      Antidilution Shares as the Staff Interpretation as then in effect may require
      to
      assure the Company’s compliance with the requirements of Rule 415; provided,
      however, that the Company shall not agree to name any Investor as an
“underwriter” in such Registration Statement without the prior written consent
      of such Investor (collectively, the “415 Restrictions”). Any cut-back imposed
      pursuant to this Section 2(d)(ix) shall be allocated first to the Antidilution
      Shares on a pro rata basis among the beneficial owners thereof and second to
      the
      Registrable Securities among the Investors on a pro rata basis. Any cut-back
      affecting the Registrable Securities shall be allocated first to any Warrant
      Shares, unless the 415 Restrictions otherwise require or provide or an Investor
      otherwise requests with respect to the portion of any cut-back allocable to
      it.
      No liquidated damages shall accrue on or as to any Cut Back Shares during the
      Tolling Period and until such time as the Company is able to effect the
      registration of the Cut Back Shares in accordance with any 415 Restrictions
      (such date, the “Restriction Termination Date”). From and after the Restriction
      Termination Date, all of the provisions of Section 2 of this Agreement
      (including the liquidated damages provisions) shall again be applicable to
      the
      Cut Back Shares; provided, however, that for such purposes, references to the
      Initial Closing Date shall be deemed to be the Restriction Termination
      Date.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    (x) Time
      shall be of the essence in the performance of the obligations contained in
      this
      Agreement, including, without limitation, the performance of the obligations
      set
      forth in this Section 2(d).

     

    (xi) The
      Company acknowledges that SSF and the Participating Investors have specifically
      requested the inclusion of the provisions set forth in this Section 2(d) as
      a
      condition to their investment in the Company and that SSF and the Participating
      Investors would not have made such investment without such provisions. The
      Company further acknowledges that in the event of any breach of this Section
      2(d), SSF and the Participating Investors would suffer a material loss for
      which
      damages at law would be difficult or impossible to determine. Accordingly,
      in
      addition to all other rights and remedies available to them at law or in equity,
      SSF and each Participating Investor shall have the right to have the provisions
      of this Section 2(d) specifically enforced against the Company and neither
      SSF
      nor any Participating Investor shall be obligated to post any bond or other
      security in connection with any action to compel such specific
      performance.

     

    3. Company
      Obligations.
      The
      Company will use commercially reasonable efforts to effect the registration
      of
      the Registrable Securities in accordance with the terms hereof, and pursuant
      thereto the Company will, as expeditiously as possible:

     

    (a)  use
      commercially reasonable efforts to cause such Registration Statement to become
      effective and to remain continuously effective for a period that will terminate
      upon the earlier of (i) the date on which all Registrable Securities covered
      by
      such Registration Statement as amended from time to time, have been sold, and
      (ii) the date on which all Registrable Securities covered by such Registration
      Statement may be sold without restriction pursuant to Rule 144 (the
“Effectiveness Period”) and advise the Investors in writing when the
      Effectiveness Period has expired;

     

    (b)  prepare
      and file with the SEC such amendments and post-effective amendments to the
      Registration Statement and the Prospectus as may be necessary to keep the
      Registration Statement effective for the Effectiveness Period and to comply
      with
      the provisions of the 1933 Act and the 1934 Act with respect to the distribution
      of all of the Registrable Securities covered thereby;

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    (c)  provide
      copies to and permit counsel designated by the Investors to review each
      Registration Statement and all amendments and supplements thereto no fewer
      than
      three (3) Business Days prior to their filing with the SEC and not file any
      document to which such counsel reasonably objects;

     

    (d)  furnish
      to the Investors and their legal counsel (i) promptly after the same is prepared
      and publicly distributed, filed with the SEC, or received by the Company (but
      not later than two (2) Business Days after the filing date, receipt date or
      sending date, as the case may be) one (1) copy of any Registration Statement
      and
      any amendment thereto, each preliminary prospectus and Prospectus and each
      amendment or supplement thereto, and each letter written by or on behalf of
      the
      Company to the SEC or the staff of the SEC, and each item of correspondence
      from
      the SEC or the staff of the SEC, in each case relating to such Registration
      Statement (other than any portion of any thereof which contains information
      for
      which the Company has sought confidential treatment), and (ii) such number
      of
      copies of a Prospectus, including a preliminary prospectus, and all amendments
      and supplements thereto and such other documents as each Investor may reasonably
      request in order to facilitate the disposition of the Registrable Securities
      owned by such Investor that are covered by the related Registration
      Statement;

     

    (e)  use
      commercially reasonable efforts to (i) prevent the issuance of any stop order
      or
      other suspension of effectiveness and, (ii) if such order is issued, obtain
      the
      withdrawal of any such order at the earliest possible moment;

     

    (f)  prior
      to
      any public offering of Registrable Securities, use commercially reasonable
      efforts to register or qualify or cooperate with the Investors and their counsel
      in connection with the registration or qualification of such Registrable
      Securities for offer and sale under the securities or blue sky laws of such
      domestic jurisdictions requested by the Investors and do any and all other
      commercially reasonable acts or things necessary or advisable to enable the
      distribution in such jurisdictions of the Registrable Securities covered by
      the
      Registration Statement;
      provided, however, that the Company shall not be required in connection
      therewith or as a condition thereto to (i) qualify to do business in any
      jurisdiction where it would not otherwise be required to qualify but for this
      Section 3(f), (ii) subject itself to general taxation in any jurisdiction where
      it would not otherwise be so subject but for this Section 3(f), or (iii) file
      a
      general consent to service of process in any such jurisdiction;

     

    (g)  use
      commercially reasonable efforts to cause all Registrable Securities covered
      by a
      Registration Statement to be listed on each securities exchange, interdealer
      quotation system or other market on which similar securities issued by the
      Company are then listed;

     

    (h)  immediately
      notify the Investors, at any time prior to the end of the Effectiveness Period,
      upon discovery that, or upon the happening of any event as a result of which,
      the Prospectus includes an untrue statement of a material fact or omits to
      state
      any material fact required to be stated therein or necessary to make the
      statements therein not misleading in light of the circumstances then existing,
      and promptly prepare, file with the SEC and furnish to such holder a supplement
      to or an amendment of such Prospectus as may be necessary so that such
      Prospectus shall not include an untrue statement of a material fact or omit
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein not misleading in light of the circumstances then existing;
      and

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    (i)  otherwise
      use commercially reasonable efforts to comply with all applicable rules and
      regulations of the SEC under the 1933 Act and the 1934 Act, including, without
      limitation, Rule 172 under the 1933 Act, file any final Prospectus, including
      any supplement or amendment thereof, with the SEC pursuant to Rule 424 under
      the
      1933 Act, promptly inform the Investors in writing if, at any time during the
      Effectiveness Period, the Company does not satisfy the conditions specified
      in
      Rule 172 and, as a result thereof, the Investors are required to deliver a
      Prospectus in connection with any disposition of Registrable Securities and
      take
      such other actions as may be reasonably necessary to facilitate the registration
      of the Registrable Securities hereunder; and make available to its security
      holders, as soon as reasonably practicable, but not later than the Availability
      Date (as defined below), an earnings statement covering a period of at least
      twelve (12) months, beginning after the effective date of each Registration
      Statement, which earnings statement shall satisfy the provisions of Section
      11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the
      purpose of this subsection 3(i), “Availability Date” means the 45th day
      following the end of the fourth fiscal quarter that includes the effective
      date
      of such Registration Statement, except that, if such fourth fiscal quarter
      is
      the last quarter of the Company’s fiscal year, “Availability Date” means the
      90th day after the end of such fourth fiscal quarter).

     

    (j)  With
      a
      view to making available to the Investors the benefits of Rule 144 (or its
      successor rule) and any other rule or regulation of the SEC that may at any
      time
      permit the Investors to sell shares of Common Stock to the public without
      registration, the Company covenants and agrees to: (i) make and keep public
      information available, as those terms are understood and defined in Rule 144,
      until the earlier of (A) six months after such date as all of the Registrable
      Securities may be sold without restriction by the holders thereof pursuant
      to
      Rule 144 or any other rule of similar effect or (B) such date as all of the
      Registrable Securities shall have been resold; (ii) file with the SEC in a
      timely manner all reports and other documents required of the Company under
      the
      1934 Act; and (iii) furnish to each Investor upon request, as long as such
      Investor owns any Registrable Securities, (A) a written statement by the Company
      that it has complied with the reporting requirements of the 1934 Act, (B) a
      copy
      of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on
      Form 10-Q, and (C) such other information as may be reasonably requested in
      order to avail such Investor of any rule or regulation of the SEC that permits
      the selling of any such Registrable Securities without
      registration.

    


    4. Due
      Diligence Review; Information.
      The
      Company shall make available, during normal business hours, for inspection
      and
      review by the Investors, advisors to and representatives of the Investors (who
      may or may not be affiliated with the Investors and who are reasonably
      acceptable to the Company), all financial and other records, all SEC Filings
      (as
      defined in the Purchase Agreement) and other filings with the SEC, and all
      other
      corporate documents and properties of the Company as may be reasonably necessary
      for the purpose of such review, and cause the Company’s officers, directors and
      employees, within a reasonable time period, to supply all such information
      reasonably requested by the Investors or any such representative, advisor or
      underwriter in connection with such Registration Statement (including, without
      limitation, in response to all questions and other inquiries reasonably made
      or
      submitted by any of them), prior to and from time to time after the filing
      and
      effectiveness of the Registration Statement for the sole purpose of enabling
      the
      Investors and such representatives, advisors and underwriters and their
      respective accountants and attorneys to conduct initial and ongoing due
      diligence with respect to the Company and the accuracy of such Registration
      Statement.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    The
      Company shall not disclose material nonpublic information to the Investors,
      or
      to advisors to or representatives of the Investors, unless prior to disclosure
      of such information the Company identifies such information as being material
      nonpublic information and provides the Investors, such advisors and
      representatives with the opportunity to accept or refuse to accept such material
      nonpublic information for review and any Investor wishing to obtain such
      information enters into an appropriate confidentiality agreement with the
      Company with respect thereto.

     

    5. Obligations
      of the Investors.

     

    (a)  Each
      Investor shall furnish in writing to the Company such information regarding
      itself, the Registrable Securities held by it and the intended method of
      disposition of the Registrable Securities held by it, as shall be reasonably
      required to effect the registration of such Registrable Securities and shall
      execute such documents in connection with such registration as the Company
      may
      reasonably request. At least five (5) Business Days prior to the first
      anticipated filing date of any Registration Statement, the Company shall notify
      each Investor of the information the Company requires from such Investor. An
      Investor shall provide such information to the Company at least three (3)
      Business Days prior to the first anticipated filing date of such Registration
      Statement if such Investor elects to have any of the Registrable Securities
      included in the Registration Statement.

     

    (b)  Each
      Investor, by its acceptance of the Registrable Securities agrees to cooperate
      with the Company as reasonably requested by the Company in connection with
      the
      preparation and filing of a Registration Statement hereunder, unless such
      Investor has notified the Company in writing of its election to exclude all
      of
      its Registrable Securities from such Registration Statement.

     

    (c)  Each
      Investor agrees that, upon receipt of any notice from the Company of either
      (i)
      the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
      happening of an event pursuant to Section 3(h) hereof, such Investor will
      immediately discontinue disposition of Registrable Securities pursuant to the
      Registration Statement covering such Registrable Securities, until the Investor
      is advised by the Company in writing that such dispositions may again be
      made.

     

    (d)  The
      Company shall have no obligation to make liquidated damages payments under
      this
      Agreement to any Investor that is in breach of these obligations.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    6. Indemnification.

     

    (a)  Indemnification
      by the Company.
      To the
      extent permitted by law, the Company will indemnify and hold harmless each
      Investor and its officers, directors, members, employees and agents, successors
      and assigns, and each other person, if any, who controls such Investor within
      the meaning of the 1933 Act, against any losses, claims, damages or liabilities,
      joint or several, to which they may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon: (i) any untrue statement or
      alleged untrue statement of any material fact contained in any Registration
      Statement, any preliminary Prospectus or final Prospectus, or any amendment
      or
      supplement thereof; (ii) any blue sky application or other document executed
      by
      the Company specifically for that purpose or based upon written information
      furnished by the Company filed in any state or other jurisdiction in order
      to
      qualify any or all of the Registrable Securities under the securities laws
      thereof (any such application, document or information herein called a “Blue Sky
      Application”); (iii) the omission or alleged omission to state in a Blue Sky
      Application a material fact required to be stated therein or necessary to make
      the statements therein not misleading; (iv) any violation by the Company or
      its
      agents of any rule or regulation promulgated under the 1933 Act applicable
      to
      the Company or its agents and relating to action or inaction required of the
      Company in connection with such registration, other than any violation resulting
      from the Company’s compliance with the provisions of Section 2(d) hereof; or (v)
      any failure to register or qualify the Registrable Securities included in any
      such Registration Statement in any state where the Company or its agents has
      affirmatively undertaken or agreed in writing that the Company will undertake
      such registration or qualification on an Investor’s behalf pursuant to an
      Investor’s affirmative request under Section 3(f) hereof and will reimburse such
      Investor, and each such officer, director or member and each such controlling
      person for any legal or other expenses reasonably incurred by them in connection
      with investigating or defending any such loss, claim, damage, liability or
      action; provided,
      however,
      that
      the Company will not be liable in any such case if and to the extent that any
      such loss, claim, damage or liability arises out of or is based upon an untrue
      statement or alleged untrue statement or omission or alleged omission so made
      in
      conformity with information furnished by such Investor or any such controlling
      person in writing specifically for use in such Registration Statement or
      Prospectus.

     

    (b)  Indemnification
      by the Investors.
      To the
      extent permitted by law, each Investor shall, severally but not jointly,
      indemnify and hold harmless the Company, its directors, officers, employees,
      stockholders and each person who controls the Company (within the meaning of
      the
      1933 Act) against any losses, claims, damages, liabilities and expense
      (including reasonable attorney fees) resulting from any untrue statement of
      a
      material fact or any omission of a material fact required to be stated in the
      Registration Statement or Prospectus or preliminary Prospectus or amendment
      or
      supplement thereto or necessary to make the statements therein not misleading,
      to the extent, but only to the extent that such untrue statement or omission
      is
      contained in any information furnished in writing by such Investor to the
      Company specifically for inclusion in such Registration Statement or Prospectus
      or amendment or supplement thereto. In no event shall the liability of an
      Investor be greater in amount than the dollar amount of the proceeds (net of
      all
      expense paid by such Investor in connection with any claim relating to this
      Section 6 and the amount of any damages such Investor has otherwise been
      required to pay by reason of such untrue statement or omission) received by
      such
      Investor upon the sale of the Registrable Securities included in the
      Registration Statement giving rise to such indemnification
      obligation.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    (c)  Conduct
      of Indemnification Proceedings.
      Any
      person entitled to indemnification hereunder shall (i) give prompt notice to
      the
      indemnifying party of any claim with respect to which it seeks indemnification
      and (ii) permit such indemnifying party to assume the defense of such claim
      with
      counsel reasonably satisfactory to the indemnified party; provided
      that any
      person entitled to indemnification hereunder shall have the right to employ
      separate counsel and to participate in the defense of such claim, but the fees
      and expenses of such counsel shall be at the expense of such person unless
      (a)
      the indemnifying party has agreed to pay such fees or expenses, or (b) the
      indemnifying party shall have failed to assume the defense of such claim and
      employ counsel reasonably satisfactory to such person or (c) in the reasonable
      judgment of any such person, based upon written advice of its counsel, a
      conflict of interest exists between such person and the indemnifying party
      with
      respect to such claims (in which case, if the person notifies the indemnifying
      party in writing that such person elects to employ separate counsel at the
      expense of the indemnifying party, the indemnifying party shall not have the
      right to assume the defense of such claim on behalf of such person); and
provided,
      further,
      that
      the failure of any indemnified party to give notice as provided herein shall
      not
      relieve the indemnifying party of its obligations hereunder, except to the
      extent that such failure to give notice shall materially adversely affect the
      indemnifying party in the defense of any such claim or litigation. It is
      understood that the indemnifying party shall not, in connection with any
      proceeding in the same jurisdiction, be liable for fees or expenses of more
      than
      one separate firm of attorneys at any time for all such indemnified parties.
      No
      indemnifying party will, except with the consent of the indemnified party,
      consent to entry of any judgment or enter into any settlement that does not
      include as an unconditional term thereof the giving by the claimant or plaintiff
      to such indemnified party of a release from all liability in respect of such
      claim or litigation.

     

    (d)  Contribution.
      If for
      any reason the indemnification provided for in the preceding paragraphs (a)
      and
      (b) is unavailable to an indemnified party or insufficient to hold it harmless,
      other than as expressly specified therein, then the indemnifying party shall
      contribute to the amount paid or payable by the indemnified party as a result
      of
      such loss, claim, damage or liability in such proportion as is appropriate
      to
      reflect the relative fault of the indemnified party and the indemnifying party,
      as well as any other relevant equitable considerations. No person guilty of
      fraudulent misrepresentation within the meaning of Section 11(f) of the 1933
      Act
      shall be entitled to contribution from any person not guilty of such fraudulent
      misrepresentation. In no event shall the contribution obligation of a holder
      of
      Registrable Securities be greater in amount than the dollar amount of the
      proceeds (net of all expenses paid by such holder in connection with any claim
      relating to this Section 6 and the amount of any damages such holder has
      otherwise been required to pay by reason of such untrue or alleged untrue
      statement or omission or alleged omission) received by it upon the sale of
      the
      Registrable Securities giving rise to such contribution obligation.

     

    7. Miscellaneous.

     

    (a)  Amendments
      and Waivers.
      This
      Agreement may be amended only by a writing signed by the Company and the
      Required Investors. The Company may take any action herein prohibited, or omit
      to perform any act herein required to be performed by it, only if the Company
      shall have obtained the written consent to such amendment, action or omission
      to
      act, of the Required Investors.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    (b)  Notices.
      All
      notices and other communications provided for or permitted hereunder shall
      be
      made as set forth in Section 9.4 of the Purchase Agreement.

     

    (c)  Assignments
      and Transfers by Investors.
      The
      provisions of this Agreement shall be binding upon and inure to the benefit
      of
      the Investors and their respective successors and assigns. An Investor may
      transfer or assign, in whole or from time to time in part, to one or more
      persons its rights hereunder in connection with the transfer of Registrable
      Securities by such Investor to such person, provided that such Investor complies
      with all laws applicable thereto and provides written notice of assignment
      to
      the Company promptly after such assignment is effected.

     

    (d)  Assignments
      and Transfers by the Company.
      This
      Agreement may not be assigned by the Company (whether by operation of law or
      otherwise) without the prior written consent of the Required Investors,
      provided, however, that the Company may assign its rights and delegate its
      duties hereunder to any surviving or successor corporation in connection with
      a
      merger or consolidation of the Company with another corporation, or a sale,
      transfer or other disposition of all or substantially all of the Company’s
      assets to another corporation, without the prior written consent of the Required
      Investors, after notice duly given by the Company to each Investor.

     

    (e)  Benefits
      of the Agreement.
      The
      terms and conditions of this Agreement shall inure to the benefit of and be
      binding upon the respective permitted successors and assigns of the parties.
      Nothing in this Agreement, express or implied, is intended to confer upon any
      party other than the parties hereto or their respective successors and assigns
      any rights, remedies, obligations, or liabilities under or by reason of this
      Agreement, except as expressly provided in this Agreement.

     

    (f)  Counterparts;
      Faxes.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument. This Agreement may also be executed via facsimile, which shall
      be
      deemed an original.

     

    (g)  Titles
      and Subtitles.
      The
      titles and subtitles used in this Agreement are used for convenience only and
      are not to be considered in construing or interpreting this
      Agreement.

     

    (h)  Severability.
      Any
      provision of this Agreement that is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof but shall be interpreted as if it were written so as to be
      enforceable to the maximum extent permitted by applicable law, and any such
      prohibition or unenforceability in any jurisdiction shall not invalidate or
      render unenforceable such provision in any other jurisdiction. To the extent
      permitted by applicable law, the parties hereby waive any provision of law
      which
      renders any provisions hereof prohibited or unenforceable in any
      respect.

     

    (i)  Further
      Assurances.
      The
      parties shall execute and deliver all such further instruments and documents
      and
      take all such other actions as may reasonably be required to carry out the
      transactions contemplated hereby and to evidence the fulfillment of the
      agreements herein contained.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    (j)  Entire
      Agreement.
      This
      Agreement is intended by the parties as a final expression of their agreement
      and intended to be a complete and exclusive statement of the agreement and
      understanding of the parties hereto in respect of the subject matter contained
      herein. This Agreement supersedes all prior agreements and understandings
      between the parties with respect to such subject matter.

     

    (k)  Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.
      This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of New York without regard to the choice of law principles
      thereof (other than Section 5-1401 of the New York General Obligation Law).
      Each
      of the parties hereto 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
      Agreement 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 Agreement. Each of the parties hereto 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. Each party hereto 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.
      EACH
      OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
      LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
      CONSULTED SPECIFICALLY AS TO THIS WAIVER.

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
      authorized officers to execute this Agreement as of the date first above
      written.

     

    
      	
              The
                Company:

            	
              PRECISION
                OPTICS CORPORATION, INC.

            
	 	 
	 	
              By:

            	/s/
              Richard E. Forkey
	 	
              Name:
                Richard E. Forkey

            
	 	
              Title:
                President, Chief Executive Officer and
                Treasurer

            


    

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    


    
      	
              The
                Investors:

            	
              SPECIAL
                SITUATIONS FUND III QP, L.P.

            
	 	 
	 	
              By:

            	/s/
              Austin W. Marxe
	 	
              Name:
                Austin W. Marxe

            
	 	
              Title:
                General Partner

            
	 	 
	 	
              SPECIAL
                SITUATIONS PRIVATE EQUITY FUND, L.P.

            
	 	 
	 	
              By:

            	/s/
              Austin W. Marxe
	 	
              Name:
                Austin W. Marxe

            
	 	
              Title:
                General Partner

            


    


    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    


    
      	
              /s/
                Arnold Schumsky

            
	
              Arnold
                Schumsky

            


    

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    


    Exhibit
      A

    


    Plan
      of Distribution

    


    The
      selling stockholders, which as used herein includes donees, pledgees,
      transferees or other successors-in-interest selling shares of common stock
      or
      interests in shares of common stock received after the date of this prospectus
      from a selling stockholder as a gift, pledge, partnership distribution or other
      transfer, may, from time to time, sell, transfer or otherwise dispose of any
      or
      all of their shares of common stock or interests in shares of common stock
      on
      any stock exchange, market or trading facility on which the shares are traded
      or
      in private transactions. These dispositions may be at fixed prices, at
      prevailing market prices at the time of sale, at prices related to the
      prevailing market price, at varying prices determined at the time of sale,
      or at
      negotiated prices.

    


    The
      selling stockholders may use any one or more of the following methods when
      disposing of shares or interests therein:

    


    -
      ordinary brokerage transactions and transactions in which the broker-dealer
      solicits purchasers;

    


    -
      block
      trades in which the broker-dealer will attempt to sell the shares as agent,
      but
      may position and resell a portion of the block as principal to facilitate the
      transaction;

    


    -
      purchases by a broker-dealer as principal and resale by the broker-dealer for
      its account;

    


    -
      an
      exchange distribution in accordance with the rules of the applicable
      exchange;

    


    -
      privately negotiated transactions;

    


    -
      short
      sales effected after the date the registration statement of which this
      Prospectus is a part is declared effective by the SEC;

    


    -
      through
      the writing or settlement of options or other hedging transactions, whether
      through an options exchange or otherwise;

    


    -
      broker-dealers may agree with the selling stockholders to sell a specified
      number of such shares at a stipulated price per share; and

    


    -
      a
      combination of any such methods of sale.

    


    The
      selling stockholders may, from time to time, pledge or grant a security interest
      in some or all of the shares of common stock owned by them and, if they default
      in the performance of their secured obligations, the pledgees or secured parties
      may offer and sell the shares of common stock, from time to time, under this
      prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
      other applicable provision of the Securities Act amending the list of selling
      stockholders to include the pledgee, transferee or other successors in interest
      as selling stockholders under this prospectus. The selling stockholders also
      may
      transfer the shares of common stock in other circumstances, in which case the
      transferees, pledgees or other successors in interest will be the selling
      beneficial owners for purposes of this prospectus.


    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    


    In
      connection with the sale of our common stock or interests therein, the selling
      stockholders may enter into hedging transactions with broker-dealers or other
      financial institutions, which may in turn engage in short sales of the common
      stock in the course of hedging the positions they assume. The selling
      stockholders may also sell shares of our common stock short and deliver these
      securities to close out their short positions, or loan or pledge the common
      stock to broker-dealers that in turn may sell these securities. The selling
      stockholders may also enter into option or other transactions with
      broker-dealers or other financial institutions or the creation of one or more
      derivative securities which require the delivery to such broker-dealer or other
      financial institution of shares offered by this prospectus, which shares such
      broker-dealer or other financial institution may resell pursuant to this
      prospectus (as supplemented or amended to reflect such
      transaction).

    


    The
      aggregate proceeds to the selling stockholders from the sale of the common
      stock
      offered by them will be the purchase price of the common stock less discounts
      or
      commissions, if any. Each of the selling stockholders reserves the right to
      accept and, together with their agents from time to time, to reject, in whole
      or
      in part, any proposed purchase of common stock to be made directly or through
      agents. We will not receive any of the proceeds from this offering. Upon any
      exercise of the warrants by payment of cash, however, we will receive the
      exercise price of the warrants.

    


    The
      selling stockholders also may resell all or a portion of the shares in open
      market transactions in reliance upon Rule 144 under the Securities Act of 1933,
      provided that they meet the criteria and conform to the requirements of that
      rule.

    


    The
      selling stockholders and any underwriters, broker-dealers or agents that
      participate in the sale of the common stock or interests therein may be
      "underwriters" within the meaning of Section 2(11) of the Securities Act. Any
      discounts, commissions, concessions or profit they earn on any resale of the
      shares may be underwriting discounts and commissions under the Securities Act.
      Selling stockholders who are "underwriters" within the meaning of Section 2(11)
      of the Securities Act will be subject to the prospectus delivery requirements
      of
      the Securities Act.

    


    To
      the
      extent required, the shares of our common stock to be sold, the names of the
      selling stockholders, the respective purchase prices and public offering prices,
      the names of any agents, dealer or underwriter, any applicable commissions
      or
      discounts with respect to a particular offer will be set forth in an
      accompanying prospectus supplement or, if appropriate, a post-effective
      amendment to the registration statement that includes this
      prospectus.

    


    In
      order
      to comply with the securities laws of some states, if applicable, the common
      stock may be sold in these jurisdictions only through registered or licensed
      brokers or dealers. In addition, in some states the common stock may not be
      sold
      unless it has been registered or qualified for sale or an exemption from
      registration or qualification requirements is available and is complied
      with.


    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    


    We
      have
      advised the selling stockholders that the anti-manipulation rules of Regulation
      M under the Exchange Act may apply to sales of shares in the market and to
      the
      activities of the selling stockholders and their affiliates. In addition, to
      the
      extent applicable we will make copies of this prospectus (as it may be
      supplemented or amended from time to time) available to the selling stockholders
      for the purpose of satisfying the prospectus delivery requirements of the
      Securities Act. The selling stockholders may indemnify any broker-dealer that
      participates in transactions involving the sale of the shares against certain
      liabilities, including liabilities arising under the Securities
      Act.

    


    We
      have
      agreed to indemnify the selling stockholders against liabilities, including
      liabilities under the Securities Act and state securities laws, relating to
      the
      registration of the shares offered by this prospectus.

    


    We
      have
      agreed with the selling stockholders to keep the registration statement of
      which
      this prospectus constitutes a part effective until the earlier of (1) such
      time
      as all of the shares covered by this prospectus have been disposed of pursuant
      to and in accordance with the registration statement or (2) the date on which
      the shares may be sold without restriction pursuant to Rule 144 of the
      Securities Act.


    
      
        
        

      

      
        -21-