Document:

Exhibit 10.1

 

SETTLEMENT AGREEMENT

 

This Settlement
Agreement (this “Agreement”), dated as of February 12, 2013, is made by and among Precision Optics Corporation,
Inc., a Massachusetts corporation (the “Company”), and Special Situations Fund III QP, L.P. and Special Situations
Private Equity Fund, L.P. (the “Holders”).

 

WHEREAS,
the Holders are party to (i) the Registration Rights Agreement, dated as of February 1, 2007, with the Company and (ii) the Registration
Rights Agreement, dated as of June 25, 2008 (collectively, the “Prior Registration Rights Agreements”), with
the Company;

 

WHEREAS,
pursuant to the Prior Registration Rights Agreements, the Company is obligated to pay to the Holders liquidated damages in amounts
calculated pursuant to the terms of the respective Prior Registration Rights Agreements in certain circumstances;

 

WHEREAS,
the Holders have agreed that, they will accept an aggregate of (i) 350,000 shares (the “Shares”) of the Company’s
common stock, par value $0.01 per share (the “Common Stock”), and warrants in the form attached hereto as Exhibit
A (the “Warrants”) to purchase an aggregate of 350,000 shares of Common Stock (the “Warrant Shares”
and, together with the Shares, and the Warrants, the “Securities”) in payment in full of the amounts due under
the Prior Registration Rights Agreements (the “Settlement Consideration”);

 

WHEREAS,
the Shares and the Warrant Shares shall be subject to certain registration rights pursuant to that certain Registration Rights
Agreement, dated of even date herewith, by and among the Company and the Holders in the form attached hereto as Exhibit B
(the “Registration Rights Agreement”); and

 

WHEREAS,
this Agreement, the Warrants and the Registration Rights Agreement are referred to herein as the “Transaction Documents”;
and

 

NOW, THEREFORE,
in consideration of the mutual promises, representations, warranties and covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Holders mutually agree as follows.

 

ARTICLE
1

ISSUANCE OF SHARES AND WARRANTS; EXTENSION of CERTAIN WARRANTS

 

1.1             
Issuance of Shares and Warrants.Within three (3) Business Days of the execution and delivery of this Agreement,
the Company shall issue to each of the Holders, the Shares and the Warrants in the respective amounts set forth opposite each such
Holder’s name on Annex I as payment in full of the Settlement Consideration owed to such Holder. Such Shares and Warrants
shall be registered in such name of names as each Holder may designate.

 

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1.2             
Extension
of Certain Warrants.The Company has agreed to extend the expiration date of the warrants issued to the Holders in conjunction
with the Company’s June 25, 2008 private placement (the “2008 Warrants”). The expiration date of the
2008 Warrants shall be amended from June 25, 2015 to May 11, 2017. If the Holder wishes to receive new warrants indicating the
amended expiration date, then the Holder must provide the original 2008 Warrant to the Company for cancellation and replacement.
The Company agrees to mail the Holders a new 2008 Warrant with the amended expiration date within three (3) Business Days of the
Company’s receipt of the original 2008 Warrant.

 

ARTICLE
2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby
represents and warrants to each of the Holders that:

 

2.1             
Organization, Qualifications and Corporate Power. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts. The Company has the corporate power and authority to
execute, deliver and perform the Transaction Documents to which it is a party and to issue, sell and deliver the Securities.

 

2.2             
Authorization.

 

(a)               
The execution and delivery by the Company of the Transaction Documents, the performance by the Company of its obligations
thereunder, the issuance, sale and delivery of the Securities have been duly authorized by all requisite corporate action.

 

(b)              
The Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization
of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation
for issuance) and delivery of the Securities. When delivered in accordance with the terms hereof, the Transaction Documents will
constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally and to general equitable principles.

 

(c)               
The execution, delivery and performance by the Company of the Transaction Documents and the offer, issuance and sale of
the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official
other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws which the Company undertakes to file within the applicable time periods.

 

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(d)              
The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities
will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under
(i) the Company’s Articles of Organization, as amended, or the Company’s Bylaws, both as in effect on the date hereof
(true and complete copies of which have been filed on EDGAR), or (ii)(a) any statute, rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over the Company, any subsidiary of the Company or any of
their respective assets or properties, or (b) any agreement or instrument to which the Company or any subsidiary of is a party
or by which the Company or a subsidiary is bound or to which any of their respective assets or properties is subject.

 

(e)               
Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising, as
those terms are used in the provisions of Regulation D (“Regulation D”), promulgated by the Securities and Exchange
Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Act”), in
connection with the offer or sale of any of the Securities.

 

(f)               
Neither the Company nor any of its affiliates, nor any Person acting on its or their behalf has, directly or indirectly,
made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would adversely
affect reliance by the Company on Section 4(2) for the exemption from registration for the transactions contemplated hereby or
would require registration of the Securities under the Act.

 

(g)              
The offer and sale of the Securities to the Holders as contemplated hereby is exempt from the registration requirements
of the Act.

 

ARTICLE
3

REPRESENTATIONS AND WARRANTIES OF THE HOLDERS

 

Each Holder, severally
and not jointly, represents and warrants to the Company that:

 

3.1             
Accredited
Investor. Holder is an “accredited investor” as defined by Rule 501 of Regulation D, and Holder is capable of
evaluating the merits and risks of its investment in the Securities and has the ability and capacity to protect its interests.

 

3.2             
Private Placement. Holder understands that the Securities have not been registered under the Act on the ground that
the issuance thereof is exempt under Section 4(2) of the Act and/or Regulation D as a transaction by an issuer not involving any
public offering and that, in the view of the Commission, the statutory basis for the exception claimed would not be present if
any of the representations and warranties of Holder contained in this Agreement are untrue or, notwithstanding the Holder’s
representations and warranties, the Holder currently has in mind acquiring any of the Securities for resale upon the occurrence
or non-occurrence of some predetermined event.

 

3.3             
Investment Intent. Holder is acquiring the Shares and Warrants as principal for its own account, and not for the
benefit of any other Person, for investment purposes and not with a view to distribution or resale in violation of the Act and
such Holder has no present intention of selling, granting any participation in, or otherwise distributing the same in violation
of the Act without prejudice, however, to such Holder’s right at all times to sell or otherwise dispose of all or any part
of the Securities in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation
or warranty by such Holder to hold any Securities for any period of time.

 

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3.4             
Opportunity to Inquire. Holder confirms that Holder has had the opportunity to ask questions of, and receive answers
from, the Company or any authorized Person acting on its behalf concerning the Company and its business and to obtain any additional
information, to the extent possessed by the Company (or to the extent it could have been acquired by the Company without unreasonable
effort or expense). In connection therewith, Holder acknowledges that Holder has had the opportunity to discuss the Company’s
business, management and financial affairs with the Company’s management or any authorized Person acting on its behalf. Neither
such inquiries nor any other due diligence investigation conducted by such Holder shall modify, limit or otherwise affect such
Holder’s right to rely on the Company’s representations and warranties contained in this Agreement and the other Transaction
Documents.

 

3.5             
Authorization. Holder has all requisite legal and other power and authority to execute and deliver this Agreement
and to carry out and perform its obligations under the terms of this Agreement. This Agreement constitutes a valid and legally
binding obligation of Holder enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

 

3.6             
Residency. Each Holder’s principal place of business is the State of New York.

 

3.7             
Restricted Securities. Holder understands that the Securities are characterized as “restricted securities”
under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may be resold without registration under the Act only
in certain limited circumstances.

 

3.8             
Legends. It is understood that, except as provided below, certificates evidencing the Securities may bear the following
or any similar legend:

 

(a)             
“The
securities represented hereby 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, and, accordingly, may
not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended,
(ii) such securities may be sold pursuant to Rule 144, or (iii) the Company has received an opinion of counsel reasonably satisfactory
to it that such transfer may lawfully be made without registration under the Securities Act of 1933 as amended.”

 

(b)             
If
required by the authorities of any state in connection with the issuance or sale of the Securities, the legend required by such
state authority.

 

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ARTICLE
4

COVENANTS

 

4.1             
Removal
of Legends. In connection with any sale or disposition of Securities by a Holder pursuant to Rule 144 or pursuant to any other
exemption under the  Act such that the purchaser acquires freely tradable Securities and upon compliance by the Holder with
the requirements of this Agreement, the Company shall or, in the case of Common Stock, shall cause the transfer agent for the
Common Stock (the “Transfer Agent”) to issue replacement certificates representing the Securities sold or disposed
of without restrictive legends. In furtherance of the foregoing, upon the earlier of (i) registration for resale pursuant to the
Registration Rights Agreement or (ii) any Shares or Warrant Shares becoming freely tradable by a non-affiliate pursuant to Rule
144 the Company shall (A) deliver to the Transfer Agent irrevocable instructions that the Transfer Agent shall issue a certificate
representing shares of Common Stock without legends upon receipt by such Transfer Agent of (X) either (1) a customary representation
by the Holder that Rule 144 applies to the shares of Common Stock represented thereby or (2) a statement by the Holder that such
Holder has sold the shares of Common Stock represented thereby in accordance with the Plan of Distribution contained in the Registration
Statement, and (Y) if applicable, the legended certificates for such shares, and (B) cause its counsel to deliver to the Transfer
Agent one or more blanket opinions to the effect that the removal of such legends in such circumstances may be effected under
the Act. At any time when any Securities may be freely sold or is covered by an effective Registration Statement, the Company
shall, or shall cause the Transfer Agent to, promptly cause such Securities held by the Holder to be replaced with Securities
which do not bear restrictive legends, and, in the case of any Warrant Shares subsequently issued upon due exercise of the Warrants,
shall not bear such restrictive legends provided such Warrant Shares may be freely sold or are covered by an effective Registration
Statement. When the Company is required to cause an unlegended Security to be issued as provided herein, if: (1) the unlegended
Security is not delivered to a Holder within three (3) Business Days of submission by that Holder of a request for unlegended
Securities and, if applicable, the documentation specified above to the Transfer Agent or the Company, as applicable, and (2)
prior to the time such unlegended Security is received by the Holder, the Holder, or any third party on behalf of such Holder
or for the Holder’s account, purchases (in an open market transaction or otherwise) another Security to deliver in satisfaction
of a sale by the Investor of such Security (a “Buy-In”), then the Company shall pay in cash to the Holder (for
costs incurred either directly by such Holder or on behalf of a third party) the amount by which the total purchase price paid
for the replacement Security as a result of the Buy-In (including brokerage commissions, if any) exceeds the proceeds received
by such Holder or as a result of the sale to which such Buy-In relates. The Holder shall provide the Company written notice indicating
the amounts payable to the Investor in respect of the Buy-In.

 

4.2             
Reservation
of Common Stock. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of providing for the exercise of the Warrants, such number of shares of Common Stock as shall from
time to time equal the number of shares sufficient to permit the exercise of the Warrants in accordance with their respective
terms.

 

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ARTICLE
5

MISCELLANEOUS

 

5.1             
Expenses.
The Company and the Holders shall each bear their own costs and expenses, including without limitation legal fees and expenses,
incurred in connection with the negotiation of this Agreement and the other Transaction Documents. In the event that legal proceedings
are commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement or the
other Transaction Documents, the party or parties which do not prevail in such proceedings shall severally, but not jointly, pay
their pro rata share of the reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by
the prevailing party in such proceedings.

 

5.2             
Further
Assurances. The Company shall duly execute and deliver, or cause to be duly executed and delivered, at its own cost and expense,
such further instruments and documents and to take all such action, in each case as may be necessary or proper in the reasonable
judgment of the Holders to carry out the provisions and purposes of this Agreement and the other Transaction Documents.

 

5.3             
Survival.
The representations, warranties, covenants and agreements made herein shall survive any investigation made by any party hereto,
the execution and delivery of this Agreement and the closing of the transactions contemplated hereby.

 

5.4             
Successors and Assigns. This Agreement shall bind and inure to the benefit of the Company and the Holders and their
respective successors and permitted assigns. Subject to applicable federal and state securities laws and regulations, the Holders
may freely assign either this Agreement or any of their rights, interests, or obligations hereunder without the prior written approval
of the Company.

 

5.5             
Entire
Agreement. This Agreement and the other writings referred to herein or delivered pursuant hereto (including the other Transaction
Documents) which form a part hereof contain the entire agreement among the parties with respect to the subject matter hereof and
thereof and supersede all prior and contemporaneous arrangements or understandings with respect thereto.

 

5.6             
Notices.Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing
and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by facsimile, then such notice shall be deemed given upon receipt of confirmation of complete
transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three (3) Business Days after such notice is deposited in first class mail, postage prepaid, (iv) 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, and (v) if given by electronic mail, upon receipt. All notices shall be addressed to the party to be notified
at the address as follows, or at such other address as such party may designate by ten (10) Business Days’ advance written
notice to the other party:

 

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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

E-mail: [______]

 

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

 

Amy Trombly, Esq.

Trombly Business Law, PC

1320 Centre Street, Suite 202

Newton, MA 02459

Fax: (617) 243-0066

E-mail: [______]

 

If to the Holders:

 

to the addresses set forth on Annex I
hereto;

 

or to such other address as the party
to whom such notice or other communication is to be given may have furnished to each other party in writing in accordance herewith.

 

5.7             
Amendments, Modifications, Terminations and Waivers. Provisions of this Agreement and the Securities may be amended,
modified, terminated or waived only by the written consent of the Company and the Holders.

 

5.8             
Governing Law; 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. 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.

 

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5.9             
No Third Party Reliance. Anything contained herein to the contrary notwithstanding, the representations and warranties
of the Company contained in this Agreement (a) are being given by the Company as an inducement to the Holders to enter into this
Agreement and the other Transaction Documents (and the Company acknowledges that the Holders have expressly relied thereon) and
(b) are solely for the benefit of the Holders. Accordingly, no third party (including, without limitation, any holder of capital
stock of the Company) or anyone acting on behalf of any holder thereof other than the Holders, and each of them, shall be a third-party
or other beneficiary of such representations and warranties and no such third party shall have any rights of contribution against
the Holders or the Company with respect to such representations or warranties or any matter subject to or resulting in indemnification
under this Agreement or otherwise.

 

5.10         
Publicity. Neither the Holders nor the Company shall issue any press release or make any public disclosure regarding
the transactions contemplated hereby unless such press release or public disclosure is approved by the Company in advance. Notwithstanding
the foregoing, each of the parties hereto may, in documents required to be filed by it with the Commission or other regulatory
bodies, make such statements with respect to the transactions contemplated hereby as each may be advised by counsel is legally
necessary or advisable.

 

5.11         
Severability. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the
fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly,
in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in any jurisdiction. Notwithstanding the foregoing,
if such provision could be more narrowly drawn so as to not be invalid, prohibited or unenforceable in such jurisdiction, it shall,
as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.

 

5.12         
Independence of Agreements, Covenants, Representations and Warranties. All agreements and covenants hereunder shall
be given independent effect so that if a certain action or condition constitutes a default under a certain agreement or covenant,
the fact that such action or condition is permitted by another agreement or covenant shall not affect the occurrence of such default,
unless expressly permitted under an exception to such covenant. In addition, all representations and warranties hereunder shall
be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact
that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect
the incorrectness of or a breach of a representation and warranty hereunder. The annexes and exhibits attached hereto are hereby
made part of this Agreement in all respects.

 

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5.13         
Counterparts; Facsimile and Electronic Signatures. This Agreement may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute
but one agreement. Counterpart signatures to this Agreement delivered by facsimile or other electronic transmission shall be acceptable
and binding.

 

5.14         
Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.

 

ARTICLE 6

 

DEFINITIONS

 

In addition to those
terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings
set forth below:

 

“Business
Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction
of business.

 

“Person”
means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.

 

“Transaction
Documents” means this Agreement, the Warrants and the Registration Rights Agreement.

 

*  *  *  *  *

 

 

 

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IN WITNESS WHEREOF, each of the
undersigned has duly executed this Settlement Agreement as of the date first written above.

 

 

		PRECISION OPTICS CORPORATION, INC.
	 	 
	 	By: 	/s/ Joseph N. Forkey
	 	Name:

        Title:
	Joseph N. Forkey
Chief Executive
Officer

 

 

 

 

 

 

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IN WITNESS WHEREOF, each of the
undersigned has duly executed this Settlement Agreement as of the date first written above.

 

		SPECIAL SITUATIONS FUND III QP, L.P.
	 	 
	 	By: 	/s/ David Greenhouse
	 	Name:

        Title:
	David Greenhouse
General Partner

 

 

		SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
	 	 
	 	By: 	/s/ David Greenhouse
	 	Name:

        Title:
	David Greenhouse
General Partner

 

 

 

 

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ANNEX I

Schedule of Holders

	
        Holders

        (Holder Name, Address and Contact Information)
	Number of Shares	Number of Warrants
	
        SPECIAL SITUATIONS FUND III QP, L.P.

        527 Madison Avenue Suite 2600

        New York, NY 10022

        (212) 319-6670

         
	175,000	175,000
	
        SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.

        527 Madison Avenue Suite 2600

        New York, NY 10022

        (212) 319-6670

         
	175,000	175,000
	Total	350,000	350,000

 

 

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EXHIBIT A

Form of Warrant to Purchase Shares
of Common Stock

(See attached)

 

 

 

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EXHIBIT B

 

Form of Registration Rights Agreement

(See attached)

 

 

 

 

 

 

 

 

 

14Exhibit 10.2

 

SETTLEMENT AGREEMENT

 

THIS SETTLEMENT
AGREEMENT (this “Settlement Agreement”) is made and entered into as of February 12, 2013 by and between
Precision Optics Corporation, Inc., a Massachusetts corporation (the “Company”), on the one hand, and Joel Pitlor,
an individual (the “Investor”), on the other hand. The Company and the Investor may be referred to hereinafter
individually as a “Party” and collectively, as the “Parties.”

 

RECITALS

 

WHEREAS, on
February 1, 2007, the Company entered into a purchase agreement with the Investor and other parties thereto (the “2007
Purchase Agreement”), and contemporaneously with the execution of the 2007 Purchase Agreement, the Parties executed a
registration rights agreement (the “2007 Registration Rights Agreement”);

 

WHEREAS, pursuant
to the terms of the 2007 Registration Rights Agreement, the Company agreed to use commercially reasonable efforts to maintain the
effectiveness of a registration statement or registration statements to cover the resale of securities sold in the 2007 Purchase
Agreement;

 

WHEREAS, the
Parties acknowledge that the Investor may have a potential basis for claims of damages calculated pursuant to the terms of the
2007 Registration Rights Agreement;

 

WHEREAS, the
Investor has agreed that, he will accept an aggregate of (i) 10,000 shares (the “Shares”) of the Company’s
common stock, par value $0.01 per share (the “Common Stock”), and warrants in the form attached hereto as Exhibit
A (the “Warrants”) to purchase an aggregate of 10,000 shares of Common Stock (the “Warrant Shares”
and, together with the Shares, and the Warrants, the “Securities”) in payment in full of the amounts due under
the 2007 Registration Rights Agreement (the “Settlement Consideration”);

 

NOW THEREFORE,
for good and valuable consideration, for the purpose of settling potential claims without litigation, and without admission of
any fault or liability on the part of any Party whatsoever, the Parties hereby agree as follows:

 

Section 1.       Definitions.

 

In addition to those terms defined above
and elsewhere in this Settlement Agreement, for the purposes of this Settlement Agreement, the following terms shall have the meanings
set forth below:

 

“Business
Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction
of business.

 

“Person”
means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.

 

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

 

“Transaction
Documents” means this Agreement and the Warrants.

    	1

    	 

    

 

 

Section 2.       Issuance of Shares and
Warrants in Settlement. Within three (3) Business Days of the execution and delivery of this Settlement Agreement, the Company
shall issue the Shares and Warrants to the Investor as payment in full of the Settlement Consideration owed to such Investor.

 

Section 3.       Reliance on Independent
Legal Advice. Each Party represents and warrants to the other Party that:

 

		(a)	It has received advice from his or its own respective, independent legal counsel prior to its execution
of this Settlement Agreement;

 

		(b)	The legal nature and effect of this Settlement Agreement has been explained to it by its respective
counsel;

 

		(c)	It fully understands the terms and provisions of this Settlement Agreement and the nature and effect
thereof;

 

		(d)	It is relying solely on the advice of its own legal counsel in executing this Settlement Agreement;
and

 

		(e)	It has carefully read this Settlement Agreement, knows the contents thereof, and is executing the
same freely and voluntarily.

 

Section 4.       Representations and Warranties
of the Company. The Company hereby represents and warrants to the Investor that:

 

		(a)	Due Organization. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts. The Company has the corporate power and authority to execute,
deliver and perform this Settlement Agreement to which it is a party and to issue and deliver the Securities.

 

		(b)	Authorization, Validity and Enforceability. The
Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and
stockholders necessary for (i) the authorization, execution and delivery of this Settlement Agreement, (ii) the authorization of
the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance and delivery of
the Securities. When delivered in accordance with the terms hereof, this Settlement Agreement will constitute the legal, valid
and binding obligations of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’
rights generally and to general equitable principles.

 

		(c)	Issuance of the Securities. The Shares and the Warrants to purchase shares of the Company’s
Common Stock, when issued pursuant to the Settlement Agreement, have been duly authorized and validly issued and are fully paid
and nonassessable and free of preemptive or similar rights, and have been issued in compliance with applicable securities laws,
rules and regulations. The Warrant Shares have been duly and validly authorized and reserved for issuance, and, when issued upon
the exercise of the Warrants in accordance with the terms of the Warrants and as described in the Transaction Documents, will be
validly issued, fully paid and nonassessable, and free of any preemptive or similar rights.

    	2

    	 

    

 

		(d)	No Consents. The execution, delivery and performance by the Company of this Settlement Agreement
and the issuance of the Securities requires no consent of, action by or in respect of, or filing with, any governmental body, agency,
official or other third party, other than filings that have been made pursuant to applicable securities laws and post-sale filings
pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods.

 

		(e)	No Conflict. The execution, delivery and performance
of this Settlement Agreement by the Company and the issuance of the Securities will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under (i) the Company’s Articles of Organization,
as amended, or the Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been filed
on EDGAR), or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any subsidiary of the Company or any of their respective assets or properties, or (b) any
agreement or instrument to which the Company or any subsidiary of is a party or by which the Company or a subsidiary is bound or
to which any of their respective assets or properties is subject.

 

		(f)	No General Solicitation. Neither the Company nor any Person acting on its behalf has conducted
any general solicitation or general advertising (as those terms are used in the provisions of Regulation D, promulgated by the
Securities and Exchange Commission (the “Commission”) under the Securities Act) in connection with the issuance
of the Securities.

 

		(g)	Neither the Company nor any of its affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances
that would adversely affect reliance by the Company on Section 4(2) for the exemption from registration for the transactions contemplated
hereby or would require registration of the Securities under the Securities Act.

 

		(h)	The issuance of the Securities to the Investor as contemplated hereby is exempt from the registration
requirements of the Securities Act.

 

Section 5.       Representations and Warranties
of the Investor. The Investor represents and warrants to the Company that:

 

		(a)	Purchase for Own Account. Such Investor is acquiring the Securities for such Investor’s
own account for investment purposes only and not with a present view towards the public sale or distribution thereof except for
sales duly registered under the Securities Act. Such Investor is not a registered broker/dealer, nor is an affiliate of a registered
broker/dealer and such Investor does not have any agreement or understanding, directly or indirectly, with any person regarding
the sale or distribution of the Securities or any of the Company’s Common Stock, except this Settlement Agreement. Such Investor
understands that it must bear the economic risk of this investment indefinitely, unless the Securities are registered pursuant
to the Securities Act and any applicable state securities or blue sky laws or an exemption from such registration is available.

 

		(b)	Accredited Investor Status. Such Investor is an “accredited investor" as that
term is defined in Rule 501(a) of Regulation D, promulgated by the Commission under the Securities Act, and such Investor is capable
of evaluating the merits and risks of its investment in the Securities and has the ability and capacity to protect its interests.

    	3

    	 

    

 

		(c)	Information Availability. Such Investor acknowledges that the Company has made available
to Investor all documents and information that Investor has requested relating to an investment in the Securities, and Investor
has had an opportunity to discuss this investment with representatives of the Company and ask questions of them.

 

		(d)	No General Solicitation. Such Investor confirms that he did not learn of the issuance of
the Securities as a result of any general solicitation or general advertising.

 

		(e)	Reliance on Exemptions. Such Investor understands that the Securities are being issued to
such Investor in reliance upon specific exemptions from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and such Investor’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Investor set forth herein in order to determine the availability
of such exemptions and the eligibility of such Investor to acquire the Securities.

 

		(f)	Governmental Review. Such Investor understands that no United States federal or state agency
or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

		(g)	Transfer or Resale. Such Investor understands that (i) the sale or resale of the Securities
has not been and is not being registered under the Securities Act or any state securities laws, and the Securities may not be transferred
unless (A) the Investor shall have delivered to the Company an opinion of Company counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred
may be sold or transferred pursuant to an exemption from such registration; or (B) sold under and in compliance with Rule 144 promulgated
under the Securities Act (or a successor rule) (“Rule 144”).

 

		(h)	Authority to Enter into Settlement Agreement. Such Investor has all requisite legal and
other power and authority to execute and deliver this Settlement Agreement and to carry out and perform his obligations under the
terms of this Settlement Agreement. This Settlement Agreement constitutes a valid and legally binding obligation of such Investor
enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors’ rights and to general equity principles.

 

		(i)	Residency. Such Investor is a resident of the state set forth under the name of Investor
on his signature page to this Settlement Agreement.

 

		(j)	Restricted Securities. Such Investor understands that

 

		a.	the Securities are characterized as “restricted securities” under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in
certain limited circumstances.

 

		b.	the Securities have not been registered under the Securities Act or any state securities laws and
are being offered in reliance upon specific exemptions from the registration requirements of the Securities Act and state securities
laws, and the Company is relying upon the truth and accuracy of, and Investor’s compliance with, the representations, warranties,
covenants, agreements, acknowledgments and understandings of Investor contained in this Settlement Agreement in order to determine
the availability of such exemptions and the eligibility of Investor to acquire the Securities;

    	4

    	 

    

 

		c.	the Securities must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration;

 

		d.	the Securities will bear a legend substantially in the form set forth in Section 5(k) herein; and

 

		e.	the Company will make a notation on its transfer books to such effect.

 

		(k)	Legend. Such Investor understands that until such time as the Securities issued pursuant
to this Settlement Agreement may have been registered under the Securities Act or otherwise may be sold by the Investor under Rule
144, certificates for the Securities may bear a restrictive legend in substantially the following form:

 

		a.	“The securities represented hereby 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, and, accordingly, may not be transferred unless (i) such securities have been registered for sale pursuant to
the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144, or (iii) the Company has received
an opinion of Company counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under
the Securities Act of 1933 as amended.”

 

		b.	If required by the authorities of any state in connection with the issuance of sale of the Securities,
the legend required by such state authority.

 

		(l)	No Registration Rights. Such Investor further understands that there are no registration
rights associated with the Securities being acquired pursuant to this Settlement Agreement.

 

Section 6.       Related Party Transaction.
The Parties acknowledge that the Investor is a member of the Company’s board of directors and accordingly, by virtue of his
directorship with the Company, he is considered a related party of the Company under federal securities law. The Company’s
Board of Directors acknowledges that the Investor’s entry into this Settlement Agreement is a related party transaction and
has approved such transaction.

 

Section 7.       Fees and Expenses.
Each Party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Settlement Agreement.

 

Section 8.       Entire Agreement.
This Settlement Agreement contains the entire understanding and agreement between the Parties hereto with respect to the matters
referred to herein and supersedes any and all prior and contemporaneous commitments, undertakings and agreements, whether written
or oral. The Parties further acknowledge and agree that parol evidence shall not be required to interpret the intent of the Parties.
No other representations, covenants, undertakings, or other prior or contemporary agreements, whether oral or written, respecting
such matters, which are not specifically incorporated herein, shall be deemed in any way to exist or bind any of the Parties. The
Parties acknowledge that each party has not executed this Settlement Agreement in reliance on any other promise, representation,
or warranty.

    	5

    	 

    

 

Section 9.       Notices. Any notice
given by any Party under this Settlement Agreement shall in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by facsimile, then
such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three (3) Business Days after such
notice is deposited in first class mail, postage prepaid, (iv) 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, and (v) if given by electronic mail,
upon receipt.

 

Section 10.      Severability. In
case any provision of this Settlement Agreement shall be declared invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Settlement Agreement shall not in any way be affected or impaired thereby.

 

Section 11.      Waiver, Amendment, and
Modification of Settlement Agreement. The Parties agree that no waiver, amendment, or modification of any of the terms and/or
conditions of this Settlement Agreement shall be effective unless in writing and signed by all Parties affected by the waiver,
amendment, or modification. No waiver of any term, condition or default of any term of this Settlement Agreement shall be construed
as a waiver of any other term, condition or default.

 

Section 12.      Counterparts; Facsimile
and Electronic Signatures. This Settlement Agreement may be executed in any number of counterparts, and each such counterpart
hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Counterpart
signatures to this Settlement Agreement delivered by facsimile or other electronic transmission shall be acceptable and binding.

 

Section 13.      Headings.
The section and paragraph headings contained in this Settlement Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Settlement Agreement.

 

Section 14.      Governing Law. This
Settlement Agreement and its terms shall be governed by and construed under Massachusetts law.

 

Section 15.      No Admissions By Parties.
Nothing contained in this Settlement Agreement is intended to, or shall be deemed or construed to, be an admission by any Party
hereto, for any liability whatsoever, to the other Party, except as may be otherwise expressly provided for in this Settlement
Agreement.

 

Section 16.      Joint Participation in
Drafting. Each Party to this Settlement Agreement has participated in the negotiation and drafting of this Settlement Agreement.
As such, the language used herein shall be deemed to be the language chosen by the Parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any Party to this Settlement Agreement.

 

[Signature page to follow]

    	6

    	 

    

IN WITNESS WHEREOF,
each of the undersigned has duly executed this Settlement Agreement as of the date first written above.

 

PRECISION OPTICS CORPORATION, INC.

 

22 East Broadway

Gardner, Massachusetts 01440-3338

Fax: (978) 630-1487

 

 

By:/s/ Joseph N. Forkey

 

Name:Joseph N. Forkey

Title:Chief Executive Officer

 

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

 

Amy Trombly, Esq.

Trombly Business Law, P.C.

1320 Centre Street, Suite 202

Newton, MA 02459

Fax: (617) 243-0066

 

 

JOEL PITLOR

 

 

/s/ Joel Pitlor

Joel Pitlor, an individual

[Address]

 

    	7

    	 

    

EXHIBIT A

 

Form of Warrant to Purchase Shares of
Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	8

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