Document:

<PAGE>

                               [CHIRON LETTERHEAD]

May 28, 1999

                                                                   CONFIDENTIAL
                                                                   ------------

Dr. Peder Jensen
40 Gatehouse Road
Bedminster, New Jersey 07921

Via Fax 908-781-7914

Dear Peder:

We are pleased to confirm the terms of our offer to you as the Head of
Development at Chiron Corporation, reporting to me. As discussed, you will be
elected as a corporate Vice President and confirmation of your role as an
executive officer of Chiron will take place at the next Board of Directors
meeting. Following an internal review of titles, your position may well
qualify as a Senior Vice President, but the review is not complete and
individual title changes are subject to approval by the Board. You will chair
the company's Development Committee and be a senior member of the REAP
Committee.

Your starting salary will be $310,000 per annum. We are offering you a
signing bonus of $50,000, payable within 10 days following your start date.
You will be eligible to participate in Chiron's Annual Incentive Plan (AIP)
program. The results of the company and the Research and Development division
and your own performance during the calendar year determine awards under this
program. You will be eligible for an award of between 0 and 90% of your base
salary, with a target of 45%. Executive compensation is reviewed annually in
February. Annual incentive plan payments and merit increases to base salary
are effective in March. We will guarantee a minimum bonus of 45% for 1999,
prorated according to your employment in this year. For the full performance
year 2000, we will guarantee a minimum AIP payment of $100,000.

You will be eligible to participate in our stock option program. Subject to
the approval of the Board of Directors, we will award you the following under
the program. Beginning in year 2000 you will be eligible for further stock
option grants based on your performance.

-    A stock option grant of 140,000 options to purchase Chiron common stock.
     The options vest fully over a four-year period, with the first 25% of
     the shares vesting at the one-year grant anniversary. Shares vest on a
     pro-rated monthly basis over the remaining three years of the vesting
     period. The exercise price of the option will be set at the fair market
     value (as defined in the Option Plan) of a share of Chiron stock on the
     date the option is approved. We expect the grant to be approved and
     effective by the end of the month in which your employment begins.

-    A restricted share right grant for 25,000 shares. The share rights vest
     40% at 2 years from date of grant and the remaining 60% at 4 years from
     date of grant. The date of grant will be your first day of employment.

<PAGE>

We will assist you in your relocation from New Jersey. The enclosed sheets
detail the relocation benefits offered. In addition we will arrange for
a rental car or cars for up to 60 days, as needed as part of your
temporary living expenses. In addition, subject to other aspects of the Loss
Protection policy for sale of your New Jersey home, we will increase the
maximum reimbursement to $60,000 from the policy limit of $15,000. According
to policy this benefit is eligible for tax gross up. Your miscellaneous
relocation expense allowance will be $10,000.

Also in addition to standard relocation benefits, we are prepared to make you
a two part loan which must be used exclusively for the purchase of your
principal residence and which must be secured by a second deed of trust on
that residence. Part one, consisting of $200,000 will be subject to the
Applicable Federal Rate of Interest and will require interest only payments.
The principal amount of this part will be forgiven as follows: $35,000 at the
end of the first anniversary of your employment. On the second through fifth
anniversaries of employment the amounts forgiven will be $35,000, $40,000,
$40,000 and $50,000, respectively. The second part of the loan, of up to
$200,000, will be at the Applicable Federal Rate of Interest and will be
payable, at your option, either on an interest only basis for 10 years with a
balloon payment of the principle due at the end of ten years or as a fully
amortized loan over 10 years. Both parts of the loan are repayable within 90
days should you voluntarily resign. Taxes arising from the loan forgiveness
are your responsibility.

In the event of a change in control and your employment is severed, you will
be eligible for severance of a minimum of one year of base salary plus bonus,
the bonus portion being calculated as the average of the prior 2 years bonus
payments. This benefit is in lieu of any other Chiron change of control
severance plan payments you might be due. Novartis exercising its right to
purchase up to 55% under the governance agreement in place does not
constitute a change in control for purposes of this severance benefit.

At your request, in lieu of executive financial counseling benefits in the
first year of your employment, we will reimburse you for tax preparation
services for the year 2000 up to a maximum of $10,000. Beginning in year
2001 you would be eligible for the annual executive financial counseling
benefit ($5,000 per annum) that you may use for tax preparation if you so
choose.

The information sheets following your offer letter contain some of the
highlights of Chiron's benefits programs. You should note that, while this
offer is being made under the terms of our current benefits and compensation
programs, changes do occur from time to time and any system-wide changes that
occur will apply to you as well. You requested information on our current
health and life insurance rates. The 1999 monthly cost for our Aetna PPO plan
for family coverage is $126.10 per month and Delta Dental Plan coverage for
family is $23.42 per month. Chiron provides "credits" in our flex benefits
program to pay for 2 times annual salary in life insurance. An employee may
purchase additional amounts up to a maximum of $800,000. Additional amounts
are approximately $0.133 per thousand dollars of coverage per month. Age and
lifestyle habits will affect the exact rates.

Some of the benefit programs are effective immediately upon your employment,
while others are dependent upon established enrollment periods. Your group
medical insurance benefits generally start on the first day of the month
FOLLOWING your date of hire. If, however, your date of hire is the first
business day of the month, your coverage becomes effective on that date. Note
also that, with few exceptions, Chiron extends benefits coverage to qualified
family members, including opposite- and same-sex domestic partners.

<PAGE>

As a part of Chiron's routine medical surveillance program, employees with
certain project assignments may be advised to provide a baseline blood sample
for archival storage. The Chiron Occupational Health Department will notify
you if a baseline blood draw is recommended.

This offer is contingent upon your ability, as required by federal law, to
establish your employment eligibility as a U.S. citizen, a U.S. lawful
permanent resident, or an individual specifically authorized for employment
in the U.S. by the Immigration and Naturalization Service.

Under California law, employment with Chiron is not for any specified term
and can be terminated at any time for any reason by you or Chiron. Any
contrary representations that have been made or may be made to you are
superseded by this offer. When you accept the offer, the terms described in
this letter and the Chiron Employee Invention and Confidential Information
Agreement shall constitute the terms of your employment.

We are anxious to confirm your acceptance and set a starting date. I think
this opportunity is an excellent one for you and I believe Chiron will
benefit from your experience and expertise. We would like a response to our
enhanced offer by Friday, May 28 but at latest Tuesday, June 1. Linda Short
and I are available to answer questions, so do not hesitate to call.

Sincerely,

CHIRON CORPORATION

/s/ Lewis T. Williams

Lewis T. Williams
President, Research and Development

Enclosures
cc:  Human Resources

Please indicate your understanding of the terms of this offer and your
acceptance of this offer by signing this letter and returning the letter to
me as soon as possible.

/s/ Peder Jensen              6-1-99
---------------------------------------
Name                          Date

<PAGE>

                                 PROMISSORY NOTE A
                                 -----------------

$200,000.00                                              SEPTEMBER 21, 1999
                                                         Emeryville, California

         FOR VALUE RECEIVED, the undersigned, PEDER K. JENSEN AND ISABEL
J. JENSEN (collectively, hereinafter called "Borrower"), hereby promise to
pay CHIRON CORPORATION, a Delaware corporation or order ("Lender"), the
principal sum of  TWO HUNDRED THOUSAND DOLLARS AND NO/100THS CENTS
($200,000.00), in lawful money of the United States of America, with interest
equal to 5.980%, to purchase that certain improved real property located at
71 Bay Way, San Rafael, Marin County, California (the "Property")
constituting Borrower's principal residence in California (the "Loan").

    1. All payments of principal, interest and any other amounts payable on
or in respect of this Note or the indebtedness evidenced hereby shall be made
to the account of Lender at its principal office located at 4560 Horton
Street, Emeryville, California 94608, or to such other place as Lender may
from time to time designate by written notice to Borrower.  All payments
shall be in lawful money of the United States of America.

    2. The principal amount of Two Hundred Thousand Dollars ($200,000.00)
hereunder shall become due and payable on the earlier to occur of the
following: (i) August 2, 2004, which is five (5) years from the date of Peder
K. Jensen's ("Dr. Jensen") date of employment ["Jensen's Employment Date"]
(the "Maturity Date"), or (ii) such earlier date as described in Paragraph 5
below (the "Repayment Date").

    3. Borrower shall make annual interest payments on the outstanding
principal balance hereunder over the five-year term, commencing on the first
anniversary of Jensen's Employment Date, and on each successive anniversary
date thereafter, through and including the Maturity Date, as more
particularly described on ANNEX 1 attached hereto.

    4. Notwithstanding the foregoing provisions, the principal amount of this
Note shall be reduced and forgiven in five (5) annual increments as follows:
beginning on the first anniversary after Dr. Jensen's Employment Date,
Thirty-Five Thousand Dollars ($35,000.00); on the second anniversary after
Dr. Jensen's Employment Date, Thirty-Five Thousand Dollars ($35,000.00); on
the third anniversary after Dr. Jensen's Employment Date, Forty Thousand
Dollars ($40,000.00); on the fourth anniversary after Dr. Jensen's Employment
Date, Forty Thousand Dollars ($40,000.00); and on the fifth anniversary after
Dr. Jensen's Employment Date, Fifty Thousand Dollars ($50,000.00), through
and including the Maturity Date, as more particularly described on ANNEX 1
attached hereto, with the outstanding principal balance forgiven in full on
the Repayment Date, if and only if on the applicable forgiveness date, Dr.
Jensen continues to be a full-time employee of Chiron Corporation or an
affiliate thereof.

<PAGE>

    5. Notwithstanding the above provisions, in the event that Dr. Jensen
voluntarily leaves Chiron Corporation or an affiliate thereof, or is
terminated for cause, prior to the Maturity Date, the outstanding principal
balance of the Loan and all accrued, but unpaid interest owing thereon
through and including the Repayment Date shall become immediately due and
payable and shall be repaid by Borrower in full within a reasonable period
not to exceed ninety (90) days from the date of Dr. Jensen's leaving the
full-time employ of Chiron Corporation or an affiliate thereof.

    6. Borrower and Lender agree that the indebtedness evidenced by this Note
shall be Borrower's sole and personal liability, and shall be secured by a
Deed of Trust executed by Borrower in favor of Lender and recorded against
the Property, which Deed of Trust shall be subordinate to that of the lien
secured by first mortgagor's Deed of Trust encumbering the Property.
Borrower agrees to use their best efforts to enable Lender to record such
Deed of Trust in favor of Lender for the total amount of this Loan, and any
related loan for additional funds extended by Lender to Borrower, including
that certain note in the principal sum of $200,000.00, dated of even date
herewith and executed by Borrower in favor of Lender (collectively, the
"Notes"), the aggregate amount of which shall be secured by the Property,
pursuant to that certain Deed of Trust to be recorded against the Property as
soon as practicable after Borrower closes escrow on the purchase of the
Property with first mortgagor.

    7. Nothing herein shall be deemed to create any obligation of continued
employment on the part of Dr. Jensen or Chiron Corporation.

    8. Borrower and Lender agree that upon recordation of a Deed of Trust
covering the Property in substantially the form attached hereto as ANNEX 2,
the obligations of Borrower under this Note, and any related loan for
additional funds extended by Lender to Borrower in connection with Borrower's
purchase of such Property, including the Notes, shall become subject to the
terms of that certain Deed of Trust which contains the following provision:
"In the event the herein described property or any part thereof, or any
interest therein is sold, agreed to be sold, conveyed or alienated by the
Trustor (Borrower), or by the operation of law or otherwise, all obligations
secured by this instrument, irrespective of the maturity dates expressed
therein, at the option of the holder hereof and without demand or notice
shall immediately become due and payable."

    9. In the event that Borrower intends to, sell, agrees to sell, transfers
or conveys their interest in the Property or any part thereof or any interest
therein, Lender and Borrower agree that they shall execute in writing an
agreement as to a substitution of security for the indebtedness covered
hereunder, or Lender will repay this Note in full, including all accrued but
unpaid interest owing thereon through the Repayment Date.

                                       2
<PAGE>

    10. Should the indebtedness evidenced by this Note be collected by action
at law, or in bankruptcy, receivership or other court proceeding, or should
this Note be placed in the hands of attorneys for collection after default,
Borrower agrees to pay, upon demand of Lender, in addition to principal and
interest, and other sums, if any, due and payable hereunder, court costs and
reasonable attorneys' fees and other reasonable collection charges, whether
suit be brought or not, unless prohibited by law. Borrower hereby waives
diligence, presentment, protest and demand of every kind and (to the full
extent permitted by law) the right to plead any statute of limitations as a
defense to any demand or action hereunder or in connection with any security
herefor, and hereby agrees that no failure on the part of Lender to exercise
any power, right or privilege hereunder, or to insist upon prompt compliance
with the terms hereof, shall constitute a waiver thereof.

    11. In the event of any failure on the part of Borrower to make any
payment when due, Borrower hereby agrees to pay, upon demand of Lender, in
addition to principal and interest and other sums, if any, due and payable
hereunder, court costs and reasonable attorneys' fees and other reasonable
collection charges that Lender shall be entitled to recover from Borrower,
whether suit be brought or not.

    12. Any notice to either party hereto may be given by delivering the same
in writing to such party in person, or by sending the same by registered or
certified mail, postage prepaid, to the following mailing addresses or to any
other mailing addresses within the State of California of which the parties
notify each other:

        Borrower:     Peder K. Jensen and Isabel J. Jensen
                      71 Bay Way
                      San Rafael, California  94901

        Lender:       Chiron Corporation
                      4560 Horton Street
                      Emeryville, California  94608
                      Attn:  Office of the General Counsel

    13. In the event that any one or more of the provisions contained in this
Note shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Note, but this Note shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained herein
or therein.

                                       3
<PAGE>

    14. Any failure of the Lender to exercise or enforce any right hereunder
shall not constitute a waiver of such right.  All rights of the Lender
hereunder shall be cumulative and not alternative and shall be in addition to
any other rights and remedies granted to the Lender pursuant to any other
agreement, by statute, or by law.

    15. Borrower shall not assign, convey, transfer, delegate, subordinate or
otherwise, mortgage, hypothecate or encumber, any of his interest, rights or
obligations hereunder to any other party.

    16. This Note may not be changed orally, but only by an agreement in
writing signed by the parties against whom enforcement of any waiver, change,
modification or discharge is sought.

    17. This Note shall be construed and enforced in accordance with, and
governed by, the laws of the State of California and shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, legal representatives, successors and
assigns.

    WITNESS the due execution hereof with the intent of being legally bound,
effective as of the date first set forth above.

BORROWER:

     /s/ Peder K. Jensen                September 11, 1999
----------------------------        -------------------------
PEDER K. JENSEN                     Date

  /s/ Isabel J. Jensen
 By Peder K. Jensen as
    Attorney-in-Fact                    September 11, 1999
----------------------------        -------------------------
ISABEL J. JENSEN                    Date

                                       4
<PAGE>

                               PROMISSORY NOTE B
                               -----------------

$200,000.00                                              SEPTEMBER 21, 1999
                                                         Emeryville, California

         FOR VALUE RECEIVED, the undersigned, PEDER K. JENSEN AND ISABEL J.
JENSEN (collectively, hereinafter called "Borrower"), hereby promise to pay
CHIRON CORPORATION, a Delaware corporation or order ("Lender"), the principal
sum of  TWO HUNDRED THOUSAND DOLLARS AND NO/100THS CENTS ($200,000.00), in
lawful money of the United States of America, with interest equal to 6.250%,
to purchase that certain improved real property located at 71 Bay Way, San
Rafael, Marin County, California (the "Property") constituting Borrower's
principal residence in California (the "Loan").

    1. All payments of principal, interest and any other amounts payable on
or in respect of this Note or the indebtedness evidenced hereby shall be made
to the account of Lender at its principal office located at 4560 Horton
Street, Emeryville, California 94608, or to such other place as Lender may
from time to time designate by written notice to Borrower.  All payments
shall be in lawful money of the United States of America.

    2. The principal amount of Two Hundred Thousand Dollars ($200,000.00.00)
hereunder shall become due and payable on the earlier to occur of the
following: (i) August 2, 2009, which is ten (10) years from the date of Peder
K. Jensen's ("Dr. Jensen") date of employment ["Jensen's Employment Date"]
(the "Maturity Date"), or (ii) such earlier date as described in Paragraph 5
below (the "Repayment Date").

    3. Borrower shall make annual interest payments on the outstanding
principal balance hereunder over the ten-year term, commencing on the first
anniversary of Jensen's Employment Date, and on each successive anniversary
date thereafter, through and including the Maturity Date, as more
particularly described in ANNEX 1 attached hereto.

    4. Notwithstanding the foregoing provisions, the principal amount of this
Note and all accrued but unpaid interest owing thereon through and including
the Maturity Date shall be due and payable on August 2, 2009.

    5. Notwithstanding the above provisions, in the event that Dr. Jensen
voluntarily leaves Chiron Corporation or an affiliate thereof, or is
terminated for cause, prior to the Maturity Date, the outstanding principal
balance of the Loan and all accrued, but unpaid interest owing thereon
through and including the Repayment Date shall become immediately due and
payable and shall be repaid by Borrower in full within a reasonable period
not to exceed ninety (90) days from the date of Dr. Jensen's leaving the
full-time employ of Chiron Corporation or an affiliate thereof.

<PAGE>

    6. Borrower and Lender agree that the indebtedness evidenced by this Note
shall be Borrower's sole and personal liability, and shall be secured by a
Deed of Trust executed by Borrower in favor of Lender and recorded against
the Property, which Deed of Trust shall be subordinate to that of the lien
secured by first mortgagor's Deed of Trust encumbering the Property.
Borrower agrees to use their best efforts to enable Lender to record such
Deed of Trust in favor of Lender for the total amount of this Loan, and any
related loan for additional funds extended by Lender to Borrower, including
that certain note in the principal sum of $200,000.00, dated of even date
herewith and executed by Borrower in favor of Lender (collectively, the
"Notes"), the aggregate amount of which shall be secured by the Property,
pursuant to that certain Deed of Trust to be recorded against the Property as
soon as practicable after Borrower closes escrow on the purchase of the
Property with first mortgagor.

    7. Nothing herein shall be deemed to create any obligation of continued
employment on the part of Dr. Jensen or Chiron Corporation.

    8. Borrower and Lender agree that upon recordation of a Deed of Trust
covering the Property in substantially the form attached hereto as ANNEX 2,
the obligations of Borrower under this Note, and any related loan for
additional funds extended by Lender to Borrower in connection with Borrower's
purchase of such Property, including the Notes, shall become subject to the
terms of that certain Deed of Trust which contains the following provision:
"In the event the herein described property or any part thereof, or any
interest therein is sold, agreed to be sold, conveyed or alienated by the
Trustor (Borrower), or by the operation of law or otherwise, all obligations
secured by this instrument, irrespective of the maturity dates expressed
therein, at the option of the holder hereof and without demand or notice
shall immediately become due and payable."

    9. In the event that Borrower intends to, sell, agrees to sell, transfers
or conveys their interest in the Property or any part thereof or any interest
therein, Lender and Borrower agree that they shall execute in writing an
agreement as to a substitution of security for the indebtedness covered
hereunder, or Lender will repay this Note in full, including all accrued but
unpaid interest owing thereon through the Repayment Date.

    10. Should the indebtedness evidenced by this Note be collected by action
at law, or in bankruptcy, receivership or other court proceeding, or should
this Note be placed in the hands of attorneys for collection after default,
Borrower agrees to pay, upon demand of Lender, in addition to principal and
interest, and other sums, if any, due and payable hereunder, court costs and
reasonable attorneys' fees and other reasonable collection charges, whether
suit be brought or not, unless prohibited by law. Borrower hereby waives
diligence, presentment, protest and demand of every kind and (to the full
extent permitted by law) the right to plead any statute of limitations as a
defense to any demand or action hereunder or in connection with any security
herefor, and hereby agrees that no failure on the part of Lender to exercise
any power, right or

                                       2
<PAGE>

privilege hereunder, or to insist upon prompt compliance with the terms
hereof, shall constitute a waiver thereof.

    11. In the event of any failure on the part of Borrower to make any
payment when due, Borrower hereby agrees to pay, upon demand of Lender, in
addition to principal and interest and other sums, if any, due and payable
hereunder, court costs and reasonable attorneys' fees and other reasonable
collection charges that Lender shall be entitled to recover from Borrower,
whether suit be brought or not.

    12. Any notice to either party hereto may be given by delivering the same
in writing to such party in person, or by sending the same by registered or
certified mail, postage prepaid, to the following mailing addresses or to any
other mailing addresses within the State of California of which the parties
notify each other:

    Borrower:  Peder K. Jensen and Isabel J. Jensen
               71 Bay Way
               San Rafael, California  94901

    Lender:    Chiron Corporation
               4560 Horton Street
               Emeryville, California  94608
               Attn:  Office of the General Counsel

    13. In the event that any one or more of the provisions contained in this
Note shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Note, but this Note shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained herein
or therein.

    14. Any failure of the Lender to exercise or enforce any right hereunder
shall not constitute a waiver of such right.  All rights of the Lender
hereunder shall be cumulative and not alternative and shall be in addition to
any other rights and remedies granted to the Lender pursuant to any other
agreement, by statute, or by law.

    15. Borrower shall not assign, convey, transfer, delegate, subordinate or
otherwise, mortgage, hypothecate or encumber, any of his interest, rights or
obligations hereunder to any other party.

    16. This Note may not be changed orally, but only by an agreement in
writing signed by the parties against whom enforcement of any waiver, change,
modification or discharge is sought.

                                       3
<PAGE>

    17. This Note shall be construed and enforced in accordance with, and
governed by, the laws of the State of California and shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, legal representatives, successors and
assigns.

    WITNESS the due execution hereof with the intent of being legally bound,
effective as of the date first set forth above.

BORROWER:

     /s/ Peder K. Jensen                September 11, 1999
----------------------------        -------------------------
PEDER K. JENSEN                     Date

  /s/ Isabel J. Jensen
 By Peder K. Jensen as
    Attorney-in-Fact                    September 11, 1999
----------------------------        -------------------------
ISABEL J. JENSEN                    Date

                                       4<PAGE>

                                                                   Exhibit 4.6.1

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.

                                                                  March 17, 2000

                                     WARRANT

                  TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
                       PRECISION OPTICS CORPORATION, INC.

             VOID AFTER 5:00 P.M., NEW YORK TIME, ON MARCH 17, 2005,
           OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.,
            NEW YORK TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY

No. 1

         THIS CERTIFIES that, for good and valuable consideration, FIRST
SECURITY VAN KASPER ("FSVK"), or registered assigns (the "Warrantholder"), is
entitled to subscribe for and purchase from Precision Optics Corporation Inc., a
Massachusetts corporation (the "Company"), at a price of $19.00 per share (such
price, as from time to time to be adjusted as hereinafter provided, being
hereinafter called the "Warrant Price"), at any time and from time to time prior
to the Expiration Date (as defined below), up to 47,368 fully paid,
nonassessable shares of Common Stock, par value $0.01 per share, of the Company
("Common Stock"), subject, however, to the provisions and upon the terms and
conditions hereinafter set forth, including without limitation the provisions of
Section 2 hereof. "Expiration Date" shall mean 5:00 P.M., New York time, on
March 17, 2005, which is five years from the date hereof, or if not a Business
Day, as defined herein, at 5:00 P.M., New York time, on the immediately
preceding business day. "Business Day" shall mean a day other than a Saturday,
Sunday or other day on which banks in the State of California are authorized by
law to remain closed.

SECTION 1.        EXERCISE OF WARRANT

         (a)      CASH EXERCISE

         This Warrant may be exercised, at any time and from time to time prior
to the Expiration Date, by the Warrantholder, in whole or in part (but not as to
a fractional share of Common Stock and in no event for less than 500 shares
(unless less than an aggregate of 500 shares are then purchasable under all
outstanding Warrants held by a Warrantholder)), by the completion of the
subscription form attached hereto and by the surrender of this Warrant (properly
endorsed) at the Company's offices at 22 East Broadway, Gardner, Massachusetts
(or at such other location in the United States as the Company may designate by
notice in writing to the Warrantholder at the address of the Warrantholder
appearing on the books of the Company), and by payment to the Company of the
Warrant Price, in cash or by certified or official bank check, for each share
being purchased.

         (b)      NET EXERCISE

         Notwithstanding anything to the contrary contained in Section 1(a), the
Warrantholder may elect to exercise this Warrant and receive shares on a "net
exercise" basis in an amount equal to the value of this Warrant by delivery of
the subscription form attached hereto and surrender of this Warrant at the
principal office of the Company, in which event the Company shall issue to
Holder a number of shares computed using the following formula:

<PAGE>

                           X = (P)(Y)(A-B)
                               -----------
                                       A

         Where:            X = the number of shares of Common Stock to be issued
                               to Holder.

                           P = the portion of the Warrant being exercised.

                           Y = the number of shares of Common Stock issuable
                               upon exercise of this Warrant.

                           A = the Current Market Price (as determined pursuant
                               to Section 1(d)) of one share of Common Stock.

                           B = Warrant Price.

         (c)      PROCEDURE FOR EXERCISE

         In the event of any exercise of the rights represented by this Warrant,
a certificate or certificates for the total number of whole shares of Common
Stock so purchased, registered in the name of the Warrantholder, shall be
delivered to the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares (except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates from the date on which this Warrant was surrendered and if exercise
is pursuant to Section 1(a), payment of the Warrant Price was made, irrespective
of the date of delivery of such certificate, except that, if the date of such
surrender and payment is a date on which the stock transfer books of the Company
are closed, such person shall be deemed to have become the holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open. No fractional shares shall be issued upon exercise of this
Warrant and no payment or adjustment shall be made upon any exercise on account
of any cash dividends on the Common Stock issued upon such exercise. If any
fractional interest in a share of Common Stock would, except for the provisions
of this Section 1, be delivered upon any such exercise, the Company, in lieu of
delivering the fractional share thereof, shall pay to the Warrantholder an
amount in cash equal to the Current Market Price of such fractional interest, as
determined below.

         (d)      CURRENT MARKET PRICE

         For any computation hereunder, the "Current Market Price" per share of
Common Stock on any date shall be deemed to be the average of the daily Market
Price per share for the 10 consecutive Trading Days prior to the date in
question. "Market Price" is defined as the closing bid prices of such security
on the principal United States securities exchange or trading market on which
such security is listed or traded as reported by the Research Service of Nasdaq
Trading and Market Services (or a comparable reporting service of national
reputation), or if the foregoing does not apply, the last reported sale price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Nasdaq, or, if no sale price is reported for
such security by Nasdaq, the average of the bid and asked prices of any market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If Market Price cannot be established as described above,
Market Price shall be the fair market value of the Common Stock as determined in
good faith by the Board of Directors. The term "Trading Day" shall mean a day on
which Nasdaq or the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for the transaction of business.

SECTION 2.        ADJUSTMENTS

         Prior to the Expiration Date, the Warrant Price and the number of
shares issuable upon the exercise of this Warrant, shall be subject to
adjustment from time to time as provided in this Section 2. In the event that
any

                                       2
<PAGE>

adjustment of the Warrant Price as required herein results in a fraction of a
cent, such Warrant Price shall be rounded up or down to the nearest cent;
provided that, in no event shall the Warrant Price per share be reduced below
$.01.

         (a)      SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company, at
any time prior to the Expiration Date, subdivides (by any stock split, stock
dividend, reclassification or otherwise) its shares of Common Stock into a
greater number of shares, then, after the date of record for effecting such
subdivision, the Warrant Price in effect immediately prior to such subdivision
will be proportionately reduced. If the Company, at any time prior to the
Expiration Date, combines (by reverse stock split, reclassification or
otherwise) its shares of Common Stock into a smaller number of shares, then,
after the date of record for effecting such combination, the Warrant Price in
effect immediately prior to such combination will be proportionately increased.

         (b)      ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Warrant Price pursuant to the provisions of this Section 2, the number of shares
of Common Stock issuable upon exercise of this Warrant shall be increased or
decreased to equal the quotient obtained by dividing (i) the product of (A) the
Warrant Price in effect immediately prior to such adjustment, multiplied by (B)
the number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such adjustment, by (ii) the adjusted Warrant Price.

         (c)      CONSOLIDATION, MERGER OR SALE. In case of any capital
reorganization or any reclassification of the shares of Common Stock of the
Company, or in the case of any consolidation with or merger of the Company into
or with another corporation or the sale of all or substantially all of its
assets to another corporation effected in such a manner that the holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as part of such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the holder of the Warrant shall have
the right thereafter to receive, upon the exercise hereof, the kind and amount
of shares of stock or other securities or property which the holder would have
been entitled to receive if, immediately before such reorganization,
reclassification, consolidation or merger, the holder had held the number of
shares of Common Stock which were then purchasable upon the exercise of the
Warrant had the Warrant been exercised. In any such case, appropriate adjustment
(as determined in good faith by the Board of Directors of the Company) shall be
made in the application of the provisions set forth herein with respect to the
rights and interests thereafter of the holder of the Warrant, to the end that
the provisions set forth herein (including provisions with respect to
adjustments of the exercise price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the exercise of this Warrant.

         (d)      NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Warrant Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Warrant Price resulting from such adjustment and the increase or
decrease in the number of shares issuable upon exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. Such calculation shall be certified by the Chief
Financial Officer of the Company.

         (e)      MINIMUM ADJUSTMENT OF THE EXERCISE PRICE. No adjustment of the
Warrant Price shall be made in an amount of less than .1% of the Warrant Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than .1% of such
Warrant Price.

         (f)      NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Warrant Price of a share of
Common Stock on the date of such exercise.

         (g)      OTHER NOTICES.  In case at any time:

                  (i) the Company shall declare any dividend upon the Common
Stock payable in shares of

                                       3
<PAGE>

stock of any class or make any other distribution (other than dividends or
distributions payable in cash out of retained earnings consistent with the
Company's past practices with respect to declaring dividends and making
distributions) to the holders of the Common Stock;

                  (ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

                  (iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or

                  (iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;

                  (v) then, in each such case, the Company shall give to the
holder of this Warrant (a) notice of the date or estimated date on which the
books of the Company shall close or a record shall be taken for determining the
holders of Common Stock entitled to receive any such dividend, distribution, or
subscription rights or for determining the holders of Common Stock entitled to
vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable estimate thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least fifteen (15) days prior to the record date or the date
on which the Company's books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
Notwithstanding the foregoing, the Company may publicly disclose the substance
of any notice delivered hereunder prior to delivery of such notice to the holder
of this Warrant.

         (h)      NO ADJUSTMENT FOR DIVIDENDS

         Except as provided in Section 2(a) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.

         (i)      FORM OF WARRANT AFTER ADJUSTMENTS

         The form of this Warrant need not be changed because of any adjustments
in the Warrant Price or the number or kind of the shares purchasable pursuant to
this Warrant, and Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in this
Warrant, as initially issued; PROVIDED, HOWEVER, that the Company may, at any
time in its sole discretion (which shall be conclusive), make any change in the
form of Warrant certificate that it may deem appropriate and that does not
affect the substance thereof. Any Warrant certificate thereafter issued, whether
upon registration of transfer of, or in exchange or substitution for, an
outstanding Warrant certificate may be in the form so changed.

         (j)      TREATMENT OF WARRANTHOLDER

         Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary.

         (k)      STOCK TO BE RESERVED

         The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for

                                       4
<PAGE>

the purpose of issuance upon the exercise of this Warrant as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
exercise of this Warrant. The Company covenants that all shares of Common Stock
which shall be so issued, upon full payment of the Warrant Price therefore or as
otherwise set forth herein, shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Company covenants that it will from time to time take all such action as may be
required to ensure that the par value per share, if any, of the Common Stock is
at all times equal to or less than the effective Warrant Price. The Company will
take all such action as may be necessary to ensure that all such shares of
Common Stock may be so issued without violation of any applicable law or
regulation, or of any requirement of any national securities exchange or
automated quotation system upon which the Common Stock of the Company may be
listed. The Company will not take any action that results in any adjustment
under this Section 2, if the total number of shares of Common Stock issued and
issuable after such action upon exercise of this Warrant would exceed the total
number of shares of Common Stock then authorized by the Company's Certificate of
Incorporation. The Company has not granted and will not grant any right of first
refusal with respect to shares issuable upon exercise of this Warrant, and there
are no preemptive rights associated with such shares.

         (l)      ISSUE TAX

         The issuance of certificates for shares of Common Stock upon exercise
of any Warrant shall be made without a charge to the Warrantholder for any
issuance tax in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.

         (m)      CLOSING OF BOOKS

         The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner that interferes with the timely exercise of this
Warrant.

         (n)      DEFINITION OF COMMON STOCK

         As used herein the term "Common Stock" shall mean and include the
Common Stock, par value $0.01, of the Company as authorized on the date hereof,
or shares of any class or classes resulting from any recapitalization or
reclassification thereof which are not limited to any fixed sum or percentage
and are not subject to redemption by the Company and in case at any time there
shall be more than one such resulting class, the shares of each class then so
issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassification bears to the total
number of shares of all such classes resulting from all such reclassification.

SECTION 3.        REGISTRATION RIGHTS

                  FSVK (and certain assignees thereof) are entitled to the
benefit of such registration rights in respect of the shares issuable upon
exercise of this Warrant as are set forth in that certain Registration Rights
Agreement dated as of March 17, 2000 among the Company, FSVK and the holders of
the Company's Common Stock named therein (as such agreement may be amended in
accordance with its terms).

SECTION 4.        NO STOCKHOLDERS RIGHTS OR LIABILITIES

         This Warrant shall not entitle the Warrantholder to any voting rights
or other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder for the
Warrant Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

SECTION 5.        LOST, STOLEN, MUTILATED OR DESTROYED WARRANT

                                       5
<PAGE>

         In case the certificate or certificates evidencing the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall, at the request of
the Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant and an agreement
of indemnity, if requested.

SECTION 6.        NOTICES

         All notices, requests and other communications required or permitted to
be given or delivered hereunder shall be in writing, and shall be delivered, or
shall be sent by certified or registered mail or overnight courier, postage
prepaid, or by facsimile, and if to the Warrantholder , at First Security Van
Kasper, 600 California Street, Suite 1700, San Francisco, CA 94108, Attention:
Ronald F. Richards, facsimile number (415) 675-2458, or to such address or
facsimile number as shall have been furnished to the Company by notice from such
Warrantholder and if to the Company, at 22 East Broadway, Gardner, MA 01440;
Attention: Chief Financial Officer, facsimile number (978) 630-1487, or at such
other address or facsimile number as shall have been furnished to the
Warrantholder by notice from the Company, with a copy to Ropes & Gray, One
International Place, Boston, MA 02110, Attention: Patrick O'Brien, facsimile
number (617) 951-7050.

SECTION 7.        RESTRICTIONS ON TRANSFER

         (a) If, at the time of the surrender of this Warrant in connection with
any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the
case of any exercise, the shares issuable hereunder), shall not be registered
under the Securities Act and under applicable state securities or blue sky laws,
the Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Warrant, as the case may be,
furnish to the Company a written opinion of counsel (which opinion shall be in
form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and sub-stance reasonably
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act.

         (b) Notwithstanding anything in the Warrant to the contrary, this
Warrant shall not be exercisable to the extent (but only to the extent) that (a)
the number of shares of Common Stock beneficially owned by the holder of this
Warrant and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
this Warrant or the unexercised or unconverted portion of any other securities
of the Company subject to a limitation on conversion or exercise analogous to
the limitation contained herein) and (b) the number of shares of Common Stock
issuable upon exercise of this Warrant (or portion thereof) with respect to
which the determination described herein is being made, would result in
beneficial ownership by such holder and its affiliates of more than 9.99% of the
outstanding shares of Common Stock. To the extent the above limitation applies,
the determination of whether and to what extent this Warrant shall be
exercisable with respect to other securities owned by such holder shall be in
the sole discretion of the holder and submission of this Warrant for full or
partial exercise shall be deemed to be the holder's determination of whether and
the extent to which this Warrant is exercisable, in each case subject to such
aggregate percentage limitation. No prior inability to exercise this Warrant
pursuant to this Section shall have any effect on the applicability of the
provisions of this Section with respect to any subsequent determination of
exercisability. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (a) hereof. The restrictions contained in this
Section 8(g) may not be amended without the written consent of the Company and
the holder of this Warrant.

                                       6
<PAGE>

SECTION 8.        AMENDMENTS AND WAIVERS

         This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.

SECTION 9.        SEVERABILITY

         If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

SECTION 10.       GOVERNING LAW

         THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.

SECTION 12.       HEADINGS

         The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.

SECTION 13.       COUNTERPARTS

         This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.

                  [Remainder of page intentionally left blank.]

                                       7
<PAGE>

         IN WITNESS WHEREOF, the Company and FSVK have executed this Warrant on
and as of the day and year first above written.

                                       PRECISION OPTICS CORPORATION, INC.,
                                       A MASSACHUSETTS CORPORATION

                                       By: /s/ JACK P. DREIMILLER
                                           -------------------------------------
                                           Jack P. Dreimiller, Senior Vice
                                           President, Finance

Attest:

/s/ RICHARD E. FORKEY
------------------------------
Richard E. Forkey, President

                                       FIRST SECURITY VAN KASPER

                                       By: /s/ RONALD F. RICHARDS
                                           -------------------------------------
                                           Ronald F. Richards, Managing Director

                                       8
<PAGE>

                                SUBSCRIPTION FORM

                  (To be executed upon exercise of this Warrant)

_______________________:

         The undersigned hereby irrevocably elects to exercise the right of
purchaser represented by the within Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for therein, and either
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $_____________ or, if the
undersigned elects pursuant to Section 1(b) of the within Warrant to convert
such Warrant into Common Stock a net issuance basis, the undersigned exercises
the within Warrant by exchange under the terms of Section 1(b).

         Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:

                                   Name:______________________________

                                   Address:___________________________

                                   Social
                                   Security No:_______________________

         If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.

                                   Name_______________________________

                                   Signature__________________________

                                   Note: The above signature must correspond
                                         exactly with the name on the first page
                                         of this Warrant or with the name of the
                                         assignee appearing in the assignment
                                         form below.

                                       9
<PAGE>

                                   ASSIGNMENT

                  (To be executed only upon assignment of Warrant)

         For value received, _______________________________ hereby sells,
assigns and transfers unto _______________________ the within Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ____________________ attorney, to
transfer said Warrant on the books of the within-named Company with respect to
the number of Warrants set forth below, with full power of substitution in the
premises:

                      Name(s) of
                      Assignee(s)/Address              No. of Warrants
                      -------------------              ---------------

And if said number of Warrants shall not be all the Warrants represented by the
Warrant, a new Warrant is to be issued in the name of said undersigned for the
balance remaining of the Warrants registered by said Warrant.

                                    Name_________________________

Dated: __________________           Signature____________________

                                    Note:  The above signature must correspond
                                           exactly with the name on the face of
                                           this Warrant

                                       10

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