Document:

sfi8kex101100212.htm

Exhibit 10.1

 

Mutual Termination of Common Stock Shares Purchase Agreement

This Mutual Termination of Common Stock Shares Purchase Agreement (this “Agreement”) is made effective as of September 30, 2012 (the “Effective Date”), among Swordfish Financial, Inc., formerly Nature Vision, Inc., a Minnesota corporation,  (“SWRF”), and Swordfish Financial, Inc., a Texas corporation (“Swordfish Texas”) may be referred to herein as a “party” and collectively as the “parties.”

 

WHEREAS, SWRF and Swordfish Texas entered into a Common Stock Shares Purchase Agreement dated as of August 14, 2009 (the “Common Stock Sales Agreement”);

 

WHEREAS, pursuant to the terms of the Common Stock Shares Purchase Agreement, SWRF issued to Swordfish Texas 10,987,417 shares of newly issued shares of the Company in exchanged for a $3,500,000 promissory note from Swordfish Texas. The Purchase Agreement provided that the Purchase Price was to be payable in two installments of $1,750,000 each with the first installment being forty-five (45) days from the date of the note and the second installment being one-hundred twenty (120) days from the date of the note.

WHEREAS, Swordfish Texas is in breach of the terms of the promissory note and SWRF and Swordfish Texas have mutually agreed to terminate the Common Stock Shares Purchase Agreement effective September 30, 2012 (the “Termination Date”); and

 

WHEREAS, Swordfish Texas has agreed to have the 10,987,417 (adjusted to 109,874,170 for the 10 to1 forward split in June 2011) shares of SWRF common stock returned to the SWRF’s treasury for cancellation.

 

NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.  Termination of Common Stock Shares Purchase Agreement.  As of the Termination Date, the Common Stock Shares Purchase Agreement will be terminated and the shares issued by SWRF, adjusted for the 10 to 1 forward split in June 2011, will be returned to the SWRF treasury for cancellation.  

2.  Releases.  SWRF, on its own behalf and on behalf of its successors and assigns, agents, affiliates and insurers hereby fully, finally and forever releases and discharges Swordfish Texas and its successors and assigns, agents, heirs, affiliates, partners and insurers, and their past, present, and future officers, directors, employees and stockholders, from any and all claims, rights, demands, actions, lawsuits or other proceedings which SWRF ever had, has or may have against the other parties through the date of this Agreement, including, without limitation, any and all claims or rights which could be asserted under or in connection with the Common Stock Shares Purchase Agreement;  provided, however , that SWRF is not releasing any claim which it may have to enforce the provisions of this Mutual Termination Agreement.

3.  Further Assurances.  The parties agree that, upon request, they each shall do such further acts and deeds, and shall provide, execute, acknowledge, deliver and/or record such books and records and such other documents and instruments as may be reasonably requested by the other party or necessary or appropriate from time to time to evidence, confirm or carry out the intent and purposes of this Agreement or to confirm compliance by a party to the terms and conditions of this Agreement.

 

4.  Governing Law.  This Agreement shall be governed by and construed, and the obligations, rights and remedies of the parties under this Agreement shall be determined, in accordance with the laws of the state of Texas, exclusive of its rules regarding conflicts of laws.

  

  

  

5.  Capitalized Terms.  Capitalized terms used herein that are not defined shall have the meaning ascribed to them in the Sales Management Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

	  	
SWORDFISH FINANCIAL, INC.

Minnesota corporation

	  
	  	  	  
	  	
By:

	
/s/ Randy Moseley

	  
	  	
Name:

	
Randy Moseley

	  
	  	
Title:

	
Chief Financial Officer

	  
	  	  	  	  
	
  

	
SWORDFISH FINANCIAL, INC.

Texas corporation

	  
	  	  	  	  
	  	
By:

	
/s/ Mike Alexander

	  
	  	
Name:

	
Mike AlexanderExhibit 4.1

 

THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OF 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.

 

SUBJECT TO THE PROVISIONS
OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON SEPTEMBER 28, 2017 (THE “EXPIRATION DATE”).

 

No. __________

 

 

PRECISION OPTICS CORPORATION, INC.

 

WARRANT TO PURCHASE _______ SHARES OF

COMMON STOCK, PAR VALUE $0.01 PER SHARE

 

For VALUE RECEIVED, ____________________
(“Warrantholder”), is entitled to purchase, subject to the provisions of this Warrant, from Precision Optics Corporation,
Inc., a Massachusetts corporation (“Company”), at any time not later than 5:00 P.M., Eastern time, on the Expiration
Date (as defined above), at an exercise price per share equal to $1.25 (the exercise price in effect being herein called the “Warrant
Price”), ______ shares (“Warrant Shares”) of the Company’s Common Stock, par value $0.01 per share (“Common
Stock”). The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to
adjustment from time to time as described herein. This Warrant is being issued pursuant to the Purchase Agreement, dated as of
September 28, 2012 (the “Purchase Agreement”), among the Company and the initial holders of the Company Warrants (as
defined in Section 22). Capitalized terms used herein have the respective meanings ascribed thereto in the Purchase Agreement unless
otherwise defined herein.

 

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

 

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Section 2.     Transfers.
As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of
1933, as amended (the “Securities Act”), or an exemption from such registration. Subject to such restrictions, the
Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender
hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may
be reasonably required by the Company, including, if required by the Company, an opinion of its counsel reasonably satisfactory
to the Company to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish
that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee and
the surrendered Warrant shall be canceled by the Company.

 

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

 

If (1) a certificate representing
the Warrant Shares is not delivered to the Warrantholder within three (3) Business Days of the due exercise of this Warrant by
the Warrantholder and (2) prior to the time such certificate is received by the Warrantholder, the Warrantholder, or any third
party on behalf of the Warrantholder or for the Warrantholder’s account, purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Warrantholder of shares represented by such certificate (a “Buy-In”),
then the Company shall pay in cash to the Warrantholder (for costs incurred either directly by such Warrantholder or on behalf
of a third party) the amount by which the total purchase price paid for Common Stock as a result of the Buy-In (including brokerage
commissions, if any) exceeds the proceeds received by such Warrantholder as a result of the sale to which such Buy-In relates.
The Warrantholder shall provide the Company written notice indicating the amounts payable to the Warrantholder in respect of the
Buy-In.

  

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Section 4.     Compliance
with the Securities Act of 1933. Except as provided in the Purchase Agreement, the Company may cause the legend set forth
on the first page of this Warrant to be set forth on each Warrant, and a similar legend on any security issued or issuable upon
exercise of this Warrant, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary.

 

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

 

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

 

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

 

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

 

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

 

(b)     If any capital reorganization, reclassification
of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not
the survivor, or sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation
shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase
and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore
issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect
to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise
of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken
place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder
to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Price) shall thereafter
be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless
prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity
shall assume the obligation to deliver to the Warrantholder, at the last address of the Warrantholder appearing on the books of
the Company, such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Warrantholder may
be entitled to purchase, and the other obligations under this Warrant. The provisions of this paragraph (b) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions.

 

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(c)     In case the Company shall fix a
payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other
than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions
referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date shall
be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price (as defined below) per share
of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Company’s Board
of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants,
and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per
share of Common Stock immediately prior to such payment date. “Market Price” as of a particular date (the “Valuation
Date”) shall mean the following: (a) if the Common Stock is then listed on the Nasdaq Global Market or the Nasdaq Capital
Market (“Nasdaq”) or any other national stock exchange, the closing sale price of one share of Common Stock on such
exchange on the last trading day prior to the Valuation Date; (b) if the Common Stock is then quoted on the National Association
of Securities Dealers, Inc. OTC Bulletin Board (the “Bulletin Board”) or such similar quotation system or association,
the closing sale price of one share of Common Stock on the Bulletin Board or such other quotation system or association on the
last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the
low asked price quoted thereon on the last trading day prior to the Valuation Date; or (c) if the Common Stock is not then listed
on a national stock exchange or quoted on the Bulletin Board or such other quotation system or association, the fair market value
of one share of Common Stock as of the Valuation Date, as determined in good faith by the Board of Directors of the Company and
the Warrantholder. If the Common Stock is not then listed on a national securities exchange, the Bulletin Board or such other quotation
system or association, the Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Warrantholder
prior to the exercise hereunder as to the fair market value of a share of Common Stock as determined by the Board of Directors
of the Company. In the event that the Board of Directors of the Company and the Warrantholder are unable to agree upon the fair
market value in respect of subpart (c) of this paragraph, the Company and the Warrantholder shall jointly select an appraiser,
who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser
shall be borne equally by the Company and the Warrantholder. Such adjustment shall be made successively whenever such a payment
date is fixed.

 

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

 

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

 

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(f)     Except as provided in subsection
(g) hereof, if and whenever the Company shall issue or sell, or is, in accordance with any of subsections (f)(l) through (f)(7)
hereof, deemed to have issued or sold, any Additional Shares of Common Stock for no consideration or for a consideration per share
less than the Warrant Price in effect immediately prior to the time of such issue or sale, then and in each such case (a “Trigger
Issuance”) the then-existing Warrant Price, shall be reduced, as of the close of business on the effective date of the Trigger
Issuance, to a price determined as follows:

 

Adjusted Warrant Price =
(A x B) + D

                           A+C

 

where

 

“A” equals
the number of shares of Common Stock outstanding, including Additional Shares of Common Stock (as defined below) deemed to be issued
hereunder, immediately preceding such Trigger Issuance (but excluding the Additional Shares included in “C” below);

 

“B” equals
the Warrant Price in effect immediately preceding such Trigger Issuance;

 

“C” equals
the number of Additional Shares of Common Stock issued or deemed issued hereunder as a result of the Trigger Issuance; and

 

“D” equals
the aggregate consideration, if any, received or deemed to be received by the Company upon such Trigger Issuance;

 

provided, however, that in no event shall the
Warrant Price after giving effect to such Trigger Issuance be greater than the Warrant Price in effect prior to such Trigger Issuance.

 

For purposes of this subsection
(f), “Additional Shares of Common Stock” shall mean all shares of Common Stock issued by the Company or deemed to be
issued pursuant to this subsection (f), other than Excluded Issuances (as defined in subsection (g) hereof).

 

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For purposes of this subsection
(f), the following subsections (f)(l) to (f)(7) shall also be applicable:

 

(f)(1)     Issuance of Rights or Options. In case at any time the Company shall in any manner grant
(directly and not by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called “Options” and such convertible or exchangeable stock or securities being called “Convertible
Securities”) whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion
or exchange of such Convertible Securities (determined by dividing (i) the sum (which sum shall constitute the applicable consideration)
of (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus
(y) the aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in
the case of such Options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number
of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the Warrant Price in effect immediately prior to the
time of the granting of such Options, then the total number of shares of Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total amount of such Convertible Securities issuable upon the exercise of such Options shall
be deemed to have been issued for such price per share as of the date of granting of such Options or the issuance of such Convertible
Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Warrant Price. Except as otherwise provided
in subsection 8(f)(3), no adjustment of the Warrant Price shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible
Securities. 

 

(f)(2)     Issuance of Convertible Securities. In case the Company shall in any manner issue (directly
and not by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert
any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such
conversion or exchange (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the
total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus
(y) the aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by
(ii) the total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall
be less than the Warrant Price in effect immediately prior to the time of such issue or sale, then the total maximum number of
shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be
outstanding for purposes of adjusting the Warrant Price, provided that (a) except as otherwise provided in subsection 8(f)(3),
no adjustment of the Warrant Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities and (b) no further adjustment of the Warrant Price shall be made by reason of the issue or sale of Convertible
Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Warrant Price
have been made pursuant to the other provisions of subsection 8(f). 

 

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(f)(3)     Change in Option Price or Conversion Rate. Upon the happening of any of the following events,
namely, if the purchase price provided for in any Option referred to in subsection 8(f)(l) hereof, the additional consideration,
if any, payable upon the conversion or exchange of any Convertible Securities referred to in subsections 8(f)(l) or 8(f)(2), or
the rate at which Convertible Securities referred to in subsections 8(f)(l) or 8(f)(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect
against dilution), the Warrant Price in effect at the time of such event shall forthwith be readjusted to the Warrant Price which
would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. On the termination
of any Option for which any adjustment was made pursuant to this subsection 8(f) or any right to convert or exchange Convertible
Securities for which any adjustment was made pursuant to this subsection 8(f) (including without limitation upon the redemption
or purchase for consideration of such Convertible Securities by the Company), the Warrant Price then in effect hereunder shall
forthwith be changed to the Warrant Price which would have been in effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination, never been issued. 

 

(f)(4)     Stock Dividends. Subject to the provisions of this Section 8(f), in case the Company shall declare or pay a dividend or make any
other distribution upon any stock of the Company (other than the Common Stock) payable in Common Stock, Options or Convertible
Securities, then any Common Stock, Options or Convertible Securities, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to have been issued or sold without consideration. 

 

(f)(5)     Consideration for Stock. In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by the Company
therefor, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by
the Company in connection therewith. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to
be the fair value of such consideration as determined in good faith by the Board of Directors of the Company, after deduction of
any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In
case any Options shall be issued in connection with the issue and sale of other securities of the Company, together comprising
one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall
be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Company. If Common
Stock, Options or Convertible Securities shall be issued or sold by the Company and, in connection therewith, other Options or
Convertible Securities (the “Additional Rights”) are issued, then the consideration received or deemed to be received
by the Company shall be reduced by the fair market value of the Additional Rights (as determined using the Black-Scholes option
pricing model or another method mutually agreed to by the Company and the Warrantholder). The Board of Directors of the Company
shall respond promptly, in writing, to an inquiry by the Warrantholder as to the fair market value of the Additional Rights. In
the event that the Board of Directors of the Company and the Warrantholder are unable to agree upon the fair market value of the
Additional Rights, the Company and the Warrantholder shall jointly select an appraiser, who is experienced in such matters. The
decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly by the Company and
the Warrantholder. 

 

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(f)(6)     Record Date. In case the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase,
as the case may be. 

 

(f)(7)     Treasury
Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the
account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation
or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of this subsection (f). 

 

(g)     Anything
herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Warrant Price in the case
of the issuance of (A) capital stock, Options or Convertible Securities issued to directors,
officers, employees or consultants of the Company in connection with their service as directors of the Company, their employment
by the Company or their retention as consultants by the Company pursuant to an equity compensation program approved by the Board
of Directors of the Company or the compensation committee of the Board of Directors of the Company, (B) shares of Common Stock
issued upon the conversion or exercise of Options or Convertible Securities issued prior to the date hereof, provided such securities
are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise
or conversion price thereof, (C) securities issued pursuant to the Purchase Agreement and securities issued upon the exercise
or conversion of those securities, and (D) shares of Common Stock issued or issuable by reason of a dividend, stock split or other
distribution on shares of Common Stock (but only to the extent that such a dividend, split or distribution results in an adjustment
in the Warrant Price pursuant to the other provisions of this Warrant) (collectively, “Excluded Issuances”).

 

(h)    Upon
any adjustment to the Warrant Price pursuant to Section 8(f) above, the number of Warrant Shares purchasable hereunder shall be
adjusted by multiplying such number by a fraction, the numerator of which shall be the Warrant Price in effect immediately prior
to such adjustment and the denominator of which shall be the Warrant Price in effect immediately thereafter.

 

(i)     To the extent permitted by applicable
law and the listing requirements of any stock market or exchange on which the Common Stock is then listed, the Company from time
to time may decrease the Warrant Price by any amount for any period of time if the period is at least twenty (20) days, the decrease
is irrevocable during the period and the Board shall have made a determination that such decrease would be in the best interests
of the Company, which determination shall be conclusive. Whenever the Warrant Price is decreased pursuant to the preceding sentence,
the Company shall provide written notice thereof to the Warrantholder at least five (5) days prior to the date the decreased Warrant
Price takes effect, and such notice shall state the decreased Warrant Price and the period during which it will be in effect.

 

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

 

    	9

    	 	

    
 

Section 10.     Extension
of Expiration Date. If the Company fails to cause any Registration Statement covering Registrable Securities (as defined in
the Registration Rights Agreement) to be declared effective prior to the applicable dates set forth therein, or if any of the
events specified in Section 2(c)(ii) of the Registration Rights Agreement occurs, and the Blackout Period (as defined in the Registration
Rights Agreement) (whether alone, or in combination with any other Blackout Period) continues for more than 60 days in any 12
month period, or for more than a total of 90 days, then the Expiration Date of this Warrant shall be extended one day for each
day beyond the 60-day or 90-day limits, as the case may be, that the Blackout Period continues.

 

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

 

Section 12.     Notices
to Warrantholder. Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall promptly
give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted
Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based. Failure to give such notice to the Warrantholder or any defect
therein shall not affect the legality or validity of the subject adjustment.

 

Section 13.     Identity
of Transfer Agent. The Transfer Agent for the Common Stock is Computershare Investor Services. Upon the appointment of any
subsequent transfer agent for the Common Stock or other shares of the Company’s capital stock issuable upon the exercise
of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the
name and address of such transfer agent.

 

Section 14.     Notices.
Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively
given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)
if given by telex or 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 days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized
overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier. All notices shall
be addressed as follows: if to the Warrantholder, at its address as set forth in the Company’s books and records and, if
to the Company, at the address as follows, or at such other address as the Warrantholder or the Company may designate by ten days’
advance written notice to the other:

 

    	10

    	 	

    
 

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

 

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) 663-6164

 

Section 15.     Registration
Rights. The initial Warrantholder is entitled to the benefit of certain registration rights with respect to the shares of
Common Stock issuable upon the exercise of this Warrant as provided in the Registration Rights Agreement, and any subsequent Warrantholder
may be entitled to such rights.

 

Section 16.     Successors.
All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.

 

Section 17.     Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial. This Warrant shall be governed by, and construed in accordance with, the
internal laws of the State of New York, without reference to the choice of law provisions thereof (other than Section 5-1401 of
the New York General Obligation Law). The Company and, by accepting this Warrant, the Warrantholder, each irrevocably submits
to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District
Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding
may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under
this Warrant. The Company and, by accepting this Warrant, the Warrantholder, each irrevocably consents to the jurisdiction of
any such court in any such suit, action or proceeding and to the laying of venue in such court. The Company and, by accepting
this Warrant, the Warrantholder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding
brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.  EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES
ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.

 

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Section 18.     Call
Provision. Notwithstanding any other provision contained in this Warrant to the contrary, from and after the second anniversary
of the Closing Date (as defined in the Purchase Agreement) in the event that (a) the closing bid price per share of Common Stock
as traded on the Bulletin Board (or such other exchange or stock market on which the Common Stock may then be listed or quoted)
equals or exceeds $2.50 (appropriately adjusted for any stock split, reverse stock split, stock dividend or other reclassification
or combination of the Common Stock occurring after the date hereof) for twenty (20) consecutive trading days commencing after
the Registration Statement (as defined in the Registration Rights Agreement) has been declared effective (the "Measurement
Period") and (b) the average daily reported trading volume of the Common Stock is at least 5,000 shares during the Measurement
Period (appropriately adjusted for any stock split, reverse stock split, stock dividend or other reclassification or combination
of the Common Stock occurring after the date hereof); then the Company, upon thirty (30) days prior written notice (the “Notice
Period”) given to the Warrantholder within one business day immediately following the end of such twenty (20) trading
day period, may call this Warrant, in whole but not in part, at a redemption price equal to $0.01 per share of Common Stock then
purchasable pursuant to this Warrant; provided that (i) the Company simultaneously calls all Company Warrants (as defined in Section
22) on the same terms, (ii) all of the shares of Common Stock issuable hereunder either (A) are registered pursuant to an effective
Registration Statement (as defined in the Registration Rights Agreement) which is not suspended and for which no stop order is
in effect, and pursuant to which the Warrantholder is able to sell such shares of Common Stock at all times during the Notice
Period or (B) no longer constitute Registrable Securities (as defined in the Registration Rights Agreement) and (iii) this Warrant
is fully exercisable for the full amount of Warrant Shares covered hereby. Notwithstanding any such notice by the Company, the
Warrantholder shall have the right to exercise this Warrant prior to the end of the Notice Period.

 

Section 19.     Cashless
Exercise. The Warrantholder may elect to receive, without the payment by the Warrantholder of the aggregate Warrant Price
in respect of the shares of Common Stock to be acquired, shares of Common Stock of equal value to the value of this Warrant, or
any specified portion hereof, by the surrender of this Warrant (or such portion of this Warrant being so exercised) together with
a Net Issue Election Notice, in the form annexed hereto as Appendix B, duly executed, to the Company. Thereupon, the Company shall
issue to the Warrantholder such number of fully paid, validly issued and nonassessable shares of Common Stock as is computed using
the following formula:

 

X = Y (A - B)

     A

 

where

 

X =the number of shares
of Common Stock to which the Warrantholder is entitled upon such cashless exercise;

 

Y =the total number
of shares of Common Stock covered by this Warrant for which the Warrantholder has surrendered purchase rights at such time for
cashless exercise (including both shares to be issued to the Warrantholder and shares as to which the purchase rights are to be
canceled as payment therefor);

 

A =the “Market
Price” of one share of Common Stock as at the date the net issue election is made; and

 

B =the Warrant Price
in effect under this Warrant at the time the net issue election is made.

 

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Section 20.     Limitations
on Exercise.

 

(a)     Notwithstanding anything to the
contrary contained herein, the number of Warrant Shares that may be acquired by the Warrantholder upon any exercise of this Warrant
(or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance),
the total number of shares of Common Stock then beneficially owned by such Warrantholder and its Affiliates and any other Persons
whose beneficial ownership of Common Stock would be aggregated with the Warrantholder's for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), does not exceed 4.999% of the total number of issued and outstanding
shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. This provision shall not restrict the number of shares of Common Stock which a Warrantholder may receive or beneficially
own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a transaction
contemplated by Section 8 of this Warrant. By written notice to the Company, the Warrantholder may waive the provisions of this
Section 20(a), but any such waiver will not be effective until the 61st day after delivery of such notice, nor will any such waiver
effect any other Warrantholder.

 

(b)     Notwithstanding anything to the
contrary contained herein, the number of Warrant Shares that may be acquired by the Warrantholder upon any exercise of this Warrant
(or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance),
the total number of shares of Common Stock then beneficially owned by such Warrantholder and its Affiliates and any other Persons
whose beneficial ownership of Common Stock would be aggregated with the Warrantholder's for purposes of Section 13(d) of the Exchange
Act, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the
shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This provision shall not restrict
the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities
or other consideration that such Holder may receive in the event of a transaction contemplated by Section 8 of this Warrant. This
restriction may not be waived.

 

Section 21.     No Rights
as Stockholder. Prior to the exercise of this Warrant, the Warrantholder shall not have or exercise any rights as a stockholder
of the Company by virtue of its ownership of this Warrant.

 

Section 22.     Amendment;
Waiver. This Warrant is one of a series of Warrants of like tenor issued by the Company pursuant to the Purchase Agreement
and initially covering an aggregate of 1,944,475 shares of Common Stock (collectively, the “Company Warrants”).
Any term of this Warrant may be amended or waived (including the adjustment provisions included in Section 8 of this Warrant)
upon the written consent of the Company and the holders of Company Warrants representing at least 50% of the number of shares
of Common Stock then subject to all outstanding Company Warrants (the “Majority Holders”); provided, that (x)
any such amendment or waiver must apply to all Company Warrants; and (y) the number of Warrant Shares subject to this Warrant,
the Warrant Price and the Expiration Date may not be amended, and the right to exercise this Warrant may not be altered or waived,
without the written consent of the Warrantholder.

 

Section 22.     Section
Headings. The section headings in this Warrant are for the convenience of the Company and the Warrantholder and in no way
alter, modify, amend, limit or restrict the provisions hereof.

 

    	13

    	 	

    
 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be duly executed, as of the ___th day of September, 2012.

 

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

 

 

 

 

    	14

    	 	

    
 

APPENDIX A

PRECISION OPTICS CORPORATION, INC.

WARRANT EXERCISE FORM

 

To Precision Optics Corporation, Inc.:

 

The undersigned hereby
irrevocably elects to exercise the right of purchase represented by the within Warrant (“Warrant”) for, and to purchase
thereunder by the payment of the Warrant Price and surrender of the Warrant, _______________ shares of Common Stock (“Warrant
Shares”) provided for therein, and requests that certificates for the Warrant Shares be issued as follows:

 

________________________________

Name

________________________________

Address

________________________________

________________________________

Federal Tax ID or Social
Security No.

 

and delivered by(certified mail to
the above address, or

(electronically (provide
DWAC Instructions:___________________), or

(other (specify): __________________________________________).

 

and, if the number of Warrant Shares shall
not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares
purchasable upon exercise of this Warrant be registered in the name of the undersigned Warrantholder or the undersigned’s
Assignee as below indicated and delivered to the address stated below.

 

 

Dated: ___________________, ____

 

Note: The signature must correspond with the name of the

Warrantholder as written on the first page
of the Warrant in

every particular, without alteration or
enlargement or any

change whatever, unless the Warrant has been assigned.

		 
	Signature:______________________________	_______________________________
		Name (please print)
		 
		_______________________________
	 	_______________________________
	 	Address
	 	_______________________________
	 	Federal Identification or
	 	Social Security No.
	 	 
	 	Assignee: 
	 	_______________________________
	 	_______________________________
	 	_______________________________

 

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APPENDIX B

PRECISION OPTICS CORPORATION, INC.

NET ISSUE ELECTION NOTICE

 

 

To: Precision Optics Corporation, Inc.

 

Date:[_________________________]

 

 

The undersigned hereby
elects under Section 19 of this Warrant to surrender the right to purchase [____________] shares of Common Stock pursuant
to this Warrant and hereby requests the issuance of [_____________] shares of Common Stock. The certificate(s) for the shares issuable
upon such net issue election shall be issued in the name of the undersigned or as otherwise indicated below.

 

 

_________________________________________

Signature

 

_________________________________________

Name for Registration

 

_________________________________________

Mailing Address

 

 

 

 

 

16

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