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October 15, 2003
Stockholders:
Very truly yours,
Very truly yours, | ||
/s/ | Richard E. Forkey | |
RICHARD E. FORKEY | ||
President |
PRECISION OPTICS CORPORATION, INC.
1. To elect two Class I directors to hold office for a three-year term and until their respective successors shall have been duly elected and qualified.
2. To consider and act on a proposal to approve an Amended and Restated 1997 Incentive Plan of the Company.
3. To transact any and all other business that may properly come before the meeting or any adjournment thereof.
1. | To approve an amendment to the Company’s Articles of Organization, to be filed at the discretion of the Board of Directors, to effect a reverse stock split at a ratio in a range between and including one-for-three and one-for-six to be determined by the Board. |
2. | To elect one Class III director to hold office for a three-year term and until his successor shall have been duly elected and qualified. |
3. | To transact any and all other business that may properly come before the meeting or any adjournment thereof. |
By Order of the Board of Directors
By Order of the Board of Directors | ||
/s/ | R. Michael Arbon | |
R. Michael Arbon | ||
Clerk | ||
November 1, 2005 |
October 15, 2003
PRECISION OPTICS CORPORATION, INC.
This Proxy Statement and form of proxy are furnished in connection with the solicitation of proxies by the Board of Directors of Precision Optics Corporation, Inc., a Massachusetts corporation (the "Company"“Company”), for the 20032005 Annual Meeting of Stockholders of the Company to be held on November 11, 2003,29, 2005, at 10:00 a.m. at the offices of Ropes & Gray LLP, One International Place, Boston, Massachusetts, and any adjournments thereof, for the purposes set forth in the notice of meeting. The Company was incorporated in 1982, and its principal executive offices are at 22 East Broadway, Gardner, Massachusetts 01440 (telephone 978-630-1800). This Proxy Statement and form of proxy are first being distributed to stockholders on or about October 15, 2003.
November 1, 2005.
The election of the Class I directors described in Proposal Number 1 requires a plurality of votes cast. Should either person so named below as nominee for the Board of Directors be unable or unwilling to serve as director, the persons named in the form of proxy for the annual meeting may, in their discretion,
vote for such other person or may vote to fix the number of directors at such number less than five, as the Board of Directors may recommend.
outstanding. The election of a Class III director described in Proposal 2 requires a plurality of votes cast.
owners.
Exchange Ratio | Shares Outstanding | |
1-for-3 | 2,336,071 | |
1-for-4 | 1,752,053 | |
1-for-5 | 1,401,642 | |
1-for-6 | 1,168,035 |
1. | A stockholder will not recognize taxable gain or loss as a result of the Reverse Stock Split. |
2. | In aggregate, a stockholder’s basis in post-split common stock will equal such stockholder’s basis in the shares of pre-split Common Stock exchanged therefor and such stockholder’s holding period for post-split Common Stock will include the holding period for pre-split common stock exchanged therefor. |
3. | The proposed Reverse Stock Split will constitute a reorganization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended, and the Company will not recognize any gain or loss as a result of the Reverse Stock Split. |
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Name | Age | Director Since | Principal Occupation; Directorships of Other Public Companies | ||
Richard E. Forkey (1) | 65 | 1982 | President, Chief Executive Officer, Treasurer and a director of the Company since founding the Company in 1982; Clerk of the Company from May 1983 to June 1990. | ||
Edward A. Benjamin (1) | 67 | 1990 | Clerk of the Company from June 1990 to January 1998. Mr. Benjamin is a Trustee of the IXIS Advisor Funds, AEW Real Estate Income Fund, and Loomis Sayles Funds and a Director of Coal, Energy Investments & Management, LLC. Mr. Benjamin was a partner in the law firm of Ropes & Gray LLP, Boston, Massachusetts, from 1969 to 1998. | ||
Joel R. Pitlor (1) | 66 | 1990 | Since 1979, Mr. Pitlor has been President of J.R. Pitlor, a management consulting firm that provides strategic business planning, which Mr. Pitlor founded. Mr. Pitlor has provided business planning consultation to the Company since 1983. Mr. Pitlor is also a director of Uroplasty, Inc. | ||
Robert R. Shannon (2) | 73 | 1990 | Since 1969, Mr. Shannon has been a Professor at the Optical Sciences Center of the University of Arizona and Director of the Center from 1983 to July 1992. Mr. Shannon is also a Director of Aerospace Corporation. | ||
Donald A. Major (1) | 44 | 2005 | Since 2002, Mr. Major has been Vice President and Chief Financial Officer of Digital Excellence, LLC. From 1999 to 2001 Mr. Major served as Chief Financial Officer and Clerk for Uroplasty, Inc. | ||
Richard Miles (3) | 62 | — | Since 1972, Professor Miles has been a member of the faculty at Princeton University, and serves as the Director of the Applied Physics Group in Princeton University’s Mechanical and Aerospace Engineering Department. | ||
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The function of the Audit Committee is to provide assistance to the Board of Directors in fulfilling its responsibility to the stockholders, potential stockholders and the investment community in respect of corporate accounting, reporting practices of the Company, and the quality and integrity of the financial reports of the Company. The Audit Committee held four meetings during the fiscal year ended June 30, 2003 and acted by unanimous written consent on one occasion. The Board does not have standing nominating or compensation committees.2 occasions. Each director attended at least 75% of the meetings of the Board of Directors.
Information as to ownership (Mr. Major became a member of the Company's securitiesAudit Committee in August 2005, following the end of the fiscal year.)
qualifications of the nominee and the name, address, and telephone number of and number of shares of Common Stock beneficially owned by the stockholder making the recommendation and should be sent to the Clerk of the Company at 22 East Broadway, Gardner, Massachusetts 01440. Such recommendations should be submitted to the Clerk of the Company prior to June 15 of the respective year in order to give the Company adequate time in order to consider the recommendations.
$0.75. Each of these options is immediately exercisable. For his service to the Company, in his capacity as Chair of the Audit Committee, Mr. Major receives compensation of $500 per month, which is in addition to the standard compensation received by all members of the Board of Directors for their services.
Participation in Plan.
The grant of Awards under the 1997 Incentive Plan to eligible participants is subject to the discretion of the plan Administrator, which is currently the Board of Directors. As of the date of this proxy statement, there has been no determination by the Administrator with respect to future awards under the 1997 Incentive Plan, except for the grant to each non-employee director on the date of each annual meeting of shareholders of a stock option exercisable for 834 shares of Common Stock. Accordingly, future Awards are not determinable. The following table sets forth information with respect to the grant of stock options to the executive officers named in the Summary Compensation Table, to all current executive officers as a
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group, to all non-executive directors as a group, and to all other employees as a group during the last fiscal year:
Amended Plan Benefits1997 Incentive Plan
Name and Position | Securities Underlying Options Granted($) | Weighted Average Exercise Price Per Share ($/share) | |||
---|---|---|---|---|---|
Richard E. Forkey, President and Chief Executive Officer | 0 | n/a | |||
Jack P. Dreimiller, Senior Vice President, Finance, Chief Financial Officer and Clerk | 0 | n/a | |||
All current executive officers as a group | 0 | n/a | |||
All non-executive directors as a group | 3,336 | $ | 1.74 | ||
All non-executive officer employees as a group | 0 | n/a |
Summary of the 1997 Incentive Plan.
The following summary is a description of the 1997 Incentive Plan, as proposed to be amended, and is qualified in its entirety by reference to the full text of the 1997 Incentive Plan attached to this proxy statement asAppendix A. Terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the 1997 Incentive Plan.
Administration. The 1997 Incentive Plan is administered by the Administrator, which may be the Board of Directors or a committee thereof (the "Committee"). The Board is currently the plan's Administrator. Subject to the terms of the 1997 Incentive Plan, the Administrator has authority to interpret the 1997 Incentive Plan; determine eligibility for and grant Awards; determine, modify or waive the terms and conditions of any Award; and otherwise do all things necessary to carry out the purposes of the 1997 Incentive Plan. In the case of any Award intended to be eligible for the performance-based compensation exception under Section 162(m), the Administrator shall exercise its discretion consistent with qualifying the Award for such exception.
Eligibility and Participation. In general, the Administrator will select participants in the 1997 Incentive Plan from among key employees of the Company and its affiliates who, in the opinion of the Administrator, are in a position to make a significant contribution to the success of the Company or its affiliates. The Administrator also has discretion to include as participants in the 1997 Incentive Plan members of the Company's Board of Directors and other persons who provide services to the Company or its affiliates. As of September 30, 2003, approximately 40 persons were eligible to receive Awards under the 1997 Incentive Plan, including the Company's twoCompany’s executive officers and four non-employee directors. The maximum number of shares for which stock options may be granted to any person, the maximum number of shares subject to stock appreciation rights granted to any person, and the aggregate maximum number of shares of Stock which may be delivered to any person pursuant to Awards that are not stock options or stock appreciation rights are each limited to 100,000 over the life of the 1997 Incentive Plan. In addition, no more than $2 million may be paid to any individual with respect to any annual cash performance-based bonuses and no more than $2 million in cash performance-based bonuses may be paid to any individual with respect to multi-year performance periods ending in the same year. No Award constituting an incentive stock option within the meaning of Section 422 of the Internal Revenue Code (an "ISO") may be
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granted under the 1997 Incentive Plan after September 15, 2007, but ISO Awards previously granted may extend beyond such date.
Types of Awards. The Administrator, in its discretion, may award (i) options to purchase Common Stock, (ii) stock appreciation rights, (iii) restricted or unrestricted Stock, (iv) promises to deliver Common Stock or other securities in the future, (v) convertible securities, (vi) cash bonuses, and (vii) cash bonuses or loans to help defray the costs of the foregoing Awards.
Deductibility of Performance Awards. Certain payments to executive officers under the 1997 Incentive Plan may be eligible for treatment as "performance-based" compensation under Section 162(m) of the Internal Revenue Code ("Section 162(m)"). Section 162(m) generally limits to $1 million the annual corporate income tax deduction for compensation paid to the chief executive officer or any of the four other highest paid executive officers of a publicly-held corporation which is not "performance-based" compensation. The 1997 Incentive Plan is intended to enable the Company to comply with Section 162(m) by allowing Awards granted under the 1997 Incentive Plan to qualify as performance-based compensation. (See "Certain Federal Income Tax Consequences"). Under current regulations, in those cases where an Award under the 1997 Incentive Plan would qualify for the Section 162(m) performance-based exception in part by reason of being conditioned upon one or more of the specific performance criteria described below (see "Performance Criteria"), continued availability of the exception will depend upon re-approval by stockholders of the material terms of the performance criteria not later than the first stockholder meeting that occurs in the fifth year following the year in which the stockholders previously approved such terms. By approving the proposed amended 1997 Incentive Plan, stockholders will also be re-approving the material terms of the performance criteria.
Performance Criteria. Awards under the 1997 Incentive Plan may be conditioned upon satisfaction of specified performance criteria. In the case of any such Award that is intended to qualify for exemption from the deduction limitation rules of Section 162(m) (an "Exempt Award"), the criteria used in connection with the Award shall be one or any combination of the following (determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business or geographical basis or in combinations thereof): (i) sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; gross margin; inventory level or turns; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; or other objective operating contributions; or (ii) acquisitions or divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) and refinancings; or other transactions that involve a change in the equity ownership of the Company. A Performance Criterion measure and any targets with respect thereto determined by the Administrator need not be based upon an increase, a positive or improved result or avoidance of loss. In the case of an Exempt Award, the Committee will preestablish the particular performance goals in writing no later than 90 days after the commencement of the period of service to which the performance relates (or earlier if so required under applicable regulations) and will certify prior to payment whether the performance goal or goals have been attained. If the performance goal with respect to an Exempt Award is not attained, no other Award shall be provided in substitution. To date, the Company has not granted any Exempt Awards.
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Rules Applicable to Awards. Neither ISOs nor, except as the Administrator otherwise expressly provides, other Awards may be transferred other than by will or by the laws of descent and distribution, and during a Participant's lifetime ISOs (and, except as the Administrator otherwise expressly provides, other non-transferable Awards requiring exercise) may be exercised only by the Participant. The Administrator may determine the time or times at which an Award will vest or become exercisable. Without limiting the foregoing, the Administrator may at any time accelerate the vesting or exercisability of an Award, regardless of any adverse or potentially adverse tax consequences resulting from such acceleration. Unless the Administrator expressly provides otherwise, immediately upon the cessation of the Participant's Employment, an Award requiring exercise will cease to be exercisable and will terminate, and all other Awards to the extent not already vested will be forfeited, except that: (a) Stock Options and SARs held by the Participant or the Participant's permitted transferee, if any, immediately prior to the cessation of the Participant's Employment, to the extent then exercisable, will remain exercisable for the lesser of (i) a period of 30 days or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised, and will thereupon terminate; (b) Stock Options and SARs held by a Participant or the Participant's permitted transferee, if any, immediately prior to the Participant's death, to the extent then exercisable, will remain exercisable for the lesser of (i) the period ending 90 days after the Participant's death or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised and will thereupon terminate, and (c) Stock Options and SARs held by a Participant or the Participant's permitted transferee, if any, immediately prior to the cessation of the Participant's Employment will immediately terminate upon such cessation if the Administrator in its sole discretion determines that such cessation of Employment has resulted for reasons which cast such discredit on the Participant as to justify immediate termination of the Award.
Stock Options. The Administrator will determine the exercise price, if any, of each Award requiring exercise. Unless the Administrator determines otherwise, each stock option will have an exercise price not less than the fair market value of the Stock subject to the stock option, determined as of the date of grant. A stock option intended to be an ISO granted to a person who owns (or by application of attribution rules is deemed to own) more than 10% of the total combined voting power of all classes of stock of the Company will have an exercise price equal to 110% of such fair market value. Options awarded under the 1997 Incentive Plan will not be ISOs except as expressly provided otherwise.
Effect of Certain Transactions. In the event of a consolidation or merger in which the Company is not the surviving corporation or which results in the acquisition of a majority of the Company's outstanding Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of all or substantially all of the Company's assets or a dissolution or liquidation of the Company, all outstanding Awards requiring exercise will cease to be exercisable, and all other Awards to the extent not fully vested (including Awards subject to performance conditions not yet satisfied or determined) will be forfeited, as of the effective time of such transaction; provided, however, that immediately prior to the consummation of such a transaction, the vesting or exercisability of Awards shall be accelerated unless, in the case of any Award, the Administrator provides for one or more substitute or replacement awards from, or the assumption of existing Awards by, the acquiring entity (if any) or its affiliates.
Equitable Adjustment. In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capital structure, the Administrator will make appropriate adjustments to the maximum number of shares that may be delivered under the 1997 Incentive Plan, to the maximum share limits under the 1997 Incentive Plan, to the number and kind of shares of
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stock or securities subject to Awards then outstanding or subsequently granted, to any exercise prices relating to Awards, and to any other provision of Awards affected by such change. In connection with the one-for-six reverse split of the Company's Common Stock that was consummated on January 29, 2003, the Administrator made such adjustments accordingly. The Administrator also may make such adjustments to take into account other distributions or events, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the 1997 Incentive Plan and to preserve the value of Awards; provided, however, that no such adjustment shall be made to the maximum share limits, or otherwise to an Award intended to be eligible for the performance-based exception under Section 162(m), except to the extent consistent with that exception.
Amendment. Subject to the Administrator's obligation to exercise its discretion consistent with qualifying Awards for the performance-based exception under Section 162(m) if such Awards are intended to so qualify, the Administrator may at any time or times amend the 1997 Incentive Plan or any outstanding Award for any purpose which may at the time be permitted by law, or may at any time terminate the 1997 Incentive Plan as to any further grants of Awards, provided that, except to the extent expressly required or permitted by the 1997 Incentive Plan, no such amendment will, without the approval of the stockholders of the Company, effectuate a change for which stockholder approval is required in order for the 1997 Incentive Plan to continue to qualify under Section 422 of the Internal Revenue Code or for Awards to be eligible for the performance-based exception under Section 162(m).
Other Compensation. The existence of the 1997 Incentive Plan and the grant of Awards will not affect the Company's right to pay other bonuses or compensation in addition to Awards under the 1997 Incentive Plan.
Price of Common Stock. The closing price of the Company's Common Stock on NASDAQ on October 7, 2003 was $2.15.
Certain Federal Income Tax Consequences.
The following discussion summarizes certain federal income tax consequences of the issuance and exercise of stock options awarded under the 1997 Incentive Plan and is based on the law as in effect on September 30, 2003. The summary does not address all federal tax consequences, nor does it cover state, local or non-U.S. tax consequences.
In general, a participant realizes no taxable income on either the grant or the vesting of a stock option. The exercise of an option that does not qualify as an ISO results in ordinary income (generally subject to withholding if the option was awarded to an Employee) equal to the difference (the "Option Spread") between the value of the stock purchased and the option exercise price. A corresponding deduction is available to the Company. In general, the ordinary income associated with the exercise is measured and taken into account at the time of exercise. Any subsequent sale of stock purchased under a nonstatutory option may result in a capital gain or loss.
The exercise of an ISO does not produce ordinary taxable income. However, because the Option Spread constitutes "alternative minimum taxable income" (measured and taken into account, in general, at the time of exercise), exercise of an ISO may result in an alternative minimum tax liability. In addition, shares purchased under an ISO ("ISO Shares") are subject to special tax holding rules. If a participant holds on to ISO Shares for at least two years from the date of the ISO grant and at least one year after exercise, any gain or loss recognized for tax purposes upon a subsequent sale of the shares will be a
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long-term capital gain or loss. However, a disposition of ISO Shares by the participant within either of these special holding periods (a so-called "disqualifying disposition") results in ordinary compensation income in the year of the disposition equal, in general, to the Option Spread at the time the option was exercised. The ordinary income realized upon a disqualifying disposition of ISO Shares is deductible to the Company but is not subject to withholding. Any additional gain recognized for tax purposes in a disqualifying disposition will be taxed as short-term or long-term capital gain.
An ISO that is exercised by the participant more than three months following termination of employment (one year, if termination occurred by reason of total and permanent disability) is treated for tax purposes as a nonstatutory option. ISOs granted to a participant under the 1997 Incentive Plan (together with ISOs granted to the participant after 1986 under any other plans of the Company and certain affiliates) are also treated as nonstatutory options to the extent that, in the aggregate, they first become exercisable in any calendar year for shares of Stock having a fair market value (determined at time of grant) in excess of $100,000.
Under Section 162(m) of the Code, in general, the deduction a public corporation may claim for remuneration in any year to the corporation's chief executive officer or any of its other four top officers (ranked by pay) is limited to $1,000,000. Stock-option related deductions are, in general, subject to this limit. An exception to the $1,000,000 deduction limit applies to certain qualified performance-based compensation, including compensation under certain stock options, but the exception is not available with respect to an award unless, among other requirements, the award is made by a committee of the Board of Directors of the corporation consisting solely of two or more "outside directors" (as defined). As the Board of Directors of the Company is currently constituted, awards under the 1997 Incentive Plan would not satisfy this requirement. The Board of Directors would therefore be required to become qualified for Section 162(m) purposes before the performance-based exception would apply to awards made pursuant to the 1997 Incentive Plan.
Under the so-called "golden parachute" provisions of the Code, certain Awards vested or paid in connection with a change of control of the Company may also be non-deductible to the Company and may be subject to an additional 20% federal excise tax. Non-deductible "parachute payments" will in general reduce the $1 million limit on deductible compensation under Section 162(m) of the Code, to the extent such limit is applicable to remuneration paid under the 1997 Incentive Plan or otherwise.
THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR THE AMENDED AND RESTATED 1997 INCENTIVE PLAN DESCRIBED IN PROPOSAL NUMBER 2.
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EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the Company's Common Stock that may be issued upon the exercise of options, warrants and rights under all of its existing equity compensation planssignificant employees as of June 30, 2003, including, but not limited to, the 1989 Stock Option Plan and the 1997 Incentive Plan:
| Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) | |||||
---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by shareholders | 116,102 | $ | 13.68 | 99,004 | (1) | |||
Equity compensation plans not approved by shareholders | 9,168 | (2)(3)(4) | $ | 8.08 | n/a | |||
Total | 125,270 | $ | 13.27 | 99,004 |
The Company's executive officers as of June 30, 20032005 were as follows:
Name | Age | ||||||||
Executive Officers | |||||||||
Richard E. Forkey | President, Chief Executive Officer and Treasurer | ||||||||
R. Michael Arbon | 40 | Chief Financial Officer and Clerk | |||||||
Significant Employee | |||||||||
Joseph N. Forkey | 37 | Chief Scientist | |||||||
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Annual Compensation | Long Term Compensation | ||||||||||||||||||
Awards | Payouts | ||||||||||||||||||
Name and Principal Position at Fiscal Year End | Fiscal Year | Salary ($) | Bonus ($) | Other Annual Compensation ($) | Securities Underlying Options (Number) | All Other Compensation ($) | |||||||||||||
Richard E. Forkey | 2005 | 195,000 | -0- | 12,250 | (1) | -0- | 7,193(2 | ) | |||||||||||
President, Chief | 2004 | 195,000 | -0- | 12,250 | (1) | -0- | 6,692(2 | ) | |||||||||||
Executive Officer | 2003 | 195,000 | -0- | 12,250 | (1) | -0- | 6,692(2 | ) | |||||||||||
& Treasurer | |||||||||||||||||||
Jack P. Dreimiller (3) | 2005 | 283,005 | (4) | -0- | 4,014 | (5) | -0- | 2,025(6 | ) | ||||||||||
Former Senior | 2004 | 164,611 | -0- | 2,406 | (5) | -0- | 2,025(6 | ) | |||||||||||
Vice President | 2003 | 164,611 | -0- | 3,166 | (5) | -0- | 2,025(6 | ) | |||||||||||
Finance, Chief | |||||||||||||||||||
Financial Officer | |||||||||||||||||||
& Clerk |
(1) | Includes $9,250 for car expense for each of 2005, 2004, and | ||||||||||||||
Represents premiums for a life insurance policy and a disability insurance policy. | |||||||||||||||
(3) | Mr. Dreimiller | ||||||||||||||
(4) | Includes $122,192 in severance payments, which consist of (1) a lump sum severance payment, (2) a payment for on-going consulting services for a period of 17 months, and | ||||||||||||||
(5) | Represents Company’s matching contribution to Profit Sharing Plan. | ||||||||||||||
There were no
Name | Number of Securities Underlying Options Granted | Percent of Total Options Granted to Employees in Fiscal Year | Exercise Price | Expiration Date | |||||||||
Richard E. Forkey | 373,600 | (1) | 30.98 | % | $ | 0.83 | 6/13/15 |
(1) | Options are exercisable as follows: | |
(a) | 30%, or 112,080 shares, are exercisable immediately; | |
(b) | the remaining 70% (261,520 shares) will become exercisable upon attainment of certain financial management milestones. | |
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underlying options have not been exercised and actual gains, if any, on exercise will depend on the value of the Company'sCompany’s Common Stock on the date of exercise.
| | | Fiscal-Year-End Option Values | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Unexercised Options at Fiscal-Year-End | Value of Unexercised In-the-Money Options at Fiscal-Year-End ($) | ||||||||
Name | Shares Acquired on Exercise (Number) | Value Realized($) | Exercisable (Number) | Unexercisable (Number) | Exercisable | Unexercisable | ||||||
Richard E. Forkey | -0- | -0- | -0- | -0- | -0- | -0- | ||||||
Jack P. Dreimiller | -0- | -0- | 17,001 | 334 | -0- | -0- |
Fiscal Year-End Option Values | |||||||||||||||||||
Unexercised Options at Fiscal Year-End | Value of Unexercised In-the-Money Options at Fiscal Year-End ($) | ||||||||||||||||||
Name | Shares Acquired on Exercise (Number) | Value Realized ($) | Exercisable (Number) | Unexercisable (Number) | Exercisable ($) | Unexercisable ($) | |||||||||||||
Richard E. Forkey | -0- | -0- | 112,080 | 261,520 | -0- | -0- |
2005.
2004.
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Name and Address Of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) | |||
---|---|---|---|---|---|
David M. Greenhouse c/o Special Situations Fund III, L.P. 153 East 53rd Street New York, NY 10022 | 146,002 | (3) | 8.33 | % | |
Directors and Officers | |||||
Edward A. Benjamin* c/o Ropes & Gray One International Place Boston, MA 02110 | 11,171 | (4) | ** | ||
Richard E. Forkey* c/o Precision Optics Corporation, Inc. 22 East Broadway Gardner, MA 01440 | 295,378 | 16.86 | % | ||
Austin W. Marxe* c/o Special Situations Funds 153 East 53rd Street New York, NY 10022 | 150,172 | (5) | 8.55 | % | |
Joel R. Pitlor* 19 Chalk Street Cambridge, MA 02139 | 34,260 | (6) | 1.95 | % | |
Robert R. Shannon* 7040 E. Taos Place Tucson, AZ 85715 | 11,671 | (4) | ** | ||
Jack P. Dreimiller c/o Precision Optics Corporation, Inc. 22 East Broadway Gardner, MA 01440 | 21,168 | (7) | 1.20 | % | |
All officers and directors as a group, including those named above (6 persons) | 523,820 | (8) | 29.13 | % |
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class (2) | |||||
David M. Greenhouse C/O Special Situations 153 East 53rd Street, New York, NY 10022 | 1,881,884 | (3) | 26.85 | % | |||
Austin W. Marxe C/O Special Situations 153 East 53rd Street, New York, NY 10022 | 1,886,888 | (4) | 26.90 | % | |||
Fred Sager 26 Woodedge Drive, Dix Hills, NY 11746 | 477,578 | 6.81 | % | ||||
Directors and Named Executive Officers | |||||||
Edward A. Benjamin* C/O Precision Optics Corporation 22 East Broadway, Gardner, MA 01440 | 44,440 | (5) | ** | ||||
Richard E. Forkey* C/O Precision Optics Corporation 22 East Broadway, Gardner, MA 01440 | 427,458 | (6) | 6.00 | % | |||
Donald A. Major* C/O Precision Optics Corporation 22 East Broadway, Gardner, MA 01440 | 10,000 | (7) | ** | ||||
Joel R. Pitlor* 237 Moody Street, Waltham, MA 02453 | 233,797 | (8) | 3.33 | % | |||
Robert R. Shannon* 7040 E. Taos Place, Tucson, AZ 85715 | 27,507 | (9) | ** | ||||
Jack P. Dreimiller C/O Precision Optics Corporation 22 East Broadway, Gardner, MA 01440 | 24,557 | ** | |||||
R. Michael Arbon C/O Precision Optics Corporation 22 East Broadway, Gardner, MA 01440 | — | ** | |||||
All executive officers and directors as a group, including those named above (6 persons) | 743,202 | (10) | 10.33 | % |
(1) | Represents shares with respect to which each beneficial owner listed has or will have, upon acquisition of such shares upon exercise or conversion of options, warrants, conversion privileges or other rights exercisable within sixty days, sole voting and investment power. |
(2) | Percentages are calculated on the basis of the amount of outstanding Common Stock plus, for each person or group, any securities that such person or group has the right to acquire within sixty days pursuant to options, warrants, conversion privileges or other rights. |
(3) | Represents (i) 557,490 shares owned of record by Special Situations Technology Fund II, L.P. (“SSTF II”); (ii) 1,296,979 shares owned of record by Special Situations Fund III, L.P. (“SSF III”); and (iii) 27,415 shares owned of record by Special Situations Cayman Fund, L.P. (“SSCF”). SSTF II, SSF III, and SSCF are affiliated investment funds. David Greenhouse and Austin Marxe are principals of the investment funds and their respective investment advisers, MGP Advisers Limited Partnership, SST Advisers, L.L.C. and AWM Investment Company, Inc. |
(4) | Includes (i) 1,881,884 shares owned by certain affiliated investment funds of which Mr. Marxe is a principal (see footnote (3) above) and (ii) 5,004 shares which may be acquired within sixty days upon exercise of outstanding stock options awarded to Mr. Marxe personally in his former capacity as a Director of the Company. |
(5) | Includes 24,171 shares which may be acquired within sixty days upon the exercise of outstanding stock options. |
(6) | Includes 112,080 shares which may be acquired within sixty days upon the exercise of outstanding stock options. |
(7) | Includes 10,000 shares which may be acquired within sixty days upon the exercise of outstanding stock options. |
(8) | Includes 19,378 shares which may be acquired within sixty days upon the exercise of outstanding stock options. |
(9) | Includes 24,171 shares which may be acquired within sixty days upon the exercise of outstanding stock options. |
(10) | Includes 189,800 shares which may be acquired within sixty (60) days upon the exercise of outstanding stock options. |
KPMG LLP has been selected to serve as independent auditors of the
Change in Independent Public Accountants
As previously disclosed on a current report on Form 8-K filed with the Securities and Exchange Commission on July 2, 2002 (the "Form 8-K"(“KPMG”), the Company dismissed Arthur Andersen LLP ("Arthur
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Andersen") as its independent accountants on July 1, 2002. The Company's Audit Committee and Board of Directors approved this action.
The report of Arthur Andersen on the Company's financial statements for the fiscal yearyears ended June 30, 2001, contained no adverse opinion2005 and 2004:
2005 | 2004 | ||||||
Audit Fees(1) | $ | 106,651 | 98,494 | ||||
Audit-Related Fees(2) | — | — | |||||
Total Audit and Audit-Related Fees | 106,651 | 98,494 | |||||
Tax Fees(3) | 20,000 | 10,000 | |||||
All Other Fees(4) | — | — | |||||
Total Fees | $ | 126,651 | $ | 108,494 |
(1) | Audit fees for fiscal 2005 are comprised of: (i) fees for professional services performed by Vitale for the audit of the Company’s annual financial statements of $47,500 and direct out-of-pocket expenses of Vitale in the amount of $1,190, (ii) fees for professional services performed by KPMG for the review of the Company’s quarterly financial statements for fiscal 2005 of $47,500 and direct out-of pocket expenses of $461 and (iii) fees for attestation services performed by KPMG in connection with the filing of the Company’s registration statement on Form S-3 of $10,000. |
Audit fees for fiscal 2004 are comprised of fees for professional services rendered by KPMG for the audit of the Company’s annual financial statements and the review of the Company’s quarterly financial statements. | |
(2) | Audit-related fees are comprised of fees for assurance and related attestation services that are reasonably related to the performance of the audit of the Company’s annual financial statements or the review thereof and fees for due diligence services. |
There were no audit-related fees incurred by the Company during fiscal 2005 or 2004. | |
(3) | Tax fees for fiscal 2005 are comprised of fees for professional services performed by KPMG with respect to corporate tax compliance, tax planning and tax advice. |
Tax fees for fiscal 2004 are comprised of fees for professional services performed by KPMG with respect to corporate tax compliance, tax planning and tax advice. | |
(4) | The Company did not incur any other fees during fiscal 2005 for products and services provided by Vitale other than those disclosed above. |
The Company did not incur any other fees during fiscal 2005 and 2004 for products and services provided by KPMG other than those disclosed above. |
During the Company's fiscal year ended June 30, 2002 and through July 1, 2002, there were no disagreements, resolved or unresolved, with Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Arthur Andersen, would have caused Arthur Andersen to make reference thereto in connection with its reports on the financial statements.
During the Company's fiscal year ended June 30, 2002 and through July 1, 2002, Arthur Andersen did not advise the Company as to anynon-audit services without prior approval of the matters describedAudit Committee. As a result, all engagements of the independent auditors to render any services, whether they would be deemed audit or non-audit services, require pre-approval of the Audit Committee. No audit, review or attest services were approved in Item 304(a)(1)(iv)(B)accordance with Section 2-01(c)(7)(i)(C) of Regulation S-B promulgated under the Securities Act of 1933, as amended.
The Company has been unable, after reasonable efforts, to have Arthur Andersen review and respond to the above disclosure; however, Arthur Andersen provided a letter dated July 2, 2002 stating that it was in agreement with the disclosure included in paragraphs 2, 3 and 4 of the Form 8-K, which disclosure is substantially the same as the above disclosure.
On July 16, 2002, the Company engaged KPMG LLP as its new independent accountant. The Company's Audit Committee and Board of Directors approved this action. The decision to engage KPMG LLP followed the Company's evaluation of proposals from several accounting firms.
During the Company's fiscal year ended June 30, 2002 and through July 16, 2002, neither the Company nor any person on the Company's behalf consulted with KPMG LLP regarding: (i) the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company's financial statements, or (ii) any matter that was the subject of a disagreement or event described in Item 304(a)(1)(iv) of Regulation S-B.
Audit Fees
The aggregate fees billed or estimated to be billed for professional services rendered by the Company's independent auditors for the audit of the Company's annual financial statements for the fiscal year ended June 30, 2003 and for the reviews of the financial statements included in the Company's quarterly reports on Form 10-QSB for that fiscal year were $86,240.
Financial Information Systems Design and Implementation Fees
The Company's independent auditors did not perform any financial information systems design or implementation work for the CompanyS-X during the fiscal year ended June 30, 2003.
2005.
The aggregate fees billed for nonaudit-related tax services rendered by the Company's independent auditors for the fiscal year ended June 30, 2003 were $10,975.
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Donald A. Major | ||
Edward A. Benjamin | ||
Robert R. Shannon |
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PRECISION OPTICS CORPORATION, INC.
1997 INCENTIVE PLAN
Amended and Restated
1. DEFINED TERMS
Exhibit A, which is incorporated by reference, defines the terms used in the Plan and sets forth certain operational rules related to those terms.
2. PURPOSE
The Plan has been established to advance the intereststhese Articles of the Company by giving selected Employees, directors and other persons (including both individuals and entities) who provide services to the Company or its Affiliates equity-based or cash incentives through the grant of Awards.
3. ADMINISTRATION
The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive the terms and conditions of any Award; prescribe forms, rules and procedures (which it may modify or waive); and otherwise do all things necessary to carry out the purposes of the Plan. In the case of any Award intended to be eligible for the performance-based compensation exception under Section 162(m), the Administrator shall exercise its discretion consistent with qualifying the Award for such exception. The Administrator may delegate to senior management the authority to grant Awards, other than Awards to the President.
4. LIMITS ON AWARDS UNDER THE PLAN
a. Number of Shares. A maximum of 300,000 shares of Stock may be delivered in satisfaction of Awards under the Plan.
b. Type of Shares. Stock delivered by the Company under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company and held in treasury. No fractional shares of Stock will be delivered under the Plan.
c. Section 162(m) Limits. The maximum number of shares of Stock for which Stock Options may be granted to any person over the life of the Plan shall be 100,000. The maximum number of shares of Stock subject to SARs granted to any person over the life of the Plan shall be 100,000. For purposes of the preceding two sentences, the repricing of a Stock Option or SAR shall be treated as a new grant to the extent required under Section 162(m). The aggregate maximum number of shares of Stock delivered to any person over the life of the Plan pursuant to Awards that are not Stock Options or SARs shall also be 100,000. However, Stock Options and SARs that are granted with an exercise price that is less than the fair market value of the underlying shares on the date of the grant will also be subject to the limits imposed by the preceding sentence. Subject to these limitations, each person eligible to participate in the Plan shall be eligible in any year to receive Awards covering up to the full number of shares of Stock then available for Awards under the Plan. No more than $2,000,000 may be paid to any individual with respect to any Cash Performance Award. In applying the limitation of the preceding sentence: (A) multiple Cash Performance
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Awards to the same individual that are determined by reference to performance periods of one year or less ending with or within the same fiscal year of the Company shall be subject in the aggregate to one $2,000,000 limit, and (B) multiple Cash Performance Awards to the same individual that are determined by reference to one or more multi-year performance periods ending in the same fiscal year of the Company shall be subject in the aggregate to a separate limit of $2,000,000.
5. ELIGIBILITY AND PARTICIPATION
The Administrator will select Participants from among those key Employees, directors and individuals or entities (other than Employees or directors) providing services to the Company or its Affiliates who, in the opinion of the Administrator, are in a position to make a significant contribution to the success of the Company and its Affiliates. Eligibility for ISOs is limited to Employees of the Company or of a "parent corporation" or "subsidiary corporation" of the Company as those terms are defined in Section 424 of the Code.
6. RULES APPLICABLE TO AWARDS
a.ALL AWARDS
(1) Award Provisions. The Administrator will determine the terms of all Awards, subject to the limitations provided herein.
(2) Transferability Of Awards. Neither ISOs nor, except as the Administrator otherwise expressly provides, other Awards may be transferred other than by will or by the laws of descent and distribution, and during a Participant's lifetime ISOs (and, except as the Administrator otherwise expressly provides, other non-transferable Awards requiring exercise) may be exercised only the Participant.
(3) Vesting, Etc. The Administrator may determine the time or times at which an Award will vest or become exercisable and the terms on which an Award requiring exercise will remain exercisable. Without limiting the foregoing, the Administrator may at any time accelerate the vesting or exercisability of an Award, regardless of any adverse or potentially adverse tax consequences resulting from such acceleration. Unless the Administrator expressly provides otherwise, immediately upon the cessation of the Participant's Employment, an Award requiring exercise will cease to be exercisable and will terminate, and all other Awards to the extent not already vested will be forfeited, except that:
(A) subject to (B) and (C) below, all Stock Options and SARs held by the Participant or the Participant's permitted transferee, if any, immediately prior to the cessation of the Participant's Employment, to the extent then exercisable, will remain exercisable for the lesser of (i) a period of 30 days or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised without regard to this Section 6.a.(3), and will thereupon terminate;
(B) all Stock Options and SARs held by a Participant or the Participant's permitted transferee, if any, immediately prior to the Participant's death, to the extent then exercisable, will remain exercisable for the lesser of (i) the period ending 90 days after the Participant's death or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised without regard to this Section 6.a.(3), and will thereupon terminate; and
(C) all Stock Options and SARs held by a Participant or the Participant's permitted transferee, if any, immediately prior to the cessation of the Participant's Employment will immediately terminate upon such cessation if the Administrator in its sole discretion determines
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that such cessation of Employment has resulted for reasons which cast such discredit on the Participant as to justify immediate termination of the Award.
(4) Taxes. The Administrator will make such provision for the withholding of taxes as it deems necessary. The Administrator may, but need not, hold back shares of Stock from an Award or permit a Participant to tender previously owned shares of Stock in satisfaction of tax withholding requirements (but not in excess of the minimum withholding required by law).
(5) Dividend Equivalents, Etc. The Administrator may provide for the payment of amounts in lieu of cash dividends or other cash distributions with respect to Stock subject to an Award.
(6) Rights Limited. Nothing in the Plan shall be construed as giving any person the right to continued Employment or serviceAmendment with the Company or its Affiliates, or any rights as a stockholder, except as to shares of Stock actually issued under the Plan. The loss of existing or potential profit in Awards will not constitute an element of damages in the event of termination of Employment or service for any reason, even if the termination is in violation of an obligation of the Company or Affiliate to the Participant.
(7) Section 162(m). This Section 6.a.(7) applies to any Performance Award intended to qualify as performance-based for the purposes of Section 162(m) other than a Stock Option or SAR with an exercise price at least equal to the fair market value of the underlying Stock on the date of grant. In the case of any Performance Award to which this Section 6.a.(7) applies, the Plan and such Award will be construed to the maximum extent permitted by law in a manner consistent with qualifying the Award for such exception. With respect to such Performance Awards, the Administrator will preestablish, in writing, one or more specific Performance Criteria no later than 90 days after the commencement of the period of service to which the performance relates (or at such earlier time as is required to qualify the Award as performance-based under Section 162(m)). The Performance Criteria so established shall serve as a condition to the grant, vesting or payment of the Performance Award, as determined by the Administrator. Prior to grant, vesting or payment of the Performance Award, as the case may be, the Administrator will certify whether the Performance Criteria have been attained and such determination will be final and conclusive. If the Performance Criteria with respect to the Award are not attained, no other Award will be provided in substitution of the Performance Award. No Performance Award to which this Section 6.a.(7) applies may be granted after the first meeting of the stockholders of the Company held in 2008 until the Performance Criteria (as originally approved or as subsequently amended) have been resubmitted to and reapproved by the stockholders of the Company in accordance with the requirements of Section 162(m) of the Code, unless such grant is made contingent upon such approval.
b.AWARDS REQUIRING EXERCISE
(1) Time And Manner Of Exercise. Unless the Administrator expressly provides otherwise, (a) an Award requiring exercise by the holder will not be deemed to have been exercised until the Administrator receives a written notice of exercise (in form acceptable to the Administrator) signed by the appropriate person and accompanied by any payment required under the Award; and (b) if the Award is exercised by any person other than the Participant, the Administrator may require satisfactory evidence that the person exercising the Award has the right to do so.
(2) Exercise Price. The Administrator will determine the exercise price, if any, of each Award requiring exercise. Unless the Administrator determines otherwise, the exercise price of an Award requiring exercise will not be less than the fair market value of the Stock subject to the Award,
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determined as of the date of grant. An ISO granted to an Employee described in Section 422(b)(6) of the Code will have an exercise price equal to 110% of such fair market value.
(3) Payment Of Exercise Price. Where the exercise of an Award is to be accompanied by payment, the Administrator may determine the required or permitted forms of payment, subject to the following: (a) all payments will be by cash or check acceptable to the Administrator, or, if so permitted by the Administrator and if legally permissible, (i) through the delivery of shares of Stock that have been outstanding for at least six months (unless the Administrator approves a shorter period) and that have a fair market value equal to the exercise price, (ii) by delivery to the Company of a promissory note of the person exercising the Award, payable on such terms as are specified by the Administrator, (iii) through a broker-assisted exercise program acceptable to the Administrator, or (iv) by any combination of the foregoing permissible forms of payment; and (b) where shares of Stock issued under an Award are part of an original issue of shares, the Award will require that at least so much of the exercise price as equals the par value of such shares be paid other than by delivery of a promissory note or its equivalent. The delivery of shares in payment of the exercise price under clause (a)(i) above may be accomplished either by actual delivery or by constructive delivery through attestation of ownership, subject to such rules as the Administrator may prescribe.
(4) ISOs. No ISO may be granted under the Plan after September 15, 2007, but ISOs previously granted may extend beyond that date.
c.AWARDS NOT REQUIRING EXERCISE
Awards of Restricted Stock and Unrestricted Stock may be made in return for either (i) services determined by the Administrator to have a value not less than the par value of the awarded shares of Stock, or (ii) cash or other property having a value not less than the par value of the awarded shares of Stock plus such additional amounts (if any) as the Administrator may determine payable in such combination and type of cash, other property (of any kind) or services as the Administrator may determine.
7. EFFECT OF CERTAIN TRANSACTIONS
a.MERGERS, ETC.
In the event of (i) a consolidation or merger in which the Company is not the surviving corporation or which results in the acquisition of a majority of the Company's then outstanding voting common stock by a single person or entity or by a group of persons and/or entities acting in concert, (ii) a sale or transfer of all or substantially all the Company's assets, or (iii) a dissolution or liquidation of the Company (any of the foregoing, a "covered transaction"), all outstanding Awards requiring exercise will cease to be exercisable, and all other Awards to the extent not fully vested (including Awards subject to performance conditions not yet satisfied or determined) will be forfeited, as of the effective time of the covered transaction;provided, however, that immediately prior to the consummation of such covered transaction the vesting or exercisability of Awards shall be accelerated unless, in the case of any Award, the Administrator provides for one or more substitute or replacement awards from, or the assumption of the existing Award by, the acquiring entity (if any) or its affiliates.
The Administrator may provide in the case of any Award that the provisions of the preceding paragraph shall also apply to (i) mergers or consolidations involving the Company that do not constitute a covered transaction, or (ii) other transactions, not constituting a covered transaction, that involve the acquisition of the Company's outstanding Stock.
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b.CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK
(1) Basic Adjustment Provisions. In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capital structure, the Administrator will make appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4.a. and to the maximum share limits described in Section 4.c., and will also make appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provision of Awards affected by such change.
(2) Certain Other Adjustments. To the extent consistent with qualification of ISOs under Section 422 of the Code and with the performance-based compensation rules of Section 162(m), where applicable, the Administrator may also make adjustments of the type described in paragraph (1) above to take into account distributions to stockholders other than those provided for in Section 7.a. and 7.b.(1), or any other event, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the Plan and to preserve the value of Awards made hereunder.
(3) Continuing Application of Plan Terms. References in the Plan to shares of Stock shall be construed to include any stock or securities resulting from an adjustment pursuant to this Section 7.
8. CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove any restriction from shares of Stock previously delivered under the Plan until: the Company's counsel has approved all legal matters in connection with the issuance and delivery of such shares; if the outstanding Stock is at the time of delivery listed on any stock exchange or national market system, the shares to be delivered have been listed or authorized to be listed on such exchange or system upon official notice of issuance; and all conditions of the Award have been satisfied or waived. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act. The Company may require that certificates evidencing Stock issued under the Plan bear an appropriate legend reflecting any restriction on transfer applicable to such Stock, and the Company may hold the certificates pending lapse of the applicable restrictions.
9. AMENDMENT AND TERMINATION
Subject to the last sentence of Section 3, the Administrator may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards;provided, that (except to the extent expressly required or permitted by the Plan) no such amendment will, without the approval of the stockholders of the Company, effectuate a change for which stockholder approval is required in order for the Plan to continue to qualify under Section 422 of the Code and for Awards to be eligible for the performance-based exception under Section 162(m).
10. NON-LIMITATION OF THE COMPANY'S RIGHTS
The existence of the Plan or the grant of any Award shall not in any way affect the Company's right to award a person bonuses or other compensation in addition to Awards under the Plan.
11. GOVERNING LAW
The Plan shall be construed in accordance with the lawsMassachusetts Secretary of the Commonwealth (the “Effective Time”), each [INSERT APPROPRIATE SPLIT NUMBER, AS DETERMINED IN ACCORDANCE WITH THE PROPOSAL, WHICH SHALL NOT BE MORE THAN 6 AND NOT LESS THAN 3,] issued and outstanding shares of Massachusetts.
A-5
Definition of Terms
The following terms, when used in the Plan, shall have the meanings and be subject to the provisions set forth below:
"Administrator": The Board or, if one or more has been appointed, the Committee. The Administrator may delegate ministerial tasks to such persons as it deems appropriate.
"Affiliate": Any corporation or other entity owning, directly or indirectly, 50% or more of the outstandingauthorized Common Stock of the Company, or in which the Company or any such corporation or other entity owns, directly or indirectly, 50%Corporation, $.01 par value per share shall be reclassified and combined into one (1) share of the outstanding capital stock (determined by aggregate voting rights) or other voting interests.
"Award": Any orCommon Stock. There shall be no fractional shares issued. Each resulting fractional share shall be rounded up to a combinationwhole share. The total number of the following:
(i) Options ("Stock Options") entitling the recipient to acquireauthorized shares of Common Stock upon payment ofimmediately after the exercise price. Each Stock Option awarded under the Plan will be deemed to have been designated as a non-ISO, unless the Administrator expressly provides for ISO treatment.
(ii) Rights ("SARs") entitling the holder upon exercise to receive cash or Stock, as the Administrator determines, equal to a function (determined by the Administrator using such factors as it deems appropriate) of the amount by which the Stock has appreciated in value since the date of the Award.
(iii) Stock subject to restrictions ("Restricted Stock") under the Plan requiring that such Stock be redelivered to the Company if specified conditions are not satisfied. The conditionsEffective Time shall continue to be satisfied in connection with any Award of Restricted Stock, the terms on which such Stock must be redelivered to the Company, the purchase price of such Stock, and all other terms shall be determined by the Administrator.
(iv) Stock not subject to any restrictions under the Plan ("Unrestricted Stock").
(v) A promise to deliver Stock or other securities in the future on such terms and conditions as the Administrator determines.
(vi) Securities (other than Stock Options) that are convertible into or exchangeable for Stock on such terms and conditions as the Administrator determines.
(vii) Cash bonuses tied to Performance Criteria as described below ("Cash Performance Awards").
(viii) Performance Awards
(ix) Grants of cash, or loans, made in connection with other Awards in order to help defray in whole or in part the economic cost (including tax cost) of the Award to the Participant. The terms of any such grant or loan shall be determined by the Administrator.
"Board": The Board of Directors of the Company.
"Code": The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or any successor statute as from time to time in effect.
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"Committee": A committee of the Board comprised solely of two or more outside directors within the meaning of Section 162(m). The Committee may delegate ministerial tasks to such persons (including Employees) as it deems appropriate.
"Company": Precision Optics Corporation, Inc.
"Employee": Any person who is employed by the Company or an Affiliate.
"Employment": A Participant's employment or other service relationship with the Company and its Affiliates. Employment will be deemed to continue, unless the Administrator expressly provides otherwise, so long as the Participant is employed by, or otherwise is providing services in a capacity described in Section 5 to the Company or its Affiliates. If a Participant's employment or other service relationship is with an Affiliate and that entity ceases to be an Affiliate, the Participant's Employment will be deemed to have terminated when the entity ceases to be an Affiliate unless the Participant transfers Employment to the Company or its remaining Affiliates.
"ISO": A Stock Option intended to be an "incentive stock option" within the meaning of Section 422 of the Code.
"Participant": An Employee, director or other person providing services to the Company or its Affiliates who is granted an Award under the Plan.
"Performance Award": An Award subject to Performance Criteria. The Committee in its discretion may grant Performance Awards that are intended to qualify for the performance-based compensation exception under Section 162(m) and Performance Awards that are not intended so to qualify.
"Performance Criteria": Specified criteria, the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the performance-based compensation exception under Section 162(m), a Performance Criterion will mean an objectively determinable measure of performance relating to any or any combination of the following (determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): (i) sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; gross margin; inventory level or turns; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; or other objective operating contributions; or (ii) acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) and refinancings; or other transactions that involve a change in the equity ownership of the Company. A Performance Criterion measure and any targets with respect thereto determined by the Administrator need not be based upon an increase, a positive or improved result or avoidance of loss.
"Plan": Precision Optics Corporation, Inc. 1997 Incentive Plan as from time to time amended and in effect.
"Section 162(m)": Section 162(m) of the Code.
"Stock": Common stock of the Company, par value $.01 per share.
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PRECISION OPTICS CORPORATION, INC.
Dear Shareholder,
Please take note of the important information enclosed with this Proxy Ballot. The Proposals which are discussed in detail in the enclosed proxy materials require your immediate attention and approval.
Your vote counts, and you are strongly encouraged to exercise your right to vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be voted. Then sign the card, detach it and return your proxy vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders on November 11, 2003.
Thank you in advance for your prompt consideration of these matters.
PRECISION OPTICS CORPORATION, INC.
COMMON STOCK PROXY
The undersigned, revoking any previous instructions, hereby acknowledges receipt of the Notice and Proxy Statement dated October 15, 2003. In connection with the Annual Meeting mentioned below, the undersigned hereby appoint(s) Richard E. Forkey and Jack P. Dreimiller as attorneys of the undersigned, each with power to act alone and with full power of substitution, to act and to vote all shares of stock which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Precision Optics Corporation, Inc. to be held on November 11, 2003, at 10:00 A.M. at the offices of Ropes & Gray LLP, One International Place, Boston, Massachusetts, and at any adjournments or postponements thereof, upon the matters set forth in the proxy statement for such Annual Meeting. The foregoing attorneys are authorized to vote, in their discretion, upon such other business as may properly come before the meeting or any adjournments or postponements thereof.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED BY THE SHAREHOLDER(S) ON THE REVERSE SIDE HEREOF. IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION OF THE CLASS I DIRECTOR NOMINEES DESCRIBED IN PROPOSAL NUMBER 1 AND FOR THE AMENDED AND RESTATED 1997 INCENTIVE PLAN DESCRIBED IN PROPOSAL NUMBER 2.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THEENCLOSED ENVELOPE.
Please sign exactly as your name appears on the books of the Company. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title.
PRECISION OPTICS CORPORATIONC/O EQUISERVE TRUST COMPANY, N.A.P.O. BOX 8694EDISON, NJ 08818-8694
PRECISION OPTICS CORPORATION, INC.
NOMINEES: (01) Richard E. Forkey and (02) Edward A. Benjamin
Mark box at right if an address change or comment has been noted on the reverse side of this card. o
Please sign this proxy exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian, please give full title as such.