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<SEC-DOCUMENT>0001094891-03-000153.txt : 20030617
<SEC-HEADER>0001094891-03-000153.hdr.sgml : 20030617
<ACCEPTANCE-DATETIME>20030617082322
ACCESSION NUMBER:		0001094891-03-000153
CONFORMED SUBMISSION TYPE:	POS AM
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20030617

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CPI AEROSTRUCTURES INC
		CENTRAL INDEX KEY:			0000889348
		STANDARD INDUSTRIAL CLASSIFICATION:	AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728]
		IRS NUMBER:				112520310
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		POS AM
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-101902
		FILM NUMBER:		03746560

	BUSINESS ADDRESS:	
		STREET 1:		200A EXECUTIVE DR
		CITY:			EDGEWOOD
		STATE:			NY
		ZIP:			11717
		BUSINESS PHONE:		5165865200
</SEC-HEADER>
<DOCUMENT>
<TYPE>POS AM
<SEQUENCE>1
<FILENAME>cpi_sb2.txt
<DESCRIPTION>POST-EFFECTIVE AMENDMENT TO FORM SB-2
<TEXT>
           As filed with the Securities and Exchange Commission on June 17, 2003
                                                     Registration No. 333-101902
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                              --------------------

                         POST -EFFECTIVE AMENDMENT NO. 1

                                       TO

                                    FORM SB-2

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                            CPI AEROSTRUCTURES, INC.
                 (Name of Small Business Issuer in its Charter)

   New York                     3728                              11-2520310
  ----------           ---------------------------            -----------------
(State or other       (Primary Standard Industrial            (I.R.S. Employer
jurisdiction of         Classification Code Number)          Identification No.)
incorporation or
 organization)

                 200A Executive Drive, Edgewood, New York 11717
                                 (631) 586-5200
          (Address and telephone number of principal executive offices)
                        Arthur August, Chairman and Chief
                                Executive Officer
                            CPI Aerostructures, Inc.
                              200A Executive Drive
                            Edgewood, New York 11717
                                 (631) 586-5200
            (Name, Address and Telephone Number of Agent for Service)

                                    Copy to:
                             David Alan Miller, Esq.
                                 Graubard Miller
                                600 Third Avenue
                               New York, NY 10016
                            Telephone: (212) 818-8800
                            Facsimile (212) 682-2320


If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ X] 333-01902


<PAGE>


ITEM 27.  Exhibits

The Registrant hereby amends this Registration Statement in order to include a
current version of the Underwriting Agremeent.

<TABLE>
<CAPTION>

Exhibit Number          Name of Exhibit                                                                              No. in Document
- --------------          ---------------                                                                              ---------------
<S>                     <C>                                                                                          <C>
*1.1                    Underwriting Agreement                                                                             1.1

3.1                     Certificate of Incorporation of the Company, as amended.  (1)                                      3.1

3.1(a)                  Certificate of Amendment of Certificate of Incorporation filed on July 14, 1998.  (2)            3.1(a)

3.2                     Amended and Restated By-Laws of the Company.  (1)                                                  3.2

***4.7                  Form of Warrant issued to Underwriter                                                              4.7

***5.1                  Opinion of Graubard Miller                                                                         5.1

10.1                    1992 Stock Option Plan.  (1)                                                                      10.3

10.2                    1995 Employee Stock Option Plan.  (3)                                                             10.4

10.3                    Form of military contract.  (1)                                                                   10.7

10.4                    Asset Purchase  Agreement,  dated September 9, 1997 by and among Kolar Machine,  Inc., a          10.19
                        New  York  corporation,  Daniel  Liguori,  the  Company  and  Kolar,  Inc.,  a  Delaware
                        corporation and wholly-owned subsidiary of the Company.  (5)

10.5                    1998 Performance Equity Plan.  (2)                                                                10.28

10.6                    Performance Equity Plan 2000.  (4)                                                                10.29

10.7                    Stock Option Agreement,  dated August 14, 2001,  between Edward J. Fred and the Company.          10.35
                        (5)

10.8                    Stock Option  Agreement,  dated August 14, 2001,  between Arthur August and the Company.          10.36
                        (6)

10.9                    Employment  Agreement,  dated August 14, 2001,  between  Edward J. Fred and the Company.          10.37
                        (7)

10.10                   Employment Agreement, dated August 14, 2001, between Arthur August and the Company.  (7)          10.38

10.11                   Peaceful  Possession  Agreement,  by and among Kolar,  Inc., JP Morgan Chase Bank f/k/a/          10.38
                        the Chase  Manhattan Bank and JP Morgan Leasing,  Inc.,  dated January 24, 2002 (without
                        schedule). (8)

10.12                   Auction Sale Agreement,  among  Daley-Hodkin  Corporation,  Kolar, Inc., JP Morgan Chase          10.40
                        and JP Morgan Leasing, Inc., dated January 10, 2002.  (8)

10.13                   Amended and Restated Credit Agreement,  among the Borrowers,  the Lenders and JP Morgan,          10.43
                        dated June 25, 2002.  (9)

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

Exhibit Number          Name of Exhibit                                                                              No. in Document
- --------------          ---------------                                                                              ---------------
<S>                     <C>                                                                                          <C>
10.14                   Form of Replacement Term Note, between Kolar and JP Morgan, dated June 25, 2002.  (9)             10.44

10.15                   Tranche C Intercreditor and Subordination  Agreement,  among the Lenders,  the Borrowers          10.45
                        and JP Morgan, dated June 25, 2002.  (9)

10.16                   Tranche C Term Note, among the Borrowers and JP Morgan, dated June 25, 2002.  (9)                 10.46

10.17                   Amendment to Intercreditor and Subordination  Agreement,  among the Subordinated Lenders          10.47
                        (as therein defined), the Borrowers and JP Morgan, dated June 25, 2002.  (9)

10.18                   Amendment to Guarantee  and  Collateral  Agreement  among the  Borrowers  and JP Morgan,          10.48
                        dated June 25, 2002.  (9)

10.19                   Tranche C Mortgage,  Fixture  Filing and  Assignment of Leases and Rents,  between Kolar          10.49
                        and JPMorgan, dated June 25, 2002.  (9)

10.20                   Amendment to Security  Agreement,  between the Borrowers and Ralok, dated June 25, 2002.          10.50
                        (9)

10.21                   Amended and  Restated  Seller  Note,  between the  Borrowers  and Ralok,  dated June 25,          10.51
                        2002.  (9)

10.22                   CPI Seller Guaranty Amendment, among CPI and Ralok, dated June 25, 2002.  (9)                     10.52

10.23                   Seller  Mortgage  Subordination  Agreement,  between Ralok and JPMorgan,  dated June 25,          10.53
                        2002.  (9)

10.24                   Mortgage Modification Agreement, between Kolar and JPMorgan, dated June 25, 2002.  (9)            10.54

***10.25                Agreement  among Ralok,  Inc., the Company and Green & Selfler,  as Escrow Agent,  dated          10.25
                        November 26, 2002, regarding right to purchase note.

***10.26                Form of Merger & Acquisition Agreement, between the Underwriter and the Company.                  10.26

***10.27                Registration  Rights  Agreement,  between the  Registrant  and GECapital CFE, Inc. dated          10.27
                        February 26, 2002.

***10.27.1              Schedule of Omitted Document in the form of Exhibit 10.27, including material detail in           10.27.1
                        10.27.1 which such document differs from Exhibit 10.27.

***10.28                Letter Agreement Amending Employment Agreement,  between Edward J. Fred and the Company,          10.28
                        dated December 12, 2002.

***10.29                Letter Agreement Amending Employment Agreement,  between Edward J. Fred and the Company,          10.29
                        dated January 1, 2003.

***10.30                Letter Agreement Amending Employment  Agreement,  between Arthur August and the Company,          10.30
                        dated January 1, 2003.

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

Exhibit Number          Name of Exhibit                                                                              No. in Document
- --------------          ---------------                                                                              ---------------
<S>                     <C>                                                                                          <C>
***21.1                 Subsidiaries of the Registrant.                                                                   21.1

***23.1                 Consent of Graubard Miller (included as part of its opinion).                                      N/A

***23.2                 Consent of Goldstein Golub Kessler LLP.                                                            N/A

***24.1                 Power of Attorney (included on signature page).                                                    N/A

***99.1                 Consent of Person to Become Director.                                                             99.1

- -----------------------
</TABLE>

          *    Filed herewith.

          **   To be filed by amendment.

          ***  Previously filed.

          (1)  Filed as an exhibit to the  Company's  Registration  Statement on
               Form S-1 (No.  33-49270) declared effective on September 16, 1992
               and incorporated herein by reference.

          (2)  Filed as an exhibit to the Company's Annual Report on Form 10-KSB
               for December 31, 1998 and incorporated herein by reference.

          (3)  Filed as an exhibit to the Company's Annual Report on Form 10-KSB
               for December 31, 1995 and incorporated herein by reference.

          (4)  Filed as an exhibit to the Company's Annual Report on Form 10-KSB
               for December 31, 2000 and incorporated herein by reference.

          (5)  Filed as an exhibit to Schedule  13D filed on behalf of Edward J.
               Fred on October 19, 2001 and incorporated herein by reference.

          (6)  Filed as an  exhibit  to  Schedule  13D filed on behalf of Arthur
               August on October 19, 2001 and incorporated herein by reference.

          (7)  Filed as an exhibit  to the  Company's  Quarterly  Report on Form
               10-QSB  for  September  30,  2001  and  incorporated   herein  by
               reference.

          (8)  Filed as an exhibit to the Company's  Current  Report on Form 8-K
               for January 22,  2002,  as amended,  and  incorporated  herein by
               reference.

          (9)  Filed as an exhibit to the Company's  Current  Report on Form 8-K
               for June 27, 2002.

          (10) Filed as an exhibit to the  Company's  Annual Report on Form 10-K
               for December 31, 1992 and incorporated herein by reference.

          (11) Filed as an exhibit to the Company's  Current  Report on Form 8-K
               for  April 29,  1994,  as  amended,  and  incorporated  herein by
               reference.
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements  for filing this amendment and authorized this  registration
statement  to be  signed  on  its  behalf  by  the  undersigned,  hereunto  duly
authorized, in Edgewood, New York on June 16, 2003.


                                     CPI AEROSTRUCTURES, INC.

                              By     /s/ Edward J. Fred
                                     -------------------------------------
                                     Edward J. Fred
                                     Chief Executive Officer, President,
                                     acting Chief Financial Officer
                                     (Principal Executive, Accounting and
                                     Financial Officer), Secretary and Director

     Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the date indicated.


           *
                                      Chairman of the Board        June 16, 2003
- --------------------------------
    Arthur August

                                      Chief Executive Officer,     June 16, 2003
  /s/ Edward J. Fred                  President, acting Chief
- --------------------------------      Financial Officer
    Edward J. Fred                    (Principal Executive,
                                      Accounting and Financial
                                      Officer), Secretary and
                                      Director

           *                          Director                     June 16, 2003
- --------------------------------
    Walter Paulick


           *                          Director                     June 16, 2003
- --------------------------------
    Kenneth McSweeney


                                      Director
- --------------------------------
    A. C. Providenti


                                      Director
- --------------------------------
    Eric Rosenfeld


*  By: /s/ Edward J. Fred
       ------------------
         Edward J. Fred,
         as Attorney in Fact





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>3
<FILENAME>cpi_sb2ex1.txt
<DESCRIPTION>UNDERWRITING AGREEMENT
<TEXT>
                                                                     EXHIBIT 1.1




                             UNDERWRITING AGREEMENT

                                     Between

                            CPI AEROSTRUCTURES, INC.

                                       And

                             EARLYBIRDCAPITAL, INC.

















                            Dated: February 12, 2002



<PAGE>


                                Table of Contents

                                                                         Page
                                                                         ----
1.  Purchase and Sale of Securities.......................................1
      1.1  Firm Securities................................................1
              1.1.1  Purchase of Firm Securities..........................1
              1.1.2  Delivery and Payment.................................1
      1.2  Over-Allotment Option..........................................2
              1.2.1  Option Securities....................................2
              1.2.2  Exercise of Option...................................2
              1.2.3  Payment and Delivery.................................2
      1.3  Underwriter's Warrant..........................................3
              1.3.1  Warrant..............................................3
              1.3.2  Delivery and Payment.................................3
2.  Representations and Warranties of the Company.........................3
      2.1  Filing of Registration Statement...............................3
      2.2  No Stop Orders, Etc............................................3
      2.3  Disclosures in Registration Statement..........................4
              2.3.1  Securities Act Representation........................4
              2.3.2  Disclosure of Contracts..............................4
              2.3.3  Prior Securities Transactions........................4
      2.4  Changes After Dates in Registration Statement..................4
              2.4.1  No Material Adverse Change...........................4
              2.4.2  Recent Securities Transactions, Etc..................5
      2.5  Independent Accountants........................................5
      2.6  Financial Statements...........................................5
      2.7  Authorized Capital; Options; Etc...............................5
      2.8  Valid Issuance of Securities; Etc..............................6
              2.8.1  Outstanding Securities...............................6
              2.8.2  Securities Sold Pursuant to this Agreement...........6
      2.9  Registration and Anti-Dilution Rights of Third Parties.........6
      2.10  Validity and Binding Effect of Agreements.....................7
      2.11  No Conflicts, Etc.............................................7
      2.12  No Defaults; Violations.......................................7
      2.13  Corporate Power; Licenses; Consents...........................8
              2.13.1  Conduct of Business.................................8
              2.13.2  Transactions Contemplated Herein....................8
      2.14  Title to Property; Insurance..................................8
      2.15  Litigation; Governmental Proceedings..........................8
      2.16  Good Standing.................................................9
      2.17  Taxes.........................................................9
      2.18  Transactions Affecting Disclosure to NASD.....................9
              2.18.1  Finder's Fees.......................................9
              2.18.2  Payments Within 12 Months...........................9
              2.18.3  Use of Proceeds....................................10
              2.18.4  Insiders' NASD Affiliation.........................10
      2.19  Foreign Corrupt Practices Act................................10
      2.20  American Stock Exchange Eligibility..........................10
      2.21  Intangibles..................................................10

<PAGE>
                            Table of Contents (cont.)

                                                                         Page
                                                                         ----
      2.22  Relations With Employees.....................................11
              2.22.1  Employee Matters...................................11
              2.22.2  Employee Benefit Plans.............................11
      2.23  Officers' Certificate........................................11
      2.24  Lock-Up Agreements...........................................11
      2.25  Subsidiaries.................................................12
      2.26  Environmental Matters........................................12
      2.27  Government Clearances........................................12
      2.28  Product Liability Insurance..................................12
      2.29  Company Not an Investment Company............................12
      2.30  Related Party Transactions...................................12
      2.31  Audit Committee..............................................12
3.  Covenants of the Company.............................................13
      3.1  Amendments to Registration Statement..........................13
      3.2  Federal Securities Laws.......................................13
              3.2.1  Compliance..........................................13
              3.2.2  Filing of Final Prospectus..........................13
              3.2.3  Exchange Act Registration...........................13
      3.3  Blue Sky Filings..............................................13
      3.4  Delivery to the Underwriter of Prospectuses...................14
      3.5  Events Requiring Notice to the Underwriter....................14
              3.5.1  AMEX Maintenance....................................14
      3.6  Reports to the Underwriter....................................14
              3.6.1  Periodic Reports, Etc...............................14
              3.6.2  Transfer Sheets and Weekly Position Listings........15
      3.7  Agreements between the Underwriter and the Company............15
              3.7.1  Merger and Acquisition Agreement....................15
              3.7.2  Underwriter's Warrant...............................15
      3.8  Payment of Expenses...........................................15
              3.8.1  General Expenses....................................15
              3.8.2  Non-Accountable Expenses............................16
      3.9  Application of Net Proceeds...................................16
      3.10  Delivery of Earnings Statements to Security Holders..........16
      3.11  Key Person Life Insurance....................................17
      3.12  Stabilization................................................17
      3.13  Internal Controls............................................17
      3.14  Sale of Securities...........................................17
      3.15  Disclosure Controls and Procedures...........................17
4.  Conditions of the Underwriter's Obligations..........................17
      4.1  Regulatory Matters............................................17
              4.1.1  Effectiveness of Registration Statement.............17
              4.1.2  NASD Clearance......................................18
              4.1.3  No Blue Sky Stop Orders.............................18
      4.2  Company Counsel Matters.......................................18
              4.2.1  Effective Date Opinion of Counsel...................18
              4.2.2  Closing Date and Option Closing Date Opinions of
                     Counsel.............................................18

                                       ii
<PAGE>
                                Table of Contents

                                                                         Page
                                                                         ----
              4.2.3  Reliance............................................18
      4.3  Cold Comfort Letter...........................................18
      4.4  Officers' Certificates........................................20
              4.4.1  Officers' Certificate...............................20
              4.4.2  Secretary's Certificate.............................20
      4.5  No Material Changes...........................................20
      4.6  Delivery of Agreements........................................21
      4.7  Opinion of Counsel for the Underwriter........................21
5.  Indemnification......................................................21
      5.1  Indemnification of the Underwriter............................21
              5.1.1  General.............................................21
              5.1.2  Procedure...........................................22
      5.2  Indemnification of the Company................................23
      5.3  Contribution..................................................23
              5.3.1  Contribution Rights.................................23
              5.3.2  Contribution Procedure..............................24
6.  Omitted..............................................................24
7.  Board Designee.......................................................24
8.  Representations and Agreements to Survive Delivery...................25
9.  Effective Date of This Agreement and Termination Thereof.............25
      9.1  Effective Date................................................25
      9.2  Termination...................................................25
      9.3  Expenses......................................................26
      9.4  Indemnification...............................................26
10.  Miscellaneous.......................................................26
      10.1  Notices......................................................26
      10.2  Headings.....................................................27
      10.3  Amendment....................................................27
      10.4  Entire Agreement.............................................27
      10.5  Binding Effect...............................................27
      10.6  Governing Law, Jurisdiction..................................27
      10.7  Execution in Counterparts....................................28
      10.8  Waiver, Etc..................................................28

                                      iii

<PAGE>





                              INDEX OF DEFINITIONS

Term                                                                Section
- ----                                                                -------
Act.....................................................................2.1
AMEX...................................................................2.20
Closing Date..........................................................1.1.2
Code ................................................................2.22.2
Commission..............................................................2.1
Common Shares.........................................................1.1.1
Company........................................................Introductory
                                                                  Paragraph
EBC............................................................Introductory
                                                                  Paragraph
Effective Date........................................................1.2.2
ERISA................................................................2.22.2
ERISA Plans..........................................................2.22.2
Exchange Act............................................................2.5
Filing Date..........................................................2.18.2
Firm Securities.......................................................1.1.1
GGK.....................................................................2.5
Insiders...............................................................2.24
Intangibles............................................................2.21
Investment Company Act.................................................2.29
Lock-up Period.........................................................2.24
Merger and Acquisition Agreement......................................3.7.1
NASD.................................................................2.18.1
Option Closing Date...................................................1.2.2
Option Securities.....................................................1.2.1
Over-allotment Option.................................................1.2.1
Preliminary Prospectus..................................................2.1
Prospectus..............................................................2.1
Public Securities.....................................................1.2.1
Registration Statement..................................................2.1
Regulations.............................................................2.1
Securities............................................................1.3.1
Subsidiary(ies)........................................................2.25
Underwriter ...................................................Introductory
                                                                  Paragraph
Underwriter's Securities..............................................1.3.1
Underwriter's Shares..................................................1.3.1
Underwriter's Warrant.................................................1.3.1

                                       iv
<PAGE>

                            CPI AEROSTRUCTURES, INC.

                             2,000,000 COMMON SHARES




                             UNDERWRITING AGREEMENT

                                                              New York, New York
                                                               February 12, 2002

EarlyBirdCapital, Inc.
One State Street Plaza
New York, New York  10004

Ladies and Gentlemen:


     The  undersigned,  CPI  Aerostructures,  Inc., a New York  corporation (the
"Company"),  hereby  confirms its agreement with  EarlyBirdCapital,  Inc. (being
referred to herein variously as "you", "EBC" or the "Underwriter") as follows:

     1. Purchase and Sale of Securities.

          1.1 Firm Securities.

               1.1.1  Purchase  of  Firm   Securities.   On  the  basis  of  the
representations  and warranties herein  contained,  but subject to the terms and
conditions  herein  set  forth,  the  Company  agrees  to issue  and sell to the
Underwriter  and the Underwriter  agrees to purchase from the Company  2,000,000
Common  Shares,  par value  $.001 per share  ("Common  Shares"),  of the Company
("Firm  Securities")  at a purchase price (net of discounts and  commissions) of
$3.68 per share.

               1.1.2  Delivery  and  Payment.  Delivery and payment for the Firm
Securities  shall be made at 10:00 A.M.,  New York time,  on or before the third
business day following the date that the Firm Securities  commence trading or at
such earlier time as the Underwriter  shall determine,  or at such other time as
shall be agreed  upon by the  Underwriter  and the  Company,  at the  offices of
counsel to the Underwriter or at such other place as shall be agreed upon by the
Underwriter  and the Company.  The hour and date of delivery and payment for the
Firm  Securities are called the "Closing  Date." Payment for the Firm Securities
shall be made on the Closing Date at the Underwriter's election by wire transfer
or by certified or bank  cashier's  check(s) in New York  Clearing  House funds,
payable  to the order of the  Company  upon  delivery  to the  Underwriter  of a
certificate  of the Company's  transfer  agent stating that the Firm  Securities
have  been  registered  in book  entry  form in such  name  or  names  and  such
denominations  as are  requested by the  Underwriter.  The Company  shall not be
obligated to sell or deliver the Firm Securities except upon tender of payment

<PAGE>

by the Underwriter for all the Firm Securities.

          1.2 Over-Allotment Option.

               1.2.1  Option  Securities.  For  the  purposes  of  covering  any
over-allotments  in  connection  with  the  distribution  and  sale of the  Firm
Securities,  the Company hereby grants to the  Underwriter an option to purchase
up to an  additional  300,000  Common  Shares from the Company  ("Over-allotment
Option").  Such additional 300,000 Common Shares are hereinafter  referred to as
the "Option  Securities."  The Firm  Securities  and the Option  Securities  are
hereinafter  referred to collectively as the "Public  Securities."  The purchase
price to be paid for the  Option  Securities  will be the same  price per Option
Security as the price per Firm Security set forth in Section 1.1.1 hereof.

               1.2.2  Exercise  of Option.  The  Over-allotment  Option  granted
pursuant to Section 1.2.1 hereof may be exercised by the  Underwriter  as to all
or any part of the  Option  Securities  at any time,  from time to time,  within
forty-five  (45)  days  after  the  effective  date  ("Effective  Date")  of the
Registration  Statement (as hereinafter  defined).  The Underwriter  will not be
under any obligation to purchase any Option  Securities prior to the exercise of
the  Over-allotment  Option.  The  Over-allotment  Option  granted hereby may be
exercised  by the giving of oral  notice to the  Company  from the  Underwriter,
which must be  confirmed  by a letter or  telecopy  setting  forth the number of
Option Securities to be purchased, the date and time for delivery of and payment
for the Option  Securities  and stating that the Option  Securities  referred to
therein are to be used for the purpose of covering over-allotments in connection
with the distribution  and sale of the Firm Securities.  If such notice is given
at least two full business  days prior to the Closing  Date,  the date set forth
therein for such  delivery and payment will be the Closing  Date. If such notice
is given  thereafter,  the date set forth  therein for such delivery and payment
will not be earlier than three full  business days after the date of the notice,
unless the  Underwriter  and the  Company  agree upon an earlier  date.  If such
delivery  and  payment for the Option  Securities  does not occur on the Closing
Date, the date and time of the closing for such Option Securities will be as set
forth in the notice  (hereinafter  the "Option Closing Date").  Upon exercise of
the  Over-allotment  Option,  the Company will become obligated to convey to the
Underwriter,  and,  subject to the terms and  conditions  set forth herein,  the
Underwriter will become obligated to purchase,  the number of Option  Securities
specified in such notice.

               1.2.3  Payment and  Delivery.  Payment for the Option  Securities
will be at the  Underwriter's  election by wire transfer or by certified or bank
cashier's check(s) in New York Clearing House funds, payable to the order of the
Company at the  offices of the  Underwriter  or at such other  place as shall be
agreed upon by the  Underwriter and the Company upon delivery to the Underwriter
of a  certificate  of the  Company's  transfer  agent  stating  that the  Option
Securities  have been registered in book entry form in such name or names and in
such denominations as are requested by the Underwriter.

                                       2
<PAGE>

          1.3 Underwriter's Warrant.

               1.3.1 Warrant. The Company hereby agrees to issue and sell to the
Underwriter  (and/or  its  designees)  on the  Closing  Date,  for an  aggregate
purchase price of $100, a warrant ("Underwriter's  Warrant") for the purchase of
an aggregate of 200,000  Common  Shares  ("Underwriter's  Shares") at an initial
exercise  price equal to 110% of the initial  offering  price of a Common  Share
(i.e., $4.40 per Common Share). Each of the Underwriter's Shares is identical to
the Common Shares  constituting the Firm Securities.  The Underwriter's  Warrant
shall be  exercisable  for a period of four years  commencing  one year from the
Effective  Date.  The  Underwriter's  Warrant and the  Underwriter's  Shares are
hereinafter  referred to collectively  as the  "Underwriter's  Securities."  The
Public Securities and the Underwriter's  Securities are hereinafter  referred to
collectively as the "Securities."

               1.3.2  Delivery  and  Payment.   Delivery  and  payment  for  the
Underwriter's  Warrant  shall be made on the Closing  Date.  The  Company  shall
deliver to the Underwriter,  upon payment therefor,  certificates evidencing the
Underwriter's Warrant in the name or names and in such authorized  denominations
as the Underwriter may request.

     2.  Representations  and Warranties of the Company.  The Company represents
and warrants to the Underwriter as follows:

          2.1 Filing of Registration  Statement.  The Company has filed with the
Securities and Exchange Commission  ("Commission") a registration  statement and
an amendment or amendments thereto, on Form SB-2 (No. 333-101902), including any
related preliminary prospectus ("Preliminary Prospectus"),  for the registration
of the Securities  under the Securities Act of 1933, as amended  ("Act"),  which
registration  statement and  amendment or  amendments  have been prepared by the
Company  in  conformity  with the  requirements  of the Act,  and the  rules and
regulations  ("Regulations")  of the  Commission  under  the Act.  Except as the
context may otherwise require, such registration  statement, as amended, on file
with the Commission at the time the  registration  statement  becomes  effective
(including the prospectus,  financial  statements,  schedules,  exhibits and all
other  documents  filed  as a part  thereof  or  incorporated  therein  and  all
information  deemed to be a part  thereof as of such time  pursuant to paragraph
(b) of Rule 430A of the  Regulations),  is hereinafter  called the "Registration
Statement,"  and the form of the final  prospectus  dated the Effective  Date or
such later date as may be determined by the Underwriter (or, if applicable,  the
form of final prospectus  filed with the Commission  pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus." The Registration Statement
has been declared effective by the Commission on the date hereof.

          2.2 No Stop Orders, Etc. No stop order suspending the effectiveness of
the  Registration   Statement  or  preventing  or  suspending  the  use  of  any
Preliminary Prospectus has been issued under the Act and no proceedings for that
purpose  have been  instituted  or are pending or, to the best  knowledge of the
Company,  are contemplated.  No state regulatory  authority has issued any order
preventing  or  suspending  the  offering  or  sale  of the  Securities  in such
jurisdiction,  or, to the best knowledge of the Company, threatened to institute
any  proceedings  with respect to such order.

                                       3
<PAGE>

          2.3 Disclosures in Registration Statement.

               2.3.1 Securities Act Representation. At the time the Registration
Statement  became  effective  and  at all  times  subsequent  thereto  up to and
including the Closing Date and the Option Closing Date, if any, the Registration
Statement and the Prospectus and any amendment or supplement  thereto  contained
and will contain all material  statements that are required to be stated therein
in accordance with the Act and the  Regulations,  and conformed and will conform
in all material  respects to the  requirements  of the Act and the  Regulations;
neither the  Registration  Statement  nor the  Prospectus,  nor any amendment or
supplement thereto, during such time period and on such dates, contained or will
contain any untrue statement of a material fact or omitted or will omit to state
any  material  fact  required  to be stated  therein  or  necessary  to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading.  The representation and warranty made in this Section 2.3.1 does
not apply to  statements  made or  statements  omitted in  reliance  upon and in
conformity with written information furnished to the Company with respect to the
Underwriter expressly for use in the Registration Statement or Prospectus or any
amendment thereof or supplement thereto.

               2.3.2   Disclosure  of   Contracts.   The   description   in  the
Registration  Statement and the  Prospectus of contracts and other  documents is
accurate in all material  respects and presents fairly the information  required
to be disclosed  and there are no contracts  or other  documents  required to be
described in the  Registration  Statement or the  Prospectus or to be filed with
the Commission as exhibits to the  Registration  Statement that have not been so
described or filed. Each contract or other instrument (however  characterized or
described)  to which the Company is a party or by which its property or business
is or may be bound or affected and that is (i) referred to in the Prospectus, or
(ii) material to the Company's business,  has been duly and validly executed, is
in full force and effect in all material respects and is enforceable against the
Company and, to the Company's knowledge, the other parties thereto in accordance
with its terms,  and none of such contracts or instruments  has been assigned by
the Company, and neither the Company nor, to the Company's knowledge,  any other
party is in default  thereunder  and, to the Company's  knowledge,  no event has
occurred that,  with the lapse of time or the giving of notice,  or both,  would
constitute a default  thereunder.  None of the  provisions of such  contracts or
instruments  violates or will result in a violation of any  existing  applicable
law, rule, regulation,  judgment,  order or decree of any governmental agency or
court having  jurisdiction  over the Company or any of its assets or businesses,
including,   without  limitation,  those  relating  to  environmental  laws  and
regulations.

               2.3.3 Prior Securities Transactions. No securities of the Company
have been sold by the  Company or by or on behalf of, or for the benefit of, any
person or persons  controlling,  controlled by, or under common control with the
Company within the three years prior to the date hereof,  except as disclosed in
the Registration Statement.

          2.4 Changes After Dates in Registration Statement.

               2.4.1 No Material  Adverse Change.  Since the respective dates as
of which information is given in the Registration  Statement and the Prospectus,
except as otherwise  specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or in the results of

                                       4
<PAGE>

operations,  business or business prospects of the Company,  including,  but not
limited to, a material loss or interference  with its business from fire, storm,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute or court or governmental action,  order or decree,  whether or
not  arising  in the  ordinary  course  of  business,  (ii)  there  have been no
transactions  entered  into by the  Company,  other than  those in the  ordinary
course of business,  that are material with respect to the condition,  financial
or otherwise, or to the results of operations, business or business prospects of
the Company.

               2.4.2 Recent Securities  Transactions,  Etc. Since the respective
dates as of which  information  is given in the  Registration  Statement and the
Prospectus,  and except as may otherwise be indicated or contemplated  herein or
therein, the Company has not (i) issued any securities or incurred any liability
or obligation,  direct or contingent,  for borrowed  money;  or (ii) declared or
paid any dividend or made any other distribution on or in respect to its capital
stock.

          2.5  Independent  Accountants.  Goldstein  Golub  Kessler LLP ("GGK"),
whose report is filed with the Commission as part of the Registration Statement,
are independent accountants as required by the Act and the Regulations.  GGK has
not,  during the periods  covered by the  financial  statements  included in the
Prospectus, provided to the Company any non-audit services, as such term is used
in Section 10A(g) of the Securities  Exchange Act of 1934, as amended ("Exchange
Act").

          2.6  Financial  Statements.  The financial  statements,  including the
notes thereto and supporting  schedules  included in the Registration  Statement
and  Prospectus,  fairly  present  the  financial  position  and the  results of
operations  of the Company at the dates and for the periods to which they apply;
and such financial  statements  have been prepared in conformity  with generally
accepted  accounting  principles,  consistently  applied  throughout the periods
involved;  and the supporting  schedules included in the Registration  Statement
present  fairly the  information  required to be stated  therein.  The pro forma
financial  information  set forth in the  Registration  Statement and Prospectus
reflects all significant  assumptions  and adjustments  relating to the business
and operations of the Company.  The  historical  financial data set forth in the
Prospectus  under the  captions  "Summary--Summary  Financial  Information"  and
"Capitalization"  fairly present in all material  respects the  information  set
forth  therein  and have been  compiled on a basis  consistent  with that of the
audited  financial  statements  contained  in the  Registration  Statement.  The
Registration  Statement  discloses all material  off-balance sheet transactions,
arrangements,   obligations  (including  contingent   obligations),   and  other
relationships of the Company with unconsolidated  entities or other persons that
may  have a  material  current  or  future  effect  on the  Company's  financial
condition,  changes in financial  condition,  results of operations,  liquidity,
capital expenditures,  capital resources,  or significant components of revenues
or expenses.

          2.7 Authorized Capital;  Options;  Etc. The Company had at the date or
dates  indicated  in the  Prospectus  duly  authorized,  issued and  outstanding
capitalization  as set forth in the  Registration  Statement and the Prospectus.
Based on the assumptions and adjustments  stated in the  Registration  Statement
and the Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization  set  forth  therein.  Except  as set  forth in the  Registration
Statement  and the  Prospectus,  on the  Effective  Date and on the Closing Date

                                       5
<PAGE>

there will be no outstanding or authorized  subscriptions,  options, warrants or
other rights to purchase or otherwise acquire, or preemptive rights with respect
to the  issuance or sale of, any Common  Shares of the  Company,  including  any
obligations to issue any shares  pursuant to  anti-dilution  provisions,  or any
security  convertible  into Common  Shares of the Company,  or any  contracts or
commitments to issue or sell Common Shares or any such options, warrants, rights
or  convertible  securities.

          2.8 Valid Issuance of Securities; Etc.

               2.8.1   Outstanding   Securities.   All  issued  and  outstanding
securities of the Company have been duly  authorized  and validly issued and are
fully paid and non-assessable;  the holders thereof have no rights of rescission
with  respect  thereto,  and are not subject to personal  liability by reason of
being such holders;  and none of such securities were issued in violation of the
preemptive  rights of any  holders  of any  security  of the  Company or similar
contractual rights granted by the Company.  The outstanding options and warrants
to  purchase  Common  Shares  constitute  valid and binding  obligations  of the
Company,  enforceable  in accordance  with their terms.  The  authorized  Common
Shares and outstanding options and warrants to purchase Common Shares conform to
all statements relating thereto contained in the Registration  Statement and the
Prospectus.  The  offers  and sales by the  Company  of the  outstanding  Common
Shares,   options  and  warrants  to  purchase  Common  Shares,  and  securities
convertible into Common Shares,  were at all relevant times registered under the
Act and registered or qualified  under the applicable  state  securities or Blue
Sky laws or exempt from such registration or qualification  requirements.

               2.8.2 Securities Sold Pursuant to this Agreement.  The Securities
have been duly authorized and, when issued and paid for, will be validly issued,
fully  paid and  non-assessable;  the  holders  thereof  are not and will not be
subject to personal  liability by reason of being such holders;  the  Securities
are not and will not be subject to the  preemptive  rights of any holders of any
security of the Company or similar  contractual  rights  granted by the Company;
and all corporate  action required to be taken for the  authorization,  issuance
and sale of the  Securities has been duly and validly  taken.  When issued,  the
Underwriter's  Warrant  will  constitute a valid and binding  obligation  of the
Company to issue and sell,  upon  exercise  thereof  and payment  therefor,  the
number  and  type of  securities  of the  Company  called  for  thereby  and the
Underwriter's Warrant will be enforceable against the Company in accordance with
its terms,  except  (i) as such  enforceability  may be  limited by  bankruptcy,
insolvency,   reorganization   or  similar  laws  affecting   creditors'  rights
generally,  (ii)  as  enforceability  of  any  indemnification  or  contribution
provision may be limited under the federal and state  securities laws, and (iii)
that the  remedy of  specific  performance  and  injunctive  and other  forms of
equitable relief may be subject to the equitable  defenses and to the discretion
of  the  court  before  which  any  proceeding  therefor  may  be  brought.

          2.9 Registration and Anti-Dilution Rights of Third Parties.  Except as
described in the  Prospectus,  no holders of any securities of the Company or of
any  options or  warrants  of the  Company or other  rights  exercisable  for or
convertible or exchangeable into securities of the Company (i) have any right to
require the Company to register  any such  securities  of the Company  under the
Act, except as described in the Registration Rights Chart previously provided to

                                       6
<PAGE>

you, or (ii) have  rights to have the  exercise  or  conversion  prices of their
securities  lowered  and/or  the  number of  securities  that they may  purchase
increased as a result of the issuance by the Company of  securities  for a price
less than such exercise or conversion price.

          2.10 Validity and Binding  Effect of  Agreements.  This  Agreement has
been  duly and  validly  authorized  by the  Company  and  constitutes,  and the
Underwriter's  Warrant  and the Merger and  Acquisition  Agreement  (as  defined
below) have been duly and validly  authorized  by the Company and, when executed
and delivered, will constitute, the valid and binding agreements of the Company,
enforceable  against  the Company in  accordance  with their  respective  terms,
except (i) as such  enforceability  may be limited  by  bankruptcy,  insolvency,
reorganization or similar laws affecting  creditors'  rights generally,  (ii) as
enforceability of any  indemnification or contribution  provision may be limited
under the  federal  and state  securities  laws,  and (iii)  that the  remedy of
specific  performance and injunctive and other forms of equitable  relief may be
subject to the  equitable  defenses  and to the  discretion  of the court before
which any proceeding therefor may be brought.

          2.11 No Conflicts,  Etc. The execution,  delivery,  and performance by
the  Company of this  Agreement,  the  Underwriter's  Warrant and the Merger and
Acquisition  Agreement,  the  consummation  by the  Company of the  transactions
herein and therein contemplated and the compliance by the Company with the terms
hereof and thereof do not and will not,  with or without the giving of notice or
the lapse of time or both,  (i) result in a breach of, or  conflict  with any of
the terms and  provisions  of, or constitute a default  under,  or result in the
creation,  modification,  termination  or  imposition  of any  lien,  charge  or
encumbrance upon any property or assets of the Company pursuant to the terms of,
any indenture,  mortgage,  deed of trust,  note, loan or credit agreement or any
other  agreement or instrument  evidencing an obligation for borrowed  money, or
any other  agreement or  instrument  to which the Company is a party or by which
the  Company  may be bound or to which  any of the  property  or  assets  of the
Company is  subject;  (ii)  result in any  violation  of the  provisions  of the
certificate of  incorporation  or the by-laws of the Company;  (iii) violate any
existing  applicable  law, rule,  regulation,  judgment,  order or decree of any
governmental agency or court, domestic or foreign,  having jurisdiction over the
Company or any of its properties or businesses;  or (iv) have a material adverse
effect on any permit, license,  certificate,  registration,  approval,  consent,
license or franchise of or concerning the Company.

          2.12 No Defaults;  Violations.  Except as described in the Prospectus,
no material  default exists in the due  performance  and observance of any term,
covenant or condition of any material license,  contract,  indenture,  mortgage,
deed of  trust,  note,  loan or credit  agreement,  or any  other  agreement  or
instrument  evidencing an obligation for borrowed  money,  or any other material
agreement or  instrument to which the Company is a party or by which the Company
may be bound or to which  any of the  properties  or assets  of the  Company  is
subject.  The  Company  is not in  violation  of any  term or  provision  of its
certificate  of  incorporation  or  by-laws  or in  violation  of  any  material
franchise, license, permit, applicable law, rule, regulation, judgment or decree
of any governmental  agency or court,  domestic or foreign,  having jurisdiction
over the Company or any of its properties or businesses.

                                       7
<PAGE>

          2.13 Corporate Power; Licenses; Consents.

               2.13.1  Conduct  of  Business.  The  Company  has  all  requisite
corporate   power  and   authority,   and  has  all   necessary   and   material
authorizations,  approvals,  orders,  licenses,  certificates and permits of and
from all  governmental  regulatory  officials  and  bodies  to own or lease  its
properties  and conduct its  business as described  in the  Prospectus,  and the
Company is and has been doing  business  in  compliance  with all such  material
authorizations,  approvals,  orders, licenses,  certificates and permits and all
federal,  state and local laws,  rules and  regulations.  The disclosures in the
Registration  Statement  concerning  the  effects  of  federal,  state and local
regulation on the Company's  business as currently  contemplated  are correct in
all material  respects and do not omit to state a material  fact  required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

               2.13.2  Transactions  Contemplated  Herein.  The  Company has all
corporate  power and authority to enter into this Agreement and to carry out the
provisions and conditions  hereof, and all consents,  authorizations,  approvals
and orders  required in connection  therewith  have been  obtained.  No consent,
approval,  authorization or order of, and no filing with, any court,  government
agency or other body is required for the valid authorization, issuance, sale and
delivery  of  the  Securities  and  the  consummation  of the  transactions  and
agreements contemplated by this Agreement, the Underwriter's Warrant, the Merger
and Acquisition Agreement and the Prospectus,  except with respect to applicable
federal and state securities laws.

          2.14  Title  to  Property;   Insurance.  The  Company  has  valid  and
defensible title to, or valid and enforceable leasehold estates in, all items of
real and personal property (tangible and intangible) owned or leased by it, free
and clear of all liens,  encumbrances,  claims, security interests,  defects and
restrictions of any material nature whatsoever,  other than those referred to in
the Prospectus (including the financial statements and notes thereto),  purchase
money  security  interests,  and liens for  taxes not yet due and  payable.  The
Company has adequately  insured its  properties  against loss or damage by fire,
theft, damage, destruction, acts of vandalism or terrorism or other casualty and
maintains, in adequate amounts, such other insurance as is usually maintained by
companies engaged in the same or similar business.

          2.15 Litigation;  Governmental Proceedings. Except as set forth in the
Prospectus,  there  is  no  action,  suit,  proceeding,   inquiry,  arbitration,
investigation,   litigation  or  governmental  proceeding  pending  or,  to  the
Company's knowledge, threatened against, or involving the properties or business
of, the  Company  that  might  materially  and  adversely  affect the  financial
position, prospects, value or the operation of the properties or the business of
the Company,  or that questions the validity of the capital stock of the Company
or this Agreement or of any action taken or to be taken by the Company  pursuant
to, or in connection  with,  this  Agreement.  There are no outstanding  orders,
judgments  or  decrees  of any  court,  governmental  agency or other  tribunal,
domestic or foreign,  naming the Company and  enjoining the Company from taking,
or  requiring  the Company to take,  any action,  or to which the  Company,  its
properties or business is bound or subject.

                                       8
<PAGE>

          2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the state of
its  incorporation.  The  Company is duly  qualified  and  licensed  and in good
standing as a foreign  corporation in each  jurisdiction  in which  ownership or
leasing of any  properties  or the  character of its  operations  requires  such
qualification or licensing, except where the failure to qualify would not have a
material  adverse  effect on the financial  position,  prospects or value or the
operation of the properties or the business of the Company.

          2.17 Taxes. The Company has filed all returns (as hereinafter defined)
required  to be filed with  taxing  authorities  prior to the date hereof or has
duly obtained  extensions of time for the filing  thereof.  The Company has paid
all taxes (as hereinafter  defined) shown as due on such returns that were filed
and has  paid  all  taxes  imposed  on or  assessed  against  the  Company.  The
provisions for taxes payable,  if any, shown on the financial  statements  filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed,  and for all periods to and including the
dates of such consolidated financial statements. No issues have been raised (and
are currently  pending) by any taxing  authority in  connection  with any of the
returns or taxes asserted as due from the Company, and no waivers of statutes of
limitation with respect to the returns or collection of taxes have been given by
or requested from the Company. The term "taxes" mean all federal,  state, local,
foreign,  and other net income,  gross income,  gross receipts,  sales,  use, ad
valorem,  transfer,  franchise,  profits,  license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property,  windfall profits,  customs, duties or other taxes, fees, assessments,
or charges of any kind  whatever,  together with any interest and any penalties,
additions to tax, or additional amounts with respect thereto. The term "returns"
means all  returns,  declarations,  reports,  statements,  and  other  documents
required to be filed in respect to taxes.

          2.18 Transactions Affecting Disclosure to NASD.

               2.18.1 Finder's Fees. There are no claims,  payments,  issuances,
arrangements  or  understandings  for  services  in the  nature  of a  finder's,
consulting or origination fee with respect to the introduction of the Company to
the  Underwriter  or the sale of the  Securities  hereunder,  and except for the
arrangements,  agreements,  understandings,  payments and issuances  between the
Company and the Underwriter that are described in the "Underwriting"  section of
the Prospectus, there are no arrangements, agreements, understandings,  payments
or issuances pursuant to which the Company will make a payment (i) to any member
of the National Association of Securities Dealers,  Inc. ("NASD") or (ii) to any
person or entity that has any direct or indirect affiliation or association with
any NASD member.

               2.18.2 Payments Within 12 Months. Except as set forth on Schedule
2.18.2, and other than payments to the Underwriter,  the Company has not made or
became obligated to make any direct or indirect payments (in cash, securities or
otherwise) to (i) any person, as a finder's fee, investing fee or otherwise,  in
consideration  of such person raising  capital for the Company or introducing to
the Company persons who provided  capital to the Company,  (ii) any NASD member,
or (iii) any person or entity  that has any direct or  indirect  affiliation  or
association with any NASD member within the 12-month period prior to the date on
which the Registration  Statement was filed with the Commission  ("Filing Date")
or thereafter.

                                       9
<PAGE>

               2.18.3 Use of Proceeds.  None of the net proceeds of the offering
will be paid by the Company to any participating NASD member or any affiliate or
associate of any participating  NASD member,  except as specifically  authorized
herein.

               2.18.4  Insiders'  NASD  Affiliation.  Except  as  set  forth  on
Schedule  2.18.4,  no officer or director of the Company or owner of at least 5%
of  the  Company's   outstanding  Common  Shares  has  any  direct  or  indirect
affiliation  or  association  with any NASD member.  The Company will advise the
Underwriter and the NASD if it learns that any officer,  director or owner of at
least 5% of the Company's  outstanding  Common Shares is or becomes an affiliate
or associated person of an NASD member participating in the offering.

          2.19 Foreign Corrupt Practices Act. Neither the Company nor any of its
officers,  directors,  employees,  agents  or any other  person  acting on their
behalf has,  directly or indirectly,  given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer,  supplier,  employee or agent of a customer
or   supplier,   or  official  or  employee  of  any   governmental   agency  or
instrumentality  of any government  (domestic or foreign) or any political party
or  candidate  for  office  (domestic  or  foreign)  or any  political  party or
candidate  for office  (domestic or foreign) or other person who was, is, or may
be in a position to help or hinder the  business of the Company (or assist it in
connection with any actual or proposed  transaction)  that (i) might subject the
Company  to any  damage  or  penalty  in any  civil,  criminal  or  governmental
litigation  or  proceeding,  (ii) if not  given in the  past,  might  have had a
material adverse effect on the assets,  business or operations of the Company as
reflected in any of the  financial  statements  contained in the  Prospectus  or
(iii) if not  continued  in the  future,  might  adversely  affect  the  assets,
business,  operations  or  prospects  of the  Company.  The  Company's  internal
accounting controls and procedures are sufficient to cause the Company to comply
with the Foreign Corrupt Practices Act of 1977, as amended.

          2.20 American Stock Exchange  Eligibility.  As of the Effective  Date,
the Public  Securities  have been  approved  for listing on The  American  Stock
Exchange ("AMEX").

          2.21 Intangibles. The Company owns or possesses the requisite licenses
or rights to use all  trademarks,  service marks,  service  names,  trade names,
patents and patent  applications,  copyrights  and other  rights  (collectively,
"Intangibles") described as being licensed to or owned by it in the Registration
Statement  or used by the  Company in its  business  or  relating to products or
services sold or currently or currently proposed to be sold by the Company.  The
Company's  Intangibles  are listed on Schedule 2.21.  The Company's  Intangibles
that have been registered in the United States Patent and Trademark  Office have
been fully  maintained  and are in full force and  effect.  There is no claim or
action by any person  pertaining to, or proceeding  pending or, to the Company's
knowledge,  threatened  relating to, and the Company has not received any notice
of conflict  with the asserted  rights of others that  challenges  the exclusive
right of the Company with respect to, any Intangibles used in the conduct of the
Company's  business.  To  the  Company's  knowledge,   after  due  inquiry,  the
Intangibles and the Company's  current  products,  services and processes do not
infringe  on any  Intangibles  held  by any  third  party,  and no  others  have
infringed  upon the  Intangibles  of the  Company.  The Company has in place all

                                       10

<PAGE>

confidentiality agreements with its employees,  consultants and third parties as
are necessary to protect its Intangibles.

          2.22 Relations With Employees.

               2.22.1  Employee  Matters.  The Company has  generally  enjoyed a
satisfactory  employer-employee  relationship  with  its  employees  and  is  in
compliance in all material  respects with all federal,  state and local laws and
regulations respecting the employment of its employees and employment practices,
terms and conditions of employment and wages and hours relating  thereto.  There
are no pending  investigations  involving the Company by the U.S.  Department of
Labor, or any other governmental  agency responsible for the enforcement of such
federal, state and local laws and regulations. There is no unfair labor practice
charge or  complaint  against  the Company  pending  before the  National  Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or, to the  Company's  knowledge,  threatened  against or involving  the
Company or any  predecessor  entity,  and none has ever  occurred.  No  question
concerning  representation exists respecting the employees of the Company and no
collective  bargaining  agreement or  modification  thereof is  currently  being
negotiated  by the Company.  No grievance or  arbitration  proceeding is pending
under any expired or existing collective  bargaining  agreements of the Company,
if any.

               2.22.2  Employee  Benefit  Plans.  Other than as set forth in the
Registration Statement, the Company neither maintains,  sponsors nor contributes
to, nor is it required to contribute to, any program or  arrangement  that is an
"employee  pension  benefit  plan," an "employee  welfare  benefit  plan," or a,
"multi-employer  plan" as such terms are  defined  in  Sections  3(2),  3(1) and
3(37), respectively,  of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")  ("ERISA Plans").  The Company does not maintain or contribute
to, and has at no time  maintained or contributed to, a defined benefit plan, as
defined  in  Section  3(35) of  ERISA.  No  ERISA  Plan  (or any  trust  created
thereunder)  has  engaged in a  "prohibited  transaction"  within the meaning of
Section 406 of ERISA or Section  4975 of the Internal  Revenue Code of 1986,  as
amended ("Code"), that could subject the Company to any material tax penalty for
prohibited  transactions and that has not adequately been corrected.  Each ERISA
Plan  is in  compliance  with  all  material  reporting,  disclosure  and  other
requirements  of the  Code and  ERISA as they  relate  to any such  ERISA  Plan.
Determination  letters have been received from the Internal Revenue Service with
respect to each ERISA Plan that is intended to comply with Code Section  401(a),
stating that such ERISA Plan and the attendant  trust are qualified  thereunder.
The Company has never completely or partially  withdrawn from a  "multi-employer
plan."

          2.23  Officers'  Certificate.  Any  certificate  signed  by  any  duly
authorized  officer of the  Company  and  delivered  directly  to you or to your
counsel  shall be deemed a  representation  and  warranty  by the Company to the
Underwriter as to the matters covered thereby and as of the date given.


          2.24 Lock-Up  Agreements.  The Company has caused to be duly  executed
legally binding and enforceable agreements pursuant to which all of the officers
and directors of the Company  (including  their family  members and  affiliates)
(collectively,  the "Insiders"), agree not to sell any Common Shares or warrants

                                       11
<PAGE>

or options to purchase, or other securities convertible into Common Shares owned
by them (either  pursuant to Rule 144 of the  Regulations  or  otherwise)  for a
period of 24 months  following the Effective Date ("Lock-up  Period") except (i)
with the prior written consent of the Underwriter,  (ii) that the Lock-up Period
for Arthur  August and  Maureen  August  shall be 13 months,  (iii) that  Arthur
August  may sell up to  10,000  Common  Shares  per month in  conformity  with a
written plan for trading  securities  designed to meet the  requirements of Rule
10b5-1(c) that is reasonably  satisfactory to the Underwriter,  and (iv) that no
such agreements shall be required from Arthur August's son and stepson.

          2.25  Subsidiaries.  Except as set forth on Schedule 2.25, the Company
does not own an  interest in any  corporation,  partnership,  limited  liability
company,  joint  venture,  trust or other  business  entity.  The Company has no
subsidiaries  other than those  subsidiaries set forth on Schedule 2.25, each of
which is a corporation duly organized and validly existing under the laws of the
jurisdiction of its  incorporation  (each a "Subsidiary"  and  collectively  the
"Subsidiaries").  The Company owns all of the capital stock of the  Subsidiaries
free and clear of all liens,  security  interests and other  encumbrances of any
nature whatsoever,  except as set forth in the Prospectus.  The  representations
and  warranties  made by the Company in this  Agreement  shall also apply and be
true with respect to each Subsidiary,  taken as a whole with the Company and all
other Subsidiaries, as if each representation and warranty contained herein made
specific  reference to the  Subsidiaries  each time the term "Company" was used.
The Company has  advised you that Kolar,  Inc. is in the process of  liquidating
its assets, as described in the Prospectus.

          2.26 Environmental  Matters.  The Company has complied in all material
respects with all applicable environmental laws.

          2.27 Government Clearances. Neither the Company nor any of its current
executive officers or engineers has ever been denied a security clearance.

          2.28  Product  Liability  Insurance.  To its  knowledge,  the  Company
maintains product liability  insurance of the types and in the amounts typically
maintained by similar  companies  operating in the industry in which the Company
operates.

          2.29 Company Not an Investment  Company.  The Company has been advised
of the rules and  requirements  under the  Investment  Company  Act of 1940,  as
amended (the "Investment Company Act"). The Company is not, and after receipt of
payment  for the  Securities  will not be, an  "investment  company"  within the
meaning of the Investment Company Act, and will conduct its business in a manner
so that it will not become subject to the Investment Company Act.

          2.30 Related Party Transactions.  There are no business  relationships
or related party transactions involving the Company or any other person required
to be described in the Prospectus that have not been described as required.

          2.31 Audit  Committee.  The audit  committee of the Company's board of
directors  is  comprised  of at least  three  directors,  a majority of whom are
"independent"  within the meaning of Section  10A(m)(3)  of the Exchange Act and
Section  121  of  the  AMEX  Company  Guide  (Listing  Standards,  Policies  and

                                       12
<PAGE>

Regulations),  and one of whom possesses the required past employment experience
as specified in Section 121B(b)(i) of the AMEX Company Guide (Listing Standards,
Policies and  Requirements).  From and after the  consummation of this offering,
all of the members of the audit committee shall be independent.

     3. Covenants of the Company. The Company covenants and agrees as follows:

          3.1 Amendments to Registration Statement.  The Company will deliver to
the  Underwriter,   prior  to  filing,   any  amendment  or  supplement  to  the
Registration  Statement or  Prospectus  proposed to be filed after the Effective
Date and not file any such  amendment  or  supplement  to which the  Underwriter
shall reasonably object.

          3.2 Federal Securities Laws.

               3.2.1  Compliance.  During the time when a Prospectus is required
to be delivered  under the Act, the Company will use all  reasonable  efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force,  so far as necessary to permit the continuance of sales of or dealings
in the Public  Securities  in accordance  with the  provisions  hereof,  and the
Prospectus.  If at any time when a Prospectus  relating to the Public Securities
is required to be delivered  under the Act,  any event shall have  occurred as a
result of which,  in the  opinion of counsel  for the Company or counsel for the
Underwriter, the Prospectus, as then amended or supplemented, includes an untrue
statement of a material  fact or omits to state any material fact required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances under which they were made, not misleading,  or if it is necessary
at any time to amend the  Prospectus  to comply with the Act,  the Company  will
notify the Underwriter and Counsel for the Underwriter  promptly and prepare and
file  with the  Commission,  subject  to  Section  3.1  hereof,  an  appropriate
amendment or supplement in accordance with Section 10 of the Act.

               3.2.2  Filing  of Final  Prospectus.  The  Company  will file the
Prospectus (in form and substance  reasonably  satisfactory to the  Underwriter)
with the Commission pursuant to the requirements of Rule 424 of the Regulations.

               3.2.3 Exchange Act Registration.  For a period of five years from
the  Effective  Date,  the Company  will use its best  efforts to  maintain  the
registration  of the  Common  Stock  under the  provisions  of Section 12 of the
Exchange Act; provided, however, that the Company shall not be in breach of this
covenant if the Company  consummates a "Rule 13e-3 Transaction" (as such term is
defined in Rule 13e-3 promulgated under the Exchange Act).

          3.3 Blue Sky  Filings.  The Company  will  endeavor in good faith,  in
cooperation  with the  Underwriter,  at or  prior  to the time the  Registration
Statement becomes  effective,  to qualify the Public Securities for offering and
sale under the securities  laws of such  jurisdictions  as the  Underwriter  may
reasonably  designate,  provided that no such qualification shall be required in
any  jurisdiction  where, as a result  thereof,  the Company would be subject to
service  of  general  process  or to  taxation  as a foreign  corporation  doing
business in such  jurisdiction.  In each jurisdiction  where such  qualification

                                       13
<PAGE>

shall be effected,  the Company will,  unless the  Underwriter  agrees that such
action is not at the time necessary or advisable,  use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.

          3.4  Delivery to the  Underwriter  of  Prospectuses.  The Company will
deliver to the Underwriter,  without charge, from time to time during the period
when the  Prospectus  is required to be delivered  under the Act or the Exchange
Act, such number of copies of each Preliminary  Prospectus and the Prospectus as
the  Underwriter  may  reasonably  request  and,  as  soon  as the  Registration
Statement or any amendment or supplement thereto becomes  effective,  deliver to
the  Underwriter  two  original  executed  Registration  Statements,   including
exhibits,  and all post-effective  amendments thereto and copies of all exhibits
filed therewith or incorporated  therein by reference and all original  executed
consents of certified experts.

          3.5 Events  Requiring  Notice to the  Underwriter.  The  Company  will
notify the Underwriter  immediately and confirm the notice in writing (i) of the
effectiveness of the Registration  Statement and any amendment thereto,  (ii) of
the issuance by the  Commission of any stop order or of the  initiation,  or the
threatening,  of any proceeding  for that purpose,  (iii) if it becomes aware of
the  issuance by any state  securities  commission  of any  proceedings  for the
suspension of the qualification of the Public Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose,  (iv) of the mailing and delivery to the  Commission for filing of
any amendment or supplement to the Registration Statement or Prospectus,  (v) of
the receipt of any comments or request for any additional  information  from the
Commission,  and (vi) of the happening of any event during the period  described
in Section 3.4 hereof that, in the judgment of the Company,  makes any statement
of a material fact made in the Registration  Statement or the Prospectus  untrue
or that requires the making of any changes in the Registration  Statement or the
Prospectus  in  order  to  make  the  statements   therein,   in  light  of  the
circumstances  under which they were made, not misleading.  If the Commission or
any  state  securities  commission  shall  enter a stop  order or  suspend  such
qualification  at any time,  the Company  will make every  reasonable  effort to
obtain promptly the lifting of such order.

               3.5.1 AMEX Maintenance.  For a period of five years from the date
hereof,  the Company  will use its best  efforts to maintain  the listing by the
AMEX of the Common Shares;  provided,  however, that the Company shall not be in
breach of this covenant if the Company  consummates  a "Rule 13e-3  Transaction"
(as  such  term is  defined  in Rule  13e-3  promulgated  under  the  Securities
Exchange).

          3.6 Reports to the Underwriter.

               3.6.1 Periodic Reports,  Etc. For a period of five years from the
Effective Date, the Company will promptly  furnish to the Underwriter  copies of
such financial  statements and other periodic and special reports as the Company
from time to time files with any governmental  authority or furnishes  generally
to holders of any class of its  securities  (at  substantially  the same time as
such  information  is filed with the  governmental  authority  or  furnished  to
securityholders),  and promptly  furnish to the  Underwriter  (i) a copy of each

                                       14
<PAGE>

periodic report the Company shall be required to file with the Commission,  (ii)
a copy of every press  release and every news item and article  with  respect to
the Company or its affairs  that was  released by the  Company,  (iii) a copy of
each Form 8-K or Schedules  13D, 13G, 14D-1 or 13E-4 received or prepared by the
Company,  and (iv) such  additional  documents  and  information  regarding  the
Company and the affairs of any  subsidiaries  of the Company as the  Underwriter
may from time to time reasonably request.

               3.6.2 Transfer Sheets and Weekly Position Listings.  For a period
of five years from the Closing Date, the Company will furnish to the Underwriter
at the Company's sole expense such transfer sheets and position  listings of the
Company's securities as the Underwriter may request, including the daily, weekly
and monthly  consolidated  transfer  sheets of the transfer agent of the Company
and the weekly position listings of the Depository Trust Company.

          3.7 Agreements between the Underwriter and the Company.

               3.7.1 Merger and Acquisition Agreement.  On the Closing Date, the
Company will enter into a Merger and Acquisition  Agreement with EBC in the form
filed with the Commission as an exhibit to the Registration  Statement providing
for a finder's fee to be paid to EBC if the Company  participates in any merger,
consolidation,  or other  transaction in which EBC introduced the Company to the
other  party for a period of five  years  from the  Closing  Date  ("Merger  and
Acquisition Agreement").

               3.7.2  Underwriter's  Warrant.  On the Closing Date,  the Company
will execute and deliver the  Underwriter's  Warrant to the  Underwriter  or its
designees in the form filed as an exhibit to the Registration Statement.

          3.8 Payment of Expenses.

               3.8.1 General  Expenses.  The Company hereby agrees to pay on the
Closing  Date and,  to the extent not paid on the  Closing  Date,  on the Option
Closing Date, all expenses incident to the performance of the obligations of the
Company under this Agreement,  including but not limited to (i) the preparation,
printing,  filing,  delivery and mailing  (including the payment of postage with
respect to such mailing) of the  Registration  Statement and any  post-effective
amendments  thereto,  the Prospectus and the  Preliminary  Prospectuses  and the
printing and mailing of this Agreement and related documents, including the cost
of all copies thereof and any amendments thereof or supplements thereto supplied
to the Underwriter in quantities as may be required by the Underwriter, (ii) the
printing,  engraving,  issuance  and  delivery  of the  Common  Shares  and  the
Underwriter's  Warrant,  including any transfer or other taxes payable  thereon,
(iii)  the  qualification  of the  Public  Securities  under  state  or  foreign
securities or Blue Sky laws, including the filing fees under such Blue Sky laws,
the costs of printing and mailing the "Preliminary  Blue Sky Memorandum" and all
amendments and supplements  thereto, the fees and disbursements of the Company's
counsel,  and fees and disbursements of local counsel, if any, retained for such
purpose,  (iv) filing fees, costs and expenses (including fees (equal to $5,000)
and  disbursements  for the  Underwriter's  counsel) incurred in registering the
offering with the NASD, (v) costs of placing  "tombstone"  advertisements in The
Wall Street Journal,  The New York Times and a third  publication to be selected
by the Underwriter, (vi) fees and disbursements of the transfer agent, (vii) the

                                       15
<PAGE>

Company's  expenses  associated  with "due diligence"  meetings  arranged by the
Underwriter,  (viii)  the  preparation,  binding  and  delivery  of  transaction
"bibles,"  in  quantity,  form and style  satisfactory  to the  Underwriter  and
transaction lucite cubes or similar  commemorative items in a style and quantity
as  reasonably  requested  by the  Underwriter,  (ix) any  listing of the Public
Securities  on the AMEX and (x) all other  costs and  expenses  incident  to the
performance of its  obligations  hereunder  that are not otherwise  specifically
provided for in this Section 3.8.1. Notwithstanding the foregoing, the aggregate
amount of costs relating to "tombstone"  advertisements  and transaction  lucite
cubes or similar  commemorative items that the Company shall be obligated to pay
under this Section 3.8.1 shall not exceed  $25,000.  The  Underwriter may deduct
from the net  proceeds  of the  offering  payable to the  Company on the Closing
Date,  or the Option  Closing  Date, if any, the expenses set forth herein to be
paid by the Company to the Underwriter and/or to third parties.

               3.8.2 Non-Accountable  Expenses. The Company further agrees that,
in addition to the expenses  payable  pursuant to Section 3.8.1,  it will pay to
the Underwriter a non-accountable  expense allowance equal to three percent (3%)
of the  gross  proceeds  received  by the  Company  from  the  sale of the  Firm
Securities  and the Option  Securities,  of which $50,000 has been paid to date,
and the  Company  will pay the balance on the  Closing  Date and any  additional
monies owed  attributable  to the Option  Securities  or otherwise on the Option
Closing  Date by certified  or bank  cashier's  check or, at the election of the
Underwriter, by deduction from the proceeds of the offering contemplated herein.
If the offering contemplated by this Agreement is not consummated for any reason
whatsoever then the following  provisions shall apply:  The Company's  liability
for payment to the Underwriter of the non-accountable expense allowance shall be
equal to the sum of the Underwriter's actual out-of-pocket  expenses (including,
but not limited to, counsel fees,  "road-show" and due diligence expenses).  The
Underwriter  shall  retain such part of the  non-accountable  expense  allowance
previously paid as shall equal such actual out-of-pocket expenses. If the amount
previously paid is insufficient to cover such actual out-of-pocket expenses, the
Company shall remain liable for and promptly pay any other actual  out-of-pocket
expenses.   If  the  amount   previously  paid  exceeds  the  amount  of  actual
out-of-pocket  expenses, the Underwriter shall promptly remit to the Company any
such excess.

          3.9  Application  of Net  Proceeds.  The  Company  will  apply the net
proceeds  from  the  offering  received  by it in a manner  consistent  with the
application described under the caption "Use of Proceeds" in the Prospectus. The
Company  hereby agrees that,  except as so described,  without the express prior
written  consent of the  Underwriter the Company will not apply any net proceeds
from  the  offering  to pay  (i) any  debt  for  borrowed  funds;  or  (ii)  any
obligations  (including  indebtedness,  both principal and any interest thereon,
for borrowed funds and unpaid salaries,  fees or other compensation) owed to any
Insider  (excluding  salaries or fees payable on a current basis to officers and
directors in the ordinary course of the Company's business).

          3.10 Delivery of Earnings Statements to Security Holders.  The Company
will make generally  available to its security  holders as soon as  practicable,
but not later than the first day of the fifteenth full calendar month  following
the  Effective  Date,  an earnings  statement  (which need not be  certified  by
independent  certified  public  accountants  unless  required  by the Act or the
Regulations, but which shall satisfy the provisions of Rule 158(a) under Section

                                       16

<PAGE>

11(a) of the Act) covering a period of at least twelve (12)  consecutive  months
beginning after the Effective Date.

          3.11 Key Person Life  Insurance.  The Company will maintain key person
life  insurance in an amount not less than  $1,000,000  on the life of Edward J.
Fred,  and pay the annual  premiums  therefor  and name the  Company as the sole
beneficiary thereof for at least three years following the Effective Date.

          3.12 Stabilization. Neither the Company, nor, to its knowledge, any of
its employees,  directors or  shareholders  has taken or will take,  directly or
indirectly,  any  action  designed  to or that  has  constituted  or that  might
reasonably  be  expected  to cause or result  in,  under the  Exchange  Act,  or
otherwise,  stabilization  or  manipulation  of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.

          3.13  Internal  Controls.  The Company  maintains and will continue to
maintain  a  system  of  internal  accounting  controls  sufficient  to  provide
reasonable  assurances  that: (i)  transactions  are executed in accordance with
management's general or specific  authorization,  (ii) transactions are recorded
as  necessary  in  order  to  permit  preparation  of  financial  statements  in
accordance  with  generally  accepted  accounting  principles  and  to  maintain
accountability  for  assets,  (iii)  access  to  assets  is  permitted  only  in
accordance with  management's  general or specific  authorization,  and (iv) the
recorded   accountability  for  assets  is  compared  with  existing  assets  at
reasonable  intervals  and  appropriate  action  is taken  with  respect  to any
differences.

          3.14  Sale of  Securities.  Subject  to the  exceptions  described  in
Section  2.24  hereof,  the  Company  agrees not to permit or cause a private or
public  sale or  private or public  offering  of any of its  securities  (in any
manner,  including  pursuant  to Rule 144  under  the Act)  owned  nominally  or
beneficially  by the  Insiders  for the time  periods set forth in Section  2.24
following the Effective Date.

          3.15 Disclosure  Controls and Procedures.  The Company has established
and observes,  and will continue to observe,  disclosure controls and procedures
meeting the requirements of Rule 13a-14(c) under the Exchange Act.

     4.  Conditions of the  Underwriter's  Obligations.  The  obligations of the
Underwriter to purchase and pay for the Securities, as provided herein, shall be
subject to the continuing  accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing  Date and the Option
Closing  Date,  if any,  to the  accuracy of the  statements  of officers of the
Company made pursuant to the  provisions  hereof and to the  performance  by the
Company of its obligations hereunder and to the following conditions:

          4.1 Regulatory Matters.

               4.1.1 Effectiveness of Registration  Statement.  The Registration
Statement has been declared effective on the date of this Agreement and, at each
of the Closing Date and the Option  Closing Date, no stop order  suspending  the
effectiveness  of the  Registration  Statement  shall  have been  issued  and no
proceedings  for such purpose shall have been instituted or shall be pending or,

                                       17
<PAGE>

to the Company's  knowledge,  contemplated  by the Commission and any request on
the part of the Commission for additional  information  shall have been complied
with to the  reasonable  satisfaction  of Davis & Gilbert  LLP,  counsel  to the
Underwriter.

               4.1.2 NASD  Clearance.  By the Effective  Date,  the  Underwriter
shall have  received  clearance  from the NASD as to the amount of  compensation
allowable  or  payable  to the  Underwriter  as  described  in the  Registration
Statement.

               4.1.3 No Blue Sky Stop Orders.  No order  suspending  the sale of
the Securities in any  jurisdiction  designated by the  Underwriter  pursuant to
Section 3.3 hereof  shall have been issued on or before  either the Closing Date
or the Option Closing Date, and no proceedings  for that purpose shall have been
instituted or, to the Company's knowledge, shall be contemplated.

          4.2 Company Counsel Matters.

               4.2.1  Effective Date Opinion of Counsel.  On the Effective Date,
the Underwriter  shall have received the favorable  opinion of Graubard  Miller,
counsel to the Company,  dated the Effective Date,  addressed to the Underwriter
and in the form attached hereto as Exhibit A.

               4.2.2  Closing Date and Option  Closing Date Opinions of Counsel.
On each of the Closing Date and the Option Closing Date, if any, the Underwriter
shall have  received  the opinion of Graubard  Miller,  counsel to the  Company,
dated the Closing Date or the Option Closing Date, as the case may be, addressed
to the  Underwriter  and in form and substance  satisfactory  to Davis & Gilbert
LLP,  counsel to the  Underwriter,  confirming  as of the  Closing  Date and, if
applicable,  the Option Closing Date, the statements  made by Graubard Miller in
their opinion delivered on the Effective Date.

               4.2.3 Reliance. In rendering such opinions, such counsel may rely
(i) as to matters  involving the  application of laws other than the laws of the
United States and  jurisdictions in which they are admitted,  to the extent such
counsel deem proper and to the extent specified in such opinion, if at all, upon
an opinion or opinions (in form and substance reasonably satisfactory to counsel
for the Underwriter) of other counsel  reasonably  acceptable to counsel for the
Underwriter,  familiar with the applicable laws, and (ii) as to matters of fact,
to the extent they deem proper,  on certificates or other written  statements of
officers of  departments  of various  jurisdiction  having  custody of documents
respecting  the corporate  existence or good  standing of the Company,  provided
that copies of any such statements or certificates shall be delivered to counsel
for the Underwriter. Any opinion relied upon by counsel for the Company, and the
opinions of counsel for the Company, shall include statements to the effect that
they may be relied upon by counsel for the Underwriter in its opinion  delivered
to the Underwriter.

          4.3 Cold Comfort Letter.  At the time this Agreement is executed,  and
at each of the Closing Date and the Option  Closing Date, if any, you shall have
received  a  letter,  addressed  to the  Underwriter  and in form and  substance
satisfactory in all respects  (including the non-material  nature of the changes
or decreases,  if any,  referred to in clause (iii) below) to you and to Davis &

                                       18
<PAGE>

Gilbert LLP, counsel for the Underwriter,  from GGK dated,  respectively,  as of
the date of this  Agreement  and as of the Closing  Date and the Option  Closing
Date, if any:

               (i)  confirming  that  they  are  independent   certified  public
accountants  with  respect to the Company  within the meaning of the Act and the
applicable Regulations and that they have not, during the periods covered by the
financial  statements  included in the  Prospectus,  provided to the Company any
non-audit services, as such term is used in Section 10A(g) of the Exchange Act;

               (ii) stating that in their opinion the financial  statements  and
the financial  statement  schedules of the Company  included (or incorporated by
reference) in the Registration Statement and Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Regulations thereunder;

               (iii)  stating  that,  based  on the  performance  of  procedures
specified by the American Institute of Certified Public Accountants for a review
of the latest available  unaudited interim  financial  statements of the Company
(as  described  in Statement  on Auditing  Standards  ("SAS") No. 71 -- "Interim
Financial Information"),  with an indication of the date of the latest available
unaudited  interim  financial  statements,  a reading  of the  latest  available
minutes of the shareholders and board of directors and the various committees of
the board of directors,  consultations  with officers and other employees of the
Company  responsible  for financial and accounting  matters and other  specified
procedures  and inquiries,  nothing has come to their  attention that would lead
them to believe  that (a) the  unaudited  financial  statements  of the  Company
included or  incorporated  by  reference  in the  Registration  Statement do not
comply  as to form in all  material  respects  with  the  applicable  accounting
requirements of the Act and the Regulations or any material  modification should
be  made  to  the  unaudited  interim  financial   statements  included  in  the
Registration  Statement for them to be in  conformity  with  generally  accepted
accounting  principles applied on a basis substantially  consistent with that of
the audited  financial  statements of the Company  included or  incorporated  by
reference in the Registration Statement,  (b) at a date not later than five days
prior to the Effective  Date,  Closing Date or Option  Closing Date, as the case
may be,  there was any  change in the  capital  stock or  long-term  debt of the
Company,  or any  decrease  in the  net  current  assets  (working  capital)  or
shareholders'  equity of the  Company  as  compared  with  amounts  shown in the
September 30, 2002 balance sheet included in the Registration  Statement,  other
than as set forth in or contemplated by the Registration Statement, or, if there
was any decrease,  setting forth the amount of such decrease, and (c) during the
period from  October 1, 2002 to a specified  date not later than five days prior
to the Effective Date,  Closing Date or Option Closing Date, as the case may be,
there was any  decrease in  revenues,  net  earnings or net  earnings per Common
Share, in each case as compared with the  corresponding  period in the preceding
year and as compared with the  corresponding  period in the  preceding  quarter,
other than as set forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such decrease;

               (iv) Setting  forth,  at a date not later than five days prior to
the  Effective  Date,  the amount of  liabilities  of the Company  (including  a
break-down of commercial paper and notes payable to banks);

                                       19
<PAGE>

               (v) stating  that they have  compared  specific  dollar  amounts,
numbers of shares,  percentages  of revenues and earnings,  statements and other
financial  information  pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages,  statements and
information may be derived from the general accounting records, and work sheets,
of the Company  with the results  obtained  from the  application  of  specified
readings,  inquiries and other  appropriate  procedures (which procedures do not
constitute  an  examination  in  accordance  with  generally  accepted  auditing
standards) set forth in the letter and found them to be in agreement; and

               (vi)  statements  as  to  such  other  matters  incident  to  the
transaction contemplated hereby as you may reasonably request.

          4.4 Officers' Certificates.

               4.4.1 Officers' Certificate.  At each of the Closing Date and the
Option Closing Date, if any, the Underwriter  shall have received a certificate,
that is true and correct in fact, of the Company  signed by the Chief  Executive
Officer and the  Secretary of the Company,  dated the Closing Date or the Option
Closing Date, as the case may be,  respectively,  to the effect that the Company
has in all material  respects  performed  all  covenants  and complied  with all
conditions  required by this  Agreement to be performed or complied  with by the
Company prior to and as of the Closing Date, or the Option  Closing Date, as the
case may be, and that the  conditions  set forth in Section 4.5 hereof have been
satisfied in all material  respects as of such date and that, as of Closing Date
and the  Option  Closing  Date,  as the case  may be,  the  representations  and
warranties of the Company set forth in Section 2 hereof are true and correct. In
addition, the Underwriter will have received such other and further certificates
of officers of the Company as the Underwriter may reasonably request.

               4.4.2  Secretary's  Certificate.  At each of the Closing Date and
the  Option  Closing  Date,  if any,  the  Underwriter  shall  have  received  a
certificate  of the Company  signed by the  Secretary of the Company,  dated the
Closing Date or the Option Date,  as the case may be,  respectively,  certifying
(i) that the By-Laws  and  Certificate  of  Incorporation,  as  amended,  of the
Company are true and complete,  have not been modified and are in full force and
effect, (ii) that the resolutions  relating to the public offering  contemplated
by this Agreement are in full force and effect and have not been modified, (iii)
all correspondence  between the Company or its counsel and the Commission,  (iv)
all  correspondence  between the Company or its counsel and the AMEX  concerning
listing  of the  Securities  on the AMEX and  (vi) as to the  incumbency  of the
officers of the Company.  The documents referred to in such certificate shall be
attached to such certificate.

          4.5 No Material Changes.  Prior to and on each of the Closing Date and
the Option  Closing Date, if any, (i) there shall have been no material  adverse
change or  development  involving a prospective  material  change in the assets,
condition or prospects or the business  activities,  financial or otherwise,  of
the Company from the latest dates as of which such condition is set forth in the
Registration   Statement  and   Prospectus,   (ii)  there  shall  have  been  no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the  financial  condition of the Company is set
forth in the Registration Statement and Prospectus that is materially adverse to

                                       20
<PAGE>

the Company,  taken as a whole,  (iii) the Company shall not be in default under
any provision of any instrument  relating to any outstanding  indebtedness which
default would have a material  adverse  effect on the Company,  (iv) no material
amount of the assets of the Company shall have been pledged or mortgaged, except
as set forth in the Registration Statement and Prospectus, (v) no action suit or
proceeding,  at law or in equity,  shall have been pending or threatened against
the Company or affecting any of its property or business  before or by any court
or federal or state commission,  board or other administrative agency wherein an
unfavorable  decision,  ruling or finding may  materially  adversely  affect the
business, operations, prospects or financial condition or income of the Company,
except as set forth in the Registration  Statement and Prospectus,  (vi) no stop
order shall have been issued  under the Act and no  proceedings  therefor  shall
have been initiated or threatened by the Commission,  and (vii) the Registration
Statement and the Prospectus and any amendments or supplements  thereto  contain
all material  statements  that are required to be stated  therein in  accordance
with the Act and the  Regulations  and conform in all  material  respects to the
requirements  of the Act and  the  Regulations,  and  neither  the  Registration
Statement nor the  Prospectus nor any amendment or supplement  thereto  contains
any untrue  statement  of a material  fact or omits to state any  material  fact
required to be stated  therein or necessary to make the statements  therein,  in
light of the circumstances under which they were made, not misleading.

          4.6  Delivery  of  Agreements.   The  Company  has  delivered  to  the
Underwriter an executed copy of the  Underwriter's  Warrant and an executed copy
of the Merger and Acquisition Agreement.

          4.7 Opinion of Counsel for the Underwriter.  All proceedings  taken in
connection with the authorization,  issuance or sale of the Securities as herein
contemplated  shall be reasonably  satisfactory in form and substance to you and
to Davis & Gilbert LLP, counsel to the Underwriter,  and you shall have received
from such  counsel a favorable  opinion,  dated the Closing  Date and the Option
Closing  Date,  if any,  with  respect to such of these  proceedings  as you may
reasonably  require. On or prior to the Effective Date, the Closing Date and the
Option Closing Date, as the case may be, counsel for the Underwriter  shall have
been furnished such documents,  certificates and opinions as they may reasonably
require  for the  purpose of  enabling  them to review or pass upon the  matters
referred  to in  this  Section  4.7,  or in  order  to  evidence  the  accuracy,
completeness  or  satisfaction  of  any of the  representations,  warranties  or
conditions herein contained.

     5. Indemnification.

          5.1 Indemnification of the Underwriter.

               5.1.1 General.  Subject to the  conditions  set forth below,  the
Company  agrees to indemnify and hold harmless the  Underwriter  and each dealer
selected by you that  participates in the offer and sale of the Securities (each
a "Selected Dealer"), and each of their respective directors,  officers,  agents
and  employees  and each person,  if any, who  controls the  Underwriter  or any
Selected Dealer  ("controlling  person") within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act,  against any and all loss,  liability,
claim,  damage and expense whatsoever  (including but not limited to any and all
legal or other  expenses  reasonably  incurred in  investigating,  preparing  or

                                       21
<PAGE>

defending  against  any  litigation,  or any  claims  whatsoever,  commenced  or
threatened,  whether  arising out of any action between the  Underwriter and the
Company or between the  Underwriter  and any third party or  otherwise) to which
they or any of them may become  subject  under the Act,  the Exchange Act or any
other  statute  or at  common  law or  otherwise  or under  the laws of  foreign
countries  (including  in settlement of any  litigation,  if such  settlement is
effected with the written consent of the Company),  arising out of or based upon
(A) any untrue  statement or alleged  untrue  statement  of a material  fact (i)
contained  in any  Preliminary  Prospectus,  the  Registration  Statement or the
Prospectus  (as from  time to time each may be  amended  and  supplemented,  and
including any information  deemed to be a part thereto  pursuant to Rule 430A or
Rule 434 of the Regulations);  (ii) contained in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the  Underwriter's
Warrant;  (iii)  contained  in any  application  or other  document  or  written
communication (in this Section 5 collectively called "application")  executed by
the Company or based upon  written  information  furnished by the Company in any
jurisdiction  in order to  qualify  the  Securities  under the  securities  laws
thereof or filed with the Commission, any state securities commission or agency,
the  NASD  (including  Nasdaq  and  NASD  Regulation,  Inc.)  or any  securities
exchange;  or (iv)  contained in any other writing  pertaining to or referencing
the sale of the Securities  and deemed to be a prospectus  within the meaning of
2(a)(10) of the Securities Act, or the omission or alleged omission therefrom of
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements  therein,  in the light of the  circumstances  under  which they were
made,  not  misleading,  unless such  statement or omission was made in reliance
upon,  and in strict  conformity  with,  written  information  furnished  to the
Company  with  respect  to the  Underwriter  by or on behalf of the  Underwriter
expressly for use in any Preliminary  Prospectus,  the Registration Statement or
Prospectus,  or any amendment or supplement thereof,  or in any application,  as
the case may be, or (B) a violation  or alleged  violation by the Company or any
of its officers, directors or agents of Section 5 of the Act. The Company agrees
promptly to notify the  Underwriter  of the  commencement  of any  litigation or
proceedings against the Company or any of its officers, directors or controlling
persons in connection with the issue and sale of the Securities or in connection
with the Registration Statement or Prospectus.

               5.1.2   Procedure.   If  any  action  is  brought   against   the
Underwriter,  a Selected Dealer or a controlling  person of the Underwriter or a
Selected  Dealer in respect of which indemnity may be sought against the Company
pursuant  to Section  5.1.1,  the  Underwriter  or such  Selected  Dealer  shall
promptly notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action,  including the  employment  and
fees of counsel  (subject to the approval of the Underwriter or Selected Dealer,
as the case may be) and payment of actual expenses.  The  Underwriter,  Selected
Dealer or  controlling  person  shall  have the right to employ its or their own
counsel in any such case,  but the fees and expenses of such counsel shall be at
the expense of the Underwriter,  such Selected Dealer or such controlling person
unless (i) the employment of such counsel shall have been  authorized in writing
by the  Company  in  connection  with the  defense of such  action,  or (ii) the
Company  shall not have  employed  counsel to have charge of the defense of such
action,  or (iii)  such  indemnified  party or  parties  shall  have  reasonably
concluded that there may be defenses  available to it or them that are different
from or additional to those  available to the Company (in which case the Company
shall not have the right to direct the  defense of such  action on behalf of the

                                       22
<PAGE>

indemnified  party or parties),  in any of which events the fees and expenses of
not more than one  additional  firm of  attorneys  selected by the  Underwriter,
Selected  Dealer  and/or  controlling  person  shall be  borne  by the  Company.
Notwithstanding  anything to the contrary  contained herein, if the Underwriter,
Selected Dealer or controlling person shall assume the defense of such action as
provided  above,  the  Company  shall have the right to approve the terms of any
settlement of such action which approval shall not be unreasonably withheld.

          5.2  Indemnification  of  the  Company.   The  Underwriter  agrees  to
indemnify  and hold  harmless the Company  against any and all loss,  liability,
claim,  damage and expense whatsoever  (including but not limited to any and all
legal or other  expenses  reasonably  incurred in  investigating,  preparing  or
defending  against  any  litigation,  or any  claims  whatsoever,  commenced  or
threatened,  whether  arising out of any action between the  Underwriter and the
Company or between the Company and any third party or  otherwise)  to which they
or any of them may become  subject  under the Act, the Exchange Act or any other
statute or at common  law or  otherwise  or under the laws of foreign  countries
(including in settlement of any litigation,  if such settlement is effected with
the written consent of the Underwriter), arising out of or based upon any untrue
statement or alleged  untrue  statement of a material fact directly  relating to
the  transactions  effected by the  Underwriter in connection with this offering
made in any Preliminary Prospectus,  the Registration Statement or Prospectus or
any amendment or supplement  thereto or in any  application,  or the omission or
alleged  omission  therefrom  of  a  material  fact  directly  relating  to  the
transactions  effected  by the  Underwriter  in  connection  with this  offering
required to be stated  therein or necessary to make the statements  therein,  in
the light of the  circumstances  under which they were made, not misleading,  in
either case in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to the  Underwriter by or on behalf of the
Underwriter expressly for use in such Preliminary  Prospectus,  the Registration
Statement or Prospectus  or any  amendment or supplement  thereto or in any such
application.  In case any action shall be brought  against the Company  based on
any  Preliminary  Prospectus,  the  Registration  Statement or Prospectus or any
amendment  or  supplement  thereto or any  application,  and in respect of which
indemnity may be sought against the Underwriter,  the Underwriter shall have the
rights and duties  given to the Company,  and the Company  shall have the rights
and duties given to the Underwriter, by the provisions of Section 5.1.2.

          5.3 Contribution.

               5.3.1  Contribution  Rights.  In  order to  provide  for just and
equitable  contribution  under  the Act in any  case  in  which  (i) any  person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant  hereto  but it is  judicially  determined  (by  the  entry  of a final
judgment or decree by a court of competent  jurisdiction  and the  expiration of
time  to  appeal  or  the  denial  of  the  last  right  of  appeal)  that  such
indemnification  may not be enforced in such case  notwithstanding the fact that
this Section 5 provides for  indemnification  in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise  may be required on the part of any
such person in circumstances  for which  indemnification  is provided under this
Section 5, then,  and in each such case, the Company and the  Underwriter  shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature  contemplated by said indemnity agreement incurred by the Company and
the  Underwriter,  as incurred,  in such  proportions  that the  Underwriter  is

                                       23
<PAGE>

responsible for that portion represented by the percentage that the underwriting
discount  appearing  on the cover page of the  Prospectus  bears to the  initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent  misrepresentation  (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution  from any
person who was not guilty of such fraudulent misrepresentation.  Notwithstanding
the provisions of this Section 5.3.1,  the Underwriter  shall not be required to
contribute  any amount in excess of the amount by which the total price at which
the Public  Securities  underwritten  by it and  distributed  to the public were
offered to the public exceeds the amount of any damages that the Underwriter has
otherwise been required to pay in respect of such losses,  liabilities,  claims,
damages and expenses.  For purposes of this Section, each director,  officer and
employee  of the  Underwriter,  and  each  person,  if  any,  who  controls  the
Underwriter  within the  meaning  of Section 15 of the Act,  shall have the same
rights to contribution as the Underwriter.

               5.3.2 Contribution  Procedure.  Within fifteen days after receipt
by any  party  to  this  Agreement  (or its  representative)  of  notice  of the
commencement of any action, suit or proceeding,  such party will, if a claim for
contribution   in  respect   thereof  is  to  be  made  against   another  party
("contributing  party"),  notify  the  contributing  party  of the  commencement
thereof,  but the omission to so notify the contributing  party will not relieve
it from  any  liability  that it may  have to any  other  party  other  than for
contribution  hereunder.  In case any such action, suit or proceeding is brought
against  any  party,  and  such  party  notifies  a  contributing  party  or its
representative  of the commencement  thereof within the aforesaid  fifteen days,
the  contributing  party  will be  entitled  to  participate  therein  with  the
notifying party and any other  contributing party similarly  notified.  Any such
contributing  party  shall not be liable to any party  seeking  contribution  on
account of any settlement of any claim,  action or proceeding  that was effected
by  the  party  seeking   contribution  without  the  written  consent  of  such
contributing  party. The contribution  provisions  contained in this Section are
intended to supersede, to the extent permitted by law, any right to contribution
under the Act, the Exchange Act or otherwise available.

     6. Omitted.

     7. Board Designee.  For a period of five years from the Effective Date, the
Company will appoint a designee of EBC (reasonably acceptable to the Company) as
a member of the Board of Directors of the Company.  Such designee  shall receive
no more or less compensation than is paid to other  non-management  directors of
the  Company  (excluding  the  Chairman  of the  Audit  Committee)  and shall be
entitled to be reimbursed for all reasonable  out-of-pocket expenses incurred in
attending  such  meetings,  including  but not  limited  to  food,  lodging  and
transportation.  To the  extent  permitted  by law,  the  Company  will agree to
indemnify EBC and its designee for the actions of such designee as a director of
the  Company.  In  addition,  the Company  will obtain and  maintain a liability
insurance policy  affording  coverage for the acts of its officers and directors
in an amount not less than  $3,000,000  and will  include  EBC's  designee as an
insured  under such policy.  If EBC has not  exercised its option to designate a
member of the Company's  Board of Directors,  EBC shall have the right to send a
representative  (who need not be the same individual from meeting to meeting) to
observe each meeting of the Board of Directors.  The Company  agrees to give EBC
written  notice of each  such  meeting  and to  provide  EBC with an agenda  and

                                       24
<PAGE>

minutes of the  meeting no later than it gives  such  notice and  provides  such
items to the other directors,  and reimburse the  representative  of EBC for its
reasonable  out-of-pocket expenses incurred in connection with its attendance at
the meeting,  including but not limited to, food, lodging and transportation and
any fees paid to the directors for attending  such meeting.

     8.  Representations  and  Agreements  to  Survive  Delivery.  Except as the
context  otherwise  requires,  all  representations,  warranties  and agreements
contained in this Agreement  shall be deemed to be  representations,  warranties
and  agreements at the Closing Dates and such  representations,  warranties  and
agreements of the  Underwriter and Company,  including the indemnity  agreements
contained  in Section 5 hereof,  shall  remain  operative  and in full force and
effect regardless of any investigation  made by or on behalf of the Underwriter,
the Company or any  controlling  person,  and shall survive  termination of this
Agreement  or the issuance and  delivery of the  Securities  to the  Underwriter
until the earlier of the expiration of any applicable statute of limitations and
the seventh  anniversary  of the later of the Closing Date or the Option Closing
Date, if any, at which time the representations, warranties and agreements shall
terminate  and be of no further  force and  effect.

     9. Effective Date of This Agreement and Termination  Thereof.

          9.1  Effective  Date.  This  Agreement  shall become  effective on the
Effective  Date  at  the  time  that  the  Registration  Statement  is  declared
effective.

          9.2 Termination.  You shall have the right to terminate this Agreement
at any time prior to any Closing  Date,  (i) if any  domestic  or  international
event or act or occurrence has materially disrupted,  or in your opinion will in
the immediate  future  materially  disrupt,  general  securities  markets in the
United States;  or (ii) if trading on the New York Stock Exchange,  the American
Stock Exchange or in the over-the-counter  market shall have been suspended,  or
minimum or maximum  prices for trading shall have been fixed,  or maximum ranges
for prices for  securities  shall have been fixed,  or maximum ranges for prices
for securities  shall have been required on the  over-the-counter  market by the
NASD or by order of the  Commission  or any other  government  authority  having
jurisdiction,  or (iii) if the United States shall have become involved in a war
or major hostilities, or (iv) if a banking moratorium has been declared by a New
York State or federal  authority,  or (v) if a  moratorium  on foreign  exchange
trading has been  declared  that  materially  and  adversely  impacts the United
States securities market, or (vi) if the Company shall have sustained a material
loss by fire, flood, accident, hurricane, earthquake, theft, sabotage, terrorism
or other  calamity or  malicious  act that,  whether or not such loss shall have
been insured,  will, in your opinion,  make it  inadvisable  to proceed with the
delivery of the  Securities,  or (vii) if the Company  has  breached  any of its
representations  or  warranties,  or failed to  perform  any of its  obligations
hereunder,  or (ix) if the  Underwriter  shall have become  aware after the date
hereof  of  such a  material  adverse  change  in the  condition  (financial  or
otherwise),  business,  or prospects of the  Company,  or such adverse  material
change in general market conditions as in the Underwriter's  judgment would make
it  impracticable  to proceed  with the  offering,  sale and/or  delivery of the
Securities or to enforce  contracts made by the  Underwriter for the sale of the
Securities.

                                       25
<PAGE>

          9.3 Expenses.  In the event that this  Agreement  shall not be carried
out  for  any  reason  whatsoever,  within  the  time  specified  herein  or any
extensions  thereof pursuant to the terms hereof, the obligations of the Company
to pay the expenses  related to the  transactions  contemplated  herein shall be
governed by Section 3.8 hereof.

          9.4 Indemnification.  Notwithstanding any contrary provision contained
in this Agreement,  any election hereunder or any termination of this Agreement,
and whether or not this  Agreement is otherwise  carried out, the  provisions of
Section 5 shall not be in any way affected by, such election or  termination  or
failure  to carry  out the  terms of this  Agreement  or any  part  hereof.

     10. Miscellaneous.

          10.1 Notices. All communications hereunder, except as herein otherwise
specifically  provided,  shall be in writing and shall be mailed,  delivered  or
telecopied and confirmed

                  If to the Underwriter:

                           EarlyBirdCapital, Inc.
                           One State Street Plaza
                           24th Floor
                           New York, New York  10004
                           Attention:  Steven Levine
                           Telecopier:  (212) 425-5861

                  Copy to:

                           Davis & Gilbert LLP
                           1740 Broadway
                           New York, New York 10019
                           Attention:  Ralph W. Norton, Esq.
                           Telecopier:  (212) 974-6969

                  If to the Company:

                           CPI Aerostructures, Inc.
                           200A Executive Drive
                           Edgewood, New York  11717
                           Attention:  Edward J. Fred
                           Telecopier:  (631) 586-5840

                                       26
<PAGE>

                  Copy to:

                           Graubard Miller
                           600 Third Avenue
                           New York, New York 10016
                           Attention:  David Alan Miller, Esq.
                           Telecopier:  (212) 818-8881

          10.2 Headings.  The headings contained herein are for the sole purpose
of  convenience  of  reference,  and shall  not in any way  limit or affect  the
meaning or interpretation of any of the terms or provisions of this Agreement.

          10.3  Amendment.  This  Agreement  may be  amended  only by a  written
instrument executed by each of the parties hereto.

          10.4  Entire  Agreement.  This  Agreement  (together  with  the  other
agreements and documents being delivered  pursuant to or in connection with this
Agreement)  constitutes the entire  agreement of the parties hereto with respect
to  the  subject  matter  hereof  and   supersedes  all  prior   agreements  and
understandings  of the parties,  oral and  written,  with respect to the subject
matter hereof.

          10.5 Binding Effect.  This Agreement shall inure solely to the benefit
of and shall be binding  upon,  the  Underwriter,  the Company and the  Selected
Dealers and controlling persons, directors and officers referred to in Section 5
hereof, and their respective successors,  legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim  under or in  respect of or by virtue of this  Agreement  or any
provisions herein contained.

          10.6 Governing Law, Jurisdiction.  This Agreement shall be governed by
and construed and enforced in accordance  with the law of the State of New York,
without  giving  effect to  principles  of conflicts of law. The Company  hereby
agrees  that any  action,  proceeding  or claim  against  it  arising  out of or
relating  in any way to this  Agreement  shall be brought  and  enforced  in the
courts  of the State of New York or the  United  States  District  Court for the
Southern  District of New York, and  irrevocably  submits to such  jurisdiction,
which jurisdiction  shall be exclusive.  The Company hereby waives any objection
to such exclusive  jurisdiction  and that such courts  represent an inconvenient
forum.  Any such  process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified  mail,  return receipt
requested,  postage prepaid, addressed to it at the address set forth in Section
10.1 hereof.  Such mailing shall be deemed  personal  service and shall be legal
and binding  upon the Company in any action,  proceeding  or claim.  The parties
agree that the  prevailing  party(ies)  in any such action  shall be entitled to
recover from the other  party(ies)  all of its  reasonable  attorneys'  fees and
expenses  relating to such action or  proceeding  and/or  incurred in connection
with the preparation therefor.

                                       27
<PAGE>

          10.7 Execution in Counterparts.  This Agreement may be executed in one
or  more  counterparts,   and  by  the  different  parties  hereto  in  separate
counterparts,  each of which shall be deemed to be an original, but all of which
taken together shall  constitute  one and the same  agreement,  and shall become
effective when one or more  counterparts  has been signed by each of the parties
hereto and delivered to each of the other parties hereto.

          10.8 Waiver, Etc. The failure of any of the parties hereto at any time
to  enforce  any of the  provisions  of this  Agreement  shall  not be deemed or
construed  to be a waiver of any such  provision,  nor in any way to affect  the
validity of this  Agreement or any  provision  hereof or the right of any of the
parties hereto thereafter to enforce each and every provision of this Agreement.
No  waiver  of  any  breach,  non-compliance  or  non-fulfillment  of any of the
provisions of this  Agreement  shall be effective  unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such  waiver is  sought;  and no waiver of any such  breach,  non-compliance  or
non-fulfillment  shall be  construed  or  deemed  to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.

















                                       28
<PAGE>



     If the  foregoing  correctly  sets  forth  the  understanding  between  the
Underwriter and the Company,  please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.

                            Very truly yours,

                            CPI AEROSTRUCTURES, INC.



                         By: /s/ Edward J. Fred
                            -------------------------------------------
                            Name:     Edward J. Fred
                            Title:    President and Chief Executive Officer


Accepted as of the date first
above written.

New York, New York

EARLYBIRDCAPITAL, INC.



By: /s/ Steven Levine
   ----------------------------------
Name:    Steven Levine
Title:   Managing Director











                                       29

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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