Document:

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                                                                    EXHIBIT 4.4
                              AXON INSTRUMENTS, INC

                                ARBN 090 106 844
      (incorporated in California, United States of America, with liability
                             of its members limited)

                                   PROSPECTUS

         in relation to an offer of Entitlement Options to shareholders
                        of Circadian Technologies Limited

           This is an important document. You may wish to consult your
        professional advisor about its contents. You should read the full
               text of this Prospectus and the incorporated parts
                of Axon's First Prospectus dated 28 January 2000
              before deciding whether to take up your entitlements.

<PAGE>

CORPORATE DIRECTORY

DIRECTORS

Alan Stockdale (Chairman)
Alan Finkel (Chief Executive Officer)
Geoffrey Powell (Executive President)
Henry Lester (Non-Executive Director)
Stanley Crooke (Non-Executive Director)

INDEPENDENT ACCOUNTANTS
Ernst & Young (Australia)
120 Collins Street
Melbourne, Victoria 3000
Telephone (03) 9288 8000

AUDITORS
Ernst & Young (US)
1451 California Avenue
Palo Alto, CA 94304, USA
Telephone 0011 1 650 496 1600

AUSTRALIAN LAWYERS TO THE ISSUE

Minter Ellison
Level 23
Rialto Towers
525 Collins Street
Melbourne, Victoria 3000
Telephone (03) 9229 2000

SHARE AND OPTION REGISTRY

Computershare Registry Services Pty Ltd
Level 12
565 Bourke Street
Melbourne, Victoria 3000
Telephone (03) 9611 5711

COMPANY SECRETARIES

Geoffrey Powell (USA)
David Kenley (Australia)

REGISTERED OFFICE
1101 Chess Drive
Foster City, CA 94404, USA
Telephone 0011 1 650 571 9400
Email InvestorInfo@axon.com
www.axon.com

REGISTERED OFFICE IN AUSTRALIA
6 Wallace Avenue
Toorak, Victoria 3142, Australia
Telephone (03) 9826 0399
Email InvestorInfo@axon.com

   THE ENTITLEMENT OPTIONS OFFERED UNDER THIS PROSPECTUS AND ANY SHARES TO BE
  ISSUED ON THEIR EXERCISE HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE
       UNITED STATES SECURITIES ACT OF 1933 (THE 'US SECURITIES ACT') AND,
     MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO OR
       FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS OTHER THAN DISTRIBUTORS
    UNLESS THE ENTITLMENT OPTIONS OR SUCH SHARES ARE REGISTERED UNDER THE US
      SECURITIES ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
      THE US SECURITIES ACT IS AVAILABLE. IN ADDITION, HEDGING TRANSACTIONS
   WITH REGARD TO THE ENTITLEMENT OPTIONS AND ANY SHARES TO BE ISSUED ON THEIR
    EXERCISE MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE US SECURITIES
    ACT. SEE SECTION 1.9 "SEC REQUIREMENTS" AND SECTION 3.3 "RIGHTS ATTACHING
                            TO ENTITLEMENT OPTIONS".

<PAGE>

MESSAGE FROM THE CHIEF EXECUTIVE OFFICER

11 April 2000

Dear Circadian Shareholders,

As Chief Executive Officer of Axon Instruments, Inc ('AXON'), I have great
pleasure in presenting this Prospectus.

Axon was formed in the United States in 1984 to develop instruments for use by
neuroscientists studying electrical activity in brain cells. Axon's business is
expanding to include instruments of Genomics and drug discovery.

Shares in Axon commenced official quotation on the Australian Stock Exchange
('ASX') on 3 March 2000 pursuant to an offer made to the public in its
prospectus dated 28 January 2000 ('FIRST PROSPECTUS').

This Prospectus explains how, as a shareholder of Circadian, you are offered
options to take up unissued securities in Axon at 1 cent per option. You should
read this Prospectus carefully, before making a decision to take up the options
in Axon.

The Directors join me in offering you the opportunity to participate directly in
the ownership of Axon and we look forward to welcoming you as an optionholder of
Axon.

Yours faithfully,

/s/ Alan Finkel

Alan Finkel
Chief Executive Officer

                                                                               1

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TABLE OF CONTENTS

<TABLE>
<S>                                                                                                          <C>
SECTION 1  - OFFER OF ENTITLEMENT OPTIONS.........................................................            4
           1.1       The Offer....................................................................            4
           1.2       Key Dates....................................................................            4
           1.3       The alternatives available to Circadian Shareholders ........................            4
           1.4       Payment......................................................................            5
           1.5       No Minimum Subscription......................................................            5
           1.6       Underwriting.................................................................            5
           1.7       Circadian Shareholders Resident Outside Australia and New Zealand ...........            6
           1.8       Reference to First Prospectus................................................            7
           1.9       SEC Requirements.............................................................            8

SECTION 2  -  INVESTMENT OVERVIEW.................................................................           11
           2.1       Capital Structure............................................................           11
           2.2       Top Ten Shareholders ........................................................           11
           2.3       Risk Factors.................................................................           11

SECTION 3  -  ADDITIONAL INFORMATION..............................................................           12
           3.1       Directors' Interests ........................................................           12
           3.2       Other interests of Directors.................................................           13
           3.3       Rights Attaching to Entitlement Options......................................           13
           3.4       Interests and Consents of Experts............................................           15
           3.5       Consents to be Named.........................................................           16
           3.6       Costs of the Offer...........................................................           18

SECTION 4  - DEFINED TERMS........................................................................           18

SECTION 5  - AUTHORISATION........................................................................           21
</TABLE>

ENTITLEMENT AND APPLICATION FORM

This Prospectus is dated 11 April 2000 and has an expiry date of 10 April 2001.
No securities will be issued on the basis of this Prospectus after the expiry
date.

A copy of this Prospectus has been lodged with the Australian Securities and
Investments Commission ('ASIC'). ASIC takes no responsibility for the content of
this Prospectus.

Copies of the Prospectus will be available on request to members of the public
who are eligible to purchase Entitlement Options by calling (03) 9826 0399
during the Exposure Period. Copies requested will be sent by way of paper copy
or by facsimile as determined by the Company. The Company will not accept
applications for securities offered under this Prospectus during the Exposure
Period.

REFERENCES TO CIRCADIAN TECHNOLOGIES LIMITED

References in this Prospectus to Circadian Technologies Limited or shareholders
of Circadian are included solely for the purposes of identification of the
persons entitled to participate in the Offer of Entitlement Options under this
Prospectus. Such references do not constitute, and are not to be construed as,
any express or implied endorsement by Circadian of the Offer of Entitlement
Options under this Prospectus. Circadian does not accept responsibility for any
statement in this Prospectus nor does it undertake any liability in respect of
the grant or exercise of any Entitlement Options offered under this Prospectus.

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RELATIONSHIP WITH CIRCADIAN TECHNOLOGIES LIMITED

References in this Prospectus to Circadian have been prepared from publicly
available information. Circadian has not been a party to its preparation or
furnished any information to Axon specifically for the purpose of the
preparation of this Prospectus. Circadian has not been involved in the
preparation of this Prospectus.

For information of the interests of the directors of Axon in shares in
Circadian, see section 3.1.

ASX QUOTATION

It is not currently proposed that the Entitlement Options will be quoted on ASX
due to regulatory limitations of the Australian Corporations Law. A secondary
market in the Entitlement Options therefore cannot be assumed.

Shares issued on exercise of the Entitlement Options will rank equally in all
respects with existing shares in Axon.

Axon will apply for quotation of the shares issuable or issued upon exercise of
the Entitlement Options and, provided certain US regulatory requirements are
met, those shares will be eligible to be quoted on ASX in the same manner as
other shares in Axon.

                                                                               3

<PAGE>

SECTION 1 - OFFER OF ENTITLEMENT OPTIONS

1.1      THE OFFER

         This Prospectus provides information on Axon's Offer to Circadian
         shareholders. Shareholders of Circadian (other than shareholders with
         registered addresses outside Australia or New Zealand) have a right to
         take up an equitable right or interest in 1 option for every 2.5 shares
         in Circadian held at 5.00 pm Melbourne time on the Record Date for
         entitlements (namely 20 March 2000) at 1 cent per option (the
         underlying option, 'ENTITLEMENT OPTION'). Each Entitlement Option is
         exercisable at any time on or before 5.00 pm Melbourne legal time on 10
         May 2005. The exercise price for each Entitlement Option (which is
         payable immediately on exercise) is A$0.20. Any fractional entitlement
         will be rounded down to the nearest whole share. Special arrangements
         for shareholders of Circadian with registered addresses outside
         Australia or New Zealand are set out in section 1.7 below.

         The cost of 1 cent per Entitlement Option is payable in full on
         application. Holdings of Circadian shares on different registers (or
         subregisters) will be aggregated for calculating entitlements. Rights
         to Entitlement Options are non-renounceable, so the rights may not be
         sold or otherwise renounced or disposed of.

         The maximum number of Entitlement Options which may be issued under
         this Offer is 12,997,845. Details of how Circadian shareholders can
         take up entitlements to Entitlement Options are set out in section 1.3
         below.

1.2      KEY DATES

         Record Date to determine entitlements of Circadian
         shareholders to Entitlement Options                      20 March 2000

         Entitlement Option acceptances close                     10 May 2000

         Entitlement Option acceptances from member
         organisations close                                      15 May 2000

1.3      THE ALTERNATIVES AVAILABLE TO CIRCADIAN SHAREHOLDERS

         The number of Entitlement Options to which you are entitled
         ('Entitlement') is shown on the accompanying Entitlement and
         Application Form.

         You may:

         -        take up your Entitlement in full;

         -        take up part of your Entitlement and allow the balance to
                  lapse; or

         -        allow your Entitlement to lapse.

         Rights to Entitlement Options are non-renounceable, so the rights may
         not be sold or otherwise renounced or disposed of.

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         IF YOU WISH TO TAKE UP ALL OF YOUR ENTITLEMENT

         Complete the accompanying Entitlement and Acceptance Form in accordance
         with the instructions set out in the Form. Forward your completed form,
         together with your cheque in payment of the total amount payable to
         Computershare Registry Services Pty Ltd at Level 12, 565 Bourke Street,
         Melbourne, Victoria 3000. Duly completed applications must be received
         by Computershare Registry Services Pty Ltd by no later than 5.00 pm
         Australian Eastern Standard Time on 10 May 2000.

         IF YOU WISH TO TAKE UP PART OF YOUR ENTITLEMENT AND ALLOW THE BALANCE
         TO LAPSE

         Complete the accompanying Entitlement and Application Form in respect
         of Entitlement Options you wish to take up and forward the Form,
         together with your cheque in payment of the requisite amount (being the
         number of Entitlement Options you wish to take up multiplied by 1 cent)
         to Computershare Registry Services Pty Ltd at Level 12, 565 Bourke
         Street, Melbourne, Victoria 3000. Duly completed applications must be
         received by Computershare Registry Services Pty Ltd by no later than
         5.00 pm Australian Eastern Standard Time on 10 May 2000.

         IF YOU WISH TO ALLOW YOUR ENTITLEMENT TO LAPSE

         If you wish to allow your Entitlement to lapse, you need not do
         anything. If your duly completed Entitlement and Acceptance Form is not
         received by Computershare Registry Services Pty Ltd by no later than
         5.00 pm Australian Eastern Standard Time on 10 May 2000, your
         Entitlement will automatically lapse, and you will receive no benefit.

1.4      PAYMENT

         Acceptance for Entitlement Options must be accompanied by payment in
         full of 1 cent per Entitlement Option accepted. Payments will only be
         accepted in Australian currency and by a cheque drawn on and payable at
         any Australian bank that is honoured on presentation.

         Cheques should be made payable to 'Axon Instruments, Inc - Float
         Account' and crossed 'not negotiable'. You should not forward cash.
         Receipts for payments will not be forwarded to applicants.

         By accepting the offer (wholly or in part) you will agree to be bound
         by the terms and conditions of the Entitlement Options granted to you
         as set out in section 3.3.

1.5      NO MINIMUM SUBSCRIPTION

         There is no minimum subscription.

1.6      UNDERWRITING

         The Offer is not underwritten.

                                                                               5

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   THE ENTITLEMENT OPTIONS OFFERED UNDER THIS PROSPECTUS AND ANY SHARES TO BE
    ISSUED ON THEIR EXERCISE HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER
    THE UNITED STATES SECURITIES ACT OF 1933 (THE 'U.S. SECURITIES ACT') AND,
   MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO OR FOR
    THE ACCOUNT OR BENEFIT OF U.S. PERSONS OTHER THAN DISTRIBUTORS UNLESS THE
        ENTITLEMENT OPTIONS OR SUCH SHARES ARE REGISTERED UNDER THE U.S.
 SECURITIES ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S.
   SECURITIES ACT IS AVAILABLE. IN ADDITION, HEDGING TRANSACTIONS WITH REGARD
         TO THE ENTITLEMENT OPTIONS AND ANY SHARES TO BE ISSUED ON THEIR
         EXERCISE MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE US
             SECURITIES ACT. SEE SECTION 1.9 "SEC REQUIREMENTS" AND
             SECTION 3.3 "RIGHTS ATTACHING TO ENTITLEMENT OPTIONS".

1.7      CIRCADIAN SHAREHOLDERS RESIDENT OUTSIDE AUSTRALIA AND NEW ZEALAND

         Circadian shareholders resident outside Australia and New Zealand and
         shareholders who are nominees of persons resident outside Australia and
         New Zealand should consult their professional advisers as to whether
         any governmental or other consents are required, or whether formalities
         need to be observed, to enable them to accept their entitlements.

         This Prospectus does not constitute an offer in any place in which, or
         to any person to whom, it would not be lawful to make such an offer.

         Neither the rights to the Entitlement Options nor the Entitlement
         Options themselves nor the Securities in Axon underlying the
         Entitlement Options will have been registered under the securities laws
         of any country other than Australia and New Zealand.

         Accordingly, this Prospectus has not been sent to holders of shares
         registered with addresses in any country outside Australia or New
         Zealand, or any of their respective territories or possessions or other
         areas subject to such country's control.

         Axon will send to each Circadian shareholder with a registered address
         outside Australia or New Zealand details of the Offer of Entitlement
         Options under this Prospectus and advice that Axon will not offer
         Entitlement Options to that holder. In particular, a Circadian
         Shareholder that is a U.S. Person is excluded from participation in the
         offer on terms outlined in sections 1.9 and 3.3.

         Instead, the Entitlement Options that would otherwise have been offered
         to that holder will, subject to the following paragraph, be granted to
         a nominee appointed by the directors of Circadian, and the Entitlement
         Options sold (subject to compliance with Regulation S under the US
         Securities Act) if there is a viable market in those options and a
         premium over the expenses of sale can be obtained. Any such sale will
         be at such prices and otherwise in such manner as the nominee may in
         its sole discretion determine. The ability to sell the Entitlement
         Options granted to the nominee and the price obtained for them are
         dependent on market conditions. None of Axon, Circadian or the nominee
         will be subject to any liability for failure to sell Entitlement
         Options at any particular price. The net proceeds of the sale (if any)
         after deducting all costs involved in the sale and the subsequent
         distribution of cash, will be distributed pro rata to each of the
         Circadian shareholders for whose benefit the Entitlement Options have
         been sold. The net proceeds of the sale (if any) will be paid in
         Australian currency to the Circadian shareholders concerned.

         If there is not a viable market for Entitlement Options or the nominee
         believes a

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<PAGE>

         premium over the expenses of sale cannot be obtained, the nominee will
         not be granted the Entitlement Options, and no proceeds of sale or any
         other monies will be paid to the Circadian shareholders concerned.

1.8      REFERENCE TO FIRST PROSPECTUS

         Reference is made to Axon's prospectus dated and lodged with ASIC on 28
         January 2000 ('FIRST PROSPECTUS').

         INFORMATION CONTAINED IN THE FIRST PROSPECTUS

         Information in the First Prospectus that is in the opinion of Directors
         primarily of interest to professional analysts or advisers or investors
         with similar specialist information needs is contained in the following
         section:

         Section 8 - Independent Accountant's Report contains Ernst & Young's
         Independent Accountant's Report covering the 6 month period ended 30
         June 1999 and the financial years ended 31 December 1998 and 1997.

         Section 9 - Valuation by Independent Expert contains Acuity Technology
         Management Pty Ltd's report on the valuation of Axon.

         Information in the First Prospectus that is in the opinion of Directors
         of primary interest to Circadian shareholders in deciding whether to
         take up their entitlement to Entitlement Options is contained in the
         following sections:

         Section 3 (other than 3.3) - Investment Overview - contains information
         on company background, purpose of the offer, capital structure, risk
         factors, business objectives and working capital.

         Section 4 - Business of Axon - contains information on Axon's markets
         and products, corporate goals, intellectual property and scientific and
         technical advisors.

         Section 5 - The Directors - contains information on the Directors of
         Axon.

         Section 10 - Risk Factors - contains information on the specific and
         general risks associated with an investment in Axon.

         Section 11 (not including 11.7) - Additional Information - contains
         information on: incorporation; company tax status; audit committee;
         corporate governance; legal proceedings; and rights attaching to
         Securities, Underlying Shares, Entitlement Options, Individual Options
         and Original Options.

         RIGHT TO OBTAIN COPY

         A copy of the First Prospectus was forwarded to all Circadian
         shareholders on the register as at 8 February 2000.

         Circadian shareholders may obtain a further copy of the First
         Prospectus free of charge, during the application period of this Offer.
         Requests for copies of the First Prospectus can be made to 6 Wallace
         Avenue, Toorak, Victoria, 3142, Australia, telephone (03) 9826 0399.

                                                                               7

<PAGE>

         Circadian shareholders should read the full text of this Prospectus and
         the referred parts of the First Prospectus before deciding whether to
         take up their Entitlements.

         The information set out in this section is not intended to be
         comprehensive and should be read in conjunction with the full text of
         this Prospectus including the referred parts of the First Prospectus.

1.9      SEC REQUIREMENTS

         The Entitlement Options and any Shares to be issued on their exercise
         have not been and will not be registered under the United States
         Securities Act of 1933 (the 'U.S. SECURITIES ACT') and may not be
         offered or sold in the United States or to, or for the account or
         benefit of, U.S. Persons other than distributors as part of their
         distribution at any time or until the date that is one year after the
         completion of the distribution of the Entitlement Options. Following
         such one-year restricted period, the Entitlement Options and any shares
         issuable upon the exercise of Entitlement Options may be sold in the
         United States or to, or for the account of benefit of, U.S. Persons
         only in transactions that are exempt from the registration requirements
         of the U.S. Securities Act. In addition, hedging transactions with
         regard to the Entitlement Options and any Shares to be issued on their
         exercise may not be conducted unless in accordance with the U.S.
         Securities Act. Terms used in this paragraph have the meaning given to
         them by Regulation S under the U.S. Securities Act.

         Until the completion of the one-year restriction period, each
         subscriber/purchaser of Entitlement Options will be deemed to have
         represented and agreed as follows:

         (1)      It is not a U.S. Person and is not acquiring the Entitlement
                  Options for the account or benefit of a U.S. Person, or is a
                  U.S. Person who acquired the Entitlement Options in a
                  transaction that did not require registration under the U.S.
                  Securities Act.

         (2)      It understands that the Entitlement Options have not been
                  registered under the U.S. Securities Act and that, if in the
                  future it decides to offer, resell, pledge or otherwise
                  transfer such Entitlement Options, the Entitlement Options may
                  be offered, sold, pledged or otherwise transferred only (a) in
                  an offshore transaction in accordance with Rule 903 or 904 of
                  Regulation S under the U.S. Securities Act, or (b) pursuant to
                  an exemption from registration under the U.S. Securities Act,
                  in each case in accordance with any applicable securities laws
                  of any state of the United States.

         (3)      It agrees not to engage in hedging transactions with regard to
                  the Entitlement Options unless in compliance with the U.S.
                  Securities Act.

         (4)      It understands that the certificates representing Entitlement
                  Options will bear a legend to the following effect unless Axon
                  determines otherwise consistent with applicable law:

                  "THE ENTITLEMENT OPTIONS OF AXON INSTRUMENTS INC AND ANY
                  SHARES TO BE ISSUED ON THEIR EXERCISE HAVE NOT BEEN AND WILL
                  NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
                  1933, AS AMENDED (THE 'U.S. SECURITIES ACT'). THE ENTITLEMENT
                  OPTIONS AND ANY SHARES ISSUED ON THEIR EXERCISE MAY NOT BE
                  OFFERED, SOLD, PLEDGED OR

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                  OTHERWISE TRANSFERRED EXCEPT (A) IN AN OFFSHORE TRANSACTION IN
                  ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE U.S.
                  SECURITIES ACT OR (B) PURSUANT TO AN EXEMPTION FROM
                  REGISTRATION UNDER THE U.S. SECURITIES ACT, IN EACH CASE IN
                  ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
                  THE UNITED STATES. IN ADDITION, HEDGING TRANSACTIONS WITH
                  REGARD TO THE ENTITLEMENT OPTIONS AND ANY SHARES ISSUED ON
                  THEIR EXERCISE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
                  THE U.S. SECURITIES ACT."

         SHARES ISSUABLE UPON EXERCISE OF ENTITLEMENT OPTIONS

         Until the completion of the one-year restriction period, each person
         who exercises Entitlement Options and each person who acquires shares
         in Axon that were issued upon exercise of Entitlement Options will be
         deemed to have represented and agreed as follows:

         (1)      It is not a U.S. Person and is not exercising the Entitlement
                  Options or acquiring such shares for the account or benefit of
                  a U.S. Person, or is a U.S. Person who is exercising the
                  Entitlement Options or acquiring such shares in a transaction
                  that did not require registration under the U.S. Securities
                  Act.

         (2)      It understands that the shares issuable or issued, as the case
                  may be, upon exercise of the Entitlement Options will not be
                  and have not been registered under the US Securities Act and
                  that, if in the future it decides to offer, resell, pledge or
                  otherwise transfer such shares, the shares may be offered,
                  sold, pledged or otherwise transferred only (a) in an offshore
                  transaction in accordance with Rule 903 or 904 of Regulation S
                  under the U.S. Securities Act, or (b) pursuant to an exemption
                  from registration under the U.S. Securities Act, in each case
                  in accordance with any applicable securities laws of any state
                  of the United States.

         (3)      It agrees not to engage in hedging transactions with regard to
                  the shares issuable or issued, as the case may be, upon
                  exercise of the Entitlement Options unless in compliance with
                  the U.S. Securities Act.

         (4)      It understands that the certificates representing the shares
                  issuable or issued, as the case may be, upon exercise of the
                  Entitlement Options will bear a legend to the following effect
                  unless Axon determines otherwise consistent with applicable
                  law:

                  "THE SHARES OF AXON INSTRUMENTS INC REPRESENTED BY THIS
                  CERTIFICATE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
                  UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S.
                  SECURITIES ACT"). THE SHARES MAY NOT BE OFFERED, SOLD, PLEDGED
                  OR OTHERWISE TRANSFERRED EXCEPT (A) IN AN OFFSHORE TRANSACTION
                  IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE
                  U.S. SECURITIES ACT OR (B) PURSUANT TO AN EXEMPTION FROM
                  REGISTRATION UNDER THE U.S. SECURITIES ACT, IN EACH CASE IN
                  ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
                  THE UNITED STATES. IN ADDITION HEDGING

                                                                               9

<PAGE>

                  TRANSACTION WITH REGARD TO THE SHARES MAY NOT BE CONDUCTED
                  UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT."

         Axon will apply for quotation of the shares issuable or issued upon
         exercise of the Entitlement Options and, provided certain US regulatory
         requirements are met, those shares will be eligible to be quoted on ASX
         in the same manner as other shares in Axon.

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<PAGE>

SECTION 2 - INVESTMENT OVERVIEW

2.1      CAPITAL STRUCTURE

         The capital structure of Axon before and following the close of this
         Offer is and will be as follows:

<TABLE>
<CAPTION>
                                                                                            Number
<S>                                                                                      <C>
Issued ordinary Shares prior to this Offer                                               400,093,600

Original Options issued and unexercised prior to this Offer (see section                  56,574,067
11.12 of the First Prospectus)

Individual Options offered under the First Prospectus (see section 11.11 of                4,100,000
the First Prospectus)

Entitlement Options offered to Circadian shareholders (see section 1 of this              12,997,845
Prospectus)

Total issued ordinary Shares (assuming all Original Options and Entitlement              473,765,511
Options are exercised).
</TABLE>

2.2      TOP TEN SHAREHOLDERS

         The top ten Shareholders and their percentage Shareholding of Axon at 3
         April 2000 were as follows:

<TABLE>
<CAPTION>
                                                                            PERCENTAGE HOLDING
            SHAREHOLDER                                                             %
-----------------------------------                                         ------------------
<S>                                                                         <C>
Alan Finkel                                                                       24.58
Elizabeth Finkel                                                                  24.58
Precision Patchclamps (Int) Pty Ltd                                               17.70
Geoffrey Powell                                                                    8.34
Cashtree Pty Ltd                                                                   4.74
Hanson Developments Pty Ltd                                                        2.96
Henry Lester                                                                       0.65
ANZ Nominees Limited                                                               0.33
Yuri Osupchuk                                                                      0.33
David Wellis                                                                       0.30
</TABLE>

2.3      RISK FACTORS

         Circadian shareholders should be aware that subscribing for Entitlement
         Options involves a number of risks. These are set out in detail in
         sections 3.4 and 10 of the First Prospectus. Circadian shareholders are
         urged to consider these risk factors carefully before deciding whether
         to subscribe for the Entitlement Options.

                                                                              11

<PAGE>

SECTION 3 - ADDITIONAL INFORMATION

3.1      DIRECTORS' INTERESTS

         This Prospectus sets out the nature and extent of interests (if any)
         that each director (and proposed director) holds, or held at any time
         in the last 2 years, in: the formation or promotion of Axon; property
         acquired or proposed to be acquired by Axon in connection with its
         formation or promotion or the Offer; or, the Offer. This Prospectus
         also sets out the amount that anyone has paid or agreed to pay, or the
         nature of any benefit anyone has given or agreed to give: to a
         director, or proposed director, to induce them to become, or to qualify
         as, a director of Axon; and, for services provided by a director in
         connection with the formation and promotion of Axon or the Offer.

         INTEREST IN CIRCADIAN TECHNOLOGIES LIMITED

         Alan Finkel and his wife, Elizabeth Finkel, are shareholders of
         Circadian holding 285,000 and 385,000 shares respectively.

         SHAREHOLDING QUALIFICATIONS

         The Directors are not required to hold any Shares in Axon under the
         Constitution of Axon.

         REMUNERATION OF DIRECTORS

         The Constitution of Axon provides that the non-executive Directors may
         collectively be paid as remuneration for their services a fixed sum not
         exceeding the aggregate maximum sum from time to time determined by
         Axon in general meeting (currently US$200,000).

         For the current financial year ending 30 June 2000, it is expected that
         the non-executive directors' fees will collectively not exceed
         A$150,000 per annum.

         A Director may be paid fees or other amounts as the Directors determine
         where a Director performs special duties or otherwise performs services
         outside the scope of the ordinary duties of a director. A Director may
         also be reimbursed for out of pocket expenses incurred as a result of
         their directorship or any special duties.

         Each of the Executive Directors, Alan Finkel and Geoffrey Powell, will
         receive salaries from Axon as employees. The employment arrangements
         provide for the payment of salaries and other benefits on commercial
         terms commensurate with the salary packages offered to the executive
         directors of public companies of a similar size and industry grouping
         and are on normal commercial terms. Henry Lester, a non-executive
         director, receives fees for scientific consulting. The fee is paid
         consistent with the amount paid to other scientific consultants for
         similar levels of consulting.

         DIRECTORS' SHAREHOLDINGS

         Set out below are details of the interests of the Directors in the
         securities of Axon immediately prior to lodgement of this Prospectus
         with the ASIC:

12

<PAGE>

<TABLE>
<CAPTION>
   DIRECTOR                                       SHARES                             OPTIONS
---------------                                ------------                        ----------
<S>                                            <C>                                 <C>
Alan Finkel                                     99,997,500*                        10,399,740
Geoffrey Powell                                 33,910,263                          4,622,157
Alan Stockdale                                         Nil                            400,000
Henry Lester                                     2,632,882                          1,100,358
Stanley Crooke                                         Nil                          1,400,000
</TABLE>

         * Alan Finkel's wife Elizabeth Finkel, also holds 99,997,500 Shares.

3.2      OTHER INTERESTS OF DIRECTORS

         Alan Finkel and his wife Elizabeth Finkel are shareholders of Circadian
         :

         (a)      which owns 100% of Precision Patchclamps (Int) Pty Ltd, which
                  owns 66,665,000 Axon Shares; and

         (b)      enables them to participate in the Offer under this
                  Prospectus.

3.3      RIGHTS ATTACHING TO ENTITLEMENT OPTIONS

         The following are the rights attaching to Entitlement Options:

         Each Entitlement Option will entitle the holder of the option
         (`Optionholder') to subscribe for and be issued one fully paid ordinary
         share (`Share') in Axon on the terms and conditions set out below:

         1.       Each Entitlement Option is exercisable at any time on or
                  before 5.00 pm Melbourne legal time on 10 May 2005 ('OPTION
                  PERIOD').

         2.       The Entitlement Options may be exercised wholly or in part by
                  giving notice in writing (`Notice of Exercise') to Axon at any
                  time during the Option Period.

         3.       The exercise price for each Entitlement Option (which is
                  payable immediately on exercise) is A$0.20 (`Exercise Price').

         4.       On receipt by Axon of the Notice of Exercise and payment of
                  the relevant Exercise Price, Axon must, within 14 days, allot
                  to the Option Holder the number of Option Securities in
                  respect of which the Entitlement Option is exercised and
                  despatch the relevant certificate for the Option Securities or
                  other appropriate acknowledgment as soon as reasonably
                  practicable thereafter.

         5.       Each person exercising an Entitlement Option is required to
                  give:

                  (a)      written certification that it is not a U.S. Person
                           and the Entitlement Option is not being exercised on
                           behalf of a U.S. Person; or

                  (b)      a written opinion of counsel to the effect that the
                           Entitlement Options and the shares issued on exercise
                           thereof have been registered under the U.S.
                           Securities Act or are exempt from registration
                           thereunder.

                                                                              13

<PAGE>

         6.       An Entitlement Option may not be exercised within the United
                  States, and shares may not be delivered within the United
                  States upon exercise, unless Axon receives proof satisfactory
                  to it that:

                  (a)      the exercise of the Entitlement Options and the
                           delivery of the shares meets the definition of
                           "offshore transaction" pursuant to Rule 902(h) of
                           Regulation S;

                  (b)      the shares issuable on exercise are registered under
                           the U.S. Securities Act; or

                  (c)      an exemption from such registration is available.

         7.       Subject to paragraph 15, shares allotted on the exercise of
                  any Entitlement Options will rank equally in all respects with
                  the then existing issued Shares in Axon.

         8.       Adjustments to the number of Securities over which Entitlement
                  Options exist and/or the Exercise Price may be made as
                  described in paragraph 10 to take account of changes to the
                  capital structure of Axon by way of pro rata bonus and cash
                  issues. Axon agrees to notify all Option Holders and its Home
                  Branch within one month after the record date for a pro rata
                  bonus or cash issue, of any adjustment to the number of Shares
                  over which the Entitlement Options exist and/or any adjustment
                  to the Exercise Price.

         9.       Subject to paragraphs 8 and 10 Entitlement Options do not
                  confer rights to participate in new issues of securities of
                  Axon.

         10.      The method of adjustment for the purpose of paragraph 8 shall
                  be in accordance with Listing Rule 6.22.2 and 6.22.3 of the
                  Official Listing Rules of the Australian Stock Exchange
                  Limited which provides:

                  (a)      Pro-Rata Cash issues

                           Where a pro-rata issue is made (except a bonus issue)
                           to the holders of underlying securities, the Exercise
                           Price of an option may be reduced according to the
                           following formula:

                           O' =   O - E[P-(S+D)] / N + 1

                           where:

                           O' =   the new exercise price of the option.

                           O =    the old exercise price of the option.

                           E =    the number of underlying securities into which
                                  one option is exercisable.

                           P =    the average market price per security
                                  (weighted by reference to volume) of the
                                  Underlying Share during the 5 trading days

14

<PAGE>

                                  ending on the day before the ex rights date
                                  or ex entitlements date.

                           S =    the subscription price for a security under
                                  the pro rata issue.

                           D =    the dividend due but not yet paid on the
                                  existing underlying securities (except those
                                  to be issued under the pro rata issue).

                           N =    the number of securities with rights or
                                  entitlements that must be held to receive a
                                  right to one new security.

                  (b)      Pro-Rata Bonus Issues

                           If there is a bonus issue to the holders of the
                           underlying securities, on the exercise of any
                           options, the number of securities received will
                           include the number of bonus securities that would
                           have been issued if the options had been exercised
                           prior to the record date for bonus issues. The
                           Exercise Price will not change.

         11.      In the event of any reorganisation (including consolidation,
                  sub-division, reduction or return) of the issued capital of
                  Axon:

                  (a)      the number of Entitlement Options or the Exercise
                           Price or both shall be reorganised (as appropriate)
                           in a manner which will not result in any benefit
                           being conferred on the Option Holders which are not
                           conferred on holders of ordinary securities in Axon;
                           and

                  (b)      Axon may round up the number of Securities to be
                           received on conversion of the Entitlement Options if
                           the rounding up is approved at a meeting of security
                           holders which approves the reorganisation.

         12.      In any reorganisation as referred to in paragraph 11, the
                  treatment of the Entitlement Options by Axon must comply with
                  the ASX Listing Rules applying to a reorganisation of capital
                  at the time of the reorganisation.

         13.      All Entitlement Options will lapse in the event of the
                  liquidation of Axon.

         14.      Entitlement Options are transferable as if they were shares in
                  Axon. However, Axon must refuse to register any transfer of
                  Entitlement Options not made in accordance with the provisions
                  of Regulation S under the U.S. Securities Act, pursuant to
                  registration under the U.S. Securities Act, or pursuant to an
                  available exemption from registration.

         15.      The shares issued on exercise of the Entitlement Options will
                  be eligible to be quoted on ASX, in the same manner as other
                  shares in Axon, provided certain U.S. regulatory requirements
                  are met. There can be no guarantee that any shares issued on
                  exercise of the Entitlement Options will be eligible to be
                  quoted on ASX.

3.4      INTERESTS AND CONSENTS OF EXPERTS

         This Prospectus sets out the nature and extent of interests (if any)
         that each person named in the Prospectus as performing a function in a
         professional advisory or other

                                                                              15

<PAGE>

         capacity in connection with the preparation or distribution of the
         Prospectus holds, or held at any time in the last 2 years, in: the
         formation or promotion of Axon; property acquired or proposed to be
         acquired by Axon in connection with its formation or promotion or the
         Offer; or, the Offer. This Prospectus also sets out the amount that
         anyone has paid or agreed to pay, or the nature of any benefit anyone
         has given or agreed to give to a person named in the Prospectus as
         performing a function in a professional advisory or other capacity in
         connection with the preparation or distribution of the Prospectus; and,
         for services provided in connection with the formation and promotion of
         Axon or the Offer.

         (a)      Ernst & Young (Australia) has prepared the Independent
                  Accountant's Report included in the First Prospectus. Axon has
                  agreed to pay the fees of Ernst & Young for this work on the
                  basis of its usual time related charge out rates. Total
                  estimated fees for work in respect of the First Prospectus and
                  this Prospectus : A$460,000.

                  Ernst & Young (Australia) has given its written consent to the
                  issue of this Prospectus including the incorporation in this
                  Prospectus by reference of the Report appearing in section 8
                  of the First Prospectus in the form and context in which it
                  appears in this Prospectus and has not withdrawn such consent
                  prior to the date of lodgement this Prospectus with the
                  Australian Securities and Investment Commission.

         (b)      Acuity Technology Management Pty Ltd has prepared the
                  valuation of Axon included in the First Prospectus.

                  Acuity Technology Management Pty Ltd has given its written
                  consent to the issue of this Prospectus including the
                  incorporation in this Prospectus by reference of the Valuation
                  by an Independent Expert appearing in section 9 of the First
                  Prospectus in the form and context in which it appears in this
                  Prospectus and has not withdrawn that consent prior to the
                  date of lodgement of this Prospectus with the Australian
                  Securities and Investment Commission. Total fees for work in
                  respect of the First Prospectus and this Prospectus: A$11,500.

         (c)      Minter Ellison has acted as Australian Lawyers to the Issue.
                  Total estimated fees for work in respect of the First
                  Prospectus and this Prospectus: $180,000.

         (d)      Computershare Registry Services Pty Ltd has acted as Share
                  Registry to the Issue. Total estimated fees for this work in
                  respect of the First Prospectus and this Prospectus: $45,000.

3.5      CONSENTS TO BE NAMED

         Each of the following has consented (and has not withdrawn such consent
         prior to the lodgment of this Prospectus with the Australian Securities
         and Investment Commission) to be named in this Prospectus as
         performing, or having performed, in the capacity specified:

         -        Minter Ellison - Australian Lawyers to the Issue

         -        Ernst & Young (Australia) - Independent Accountants

         -        Ernst & Young LLP (US) - Auditors

         -        Computershare Registry Services Pty Ltd - Share Registry

16

<PAGE>

         -        Acuity Technology Management Pty Ltd - Independent Valuer

3.6      COSTS OF THE OFFER

         The total estimated costs of the Offer, including legal fees incurred,
         lodgement fees, fees for other advisors, printing expenses and other
         miscellaneous expenses, will be approximately $45,000.

                                                                              17

<PAGE>

SECTION 4 - DEFINED TERMS

The following definitions apply throughout this document unless the context
requires otherwise.

'APPLICANT(S)' means person(s) who submit valid Entitlement and Application
Forms pursuant to this Prospectus.

'ASIC' means the Australian Securities and Investment Commission.

'ASX' means Australian Stock Exchange Limited.

'AXON' means Axon Instruments, Inc ARBN 090 106 844.

'CIRCADIAN' means Circadian Technologies Limited ACN 006 340 567.

'DIRECTORS' means the directors of Axon.

'ENTITLEMENT OPTION' means an equitable right or interest in 1 option, at the
cost of 1 cent, to take up 1 unissued Share at 20 cents at any time on or before
5 years after the date of issue for every 2.5 shares in Circadian held as at the
Record Date.

'ERNST & YOUNG' means Ernst & Young (Australia) and Ernst & Young LLP (US)
unless otherwise stated.

'EXPOSURE PERIOD' means the period between the date of lodgment of this
Prospectus with ASIC and ending 7 days after such lodgment, unless the period is
extended by ASIC, in which event it means the extended period.

'FIRST PROSPECTUS' means Axon's prospectus dated and lodged with ASIC on 28
January 2000.

'INDIVIDUAL OPTIONS' options granted to Geoffrey Powell, Stanley Crooke, Alan
Stockdale, Chris Belyea and David Kenley not pursuant to the stock plan adopted
by Axon Directors and Shareholders in 1987 as described in section 11.11 of the
First Prospectus.

'LISTING RULES' means the official listing rules of the ASX.

'OFFER' means the invitation to the Circadian shareholders to subscribe for a
total of approximately 12,997,845 Entitlement Options.

'ORIGINAL OPTIONS' means option granted to employees, officers and executives of
Axon and associated research staff pursuant to a stock plan adopted by Axon
Directors and shareholders in 1987 as described in section 11.12 of the First
Prospectus.

'PROSPECTUS' means this Prospectus and includes the identified sections of the
First Prospectus.

'RECORD DATE' means 20 March 2000.

'SCH BUSINESS RULES' has the same meaning as in the Corporations Law.

'SHARE(S)' means ordinary shares in the common stock of Axon.

18

<PAGE>

'U.S. PERSON' means:

(a)      any natural person resident in the United States;

(b)      any partnership or corporation organised or incorporated under the laws
         of the United States;

(c)      any estate of which any executor or administrator is a U.S. Person;

(d)      any trust of which any trustee is a U.S. Person;

(e)      any agency or branch of a foreign entity located in the United States;

(f)      any non-discretionary account or similar account (other than an estate
         or trust) held by a dealer or other fiduciary for the benefit or
         account of a U.S. Person;

(g)      any discretionary account or similar account (other than an estate or
         trust) held by a dealer or other fiduciary organised, incorporated or
         (if an individual) resident in the United States; and

(h)      any partnership or corporation if:

         (i)      organised or incorporated under the laws of any foreign
                  jurisdiction; and

         (ii)     formed by a U.S. Person principally for the purpose of
                  investing in securities not registered under the U.S.
                  Securities Act, unless it is organised or incorporated, and
                  owned, by accredited investors (as defined by Rule 501(a)
                  under the U.S. Securities Act) who are not natural persons,
                  estates or trusts.

The following are not U.S. Persons:

(a)      any discretionary account or similar account (other than an estate or
         trust) held for the benefit or account of a non-U.S. Person by a dealer
         or other professional fiduciary organised, incorporated, or (if an
         individual) resident in the United States;

(b)      any estate of which any professional fiduciary acting as executor or
         administrator is a U.S. Person if:

         (i)      an executor or administrator of the estate who is not a U.S.
                  Person has sole or shared investment discretion with respect
                  to the assets of the estate; and

         (ii)     the estate is governed by foreign law;

(c)      any trust of which any professional fiduciary acting as trustee is a
         U.S. Person, if a trustee who is not a U.S. Person has sole or shared
         investment discretion with respect to the trust assets, and no
         beneficiary of the trust (and no settlor if the trust is revocable) is
         a U.S. Person;

(d)      an employee benefit plan established and administered in accordance
         with the law of a country other than the United States and customary
         practices and documentation of such country;

(e)      any agency or branch of a U.S. Person located outside the United States
         if:

                                                                              19

<PAGE>

         (i)      the agency or branch operates for valid business reasons; and

         (ii)     the agency or branch is engaged in the business of insurance
                  or banking and is subject to substantive insurance and banking
                  regulation, respectively, in the jurisdiction where located;
                  and

(f)      the International Monetary Fund, the International Bank for
         Reconstruction and Development, the Inter-American Development Bank,
         the Asian Development Bank, the African Development Bank, the United
         Nations, and their agencies, affiliates and pension plans, and any
         other similar international organisations, their agencies, affiliates
         and pension plans.

'UNITED STATES' means the United States of America, its territories and
possessions, any State of the United States, and the District of Colombia.

'US SECURITIES ACT' means United States Securities Act of 1933, as amended.

REFERENCES TO CURRENCY, INCLUDING $, CENTS AND A$ ARE REFERENCES TO AUSTRALIA
CURRENCY UNLESS OTHERWISE STATED BY, FOR EXAMPLE, REFERENCES TO US$.

20

<PAGE>

SECTION 5 - AUTHORISATION

Each Director has consented to the lodgment of this Prospectus with ASIC.

                                                                              21EXHIBIT 10.21

                              EMPLOYMENT AGREEMENT

     AGREEMENT dated May 17, 2004 between VINCENT PALAZZOLO, residing at 1595
James Road, Wantagh, New York 11752 ("Executive"), and CPI AEROSTRUCTURES, INC.,
a New York corporation having its principal office at 200A Executive Drive,
Edgewood, New York 11717, ("Company");

     WHEREAS, the Company desires to employ Executive as its Chief Financial
Officer pursuant to the terms and conditions herein set forth, superseding all
prior agreements between the Company, its subsidiaries and/or predecessors and
Executive;

IT IS AGREED:

1.   Employment, Duties and Acceptance.

     1.1 General. The Company shall employ Executive from May 17, 2004 until
December 31, 2006 as its Chief Financial Officer ("CFO") under the terms hereof.
All of Executive's powers and authority in any capacity shall at all times be
subject to the direction and control of the Company's Board of Directors. The
Board may assign to Executive such management and supervisory responsibilities
and executive duties for the Company or any subsidiary of the Company, including
serving as an executive officer and/or director of any subsidiary, as are
consistent with Executive's status as CFO.

     1.2 Full-Time Position. Executive accepts such employment and agrees to
devote substantially all of his business time, energies and attention to the
performance of his duties hereunder. Nothing herein shall be construed as
preventing Executive from making and supervising personal investments, provided
they will not interfere with the performance of Executive's duties hereunder or
violate the provisions of Section 5.4 hereof.

     1.3 Location. The Company will maintain its principal executive offices
within a 30 mile radius of its current location in Edgewood, New York. Executive
shall

undertake such occasional travel, within or without the United States, as is
reasonably necessary in the interests of the Company.

2.   Compensation and Benefits.

     2.1 Salary. The Company shall pay to Executive a salary ("Base Salary") at
the annual rate of not less than $175,000. Executive's compensation shall be
paid in equal, periodic installments in accordance with the Company's normal
payroll procedures.

     2.2 Bonus. In addition to Base Salary, Executive shall be paid a bonus
("Bonus") equal to 1% of the Company's consolidated net income for the year
ending December 31, 2004 (pro-rated to account for Executive's May 17 start
date) and equal to 2% of the Company's consolidated net income for the years
ending December 31, 2005 and 2006, as determined by reference to the Company's
audited financial statements for such year. Consolidated net income shall not
give effect to any extraordinary items of gain or loss. The Bonus with respect
to any year shall be paid on or prior to April 15 of the following year.

     2.3 Additional Compensation. As additional compensation for Executive
entering into this Agreement and agreeing to be bound by its terms (including
Article 5 hereof) and for the services to be rendered by Executive hereunder,
the Company hereby issues to Executive options to purchase 50,000 shares of
Common Stock under the 1995 Stock Option Plan. These options ("Options") shall
be evidenced by a Stock Option Agreement of even date herewith between the
Company and Executive. The Options will have an exercise price of equal to the
closing price of the common stock on the date of grant and will vest as to
25,000 shares on May 17, 2005 and as to the remaining 25,000 shares on May 17,
2006, subject to the terms of the Stock Option Agreement. The Compensation
Committee may, in its discretion, grant additional options to Executive during
the term of this Agreement.

     2.4 Benefits. Executive shall be entitled to such medical, life, disability
and other benefits as are generally afforded to other executives of the Company,
subject to applicable waiting periods and other conditions.

     2.5 Vacation. Executive shall be entitled to such paid vacation days in
each year during the Employment Term and to a reasonable number of other days
off for religious and personal reasons in accordance with customary Company
policy.

     2.6 Automobile.

          (a) The Company shall reimburse Executive for all reasonable costs
     associated with the use of an automobile, including lease and insurance
     costs, repairs and maintenance, upon the presentation of appropriate
     receipts or other evidence of such expenditures, not to exceed $3,000 per
     annum until August 15, 2005 (pro rated for partial years).

          (b) Commencing August 16, 2005, the Company shall lease a luxury class
     automobile (reasonably satisfactory to Executive) for Executive during the
     remainder of the term of this Agreement to be used in connection with the
     business of the Company. The Company shall reimburse Executive for all
     costs associated with the use of this luxury automobile, including lease
     and insurance costs, repairs and maintenance.

     2.7 Expenses. The Company shall pay or reimburse Executive for all
transportation, hotel and other expenses reasonably incurred by Executive on
business trips and for all other ordinary and reasonable out-of-pocket expenses
actually incurred by him in the conduct of the business of the Company against
itemized vouchers submitted with respect to any such expenses and approved in
accordance with customary procedures.

     2.8 Club Membership. Executive shall be entitled, during the term of this
Agreement, to a membership at the Hamlet Windwatch Golf Course, Hauppauge, as
long as the Company maintains its group membership at such club.

3.   Term. The term of Executive's employment hereunder shall commence as of May
     17, 2004 and shall continue until December 31, 2006 (as it may be extended,
     the "Employment Term"), unless sooner terminated as herein provided. The
     Employment Term shall be automatically renewed for successive one year
     periods

     unless terminated by the Company or Executive by written notice to the
     other party at least thirty (30) days before the end of the Employment Term
     or any renewal thereof.

4.   Termination.

     4.1 Death. If Executive dies during the term of this Agreement, Executive's
employment hereunder shall terminate and the Company shall pay to Executive's
estate the amount set forth in Section 4.6.

     4.2 Disability. The Company, by written notice to Executive, may terminate
Executive's employment hereunder if Executive shall fail because of illness or
incapacity to render, for six consecutive months, services of the character
contemplated by this Agreement. Upon such termination, the Company shall pay to
Executive the amount set forth in Section 4.6.

     4.3 By Company for "Cause". The Company, by written notice to Executive,
may terminate Executive's employment hereunder for "Cause". As used herein,
"Cause" shall mean: (a) the refusal or failure by Executive to carry out
specific directions of the Board which are of a material nature and consistent
with his status as CFO (or whichever positions Executive holds at such time), or
the refusal or failure by Executive to perform a material part of Executive's
duties hereunder; (b) the commission by Executive of a material breach of any of
the provisions of this Agreement; (c) fraud or dishonest action by Executive in
his relations with the Company or any of its subsidiaries or affiliates
("dishonest" for these purposes shall mean Executive's knowingly or recklessly
making of a material misstatement or omission for his personal benefit); or (d)
the conviction of Executive of a felony under federal or state law.
Notwithstanding the foregoing, no "Cause" for termination shall be deemed to
exist with respect to Executive's acts described in clauses (a) or (b) above,
unless the Company shall have given written notice to Executive specifying the
"Cause" with reasonable particularity and, within thirty calendar days after
such notice, Executive shall not have cured or eliminated the problem or thing
giving rise to such "Cause;" provided, however, no more than two cure periods

need be provided during any twelve-month period. Upon such termination, the
Company shall pay to Executive the amount set forth in Section 4.6.

     4.4 By Company Without "Cause". The Company may terminate Executive's
employment hereunder without "Cause" by giving at least 30 days written notice
to Executive. Upon such termination, the Company shall pay to Executive the
amount set forth in Section 4.6.

     4.5 By Executive for "Good Reason". The Executive, by written notice to the
Company, may terminate Executive's employment hereunder if a "Good Reason"
exists. For purposes of this Agreement, "Good Reason" shall mean the occurrence
of any of the following circumstances without the Executive's prior written
consent: (a) a substantial and material adverse change in the nature of
Executive's title, duties or responsibilities with the Company that represents a
demotion from his title, duties or responsibilities as in effect immediately
prior to such change; (b) material breach of this Agreement by the Company; (c)
a failure by the Company to make any payment to Executive when due, unless the
payment is not material and is being contested by the Company, in good faith; or
(d) a liquidation, bankruptcy or receivership of the Company. Notwithstanding
the foregoing, no "Good Reason" shall be deemed to exist with respect to the
Company's acts described in clauses (a), (b) or (c) above, unless Executive
shall have given written notice to the Company specifying the "Good Reason" with
reasonable particularity and, within thirty calendar days after such notice, the
Company shall not have cured or eliminated the problem or thing giving rise to
such "Good Reason"; provided, however, that no more than two cure periods shall
be provided during any twelve-month period of a breach of clauses (a), (b) or
(c) above. Upon such termination, the Company shall pay to Executive the amount
set forth in Section 4.6.

     4.6 Compensation Upon Termination. In the event that Executive's employment
hereunder is terminated, the Company shall pay to Executive the following
compensation:

          (a) Payment Upon Death or Disability. In the event that Executive's
     employment is terminated pursuant to Sections 4.1 or 4.2, the

     Company shall pay to Executive (or his executor, administrator or personal
     representative), (i) the Base Salary due Executive pursuant to Section 2.1
     hereof through the date of termination; (ii) any Bonus which would have
     become payable under Section 2.2 for the year in which the employment was
     terminated prorated by multiplying the full amount of the Bonus by a
     fraction, the numerator of which is the number of "full calendar months"
     worked by Executive during the year of termination and the denominator of
     which is 12 (a "full calendar month" is a month in which the Executive
     worked at least two weeks); (iii) all earned and previously approved but
     unpaid Bonuses for any year prior to the year of termination; (iv) all
     valid expense reimbursements, and (v) all accrued but unused vacation pay.

          (b) Payment Upon Termination by the Company For "Cause". In the event
     that the Company terminates Executive's employment hereunder pursuant to
     Section 4.3, the Company shall pay to Executive his Base Salary, all valid
     expense reimbursements and all unused vacation pay required by law through
     the date of termination.

          (c) Payment Upon Termination by Company Without Cause or Executive for
     Good Reason. In the event that Executive's employment is terminated
     pursuant to Sections 4.4 or 4.5, the Company shall continue to pay to
     Executive (or in the case of his death, the legal representative of
     Executive's estate or such other person or persons as Executive shall have
     designated by written notice to the Company), all payments, compensation
     and benefits required under Section 2 hereof through December 31, 2006.
     Notwithstanding the foregoing, if any person or entity other than the
     Company and/or any officer or director of the Company as of the date of
     this Agreement and/or their respective affiliates acquires securities of
     the Company (in one or more transactions) having 30% or more of the total
     voting power of all of the Company's securities then outstanding ("Change
     In Control"), prior to December 31, 2006 and thereafter Executive's
     employment is terminated pursuant to Sections 4.4 or 4.5, then at the
     election of Executive, in lieu of the above compensation and benefits, the

     Company shall pay to Executive a lump sum payment of $50,000 within ten
     days of such election.

          (d) Payment Upon Termination by Executive Upon Change in Control. If
     at any time prior to December 31, 2006, a "change of control" of the
     Company (as described in Section 4.6(c)) occurs, then within ten days of
     the consummation of the Change in Control, Executive shall have the right
     to terminate his employment by notice of the Company. In such event, the
     Company shall pay to Executive the lesser of (i) $50,000 in a lump sum
     within ten days after receipt of notice of termination from Executive or
     (ii) the Base Salary due Executive pursuant to Section 2.1 hereof through
     December 31, 2005.

          (e) Executive shall have no duty to mitigate awards paid or payable to
     him pursuant to this Agreement, and any compensation paid or payable to
     Executive from sources other than the Company will not offset or terminate
     the Company's obligation to pay to Executive the full amounts pursuant to
     this Agreement.

5.   Protection of Confidential Information; Non-Competition.

     5.1 Acknowledgment. Executive acknowledges that:

          (a) As a result of his current and prior employment with the Company,
     Executive has obtained and will obtain secret and confidential information
     concerning the business of the Company and its subsidiaries (referred to
     collectively in this Article 5 as the "Company"), including, without
     limitation, financial information, proprietary rights, trade secrets and
     "know-how," customers and sources ("Confidential Information").

          (b) The Company will suffer substantial damage which will be difficult
     to compute if, during the period of his employment with the Company or
     thereafter, Executive should enter a business competitive with the Company
     or divulge Confidential Information.

          (c) The provisions of this Agreement are reasonable and necessary for
     the protection of the business of the Company.

     5.2 Confidentiality. Executive agrees that he will not at any time, during
the Employment Term or thereafter, divulge to any person or entity any
Confidential Information obtained or learned by him as a result of his
employment with the Company, except (i) in the course of performing his duties
hereunder, (ii) with the Company's prior written consent; (iii) to the extent
that any such information is in the public domain other than as a result of
Executive's breach of any of his obligations hereunder; or (iv) where required
to be disclosed by court order, subpoena or other government process. If
Executive shall be required to make disclosure pursuant to the provisions of
clause (iv) of the preceding sentence, Executive promptly, but in no event more
than 48 hours after learning of such subpoena, court order, or other government
process, shall notify, confirmed by mail, the Company and, at the Company's
expense, Executive shall: (a) take all reasonably necessary and lawful steps
required by the Company to defend against the enforcement of such subpoena,
court order or other government process, and (b) permit the Company to intervene
and participate with counsel of its choice in any proceeding relating to the
enforcement thereof.

     5.3 Documents. Upon termination of his employment with the Company,
Executive will promptly deliver to the Company all memoranda, notes, records,
reports, manuals, drawings, blueprints and other documents (and all copies
thereof) relating to the business of the Company and all property associated
therewith, which he may then possess or have under his control; provided,
however, that Executive shall be entitled to retain copies of such documents
reasonably necessary to document his financial relationship with the Company.

     5.4 Non-competition. During the Employment Term and for a period of two
years thereafter, Executive, without the prior written permission of the
Company, shall not, anywhere in the world, (i) be employed by, or render any
services to, any person, firm or corporation engaged in any business
("Competitive Business") which is directly in competition with any "material"
business conducted by the Company or any of its subsidiaries at the time of
termination (as used herein "material" means the business

generated at least 10% of the Company's consolidated revenues for the last full
fiscal year for which audited financial statements are available); (ii) engage
in any Competitive Business for his or its own account; (iii) be associated with
or interested in any Competitive Business as an individual, partner,
shareholder, creditor, director, officer, principal, agent, employee, trustee,
consultant, advisor or in any other relationship or capacity; (iv) employ or
retain, or have or cause any other person or entity to employ or retain, any
person who was employed or retained by the Company while Executive was employed
by the Company (other than Executive's personal secretary and assistant); or (v)
solicit, interfere with, or endeavor to entice away from the Company, for the
benefit of a Competitive Business, any of its customers or other persons with
whom the Company has a contractual relationship. Notwithstanding the foregoing,
nothing in this Agreement shall preclude Executive from investing his personal
assets in any manner he chooses, provided, however, that Executive may not,
during the period referred to in this Section 5.4, own more than 4.9% of the
equity securities of any Competitive Business.

     5.5 Injunctive Relief. If Executive commits a breach, or threatens to
commit a breach, of any of the provisions of Sections 5.2 or 5.4, the Company
shall have the right and remedy to seek to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed by Executive that the services being rendered hereunder
to the Company are of a special, unique and extraordinary character and that any
such breach or threatened breach will cause irreparable injury to the Company
and that money damages will not provide an adequate remedy to the Company. The
rights and remedies enumerated in this Section 5.5 shall be in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or equity. In connection with any legal action or proceeding arising out of or
relating to this Agreement, the prevailing party in such action or proceeding
shall be entitled to be reimbursed by the other party for the reasonable
attorneys' fees and costs incurred by the prevailing party.

     5.6 Modification. If any provision of Sections 5.2 or 5.4 is held to be
unenforceable because of the scope, duration or area of its applicability, the
tribunal making such determination shall have the power to modify such scope,
duration, or area,

or all of them, and such provision or provisions shall then be applicable in
such modified form.

     5.7 Survival. The provisions of this Article 5 shall survive the
termination of this Agreement for any reason, except in the event Executive is
terminated by the Company without "Cause, " or if Executive terminates this
Agreement with "Good Reason," in either of which events, this Section 5.4 shall
be null and void and of no further force or effect.

6.   Miscellaneous Provisions.

     6.1 Notices. All notices provided for in this Agreement shall be in
writing, and shall be deemed to have been duly given when (i) delivered
personally to the party to receive the same, or (ii) when mailed first class
postage prepaid, by certified mail, return receipt requested, addressed to the
party to receive the same at his or its address set forth below, or such other
address as the party to receive the same shall have specified by written notice
given in the manner provided for in this Section 6.1. All notices shall be
deemed to have been given as of the date of personal delivery or mailing
thereof.

     If to Executive:

     Vincent Palazzolo
     1595 James Road
     Wantagh, New York 11752

     If to the Company:

     CPI Aerostructures, Inc.
     200A Executive Drive
     Edgewood, New York 11717
     Attn: Edward J. Fred

     With a copy in either case to:

     Graubard Miller
     600 Third Avenue
     New York, New York 10016

     Attn: David Alan Miller, Esq.

     6.2 Entire Agreement; Waiver. This Agreement sets forth the entire
agreement of the parties relating to the employment of Executive and is intended
to supersede all prior negotiations, understandings and agreements. No
provisions of this Agreement, may be waived or changed except by a writing by
the party against whom such waiver or change is sought to be enforced. The
failure of any party to require performance of any provision hereof or thereof
shall in no manner affect the right at a later time to enforce such provision.

     6.3 Governing Law. All questions with respect to the construction of this
Agreement, and the rights and obligations of the parties hereunder, shall be
determined in accordance with the law of the State of New York applicable to
agreements made and to be performed entirely in New York.

     6.4 Binding Effect; Nonassignability. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company. This
Agreement shall not be assignable by Executive, but shall inure to the benefit
of and be binding upon Executive's heirs and legal representatives.

     6.5 Severability. Should any provision of this Agreement become legally
unenforceable, no other provision of this Agreement shall be affected, and this
Agreement shall continue as if the Agreement had been executed absent the
unenforceable provision.

     IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.

CPI AEROSTRUCTURES, INC.

/s/ Edward J. Fred
---------------------
By: Edward J. Fred
Chief Executive Officer

/s/ Vincent Palazzolo
---------------------
VINCENT PALAZZOLO

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