Document:

Exhibit - 10 ii

                           Reimbursement Agreements

The Scott James Fund will reimburse officers and directors not affiliated with
the Investment Adviser to compensate for travel expenses associated with
performance of their duties.  As the Fund grows in total assets, the  Board of
Directors may place them on salaries commensurate with their duties.

The Fund has no plans to compensate officers, employees and directors  who  are
affiliated with the Investment Adviser  except indirectly through payment of the
management fee.

/s/ Scott S. James
Scott S. James, President

Exhibit - 10 iii

Custodian Agreement

Safekeeping Agreement (Pursuant to Rule 17F-2)

Gentlemen:

     This letter will confirm our agreement with respect to our designation of
First Virginia Bank as the safekeeping agent for the securities and similar
investments of The Scott James Fund, Inc.

     The Bank has been duly designated and appointed by the Board of Directors
of the Corporation as the safekeeping agent for the Corporation's securities
and similar investments pursuant to the Investment Company Act of 1940 and the
rules and regulations of the Securities and Exchange Commission thereunder.

     The securities and similar investments of the Corporation shall be
deposited in the safekeeping of, or in a vault or other depository maintained
by, the Bank, and the securities and similar investments so deposited shall be
physically segregated at all times from those of any other persons, firms, or
corporations.

     Any two of the following directors, to-wit, Scott S. James and Zhifeng
Sun of the Corporation are authorized and permitted to have access to the
securities and similar investments so deposited, and such access to such
securities and similar investments so deposited shall be had only by two or
more of such persons jointly.

     Access to such securities and similar investments shall be permitted to
the properly authorized officers and employees of the Bank.  Access to such
securities and similar investments shall be permitted, jointly with any two
of the above designated directors of the Corporation or with any officer or
employee of the Bank, to an independent public accountant for the purpose of
the examination of the Corporation's securities and similar investments
required by the rules and regulations of the Securities and Exchange Commission.

     Such securities and similar investments shall at all times be subject to
inspection by the Securities and Exchange Commission through its authorized
employees or agents, accompanied, unless otherwise directed by order of the
Commission, by one or more of the designated officers of the Corporation, or
one or more of the officers or employees of the Bank.

     Each person when depositing such securities or similar investments in, or
withdrawing them from, the Bank, or when ordering their withdrawal or delivery
from the safekeeping of the Bank, shall sign a notation in duplicate in respect
to such deposit, withdrawal or order which shall show (1) the date and time of
deposit, withdrawal or order, (2) the title and amount of the similar securities
or similar investments deposited, withdrawn or ordered to be withdrawn, and an
identification thereof by a certificate number or otherwise, (3) the manner
of acquisition of the securities or similar investments deposited, or the
purpose for which they have been withdrawn or ordered to be withdrawn and
(4) if withdrawn and delivered to any other person, the name of such person.
A copy of such notation shall be transmitted promptly by the Bank to Xiongwu
Wu, a Non-Interested Director of the Corporation.  Such notation shall be on
serially-numbered forms and shall be preserved for at least one year.

     Such securities and similar investments shall be verified by complete
examination of an independent public accountant to be retained by the
Corporation at least three times during each fiscal year, at least two of
which times shall be chosen by the said accountant without prior notice
to the Corporation.

     The Secretary and the President of this Corporation, and each of them,
have been authorized and directed to certify to the Bank that resolutions
incorporating the terms of this agreement, copies of which are attached, have
been duly adopted, and do further certify the names and specimen signatures,
copies of which are attached, of the directors of the Corporation designated
above.

     The Corporation undertakes to notify the Bank of any changes in the names
and signatures of the officers of the Corporation designated above.

     If the above correctly states our understanding and agreement, would you
kindly indicate your acceptance thereof by signing the name of the Bank, by
its duly authorized officer, in the space provided below, and return a copy
of this agreement to the Corporation.

                                      Very truly yours,

                                      By: /s/ Scott S. James

First Virginia Bank

By: /s/ Josephina Dela Rosa

Exhibit - 11 i

Legal Opinion

Albanese & Associates, P.C.
Attorneys at Law
4041 University Drive, Suite #301
Fairfax, VA  22031

June 21, 2000

Board of Directors
The Scott James Fund, Inc.
6700 Arlington Boulevard
Falls Church, VA  22042

Re:  Opinion letter for The Scott James Fund, Inc. and 25,000.00 Shares of
Common Stock with .004 par value per share.

Gentlemen:

In our capacity as Counsel to The Scott James Fund, Inc. the undersigned has
examined and herein relies on copies of the following:
1.  The Articles of Incorporation filed with the State Corporation Commission
for the Commonwealth of Virginia;
2.  The By-Laws of The Scott James Fund, Inc.
3.  The Shareholder Records of The Scott James Fund, Inc.
4.  Certificate of the Commonwealth of Virginia, dated June 16, 2000, issued
by the State Corporation Commission certifying that the Certificate of
Incorporation is issued to The Scott James Fund, Inc.

I have also examined other such documents, records and matters of law as we
have deemed necessary for purposes of furnishing this opinion.

It should be noted that in rendering this opinion (i) the undersigned is unaware
of the untruth/omission or invalidity of any representation called for in any
of the above documents.  In rendering his opinion, the undersigned has
examined the following Virginia Code statute as it pertains to the corporation.

1.  Section 13.1-643 of the Virginia Code.

Based upon such examinations and investigations, and such other investigations
and examinations, that the undersigned has deemed necessary for the purposes
of the opinions expressed herein and subject to the foregoing examination
limitations and qualifications expressed herein the undersigned opines as
follows:

1.  Company is duly incorporated and organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia.

2.  The Open Shares per The Scott James Fund, Inc. Shareholder Records to be
sold by the Company are duly authorized and when issued and delivered to
investors under the terms of the Prospectus and Statement of Additional
Information against payment of the appropriate consideration will be duly
and validly issued, full paid and non-assessable.

The opinions expressed in this letter are qualified to the following extent:

A.  The undersigned is a memeber of the bar of the Commonwealth of Virginia,
and the opinions expressed in this letter (except where otherwise expressly
stated) are limmited to the laws of the Commonwealth of Virginia.

B.  The services of the undersigned have been limited to rendering the foregoing
opinion based upon his review of such documents as he deemed necessary to make
the the statement contained herein.

C.  This opinion does not extend beyond the documents or to any information
and/or the the validity, and/or to any representation contained in, and/or
whether or not The Scott James Fund, Inc., has or has not complied with any
law and/or regulation concerning the Prospectus and Statement of Additional
Information by The Scott James Fund, Inc. for the Sale of Securities.

D.  The business or financial resources of The Scott James Fund, Inc. have not
been reviewed by the undersigned and therefore, expresses no opinion as to the
accuracy or completeness of any information that may have been relied upon by
anyone in making its decision to either approve the Prospectus and Statement of
Additional Information or by anyone offering to purchase share(s) of stock in
The Scott James Fund, Inc.

E.  The law firm of Albanese & Associates, P.C., has provided this legal opinion
as to certain matters relating to the corporation pursuant to the laws of the
Commonwealth of Virginia.  The Prospectus and Statement of Additional
Information has been prepared by the Corporation's management and its advisors.
Therefore, no opinion in respect to the Prospectus and Statement of Additional
Information orthe information contained therein has been provided by the
undersigned and his law firm.

This opinion is given as the date of this correspondence only and is limited
to the specific issues discussed herein, and is issued to and for the sole
benefit of The Scott James Fund, Inc.

Pursuant to the request of the Board of Directors, the undersigned hereby
consents to the inclusions of this opinion as an exhibit to the Securities Act
Registration Statement of the Fund in the N1-A Filing, and to the reference
in the Fund's Prospectus and/or Statement of Additional Information.

ALBANESE & ASSOCIATES, P.C.

/s/ Mark S. Albanese

MSA/LC
GLM/gm

Exhibit 11 ii

CONSENT OF INDEPENDENT AUDITORS:

We consent to the inclusion in this pre-effective amendment number10 to the
Initial Registration Statement of The Scott James Fund, Inc. on Form N-1A
(File Nos. 811-9809 and 333-96139) of our report dated May 31, 2000,
on our audit of the Statement of Assets and Liabilities of The Scott James
Fund, Inc., as of May 31, 2000.  We also consent to the reference to
our firm under the caption "Auditors" in the Prospectus.

/s/ Tamba S. Mayah
Tamba S.Mayah
MAYAH & ASSOCIATES, CPAs
New Carrollton, MD
October 24, 2000

Exhibit 11 iii

INITIAL CAPITAL AGREEMENT

The initial capital deposited into The Scott James Fund, Inc., is for investment
purposes only and the initial capital is not for re-selling or redeeming.

/s/Scott S. James
Scott S. James, President

Exhibit 12 i

Code Of Ethics

I.  General Principles

The personal investment activites of any officer, director, trustee or employee
of The Scott James Fund, Inc. will be governed by the following principles:
(A) Covered Persons have a duty at all times to place first the interests of
Fund Shareholders (B) All securities transactions by Covered Persons shall
be consistent with this Code and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's position of
trust and responsibility; and (C) Covered Persons should not take
inappropriate advantage of their positions with The Scott James Fund.

II. A) Specific Prohibitions

No person covered by this Code, shall purchase or sell a security, except an
Excepted Security, if there has been a determination to purchase or sell such
security for the Fund or if such a purchase or sale is under consideration for
the Fund, nor may such a person have any dealings in a security that he may not
purchase or sell for any other account in which he has Beneficial Ownership,
or disclose the information to anyone, until such purchase, sale or contemplated
action has either been completed or abandoned.

B)  Fund Rules Enforcer:  To ensure compliance with this code required documents
must be submitted according to procedures set forth below to the Fund
Rules Enforcer.  The Fund Rules Enforcer at a minimum will be Series 7
Registered with the Securities and Exchange Commission, and selection of this
Person must be approved by the Board of Directors. This position will not be
occupied by Scott S. James.

III.  Obtaining Advance Approval

Except as provided in Sections V and VI of this Code, all proposed transactions
in securities (privately or publicly owned) by Covered Persons, except
transactions in Excepted Securities, should be
approved consistent with the provisions of this Code in advance by
the Fund Rules Enforcer.  This request should
be submitted by e-mail to fundrulesenforcer@scottjamesgroup.com,
and requests will be answered within 7 days.

IV.  Reporting and Certification Requirements; Brokerage Confirmations

(1)  Except as provided in Sections V and VI of this code, within 10 days
following the end of each calendar quarter each Covered Person must file
with the Fund Rules Enforcer a signed Security Transaction
Reporting Form.  The form
must be signed and filed whether or not any security transaction has been
effected.  If any transaction has been effected during the quarter for the
Covered Person's account or for any account in which he has a direct or
indirect Beneficial Ownership, it must be reported.  Excepted from this
reporting requirement are transactions effected in any accounts over which
the Covered Person has no direct or indirect influence or control and
transactions in Excepted Securities.  The Fund Rules Enforcer is
responsible for reviewing these transactions promptly and
must address any apparent violation promptly.
(2)  Each employee of the Fund will upon commencement of employment and
annually thereafter disclose all personal securities holdings and annually
certify that: (i) they have read and understand this Code and recognize they
are subject hereto; and (ii) they have complied with the requirements of this
Code and disclosed or reported all securities transactions required to be
disclosed or reported pursuant to the requirements of this Code.
(3)  Each employee of the Fund will direct his brokerage firm to send copies of
all confirmations and all monthly statements directly to the Fund Rules
Enforcer.
(4)  Each employee of the Fund who has a Fully-Discretionary Account (as
defined in Section VI) shall disclose all pertinent facts regarding such
Account to the Fund Rules Enforcer upon commencement of employment.
Each such employee
or partner shall thereafter annually certify on the prescribed form that he
or she has not and will not exercise any direct or indirect influence or control
over such Account, and has not discussed any potential investment decisions with
such independent fiduciary in advance of any such transactions.

V.  Special Provisions Applicable to Outside Directors and Trustees of the Funds

The primary function of the Outside Directors and Trustees of the Funds is to
set policy and monitor the management performance of the Funds' officers and
employees involved in the management of the Fund.  Although they receive
complete information as to actual portfolio transactions, Outside Directors and
Trustees are not given advance information as to the Funds' contemplated
investment transactions.

An Outside Director or Trustee wishing to purchase or sell any security will
therefore generally not be required to obtain advance approval of his security
transactions.  If, however, during discussions at Board meetings or otherwise
an Outside Director or Trustee should learn in advance of the Funds' current or
contemplated investment transactions, then advance approval of transactions in
the securities of such company(ies) shall be required for a period of 30 days
from the date of such Board meeting.  In addition, an Outside Director or
Trustee can voluntarily obtain advance approval of any security transaction or
transactions at any time.

No report described in Section IV(1) will be required of an Outside Director
or Trustee unless he knew, or in the ordinary course of fulfilling his official
duties as a director or trustee should have known, at the time of his
transaction, that during the 15-day period immediately before or after the date
of the transaction (i.e., a total of 30 days) by the Outside Director or Trustee
such security was or was to be purchased or sold by the Fund or such a purchase
or sale was or was to be considered by the Fund.  If he makes any
transaction requiring such a report, he must report all securities transactions
effected during the quarter for his account or for any account in which he has a
direct or indirect Beneficial Ownership interest and over which he has any
direct or indirect influence or control.  Each Outside Director and Trustee will
direct his brokerage firm to send copies of all confirmations of securities
transactions to the Fund Rules Enforcer, and annually make the
certification required under Section IV(2)(i) and (ii).  Outside Directors' and
Trustees' transactions in Excepted Securities are excepted from the
provisions of this Code.

It shall be prohibited for an Outside Director or Trustee to trade on
material non-public information.  Prior to accepting an appointment as a
director of any company, an Outside Director or Trustee will advise and
discuss with the Board whether accepting
such appointment creates any conflict of interest or other issues.

VI. Additional Requirement relating to Employees of the Fund

It shall be prohibited for any employee of the Fund:
(1) to obtain or accept favors or preferential treatment of any kind or gift or
other thing having a value of more than $100 from any person or entity that
does business with or on behalf of the investment company.
(2) to trade on material non-public information or otherwise fail to comply
with the Fund's Statement of Policy and Procedures on Receipt and Use of
Inside Information adopted pursuant to Section 15(f) of the Securities
Exchange Act of 1934 and Section 204A of the Investment Advisers Act of
1940;
(3) to become a director of any company without the Firm's prior consent and
implementation of appropriate safeguards against conflicts of interest.

In connection with any request for approval, pursuant to Section III of
this Code, of an acquisition by employees of the Fund of any securities
in a private placement, prior approval will take into account, among
other factors, whether the investment opportunity should be reserved for any of
the Funds and their shareholders (or other clients of the Fund) and whether
the opportunity is being offered to the individual by virtue of the individual's
position with the Fund.  An individual's investment in privately-placed
securities will be disclosed to the Fund Rules Enforcer if such an individual is
involved in consideration of an investment by the Fund in the issuer of such
securities.  In such circumstances, the Fund's (or other client's) decision
to purchase securities of the issuer will be subject to independent review by
personnel with no personal interest in the issuer.

If a spouse of an employee of the Fund who is a director or an employee of,
or a consultant to, a company, receives a grant of options to purchase
securities in that company (or an affiliate), neither the receipt nor
the exercise of those options requires advance approval from the Fund or
reporting.  Any subsequent sale of the security acquired by the option exercise
by that spouse would require advance approval and is a reportable transaction.

Advance approval is not required for transactions in any account of a
Covered person if the Covered Person had no direct or indirect influence or
control (a "Fully-Discretionary Account").  A Covered person will be deemed to
have "no direct or indirect influence or control" over an account only if:
(i) investment discretion for the account has been delegated to an independent
fiduciary and such investment discretion is not shared with the employee,
(ii) the Covered Person certifies in writing that he or she has not and will not
discuss any potential investment decisions with such independent fiduciary
before any transaction the Fund Rules Enforcer has determined that the account
satisfies these requirements.  Transaction in Fully-Discretionary Accounts by
an employee of the Fund are subject to the post-trade reporting requirements
of this Code.

VII.  Enforcement

The Fund Rules Enforcer for The Scott James Fund, Inc. is charged with
the responsibility of enforcing this code, and may appoint one or more employees
to aid in carrying out these enforcement responsibilities.  The Fund Rules
Enforcer shall implement a procedure to monitor compliance with this Code
through a periodic review of
personal trading records provided under this Code against transactions in the
Fund. The Fund Rules Enforcer shall bring to the attention of the Funds' Audit
Committee any apparent violations of this Code, and the Audit Committee shall
determine what action shall be taken as a result of such violation.
The record of any violation of this Code and any action taken as a result
thereof, which may include suspension or removal of the violator from his or
her position, shall be made a part of the permanent record of the Fund.  An
annual report will be prepared for the directors or trustees of the Fund that
summarizes the Funds' procedures concerning personal investing, including the
procedures followed to determine whether to grant approvals under Section III
and the procedures followed by the Fund Rules Enforcer in determining
pursuant to Section IV whether the Fund has determined to purchase or sell a
security or are considering such a purchase or sale,
and any changes in those procedures during
the past year, and (b) identifies any recommended changes in the restrictions
imposed by this Code or in such procedures with respect to the Code and any
changes to the Code based upon experience with the Code, evolving industry
practices or developments in the regulatory environment.

VII.  Definitions

"Covered Person" means any officer, director, trustee, director or trustee
emeritus or employee of the Fund.  (See also definition of "Beneficial
Ownership.")

"Excepted Securities" are shares of the Funds, banker's acceptances, bank
certificates of deposit, commercial paper, shares of registered open-end
investment companies and U.S. Government securities.

"Outside Directors and Trustees" are directors and trustees who are not
"interested persons" as defined by the Investment Company Act of 1940.

"Security" means any stock, bond, debenture or in general any instrument
commonly known as a security and includes a warrant or right to subscribe to or
purchase any of the foregoing and also includes the writing of an option on
any of the foregoing.

"Beneficial Ownership" is interpreted in the same manner as it would be under
Section 16 of the Securities Exchange Act of 1934 and Rule 16a-1 thereunder.
Accordingly, a "beneficial owner" includes any Covered Person who, directly
or indirectly, though any contract, arrangement, understanding, relationship
or otherwise, has or shares a direct or indirect pecuniary interest (i.e. the
ability to share in profits derived from such security) in any equity security
including:
(i)  securities held by a person's immediate family sharing the same house
     (with certain exceptions);
(ii) a general partner's interest in portfolio securities held by a general
     or limited partnership;
(iii) a person's interest in securities held in trust as trustee, beneficiary
     or settlor, as provided in Rule 16a-8(b); and
(iv) a person's right to acquire securities through options, rights or other
     derivatives securities.

"Gender/Number" whenever the masculine gender is used herein, it includes
the feminine gender as well, and the singular includes the plural and the
plural includes the singular, unless in each case the contest clearly
indicates otherwise.

/s/ Scott S. James
Scott S. James, President

                                     - 1 -Exhibit 10.12
                                                                   -------------
                            ASSET PURCHASE AGREEMENT

     ASSET PURCHASE AGREEMENT  ("Agreement") made as of the 12th day of October,
2000,  by  and  between  AMERICAN  MICROWAVE  TECHNOLOGY,   INC.,  a  California
corporation  (hereinafter  called  "Seller")  and  HERLEY  INDUSTRIES,  INC.,  a
Delaware corporation (hereinafter called "Buyer").

                              W I T N E S S E T H:

     WHEREAS,  Seller is engaged in the  business of  manufacturing  and selling
radio frequency power  amplifiers and desires to sell to Buyer its business unit
commonly  referred  to  as  medical   /scientific  unit  ("Business  Unit")  and
substantially  all of the Business Unit assets,  as herein  provided,  and Buyer
desires to purchase  the Business  Unit and assets,  all at the price and on the
terms and conditions hereinafter set forth.

     NOW,  THEREFORE,  for and in consideration  of the mutual  representations,
covenants and  warranties  herein  contained,  and intending to be legally bound
hereby, the parties hereto agree as follows:

ARTICLE 1.

     1.1 Purchase and Sale of Assets. Subject to the terms and conditions hereof
and based upon the representations,  warranties, covenants and agreements of the
parties  hereafter  set forth,  Buyer hereby  agrees to purchase and accept from
Seller, and Seller agrees to sell,  assign,  transfer and convey to Buyer on the
Closing Date (as  hereinafter  defined) except as otherwise set forth in Section
1.2 below and the Exhibits attached hereto, all of the assets used in or related
to the Business Unit,  including  without  limitation,  all of the Business Unit
related  tangible and  intangible  assets,  rights,  interests and properties of
every kind and nature,  wherever  located and by  whomever  possessed,  owned by
Seller as of the date hereof  (together with any proceeds thereof or any payment
thereon which may be received by Seller  subsequent to the date hereof),  except
as  otherwise  specifically  stated  herein,  free  and  clear  of all  security
interests, liens and encumbrances, including, without limitation, the following:

          (a) All  Business  Unit  related real  property,  machinery  and other
     equipment,  telephone systems, vehicles, furniture, fixtures, computers and
     computer  software  and fixed  assets  of  Seller  of any kind  whatsoever,
     including  without  limitation those Business Unit related assets reflected
     on the pro forma Balance Sheet of Seller  ("Balance  Sheet") which reflects
     only  Business  Unit  related  assets as  described on Exhibit "A" attached
     hereto.

          (b) All catalogues, shipping and office supplies, books of account and
     other financial records  necessary to or useful in the continued  operation
     of the  Business  Unit,  customer  lists and vendor  lists,  Business  Unit
     customer backlogs,  telephone numbers and telephone directory listings, the
     name AMT and any variation  thereof,  Business  Unit  patents,  copyrights,
     licenses and rights listed in Exhibit "B" attached hereto, all rights under
     any Business Unit contracts  subject to consents required for assignment of
     government contracts,  licenses and permits, the Business Unit of Seller as
     an operating  business,  and all Business Unit related intangible assets of
     Seller of any kind whatsoever.
<PAGE>
          (c) All other  Business  Unit related  assets,  property and rights of
     Seller of any kind whatsoever,  including, but not limited to, tax refunds,
     accounts receivable and prepaid expenses.

          (d) All Business Unit related  inventories  of supplies,  merchandise,
     packaging  and  promotional  materials  including  raw  material,  works in
     process and finished goods as attached in Exhibit H.

          (e) All Business Unit related intellectual property rights.

     The  assets,  property  and  rights  to be  transferred  to Buyer by Seller
hereunder  on the Closing  Date are  hereafter  sometimes  called the  "Assets".
Notwithstanding  the  foregoing,  it is  expressly  agreed that Seller  shall be
entitled to use the name American  Microwave  Technology but not the name AMT in
connection with the assets and liabilities it retains.

     1.2 Excluded  Assets.  The assets  listed on Exhibit "E" are not Assets and
are excluded from the purchase contemplated by this Agreement.

ARTICLE  2.

     2.1 Payment of Purchase Price and Assumption of Liabilities. Subject to the
terms  and  conditions  set  forth  in  this  Agreement,  Buyer  shall,  in full
consideration of the Assets to be sold and assigned to Buyer:

          (a) Pay to Seller or as  otherwise  directed by Seller the sum of Five
     Million,  Four Hundred  Thousand  Dollars  ($5,400,000) by cashier's check,
     bank check or wire transfer on the Closing Date.

          (b) On the Closing Date,  assume the following  liabilities  of Seller
     and no others:

               (i) Accounts  payable as set forth in the  attached  Exhibit "C",
          the aggregate of which shall not exceed $800,000.

               (ii)  Equipment  lease  obligations  as set forth in the attached
          Exhibit "D", the aggregate of which shall not exceed $200,000.

               (iii) All  liabilities  set forth in Exhibit "A" in an amount not
          to exceed $1,153,191.
<PAGE>
     The  liabilities  and  obligations  to be assumed  and  referred  to in (i)
through (iii) above are hereinafter termed the "Assumed Liabilities".  Except as
expressly set forth in this  Agreement,  no liabilities or obligations of Seller
shall be assumed by Buyer.

          (c) Any provision of this  Agreement to the contrary  notwithstanding,
     Buyer  will  not  and  does  not  assume  the  following   liabilities  and
     obligations  of Seller even if, to any extent,  they were  reflected in the
     Financials  set forth at Exhibit  "F" and arose in  connection  with,  were
     incurred by or were related to the operation of the Business Unit:

               (i) liabilities or obligations of Seller to any officer, director
          or  stockholder  of the Seller,  whether or not owed to such person in
          his capacity as such, any person  affiliated with any of the foregoing
          or any  person  related  to or  sharing  a  household  with any of the
          foregoing except  liabilities for accrued wages and salaries reflected
          in the Balance Sheet.

               (ii)  expenses  incurred  by the  Seller in  connection  with the
          transactions contemplated herein, including,  without limitation, fees
          and expenses of Seller's finder's fees to  Decisionpoint,  counsel and
          accountants.

               (iii)     any obligation or liability of the Seller to the Buyer.

               (iv) any foreign,  federal, state or local tax based on income or
          revenues or interest or penalties relating thereto, whether arising by
          reason of the sale of the  Assets as herein  provided  or by reason of
          the  existence or  operations of the Seller prior to or after the date
          hereof  and any sales or use taxes  incurred  by Seller on or prior to
          the Closing.

               (v) to the extent not paid for under existing  insurance policies
          assigned to Buyer  hereunder,  workman's  compensation  claims against
          Seller based on occurrences prior to the Closing Date.

               (vi) to the extent not paid for under existing insurance policies
          assigned to Buyer hereunder, liabilities to third parties for tort and
          product liability claims made against Seller prior to the Closing Date
          based upon occurrences prior to the Closing Date.

               (vii) all  obligations  of Seller  incurred after the date hereof
          other than those incurred in the ordinary course of business.

               (viii)  all other  liabilities  or  obligations  of Seller to the
          extent any of such  liabilities or obligations  constitute a breach of
          the  representations  or  warranties  of Seller set forth in Article 3
          hereof.
<PAGE>
               (ix)  obligations  or  liabilities  of Seller with respect to any
          employee option or benefit plan  including,  without  limitation,  any
          underfunding or termination liability.

               (x)  liabilities or obligations of Seller in connection  with its
          failure to obtain, its failure to maintain in full force and effect or
          its default under any approval, authorization, consent, certificate of
          occupancy (or local equivalent),  license,  franchise,  order or other
          permit of any  governmental  or regulatory  agency,  whether  federal,
          state,  local  or  foreign  necessary  to the  operation  of  Seller's
          business as presently conducted  including,  without  limitation,  the
          construction,  alteration, operation, use or occupancy of the premises
          occupied by Seller, or any improvements thereon.

               (xi) except to the extent provided in Section  2.1(c)(i) above or
          as  otherwise  expressly  provided  herein  or in any  other  document
          executed in  connection  herewith,  any  liabilities  to  employees or
          former  employees  of the  Seller,  and their  beneficiaries,  whether
          pursuant to  agreement or  otherwise,  including  those for  salaries,
          bonus and employment benefits,  fringe benefits,  insurance,  welfare,
          post retirement medical, medical reimbursement, deferred compensation,
          sick  pay,  termination,  severance,  stock  option,  stock  purchase,
          accident,   disability,   vacation,   health,   medical  and  worker's
          compensation insurance or benefits.

               (xii) any and all  environmental  liabilities  arising  out of or
          resulting  from  any  or  all  of  the  following  conditions,   which
          hereinafter are collectively referred to as the "pre-closing liability
          conditions":  (A) the existence prior to the Closing Date of hazardous
          materials  upon,  within  or  beneath  any of the  real  property,  or
          migrating from such real property; (B) any violations of environmental
          requirements  premised  upon, or arising out of any of the  conditions
          described  in  (A)  above;   (C)  any   violations  of   environmental
          requirements  pertaining  to the use or operation of the real property
          or any other of the Assets prior to the Closing  Date,  or the conduct
          of operation of the business of the Seller prior to the Closing  Date;
          and (D) the  existence of any  underground  storage tank (USTs) at the
          real property.

               (xiii) any other  liabilities  or obligations of Seller which are
          not expressly assumed hereunder.

     Notwithstanding  the  foregoing,  Seller  shall not have any  liability  or
responsibility  whatsoever arising in any way from actions or inactions of Buyer
relative to the Assumed  Liabilities,  Assets or the Business Unit  purchased by
Buyer  hereunder  after the  Closing to the extent  Buyer's  actions  impair the
Assets or Business Unit.
<PAGE>
ARTICLE  3.

     3.1 Representations and Warranties of Seller.  Seller represents,  warrants
and covenants as follows:

          (a) Seller is a corporation  duly organized,  validly  existing and in
     good  standing  under  the laws of the State of  California.  Seller is not
     required  by  reason  of its  present  ownership  of  property  or  present
     operations  to be qualified to do business in any other state.  Seller does
     not have any subsidiaries.

          (b)  Seller  has  corporate  power to enter  into and  carry  out this
     Agreement and related  documents,  has no contractual or other  restriction
     upon its so doing and has properly  secured the approval of this  Agreement
     by its Board of Directors and stockholders; and Seller's executing officers
     are authorized thereby to execute this Agreement,  and such other documents
     as may be necessary to consummate the transaction  contemplated herein. The
     Agreement and related  documents to which Seller is a party executed on the
     Closing Date will be valid and binding  agreements  of Seller,  enforceable
     against Seller in accordance with their terms.

          (c)  Attached  hereto  as  Exhibit  "F" are  copies  of the  unaudited
     financial  statements  of Seller for the year ended  December  31, 1999 and
     unaudited  financial  statements  for the period  ended  August  26,  2000,
     including  the  balance  sheet of the  Seller as at August  26,  2000,  and
     statement of operations and retained  earnings,  and. changes of cash flows
     of the Seller, with appended notes to all such financial statements,  which
     are an integral part of such statements  (collectively  the  "Financials").
     The Financials  have been prepared in conformity  with  generally  accepted
     accounting  principles applied on a consistent basis and present fairly the
     financial position and results of operations of Seller at the dates and for
     the periods specified.

          (d) There has been no  material  change  in the  financial  condition,
     assets or liabilities of Seller as they relate to the Business Unit and the
     Assets from August 26, 2000 to the date  hereof,  except for changes  which
     have occurred in the ordinary  course of business,  none of which have been
     materially adverse.

          (e) The only real  property  owned by Seller are real estate leases as
     described  in Exhibit "G"  attached  hereto.  Aside from  Exhibit  "G", the
     Seller neither owns nor has interest in or rights to any real estate.

          (f) Exhibit "A", attached hereto,  includes a true and correct list of
     all fixed assets  owned by Seller used in the Business  Unit and a schedule
     of all  leases  of fixed  assets  used in the  Business  Unit and  personal
     property  used in the Business  Unit under which  Seller is lessee,  all of
     which leases are valid and binding and not in default,  by either lessor or
     lessee thereunder.
<PAGE>
          (g) Seller has not received any notice from any governmental authority
     that its real estate,  or personal  property  within the Assets violate the
     provisions of any building or similar code,  nor does Seller have knowledge
     of any  basis  for such a  claim.  Seller  is  conveying  to Buyer  all the
     equipment  and  property  previously  required  by  Seller  for the  proper
     operation of its Business Unit. Except with respect to government contracts
     and governmental  licenses and permits, no consent (except those which have
     already been  obtained)  are  necessary to transfer to the Buyer any of the
     Assets,  property or rights of the Business  Unit,  including any leases or
     licenses of personal property or other rights.

          (h) The  Assets  are and will be on the  Closing  Date owned by Seller
     free and  clear of any  liens,  encumbrances  or  restrictions,  except  as
     specifically reflected in the Exhibit "J".

          (i) From and after the date of this  Agreement  and until the  Closing
     Date,  the  Business  Unit has been and will be  operated  in the  ordinary
     course  consistent  with past  practices and there has not or will not have
     been:

               (i) any damage,  destruction  or loss,  whether or not covered by
          insurance,  which has had, or will have, a material  adverse effect on
          the Business Unit;

               (ii) any strike,  picketing or similar  labor  trouble  which has
          had, or will have, a material adverse effect on the Business Unit;

               (iii) any license, sale, transfer,  mortgage or other disposition
          of any  Assets  except  in the  ordinary  course of  business,  or any
          license,  sale,  assignment,  transfer  or  other  disposition  of any
          patent,   copyright,    trademark,   license,   franchise,   know-how,
          proprietary  process,  formula or other  intangible  asset used in the
          Business Unit;

               (iv) any change in the  benefits  or  compensation  payable or to
          become  payable  to  officers  or  employees  in any  form,  including
          bonuses, pension, severance, etc.;

               (v) any loans,  advances or capital contribution to or investment
          in any person or entity;

               (vi) any issuances or sale of any stock,  bond or other corporate
          security;

               (vii) any material adverse change in the condition  (financial or
          otherwise) of the Business Unit.

          (j) Seller has not  received any notice from any  governmental  agency
     with  respect  to  any  "alleged  material  violation"  (i.e.,  an  alleged
     violation which would have a material  adverse effect on the Business Unit)
     by it of any applicable federal, state or local environmental or health and
     safety  statutes and  regulations in connection with the Business Unit, nor
     does Seller know of any basis for any  investigation or proceeding  against
     it by any  federal,  state or local  environmental  or  health  and  safety
     enforcement  agency  regarding  such a  violation  in  connection  with the
<PAGE>
     operation of the Business  Unit. To the best  knowledge of Seller,  neither
     Seller nor any  predecessor  of Seller has been  alleged to be in  material
     violation  of,  or has  been  subject  to any  administrative  or  judicial
     proceeding pursuant to such environmental laws and regulations with respect
     to the  Business  Unit,  either  now or at any time  during  the past three
     years,  and so far as  Seller is aware,  there  are no such  threatened  or
     proposed violations with respect to the Business Unit.

          (k) The  equipment and other  personal  property  included  within the
     Assets  taken as a whole,  is in good  operating  condition in all material
     respects, subject to normal wear and tear.

          (l)  Except  as set  forth in  Exhibit  "I ",  there  are no  material
     agreements  or contracts to which the Business Unit of Seller is a party or
     by which it is bound.

          (m) With respect to government contracts or OEM subcontracts  included
     within the Assets,  there are (i) no  outstanding  written  cure notices or
     show causes, (ii) any written notices of contract  termination or stop work
     orders,  (iii) any written final  decision  assessing a penalty or damages,
     (iv)  any  written  assertion  of a formal  claim  based  on  violation  of
     government  cost  accounting  standards or government  pricing,  or (v) any
     formal  notice of  proposed  disallowance  of  indirect  cost  claims,  any
     subpoena or written notice signifying government investigation.

          (n) Seller is not aware of any fact or  circumstance  which would have
     an adverse  effect on the  efforts  of Seller and Buyer to obtain  novation
     agreements and to otherwise obtain all required consents.

          (o) Seller is not in default or breach  with  respect to any  material
     obligation  under  any of  its  vendor,  supplier  or  customer  contracts,
     including the government contracts relative to the Assets.

          (p) All inventory  within the Assets reflected on the balance sheet at
     August 26,  2000 is, and on the  Closing  Date will be, of usable  quality,
     except as may be  otherwise  reserved  for and  reflected  on the  Seller's
     financial statements.

          (q) Seller has never had any labor trouble, by which is meant employee
     strikes,  work stoppages,  slow downs or lock outs, or any threats thereof.
     None of Seller's employees has ever been covered by a collective bargaining
     agreement between Seller and any labor union.

          (r) Exhibit "B",  attached hereto  contains a complete  listing of all
     patents, licenses, trademarks, trade names, brand names, copyrights, logos,
     inventions,  trade  secrets,  and  other  proprietary  information  used or
     required by Seller in  connection  with the  carrying on and conduct of its
     Business Unit,  none of which,  to the best knowledge of Seller,  infringes
<PAGE>
     the  rights of  others.  Seller is the sole  owner of or has the  exclusive
     right  to  use,  for the  life  of the  proprietary  rights,  all  patents,
     trademarks, service marks, tradenames, copyrights, inventions, logos, trade
     secrets, etc. used in the Business Unit.

          (s) Seller has timely and properly filed all federal,  state and other
     tax returns and reports,  statements and other documents which it is or has
     been  required  to file,  and has paid all taxes,  including  interest  and
     penalties,  if any,  which have  become due  pursuant  to tax  returns  and
     reports  filed and pursuant to  assessments  received by it. Seller has, to
     the date  hereof,  properly  accrued,  and will pay when due,  all federal,
     state and other tax liabilities of Seller.

          (t) To the best of its knowledge,  Seller has complied in all material
     respects with all laws, rules, regulations,  ordinances, judgments, decrees
     and orders of federal,  state and local authorities and agencies applicable
     to its Business  Unit,  the violation of which could result in liability to
     Seller  of $2,000  or more.  Seller  has  substantially  complied  with all
     requirements under necessary permits, authorizations,  or licenses and has,
     as of the date hereof, secured such permits, authorizations and licenses in
     connection with the Assets. Notwithstanding the foregoing, Seller has fully
     disclosed to Buyer the  circumstances  surrounding its ESOP,  including the
     fact that the Department of Labor has requested information about the ESOP.

          (u) Except as set forth on Exhibit "K," there are no actions at law or
     in equity pending or, to the best knowledge of Seller,  threatened  against
     or adversely affecting Seller or any of the Assets, and except as set forth
     on Exhibit "K," there are no proceedings  pending or, to the best knowledge
     of Seller,  threatened against Seller by or before any governmental  board,
     department, commission or agency involving the Assets.

          (v) None of the real property nor to the best  knowledge of the Seller
     any real  property  previously  owned or  leased  by  Seller  or any of its
     predecessors  have been used at any time in  connection  with the  Business
     Unit:  (i) as a site for the  storage  or  disposal  of  waste  (including,
     without  limitation,  as that  term is  used in the  Resource  Conservation
     Recovery Act (the "Conservation Act") (42 U.S.C. 901 et seq); (ii) so as to
     cause a violation of or to give rise to a removal or restoration obligation
     or  liability  for the  costs of  removal  or  restoration  by  others,  or
     liability  for  damages to others,  under any  statute,  ordinance,  order,
     decree, or under the common law of any state,  federal,  municipal or other
     governmental  entity,  body or agency having  jurisdiction  over any of the
     real property or any such previously owned or leased  property,  including,
     without limitation, the Comprehensive Environmental Response,  Compensation
     and Liability Act, as amended  ("CERCLA") (42 U.S.C.  9601 et seq.), or any
     similar Environmental Requirement,  nor has any such violation,  obligation
     or liability been created by the removal by or at the request of the Seller
     or, to the best  knowledge of the Seller,  any of its  predecessors  of any
<PAGE>
     waste from the real property or such leased or  previously  owned or leased
     properties,  the  disposition  of such  removed  waste or by  reason of the
     discontinuance of operations of any business conducted at the real property
     or the previously owned or leased properties or (iii) to the best knowledge
     of the  Seller,  for storage of  hazardous  materials  in USTs.  Seller has
     delivered  to Buyer true,  complete  and  correct  copies or results of any
     reports,  studies or tests in the  possession  of or  initiated  by Sellers
     pertaining to the existence of hazardous  materials and other environmental
     concerns  at any part of the real  property  or any  properties  previously
     owned  or  leased  by  Seller  or  any of its  predecessors  or  concerning
     compliance  with or liability  under laws relating to toxic waste and other
     environmental  matters in the  operation of the business and  properties of
     the Seller or any of its predecessors.

          (w) Seller has no reason to believe that the accounts receivable being
     conveyed to Buyer hereunder are uncollectible.

          (x) Seller is not in default,  or alleged to be in default,  under any
     agreement, instrument or obligation, which singly or in the aggregate might
     have an adverse effect on the Seller's  Business Unit.  There is no default
     by any party  with whom the Seller has an  agreement  which is of  material
     importance to the Seller's Business Unit.

          (y) Except with respect to government contracts,  licenses and permits
     for which  consent is  required,  there is no material  asset,  property or
     right used or  required by the Buyer in the  conduct of the  Business  Unit
     which is not being conveyed,  transferred,  or assigned to Buyer under this
     Agreement.

          (z) Except as set forth on Exhibit  "L",  neither  the  execution  and
     delivery  of this  Agreement,  nor  the  consummation  of the  transactions
     contemplated   hereby,   violates   any   provision   of  the  articles  of
     incorporation  or by-laws of Seller;  violates  or is in  conflict  with or
     constitutes a default (or an event which,  with notice or lapse of time, or
     both,  would constitute a default) under, or results in the termination of,
     or accelerates the performance  required by, or excuses  performance by any
     person of any of its or their obligations under, or causes the acceleration
     of the maturity of any debt or  obligation  pursuant to, or results in, the
     creation or  imposition of any lien or  encumbrance  upon any of the Assets
     under any  agreement or  commitment  to which Seller is a party or by which
     any of its Assets is bound,  or to which any of the Assets of the Seller is
     subject; or violates any statute, law, regulation,  rule, judgment or order
     of any court or other governmental body.

          (aa) The insurance coverage of Seller is within industry standards for
     the Assets and Business Unit.

          (bb) Seller has not employed any broker, finder,  investment banker or
     financial  advisor  as to whom the  Seller  may have an  obligation  to pay
     monies,  or incurred any liability for any brokerage fees or commissions or
     for any finders'  investment  banking or financial  advisory fees for which
     the  Seller  may  be  responsible  in  connection  with  the   transactions
     contemplated  hereby except finder's fees to Decisionpoint in the amount of
     $432,000.
<PAGE>
          (cc) No  representation  or  warranty  made in this  Agreement  by the
     Seller,  nor any  statement,  schedule or  certificate  furnished  or to be
     furnished  to  the  Buyer  pursuant  hereto,  or  in  connection  with  the
     transactions  contemplated  hereby,  contains  or will  contain  any untrue
     statement  of a  material  fact,  or omits or will omit to state a material
     fact  necessary  to make the  statements  contained  herein or therein  not
     misleading.

ARTICLE 4.

     4.1  Representations and Warranties of Buyer. Buyer represents and warrants
to Seller that:

          (a) Buyer is a corporation  duly  organized,  validly  existing and in
     good standing under the laws of the State of Delaware with corporate  power
     to carry on its business as now  conducted.  Buyer has  corporate  power to
     enter  into and  carry  out this  Agreement,  has no  contractual  or other
     restriction upon its so doing, and has properly secured the approval of its
     Board of  Directors to do so, no other  approval  being  required.  Buyer's
     executing  officers are authorized  thereby to execute this Agreement,  and
     such other  documents as may be necessary to  consummate  the  transactions
     contemplated herein.

          (b) Neither the  execution  and  delivery of this  Agreement,  nor the
     consummation  of  the  transactions   contemplated  hereby,   violates  any
     provision of the certificate of incorporation or by-laws of Buyer; violates
     or is in conflict with or  constitutes  a default (or an event which,  with
     notice or lapse of time, or both,  would  constitute a default)  under,  or
     results in the termination of, or accelerates the performance  required by,
     or excuses  performance  by any  person of any of its or their  obligations
     under, or causes the acceleration of the maturity of any debt or obligation
     pursuant  to, or  results  in the  creation  or  imposition  of any lien or
     encumbrance  upon any  property or assets of Buyer under any  agreement  or
     commitment  to which  Buyer is a party or by which any of its  property  or
     assets is bound,  or to which any of the property or assets of the Buyer is
     subject; or violates any statute, law, regulation,  rule, judgment or order
     of any court or other governmental body.

          (c) Buyer will use all reasonable efforts to release Seller from those
     liabilities   which  Buyer  has  expressly  agreed  to  assume  under  this
     Agreement.

          (d) No representation or warranty made in this Agreement by the Buyer,
     nor any statement,  schedule or certificate furnished or to be furnished to
     the  Seller  pursuant  hereto,  or  in  connection  with  the  transactions
     contemplated  hereby,  contains or will  contain any untrue  statement of a
     material  fact, or omits or will omit to state a material fact necessary to
     make the statements contained herein or therein not misleading.

ARTICLE 5.

     5.1  Operations  of Business  Unit Since August 26, 2000 . Since August 26,
2000, the Seller has adhered to the following restrictions:
<PAGE>
          (a) Seller has  conducted  the Business Unit in the ordinary and usual
     course and has used its best efforts to maintain the Business  Unit and the
     goodwill thereof in accordance with its prior practice.

          (b) Seller has  maintained the Assets owned or leased by Seller in the
     same  condition  as the same were on August 26, 2000,  reasonable  wear and
     tear excepted and  dispositions in the ordinary  course of business,  which
     dispositions have not been material in the aggregate.

          (c) Seller has not  mortgaged,  pledged  or  subjected  to any lien or
     encumbrance  any of the Assets or suffered or permitted,  any of the Assets
     to become encumbered or subject to any lien.

          (d) Seller has not made or  declared  any  distribution,  transfer  or
     dividend to its  shareholders,  or sold or disposed  of, or made any offer,
     agreement or contract  relating to the sale or  disposition  of, any of the
     Assets acquired by Seller since August 26 2000 (with the further  exception
     of those  which have been  disposed of in the  ordinary  course of business
     consistent with historical practice).

          (e) Except as otherwise disclosed to Buyer, Seller has not incurred or
     become liable for any obligation or liability  except  current  liabilities
     incurred in the  ordinary  course of business  consistent  with  historical
     business practices.

          (f) Seller has not made  increases in employees'  salaries or benefits
     subsequent to August 26, 2000 except for a $150,000  termination payment to
     Hans Gregory Wood which is not being paid from the Business Unit Assets.

          (g) Seller has paid or accrued all  operating  costs since  August 26,
     2000, including but not limited to all wages and salaries as the same shall
     have become due and payable,  any premiums due on employee health insurance
     and other insurance  policies,  utility bills, rents, all payments required
     for  merchandise and services  received  during such period,  and all other
     expenses  of the  type  ordinarily  and  reasonably  incurred  by  Seller's
     business since August 26, 2000.

ARTICLE 6.

     6.1 Conditions to Obligation of Buyer to Close.  The obligation of Buyer to
purchase the Assets and otherwise to consummate the transactions  that are to be
consummated  at the  Closing is subject  to the  satisfaction,  on or before the
Closing Date, of the following  conditions  (any of which may be waived by Buyer
in whole or in part):

          (a) All required  consents  shall have been duly obtained or obviated,
     except where (i) the failure to obtain any such required consents would not
     reasonably  be expected to subject  Buyer to any material  penalty or loss,
     including loss of partial revenue, or (ii) such required consent relates to
     an  assigned  contract  or a  related  assumed  liability,  as to which the
     parties will proceed pursuant to Article 8.
<PAGE>
          (b) The  representations and warranties of Seller set forth in Article
     3 shall be true and correct in all material respects on the Closing Date.

          (c) Seller shall have  complied  with and  performed,  in all material
     respects, all obligations required by this Agreement to be complied with or
     performed by Seller on or before the Closing Date.

          (d) Seller shall have  delivered to Buyer a  certificate,  dated as of
     the Closing Date, to the effect that the  conditions  set forth in Sections
     (b) and (c) pursuant to this Article 6 have been satisfied.

          (e) Buyer shall have entered into an  employment  agreement  with Hans
     Gregory Wood, in conformity  with the form of agreement  annexed  hereto as
     Exhibit "M".

          (f) Seller  shall  have  fully  complied  with the  provisions  of any
     so-called  Bulk Sales Laws  applicable  to the  conveyance  to Buyer of the
     Assets.

ARTICLE 7.

     7.1  Conditions to Obligation of Seller to Close.  The obligation of Seller
to sell the Assets to Buyer and otherwise to consummate  the  transactions  that
are to be  consummated  at the  Closing is subject  to the  satisfaction,  on or
before the Closing Date, of the following conditions (any of which may be waived
by Seller in whole or in part):

          (a) All required  consents  shall have been duly obtained or obviated,
     except where (i) the failure to obtain any such required consents would not
     reasonably be expected to subject  Seller to a material  penalty or loss or
     (ii) such  required  consent  relates to an assigned  contract or a related
     assumed  liability,  as to which the party will proceed pursuant to Article
     8.

          (b) The representations and warranties of Buyer set forth in Article 4
     and the  representations  and  warranties  of Buyer  set forth in the other
     instruments  shall be true and  correct  in all  material  respects  on the
     Closing Date.

          (c) Buyer shall have  complied  with and  performed,  in all  material
     respects, all obligations required by this Agreement to be complied with or
     performed by Buyer on or before the Closing Date.

          (d) Buyer shall have delivered to Seller a certificate dated as of the
     Closing Date, to the effect that the  conditions  set forth in Sections (b)
     and (c) of this Article 7 above have been satisfied.
<PAGE>
          (e) Buyer shall have entered into an  Employment  Agreement  with Hans
     Gregory Wood, in conformity  with the form of agreement  annexed  hereto as
     Exhibit "M".

ARTICLE 8.

     8.1  Best Efforts to Obtain Consents.

          (a) Where required,  Seller and Buyer shall notify Seller's  customers
     and suppliers  that Seller's  obligations  under its  contracts,  including
     government contracts, will, after the closing, be performed by Buyer. Prior
     to the Closing,  Seller will use its best efforts to obtain the consents of
     any parties to the  contracts  which  require  such  consent to be obtained
     prior to  transfer  of the  contracts  to Buyer  ("Pre-closing  Consents").
     Seller and Buyer will  cooperate and use their best  reasonable  efforts to
     obtain  (i)  novation  agreements  to the  extent  required  by law to each
     government contract ("Novation Contracts ") as soon as reasonably possible,
     (ii) any  security  clearances,  licenses  or similar  permits  required to
     operate any facility or conduct any portion of the Business Unit, and (iii)
     all other consents,  approvals,  novations, and waivers necessary to convey
     to Buyer any of the Assets  which are not required by law or by contract to
     be obtained  prior to the Closing Date.  (All Novation  Contracts and other
     consents, security clearances,  permits, approvals and waivers described in
     (i),  (ii) and (iii) above are  hereinafter  referred  to as  "Post-closing
     Consents ".).

          (b) To the extent that the  assignment by Seller and the assumption by
     Buyer of any contracts included within the Assets shall require the consent
     or approval of any third party,  this  Agreement  shall not  constitute  an
     assignment  and/or  assumption  thereof  if such  attempted  assignment  or
     assumption would constitute a breach thereof.

          (c) Until (i) any Novation  Contract  legally required with respect to
     any government contract has been executed and delivered and (ii) Seller and
     Buyer have obtained any Post-closing  Consents necessary to convey to Buyer
     any contract  not  requiring a Novation  Contract  pursuant to Section 1 of
     this Article 8 above, Buyer on behalf of Seller, from and after the Closing
     Date, shall assume and perform (as a subcontractor to Seller in the case of
     government  contracts) and Buyer shall assume and perform,  for the benefit
     of the issuer thereof or other party or parties  thereto,  the liabilities,
     responsibilities  and  obligations  of Seller  thereunder  (other  than the
     liabilities,  responsibilities  and obligations of Seller under Section (d)
     of this Article 8.

          (d) Until Seller and Buyer have  obtained  any  Novation  Contracts or
     Post-closing Consents necessary to convey to Buyer any contracts, including
     government contracts pursuant to Section (a) of this Article 8, Seller from
     and  after  the  Closing  Date  will  (i)  promptly  transmit  to  Seller's
     government  contract  customers,  Seller's invoices based upon the invoices
     submitted  by Buyer to Seller  pursuant to Section  (e) of this  Article 8,
     (ii)  receive  payments  tendered  to  Seller by such  government  contract
     customers and promptly remit such payments to Buyer,  (iii) enforce for the
<PAGE>
     benefit of Buyer all rights of Seller under any  government  contract,  and
     (iv) take any other reasonable  actions necessary to allow Buyer to perform
     its  obligations  and  derive its  benefits  as a  subcontractor  under the
     government contracts.

          (e)  From  and  after  the  Closing  Date  and  until  the  applicable
     Post-closing Consents are obtained,  Buyer shall take all reasonable action
     necessary to allow Seller to perform its  obligations  under the government
     contracts,  including  but not limited to promptly  submitting  invoices to
     Seller for such payments or reimbursements as are appropriate in accordance
     with the respective terms of such government contracts.

ARTICLE 9.

     9.1  The Closing.

          (a)  The  Closing  hereunder  shall  take  place  at  the  offices  of
     McAndrews,  Allen & Matson on October 12, 2000 at 9:00 a.m,  (the  "Closing
     Date").

          (b) On the Closing Date, (a) Seller shall transfer the Assets to Buyer
     by good  and  sufficient  deeds,  bills  of  sale,  assignments  and  other
     documents and instruments of conveyance reasonably  satisfactory to counsel
     for Buyer;  and (b) Buyer shall deliver to Seller the cash payment  payable
     on the Closing Date (by cashier's check or wire transfer) and duly executed
     instrument or  instruments  reasonably  satisfactory  to counsel for Seller
     evidencing the assumption by Buyer of the Assumed Liabilities.

          (c) Seller shall furnish to Buyer, on the Closing Date, the Exhibits.

          (d) Except as  otherwise  provided  in Article  8,  Seller  shall have
     received on or prior to the Closing  Date,  all required  consents of third
     parties  to the  consummation  of the  transactions  provided  for  herein,
     including consents to the assignment of the material contracts,  leases and
     agreements addressed above in Section 6.1.

          (e) Seller shall furnish to Buyer on the Closing Date resolutions duly
     adopted and carried by its directors  authorizing  the execution,  delivery
     and  performance of this Agreement and evidence of shareholder  approval of
     the sale of the Business Unit certified by its secretary.

          (f) Seller shall furnish to Buyer,  on the Closing Date, an opinion of
     counsel for Seller in form and substance reasonably satisfactory to counsel
     for Buyer to the effect that:

               (i) Seller is a corporation duly organized,  existing and in good
          standing  under the laws of the State of  California,  with  corporate
          power to enter into and perform this Agreement and transfer the Assets
          as provided for herein.
<PAGE>
               (ii)  This  Agreement  has been  duly  authorized,  executed  and
          delivered by Seller and constitutes  its legal,  valid and enforceable
          obligation in accordance with its terms,  except as enforceability may
          be  limited  by  applicable  bankruptcy,  insolvency,  reorganization,
          moratorium  or similar laws  affecting the  enforcement  of creditors'
          rights generally.

               (iii) The  carrying out of the  transactions  provided for herein
          will not violate  any  charter or by law of Seller  nor, to  counsel's
          knowledge,  any corporate  restriction,  agreement,  or arrangement to
          which Seller is a party or to which it is subject.

               (iv) The  bills of sale and other  documents  of  conveyance  and
          transfer  delivered  to Buyer by Seller on the Closing  Date have been
          duly  authorized,  executed  and  delivered by Seller and are adequate
          under the laws of California to effect such conveyance and transfer.

          (g) Buyer shall furnish to Seller,  on the Closing Date, an opinion of
     counsel for Buyer in form and substance reasonably  satisfactory to counsel
     for Seller to the effect that:

               (i) Buyer is a corporation  duly organized,  existing and in good
          standing under the laws of the State of Delaware with corporate  power
          to enter into and perform this Agreement.

               (ii)  This  Agreement  has been  duly  authorized,  executed  and
          delivered by Buyer and  constitutes  the legal,  valid and enforceable
          obligation in accordance with its terms,  except as enforceability may
          be  limited  by  applicable  bankruptcy,  insolvency,  reorganization,
          moratorium  or similar laws  affecting the  enforcement  of creditors'
          rights generally.

               (iii) This  Agreement  and the carrying  out of the  transactions
          herein  provided for will not violate any charter or to our  knowledge
          other  corporate  restrictions,  agreements or  arrangements  to which
          Buyer is subject.

ARTICLE 10.

     10.1  Survival  of   Representations   and   Warranties   of  Seller,   and
Indemnification.

          (a) The representations,  covenants and warranties of Seller contained
     in  this  Agreement  or any  Exhibit  attached  hereto  or any  certificate
     delivered pursuant hereto shall survive the Closing Date for two years.

          (b)  Notwithstanding  any  investigation  of Seller  or the  Assets or
     Business  Unit which is made by or on behalf of Buyer  prior to the Closing
     Date, Seller shall indemnify,  defend,  and hold harmless Buyer against any
     loss, expense (including  reasonable cost of investigation and legal fees),
<PAGE>
     or other damage  resulting from (i) any material breach by Seller of any of
     their warranties,  representations or agreements contained herein, (ii) any
     action or claim which is brought or asserted by third parties against Buyer
     or any successor  arising out of the conduct of Seller  (except the Assumed
     Liabilities  expressly assumed by Buyer pursuant to Article 2 hereof) or on
     account of the non-compliance by Buyer with the provisions of any so-called
     Bulk Sales Law applicable to the  conveyance to Buyer of the Assets,  (iii)
     any failure by Seller to perform any  covenant,  undertaking  or obligation
     hereunder,  or  (iv)  any  liability  arising  as a  result  of  any of the
     proceedings  listed on Exhibit  "K"; to the extent any such claim or claims
     exceed in the aggregate $50,000.

          (c) If any action or claim shall be brought or asserted  against Buyer
     or any  successor in respect of which  indemnity  may be sought from Seller
     pursuant  to  paragraph  10.1 (b) of this  Article 10,  Buyer shall  timely
     notify  Seller and Seller shall assume the defense  thereof,  including the
     employment of counsel reasonably  satisfactory to Buyer, and the payment of
     all expenses.  Buyer shall have the right to employ separate counsel in any
     such  action  and  participate  in the  defense  thereof,  but  the fee and
     expenses of such  counsel  shall be at the expense of Buyer  unless (i) the
     employment thereof shall have been specifically directed by Seller, or (ii)
     Seller shall have elected not to assume the defense and employ counsel. For
     the purpose of this section, notice given within thirty (30) days after the
     occurrence  giving rise to the right of  indemnification  shall be "timely"
     but notice  given later than such  thirty  (30) days shall not  terminate a
     party's right to indemnification unless the party receiving such notice can
     demonstrate  that its rights  have been  adversely  affected  in a material
     fashion by such allegedly untimely notice.

          (d) The indemnity  liability of the Seller herein shall not exceed the
     amount of the purchase price to be paid by Buyer under Article 2 hereof.

     10.2   Survival  of   Representations   and   Warranties   of  Buyer,   and
Indemnification.

          (a) The  representations  and  warranties  of Buyer  contained in this
     Agreement  or any  Exhibit  attached  hereto or any  certificate  delivered
     pursuant hereto shall survive the Closing Date for two years.

          (b)  Notwithstanding any investigation of Buyer which is made by or on
     behalf of Seller prior to the Closing Date, Buyer shall indemnify,  defend,
     and hold harmless Seller against any loss,  expense  (including  reasonable
     cost of  investigation  and legal fees), or other damage resulting from (i)
     any breach by Buyer of any of its warranties, representations or agreements
     contained  herein,  (ii) any  failure  by Buyer to  perform  any  covenant,
     undertaking or obligation  hereunder,  or (iii) any action or claim brought
     or asserted, by third parties against Seller which relates to the Assets or
     the conduct of the Business  Unit by Buyer after the Closing  Date;  to the
     extent any such claim or claims exceed in the aggregate $50,000.
<PAGE>
          (c) If any action or claim shall be brought or asserted against Seller
     or any  successor  in respect of which  indemnity  may be sought from Buyer
     pursuant to  paragraph  10.2(b) of this  Article 10.  Seller  shall  timely
     notify  Buyer and Buyer shall  assume the defense  thereof,  including  the
     employment of counsel reasonably satisfactory to Seller, and the payment of
     all expenses. Seller shall have the right to employ separate counsel in any
     such  action  and  participate  in the  defense  thereof,  but  the fee and
     expenses of such counsel  shall be at the expense of Seller  unless (i) the
     employment thereof shall have been specifically  directed by Buyer, or (ii)
     Buyer shall have elected not to assume the defense and employ counsel.  For
     the purpose of this section, notice given within thirty (30) days after the
     occurrence  giving rise to the right of  indemnification  shall be "timely"
     but notice  given later than such  thirty  (30) days shall not  terminate a
     party's right to indemnification unless the party receiving such notice can
     demonstrate  that its rights  have been  adversely  affected  in a material
     fashion by such allegedly untimely notice.

ARTICLE 11

     11.1  Covenants  and  Agreements  Pertaining  to the Period  Subsequent  to
Closing.

          (a)  After the Closing:

               (i) Seller shall  indemnify  Buyer from, and use its best efforts
          to promptly  discharge or cause to be  discharged  as they become due,
          all  debts,  obligations  and  liabilities  of Seller  other  than the
          Assumed Liabilities

               (ii) Buyer shall indemnify  Seller from, and promptly  discharge,
          or cause to be discharged as they become due, the Assumed  Liabilities
          and those liabilities  arising out of the conduct of the Business Unit
          by Buyer after the Closing Date.

          (b) Upon the request of either  Buyer or Seller,  the other party will
     execute  and  deliver  to the  requesting  party all such  instruments  and
     documents of further  assurance or otherwise,  and will do any and all such
     acts and things as may reasonably be required to carry out the  obligations
     of such party  hereunder and to consummate  the  transactions  contemplated
     hereby.

          (c) Seller and its  representatives  shall, upon reasonable notice and
     at reasonable  times,  have access to Seller's records which have been left
     in the  possession  of Buyer for the  purpose of winding up its affairs and
     filing and paying its tax obligations.

          (d) From and after the date  hereof,  the Seller and its  officers and
     directors  will,  and Seller will cause its officers and directors to, hold
     in  a  fiduciary  capacity  for  the  benefit  of  Buyer  all  confidential
     information, knowledge, and data relating to or concerned with the Business
<PAGE>
     Unit and shall not divulge, and shall cause such officers and directors not
     to divulge, any such confidential  information,  knowledge,  or data to any
     person, firm or corporation other than Buyer.

          (e) Buyer will not assign, transfer or convey the Business Unit to any
     third party without requiring such third party to assume the obligations of
     Buyer hereunder.  Such assignment,  transfer or conveyance will not release
     or modify any of the obligations of Buyer under this Agreement.

          (f) Buyer will be entitled,  for a period of five (5) months after the
     Closing,  to use Seller's  leased premises in Anaheim,  California  without
     additional cost to Buyer.  Should Buyer continue to use or otherwise occupy
     such premises  after the five (5) month  period,  Buyer shall pay to Seller
     $12,500 per month, and pro rated for any portion of a month.

     ARTICLE 12.

     12.1 Miscellaneous.

          (a) Any notices, approvals or other communications provided for herein
     to be given  hereunder by any party to another shall be deemed  validly and
     properly  given or made if in writing and  delivered  personally or sent by
     overnight or certified mail, return receipt requested,  postage prepaid, as
     follows:

        If to Seller:    American Microwave Technology, Inc.
                         c/o Edgewater Private Equity Fund II, LP
                         2 Corporate Plaza
                         Newport Beach, CA  92660
                         Attention: Robert G. Allison

        With a copy to:  McAndrews Allen & Matson
                         1301 Dove Street, Ste. 1020
                         Newport Beach, CA  92660
                         Attention: Stephanie E. Allen, Esq.

        If to Buyer:     Herley Industries, Inc.
                         10 Industry Drive
                         Lancaster, Pennsylvania  17603
                         Attention:  Mr. Lee N. Blatt, Chairman of the Board

        With a copy to:  Blau, Kramer, Wactlar, & Lieberman, P.C.
                         100 Jericho Quadrangle
                         Jericho, New York  11753
                         Attention:  David H. Lieberman, Esq.
<PAGE>
     Either of the  parties  hereto may give  notice to the other at any time by
the methods  specified above of a change in the address at which, or the persons
to whom,  notices  addressed to it are to be  delivered in the future,  and such
notice  shall be deemed to amend  this  paragraph  until  superseded  by a later
notice  of the  same  type.  Any  notice  given  by mail as  aforesaid  shall be
conclusively  deemed to have been received by a party hereto and be effective on
the third  business  day after the day on which  mailed to the address set forth
above.

          (a) This  Agreement  shall be  binding  upon  and  shall  inure to the
     benefit of the parties hereto and their respective successors and assigns.

          (b) This Agreement may be executed in one or more  counterparts,  each
     of which shall constitute an original hereof.

          (c) This Agreement may be modified,  amended or  supplemented  only by
     mutual  written  agreement  of the Seller and the  Buyer.  Each  amendment,
     modification  or  supplement  shall be in  writing  signed  by the party or
     parties to be charged.

          (d) This  Agreement,  the  Exhibits  hereto  and the  other  documents
     delivered hereto  constitute the entire agreement of the parties in respect
     of the  subject  matter  hereof  and  supersedes  all prior  statements  or
     agreements among the parties in respect of such subject matter.

          (e) Article  headings used in this Agreement are for convenience  only
     and shall not affect the construction of this Agreement.

          (f)  Whenever in this  Agreement  it is provided  that a party  hereto
     shall deliver an agreement or other  instrument to the other of them,  such
     agreement or instrument shall be in form reasonably satisfactory to counsel
     for the party to which-the same is to be delivered.

          (g)  In the  event  of  litigation  to  enforce  this  Agreement,  the
     prevailing  party shall receive an award of reasonable  attorney's fees and
     costs.

          (h) This Agreement shall be construed and interpreted according to the
     laws of the  State of  Delaware  without  regard to its  conflicts  of laws
     provisions.

                         [SIGNATURES ON FOLLOWING PAGE]
<PAGE>
     IN WITNESS WHEREOF, Seller and Buyer have caused  this  Agreement to  be
executed  by their duly  authorized  officers  and their  corporate  seals to be
affixed and attested by their  respective  Secretaries  as of the day, month and
year first above written.

                         AMERICAN MICROWAVE TECHNOLOGY, INC.

                         By:  /s/ James P. Burra
                              ------------------------------------
                              James P. Burra
                              Interim Chairman of the Board

                         HERLEY INDUSTRIES, INC.

                         By:  /s/ Myron Levy
                              ------------------------------------
                              Myron Levy
                              President

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