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CPI AEROSTRUCTURES, INC.
91 Heartland Blvd.
Edgewood, New York 11717

March 5, 2014

Mr. Edward Fred

Re:           Independent Consulting Agreement

Dear Mr. Fred:

On the date hereof, you resigned as President and Chief Executive Officer and
terminated your Employment Agreement with CPI Aerostructures, Inc. (the
“Company’).  Concurrently with the execution of this independent consulting
agreement (this “Consulting Agreement”), the Company and you are executing a
Separation Agreement (the “Separation Agreement”) which provides for your
continued employment with the Company until May 16, 2014 (your “Separation
Date”) and the execution by you of a General Release of All Claims (the “General
Release”). The Company desires to retain you (“Consultant”) to serve as an
independent consultant to advise and assist the Company in connection with the
Company’s business upon the terms and conditions set forth in this Consulting
Agreement.
 
1. Retention. Consultant will be retained by the Company during the Term (as
defined below) as an independent consultant, to provide advice and assistance to
the Company in connection with the Company’s business, customers and operations
and to cooperate with the Company with respect to matters relating to
Consultant’s former employment by the Company (“Consulting Services”).
Consultant shall render Consulting Services to the Company as reasonably
requested by the Company’s Chairman of the Board and/or Chief Executive Officer,
and will participate in meetings or conferences as may be reasonably requested
by the same.  Consultant shall be available to render Consulting Services for up
to thirty (30) hours per calendar month during regular business hours and such
other times as shall be mutually agreed to by the Company and Consultant which
amount will represent 20% or less of the average level of bona fide services
provided during the preceding 3-years of service for the Company.
 
1.1 Subject to the terms and conditions of this Consulting Agreement and the
Separation Agreement (including, without limitation, any restrictive covenants),
during the Term, Consultant (a) will not be required to render services
exclusively to the Company, and (b) will be free to accept other employment or
to provide consulting or other personal services to third parties, Nothing in
this Consulting Agreement requires Consultant to divulge the confidential
information of any employer or third parties by whom Consultant is retained.
 
1.2 In rendering the Consulting Services to the Company hereunder, Consultant
will cooperate with the Company and its management, utilize professional skill
and diligence to provide the expertise required in connection with such services
and at all times comply with the Company’s Code of Ethics, Insider Trading
Policy and other corporate policies and procedures as in effect from time to
time.  The Company shall not be required to furnish Consultant with any
equipment or facilities.
 
2. Term. This Consulting Agreement shall become effective (the “Commencement
Date”), on the business day following the expiration of the seven (7) day
revocation period provided for in the General Release (the “Revocation Period”),
subject to Consultant not having revoked the General Release prior to such date
(“Revocation”), and shall terminate eighteen (18) months following such date
(the “Term”), unless this Consulting Agreement shall be sooner terminated as
provided for in Paragraph 7 below.
 
3. Compensation.  In addition to the Separation Benefits provided for in
Paragraph 2 of the Separation Agreement, and in consideration of the performance
of the Consulting Services, during the Term, the Company shall pay to Consultant
at the rate of $20,000 per month (the “Consulting Compensation”), on the 15th
day of each month (if such day is not a business day the next business day after
such day).  The Consulting Compensation shall be the sole consideration payable
by the Company for Consultant’s services hereunder.
 
4. Expenses/Disbursements. The Company will reimburse Consultant, in accordance
with Company policy, for expenses and/or disbursements reasonably incurred by
Consultant during the Term in connection with the performance of the Consulting
Services requested to be performed by the Company, provided that such expenses
and/or disbursements that exceed $100 shall have been authorized and approved in
advance in writing by the Company.
 
5. Independent Contractor. Consultant is not and will not be deemed to be an
employee of the Company by virtue of his retention hereunder or the performance
of the Consulting Services, but will, for all purposes, be deemed an independent
contractor. The Company will not deduct withholding or other payroll or related
taxes from any payments to be made to the Consultant under this Consulting
Agreement.  Consultant acknowledges that he will not be entitled to participate
in any retirement or other employee benefit plans which may be available to the
Company’s employees. Consultant acknowledges that the Consulting Compensation
payable to Consultant under this Consulting Agreement has been established on
the basis that he is an independent contractor and is responsible for the
payment of all taxes. Contractor agrees to comply with all applicable federal,
state and local laws and regulations relating to the performance of his services
hereunder.
 
5.1 Except as otherwise specifically authorized by the Company, (i) Consultant
will not he deemed to have been granted any right or authority to assume or
create any obligation or responsibility on behalf or in the name of the Company,
(ii) Consultant will make no representations, warranties or commitments
purporting to be binding upon the Company, and (iii) Consultant will not execute
any agreement on behalf of the Company nor hold himself out as having such
authority.
 
5.2 Consultant’s sole entitlement pursuant to this Consulting Agreement shall be
to receive payment of the Consulting Compensation, as and to the extent that the
same is payable in accordance with the terms of this Consulting Agreement. The
Company shall not be liable to Consultant for any damage, loss, cost or expense
(whether general, special or consequential) suffered or incurred by Consultant
for any reason, including without limitation, by reason of the lawful
termination of this Consulting Agreement, for loss of anticipated profits or
goodwill, damage to business reputation or any investments or expenditures made
or incurred by Consultant in anticipation of the continuation of this Consulting
Agreement.
 

 
 

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6. Protection of Confidential Information; Non-Competition.
 
6.1 Consultant acknowledges that: (a) as a result of his prior employment and
current engagement by the Company, Consultant has obtained and may obtain secret
and confidential information concerning the business of 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 engagement by the Company or thereafter, Consultant should enter a
business competitive with the Company or divulge Confidential Information; and
(c) the provisions of this Paragraph 6 are reasonable and necessary for the
protection of the business of the Company.
 
6.2 Consultant agrees that he will not at any time, during the Term or
thereafter, divulge to any person or entity any Confidential Information
obtained or learned by him as a result of his engagement by the Company, except
(i) as is required in the course of performing his Consulting Services
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
Consultant’s breach of any of his obligations hereunder, or (iv) where required
to be disclosed by court order, subpoena or other government process.  If
Consultant shall be required to make disclosure pursuant to the provisions of
clause (iv) of the preceding sentence, Consultant promptly, but in no event more
than forty-eight (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, Consultant 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.
 
6.3 Upon termination of his engagement under this Consulting Agreement,
Consultant 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 Consultant shall be entitled to retain copies of such documents
reasonably necessary to document his financial relationship with the Company.
 
6.4 During the Term and for a period of one (1) year thereafter, Consultant,
without the prior written permission of the Company, shall not, anywhere in the
world: (i) be employed by, or render any services to, (a) any person, firm or
corporation engaged in any business (“Competitive Business”) which is directly
in competition with any “material” business conducted by the Company at the
expiration of the Term (as used herein “material” means a business which
generated at least ten percent (10%) of the Company’s consolidated revenues for
the last full fiscal year for which audited financial statements are available)
or (b) any of the Company’s customers or other persons with whom the Company has
a contractual relationship; (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 Consultant was engaged by the Company; 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 Consulting Agreement shall preclude Consultant from investing his
personal assets in any manner he chooses, provided, however, that Consultant may
not, during the period referred to in this Paragraph 6.4, own more than four and
nine-tenths percent (4.9%) of the equity securities of any Competitive Business.
 
6.5 If Consultant commits a breach, or threatens to commit a breach, of any of
the provisions of Paragraphs 6.2 or 6.4, the Company shall have the right and
remedy to seek to have the provisions of this Consulting Agreement specifically
enforced by any court having equity jurisdiction, it being acknowledged and
agreed by Consultant 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 Paragraph 6.5 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 Consulting 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.
 
6.6 If any provision of Paragraphs 6.2 or 6.4 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.
 
6.7 The provisions of this Paragraph 6 shall survive the termination of this
Consulting Agreement.
 
 
 

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7. Termination.
 
7.1 The Company may terminate this Consulting Agreement and Consultant’s
retention hereunder for “cause” upon written notice if Consultant materially
breaches his material obligations hereunder, which breach, if curable, is not
cured within thirty (30) days after receipt by Consultant of written notice
thereof by the Company, or if Consultant shall engage in any conduct or commit
any act in the performance of his duties hereunder which is unlawful, fraudulent
or intentionally injurious and such conduct or act is detrimental to the
interests of the Company.  Consultant may terminate this Consulting Agreement
and his retention hereunder for any reason upon ten (10) day’s written notice to
the Company.  If, prior to the scheduled expiration of the Term, this Consulting
Agreement and Consultant’s retention hereunder is terminated by the Company for
cause or if Consultant chooses to terminate this Consulting Agreement and his
retention hereunder, then Consultant will be entitled to receive only the
Consulting Compensation actually earned and payable to him through the date of
termination.
 
7.2 If this Consulting Agreement and Consultant’s retention hereunder shall be
terminated by the Company for any reason other than for cause, then Consultant
shall be entitled to receive the Consulting Compensation when, as and to the
extent that the same would otherwise have been earned and payable in accordance
with the terms hereof.
 
8. Assignment. This Consulting Agreement shall be binding upon Consultant, his
heirs and personal representatives, and upon the Company, its successors and
assigns. The performance of Consultant’s personal services under this Consulting
Agreement shall not otherwise be delegated, subcontracted or assigned and may be
performed only by him.
 
9. Notices. Any notice required, permitted or desired to be given pursuant to
any of the provisions of this Consulting Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or sent by
certified mail, return receipt requested, postage and fees prepaid, or by
national overnight delivery prepaid service to the parties at their addresses
set forth above. Either of the parties hereto may at any time and from time to
time hereafter change the address to which notice shall be sent hereunder by
notice to the other party given under this Paragraph 9. The date of the giving
of any notice delivered in person or by overnight delivery shall be the date
upon which that notice is delivered. The date of the giving of any notice sent
by mail shall be the date upon which that notice is received (which may be
evidenced by the return receipt.)
 
10. Governing Law.  This Consulting Agreement shall be governed and construed
under the laws of the State of New York applicable to agreements to be performed
entirely therein, without regard to any provision of the doctrine of conflict of
laws.  Any suit, action or proceeding with respect to this agreement shall be
brought exclusively in the courts of the State of New York or in the United
States District Courts located in New York County, New York, and each of the
parties irrevocably consents to the jurisdiction of each such court in respect
of any such action, suit or proceeding.  The parties hereby waive trial by jury
in any action or proceeding arising hereunder.
 
11. Entire Agreement. This Consulting Agreement constitutes the entire agreement
between the parties as to Consultant’s retention by the Company and supersedes
all prior understandings and agreements regarding such retention. The Company is
not making, and in executing this agreement, Consultant has not relied upon, any
representations, promises or inducements, except to the extent that the same are
expressly set forth in this Consulting Agreement.
 
12. Partial Invalidity. If any clause, paragraph, section or part of this
Consulting Agreement is held or declared to be void, invalid or illegal for any
reason by any court of competent jurisdiction, such provision will be
ineffective but will not in any way invalidate or affect any other clause,
paragraph, section or part of this agreement.
 
13. Binding Effect. This document is not intended to constitute an agreement,
commitment, or offer binding upon the Company until and unless executed and
delivered on behalf of the Company, as provided below, and the expiration of the
Revocation Period (without Revocation having occurred) and no representative of
the Company has authority to make any commitment or to give any assurance to the
contrary.
 

If the foregoing correctly sets forth our understanding and agreement, please
sign where indicated below.
 
Very truly yours,

CPI AEROSTRUCTURES, INC.

By:/s/ Douglas
McCrosson                                                                
Name:  Douglas McCrosson
Title:  Chief Operating Officer
 
 
 
 
AGREED TO AND ACCEPTED:

/s/ Edward J. Fred                                                      
EDWARD FRED

256037.1
 
 

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