ex10_16.htm


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    FIRST AMENDMENT TO CREDIT
AGREEMENT

    


    FIRST AMENDMENT (the
“Amendment”) entered into as of October 22, 2008 by and between CPI
AEROSTRUCTURES, INC. (the “Borrower”) and SOVEREIGN BANK (the
“Bank”).

    


    WHEREAS, the Borrower and the
Bank are parties to that Amended and Restated Loan Agreement dated as of August
13, 2007, as same may be hereafter amended and modified (the “Agreement”);
and

    


    WHEREAS, the Borrower has
requested that the Bank make available, and the Bank has agreed to extend to
Borrower, an additional $3,000,000.00 term loan facility, subject to the
provisions hereof; and

    


    WHEREAS, the Borrower has
requested that the Bank amend, and the Bank has agreed to amend, certain
provisions of the Agreement, subject to the terms and conditions hereinafter set
forth.

    


    NOW, THEREFORE, the parties
hereto hereby agree as follows:

    


    1. All
capitalized terms used herein, unless otherwise defined herein, have the same
meanings provided therefor in the Agreement.

    


    2. Subject
to the terms and conditions hereof, the Agreement is hereby amended as
follows:

    


    (A) Section
1.1 is amended by deleting the definitions of Interest Period, Libor Rate Loan,
Loan Documents, Post Default Rate, Prime Rate Loan and Termination Date
contained therein, and  substituting the following
therefor:

    


    “‘Interest
Period’ shall mean any period during which a Loan bears interest based on the
Libor Rate as elected by the Borrower in accordance with the terms of this
Agreement.

    


               (a)  If
any Interest Period would otherwise end on a day which is not a Business Day,
that Interest Period shall be extended to the next succeeding Business Day
unless the result of such extension would be to extend such Interest Period into
another calendar month, in which event such Interest Period shall end on the
immediately preceding Business Day.

    


    (b)  No Interest Period shall
extend beyond the Termination Date.”


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    


    “‘Libor
Rate Loan’ shall  mean Loans hereunder (or any portion of the
outstanding principal balance thereof) that bear interest for the Interest
Period applicable thereto at a rate of interest based upon the Libor Rate plus
the applicable margin.”

    


    “‘Loan
Documents’ shall mean, collectively, this Agreement, the Revolving Credit Note,
the Term Note, the Security Agreement, the Master Agreement together with all
other documents executed in connection with the interest rate swap transaction
(if any) with respect to the Term Loan, the Additional Documents (as defined in
Section 10.14 hereof), the Replacement Documents (as defined in Section 10.15
hereof) and each document, agreement and instrument executed in connection
herewith or pursuant hereto together with each document, agreement and
instrument made by the Borrower or any Guarantor with or in favor of or owing to
the Bank.”

    


    “‘Post
Default Rate’ shall mean at any time a rate of interest equal to four (4%)
percent per annum in excess of the rate that would then be applicable to the
Loans.”

    


    “‘Prime
Rate Loan’ shall mean Loans hereunder (or any portion of the outstanding
principal balance thereof) which shall bear interest based upon the Prime
Rate.”

    


    “‘Termination
Date’ shall mean (i) with respect to Revolving Credit Loans, August 13, 2010, or
(ii) with respect to the Term Loan, the Maturity Date, or if such dates are not
a Business Day, the Business Day next succeeding such date.”

    


    (B)           Section
1.1 is amended by adding the definitions of Loan or Loans, Master Agreement,
Maturity Date, Note or Notes, Term Loan and Term Note, each to read as
follows:

    


    “‘Loan’
or ‘Loans’ shall mean a Revolving Credit Loan, a Term Loan, or any or all of
same as the context may require.”

    


    “‘Master
Agreement’ shall mean the ISDA Master Agreement dated October 22, 2008 between
the Bank and the Borrower.”


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    “‘Maturity
Date’ shall mean November 1, 2013.”

    


    “‘Note’
or ‘Notes’ shall mean the Revolving Credit Note, the Term Note or any or all of
the same as the context may require.”

    “‘Term
Loan’ shall mean the term loan made pursuant to Section 2.1.1
hereof.”

    


    “‘Term
Note’ shall mean the term note referred to in Section 2.2.1
hereof.”

    


    (C)           The
title to Section 2 is amended by deleting the title contained therein and
substituting the following therefor:

    


    “SECTION
2.                                                      AMOUNT
AND TERMS OF REVOLVING CREDIT COMMITMENT AND TERM LOAN”

    


    (D)           Section
2.7 is amended by deleting the language contained therein and substituting the
following therefor:

    


    “2.7.  Continuation
and Conversion of Loans.  The Borrower shall have the right at
any time on prior irrevocable written or facsimile notice to the Bank as
specified in Section 2.3: (i) to continue any Loan into a subsequent Interest
Period, (ii) to convert any Loan into another type of Loan (specifying, in the
case of a Libor Rate Loan, the Interest Period to be applicable thereto), and
(iii) to convert any Prime Rate Loan into a Libor Rate Loan (specifying the
Interest Period to be applicable thereto), subject to the
following:

    


    (a)           in
the case of a conversion of less than all of the outstanding Revolving Credit
Loans, the aggregate principal amount of Revolving Credit Loans converted shall
not be less than $100,000.00 and shall be an integral multiple
thereof;

    


    (b)           no
Loan (other than a Prime Rate Loan) shall be converted at any time other than at
the end of an Interest Period applicable thereto;

    


    (c)           any
portion of a Loan maturing or required to be prepaid in less than one month may
not be converted into or continued as a Libor Rate Loan;


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    (d)           a
Loan subject to an interest rate swap transaction pursuant to the Master
Agreement may not be converted to a Prime Rate Loan; and

    


    (e)           no
more than five (5) types of Libor Rate Loans may be outstanding at any one
time.

    In the
event that the Borrower shall not give notice to continue any Libor Rate Loan
into a subsequent Interest Period or convert any such Loan, into a Loan of
another type, on the last day of the Interest Period thereof, such Loan (unless
prepaid) shall automatically be converted into a Prime Rate Loan.  The
Interest Period applicable to any Libor Rate Loan resulting from a conversion or
continuation shall be specified by the Borrower in the irrevocable notice
delivered by the Borrower pursuant to this Section and Section 2.3; provided,
however, that, if such notice does not specify either the type of Loan or the
Interest Period to be applicable thereto, the Loan shall automatically be
converted into, or continued as, as the case may be, a Prime Rate Loan until
such required information is furnished pursuant to the terms
hereof.  Notwithstanding the foregoing, if the Term Loan is subject to
an interest rate swap transaction pursuant to the Master Agreement, the Term
Loan will be automatically continued as a Libor Rate Loan with a one month
Interest Period.  Notwithstanding anything to the contrary contained
above, if an Event of Default shall have occurred and is continuing, no Libor
Rate Loan may be continued into a subsequent Interest Period and no Prime Rate
Loan may be converted into a Libor Rate Loan.”

    


    (E)           Section
2.08(a) is amended by deleting the language contained therein and substituting
the following therefor:

    


    “(a)                      Voluntary.                                The
Borrower may prepay any Prime Rate Loan in whole or in part without premium or
penalty; provided, however, that each partial prepayment on account of any Prime
Rate Loan shall be in an amount not less than $50,000.00.  Except as
provided in Section 2.8(b) or in connection with a termination or reduction of
the Commitment pursuant to Section 2.6, the Borrower may not prepay any Libor
Rate Loan prior to the last day of the Interest Period therefor.  Any
amount prepaid on account of a Revolving Credit Loan may be reborrowed in
accordance with the provisions of Section 2.1 hereof.  Any prepayment
of the Term Loan subject to an interest rate swap


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    transaction
pursuant to the Master Agreement, shall be subject to the provisions of the
Master Agreement.”

    


    (F)           Section
2.9 is amended by deleting the language contained therein and substituting the
following therefore:

    


    “2.9.                      Payments.

    


    (a)           Interest
accrued on each Loan shall be payable, without duplication, on:

    


    (i)           the
Termination Date;

    


    (ii)           with
respect to any portion of any Revolving Credit Loan repaid or Loan prepaid
pursuant to this Agreement, the date of such repayment or prepayment, as the
case may be;

    


    (iii)           with
respect to that portion of the outstanding principal amount maintained as Prime
Rate Loans, the first day of each month and commencing with the first such date
following the date of the making of such Loans;

    


    (iv)           with
respect to that portion of the outstanding principal amount maintained as Libor
Rate Loans, the last day of each applicable Interest Period (and, if such
Interest Period for Revolving Credit Loans shall exceed three months, on the
last day of each three-month period occurring during such Interest Period);
and

    


    (v)           with
respect to that portion of the outstanding principal amount converted into Prime
Rate Loans or Libor Rate Loans on a day when interest would not otherwise have
been payable pursuant to Sections 2.9(a)(iii) or 2.9(a)(iv), the date of such
conversion.

    


    (b)           All
payments (including prepayments) to be made by the Borrower on account of
principal or interest with respect to any Loan or on account of fees or any
other obligations of the Borrower to the Bank hereunder shall be made to the
Bank at the office of the Bank set forth in Section 10.1 hereof or at such other
place as the Bank may from time to time designate in writing in lawful money of
the United States of America in immediately available funds.  The
Borrower hereby authorizes the Bank to deduct


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    from any
general deposit account of the Borrower the amount of any loan payment including
all payments of interest, principal and other sums due (“Automatic Payment”),
from time to time, under this Agreement and/or any Note; the Bank will
thereafter promptly notify the Borrower of the amount so charged.  If
the funds in the account are insufficient to cover any payment due, the Bank
shall not be obligated to advance funds to cover the payment. The failure of the
Bank so to charge any account or to give any such notice shall not affect the
obligation of the Borrower to pay interest, principal or other sums as provided
herein or in any Note, at any time and for any reason the Borrower or the Bank
may voluntarily terminate the Automatic Payment.  Termination by the
Borrower of the Automatic Payment must be made by written notice to the
Bank.  Subject to the provisions of subparagraph (a) in the definition
of Interest Period set forth in Section 1.1 hereof, if any payment to be so made
hereunder, or under any Note, becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business Day
and, to the extent permitted by applicable law, interest thereon shall be
payable at the then applicable rate during such extension.

    


    (c)           If
all or a portion of the principal or interest of any Loan shall not be paid when
due (whether at the stated or any accelerated maturity of such Loan) or if any
fee or other amount due hereunder shall not be paid when due, or upon the
occurrence of an Event of Default, the Borrower’s right to select pricing
options shall cease and all Loans, and such interest, fee or amount due
hereunder, to the extent permitted by applicable law, shall bear interest
(payable on demand) (i) in all cases other than Libor Rate Loans at the Post
Default Rate until paid and (ii) in the case of Libor Rate Loans at the Post
Default Rate until the expiration of the Interest Period applicable to such
Loan, at which time the such Libor Rate Loan will automatically be converted
into a Prime Rate Loan and until paid shall bear interest at the Post Default
Rate.  In no event, however, shall interest payable hereunder be in
excess of the maximum rate of interest permitted under applicable
law.  The obligation to so pay interest upon any reimbursement
obligation of the Borrower to the Bank shall not be construed so as to waive the
requirement for reimbursement on the same date that payment is made by the Bank
as set forth in this Agreement.  If a regularly scheduled
payment


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    is
fifteen (15) days or more late, the Borrower will be charged five (5.0%) percent
of the unpaid portion of the regularly scheduled payment, or $10.00, whichever
is greater.

    


    (d)           All
payments received will be applied first to interest, then to fees, and then to
principal.

    


    (e)           The
Borrower hereby expressly authorizes the Bank to record on the schedule attached
to the Revolving Credit Note the

    amount
and date of each Revolving Credit Loan, the rate of interest thereon, the date
and amount of each payment of principal and the unpaid principal balance;
provided, however, that the failure of the Bank to make any such notation shall
not in any manner affect the obligation of the Borrower to repay any Revolving
Credit Loan in accordance with the terms hereof.  All such notations
shall be presumed to be correct.”

    


    (G)           Section
2.10 is amended by deleting the language contained therein and substituting the
following therefor:

    


    “2.10.                      Use of
Proceeds.  The proceeds of (i) Revolving Credit Loans hereunder
shall be used to finance working capital requirements of the Borrower and for
general corporate purposes and (ii) the Term Loan shall finance the initial
costs related to a long-term contract with Spirit Aero. No part of the proceeds
of any Loan will be used, whether directly or indirectly, for any purpose that
entails a violation of any of the Federal Reserve Board Regulations including
Regulations T, U and X.”

    


    (H)           Sections
2.11, 2.12, 2.13, and 2.14 are amended by deleting the words “Revolving Credit
Loans” appearing therein, and substituting the word “Loans”
therefor.

    


    (I)           Section
3.9 is amended by deleting the language contained therein and substituting the
following therefor:

    


    “3.9.                      Federal
Regulations.  The Borrower is not engaged nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    Federal
Reserve System as now and from time to time hereafter in effect.  No
part of the proceeds of any Loans hereunder will be used for “purchasing” or
“carrying” “margin stock” as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of the Regulations of such
Board of Governors.”

    


    (J)           The
preamble to Section 4.2 is amended by deleting the language contained therein
and substituting the following therefor:

    


    “4.2.  Conditions
to All Loans.  The obligation of the Bank to make any Loan
(including the initial Revolving Credit Loan) to be made by

    it
hereunder is subject to the satisfaction of the following conditions
precedent:”

    


    (K)           The
preamble to Section 5 is amended by deleting the language contained therein and
substituting the following therefor:

    


    “The
Borrower hereby agrees that, so long as the Commitment remains in effect, any
Note remains outstanding and unpaid, or any amount is owing to the Bank
hereunder, the Borrower will and will cause each Specified Person, as
applicable, to:”

    


    (L)           The
preamble to Section 6 is amended by deleting the language contained therein and
substituting the following therefor:

    


    “The
Borrower hereby agrees that, so long as the Commitment remains in effect, any
Note remains outstanding and unpaid, or any amount is owing to the Bank
hereunder, the Borrower will:”

    


    (M)           The
preamble to Section 7 is amended by deleting the language contained therein and
substituting the following therefor:

    


    “The
Borrower hereby agrees that, so long as the Commitment remains in effect, any
Note remains outstanding and unpaid, or any amount is owing to the Bank
hereunder it will not, nor will it permit any of its Subsidiaries or any
Specified Person to:”

    


    (N)           Section
7.1 is amended by deleting the language contained therein and substituting the
following therefor:

    


    “7.1                      Indebtedness
for Borrowed Money.  Incur, or permit to exist, any
Indebtedness for borrowed money


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


     except
(i) Indebtedness incurred pursuant to borrowings hereunder and under any other
loans made by the Bank in its discretion to the Borrower, (ii) Indebtedness
existing on the date hereof and reflected in the financial statements referred
to in Section 3.1 hereof and (iii) purchase money Indebtedness incurred in the
acquisition of fixed assets permitted under Section 7.4(iv) hereof not in excess
of $250,000.00 in the aggregate.”

    


    (O)           Section
8(a) is amended by deleting the language contained therein and substituting the
following therefor:

    


    “(a)           The
Borrower shall fail to pay any interest on or principal of any Note when due or
shall fail to pay any other amount payable

    hereunder;
or the Borrower or any Guarantor shall default beyond any applicable notice or
cure period (if any) under any other Loan Document; or”

    


    (P)           Section
8(e) is amended by deleting the language contained therein and substituting the
following therefor:

    


    “(e)           Any
Specified Person shall (i) default in any payment of any indebtedness for
borrowed money in excess of $100,000.00 (other than the Notes), individually or
in the aggregate, beyond the period of grace, if any, provided in the instrument
or agreement under which such indebtedness was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto or any other event shall occur or condition exist,
in each case the effect of which default or other event or condition is to cause
or permit the holder or holders of such indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause such indebtedness to become due prior
to its stated maturity; or”

    


    (Q)           The
last paragraph of Section 8 is amended by deleting the language contained
therein and substituting the following therefor:

    


    “then, in
any such event, any or all of the following actions may be taken:  (i)
the Bank may, at its option, declare the Commitment to be terminated forthwith,
whereupon the Commitment and all obligations to the Bank to make Revolving
Credit Loans shall immediately terminate; and


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    (ii) the
Bank may, at its option, declare all Loans  (with accrued interest
thereon) and all other amounts owing under this Agreement and each Note to be
due and payable and the same, and all interest accrued thereon, shall forthwith
become due and payable without presentment, demand, protest or notice of any
kind (other than any notice specified herein), all of which are hereby waived,
anything contained herein or in any instrument evidencing the Loans to the
contrary notwithstanding.”

    


    (R)           Sections
9.1, 10.5 and 10.14 are amended by deleting the words “Revolving Credit Loans”
appearing therein and substituting word “Loans” therefore.

    


    (S)           Sections
10.1, 10.3, 10.6, 10.9, 10.10, 10.13 and 10.15 are amended by deleting the words
“Revolving Credit Note” appearing therein and substituting the words “each Note”
therefore

    


    (T)           The
Agreement is hereby amended to add a new Section 2.1.1 to read as
follows:

    


    “2.1.1                      Term
Loan.                                Subject
to the terms and conditions hereof, the Bank agrees to make a term loan (the
“Term Loan”) to the Borrower on the effective date of the first amendment hereto
in the amount of Three Million and 00/100 ($3,000,000.00) Dollars.”

    


    (U)           The
Agreement is hereby amended to add a new Section 2.2.1 to read as
follows:

    


    “2.2.1                      Term
Note.                                The
Term Loan shall be evidenced by the Term Note of the Borrower.  The
Term Note shall be dated the effective date of the first amendment to this
Agreement and shall mature on the Maturity Date at which time the entire
outstanding principal balance and all interest thereon shall be due and
payable.  The Term Loan shall bear interest at a rate per annum equal
to (a) 1⁄4% in excess of the Prime Rate, (b) 2.5% in excess of the Libor Rate for
an Interest Period one, two or three months, or (c) 2.5% in excess of the Libor
Rate for a one month Interest Period, the entire outstanding principal balance
of which, at the Borrower’s option (subject to availability), shall be swapped
into a fixed rate equivalent for the remainder of the term pursuant to the
Master Agreement.  Interest shall be payable pursuant to Section 2.9
hereof and continued or converted in accordance with the requirements of Section
2.7 hereof.  Prepayments shall be subject to Section
2.8


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    hereof.  The
Term Note shall be entitled to the benefits and subject to the provisions of
this Agreement.”

    


    (V)           The
Agreement is hereby amended to add a new Section 2.9.1 to read as
follows:

    


    “2.9.1                      Repayment
of Term Note.                                                                The
principal balance of the Term Note shall be payable in sixty (60) consecutive
monthly installments of principal, the first fifty-nine (59) of which shall be
in an amount equal to Fifty Thousand and 00/100 ($50,000.00) Dollars each,
commencing on December 1, 2008 with each succeeding installment
being

     due
on the first day of each month thereafter until October 1, 2013 with a final
payment due on the Maturity Date in an amount equal to the then outstanding
principal balance of the Term Note.”

    


    (W)           The
Agreement is hereby amended to add a new Section 4.1.1 to read as
follows:

    


    “4.1.1                      Conditions
to Term
Loan.                                                                The
obligations of the Bank to make the Term Loan to the Borrower is subject to the
satisfaction of the following conditions precedent:

    


    (a)           First Amendment to Credit
Agreement.  The Bank shall have received the First Amendment to
Credit Agreement duly executed by the Borrower, together with evidence that all
conditions thereto have been satisfied.

    


    (b)           Term
Note.                                The
Bank shall have received the Term Note conforming to the requirements hereof,
substantially in the form of Exhibit B hereto with appropriate insertions and
duly executed by the Borrower.

    


    (c)           Master
Agreement.                                           The
Bank shall have received the completed Master Agreement together with all other
documents necessary to evidence, secure, authorize and effectuate the interest
rate swap transaction duly executed by the Borrower.

    


    (d)           Officers’
Certificate.   Certificate of an officer of the Borrower
dated on or about the date of  the first amendment to this Agreement
certifying as to (w) no change to the copies of the Borrower’s certificate of
incorporation and all amendments thereto previously delivered to the Bank, (x)
no change to the copies of the


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    bylaws of
the Borrower and all amendments thereto, previously delivered to the Bank, (y)
true and correct copies of resolutions adopted by the board of directors of the
Borrower authorizing (1) the execution, delivery and performance by the Borrower
of each of the Loan Documents to which it is a party and the performance by the
Borrower of its obligations under each of the Loan Documents to which it is a
party, (2) approving forms in substantially execution form of each of the Loan
Documents to which it is a party, and (3) authorizing officers of the Borrower
to execute and deliver each of the Loan Documents to which it is a party, and
(z) the

     incumbency
and specimen signatures of the duly authorized officers of the Borrower
executing the Loan Documents and any other documents delivered to the Bank by
the Borrower in connection herewith.

    


    (e)           UCC Searches; Good Standing
Certificate.

    The  Bank
shall have received current UCC Searches and an updated Good Standing
Certificate, each for the Borrower from the New York Secretary of State, in each
case satisfactory to the Bank.

    


    (f)           Opinion of
Counsel.                                                      The
Bank shall have received an opinion of the Borrower’s counsel with respect to
the Term Loan, satisfactory to the Bank in all respects.

    


    (g)           Other
Information.                                           The
Bank shall have received such other information and documents with respect to
the Borrower, its business or the collateral as is reasonably
requested.”

    


    (h)           Additional
Matters.  All other documents and legal matters in connection
with the transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to the Bank and its counsel.

    


    (X)           The
Agreement is hereby amended to add a new Section 6.3 to read as
follows:

    


    “6.3                      Debt
Service Coverage Ratio.   Commencing
the fiscal quarter ending on December 31, 2009 and the end of each fiscal
quarter thereafter, for the preceding four fiscal quarters then-ended, a Debt
Service Coverage Ratio of 1.50 to 1.0.  For purposes hereof, ‘Debt
Service Coverage Ratio’


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    shall
mean (i) The sum of Earnings before Interest, Taxes, Depreciation and
Amortization minus Dividends minus unfinanced Capital Expenditures, divided by (ii) the
sum of scheduled principal and capital lease payments plus Interest Expense; in
each case as determined by GAAP consistently applied.”

    


    (Y)           The
Agreement is hereby amended to add a new Exhibit B in the form annexed
hereto.

    


    (Z)           Except
as amended herein, all other provisions of the Agreement shall remain in full
force and effect, and are hereby ratified.

    


    3.           The
Bank and the Borrower agree that as of October 14, 2008, the aggregate
outstanding principal amount of:  (i) the Revolving Credit Loans as
evidenced by the Revolving Credit Note is $2,500,000.00, and interest has been
paid through October 1, 2008.

    


    
      4.           The
Borrower hereby represents and warrants to the Bank that:

      


    

    
      (a)           Each
and every of the representations and warranties set forth in the Agreement is
true as of the date hereof and with the same effect as though made on the date
hereof, and is hereby incorporated herein in full by reference as if fully
restated herein in its entirety.

      


      (b)           No
Default or Event of Default and no event or condition which, with the giving of
notice or lapse of time or both, would constitute such a Default or Event of
Default, now exists or would exist after giving effect
hereto.

    

    
      


    

    
      (c)           There
are no defenses or offsets to the Borrower's obligations under the Agreement,
the Notes or the Loan Documents or any of the other agreements in favor of the
Bank referred to in the Agreement.

    

    
      


    

    5.           It
is expressly understood and agreed that all collateral security for the Loans
and other extensions of credit set forth in the Agreement prior to the amendment
provided for herein is and shall continue to be collateral security for the
Loans and other extensions of credit provided in the Agreement as herein
amended, including (without limitation) Borrower’s obligations under the Master
Agreement.  Without limiting the generality of the foregoing, the
Borrower hereby absolutely and unconditionally confirms that each document and
instrument executed by the Borrower pursuant to the Agreement continues in full
force and effect, is ratified and confirmed and is and shall continue to be
applicable to the Agreement (as herein amended).

    


    6.           The
amendments set forth herein are limited precisely as written and shall not be
deemed to (a) be a consent to or a waiver of any other term or condition of the
Agreement or any of the documents referred to therein, or (b) prejudice any
right or rights


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    which the
Bank may now have or may have in the future under or in connection with the
Agreement or any documents referred to therein.  Whenever the
Agreement is referred to in the Agreement or any of the instruments, agreements
or other documents or papers executed and delivered in connection therewith, it
shall be deemed to mean the Agreement as modified by this
Amendment.

    


    7.           The
Borrower agrees to pay on demand, and the Bank may charge any deposit or loan
account(s) of the Borrower, all expenses (including reasonable attorneys fees)
incurred by the Bank in connection with the negotiation and preparation of the
Agreement as amended hereby.

    8.           This
Amendment shall become effective on such date as all of the following conditions
shall be satisfied retroactive to the date hereof:

    
      


    

    
      (a) The Bank
shall have received four (4) executed, original counterparts of this
Amendment.

    

    
      


    

    
      (b) The Bank
shall have received the documents set forth in Section 4.1.1 of the
Agreement.

    

    
      


    

    
      (c) The Bank
shall have received four (4) executed counterparts of the Secretary's
Certificate of the Borrower together with any other action (in form and
substance satisfactory to the Bank and its counsel) taken by the Borrower to
authorize the execution, delivery and performance of this Amendment and such
other documents as the Bank or its counsel may require.

    

    
      


    

    
      (d) The Bank
shall have received (i) an extension fee with respect to the Revolving Credit
Note of $2,500.00, (ii) a facility fee with respect to the Term Loan of
$7,500.00 and (iii) payment of the fees and disbursements of the Bank’s outside
counsel with respect to this Amendment .

    

    
      


    

    9.           This
Amendment is dated as of the date set forth in the first paragraph hereof and
shall be effective (after satisfaction of the conditions set forth in paragraph
8 above) on the date of execution by the Bank retroactive to such
date.

    
      


    

    
      4. This
Amendment may be executed in counterparts, each of which shall constitute an
original, and each of which taken together shall constitute one and the same
agreement.

    


    
      
         


      

      
         


        
          

        

      

      
         


        
          Exhibit
10.16

        

      

    


    
      


    

    
      IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be duly executed and delivered by
their respective duly authorized officers as of the date first above
written.

    

    
      


    

    
      CPI
AEROSTRUCTURES, INC.

    

    
      


      


    

    
      By: /s/ Vincent
Palazzolo

            Vincent
Palazzolo

            Chief
Financial Officer

    

    
      


    

    
      SOVEREIGN
BANK

    

    
      


      


    

    
      By: /s/ Christine
Gerula

    

    
           Christine
Gerula

    

    
           Senior
Vice President