EMPLOYMENT AGREEMENT



                  AGREEMENT dated August 14, 2001, between EDWARD J. FRED,

residing at 126 Brentwood Parkway, Brentwood, New York 11717 ("Executive"), and

CPI AEROSTRUCTURES, INC., a New York corporation having its principal office at

200A Executive Drive, Edgewood, New York 11717, ("Company");



                  WHEREAS, the Company desires to continue the employment of

Executive and Executive desires to continue his present employment with the

Company, pursuant to the terms and conditions herein set forth, superseding all

prior agreements between the Company, its subsidiaries and/or predecessors and

Executive;



                  IT IS AGREED:



         1.       Employment, Duties and Acceptance.

                  ---------------------------------



                  1.1    General. The Company shall continue to employ Executive

from August 14, 2001 until December 31, 2001 as its Chief Financial Officer

("CFO") and Executive Vice President and, from January 1, 2002 until December

31, 2004, as its President and CFO under the terms hereof. All of Executive's

powers and authority in any capacity shall at all times be subject to the

direction and control of the Company's Board of Directors. The Board may assign

to Executive such management and supervisory responsibilities and executive

duties for the Company or any subsidiary of the Company, including serving as an

executive officer and/or director of any subsidiary, as are consistent with

Executive's status as President, CFO and Executive Vice President, as the case

may be.



                  1.2    Full-Time Position. Executive accepts such employment

and agrees to devote substantially all of his business time, energies and

attention to the performance of his duties hereunder. Nothing herein shall be

construed as preventing Executive from making and supervising personal

investments, provided they will not interfere with the performance of

Executive's duties hereunder or violate the provisions of Section 6.4 hereof.











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                  1.3    Location. The Company will maintain its principal

executive offices within a 30 mile radius of its current location in Edgewood,

New York. Executive shall undertake such occasional travel, within or without

the United States, as is reasonably necessary in the interests of the Company.



                  1.4    Board of Directors Position. If, at any time during the

term hereof, that Executive is not serving as a director of the Company, he

shall nonetheless be invited to attend each meeting of the Board of Directors of

the Company.



         2.       Compensation and Benefits.

                  -------------------------



                  2.1    Salary. The Company shall pay to Executive a salary

("Base Salary") at the annual rate of not less than $150,000 from August 14,

2001 until December 31, 2001; at the annual rate of $200,000 from January 1,

2002 until December 31, 2002; at the annual rate of not less than $216,000 from

January 1, 2003 until December 31, 2003; and at the annual rate of $233,280 from

January 1, 2004 until December 31, 2004. Executive's compensation shall be paid

in equal, periodic installments in accordance with the Company's normal payroll

procedures.



                  2.2    Bonus. In addition to Base Salary, Executive shall be

paid a bonus ("Bonus") equal to 2% of the Company's consolidated net income for

the year ending December 31, 2001 and 2002; equal to 3% of the Company's

consolidated net income for the year ending December 31, 2003; and equal to 4%

of the Company's consolidated net income for the year ending December 31, 2004,

as determined by reference to the Company's audited financial statements for

such year. The amount of the Bonus shall be pro-rated to the date of termination

of Executive's employment. The Bonus with respect to any year shall be paid on

or prior to April 15 of the following year.



                  2.3    Additional Compensation. As additional compensation for

Executive entering into this Agreement and agreeing to be bound by its terms

(including Article 6 hereof) and for the services to be rendered by Executive

hereunder, the Company hereby issues to Executive options to purchase 100,000

shares of Common Stock under the Company's Performance Equity Plan 2000. These

options ("Agreement Options") shall be evidenced by one or more Stock Option

Agreements of even date herewith between the Company and Executive. The









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Agreement Options will have an exercise price of $1.20 per share and will vest

immediately. The Compensation Committee may, in its discretion, grant additional

options to Executive during the term of this Agreement.



                  2.4    Benefits. Executive shall be entitled to such medical,

life, disability and other benefits as are generally afforded to other senior

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