EIGHTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

 

This Eighth Amendment to Credit and Security Agreement (this “Eighth
Amendment”), dated as of March 30, 2017, is made by and among COMMAND SECURITY
CORPORATION, a New York corporation (“CSC” or “Borrower”), and WELLS FARGO BANK,
NATIONAL ASSOCIATION, a national banking association (“Wells Fargo”).

 

WITNESSETH:

 

WHEREAS, the Borrower and Wells Fargo are parties to a certain Credit and
Security Agreement dated as of February 12, 2009 (as amended by that certain
Amendment to Credit and Security Agreement dated as of December 1, 2009 (the
“First Amendment”), that certain Second Amendment to Credit and Security
Agreement dated as of October 18, 2011 (the “Second Amendment”), that certain
Third Amendment to Credit and Security Agreement dated as of November 6, 2012,
that certain Fourth Amendment to Credit and Security Agreement dated as of June
30, 2014 (the “Fourth Amendment”), that certain Fifth Amendment to Credit and
Security Agreement dated as of November 13, 2015, that certain Sixth Amendment
to Credit and Security Agreement dated as of February 12, 2016, that certain
Seventh Amendment to Credit and Security Agreement dated as of October 12, 2016,
(the “Seventh Amendment”, and as further amended, supplemented and in effect,
collectively, the “Credit Agreement”); and

 

WHEREAS, the Borrower has requested that Wells Fargo further modify and amend
certain terms and conditions of the Credit Agreement; and

 

WHEREAS, the Wells Fargo has agreed to further modify and amend certain terms
and conditions of the Credit Agreement, all as provided herein.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:

 

1. Defined Terms. Capitalized terms used in this Eighth Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.     2. Amendment to Recitals. The Recitals
paragraph on page 1 of the Credit Agreement is hereby amended by deleting the
reference to “$20,000,000” where it appears and substituting “$27,500,000” in
its stead.     3. Amendments to Section 1.

 

  (a) Section 1.1(a) of the Credit Agreement is hereby amended by deleting the
reference to “$20,000,000” where it appears in subclause (i) and substituting
“$27,500,000” in its stead.         (b) Section 1.1(b) of the Credit Agreement
(for avoidance of doubt, as most recently amended by the Seventh Amendment) is
hereby amended by deleting “March 31, 2017” where it appears and by substituting
“March 31, 2020” in its stead.

 

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  (c) Section 1.2(a) of the Credit Agreement (for avoidance of doubt, as most
recently amended by the Fourth Amendment) is hereby deleted in its entirety and
the following substituted in its stead:           “(a)      Borrowing Base. The
borrowing base (the “Borrowing Base”) is an amount equal to:          
             (i)       85% or such lesser percentage of Eligible Billed Accounts
as Wells Fargo in its reasonable commercial judgment may deem appropriate, plus
                       (ii)       the lesser of (a) $14,500,000, and (b) 75% or
such lesser percentage of Eligible Unbilled Accounts as Wells Fargo in its
reasonable commercial judgment may deem appropriate, less          
             (iii)       the Borrowing Base Reserve, less          
             (iv)       the outstanding amount of any Indebtedness of Borrower
that is not otherwise described in this Section 1 and that is then due and owing
to Wells Fargo, including Indebtedness that Wells Fargo in its sole discretion
finds on the date of determination to be equal to Wells Fargo’s net credit
exposure with respect to any swap, derivative, foreign exchange, hedge, deposit,
treasury management or similar transaction or arrangement extended to Borrower
by Wells Fargo, and any Indebtedness owed by Borrower to Wells Fargo Merchant
Services, L.L.C., but excluding the total of all transactions charged to all
Cards (as defined in the Credit Card Agreement) outstanding at any time under
the Credit Card Agreement, provided that the Indebtedness described in this
subsection (iv) shall include, to the extent the Borrower is obligated by the
Credit Card Agreement to reimburse the Lender therefor, all costs and expenses,
including any attorney’s fees, incurred by the Lender in enforcing the Credit
Card Agreement.           Notwithstanding the foregoing, at no time shall the
outstanding Advances supported by Eligible Foreign Accounts exceed $2,975,000.”

 

  (d) Section 1.6(f) of the Credit Agreement (for avoidance of doubt, as most
recently amended by the Second Amendment) is hereby deleted in its entirety, and
the following substituted in its stead:                       “(f)      Line of
Credit Termination and/or Reduction Fees. If (i) Wells Fargo terminates the Line
of Credit during a Default Period, or if (ii) Borrower terminates the Line of
Credit on a date prior to the Maturity Date, or if (iii) Borrower and Wells
Fargo agree to reduce the Maximum Line Amount, then Borrower shall pay Wells
Fargo as liquidated damages a termination or reduction fee in an amount equal to
a percentage of the Maximum Line Amount (or the reduction of the Maximum Line
Amount, as the case may be) calculated as follows: (A) one and one-half percent
(1.50%) if the termination or reduction occurs on or before the first
anniversary of the Eighth Amendment Effective Date; (B) one-half percent (0.50%)
if the termination or reduction occurs after the first anniversary of the Eighth
Amendment Effective Date, but on or before the second anniversary of the Eighth
Amendment Effective Date; and (C) one quarter of one percent (0.25%) if the
termination or reduction occurs after the second anniversary of the Eighth
Amendment Effective Date.”

 

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  (e) Section 1.9(a) of the Credit Agreement is hereby amended by deleting the
reference to “$3,000,000” where it appears and substituting “$1,500,000” in its
stead.

 

4. Amendments to Section 5.

 

  (a) Section 5.1(b) of the Credit Agreement is hereby amended by inserting the
following provision at the end thereof:           “Simultaneously with the
delivery of the monthly financial statement and the Compliance Certificate, Lead
Borrower shall provide Wells Fargo with a report which evidences the Unbilled
Account Variance.”         (b) Section 5.2(a) of the Credit Agreement (for
avoidance of doubt, as most recently amended by the Seventh Amendment) is hereby
deleted in its entirety, and the following substituted in its stead:          
“(a) Reserved.”         (c) Section 5.2 of the Credit Agreement is hereby
amended by adding the following provision as a new Section 5.2(d):

 

“(d) Fixed Charge Coverage Ratio. Commencing month ending March 31, 2017 and on
the last day of each month thereafter, Borrower shall have a Fixed Charge
Coverage Ratio, measured on a trailing twelve (12) month-end basis, of at least
the required amount set forth in the following table for the applicable period
set forth opposite thereto:

 

Applicable Ratio   Trailing twelve (12) month period ending       1.10 :1.00  
March 31, 2017 1.15 :1.00   April 30, 2017 1.20 :1.00   May 31, 2017 1.25 :1.00
  June 30, 2017 and each month thereafter

 

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  (d) Section 5.7 of the Credit Agreement is hereby deleted in its entirety, and
the following substituted in its stead:                          “5.7 Dividends
and Distributions. Borrower shall not declare or pay any dividends (other than
dividends payable solely in stock of Borrower) on any class of its stock, or
make any payment on account of the purchase, redemption or retirement of any
shares of its stock, or other securities or evidence of its indebtedness or make
any distribution regarding its stock, either directly or indirectly.”

 

  (e) By adding the following provision as a new Section 5.30:          
                “5.30 SEIU Litigation and CSEHWTF Litigation. Borrower shall (i)
provide Wells Fargo with periodic updates regarding the foregoing litigations,
including, but not limited to, the status of negotiations with the plaintiffs
and the proposed terms of any settlement, and (ii) not settle the SEIU
Litigation and the CSEHWTF Litigation for a collective amount in excess of
$500,000 without the prior consent of Wells Fargo (each such settlement amount,
a “Permitted Settlement Amount”). Any such Permitted Settlement Amount shall
constitute Debt permitted by Section 5.4 hereof.”

 

5. Amendments to Exhibit A. Exhibit A of the Credit Agreement is hereby amended
as follows:

 

  (a) The definition of “Borrowing Base Reserve” (for avoidance of doubt, as
most recently amended by the First Amendment) is hereby deleted in its entirety
and the following substituted in its stead:           ““Borrowing Base Reserve”
means, as of any date of determination, an amount (including without limitation,
the Credit Card Reserve Amount) or a percent of a specified category or item
that Wells Fargo deems necessary in its reasonable business judgment from time
to time to reduce availability under the Borrowing Base (a) to reflect events,
conditions, or risks which adversely affect the assets, business or prospects of
Borrower, or the Collateral or its value, or the enforceability, perfection or
priority of Wells Fargo’s Security Interest in the Collateral, as the term
“Collateral” is defined in this Agreement, or (b) to reflect Wells Fargo’s
reasonable judgment that any collateral report or financial information relating
to Borrower and furnished to Wells Fargo may be incomplete, inaccurate or
misleading in any material respect. For avoidance of doubt, each of the Payroll
Reserve, the Leal Litigation Settlement Reserve, the SEIU Litigation and CSEHWTF
Litigation Reserve, and the Dilution Reserve shall each constitute a Borrowing
Base Reserve.”         (b) The definition of “Daily Three Month LIBOR” is hereby
amended by inserting the following provision at the end thereof:          
                 “Notwithstanding the foregoing, if the rate determined pursuant
to the foregoing method is less than zero, Daily Three Month LIBOR for purposes
of this Agreement shall be zero.”

 

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  (c) The definition of “Eligible Billed Accounts” is hereby amended as follows:

 

  i. subclause (a) (for avoidance of doubt, as most recently amended by the
Seventh Amendment) is hereby deleted in its entirety and the following
substituted in its stead:         “(a)     That portion of Accounts unpaid 90
days or more after the invoice date;”         ii. subclause (m) (for avoidance
of doubt, as most recently amended by the Second Amendment) is hereby deleted in
its entirety and the following substituted in its stead:        
“(m)     Accounts owed by an account debtor, regardless of whether otherwise
eligible, to the extent that the aggregate balance of such Accounts exceeds 20%
of the aggregate amount of all Eligible Accounts, provided however, that Wells
Fargo, upon request of the Borrower, may, in its sole and absolute discretion,
increase such percentage with respect to an account debtor, and if Wells Fargo
so elects to increase such percentage, Wells Fargo shall promptly notify
Borrower of the same;”

 

  (d) The definition of “Eligible Unbilled Accounts” is hereby deleted in its
entirety, and the following substituted in its stead:           “Eligible
Unbilled Accounts” means all unpaid Accounts of Borrower arising from the
performance of services by Borrower, net of any credits, that would otherwise
qualify as Eligible Billed Accounts except invoices have not been rendered by
Borrower to the account debtors of such Accounts, but excluding (i) for the
period commencing as of the Eighth Amendment Effective Date and ending on March
31, 2018, any Account for which an invoice has not been rendered to the account
debtor within forty-five (45) days of Borrower having performed the services
giving rise to such Account, and (ii) for the period commencing April 1, 2018
and thereafter, any Account for which an invoice has not been rendered to the
account debtor within forty (40) days of Borrower having performed the services
giving rise to such Account.”         (e) By inserting the following definitions
in their respective alphabetical orders:

 

  i. ““CSEHWTF Litigation” means the litigation which is the subject of the
complaint captioned California Service Employees Health & Welfare Trust Fund,
Mike Garcia, Trustee, Charles Gilchrist, Trustee, David Stillwill, Trustee,
Raymond C. Nann, Trustee, and Larry T. Smith, Trustee vs. Command Security
Corp., a New York Corporation, d/b/a Aviation Safeguards” Case No. CV-12-1079
and filed with the United States District Court for the Northern District of
California on March 2, 2012.”

 

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  ii. ““Dilution Reserve” means, as of any date of determination, a reserve
established by Wells Fargo in an amount equal to the product of (x) the excess
of (i) Dilution (expressed as a percentage) for such trailing twelve (12) month
period ending as of such date, as determined by Wells Fargo pursuant to a field
examination which has been approved and accepted by Wells Fargo, over (ii) five
percent (5.0%), multiplied by (y) the then outstanding balance of Eligible
Billed Accounts.”         iii. ““EBITDA” means, with respect to any fiscal
period,           (a) Borrower’s Net Income (or loss),           minus          
(b) without duplication, the sum of the following amounts of Borrower for such
period to the extent included in determining consolidated net earnings (or loss)
for such period:           (i) extraordinary gains,           (ii) interest
income,           plus           (c)       without duplication, the sum of the
following amounts of Borrower for such period to the extent included in
determining consolidated net earnings (or loss) for such period:           (i)
non-cash extraordinary losses,           (ii)Interest Expense,           (iii)
income taxes, and           (iv) depreciation and amortization for such period,
in each case, determined on a consolidated basis in accordance with GAAP. “

 

  iv. ““Eighth Amendment” means that certain Eighth Amendment to Credit and
Security Agreement by and between the Borrower and Wells Fargo dated as of the
Eighth Amendment Effective Date.”         v. ““Eighth Amendment Effective Date”
means March 31, 2017.”         vi. ““Excess Availability” means the result of
(a) (i) collateral availability calculated pursuant to the Borrowing Base
limitations set forth in Section 1.2, less (ii) the aggregate of the
unreimbursed Advances plus the L/C Amount.”

 

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  vii. ““Fixed Charges” means, with respect to any fiscal period and with
respect to Borrower determined on a consolidated basis in accordance with GAAP,
the sum, without duplication, of (a) Interest Expense accrued (other than
interest paid-in-kind, amortization of financing fees, and other non-cash
Interest Expense) during such period, and (b) principal payments in respect of
Debt that are required to be paid during such period.”         viii. ““Fixed
Charge Coverage Ratio” means, with respect to any fiscal period and with respect
to Borrower determined on a consolidated basis in accordance with GAAP, the
ratio of (a) EBITDA for such period minus unfinanced Capital Expenditures made
(to the extent not already incurred in a prior period) or incurred during such
period, minus all federal, state, and local income taxes paid in cash during
such period, to (b) Fixed Charges for such period.”         ix. ““Interest
Expense” means, for any period, the aggregate of the interest expense of
Borrower for such period, determined on a consolidated basis in accordance with
GAAP.”         x. ““Leal Litigation Settlement Reserve” means a reserve of
$700,000 or such other amount as Wells Fargo deems necessary in its reasonable
business judgment from time to time in connection with a settlement of the Leal
Litigation.”         xi. ““Payroll Reserve” means a reserve for payroll
obligations of the Borrower (including, without limitation, payroll taxes) in
such amount as Wells Fargo deems necessary in its reasonable business judgment
from time to time, after consultation with the Borrower.”         xii. ““SEIU
Litigation” means the litigation which is the subject of the complaint captioned
“Marlene Herrera; Edward Lopez; and Service Employees International Union,
United Service Workers West vs. Command Security Corp., a New York Corporation,
d/b/a Aviation Safeguards”, Case No. CV 12-4032 and filed with the United States
District Court for the Northern District of California on July 31, 2012.”      
  xiii. ““SEIU Litigation and CSEHWTF Litigation Reserve” means a reserve of
$300,000 or such other amount as Wells Fargo deems necessary in its reasonable
business judgment from time to time in connection with a settlement of the SEIU
Litigation and the CSEHWTF Litigation.”         xiv. ““Unbilled Account
Variance” means the variance between the amount of Accounts which the Borrower
reported to Wells Fargo as Eligible Unbilled Accounts for a subject month and
the amount of such Accounts which were subsequently converted to Eligible Billed
Accounts for such month.”

 

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6. Ratification of Loan Documents. Except as provided for herein, all terms and
conditions of the Credit Agreement and the other Loan Documents remain in full
force and effect. Borrower hereby ratifies, confirms, and reaffirms all
representations, warranties, and covenants contained therein and acknowledges
and agrees that the Indebtedness, as modified hereby, are and continue to be
secured by the Collateral. Borrower warrants and represents to Wells Fargo that
as of the date hereof, no Event of Default has occurred and is continuing.
Borrower acknowledges and agrees that Borrower does not have any offsets,
defenses, or counterclaims against Wells Fargo thereunder, and to the extent
that any such offsets, defenses, or counterclaims may exist, Borrower hereby
WAIVES and RELEASES Wells Fargo therefrom.     7. Schedules and Exhibits.

 

  (a) Exhibit B to the Credit Agreement (Premises) is hereby amended and
restated as set forth on Exhibit B hereto.         (b) Exhibit D to the Credit
Agreement (Representations and Warranties) is hereby amended and restated as set
forth on Exhibit D hereto.         (c) Exhibit E to the Credit Agreement
(Compliance Certificate) is hereby amended and restated as set forth on Exhibit
E hereto.         (d) Exhibit F to the Credit Agreement (Commercial Tort Claims;
Permitted Liens; Indebtedness; Guaranties) is hereby amended and restated as set
forth on Exhibit F hereto.         (e) Exhibit G to the Credit Agreement
(Deposit Accounts) is hereby amended and restated as set forth on Exhibit G
hereto.

 

8. Eighth Amendment Fee. In addition to the other fees described in the Credit
Agreement for which the Borrower is obligated to pay to Wells Fargo, in
consideration of Wells Fargo’s entering into this Eighth Amendment, the Borrower
shall pay to Wells Fargo a fee (the “Eighth Amendment Fee”) in the amount of
Seventy-five Thousand Dollars ($75,000) simultaneous with the execution and
delivery of this Eighth Amendment to Wells Fargo, which Eighth Amendment Fee
shall be fully and irrevocably earned by Wells Fargo as of such date, and is
non-refundable to the Borrower.     9. Conditions Precedent. This Eighth
Amendment shall not be effective until each of the following conditions
precedent has been fulfilled to the satisfaction of Wells Fargo:

 

  (a) This Eighth Amendment shall have been duly executed and delivered by the
respective parties thereto, and shall be in full force and effect and shall be
in form and substance satisfactory to Wells Fargo.

 

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  (b) Wells Fargo shall have received the documents, instruments and agreements
set forth on the closing checklist for this Eighth Amendment.         (c)
Without limiting subclause (b), all action on the part of the Borrower necessary
for the valid execution, delivery and performance by the Borrower of this Eighth
Amendment shall have been duly and effectively taken and evidence thereof
reasonably satisfactory to Wells Fargo shall have been provided to Wells Fargo.
        (d) After giving effect to the effectiveness of this Eighth Amendment,
Borrower shall have Excess Availability of at least $2,750,000 as evidenced by
calculations provided to and accepted by Wells Fargo.         (e) The Borrower
shall have paid the Eighth Amendment Fee.         (f) No Event of Default shall
have occurred and be continuing.         (g) The Borrower shall have paid all
reasonable and documented costs and expenses of Wells Fargo, including, without
limitation, reasonable attorneys’ fees in connection with the preparation,
negotiation, execution and delivery of this Eighth Amendment as well as any
outstanding invoices.

 

10. Post-Closing Matters. The Borrower shall satisfy the post-closing matters
set forth on Schedule 1 hereto within the time frames set forth on said Schedule
1.     11. Miscellaneous.

 

  (a) This Eighth Amendment may be executed in several counterparts and by each
party on a separate counterpart, each of which when so executed and delivered
shall be an original, and all of which together shall constitute one instrument.
        (b) This Eighth Amendment expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect the
provisions hereof.         (c) Any determination that any provision of this
Eighth Amendment or any application hereof is invalid, illegal or unenforceable
in any respect and in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality or enforceability of any other provisions of this Eighth Amendment.    
    (d) The Borrower warrants and represents that the Borrower has consulted
with independent legal counsel of the Borrower’s selection in connection with
this Eighth Amendment and is not relying on any representations or warranties of
Wells Fargo or its counsel in entering into this Eighth Amendment.

 

[Remainder of Page Left Blank Intentionally]

 

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IN WITNESS WHEREOF, each party hereto has executed this Eighth Amendment as a
sealed instrument under the laws of the Commonwealth of Massachusetts through
its authorized officer as of the date set forth above.

 

  COMMAND SECURITY CORPORATION         By: /s/ N. Paul Brost   Name: N. Paul
Brost   Title: Chief Financial Officer         WELLS FARGO BANK,   NATIONAL
ASSOCIATION         By: /s/ James A. Kelly   Name: James A. Kelly   Title: Vice
President

 

Signature Page to Eighth Amendment to Credit Agreement

 

 

 

 

Exhibit B

Premises

 

(see attached)

 

 

 

 

Exhibit D

Representations and Warranties

 

(see attached)

 

 

 

 

Exhibit E

Compliance Certificate

 

(see attached)

 

 

 

 

Exhibit F

Commercial Tort Claims; Permitted Liens;
Indebtedness; Guaranties

 

(see attached)

 

 

 

 

Exhibit G

Deposit Accounts

 

(see attached)

 

 

 

 

Schedule 1

Post-Closing Matters

 

Post-closing Requirement   Timeframe       Satisfactory opinion of counsel  
April 14, 2017       Recent Foreign Qualification Certificates for the
jurisdictions set forth the Closing Checklist previously provided to Borrower  
April 14, 2017