EXECUTION COPY

ASSET PURCHASE AGREEMENT

by and among

COMMAND SECURITY CORPORATION,

EXPERT SECURITY SERVICES, INC.,

and

THE SHAREHOLDERS OF EXPERT SECURITY SERVICES, INC.
 

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January 1, 2008

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ASSET PURCHASE AGREEMENT
 
ASSET PURCHASE AGREEMENT, dated as of January 1, 2008 (the “Effective Date”), by
and among COMMAND SECURITY CORPORATION, a New York corporation (the
“Purchaser”), EXPERT SECURITY SERVICES, INC., a Maryland corporation (the
“Seller”), and the Shareholders of the Seller listed on Schedule 1 (each, a
“Shareholder,” and collectively, the “Shareholders” and, together with the
Seller, the “Seller Parties”)). The foregoing parties to this Agreement are
hereinafter sometimes referred to individually as a “Party” and collectively as
the “Parties.”
 
RECITALS
 
The Seller is the business of providing armed and unarmed uniformed security
guard services and motorized patrol services, with existing operations in the
State of Maryland (the “Business”).
 
The Purchaser wishes to purchase from the Seller, and the Shareholders desire to
cause the Seller to sell to the Purchaser, the Acquired Assets (as defined
herein), all in exchange for the payment of the Purchase Price (as defined
herein) and the assumption of the Assumed Liabilities (as defined herein) by the
Purchaser, upon the terms and subject to the conditions hereinafter set forth.
 
Accordingly, in consideration of the mutual agreements contained herein,
intending to be legally bound hereby, the Parties agree as follows:
 
CERTAIN DEFINITIONS
 
As used in this Agreement each of the following terms shall have the following
meaning:
 
“Accounts Receivable” means any and all amounts and other obligations owed to
the Seller by reason of a sale of a good or provision of a service in the
ordinary course of the Business.
 
“Acquired Assets” means all of the assets, properties and right, whether real,
personal, tangible or intangible, of every kind, nature and description of the
Seller with respect to, or used in connection with, the Business, other than the
Excluded Assets, including without limitation:
 
all Computer Equipment, machinery, furniture, fixtures, equipment and other
tangible personal property owned by the Seller (the “Owned Tangible Property”),
including without limitation that listed and described on Schedule 1.02(a) and
the Seller’s rights under all related warranties;
 
all of the Seller’s right, title and interest in and to the Leased Tangible
Property, including without limitation that listed and described on Schedule
1.02(b);
 
all of the Seller’s right, title and interest in, to and under the Contracts,
including without limitation those listed on Schedule 5.11(a);
 
all of the Seller’s right, title and interest in, to and under the Leases listed
on Schedule 5.11(b);
 

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all client, customer, lead, mailing, circulation and related lists, and all
other lists, accounts, books and records of the Seller (including without
limitation those relating to (i) proprietary research and other databases, (ii)
the purchase of materials, supplies or services, and (iii) the production and
sale of products or services, including all correspondence and other files), and
all other existing records of the Seller, and all computerized records, together
with the related documentation used in connection therewith;
 
all Governmental Authorizations, including without limitation those listed and
described on Schedule 5.24;
 
any sales, excise or other licenses or registrations issued to or held by the
Seller necessary for the operation of the Business, all of which are listed on
Schedule 1.02(i); and
 
all goodwill of the Seller specific to the Business.
 
“Actual Billed Revenues” shall mean the aggregate amount of revenues of the
Business under Customer Contracts and from New Clients as reflected on the
Purchaser’s internal accounting books and records (either as having been
received or as Accounts Receivable), determined in accordance with GAAP and in a
manner consistent with the preparation of the Financial Statements.
 
“Actual Revenue Surplus” has the meaning ascribed to such term in
Section 2.07(b)(i)(A).
 
“Actual Revenue Shortfall” has the meaning ascribed to such term in
Section 2.07(b)(i)(B).
 
“Adjudication” has the meaning ascribed to such term in Section 2.08(c).
 
“Affiliate” means an affiliate of an individual or entity as the term
“affiliate” is defined in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended.
 
“Agreement” means this Asset Purchase Agreement and all schedules and exhibits
hereto.
 
“Annualized Revenue Run Rate” shall mean (a) for the Interim Measurement Period,
the product of (i) the Actual Billed Revenues during the final two-week billing
period in the sixth month following the Closing, and (ii) 26, and (b) for the
Annual Measurement Period, the product of (i) the Actual Billed Revenues during
the final two-week billing period in the 12th month following the Closing, and
(ii) 26.
 
“Annual Measurement Period” has the meaning ascribed to such term in Section
2.07(b).
 
“Annual Measurement Date” has the meaning ascribed to such term in Section
2.07(b).
 
“Annual Statement Challenge” has the meaning ascribed to such term in Section
2.07(b).
 
“Annual Target” has the meaning ascribed to such term in Section 2.07(b)(i)(A).
 
“Assignment and Assumption Agreement” means an assignment and assumption
agreement providing for the assumption by the Purchaser of the Assumed
Liabilities and the transfer to the Purchaser of the Contracts, in the form
attached hereto as Exhibit A.
 
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“Assumed Liabilities” has the meaning ascribed to such term in Section 2.03(a).
 
“Benefit Plans” has the meaning ascribed to such term in Section 5.20(a).
 
“Business” has the meaning ascribed to such term in the first Recital clause of
this Agreement.
 
“Business Personnel” has the meaning ascribed to such term in
Section 4.01(a)(iii).
 
“Claims” has the meaning ascribed to such term in Section 7.02.
 
“Closing” has the meaning ascribed to such term in Section 3.01.
 
“Closing Date” has the meaning ascribed to such term in Section 3.01.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Computer Equipment” means all computer equipment, devices and accessories
(including, but not limited to, personal computers, workstations, servers, data
processing hardware and related telecommunications equipment, media and tools)
used in the Business.
 
“Confidential Information” has the meaning ascribed to such term in
Section 4.01(b).
 
“Contract” means any contract, understanding, license, agreement, commitment,
lease, or contractual restriction of any kind relating to the Business to which
the Seller is a party or, in respect of the Business, by which the Seller is
bound or to which any of the Acquired Assets are subject, including without
limitation Customer Contracts, but does not include any contract or commitment
in respect of Benefit Plans.
 
“Customer Contracts” means those Contracts in effect on the Closing Date
pursuant to which the Seller has agreed to (a) provide the Services to the
Customers and/or (b) maintain and/or support Services for the Customers.
 
“Customers” has the meaning ascribed to such term in Section 5.21(a).
 
“Damages” has the meaning ascribed to such term in Section 7.03(a).
 
“Database” means any compilation of Proprietary Information or any other data or
information that can be electronically searched, organized or otherwise
manipulated using software or otherwise.
 
“Employee” and “Employees” has the meaning ascribed to such term in
Section 5.17(a).
 
“Employment and Non-Competition Agreement” means the employment and
non-competition agreement between the Purchaser or an Affiliate of the Purchaser
and Andrew Maggio, substantially in the form attached hereto as Exhibit B.
 
“Encumbrance” means any claim, mortgage, pledge, lien, security or other third
party right or interest of any kind whatsoever, conditional sales agreement,
option, encumbrance or charge of any kind affecting real or personal property.
 
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“Environmental Claims” means any and all claims, actions, causes of action, or
other written notices by any Person or entity alleging potential liability
(including, but not limited to, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or civil or criminal penalties) arising out of or
resulting from (i) circumstances forming the basis of any violation of any
Environmental Laws or (ii) any releases of Hazardous Materials at any real or
personal property presently or formerly owned, leased or managed by the Seller
in the conduct of the Business or at any disposal facility which may have
received Hazardous Materials generated by the Seller in the conduct of the
Business.
 
“Environmental Laws” means any applicable federal, state, local or foreign law,
treaty, judicial decision, regulation, rule, judgment, order, decree,
injunction, permit or governmental restriction, each as in effect on or prior to
the Closing Date, relating to the environment or health.
 
“Environmental Permits” means Permits required by Environmental Laws.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“Escrow Agent” has the meaning ascribed to such term in Section 2.05.
 
“Escrow Agreement” has the meaning ascribed to such term in Section 2.05.
 
“Escrow Amount” has the meaning ascribed to such term in Section 2.05.
 
“Escrow Balance” has the meaning ascribed to such term in Section 2.08(b).
 
“Excluded Assets” has the meaning ascribed to such term in Section 2.02.
 
“Excluded Liabilities” has the meaning ascribed to such term in Section 2.03(b).
 
“Filed Purchaser SEC Documents” has the meaning ascribed to such term in Section
6.05.
 
“Final Allocation Schedule” has the meaning ascribed to such term in Section
2.06.
 
“Financial Statements” has the meaning ascribed to such term in Section 5.06.
 
“GAAP” means United States generally accepted accounting principles,
consistently applied.
 
“Governmental Authority” means any government, regulatory authority,
governmental department, agency, commission, board, tribunal, dispute settlement
panel or body, bureau, official or court or other law, rule or regulation-making
entity having or purporting to have jurisdiction on behalf of any nation or
state or other geographical or political subdivision thereof.
 
“Governmental Authorizations” means all governmental approvals, authorizations,
certifications, consents, variances, permissions, licenses, directives, and
permits to or from, or filings, notices, or recordings to or with United States
federal, state, and local governmental authorities.
 
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“Hazardous Materials” shall include (a) any element, compound, or chemical that
is defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, biohazardous or infectious waste, special waste, or
solid waste under Environmental Laws; (b) petroleum, petroleum-based or
petroleum-derived products; (c) polychlorinated biphenyls; (d) any substance
exhibiting a hazardous waste characteristic including but not limited to
corrosivity, ignitability, toxicity or reactivity as well as any radioactive or
explosive materials; and (e) any asbestos-containing materials.
 
“INA” has the meaning ascribed to such term in Section 5.17(g).
 
“Indemnification Notice” has the meaning ascribed to such term in Section 7.02.
 
“Indemnified Party” has the meaning ascribed to such term in Section 7.02.
 
“Indemnitor” has the meaning ascribed to such term in Section 7.02.
 
“Interim Measurement Period” has the meaning ascribed to such term in Section
2.07(a).
 
“Interim Measurement Date” has the meaning ascribed to such term in Section
2.07(a).
 
“Interim Statement Challenge” has the meaning ascribed to such term in Section
2.07(a).
 
“Interim Target” has the meaning ascribed to such term in Section 2.07(a).
 
“Knowledge” means (i) as to the Seller, the actual knowledge, after due inquiry,
of Damien Maggio and Andrew Maggio and (ii) as to the Purchaser, the actual
knowledge, after due inquiry, of Barry I. Regenstein.
 
“Lease” or “Leases” has the meaning ascribed to such term in Section 5.11(b).
 
“Leased Tangible Property” means all Computer Equipment, machinery, furniture,
equipment and other tangible personal property, in each case which is subject to
a leasehold interest held by the Seller and which is used by the Seller
exclusively in the conduct of the Business.
 
“Material Adverse Effect” means a material adverse effect, either individually
or when aggregated with other such effects, on the assets, business, operations,
condition (financial or otherwise) or results of operations of the Business.
 
“Neutral Auditors” has the meaning ascribed to such term in Section 2.08(a).
 
“New Clients” shall mean persons or entities initially identified by Andrew
Maggio that have agreed to engage services of the Business after the Closing
Date under arrangements providing for a term of not less than one year.
 
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“OSHA” means the Occupational Safety and Health Administration.
 
“Owned Tangible Property” has the meaning ascribed to such term in
Section 1.02(a).
 
“Partial Actual Revenue Shortfall” has the meaning ascribed to such term in
Section 2.07(b)(i)(D).
 
“Partial Run Rate Shortfall” has the meaning ascribed to such term in
Section 2.07(b)(i)(E).
 
“Permit” means any license, franchise, permit, consent, order, approval,
authorization or registration from, of or with a Governmental Authority.
 
“Permitted Encumbrances” means (i) Encumbrances for current Taxes not yet due
and payable or Taxes which are being disputed in good faith where no lien has
yet been filed, (ii) mechanics, warehousemen and materialmen liens not material
in nature or amount, (iii) Encumbrances consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on the
use of real property or irregularities in title thereto which do not materially
detract from the value of, or materially impair the use of, such property, and
(iv) statutory Encumbrances in favor of lessors arising in connection with any
property leased to the Seller in connection with its business.
 
“Person” means an individual, partnership, corporation, limited liability
company, association, joint stock company, trust, joint venture, unincorporated
organization or governmental entity or any department, agency or political
subdivision thereof.
 
“Proposed Annual Statement” has the meaning ascribed to such term in Section
2.07(b).
 
“Proposed Interim Statement” has the meaning ascribed to such term in Section
2.07(a).
 
“Proprietary Information” means technical, commercial, marketing and other
information, data and material of the kind which is or can be used in the
operation of a business and which is normally considered to be confidential or
proprietary in nature including, but not limited to, any procedure; idea;
concept; strategic, business and other plan; research; invention or invention
disclosure (whether patentable or unpatentable); test, engineering and technical
data and materials, know-how, show-how or methodology; trade secret, process,
design, formula, or other information or data which has not entered the public
domain, and all records thereof.
 
“Purchase Price” has the meaning ascribed to such term in Section 2.04.
 
“Purchase Price Adjustment” has the meaning ascribed to such term in
Section 2.07.
 
“Purchaser” has the meaning ascribed to such term in the preamble of this
Agreement.
 
“Purchaser 401(k) Plan” has the meaning ascribed to such term in
Section 4.03(e).
 
“Purchaser Indemnified Parties” has the meaning ascribed to such term in
Section 7.03(a).
 
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“Purchaser SEC Documents” has the meaning ascribed to such term in Section 6.05.
 
“Real Property” means all fee or leasehold interests, easements, real estate
licenses, rights of access and other rights with respect to real property.
 
“Related Documents” means all agreements, instruments, documents and
certificates to be executed and delivered pursuant to this Agreement.
 
“Representatives” of any Person means the attorneys, accountants or other agents
or employees of such Person.
 
“Restricted Persons” has the meaning ascribed to such term in Section 4.01(a).
 
“Run Rate Shortfall” has the meaning ascribed to such term in
Section 2.07(b)(i)(B).
 
“Run Rate Surplus” has the meaning ascribed to such term in
Section 2.07(b)(i)(C).
 
“Scheduled Contracts” has the meaning ascribed to such term in Section 5.11(a).
 
“SEC” means the United States Securities and Exchange Commission.
 
“Seller” has the meaning ascribed to such term in the preamble of this
Agreement.
 
“Seller Parties” has the meaning ascribed to such term in the preamble of this
Agreement.
 
“Seller Indemnified Parties” has the meaning ascribed to such term in
Section 7.03(b).
 
“Seller’s Disclosure Letter” has the meaning ascribed to such term in the
introductory paragraph of Article V.
 
“Seller’s License” has the meaning ascribed to such term in Section 7.03(b).
 
“Services” means services offered or provided by the Seller in the conduct of
the Business.
 
“Survival Period” has the meaning ascribed to such term in Section 2.08(b).
 
“Tangible Property” means the Owned Tangible Property and the Leased Tangible
Property.
 
“Tax” means any federal, state, local, or foreign income, gross receipts,
license, payroll, wage, employment, excise, utility, communications, production,
occupancy, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, capital levy, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, real property gains, recordation, business license, workers’
compensation, personal property, sales, use, transfer, registration, value
added, ad valorem, alternative or add-on minimum, estimated, or other tax, fee,
charge, premium, imposition of any kind whatsoever in the nature of taxes,
however denominated, imposed by any Tax Authority, together with any interest,
penalties or other additions to tax and any interest on any such interest,
penalties and additions to tax that may become payable in respect thereof.
 
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“Tax Authority” means the Internal Revenue Service (“IRS”) and any other
federal, state, local or foreign government and any agency, authority or
political subdivision of any of the foregoing.
 
“Tax Laws” means the Code, any federal, state, county, local or foreign laws
related to Taxes and any regulations or official administrative pronouncements
released under any such laws.
 
“Tax Returns” means all reports, estimates, declarations of estimated tax,
information statements and returns relating to, or required to be filed in
connection with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third parties.
 
“Taxable Period” means any taxable year or any other period that is treated as a
taxable year with respect to which any Tax may be imposed under any Tax Law.
 
“Third Party Claim” has the meaning ascribed to such term in Section 7.04.
 
“Transferred Employee” means any Employee who receives and accepts an offer of
employment by the Purchaser on the Closing Date pursuant to Section 4.03.
 
“Treasury Regulations” means the regulations of the United States Treasury
promulgated under the Code.
 
“Vendor” has the meaning ascribed to such term in Section 5.21(b).
 
“Website” means the website http://www.essinv.com and content available thereon.
 
PURCHASE AND SALE OF ASSETS; PURCHASE PRICE
 
Sale of the Acquired Assets.
 
At the Closing, subject to the terms and conditions of this Agreement, the
Seller shall sell, transfer, convey, assign and deliver to the Purchaser, all
right, title and interest of the Seller of every kind and description in and to
the Acquired Assets, free of any Encumbrances except for Permitted Encumbrances.
 
Anything to the contrary herein notwithstanding, if any Contract which
constitutes an Acquired Asset being acquired by the Purchaser hereunder by its
terms is not assignable without the consent of the other Party or Parties
thereto, such assignment shall be deemed effective only upon receipt of such
consent. With respect to each such Contract, after the Closing Date and until
such time as such assignment has become effective, the Seller shall use its
commercially reasonable efforts (including the payment by the Seller of any fee
required to be paid to the landlord under the Lease or any other reasonable fee
to a third party to obtain consent to assignment or any similar fee) to obtain
the consent of all required parties thereto to the assignment of such Contract
after the Closing Date.
 
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Subject to the obligations under the Contracts and to the Permitted
Encumbrances, the Seller’s right, title and interest in and to the Acquired
Assets, all of which are being conveyed hereunder to the Purchaser, include all
rights pertaining to the Acquired Assets, including, but not limited to, the
right to institute and prosecute all suits and proceedings and take all actions
as may be necessary to collect, assert, or enforce any claim, right or title of
any kind in and to any and all of the Acquired Assets.
 
Excluded Assets. Notwithstanding any provision in this Agreement or in any
Related Document to the contrary, the following properties, assets and contracts
of the Seller (collectively, the “Excluded Assets”) are not part of the sale and
purchase contemplated by this Agreement, are excluded from the Acquired Assets
and shall remain the properties, assets and contracts of the Seller after the
Closing:
 
all cash on hand and in banks and other cash items and equivalents of the
Seller;
 
the Seller’s corporate charters, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, corporate
minute books, and other books and records relating to internal corporate matters
and any other books and records of the Seller (i) not related to the Business
(which shall not include financial and taxation books and records of the Seller
related to the Business), (ii) relating to financial relationships with the
Seller’s lenders or Affiliates, or (iii) that the Seller is required by law to
retain;
 
all employee benefit plans, programs and arrangements, and all assets, rights
and claims thereunder, and other commitments of the Seller relating to
employees, whether written or oral, express or implied including, without
limitation, the Benefit Plans;
 
any claims, rights and interest in and to any refunds of federal or local
franchise, income or other Taxes or fees of any nature whatsoever which relate
solely to the period up to and including the Closing Date;
 
all capital stock of the Seller;
 
that certain 1999 Toyota model RAV 4 heretofore used by Seller in the Business;
 
all claims of the Seller against third Persons relating to the Excluded Assets,
whether choate or inchoate, known or unknown, contingent or non-contingent, or
otherwise arising from or relating to periods prior to the Closing Date; and
 
all rights of the Seller under this Agreement or any Related Document;
 
all insurance policies relating to the Business;
 
all prepaid expenses and deposits of the Seller with third parties in respect of
the Business;
 
all claims of the Seller, including but not limited to claims under the Seller’s
insurance policies, causes of action and choses in action; and
 
all Accounts Receivable.
 
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Liabilities.
 
Assumed Liabilities. At the Closing, the Purchaser shall assume, and from and
after the Closing the Purchaser shall pay, honor, discharge and perform promptly
when due, the liabilities set forth below in this Section 2.03 but excluding the
Excluded Liabilities (collectively, the “Assumed Liabilities”): (i) all of the
liabilities and obligations of the Seller under the Contracts that are included
in the Acquired Assets to be performed after the Closing Date and (ii) all other
liabilities of the Seller specifically reflected on Schedule 2.03(a).
 
Excluded Liabilities. Notwithstanding the foregoing or anything to the contrary
set forth in this Agreement or in any Related Document, neither the Purchaser
nor any of its Affiliates shall assume or otherwise be liable in respect of, or
be deemed to have assumed or otherwise be liable in respect of, and the Seller
shall remain solely liable for, all liabilities except for the Assumed
Liabilities including, without limitation, the following liabilities (the
“Excluded Liabilities”):
 
any Taxes of Seller resulting from the conduct of the Business up to and
including the Closing Date;
 
any outstanding debt and related accrued interest thereon of the Seller or the
Business on the Closing Date;
 
any shareholder or equity related distributions accrued or payable by the Seller
on the Closing Date;
 
any obligations, whether under any lease or otherwise, with respect to that
certain 1999 Toyota model RAV 4 heretofore used by Seller in the Business;
 
any management or employee bonus accrued or payable by the Seller on the Closing
Date; and
 
any other debt, claim, Action, obligation or other liability of the Seller
(regardless or whether such debt, claim, obligation, or other liability is
matured or unmatured, contingent or fixed, known or unknown) that relates solely
to the Excluded Assets.
 
The Seller agrees that it shall pay promptly when due any and all Excluded
Liabilities not discharged by it at or prior to Closing including, without
limitation, any liabilities related to the Seller’s Employees during the period
they are employed by the Seller and any liabilities under the Benefit Plans.
Upon receipt of any invoices for obligations relating to the Business which were
incurred prior to the Closing Date, the Purchaser shall forward such invoices to
the Seller, whereupon the Seller shall promptly pay or otherwise dispose of such
invoices.
 
Purchase Price. The purchase price for the Acquired Assets shall be the sum of
four hundred thirty seven thousand dollars ($437,000) (the “Purchase Price”),
subject to adjustment after the Closing as provided in Section 2.07.
 
Payment of the Purchase Price. At the Closing, the Purchaser shall (a) pay to
the Seller, by wire transfer in immediately available funds to such account of
the Seller as shall be designated by the Seller in writing to the Purchaser at
least two (2) business days in advance of the Closing, an amount equal to (i)
four hundred thirty seven thousand dollars ($437,000) less (ii) the amount of
the Accrued Employee Liability (as defined and described in this Section 2.05
below) and (b) deliver to the Escrow Agent the sum of (i) seventy-five thousand
dollars ($75,000) (as such amount shall have been modified from time to time in
accordance with the terms hereof, the “Escrow Amount”) plus (ii) an amount, if
any, equal to the aggregate amount owed to the Transferred Employees in respect
of the liability and obligation of the Seller to such Transferred Employees (the
“Accrued Employee Liability”) in connection with any accrued and unused vacation
leave or time of such Transferred Employees as of the Closing Date (such amount
due to the Transferred Employees in respect of such unused vacation leave or
time is referred to herein as the “Accrued Employee Liability Amount”)), which
amount is set forth on Schedule 2.05, and is estimated to be an aggregate of six
thousand nine hundred seventy dollars ($6,970) on the Closing Date. The Escrow
Amount and the Accrued Employee Liability Amount shall be held by Deutch as
escrow agent (the “Escrow Agent”), in an interest-bearing escrow account
pursuant to an escrow agreement substantially in the form attached hereto as
Exhibit C (the “Escrow Agreement”). The Escrow Amount shall be held by the
Escrow Agent and shall be disbursed to the Seller or the Purchaser, as the case
may be, in accordance with the terms thereof and Section 2.07. Each Transferred
Employee shall be paid his or her respective portion of the Accrued Employee
Liability Amount if, when and to the extent that such Transferred Employee is
entitled to be paid such amount, and the balance of the Accrued Employee
Liability Amount, if any, shall be delivered to the Seller within 90 days
following the first anniversary of the Closing Date. Notwithstanding the
foregoing, the Parties acknowledge and agree that the Purchaser is not assuming
such Accrued Employee Liability, and that such Accrued Employee Liability is an
Excluded Liability.
 
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Allocation of Purchase Price. Attached hereto as Schedule 2.06 is a schedule
(the “Final Allocation Schedule”) that sets forth the allocation of that portion
of the Purchase Price paid for the Acquired Assets among the various categories
of Acquired Assets and the covenants contained in Section 4.01, which allocation
has been made in the manner required by Section 1060 of the Code. The Purchaser
and the Seller agree to prepare and file an IRS Form 8594 in a timely fashion in
accordance with the rules under Section 1060 of the Code. The determination as
set forth on the Final Allocation Schedule shall be binding on the Purchaser and
the Seller for all Tax reporting purposes. Each of the Parties shall report on
all Tax Returns consistent with and based upon the Final Allocation Schedule.
 
Purchase Price Adjustments. The Purchase Price shall be subject to adjustment
(the “Purchase Price Adjustment”) after the Closing Date as follows:
 
Interim Period Adjustment. Within 45 days after the six-month period immediately
following the Closing Date (such six-month period is referred to herein as the
“Interim Measurement Period,” and the last day of the Interim Measurement Period
is referred to herein as the “Interim Measurement Date”), the Purchaser shall
deliver to the Seller a proposed statement (the “Proposed Interim Statement”)
that sets forth the Seller’s determination of the Annualized Revenue Run Rate
for the Interim Measurement Period. The Proposed Interim Statement shall not be
audited, but shall be otherwise prepared on a basis consistent with the
accounting practices and policies used in connection with the preparation of the
Financial Statements, as adjusted to solely reflect Actual Billed Revenues and
to exclude Excluded Assets and Excluded Liabilities. The Seller shall cooperate
with the Purchaser, at no cost to the Purchaser, in the preparation of the
Proposed Interim Statement, including but not limited to providing access to any
appropriate work papers or to the Seller’s accountants and auditors. The Seller
shall have the right, exercisable within 15 days following its receipt of the
Proposed Interim Statement, to deliver to the Purchaser a detailed statement (an
“Interim Statement Challenge”) describing all of its objections (if any) thereto
including a reasonably detailed explanation of such objections. If the Purchaser
has not received an Interim Statement Challenge within 15 days following the
Seller’s receipt of the Proposed Interim Statement, the Seller shall be deemed
for all intents and purposes to have accepted and agreed in full to the Proposed
Interim Statement. If, however, the Purchaser shall have received an Interim
Statement Challenge within 15 days following the Seller’s receipt of the
Proposed Interim Statement, there shall be no Purchase Price Adjustment in
respect of the Interim Measurement Period until resolution of the disagreement
between the Seller and the Purchaser in accordance with Section 2.08 hereof, and
the Escrow Agent shall make no disbursement of the Escrow Amount until such
dispute has been so resolved. Notwithstanding the foregoing, if the Purchaser
shall fail to deliver to the Seller the Proposed Interim Statement within 45
days after the Interim Measurement Date, then the Seller shall have the right in
its sole discretion to declare that the Interim Target has been reached, which
declaration shall be final and binding upon the Purchaser and the Escrow Agent.
Subject to the foregoing, if the Annualized Revenue Run Rate for the Interim
Measurement Period is equal to or greater than two million four hundred thousand
dollars ($2,400,000) (the “Interim Target”), the Escrow Agent shall deduct from
the Escrow Amount, and release to the Seller within 45 days following the
Interim Measurement Date (or as soon thereafter as practicable, following
resolution of any disputes in accordance with the terms of this Section 2.07 and
Section 2.08), an amount equal to twenty five thousand dollars ($25,000).
 
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Annual Period Adjustments.
 
Within 45 days after the one-year period immediately following the Closing Date
(such one- year period is referred to herein as the “Annual Measurement Period,”
and the last day of the Annual Measurement Period is referred to herein as the
“Annual Measurement Date”), the Purchaser shall deliver to the Seller a proposed
statement (the “Proposed Annual Statement”) of (x) the Annualized Revenue Run
Rate for the Annual Measurement Period and (y) the Actual Billed Revenues for
the Annual Measurement Period. The Proposed Annual Statement shall not be
audited, but shall be otherwise prepared on a basis consistent with the
accounting practices and policies used in connection with the preparation of the
Financial Statements, as adjusted to solely reflect Actual Billed Revenues and
to exclude Excluded Assets and Excluded Liabilities The Seller shall cooperate
with the Purchaser, at no cost to the Purchaser, in the preparation of the
Proposed Annual Statement, including but not limited to providing access to any
appropriate work papers or to the Seller’s accountants and auditors. The Seller
shall have the right, exercisable within 15 days following its receipt of the
Proposed Annual Statement, to deliver to the Purchaser a detailed statement (an
“Annual Statement Challenge”) describing all of its objections (if any) thereto
including a reasonably detailed explanation of such objections. If the Purchaser
has not received an Annual Statement Challenge within 15 days following the
Seller’s receipt of the Proposed Annual Statement, the Seller shall be deemed
for all intents and purposes to have accepted and agreed in full to the Proposed
Annual Statement. If, however, the Purchaser shall have received an Annual
Statement Challenge within 15 days following the Seller’s receipt of the
Proposed Annual Statement, there shall be no Purchase Price Adjustment in
respect of the Annual Measurement Period until resolution of the disagreement
between the Seller and the Purchaser in accordance with Section 2.08 hereof, and
the Escrow Agent shall make no disbursement of the Escrow Amount until such
dispute has been so resolved. Notwithstanding the foregoing, if the Purchaser
shall fail to deliver to the Seller the Proposed Annual Statement within 45 days
after the Annual Measurement Date, then the Seller shall have the right in its
sole discretion to declare that the Annual Target has been reached, which
declaration shall be final and binding upon the Purchaser and the Escrow Agent.
Subject to the foregoing:
 
If the (i) Annualized Revenue Run Rate for the Annual Measurement Period is
equal to or greater than two million dollars ($2,000,000) (the “Annual Target”)
and (ii) Actual Billed Revenues for the Annual Measurement Period are equal to
or greater than the Annual Target (the amount by which Actual Billed Revenues
exceed the Annual Target is referred to herein as the “Actual Revenue Surplus”),
then the Purchase Price shall not be further adjusted, and the Escrow Agent
shall release the entire balance of the Escrow Amount to the Seller within 45
days following the Annual Measurement Date (or as soon thereafter as
practicable, following resolution of any disputes in accordance with the terms
of this Section 2.07 and Section 2.08).
 
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If, at the end of the Annual Measurement Period, the (i) Annualized Revenue Run
Rate during the Annual Measurement Period is less than the Annual Target (the
amount by which the Annual Target exceeds the Annualized Revenue Run Rate is
referred to herein as the “Run Rate Shortfall”) and (ii) Actual Billed Revenues
during the Annual Measurement Period are less than the Annual Target (the amount
by which the Annual Target exceeds the Actual Billed Revenues is referred to
herein as the “Actual Revenue Shortfall”), then the Purchase Price shall be
reduced by the product of (A) the average of (x) the Run Rate Shortfall and (y)
the Actual Revenue Shortfall and (B) twenty two percent (22%), and the Escrow
Agent shall release such amount from the Escrow Amount to the Purchaser within
45 days following the end of the Annual Measurement Period (or as soon
thereafter as practicable, following resolution of any disputes in accordance
with the terms of this Section 2.07 and Section 2.08). For example, if at the
end of the Annual Measurement Period the Run Rate Shortfall was $300,000 and the
Actual Revenue Shortfall was $200,000, the Purchase Price would be reduced by
$55,000 pursuant to this clause (B) [(($300,000+$200,000) ¸ 2) X 0.22 =
$55,000].
 
If, at the end of the Annual Measurement Period, (i) the Annualized Revenue Run
Rate for such Annual Measurement Period is equal to or greater than the Annual
Target (the amount by which the Annualized Revenue Run Rate during the Annual
Measurement Period exceeds the Annual Target is referred to herein as the “Run
Rate Surplus”), but (ii) there is an Actual Revenue Shortfall during the Annual
Measurement Period and (iii) the Run Rate Surplus exceeds the Actual Revenue
Shortfall (assuming such Actual Revenue Shortfall is a positive, and not a
negative, number) then the Purchase Price shall not be further adjusted, and the
Escrow Agent shall release the entire balance of the Escrow Amount to the Seller
within 45 days following the Annual Measurement Date (or as soon thereafter as
practicable, following resolution of any disputes in accordance with the terms
of this Section 2.07 and Section 2.08). For example, if at the end of the Annual
Measurement Period the Run Rate Surplus was $300,000 and the Actual Revenue
Shortfall was $200,000, the Purchase Price would not be further adjusted.
 
If, at the end of the Annual Measurement Period, there is both (i) a Run Rate
Surplus and (ii) an Actual Revenue Shortfall for such Annual Measurement Period
and (iii) the Run Rate Surplus is less than the Actual Revenue Shortfall
(assuming such Actual Revenue Shortfall is a positive, and not a negative,
number) (such difference being referred to herein as a “Partial Actual Revenue
Shortfall”), then the Purchase Price shall be reduced by the product of (x) the
Partial Actual Revenue Shortfall and (y) eleven percent (11%), and the Escrow
Agent shall release such amount from the Escrow Amount to the Purchaser within
45 days following the end of the Annual Measurement Period (or as soon
thereafter as practicable, following resolution of any disputes in accordance
with the terms of this Section 2.07 and Section 2.08). For example, if at the
end of the Annual Measurement Period the Run Rate Surplus was $200,000 and the
Actual Revenue Shortfall was $300,000, the Purchase Price would be reduced by
$11,000 pursuant to this clause (b) [(($200,000-$300,000) X 0.11 = $11,000].
 
If, at the end of the Annual Measurement Period, (i) there is and Actual Revenue
Surplus and a Run Rate Shortfall and (ii) the Actual Revenue Surplus is less
than the Run Rate Shortfall (assuming such Run Rate Shortfall is a positive, and
not a negative, number) (such difference being referred to herein as a “Partial
Run Rate Shortfall”), then the Purchase Price shall be reduced by the product of
(x) the Partial Run Rate Shortfall and (y) twenty-two percent (22%), and the
Escrow Agent shall release such amount from the Escrow Amount to the Purchaser
within 45 days following the end of the Annual Measurement Period (or as soon
thereafter as practicable, following resolution of any disputes in accordance
with the terms of this Section 2.07 and Section 2.08). For example, if at the
end of the Annual Measurement Period the Actual Revenue Surplus was $200,000 and
the Run Rate Shortfall was $300,000, the Purchase Price would be reduced by
$22,000 pursuant to this clause (E) [(($300,000-$200,000) X 0.22 = $22,000].
 
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Dispute Resolution Procedures; Set-Off Rights.
 
The Purchaser and the Seller shall use reasonable good faith efforts to resolve
any such objections, but if they do not reach a final resolution within 30 days
after the Purchaser has received the statement of objections, the Purchaser and
the Seller shall select a regional accounting firm in good standing, other than
their respective regular independent accounting firms, mutually acceptable to
them (the “Neutral Auditors”) to resolve any remaining objections. If the
Purchaser and the Seller are unable to agree on the choice of Neutral Auditors
they shall select as Neutral Auditors a regional accounting firm in good
standing by lot (after excluding their respective regular independent accounting
firms). Notwithstanding the foregoing, the Parties agree that Miller Ellin
Company LLP shall be mutually acceptable to serve as the Neutral Auditors. The
Neutral Auditors shall determine, within 30 days after their appointment,
whether the objections raised by the Seller are valid. Any such resolution by
the Neutral Auditors shall be made on a basis otherwise consistent with the
methodologies and principles used in the preparation of the Seller’s income
statement included in the Financial Statements dated September 30, 2007, as
adjusted to solely reflect Actual Billed Revenues and to exclude Excluded Assets
and Excluded Liabilities. Subject to the foregoing, the Proposed Statements that
are the subject of objections by the Seller shall be adjusted in accordance with
the Neutral Auditors’ determination and, as so adjusted, shall be conclusive and
final and binding upon the Parties. The fees and expenses of the Neutral
Auditors shall be paid one-half by the Seller and one-half by the Purchaser.
 
On the date that is 18 months following the Closing Date (the period between the
Closing and such date is referred to herein as the “Survival Period”), in
accordance with the terms of the Escrow Agreement, the Escrow Agent shall
release from the Escrow Account and deliver to the Seller an amount equal to the
Escrow Amount together with any interest earned thereon, minus the amount of (i)
any distributions of the Escrow Fund in accordance with Section 2.07 and (ii)
any Claim or Claims that have been set forth in an Indemnification Notice
pursuant to Article VII of this Agreement (whether or not such Claim or Claims
have been determined to be valid as of such date (the portion of the Escrow
Amount that has not been released to the Seller is referred to as the “Escrow
Balance”), and the Escrow Balance shall be retained in escrow pending
Adjudication of such Claim(s).
 
If the Purchaser delivers an Indemnification Notice pursuant to Article VII of
this Agreement, the Purchaser may, but it shall not be required to, deliver a
notice to the Escrow Agent in accordance with the terms of the Escrow Agreement,
instructing the Escrow Agent to retain in escrow from the Escrow Amount and/or a
notice to the Seller advising the Seller that the Purchaser has elected to
set-off from the Escrow Amount such amounts (which shall be specified in such
notice(s) to the Escrow Agent and/or the Seller) as the Purchaser reasonably
determines may be necessary to satisfy the Claim(s) set forth in such
Indemnification Notice (including reasonable costs and attorneys fees and
disbursements in respect thereof) pending Adjudication of such Claim(s).
“Adjudication” means, unless otherwise agreed among the Parties, a final
judgment or order of a court of competent jurisdiction not subject to any
further appeals.
 
Upon the Adjudication of a Claim, (i) if the amount set-off pursuant to this
Section 2.08 by the Purchaser exceeds the aggregate amount of all remaining
unresolved Claims, at such time the Purchaser shall pay, or (ii) if the amount
retained by the Escrow Agent from the Escrow Amount exceeds the aggregate amount
of all remaining unresolved Claims, the Purchaser shall instruct the Escrow
Agent to pay in accordance with the terms of the Escrow Agreement, to the Seller
(to an account or accounts designated by the Seller in writing) any such excess
from amounts retained by the Escrow Agent or set-off by the Purchaser, subject,
in all cases, to such adjustments as may be required to be made pursuant to
Section 2.07; it being understood that if at such time the aggregate amount
being retained by the Escrow Agent or set-off by the Purchaser is less than or
equal to the aggregate amount of all Claims pending at such time, the Purchaser
shall not be obligated to pay any amounts to the Seller, subject, however, to
the Adjudication of such Claims.
 
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Nothing in this Section 2.08 shall limit or impair, in any way, the rights of
the Purchaser set forth in Article VII of this Agreement.
 
CLOSING AND PAYMENT OBLIGATION
 
Closing. The consummation of the purchase and sale contemplated by this
Agreement (the “Closing”) shall be held at the offices of Dewey & LeBoeuf LLP,
1301 Avenue of the Americas, New York, New York, simultaneously with the
execution of this Agreement. The date of the Closing is sometimes herein
referred to as the “Closing Date”. At the Closing, all of the transactions
contemplated hereby shall be deemed to have been consummated as of 12:01 a.m. on
the Effective Date. By mutual agreement of the Parties, the Closing may be
alternatively accomplished by facsimile transmission to the respective offices
of legal counsel for the Parties of the requisite documents, duly executed where
required, with originals to be delivered by overnight courier service on the
next business day following the Closing.
 
Deliveries by the Seller Parties. Upon the terms and subject to the conditions
of this Agreement, in reliance on the representations, warranties, covenants and
agreements of the Purchaser contained herein, and in consideration of the
Purchase Price and the assumption of the Assumed Liabilities, the Seller agrees
to deliver (or cause to be delivered) to the Purchaser at the Closing the
following agreements and documents, all reasonably satisfactory in form and
substance to the Purchaser and its legal counsel (the delivery of which may be
waived in writing by the Purchaser):
 
a duly executed Escrow Agreement in the form attached hereto as Exhibit C;
 
a duly executed bill of sale for all of the Acquired Assets in the form attached
hereto as Exhibit D;
 
a duly executed Assignment and Assumption Agreement in the form attached hereto
as Exhibit A;
 
all documents necessary to transfer to the Purchaser the registered domain name
related to the Website;
 
all documents of title, if any, necessary to transfer to the Purchaser any of
the Owned Tangible Property included within the Acquired Assets;
 
evidence satisfactory to the Purchaser that any and all Encumbrances on the
Acquired Assets (other than Permitted Encumbrances) have been released;
 
evidence of receipt of all consents set forth on Schedule 3.02(g) and any
related filings having been made;
 
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certified copies of all resolutions of the Board of Directors of the Seller
approving the transactions contemplated by the Agreement;
 
the Employment and Non-Competition Agreement, duly executed by Andrew Maggio in
the form attached hereto as Exhibit B;
 
such other deeds, endorsements, assignments and other instruments as, in the
opinion of counsel for the Purchaser, may be reasonably required to vest in the
Purchaser all right, title and interest of every kind and description in and to
any of the Acquired Assets, free of any Encumbrances (other than Permitted
Encumbrances) and to cause the Purchaser to assume all of the Assumed
Liabilities.
 
Deliveries by the Purchaser. Upon the terms and subject to the conditions of
this Agreement, in reliance on the representations, warranties, covenants and
agreements of the Seller contained herein, and in consideration of the transfer
and sale of the Acquired Assets, the Purchaser agrees to deliver at the Closing
the following, all satisfactory in form and substance to the Seller and its
legal counsel (the delivery of which may be waived in writing by the Seller):
 
the wire transfer of the Purchase Price as set forth in Section 2.04;
 
a duly executed Escrow Agreement and a duly executed Assignment and Assumption
Agreement;
 
the Employment and Non-Competition Agreement duly executed by the Purchaser or
an Affiliate of the Purchaser; and
 
such other documents and instruments as in the opinion of counsel for the Seller
may be reasonably required to effectuate the terms of this Agreement and to
comply with the terms hereof.
 
ADDITIONAL AGREEMENTS
 
Agreement Not to Compete and to Maintain Confidentiality.
 
For good and valuable consideration and in furtherance of the sale of the
Acquired Assets and the Business to the Purchaser hereunder, in order to induce
the Purchaser to enter into and perform this Agreement, to ensure that the
Purchaser obtains the benefits it reasonably expects to obtain hereunder and to
more effectively protect the value and goodwill of the Acquired Assets and the
Business, each of the Seller Parties covenants and agrees that for a period
commencing on the Closing Date and ending on the third (3rd) anniversary of the
Closing Date, it shall not, and shall use commercially reasonable efforts to
ensure that any agents, representatives and other Persons acting on behalf of
the Seller (the Seller and such agents, representatives, and other Persons being
collectively referred to as the “Restricted Persons”) do not, directly or
indirectly, for the benefit of the Seller, its Affiliates, or themselves:
 
(whether as principal, agent, independent contractor, partner or otherwise or by
any other means) own, manage, operate, control, invest in or otherwise
establish, operate, or carry on any business which engages in a business
competitive with the Services offered by the Seller as part of the Business as
of the Closing Date in any geographic area in which the Business, or the
business of the Purchaser; provided, however, that it will not be deemed a
breach of this Agreement:
 
if the Restricted Persons and their respective Affiliates acquire an interest
in, or make any investment in, any Person (i) where the amount invested was less
than $50,000, (ii) in which such Restricted Persons and such Affiliates do not
have the right to designate a majority of the members of the board of directors
(or similar governing body) of such Person, (iii) in which such Restricted
Persons and such Affiliates own less than 10% of the outstanding voting
securities or (iv) that derives no more than 10% or less of its gross revenues
from the sale or provision of services that are competitive with the Business;
or
 
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for any of the Restricted Persons to conduct any businesses other than the
Business;
 
induce or attempt to persuade any customer of the Business to terminate the
relationship of such customer with the Business;
 
induce or attempt to persuade any Business Personnel (as defined below) to
terminate or to refuse to enter into any employment, agency or other business
relationship with the Purchaser. For purposes of this clause (iii), “Business
Personnel” means any person (A) who is an employee, consultant, independent
contractor or free-lance worker of the Seller or an Affiliate of the Seller on
the Closing Date and who becomes employed or engaged by the Purchaser or an
Affiliate of the Purchaser in connection with the transactions contemplated
hereby, or (B) who is an employee, consultant, independent contractor or
free-lance worker of the Purchaser or an Affiliate of the Purchaser employed or
engaged in the Business or (C) who within one (1) year prior to the prohibited
contact by a Restricted Person was an employee, consultant, independent
contractor or free-lance worker employed or engaged in the Business for or on
behalf of the Seller, the Purchaser or an Affiliate of the Purchaser or the
Seller; or
 
Each of the Seller Parties hereby expressly represents and warrants that it has
or may have knowledge of certain commercial and marketing information and
material regarding the Acquired Assets and the Business (including, but not
limited to, the Services, lists of customers, product documentation, development
work, lead lists, trade secrets and other Proprietary Information of the Seller
relating to the Business) (the “Confidential Information”). The Seller
acknowledges and agrees that all such Confidential Information is confidential
and proprietary and that a substantial portion of the Purchase Price is being
paid for such Confidential Information and that it represents a substantial
investment having economic value to the Purchaser, and constitutes a substantial
part of the value to the Purchaser of the Business and the Acquired Assets. The
Seller acknowledges and agrees that the Purchaser would be irreparably damaged
if any of the Confidential Information was disclosed to, or used or exploited on
behalf of, any Person other than the Purchaser or any of its Affiliates to
compete with the Purchaser’s operation of the Business after the Closing Date.
Accordingly, each of the Seller Parties covenants and agrees that it shall not,
and shall use its reasonable best efforts to ensure that each other Restricted
Person does not, without the prior written consent of the Purchaser, disclose,
use or exploit any such Confidential Information, for the benefit of the Seller,
any other Restricted Persons or of any third-party; provided, that the term
“Confidential Information” shall not include any information or material that:
 
is or becomes publicly known through no act of any Restricted Person;
 
is required to be disclosed to or by order of a governmental agency or a court
of law or otherwise as required by law or legal process; provided, that prior to
any such disclosure notice of such requirement of disclosure is provided to the
Purchaser and the Purchaser is afforded the reasonable opportunity to object to
such disclosure; or
 
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becomes available to the Seller on a non-confidential basis from a third party
source; provided, that such source is not bound by a confidential, legal or
fiduciary duty of confidentiality to the Purchaser or any Affiliate thereof with
respect to such information or material.
 
Each of the Seller Parties expressly acknowledges that (i) each of the covenants
contained in this Section 4.01 are integral to the sale to the Purchaser of the
Acquired Assets and the Business, (ii) without the protection of such covenants,
the Purchaser would not have entered into this Agreement, (iii) the
consideration paid by the Purchaser bears no relationship to the damages the
Purchaser may suffer in the event of any breach of any of the covenants of this
Section 4.01, and (iv) such covenants contain limitations as to time,
geographical area and/or scope of activity to be restrained which are reasonable
and necessary to protect the Purchaser’s business interests. If this
Section 4.01 shall nevertheless for any reason be held to be excessively broad
as to time, duration, geographical scope, activity or subject, it shall be
enforceable to the fullest extent compatible with applicable laws that shall
then apply. The Seller hereby further acknowledges that money damages will be
impossible to calculate and may not adequately compensate the Purchaser in
connection with an actual or threatened breach by the Seller of any of the
provisions of this Section 4.01. Accordingly, each of the Seller Parties, on its
own behalf and on behalf of each of the other Restricted Persons, hereby
expressly waives all rights to raise the adequacy of the Purchaser’s remedies at
law as a defense if the Purchaser seeks to enforce by injunction or other
equitable relief the due and proper performance and observance of the provisions
of this Section 4.01. In addition, the Purchaser shall be entitled to pursue any
other available remedies at law or equity, including the recovery of money
damages, in respect of the actual or threatened breach of the provisions of this
Section 4.01.
 
Each of the Seller Parties hereby expressly waives any right to assert
inadequacy of consideration as a defense to enforcement of the non-competition
and confidentiality covenants in this Section 4.01 should such enforcement ever
become necessary.
 
Taxes, Fees and Expenses. The Seller shall pay all sales, use, transfer and
purchase taxes and fees, if any, arising out of the transfer of the Acquired
Assets pursuant to this Agreement.
 
Employees; Employee Benefits.
 
The Purchaser may, in its sole discretion, make an offer of employment to, and
employ, certain Employees of Seller, but shall not be obligated to do so. Those
Employees to whom the Purchaser makes an offer of employment, and who become
employed by the Purchaser, are referred to herein individually as a “Transferred
Employee” and collectively as the “Transferred Employees.” The Seller shall be
responsible for, and shall indemnify and hold harmless (as set forth in Article
VII of this Agreement) the Purchaser from and against, any and all severance,
termination, retention, “golden parachute,” unemployment compensation or any
similar payment or other liabilities or obligations with respect to any
Employee, whether or not the Purchaser extends an offer of employment to such
Employee, whether or not such Employee accepts employment with the Purchaser,
whether pursuant to any corporate policy, plan, agreement, or arrangement of
Seller with respect to such Employee, any Benefit Plan, or by law (domestic or
foreign and including, but not limited to, any liability under the Workers
Adjustment and Retraining Notification Act as it may be amended from time to
time and the provisions of Section 4980B of the Code and Part 6 of the Subtitle
B of Title I of ERISA), and whether or not pursuant to individual agreement or
commitment or group plan. No agreement, understanding or arrangement entered
into by a Transferred Employee and the Seller prohibits or restricts (or shall
prohibit or restrict) any Employee from disclosing Proprietary Information of
the Seller to the Purchaser or its Affiliates after the Closing.
 
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The Purchaser shall not assume any of the Seller’s Benefit Plans. To the extent
required by the terms of any such plan or program, the Purchaser shall give each
Transferred Employee credit for such employee’s service with the Seller and any
of its Affiliates and any of their respective predecessors prior to the Closing
for all purposes, including participation requirements, vesting and benefit
accrual (except for purposes of benefit accrual under any defined benefit
pension plan sponsored by the Purchaser or any of its Affiliates) under any
benefit plan or program of the Purchaser and any of its Affiliates in which
Transferred Employees are eligible to participate, except to the extent that
such credited service would result in a duplication of benefits.
 
Subject to applicable law, except as forth in this Section 4.03, as of and after
the Closing Date, the Purchaser shall not assume any obligation or liability for
and the Seller shall remain responsible for (i) any vested benefits accrued by
Transferred Employees, Employees and former employees under any Benefit Plans,
whether or not set forth in any employment agreement with the Seller, including,
without limitation, under any equity appreciation or stock option plans of the
Seller and (ii) any and all obligations and liabilities to Transferred
Employees, Employees and former employees of the Seller related to any
employment or service performed or otherwise, which were incurred or accrued
prior to the Closing, including, without limitation, under any Benefit Plans
that the Seller is or becomes obligated to provide prior to or after the
Closing, including, without limitation, retirement benefits, disability payments
and the obligation to provide COBRA continuation coverage to such former
employees and their beneficiaries, whether payable prior to or after the
Closing.
 
The Purchaser shall be solely responsible for all severance, termination and
other liabilities pursuant to the Purchaser’s plans or policies related to the
termination of employment of each Transferred Employee whose employment is
terminated by the Purchaser after the Closing Date and shall be responsible for
all other liabilities relating to the Transferred Employees that arise after the
Closing Date.
 
As soon as practicable on or after the Closing Date, the Purchaser shall take
any and all action necessary to cause the trustee of any tax-qualified defined
contribution plan of the Purchaser or any of its Affiliates to which any
Transferred Employee becomes a participant (“Purchaser 401(k) Plan”) to accept a
direct rollover of all of such Transferred Employee's “eligible rollover
distribution” within the meaning of Section 402 of the Code from the Seller’s
401(k) plan, which shall consist of only cash and any outstanding qualifying
401(k) plan loan notes. Any such qualifying 401(k) plan loan notes shall not be
treated as due and payable immediately as of the date such rollover occurs and
instead shall be transferred to the Purchaser 401(k) Plan.
 
Maintenance of Books and Records. Each of the Parties shall preserve, until at
least the seventh (7th) anniversary of the Closing Date, all pre-closing records
possessed or to be possessed by such Party relating to the Acquired Assets, the
Assumed Liabilities or the Business. After the Closing Date and up until at
least the seventh (7th) anniversary of the Closing Date, upon any reasonable
request from a Party or its Representatives, the Party holding or controlling
such records shall, or shall cause its Affiliates to, (x) provide to the
requesting Party or its representatives reasonable access to inspect and audit
such records during normal business hours and (y) permit the requesting Party or
its Representatives to make copies of such records, in each case at no cost to
the requesting Party or its Representatives (other than for reasonable
out-of-pocket expenses). Such records may be sought under this Section 4.04 for
any reasonable purpose, including, but not limited to, to the extent reasonably
required in connection with the Audit, accounting, Tax, litigation, federal
securities disclosure or other similar needs of the Party seeking such records.
Without limiting the foregoing, each Party shall cause, and (as applicable)
shall cause each of its Affiliates to cause, its employees to cooperate to the
fullest extent practicable, with the Seller and its Affiliates and any agents,
representatives and other Persons acting on behalf of such purchaser or
successor), in each case with respect to the foregoing, to the extent that such
access may be reasonably required by the other Party or Parties or any of their
respective Affiliates for any lawful business purpose, including without
limitation the investigation, defense, prosecution, litigation and final
disposition of any claims that might have been or might be made by or against
such Party or any Affiliate of such Party in connection with the Business. Such
cooperation shall include, without limitation, the execution of affidavits,
appearances, testimony and production of documents pursuant to federal and state
criminal and civil subpoenas, depositions, interrogatories and other requests.
 
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Bulk Sales Law. The Purchaser hereby waives compliance by the Seller with the
provisions of all applicable state bulk sales laws, and the Seller Parties
warrant and agree to pay and discharge when due all claims of creditors which
could be asserted against the Purchaser by reason of such noncompliance to the
extent that the liabilities to such creditors arise before or as a result of the
Closing.
 
[intentionally omitted]
 
Further Assurances; Email and Website. After the Closing, each Party shall, at
the request of the other Party and without further conditions or consideration,
execute and deliver from time to time such other instruments of conveyance and
transfer and take such other actions as such other Party may reasonably request
in order to more effectively consummate the transactions contemplated hereby.
 
4.08 Accounts Receivable. The Seller shall instruct its customers to remit
payments in respect of the Accounts Receivable to the Purchaser in accordance
with written instructions of the Purchaser. The Seller shall maintain its
current billing systems for the benefit of the Purchaser for a period of thirty
(30) days after the Closing at the Seller’s sole cost and expense.
 
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
 
Except as set forth in the letter, dated the date hereof, delivered by the
Seller to the Purchaser concurrently with the execution and delivery of this
Agreement (the “Seller’s Disclosure Letter”) (with specific reference to the
particular Section or subsection of the Agreement to which the information set
forth in such letter relates, each of the Seller Parties, jointly and severally,
represents and warrants to the Purchaser as follows:
 
Organization. The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland. The Seller has all
requisite corporate power and authority to enable it to own, lease or otherwise
hold its properties and assets and to carry on its business as presently
conducted. The Seller is duly qualified to do business and in good standing in
each jurisdiction in which the nature of the Business or the ownership, leasing
or holding of the Acquired Assets makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified or to be in good
standing would not reasonably be expected to have a Material Adverse Effect or
adversely affect the ability of the Seller to consummate the transactions
contemplated by this Agreement. A list of the jurisdictions in which the Seller
is so qualified is set forth on Schedule 5.01.
 
Authorization. The Seller has all requisite power and authority to enter into
this Agreement and the Related Documents to be executed and delivered by the
Seller pursuant hereto or in connection with the transactions contemplated
hereby or thereby, and to consummate the transactions contemplated hereby and
thereby. All acts and other proceedings required to be taken by the Seller to
authorize the execution, delivery and performance of this Agreement and the
Related Documents to which it is a Party, and the consummation of the
transactions contemplated hereby and thereby, have been duly and properly taken.
 
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Valid and Binding. This Agreement and each Related Document, to the extent any
Seller Party is a party thereto, constitutes a valid and binding obligation of
such Seller Party, enforceable against such Seller Party in accordance with its
terms (assuming this Agreement each Related Document constitutes the valid and
binding agreement of the Purchaser or such other party), except that (i) such
enforcement may be limited by or subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or limiting creditors’ rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
 
No Violation. The execution and delivery of this Agreement and each Related
Document by each Seller Party, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and
thereof, do not and will not (subject only to obtaining any required consents,
approvals, authorizations, exemptions or waivers set forth on Schedule 5.05) (i)
conflict with, or result in any violation of, any provision of the Articles of
Incorporation or By-laws of the Seller (as amended, if applicable), (ii)
conflict with, or result in any violation of or default on the part of any
Seller Party (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation,
or result in the creation of any Encumbrance upon any of the Acquired Assets,
under any material note, bond, mortgage, indenture, deed of trust, license,
lease, contract, commitment or loan or other agreement to which such Seller
Party is a party or by which any of its properties or assets are bound, or (iii)
conflict with, or result in any violation of any statute, regulation, rule,
injunction, judgment, order, law, ordinance, decree, ruling, charge or other
restriction of any government, governmental agency, or court applicable to any
Seller Party, or its property or assets, except in the case of clauses (ii) and
(iii) for any such conflicts, violations, breaches, defaults, rights of
termination, cancellation or acceleration or requirements which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Affect or adversely affect the ability of the Seller Parties to consummate the
transactions contemplated by this Agreement.
 
Consents and Approvals. Except as set forth on Schedule 5.05, no consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority or any court or other tribunal, and no
consent or waiver of any party to any Contract is required to be obtained by any
Seller Party in connection with the execution, delivery and performance of this
Agreement and each Related Document or the consummation of the transactions
contemplated hereby or thereby.
 
Financial Statements. The Seller has furnished to the Purchaser complete copies
of (i) unaudited balance sheets of the Business as of December 31, 2004,
December 31, 2005 and December 31, 2006, and an unaudited balance sheet of the
Business as of September 30, 2007 and (ii) unaudited income statements of the
Business for the years ended December 31, 2004, December 31, 2005 and December
31, 2006 and an unaudited income statement of the Business for the nine-month
period ended September 30, 2007 (collectively, the “Financial Statements”),
copies of which are attached hereto as Schedule 5.06. The Financial Statements
have been prepared on the basis of the books and records maintained by the
Seller in the ordinary course of business in accordance with the accounting
policies and procedures of the Seller in a manner consistently used and applied
throughout the periods involved. Except as set forth on Schedule 5.06, the
Financial Statements have been prepared in accordance with GAAP and present
fairly in all material respects the assets, liabilities and the financial
condition of the Business as at the respective dates thereof and the results of
operations of the Business for the periods then ended.
 
Interim Operations. Except as set forth on Schedule 5.07(a), since December 31,
2006:
 
the Business has been conducted by the Seller in the ordinary and usual course
and in a manner consistent with past practice;
 
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with respect to the Business, the Seller has not:
 
suffered any Material Adverse Effect;
 
incurred any liabilities or obligations (absolute, accrued, contingent or
otherwise), except in the ordinary and usual course of business and consistent
with past practice and except for liabilities and obligations that have not,
individually or in the aggregate, been material to the Business;
 
increased, or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves;
 
paid, discharged or satisfied any claims, liabilities or obligations (absolute,
accrued, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary and usual course of business and consistent with
past practice of claims, liabilities and obligations reflected or reserved
against in the Financial Statements or incurred in the ordinary and usual course
of business and consistent with past practice;
 
permitted or allowed any of the Acquired Assets to be subjected to any
Encumbrance (except Permitted Encumbrances);
 
canceled any debt for borrowed money owing to the Seller or waived any material
claims or rights;
 
sold, transferred, or otherwise disposed of, or transferred or granted any
rights under any lease, license or agreement with respect to any of its assets,
except pursuant to Customer Contracts entered into in the ordinary course of
business consistent with past practice;
 
disposed of, failed to take reasonable steps to protect, or permitted to lapse,
any rights for the use of, the Intellectual Property, other than Incidental
Intellectual Property, used in the Business;
 
made any change in any method of accounting or accounting practice, except
insofar as may be required by GAAP;
 
made any single capital expenditure or future commitment in excess of $10,000
for additions to property, plant, equipment or intangible capital assets, or
made capital expenditures or future commitments in excess of $25,000 in the
aggregate for additions to property, plant, equipment or intangible capital
assets;
 
made any single capital expenditure or future commitment in excess of $10,000
for improvements, updates or fixes to its systems, Products or the development
of new Software, or made aggregate capital expenditures or future commitments in
excess of $25,000 for improvements, updates or fixes to its systems, Products or
the development of new Software;
 
made any material change in development, marketing or pricing policies relating
to products or services of the Business (whether or not in the ordinary and
usual course of business);
 
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had any significant labor dispute or received written notice of any grievance;
 
borrowed or agreed to borrow any funds;
 
paid and/or declared any dividends (other than in cash) with respect to its
shares of capital stock, whether in shares of capital stock or other property;
 
granted to any officer or employee any increase in compensation or benefits;
 
paid any pension, retirement allowance or other employee benefit not required by
any plan, policy or program set forth on Schedule 5.20(a) or any employment
agreement set forth on Schedule 5.20(a);
 
adopted, agreed to adopt, or made any announcement regarding the adoption of (i)
any new pension, retirement or other employee benefit plan, program or policy,
or (ii) any amendments to any existing pension, retirement or other employee
benefit plan, policy or program set forth on Schedule 5.20(a) unless otherwise
required by applicable law;
 
except as set forth in the Financial Statements, written off as uncollectible
any notes or Accounts Receivable, other than in the ordinary course of business;
 
changed its practice or policy with respect to collection of Accounts
Receivable; or
 
suffered or agreed to take any of the actions set forth in this subparagraph
(ii).
 
None of the assets of the Seller used in the Business have been affected in any
way as a result of fire, explosion or other casualty (whether or not covered by
insurance).
 
Undisclosed Liabilities. To Seller’s Knowledge, with respect to the Business,
the Seller does not have any liabilities or obligations (whether accrued,
absolute, contingent or otherwise), except for liabilities or obligations (i)
disclosed on Schedule 5.08, (ii) disclosed in the Financial Statements in
accordance with GAAP, (iii) arising in the ordinary course of business
consistent with past practice under any Contract or (iv) incurred in the
ordinary course of business consistent with past practice since December 31,
2006.
 
Taxes.
 
All Tax Returns required to be filed with any Tax Authority on or prior to the
date hereof by or with respect to the Seller have been filed, except Tax Returns
for which requests for extensions have been timely filed, and all such filed Tax
Returns are complete in all material respects.
 
The Seller has paid all Taxes shown as due and payable on Tax Returns that have
been filed.
 
The Seller has paid or accrued on its December 31, 2006 balance sheet included
in the Financial Statements all Taxes payable by it for all Taxable Periods
ending on or before December 31, 2006 for which no Tax Return has yet been
filed.
 
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No federal, state, local or foreign audits, examinations or other administrative
or court proceedings are presently pending with regard to any Tax Returns or
Taxes of the Seller.
 
There are no Encumbrances for Taxes on the assets of the Seller, other than
Encumbrances for Taxes not yet due.
 
The Seller has withheld from each payment to any of its officers, directors,
employees or creditors all amounts which it is required by the laws to which it
is subject to withhold or deduct, has timely remitted all amounts so withheld or
deducted to the proper recipients thereof in the manner required by such laws
and has made adequate provision in its books for all such amounts which it is
not yet required to remit.
 
No claim has ever been asserted by a Tax Authority in a jurisdiction where the
Seller has not filed Tax Returns that the Seller is or may be subject to
taxation by that jurisdiction.
 
Schedule 5.09(h) sets forth all the states for which the Seller is required to
file income or franchise Tax Returns (or similar type of Tax Returns) for the
Taxable Period most recently ended, or for which the Seller expects to be
required to file for the current Taxable Period.
 
The Seller has provided the Purchaser copies of: (i) all income or franchise Tax
Returns filed by, or on behalf of, the Seller since its incorporation (the “Tax
Period”); (ii) all material notices, protests or other correspondence issued by
or filed with a Tax Authority relating to any Taxes for any Taxable Period
beginning with the Tax Period; (iii) any elections or disclosure of any
controversial positions filed by or on behalf of the Seller with any Tax
Authority (whether or not filed with any Tax Return); (iv) any letter rulings,
determination letters or similar documents issued by any Tax Authority with
respect to the Seller; (v) any closing agreement entered into by the Seller with
any Tax Authority; and (vi) Tax Return work papers.
 
Condition of Property. Except as set forth on Schedule 5.10, all Tangible
Property included within the Acquired Assets is in good operating condition and
repair, reasonable wear and tear excepted, and all such Tangible Property is
adequate for the uses to which it is being put. None of such Tangible Property
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs which are not material in nature or cost.
 
Contracts and Commitments.
 
Schedule 5.11(a) lists all Contracts (copies of which have heretofore been made
available to the Purchaser) and describes all currently effective oral
agreements and commitments, if any, to which the Seller is a party in respect of
the Business and involving annual payments by any party in excess of $10,000.
The Contracts listed on Schedule 5.11(a) are referred to herein as the
“Scheduled Contracts.” Each Scheduled Contract that is a Customer Contract was
entered into in the ordinary course of business. Except as set forth on Schedule
5.11(a), (i) all written Scheduled Contracts constitute valid and binding
agreements of the Seller party thereto, and, to the Seller’s Knowledge, each
other party thereto, enforceable in accordance with their terms except (A) as
such enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or limiting creditors’ rights generally and (B) that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought, (ii) with respect to the Scheduled Contracts
(A) there are no existing material defaults by the Seller or, to the Seller’s
Knowledge, by any other party thereto and (B) there is no event which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a material default under the Scheduled Contracts
by the Seller, or by any other party thereto and (iii) the Seller is not
restricted under any Scheduled Contract from carrying on the Business in any
geographical location.
 
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The Seller does not own any Real Property in respect of the Business. The only
leases for Real Property to which the Seller is a party in respect of the
Business are as set forth on Schedule 5.11(b) (each, a “Lease” and collectively,
and together with all addenda, the “Leases”). With respect to each Lease, (i)
such Lease is in full force and effect and is binding and enforceable in
accordance with its terms except (A) as such enforcement may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to or limiting creditors’ rights
generally, (B) that the remedy of specific performance and injunctive and other
forms of equitable relief are subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought;
(ii) all rental and other charges payable pursuant to the terms and conditions
of such Lease have been paid and no rent has been paid in advance more than 30
days; (iii) to the Seller’s Knowledge, there are no charges, offsets or defenses
against the enforcement by the lessors thereunder of any agreement, covenant or
condition on the part of the Seller to be performed or observed pursuant to the
terms of the Leases; (iv) there are no defaults by the Seller of any material
agreement, covenant or condition on the part of the Seller to be performed or
observed pursuant to the terms of such Leases; (v) there are no actions or
proceedings pending or, to the Seller’s Knowledge, threatened, by the lessor
under such Leases; (vi) except for the security deposits required by the Leases
identified on Schedule 5.11(b), the lessor does not hold any deposits for the
Seller’s accounts under such Leases; (vii) except as set forth on Schedule 5.05,
the consummation of the sale of the Acquired Assets will not constitute a
prohibited transfer or assignment under the Leases (or lessor’s consent to any
such transfer or assignment will have been obtained prior to Closing); and
(viii) to the Seller’s Knowledge, there are no defaults by the lessor under each
Lease of any material agreement, covenant or condition on the part of the lessor
to be performed or observed pursuant to the terms of the Lease. The current
expiration dates and remaining options to extend the Leases are as set forth on
Schedule 5.11(b). Minimum monthly rent and additional rent under the Leases are
set forth on Schedule 5.11(b).
 
[intentionally omitted]
 
Assets of the Seller.
 
Except as described on Schedule 5.13(a), the Seller has valid, good and
marketable title to, or has a valid leasehold interest or valid license or other
contractual rights in, the Acquired Assets, free and clear of all Encumbrances,
except for Permitted Encumbrances.
 
The Acquired Assets constitute all of the assets and properties that are
necessary or required for the operation or conduct of the Business in the manner
presently operated and conducted by the Seller as of the date hereof.
 
Land Use Matters. There are no pending or, to the Seller’s Knowledge,
threatened, legal actions or proceedings in the nature of condemnation
proceedings that might prohibit, restrict or impair the use and occupancy of the
property covered by the Lease, or result in the suspension, revocation,
impairment, forfeiture or non-renewal of any required licenses, permits,
certificates and approvals for the use and occupancy and operation of the
properties covered by the Leases, other than such prohibitions, restrictions,
suspensions, revocations, impairments, forfeitures and non-renewals that
individually or in the aggregate would not result in a Material Adverse Effect.
 
Environmental Matters. To the Seller’s Knowledge, the Seller is in compliance in
all material respects with all applicable Environmental Laws and Environmental
Permits in respect of the Business. There are no Environmental Claims pending
or, to the Seller’s Knowledge, threatened, against the Seller or against any of
the Acquired Assets and, to the Seller’s Knowledge, there exists no basis, facts
or circumstances which could reasonably be expected to give rise to an
Environmental Claim.
 
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Insurance. Schedule 5.16 (i) lists the insurance policies currently maintained
with respect to the Business (summaries of which have been provided to the
Purchaser) in such amounts, with such deductibles as listed therein and (ii)
specifically describes all claims made by the Seller during the past three (3)
years under any such insurance policies. All premiums due and payable with
respect to the insurance policies listed on Schedule 5.16 have been paid, and
the Seller has not received any written notice that (i) any of the policies
listed on Schedule 5.16 are not in full force and effect, or that any such
policies have been cancelled or terminated, except for policies that have been
replaced on substantially similar terms prior to the date of such cancellation.
 
Employees and Labor Relations.
 
Schedule 5.17(a) contains the names of all persons employed or retained by the
Seller, on a full-time, part-time or temporary basis, relating to the Business,
including those employees of the Business on disability leave, parental leave or
other absence as of the date hereof (each, an “Employee” and collectively, the
“Employees”), and lists which Employees are leased, part-time or temporary
employees and lists the salary for each Employee. The Seller has provided the
Purchaser with the commission, bonus entitlement, profit sharing arrangements
both contractual and discretionary, and current vacation accrual for each
Employee, has indicated which Employees are currently on short-term or long-term
disability, and has provided the date of each Employee's commencement of
employment and a description of each Employee's function in the Business. Except
for the persons listed on Schedule 5.17(a), the Seller does not have any
employment, compensation, noncompetition, nonsolicitation or other similar
arrangements with any individuals who perform services for the Seller in
connection with the Business.
 
A copy or description of the standard terms of employment (including
noncompetition and nonsolicitation obligations) of the Employees is attached
hereto as Schedule 5.17(b). All Employees employed on terms other than
substantially in accordance with such standard terms are employed pursuant to an
employment agreement identified on Schedule 5.17(b). All Employees are “at will”
employees, each of whom can be terminated at any time without penalty or premium
and whose employment terms are solely governed by the current policy manual of
the Seller (a true and complete copy of which has been provided to the
Purchaser), except as otherwise specified on Schedule 5.17(b).
 
Except as set forth on Schedule 5.17(c), (i) there is no current or pending
labor strike or work stoppage or lockout against the Seller or materially
affecting the Business; during the past five (5) years there has not been any
such action against the Seller in respect of the Business; and to the Seller’s
Knowledge, there has not been, and is not now, any such action threatened
against the Seller or materially affecting the Business; (ii) none of the
Employees are represented by a union or subject to a collective bargaining
agreement and, to the Seller’s Knowledge, no union organizational campaign is in
progress with respect to the Employees and no question concerning representation
exists respecting such Employees; (iii) with respect to the Employees, the
Seller is in compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours and is not engaged in any unfair labor practice;
and (iv) there are no written agreements or arrangements between (x) the Seller
and (y) any current or former employee, consultant, independent contractor, or
leased or contract employee obligating the Seller to make any payment or
increase compensation due to any such individual as a result of the transactions
contemplated by this Agreement, nor will the transactions contemplated by this
Agreement result in any breach of any agreement with any current or former
employee, consultant, independent contractor, or leased or contract employee.
 
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Except as set forth on Schedule 5.17(d), there are no loans outstanding from the
Seller to any of the Employees.
 
The Seller is not in breach of any material terms of employment of any Employee
nor, to the Seller’s Knowledge, is any Employee in breach of any material term
of his or her employment relationship.
 
As of the date hereof, no Employee has given or received written notice of
termination of his or her employment.
 
With respect to the Business and the Employees, the Seller (i) has complied in
all material respects with the employment eligibility verification form
requirements under the Immigration and Naturalization Act, as amended (“INA”),
in recruiting, hiring, reviewing and documenting prospective employees for
employment eligibility verification purposes; (ii) has complied in all material
respects with the paperwork provisions and anti-discrimination provisions of the
INA; (iii) has obtained and maintained the employee records and I-9 forms in
proper order as required by United States law; and (iv) does not employ any
workers unauthorized to work in the United States.
 
Litigation. Except as set forth on Schedule 5.18, as of the date hereof, there
is no action, proceeding or investigation by or before any court, governmental
agency or arbitrator or other tribunal that is pending or, to the Seller’s
Knowledge, threatened (an “Action”) which:
 
is or may be brought against or which involves the Seller in respect of the
Business;
 
questions or challenges the validity of, or seeks damages or equitable relief on
the basis of, this Agreement or any action taken or to be taken by the Seller
pursuant to this Agreement or in connection with the transactions contemplated
hereby; or
 
is likely to affect the right of the Purchaser after the Closing Date to own all
right, title and interest in and to the Acquired Assets or to conduct the
Business as presently conducted.
 
Court Orders, Decrees, and Laws. The Seller is in compliance in all material
respects with all applicable federal, state or local laws, rules, regulations,
ordinances, zoning requirements, governmental restrictions, orders, judgments
and decrees affecting, involving or relating to the Business, and the Seller has
not received any written notices alleging any such violation. The foregoing
shall be deemed to include laws, rules and regulations relating to the federal
patent, copyright, and trademark laws, state trade secret and unfair competition
laws, and to all other applicable laws, rules and regulations including, but not
limited to, equal opportunity, wage and hour, and other employment matters, and
antitrust and trade regulations, health product marketing, anti-bribery,
anti-kickback, physician self-referral and false claims, safety (including
OSHA), building, electronic signatures, import and export, zoning or health and
privacy laws (including, without limitation, HIPAA), ordinances and regulations.
Seller has not made or agreed to make gifts of money, other property or similar
benefits, or provide any other remuneration directly or indirectly (other than
incidental gifts of articles of nominal value used in a practice) to any actual
or potential customer, supplier, governmental employee or any other person in a
position to assist or hinder the Seller or the Business (or any of their
respective family members or affiliates) in connection with any actual or
proposed transaction.
 
Employee Benefit Plans; ERISA.
 
Schedule 5.20(a) contains a list of employee benefit plans under Section 3(3) of
ERISA and any other employment, consulting, bonus, deferred compensation,
incentive compensation, severance, termination or post-employment pay,
disability, hospitalization or other medical, dental, vision, life or other
insurance, stock purchase, stock option, stock appreciation, stock award,
pension, profit sharing, 401(k) or retirement plan, agreement or arrangement,
and each other employee benefit plan or arrangement arising out of the
employment or the termination of an Employee, former employee, retiree or sales
personnel, by the Seller, whether written or oral, tax-qualified under the Code
or non-qualified, whether covered by ERISA or not, maintained or contributed to
by the Seller, its Affiliates or any trade or business under common control with
the Seller (as determined pursuant to Section 414(b), (c), (m), (o) or (t) of
the Code) covering any such person (collectively, “Benefit Plans”). The Seller
has made available to the Purchaser true and complete copies of the Benefit
Plans. The Seller does not have any legally binding oral or written plan or
other commitment, whether covered by ERISA or not, to create any additional
plan, agreement or arrangement or to modify or change any existing Benefit Plan
in any manner that would affect any of the Transferred Employees.
 
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The Seller does not maintain, nor has it ever maintained or contributed to, a
“multiemployer plan,” as that term is defined in Section 3(37) of ERISA.
 
All contributions or other amounts which the Seller is required to make under
the terms of the Benefit Plans with respect to Transferred Employees on or prior
to Closing have been paid.
 
There are no pending, or to the Seller’s Knowledge, threatened, claims,
litigation, administrative actions or proceedings against or otherwise involving
any of the Benefit Plans by any Transferred Employee (other than routine claims
for benefits) that would reasonably be expected to have a Material Adverse
Effect. There is no judgment, decree, injunction, rule or order of any court,
governmental body, commission, agency or arbitrator outstanding against or in
favor of any Benefit Plan or, to the Seller’s Knowledge, any fiduciary thereof
in that capacity, related to the Transferred Employees.
 
None of the Acquired Assets is subject to any Encumbrance under Section 302(f)
of ERISA or Section 412(n) of the Code.
 
Customers and Vendors.
 
Set forth on Schedule 5.21(a) is a true, complete and current list of the
Seller’s top 20 customers (the “Customers”), as measured by revenues contributed
to the Business for each of (i) the year ended December 31, 2006 and (ii) the
nine months ended September 30, 2007, including the revenue received from such
Customers in each of such 12-month and nine-month periods.
 
Schedule 5.21(b) is a true, complete and current list of each vendor that is a
supplier of any significant material, product, component or service used in the
Business during each of the year ended December 31, 2006 and the nine months
ended September 30, 2007 (each, a “Vendor”). Except as set forth on Schedule
5.21(b), the Seller has written Contracts with each such Vendor, each of which
Contract is included on Schedule 5.11(a). Schedule 5.21(b) identifies Vendors to
whom the Seller paid in the aggregate $10,000 or more during the most recently
completed fiscal year, together with, in each case, the amount paid or billed
during such period.
 
To the Seller’s Knowledge, no Customer has indicated in writing that it will
stop, or materially decrease the rate of, purchasing services from the Business,
and no Vendor has indicated in writing that it will stop, or materially decrease
the rate of, supplying materials, products, components or services to the
Business.
 
Broker’s Fees. Except for the fee owed to David Heller & Company, LLC (or its
affiliates), which the Seller shall pay at the Closing and be solely responsible
for in full, no broker, investment banker, financial advisor or other Person is
entitled to any broker’s, finder’s, financial advisor’s or similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Seller, except those for
which the Seller will be solely responsible.
 
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Related-Party Transactions. Schedule 5.23 contains a complete and correct list,
and copy, of each contract, agreement, license, lease, or arrangement between
the Seller and (i) any Affiliate of the Seller; (ii) any officer or employee of
the Seller; (iii) any corporation, trust, or other entity in which the Seller or
any such officer or employee has a material equity or participating interest;
(iv) any partnership in which the Seller or any such officer or employee has a
partnership or participating interest; or (v) any such officer or employee, in
each case, relating to or involving the Business.
 
Licenses; Permits. Schedule 5.24 sets forth all Governmental Authorizations and
Permits maintained by the Seller in respect of the Business. Such Governmental
Authorizations and Permits constitute all approvals, authorizations,
certifications, consents, variances, permissions, licenses, or permits to or
from, or filings, notices, or recordings to or with, federal, state, or local
governmental authorities that are required for the ownership and use of the
Acquired Assets and the conduct of the Business as currently conducted by the
Seller under federal, state, and local law, regulation, ordinance, zoning
requirement, governmental restriction, order, judgment, or decree. The Seller is
in compliance in all material respects with all terms and conditions of such
Governmental Authorizations and Permits. All of such Governmental Authorizations
and Permits are in full force and effect, and to the Seller’s Knowledge, no
suspension or cancellation of any of them is being threatened, nor will any of
such Governmental Authorizations and/or Permits be affected by the consummation
of the transactions described in this Agreement.
 
Accounts Receivable. All Accounts Receivable of the Seller have arisen in the
ordinary course of business in arm’s-length transactions for goods actually sold
and services actually performed or to be performed, represent valid obligations
to the Seller, collectible in full in accordance with their terms within 30 days
after the day on which they first become payable, subject to any bad debt or
similar reserves reflected on Seller’s Financial Statements in accordance with
GAAP, and are subject to no known set-offs or counterclaims. The Seller has
available in its records copies of invoices or electronic records of services
performed and all existing Contracts with respect to all such Accounts
Receivable.
 
Disclosure. None of the representations and warranties of the Seller in this
Agreement, together with statements contained in this Agreement or in any
Related Document contain any untrue statement of material fact or omit to state
any material fact necessary in order to make such representations, warranties or
statements not misleading.
 
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
 
The Purchaser hereby represents and warrants to the Seller as follows:
 
Organization; Due Authorization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has full corporate power to execute, deliver and perform this Agreement and
each Related Document to which it is a party. The Purchaser has all requisite
power and authority to enter into this Agreement and the Related Documents to be
executed and delivered by the Purchaser pursuant hereto or in connection with
the transactions contemplated hereby or thereby, and to consummate the
transactions contemplated hereby and thereby. All acts and other proceedings
required to be taken by the Purchaser to authorize the execution, delivery and
performance of this Agreement and the Related Documents to which it is a party,
and the consummation of the transactions contemplated hereby and thereby, have
been duly and properly taken.
 
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Valid and Binding. This Agreement and each Related Document, to the extent that
the Purchaser is a party thereto, constitutes a valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms
(assuming this Agreement each Related Document constitutes the valid and binding
agreement of the Seller or such other party), except that (i) such enforcement
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or limiting
creditors’ rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
 
Consents and Approvals. No consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority is required
to be obtained by the Purchaser in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
 
No Violation. The execution and delivery of this Agreement and each Related
Document by the Purchaser, and the consummation of the transactions contemplated
hereby and thereby and compliance with the terms hereof and thereof does not and
will not, conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under or result in the creation of any Encumbrance of any kind
upon any of the properties or assets of the Purchaser under, any provision of
(i) the Certificate of Incorporation or By-laws of the Purchaser, (ii) any note,
bond, mortgage, indenture, deed of trust, license, lease, contract, commitment
or loan or other agreement to which the Purchaser is a party or by which any of
its properties or assets are bound, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Purchaser or its
property or assets. Purchaser possesses, or is the beneficiary of, a sufficient
number of licenses from Microsoft Corporation to permit it to continue to
utilize the Microsoft general purpose office and operating system software
installed on the Computer Equipment included within the Acquired Assets.
 
SEC Documents. The Purchaser has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 2005 (the
“Purchaser SEC Documents”). As of their respective dates, the Purchaser SEC
Documents complied as to form in all material respects with the requirements of
the Securities Act of 1933, as amended, (the “Securities Act”) or the Securities
Exchange Act of 1934, as amended, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Purchaser SEC
Documents, and none of the Purchaser SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Except to the
extent that information contained in any Purchaser SEC Document has been revised
or superseded by a later-filed Purchaser SEC Document filed and publicly
available prior to the date of this Agreement (the “Filed Purchaser SEC
Documents”), as of the date of this Agreement, none of the Purchaser SEC
Documents contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Purchaser included in the Purchaser
SEC Documents complied as of their respective dates of filing with the SEC as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of
Purchaser and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the Filed Purchaser SEC Documents, and
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice, neither Purchaser nor any of its
subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted accounting
principles to be set forth on a consolidated balance sheet of Purchaser and its
consolidated subsidiaries or in the notes thereto which, individually or in the
aggregate, could reasonably be expected to have a material adverse effect on
Purchaser.
 
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Broker’s Fees. No broker, investment banker, financial advisor or other Person
is entitled to any broker’s, finder’s, financial advisor’s or similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser, except those for
which Purchaser will be solely responsible; provided, that Seller shall be
solely responsible for the fee payable to David Heller & Company, LLC (or its
affiliates), as specified in Section 5.23.
 
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
 
Survival of Representations and Warranties. All representations and warranties
made by any Party in this Agreement shall survive the Closing until the
expiration of the statute of limitations applicable thereto (in each case, the
“Survival Period”). No investigation by, or Knowledge of, the Purchaser shall
relieve the Seller from any liability for any breach of a representation or
warranty made in this Agreement or in any Related Document. Covenants and
agreements required to be performed after the Closing shall survive the Closing
and shall expire in accordance with their terms.
 
Notice of Damages. A Party seeking indemnity hereunder (the “Indemnified Party”)
shall give the Party from which indemnity is sought hereunder (the “Indemnitor”)
prompt written notice (hereinafter, the “Indemnification Notice”) of any
demands, claims, actions or causes of action (collectively, “Claims”) asserted
against the Indemnified Party. Failure to give such notice shall not relieve the
Indemnitor of any obligations which the Indemnitor may have to the Indemnified
Party under this Article VII, except and only to the extent that such failure
has actually prejudiced the Indemnitor under the provisions for indemnification
contained in this Agreement or the Indemnitor’s ability to defend such Claim.
For purposes of this Article VII, the Purchaser or another Purchaser Indemnified
Party (as defined herein), on the one hand, and the Seller or another Seller
indemnified Party (as defined herein), on the other hand, shall be deemed to be
the “Indemnified Party” or the “Indemnitors”, as the case may be. Each
Indemnification Notice shall state that the Indemnified Party has paid or
incurred Damages for which such Indemnified Party is entitled to indemnification
pursuant to this Agreement, and specify in reasonable detail (and have annexed
thereto all supporting documentation, including any correspondence in connection
with any Claims by persons not party to this Agreement and paid invoices for
claimed Damages) each individual item of Damages included in the amount so
stated, the date such item was paid or incurred, the basis for any anticipated
liability and the nature of the misrepresentation, breach of warranty, breach of
covenant or claim to which each such item is related and the computation of the
estimated amount to which such Indemnified Party claims to be entitled
hereunder.
 
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Agreements to Indemnify.
 
Subject to the terms and conditions of this Article VII, each of the Seller
Parties, jointly and severally, covenants and agrees to indemnify, defend and
hold harmless the Purchaser and its Affiliates (including any officer, director,
shareholder, partner, member, employee, agent or Representative of any thereof)
(each, a “Purchaser Indemnified Party” and collectively, the “Purchaser
Indemnified Parties”) from and against all assessments, losses, damages,
liabilities, costs and expenses, including, but not limited to, interest,
penalties, and reasonable fees and expenses of legal counsel (collectively,
“Damages”), to the extent incurred by a Purchaser Indemnified Party as a result
of or relating to:
 
any breach of any representation or warranty of the Seller contained in Article
V of this Agreement or in any Related Document to which the Seller is a party;
 
any breach or nonfulfillment of any covenant or agreement of the Seller
contained in this Agreement or in any Related Document to which the Seller is a
party;
 
the Excluded Liabilities; or
 
any and all claims made by creditors of the Seller relating to the provisions of
any “bulk sales” laws of any state or other jurisdiction that may be applicable
to the transactions contemplated hereby.
 
Subject to the terms and conditions of this Article VII, the Purchaser covenants
and agrees to indemnify, defend and hold harmless the Seller and its Affiliates
(including any successor or assigns, officer, director, shareholder, partner,
member, employee, agent or Representative thereof) (each, a “Seller Indemnified
Party” and collectively, the “Seller Indemnified Parties”) from and against all
Damages to the extent incurred by a Seller Indemnified Party as a result of or
relating to:
 
any breach of any representation or warranty of the Purchaser contained in
Article VI of this Agreement or in any Related Document to which the Purchaser
is a party;
 
any breach or nonfulfillment of any covenant or agreement of the Purchaser
contained in this Agreement or in any Related Document to which the Purchaser is
a party;
 
the Assumed Liabilities; or
 
any breach or violation of the Maryland Security Guards Act (Title 19 of the
Business Occupations and Professions Article of the Annotated Code of Maryland),
or any related Federal statute or regulation, COMAR or other regulations
promulgated by the State of Maryland or regulation of any local  jurisdiction in
which Seller's license to operate a Security Guard firm (“Seller’s License”) is
utilized by Purchaser, until such time as Purchaser obtains its own Security
Guard license, whether on or after the Closing Date, at which time Purchaser
hereby expressly agrees that it shall no longer use, or have any rights with
respect to, Seller’s License.
 
Conditions of Indemnification of Third-Party Claims. The obligations and
liabilities of an Indemnitor under Section 7.03 hereof with respect to Damages
resulting from any Claim by a Person not party to this Agreement (a “Third Party
Claim”) shall be subject to the following terms and conditions:
 
The Indemnified Party agrees to give the Indemnitor notice of a Third Party
Claim in respect of which indemnity may be sought under Section 7.03 in
accordance with the notice procedures set forth in Section 7.02 promptly after
such Indemnified party learns of the Third Party Claim; provided, however, that
failure to give such notice shall not affect the indemnification provided
hereunder, except to the extent the Indemnitor shall have been actually
prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the Indemnitor, within ten (10) calendar days after the Indemnified
Party’s receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the Third Party Claim. If
a Third Party Claim is made against an Indemnified Party, the Indemnitor will be
entitled to participate in the defense thereof, and, subject to paragraph (c) of
this Section 7.04, the Indemnitor may elect, by written notice to the
Indemnified Party, to undertake the defense and/or settlement thereof with
counsel reasonably approved by the Indemnified Party, at the sole cost and
expense of the Indemnitor; provided, that should the Indemnitor so elect to
undertake the defense of a Third Party Claim, the Indemnitor will not, as long
as it conducts such defense, be liable to the Indemnified Party for legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof except as otherwise provided in paragraph (c) of this
Section 7.04. If the Indemnitor chooses to defend any claim, the Indemnified
Party shall cooperate in good faith with all reasonable requests of the
Indemnitor and shall retain and make available to the Indemnitor any books,
records or other documents within its control that are necessary or appropriate
for such defense and make available its employees on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder.
 
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In the event that the Indemnitor, within thirty (30) days after receipt of an
Indemnification Notice, does not so elect to defend such Third Party Claim, the
Indemnified Party will have the right to undertake the defense of such Third
Party Claim at the sole cost and expense of the Indemnitor.
 
Anything in this Section 7.04 to the contrary notwithstanding, (i) if the
Indemnitor assumes the defense of any Third Party Claim, any Indemnified Party
shall be entitled to participate in the defense, compromise or settlement of
such Third Party Claim with counsel of its own choice at its own expense;
provided, however, that if representation by the Indemnitor’s counsel would
present a conflict of interest, then such Indemnified Party shall be entitled to
participate in the defense, compromise or settlement of such Third Party Claim
with counsel of its own choice; provided, further, that Indemnitor shall
reimburse the Indemnified Party for the expenses of such counsel if a court of
competent jurisdiction determines that a conflict of interest existed, (ii) no
Person that has undertaken to defend a Third Party Claim under Section 7.04(a)
hereof shall, without written consent of all Indemnified Parties, settle or
compromise any Third Party Claim or consent to entry of any judgment, whether
for monetary, injunctive or other non-monetary relief which (A) does not include
as an unconditional term thereof the general release by the claimant or the
plaintiff of all Indemnified Parties from all liability arising from events
which allegedly give rise to such Third Party Claim or (B) imposes any
restrictions of any kind on the continuing operations of the Business. If the
Indemnified Party shall in good faith determine that the conduct of the defense
of any claim subject to indemnification hereunder or any proposed settlement of
any such Third Party Claim by the Indemnitor might be expected to affect
adversely the ability of the Indemnified Party to conduct its business, or that
the Indemnified Party may have available to it one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnitor in respect of such Third Party Claim or any
litigation relating thereto, the Indemnified Party shall have the right at all
times to take over and assume control over the defense, settlement, negotiations
or litigation relating to any such Third Party Claim at the sole cost of the
Indemnitor; provided, however, that whether or not the Indemnitor or the
Indemnified Party shall have control over the defense, settlement, negotiations
or litigation relating to any such Third Party Claim, the Indemnified Party
shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the Indemnitor’s prior written
consent. Notwithstanding the foregoing, if a settlement offer is made by a third
party claimant and such settlement offer (x) is solely for money damages, (y)
includes as an unconditional term thereof the general release by the claimant or
the plaintiff of all Indemnified Parties from all liability arising from events
which allegedly give rise to such Third Party Claim and (z) does not impose any
restrictions on the continuing operations of the Business, and the Indemnitor
notifies in writing the Indemnified Party of the Indemnitor’s willingness to
accept the settlement offer and, subject to the applicable limitations of this
Article VII, pay the amount called for by such offer, and the Indemnified Party
declines to accept such offer, the Indemnified Party may continue to contest
such Third Party Claim, free of any participation by the Indemnitor, and the
amount of any ultimate liability with respect to such Third Party Claim that the
Indemnitor has an obligation to pay hereunder shall be limited to the lesser of
(1) the amount of the settlement offer that the Indemnified Party declined to
accept plus the other Damages of the Indemnified Party relating to such Third
Party Claim prior to the date of its rejection of the settlement offer or
(2) the aggregate Damages of the Indemnified Party with respect to such Third
Party Claim.
 
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Conditions of Indemnification of Non-Third-Party Claims. With respect to any
Claim for indemnification hereunder which does not involve a third party Claim,
the Indemnified Party will give the Indemnitor written notice of such Claim in
accordance with Section 7.02. The Indemnitor may acknowledge and agree by notice
to the Indemnified Party in writing to satisfy such Claim within forty-five (45)
days of receipt of notice of such Claim from the Indemnified Party. If the
Indemnitor shall dispute such Claim, the Indemnitor shall provide written notice
of such dispute to the Indemnified Party within such 45-day period, setting
forth in reasonable detail the basis of such dispute. Upon receipt of notice of
any such dispute, the Indemnified Party and the Indemnitor shall use reasonable
good faith efforts to resolve such dispute within forty-five (45) days of the
date such notice of dispute is received. If the Indemnitor shall fail to provide
written notice to the Indemnified Party within forty-five (45) days of receipt
of notice from the Indemnified Party that the Indemnitor either acknowledges and
agrees to pay such Claim or disputes such Claim, the Indemnitor shall be deemed
to have acknowledged and agreed to pay such Claim in full and to have waived any
right to dispute such Claim. If the Indemnified Party and the Indemnitor shall
succeed in reaching agreement on their respective rights with respect to any of
such claims, the Indemnified Party and the Indemnitor shall promptly prepare and
sign a memorandum setting forth such agreement. Should the Indemnified Party and
the Indemnitor be unable to agree as to any particular item or items or amount
or amounts within such time period, then either the Indemnified Party or the
Indemnitor Party shall submit such dispute to a court of competent jurisdiction
as set forth in Section 8.05. Once (i) the Indemnitor has acknowledged and
agreed to pay any claim pursuant to this Section 7.05, (ii) any dispute under
this Section 7.05 has been resolved in favor of indemnification by mutual
agreement of the Indemnitor and the Indemnified Party or (iii) any dispute under
this Section 7.05 has been finally resolved in favor of indemnification by order
of a court of competent jurisdiction having jurisdiction over such dispute, then
the Indemnitor shall pay the amount of such Claim to the Indemnified Party
within twenty (20) days after the date of acknowledgement by the Indemnitor or
final resolution in favor of indemnification, as the case may be, to such
account and in such manner as is designated in writing by the Indemnified Party.
 
Limitations on Indemnification. Notwithstanding anything to the contrary
provided elsewhere in this Agreement:
 
Except for any claim resulting from Seller’s fraud, to which the following
limitations shall not apply, the rights of the Purchaser Indemnified Parties to
indemnification under Section 7.03(a)(i) shall be limited as follows:
 
The amount of any Damages incurred by a Purchaser Indemnified Party shall be net
of any (x) cash proceeds actually received by such Purchaser Indemnified Party
under such Party’s insurance policies (less deductibles or increased premiums)
in respect of such Damages and (y) the net amount of any income Tax benefits
actually realized by such Purchaser Indemnified Party by reason of such Damages
during the taxable period in which such Damages occurred.
 
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In any event, the maximum amount for which the Seller Parties shall be liable in
the aggregate shall not exceed the Purchase Price.
 
Except for any claim resulting from Purchaser’s fraud, to which the following
limitations shall not apply, the rights of the Seller Indemnified Parties to
indemnification under Section 7.03(b) shall be limited as follows:
 
The amount of any Damages incurred by a Seller Indemnified Party shall be net of
any (x) cash proceeds actually received by such Seller Indemnified Party under
such Party’s insurance policies (less deductibles or increased premiums) in
respect of such Damages and (y) the net amount of any income Tax benefits
realized by such Seller Indemnified Party by reason of such Damages during the
taxable period in which such Damages occurred.
 
In any event, the maximum amount for which the Purchaser shall be liable in the
aggregate shall not exceed the Purchase Price.
 
Treatment of Indemnification Payments. All indemnification payments made under
this Agreement shall be treated by the Parties as an adjustment to the Purchase
Price. If, notwithstanding such treatment by the Parties, any indemnity payment
is determined to be taxable income rather than an adjustment to Purchase Price
by any Governmental Authority, then the Indemnitor shall indemnify the
Indemnified Party for any Taxes payable by the Indemnified Party by reason of
the receipt of such indemnity payment (including payments under this
Section 7.07), determined at an assumed marginal tax rate equal to the highest
marginal tax rate then in effect for corporate taxpayers in the relevant
jurisdiction.
 
Termination, etc.
 
The indemnities provided in this Agreement shall survive the Closing as set
forth herein and subject to Section 7.01 of this Agreement. After the Closing,
the indemnities provided in Section 7.03(a) and 7.03(b) shall be the sole and
exclusive remedy at law or in equity for any breach of a representation,
warranty, covenant or agreement or other claim arising out of this Agreement or
the transactions contemplated hereby other than for fraud.
 
The Indemnified Party shall take and shall cause its Affiliates to take all
commercially reasonable steps to mitigate any Damages upon becoming aware of any
event which would reasonably be expected to, or does, give rise thereto;
provided, however, that the failure to take such steps shall not affect such
Indemnified Party’s rights to indemnification hereunder.
 
Subject to the reasonable consent of the Indemnitor (which may be withheld if
such subrogation right would, in the reasonable judgment of the Indemnitor,
adversely affect the Indemnitor’s business), upon making any indemnification
payment, the Indemnitor will, to the extent of such payment, be subrogated to
all rights of the Indemnified Party against any third party in respect of the
Damages to which the payment relates. Without limiting any other provision
hereof, each such Indemnified Party and Indemnitor will duly execute upon
request all instruments reasonably necessary to evidence and perfect the
above-described subrogation rights.
 
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Except as set forth in Section 2.08, neither the Seller nor the Purchaser shall
have any right to set-off any Damages against any payments to be made by such
Party or Parties pursuant to this Agreement or any other agreement between the
Parties.
 
MISCELLANEOUS PROVISIONS
 
Expenses. Except as otherwise provided herein, the Seller shall pay all expenses
incurred by or on behalf of the Seller, and the Purchaser shall pay all expenses
incurred by or on behalf of the Purchaser, in each case in connection with this
Agreement or any transaction contemplated by this Agreement, including, but not
limited to, all fees of their respective legal counsel and accountants.
 
Notices. All notices, requests, claims, demands, consents or waivers and other
communications required or permitted hereunder shall be in writing and shall be
delivered personally, by telecopy (which is confirmed as provided below) or by
nationally recognized overnight courier (providing proof of delivery):
 
If to the Seller or any of the Seller Parties, to:
 
Expert Security Services, Inc.
1100 Wicomico Street, Ste 545
Baltimore, MD 21230
Attention: Andrew Maggio
Telephone: (410) 796-0871
Email: amaggio@essinv.com

with a copy to:

Jeffrey L. Forman
Kauffman and Forman, P.A.
406 W. Pennsylvania Avenue
Towson, Maryland  21204
Telephone: (410) 823-5700
Email: forman@comcast.net 

If to the Purchaser, to:
 
Command Security Corp.
P.O. Box 340
1133 Route 55, Suite D
Lagrangeville, New York 12540
Attention: Barry Regenstein, President
Telephone: (845) 454-3703 x 46
Email: BRegenstein@commandsecurity.com
 
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with a copy to:

Dewey & LeBoeuf LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Andrew Hulsh, Esq.
Telephone: (212) 259-8284
Email: ahulsh@dl.com

or, in each case, to such other person or address as any Party shall furnish to
the other Parties in writing. Notice given by personal delivery or overnight
courier shall be effective upon actual receipt. Notice given by telecopy shall
be confirmed by appropriate answer back and shall be effective upon actual
receipt if received during the recipient’s normal business hours, or at the
beginning of the recipient’s next business day if not received during the
recipient’s normal business hours.
 
Binding; No Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by the any of the
Seller Parties without the prior written consent of the Purchaser; provided,
that no such assignment shall release any of the Seller Parties from their
respective duties and obligations hereunder and prior written notice of any such
assignment shall be provided to the Purchaser. The Purchaser may assign all or
part of this Agreement and its rights and benefits hereunder to a Purchaser
Affiliate; provided, that no such assignment shall release the Purchaser from
its duties and obligations hereunder and prior written notice of any such
assignment shall be provided to the Seller.
 
Severability. If in any jurisdiction, any provision of this Agreement or its
application to any Party or circumstance is restricted, prohibited or
unenforceable, such provision shall, as to such jurisdiction, be ineffective
only to the extent of such restriction, prohibition or unenforceability without
invalidating the remaining provisions hereof and without affecting the validity
or enforceability of such provision in any other jurisdiction or its application
to other Parties or circumstances. In addition, if any one or more of the
provisions contained in this Agreement shall for any reason in any jurisdiction
be held to be excessively broad as to time, duration, geographical scope,
activity or subject, it shall be construed by limiting and reducing it, so as to
be enforceable to the extent compatible with the applicable law of such
jurisdiction as it shall then appear.
 
Governing Law; Consent to Jurisdiction and Venue.
 
The Parties acknowledge and agree that this Agreement shall be governed by the
laws of the State of New York as to all matters including matters of validity,
construction, effect, performance and liability, without consideration of
conflicts of laws provisions contained therein, and the courts of the State of
New York have exclusive jurisdiction of all disputes with respect to an alleged
breach of any representation, warranty, agreement or covenant of this Agreement,
including any dispute relating to the construction or interpretation of the
rights and obligations of any Party, which is not resolved through discussion
between the Parties.
 
Each of the Parties hereby irrevocably and unconditionally submits to the
exclusive jurisdiction of any New York State or Federal court sitting in New
York County in any action or proceeding arising out of or relating to this
Agreement, any Related Document or any transaction contemplated in this
Agreement. Each of the Parties hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. Each of the Parties also irrevocably
and unconditionally consents to the service of any and all process in any such
action or proceeding by the mailing of copies of such process by certified mail
to such Party and its counsel at their respective addresses specified in
Section 8.02. Each of the Parties further irrevocably and unconditionally agrees
that a final judgment in any such action or proceeding (after exhaustion of all
appeals or expiration of the time for appeal) shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
 
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Counterparts. This Agreement may be executed simultaneously in counterparts,
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
 
Headings. The title of this Agreement and the headings of the Sections and
Articles of this Agreement are for reference purposes only and shall not be used
in construing or interpreting this Agreement.
 
Entire Agreement; Amendment; Waiver. This Agreement and the Related Documents
delivered pursuant to the terms hereof set forth the entire agreement and
understanding of the Parties in respect of the subject matter hereof, and
supersede all prior agreements, promises, covenants, arrangements,
representations or warranties, whether oral or written, by any Party or any
officer, director, employee or Representative of any Party. No modification or
waiver of any provision of this Agreement shall be valid unless it is in writing
and signed by the Party to be charged therewith. The waiver of breach of any
term or condition of this Agreement shall not be deemed to constitute a waiver
of any other breach of the same or any other term or condition.
 
Third Parties. Except as otherwise provided in Article VII, nothing herein
expressed or implied is intended or shall be construed to confer upon or give to
any person or corporation other than the Parties and their respective successors
or assigns any rights or remedies under or by reason of this Agreement.
 
Publicity. From and after the date hereof, except as otherwise required by law
or the rules of the American Stock Exchange (upon which the equity of the
Purchaser is currently being traded), neither the Seller nor the Purchaser shall
make any announcement, issue any press release or disseminate information to the
press or any third party regarding this Agreement or the transactions
contemplated by this Agreement without the prior written consent of the other
Parties.
 
No Presumption. The Seller and the Purchaser has each participated in the
negotiation and drafting of this Agreement and has each been represented
throughout to its satisfaction by legal counsel of its choosing. In the event
any ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
 
Gender; Tense, Etc. Where the context or construction requires, all words
applied in the plural shall be deemed to have been used in the singular, and
vice versa; the masculine shall include the feminine and neuter, and vice versa;
and the present tense shall include the past and future tense, and vice versa.
 
Reference to Days. All references to days in this Agreement shall be deemed to
refer to calendar days, unless otherwise specified.
 
Waiver of Jury Trial.
 
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO
HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY CIVIL ACTION IN ANY
FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN
CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT
OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY.
 
[Remainder of Page Intentionally Left Blank; Signature Page Follows.]
 
38

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
and delivered, all on the date first above written.
 

       
PURCHASER:
     
COMMAND SECURITY CORP.
 
   
   
  By:    
 
Name:

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

Barry I. Regenstein
  Title:
President
           
SELLER:
       
EXPERT SECURITY SERVICES, INC.
        By:     Name:

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

 
  Title:  

 
39

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EXHIBIT A
 
ASSIGNMENT AND ASSUMPTION AGREEMENT
 
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of January 1, 2008 (the
“Agreement”), by and between Command Security Corporation, a New York
corporation (“Assignee”), and Expert Security Services, Inc., a Maryland
corporation (“Assignor”). Capitalized terms used but not defined herein shall
have the meaning given to such terms in the Purchase Agreement (as defined
below).
 
WHEREAS, Purchaser, Seller and the shareholders of Seller are parties to that
certain Asset Purchase Agreement (the “Purchase Agreement”), dated as of January
1, 2008, pursuant to which, among other things, Purchaser will purchase from
Seller the Acquired Assets;
 
WHEREAS, Assignor wishes to assign all of its rights in and to the Acquired
Assets to Assignee and Assignee wishes to assume all of Assumed Liabilities.
 
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and for the mutual agreements herein
contained, the parties hereto agree as follows:
 
1. Assignment and Assumption. Assignor hereby assigns, transfers and conveys to
Assignee all of Assignor’s right, title and interest in and to the Acquired
Assets and Assignee hereby accepts such assignment and assumes all of the
Assumed Liabilities in all respects.
 
2. Miscellaneous Provisions. Article VIII of the Purchase Agreement is hereby
incorporated herein by reference, as if set forth herein in full
 
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
and delivered, all on the date first above written.
 

       
ASSIGNEE:
     
COMMAND SECURITY CORPORATION
 
   
    By:    
Name: 

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

Barry I. Regenstein
  Title: President

 

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ASSIGNOR:
     
EXPERT SECURITY SERVICES, INC.
 
   
   
  By:    
 
Name:

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Title: 
 

 
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
 

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NEITHER THIS OPTION (THE "OPTION") NOR THE SHARES OF COMMON STOCK OR OTHER
SECURITIES RECEIVABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE
SECURITIES LAWS. THIS OPTION AND THE SHARES OF COMMON STOCK OR OTHER SECURITIES
RECEIVABLE UPON THE EXERCISE HEREOF MAY NOT BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED OR HYPOTHECATED, EXCEPT IN COMPLIANCE WITH THE ACT, THE RULES AND
REGULATIONS THEREUNDER AND APPLICABLE STATE LAWS.

Registered Holder: ANDREW D. MAGGIO

Certificate Number:  A7

Date of Issuance: JANUARY 1, 2008
 
COMMAND SECURITY CORPORATION

COMMON STOCK OPTION

This certifies that the Registered Holder is entitled to purchase from Command
Security Corporation, a New York corporation (the "Company"), subject to the
occurrence of certain specified time vesting criteria, at any time commencing
from the Date of Issuance and ending at 11:59 p.m., New York City time, on the
tenth (10th) anniversary date of the Date of Issuance hereof, at the purchase
price per share (the "Exercise Price") of THREE DOLLARS AND THIRTY-FIVE CENTS
($3.35), an aggregate of twenty-five thousand (25,000) shares (the “Shares”) of
Common Stock, $.0001 par value, of the Company; provided that this Option shall
be exercisable only with respect to “Earned Options” as set forth in the
schedule contained in Section 2 of this Option. The number of Shares purchasable
upon exercise of this Option and the Exercise Price shall be subject to
adjustment from time to time as set forth herein.

This Option may be exercised in whole or in part by presentation of this Option
with the Exercise Agreement, a form of which is attached hereto as Exhibit I
(the "Exercise Agreement"), duly executed and simultaneous payment of the
Exercise Price (subject to any adjustment) at the principal office of the
Company. Payment of such price shall be made at the option of the Holder hereof
in cash or by certified check or bank cashier's check.

This Option is subject to the terms and conditions of the Company's 2005 Stock
Incentive Plan (the "Plan"), the terms of which are hereby incorporated herein
by reference. Terms used herein and not otherwise defined shall have the
meanings as set forth in the Plan. In the event of any conflict between the
terms of this Option and those contained in the Plan, the terms of the Plan
shall determine the outcome of such conflict and shall prevail. This Option is a
Non-Qualified Stock Option as determined under the Plan.

This Option is subject to the following provisions:

Section 1. Certain Definitions. When used in this Option, the following terms,
when capitalized, shall have the meanings set forth below. Certain other terms
are defined in the text of this Option.

1.1. "Act" means the Securities Act of 1933, as amended, and any successor law
or statute thereto.
 

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1.2. "Common Stock" means the Company's Common Stock, par value $.0001 per
share.

1.3. "Company" means Command Security Corporation, a New York corporation, and
any other corporation or any other entity which shall succeed to or assume the
obligations of the Company.

1.4 “Conversion Shares” means the Shares of Common Stock that have been
purchased upon the exercise of this Option.

1.5. "Date of Issuance" is the date set forth on the first page of this Option.

1.6. "Earned Options" means that portion of the Option Grant that has been
earned as a result of the passage of time as set forth in Section 2 hereto.

1.7. "Registered Holder” or "Holder" means the person whom this Option was
originally issued.

1.8. "Option Grant" means the total number of Options granted to the Holder
which are each convertible into shares of Common Stock upon the attainment of
specified vesting criteria set forth herein.

Section 2. Vesting Criteria.

2.1. This Option, and the Shares of Common Stock that may be purchased
hereunder, shall vest with respect to one-twelfth (1/12) of the aggregate number
of Shares on the Date of Issuance and on the same date of each succeeding month
(and the balance, if any of the Shares that is subject to this Option may be
purchased in the 12th month from the Date of Issuance), so long as the Holder is
still an employee of the Company on such date. The portion of this Option that
shall have so vested and become exercisable is referred to herein as the “Earned
Option.”
 
2.2. Notwithstanding the foregoing, upon a Change of Control of the Company
occurring during the Holder’s employment by the Company or during a period of 30
days thereafter, this entire Option shall vest and become exercisable. For
purposes of this Agreement, a "Change in Control" shall mean:

(i) The acquisition (other than by or from the Company), at any time after the
date hereof, by any person, entity or "group", within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange Act"), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors (together with such common stock, "Voting Securities"); or

(ii) If the six members who comprise the Company’s Board of Directors on the
Issuance Date cease for any reason to comprise a majority of the members of the
Board; or

(iii) Approval by the shareholders of the Company of (x) a reorganization,
merger or consolidation with respect to which persons who were the shareholders
of the Company immediately prior to such reorganization, merger or consolidation
do not, immediately thereafter, own more than 50% of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merged or consolidated company's then outstanding voting securities, (y) a
liquidation or dissolution of the Company or (z) the sale of all or
substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.
 

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

 
Section 3. Adjustments.

In order to prevent dilution of the rights granted under this Option, the
Exercise Price and the number of shares of other securities to be received upon
the exercise hereof shall be adjusted as set forth in the Plan.

Section 4. Exercise of Option. Upon any partial exercise of this Option, there
shall be countersigned and issued to the Holder hereof a new Option in respect
of the Shares as to which this Option shall not have been exercised. This Option
may be exchanged at the principal office of the Company by surrender of this
Option properly endorsed either separately or in combination with one or more
other Options for one or more new Options of the same aggregate number of shares
of Common Stock evidenced by the Option or Options exchanged. No fractional
Shares will be issued upon the exercise of rights to purchase hereunder, but the
Company shall pay the cash value of any fraction of a Share upon the exercise of
this Option.

Section 5. Registered Holder Termination. In the event of the voluntary or
involuntary termination (including by reason of death) of employment of the
original Registered Holder of the Option for any reason whatsoever, all Options
which have not vested pursuant to Sections 2.1 or 2.2 hereof shall expire and
become void and shall no longer be exercisable, and all Shares of Common Stock
received upon the exercise of this Option that are held by the Holder on the
date immediately preceding such Termination shall be subject to the repurchase
provisions of Section 11 hereof.

Section 6. No Voting Rights. This Option will not entitle the Holder hereof to
any voting rights or other rights as a stockholder of the Company.

Section 7. Section 83(b) Election. If as a result of exercising all or any part
of this Option, the Holder receives shares that are subject to a "substantial
risk of forfeiture" and are not "transferable" as those terms are defined for
purposes of Section 83(a) of the Internal Revenue Code, then such Holder may
elect under Section 83(b) of the Internal Revenue Code to include in the
Holder's gross income, for the Holder's taxable year in which the shares are
transferred to the Holder, the excess of the fair market value of such shares at
the time of transfer (determined without regard to any restriction other than
one that by its terms will never lapse), over the amount paid for the shares. If
the Holder makes the Section 83(b) election described above, the Holder shall
(i) make such election in a manner that is satisfactory to the Committee, (ii)
provide the Company with a copy of such election, (iii) agree to promptly notify
the Company if any Internal Revenue Service or state tax agent, on audit or
otherwise, questions the validity or correctness of such election or of the
amount of income reportable on account of such election, and (iv) agree to such
tax withholding as the Company may reasonably require in its sole and absolute
discretion.

Section 8. No Right to Employment. This Option shall not confer upon the Holder
any right to employment.

Section 9. Compliance with the Act; Transferability.

9.1. Compliance with the Act. The Holder acknowledges that neither this Option
nor the shares of Common Stock issuable upon exercise of this Option have been
registered under the Act or the securities laws of any state and agrees that
this Option and all shares purchased upon exercise hereof shall be disposed of
only in accordance with the Act and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder and applicable state securities
laws. Except as provided herein, the Holder further agrees not to offer, sell,
transfer or otherwise dispose of this Option or any shares issuable upon
exercise of this Option to any other person unless a registration statement
covering the sale, transfer or other disposition shall then be effective under
the Act and except in compliance with any applicable state securities laws, or
there shall have been delivered to the Company an opinion of counsel reasonably
acceptable to the Company to the effect that such offer, sale, transfer or other
disposition may be effected without compliance with the registration and
prospectus delivery requirements of the Act and any applicable state securities
laws. Each certificate evidencing shares purchased upon exercise of this Option
shall bear a legend to the foregoing effect, and the Holder and any other Person
to whom a certificate for shares or a new warrant is to be delivered shall be
required, at or before receipt of such certificate or warrant, to execute and
deliver to the Company a letter to the effect that it is acquiring the shares
evidenced by such certificate or such warrant for its own account and not with a
view to, or for resale in connection with, any distribution thereof.
 

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

 
9.2. Transferability of Options. This Option shall be transferable only on the
books of the Company maintained at the principal office of the Company. The
transferability of the Option is limited to the Holder's estate or family trust
for which the Holder is a trustee.

Section 10. Notice of Certain Events.

10.1. Adjustment of Exercise Price. Immediately upon any adjustment of the
Exercise Price, the Company will give written notice thereof to the Holder.

10.2. Dividend Distributions, etc. The Company will give written notice to the
Holder at least ten calendar days prior to the date on which the Company closes
its books or takes a record (i) with respect to any dividend or distribution
upon the Common Stock, and (ii) with respect to any pro rata subscription offer
to holders of Common Stock (although the Company shall have no obligation to
cause to occur any of the events set forth in the foregoing subparagraphs (i) or
(ii)).

10.3. Other Events. The Company will give written notice to the Holder at least
ten (10) calendar days prior to the date on which any dissolution, liquidation,
capital reorganization, reclassification, consolidation or merger (in which the
Company is not the surviving corporation) or sale of all or substantially all of
the Company's assets will take place.

Section 11. Company Repurchase Rights.

(a) In the event a Holder ceases to be employed by the Company or its
subsidiaries (the "Termination"), the Earned Option granted to such Holder and
the Shares of Common Stock (or other securities received upon exercise of this
Option received upon the exercise of Earned Options (whether held by the Holder
or otherwise) shall be subject to repurchase by the Company on or after the
Holder's Termination date pursuant to the terms and conditions set forth in this
Section 11 (the "Repurchase Option"). The Company shall have the right, but not
the obligation, to purchase all, but not less than all, the Earned Option
granted or issued to the Holder for the Option Repurchase Price (as defined
below) multiplied by the number of Shares of Common Stock represented by the
Option(s) to be repurchased. The Company shall concurrently therewith also have
the right, but not the obligation, to purchase all, but not less than all, of
the Conversion Shares for the Stock Repurchase Price (as defined below)
multiplied by the number of Conversion Shares to be repurchased.

(b) When and as permitted under paragraph (a) above, the Company may elect to
purchase all of the Earned Options and Conversion Shares by delivering written
notice (the "Repurchase Notice") to the Holder. The Repurchase Notice will set
forth the number of Options and the Conversion Shares to be acquired from such
Holder, the aggregate consideration to be paid for such securities and the time
and place for the closing of the transaction.
 

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

 
(c) The closing of the purchase of the Options and Conversion Shares pursuant to
the Repurchase Option shall take place on the date designated by the Company in
the Repurchase Notice, which date shall not be more than forty-five (45) days
nor less than two (2) business days after the delivery of the Repurchase Notice.
The Company will pay for the Earned Option and Conversion Shares to be purchased
pursuant to the Repurchase Option by delivery of (i) a check or wire transfer of
funds, (ii) a subordinated promissory note payable prior to the six (6) month
anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate of interest as announced
by Citibank, N.A. plus 1% or (iii) both (i) and (ii), in the aggregate amount of
the Option Repurchase Price and/or Stock Repurchase Price for such Earned Option
or Conversion Shares. Any promissory note issued by the Company pursuant to this
Section 11(c) shall be subject to any restrictive covenants under any credit
agreements to which the Company is subject at the time of such purchase. The
Company will be entitled to receive customary representations and warranties as
to title from the sellers regarding such sale and to require all sellers'
signatures be guaranteed. The Company may elect to assign its right to purchase
hereunder to the shareholders of the Company (which right to purchase shall be
distributed pro rata to all shareholders (other than the Holder), based upon the
number of votes held by such shareholders). The other shareholders (other than
the Holder) shall have the same rights and shall be subject to the same
obligations as the Company to purchase the Earned Option or the Conversion
Shares pursuant to the Repurchase Notice.

(d) The Option Repurchase Price and the Stock Repurchase Price shall be equal to
the fair market value of the Earned Options or Conversion Shares, as the case
may be, as determined by the Company’s Board of Directors in its sole and
absolute discretion.

Section 12. Supplements and Amendments. The Board of Directors of Company may
from time to time supplement or amend this Option in order to cure any ambiguity
or to correct or supplement any provision contained herein which may be
defective or inconsistent with the Company's policies or operations.

Section 13. Notices. Except as otherwise expressly provided herein, all notices
referred to in this Option will be in writing and will be delivered personally,
mailed by registered or certified first class mail, return receipt requested,
postage prepaid or transmitted by telegram, telecopy or telex, and will be
deemed to have been given when so delivered, mailed or transmitted (a) to the
Company, at its principal executive offices and (b) to the Holder of this
Option, at such Holder's address as it appears in the records of the Company.

Section 14. Other. The Holder hereof may be treated by the Company and all other
persons dealing with this Option as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.

Section 15. Law Governing. This Agreement shall be construed in accordance with
and governed by the internal laws of the State of New York.

Section 16. Interpretation. The Holder accepts this Option subject to all the
terms and provisions of the Plan and this Agreement. The undersigned Holder
hereby accepts as binding, conclusive and final all decisions or interpretations
of the Company’s Board of Directors upon any questions arising under the Plan
and this Agreement.

* * * *

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

 
 
IN WITNESS WHEREOF, the Company has caused this Option to be signed and attested
by its duly authorized officers under its corporate seal and to be dated the
Date of Issuance hereof.
 

       
COMMAND SECURITY CORPORATION
 
   
   
  By:    

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

Name:
 
Title:

       
OPTIONEE:
       

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

Andrew D. Maggio

 

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

 

EXHIBIT I
 

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

COMMON STOCK OPTION

EXERCISE AGREEMENT
 
TO: _____________________________
DATED: _______________

 
The undersigned, pursuant to the provisions set forth in the attached Option
(Certificate No. __________), hereby agrees to subscribe for the purchase of
________ shares of the Common Stock covered by such Option and makes payment
herewith in full therefor at the price per share provided by such Option.

      By:    
 
Name:

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Address:

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Witness: _______________________________

Name: _______________________________
 
Address: _______________________________
                
                 _______________________________
 

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EXHIBIT C
 
ESCROW AGREEMENT
 
THIS ESCROW AGREEMENT (this “Agreement”) is made as of January 1, 2008, by and
among (i) Expert Security Services, Inc., a Maryland corporation (the “Seller”),
(ii) Command Security Corporation, a New York corporation (“Purchaser”) and
(iii) Deutsche Bank, as Escrow Agent (the “Escrow Agent”). Capitalized terms
used but not defined herein shall have the meaning given to such terms in the
Purchase Agreement (as defined below).
 
WHEREAS, Purchaser, Seller and the shareholders of Seller (each, a “Stockholder”
and collectively, the “Stockholders”) are parties to that certain Asset Purchase
Agreement (the “Purchase Agreement”), dated as of January 1, 2008, pursuant to
which, among other things, Purchaser will purchase from Seller the Acquired
Assets;
 
WHEREAS, the Purchase Agreement provides, among other things, that certain funds
shall be delivered by Purchaser to be held in escrow subject to the terms and
conditions of this Agreement; and
 
WHEREAS, the Escrow Agent is willing to maintain the assets held in escrow and
distribute them to the parties in accordance with the terms hereof;
 
NOW, THEREFORE, in consideration of the mutual covenants of the parties as
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
 
1. Receipt of Escrow Deposit. Pursuant to Section 2.05 of the Purchase
Agreement, at the Closing Purchaser shall deliver to the Escrow Agent by wire
transfer of immediately available funds an aggregate sum of $81,970 (the “Escrow
Amount”). The Escrow Amount, together with all gains, interest and other
earnings realized with respect thereto (“Escrow Income”), and as subsequently
adjusted as provided herein, shall be referred to herein as the “Escrow
Account.” The Escrow Agent agrees to hold the Escrow Account, in a separate and
distinct custodial arrangement, for the benefit of Purchaser and Seller in
accordance with the terms and conditions of this Agreement. The Escrow Account
shall be maintained by the Escrow Agent as part of a single investment account.
The Escrow Agent shall not distribute or release all or any portion of the
Escrow Account, except in accordance with the express terms and conditions of
this Agreement.
 
2. Permitted Investments.
 
(a) In accordance with the written instructions of Purchaser, the Escrow Agent
shall invest the Escrow Amount in investments that shall be limited to: (i)
treasury bills, treasury notes or any other direct obligations issued by or
guaranteed in full as to principal and interest by the United States of America,
(ii) accounts of, and certificates of deposit issued by, the Escrow Agent (or
any of its Affiliates) or any other commercial bank having capital, surplus and
undivided profits of not less than $100,000,000.00 and having a rating of Baa-2
or better by Moody’s, or the equivalent, (iii) commercial paper rated no lower
than “P-1” by Moody’s, or the equivalent, (iv) money market accounts and money
market mutual funds whose investments are substantially as described in clauses
(i) through (iii), and (v) such other investments as may be set forth in any
written agreement of Purchaser and Seller (the “Permitted Investments”). In the
event that the Escrow Agent does not receive written direction to invest funds
held in the Escrow Account, the Escrow Agent shall invest and reinvest such
funds in a money market deposit account offered by the Escrow Agent in
connection with its escrow-related services generally. None of the parties
hereto shall be liable or responsible in any manner for any loss or depreciation
resulting from any such Permitted Investment or any liquidation thereof, or for
any costs in connection therewith, and all of said losses and costs shall be
borne by the Escrow Account.
 
1

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(b) The parties recognize and agree that the Escrow Agent will not provide
supervision, recommendations or advice relating to either the investment of
moneys held in the Escrow Account or the purchase, sale, retention or other
disposition of any Permitted Investment.
 
(c) Interest and other earnings on Permitted Investments shall be added to the
Escrow Account. Any loss or expense incurred as a result of an investment will
be borne by the Escrow Account.
 
(d) The Escrow Agent is hereby authorized to execute purchases and sales of
Permitted Investments through the facilities of its own trading or capital
markets operations or those of any affiliated entity. The Escrow Agent shall
send statements to Purchaser and Seller on a monthly basis reflecting activity
in the Escrow Account for the preceding month. Although Purchaser and Seller
each recognize that it may obtain a broker confirmation or written statement
containing comparable information at no additional cost, Purchaser and Seller
hereby agree that confirmations of Permitted Investments are not required to be
issued by the Escrow Agent for each month in which a monthly statement is
rendered. No statement need be rendered for the Escrow Account if no activity
occurred for such month.
 
(e) Purchaser and Seller each acknowledge and agree that the delivery of the
escrowed property is subject to the sale and final settlement of Permitted
Investments. Proceeds of a sale of Permitted Investments will be delivered on
the business day on which the appropriate instructions are delivered to the
Escrow Agent if received prior to the deadline for same day sale of such
Permitted Investments. If such instructions are received after the applicable
deadline, proceeds will be delivered on the next succeeding business day.
 
2

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3. Claims and Escrow Account. The purpose of the escrow established hereunder is
to provide a source of funds for the payment of certain amounts to which (i)
Purchaser may become entitled under Article VII of the Purchase Agreement, and
(ii) Purchaser or Seller may become entitled under Section 2.07 of the Purchase
Agreement. The procedures for payments to be made pursuant to such sections of
the Purchase Agreement are set forth in Section 4 below.
 
4. Payments from the Escrow Account.
 
(a) If, from time to time, (i) Purchaser determines that it is entitled to
payment pursuant to Section 7.03(a) or Section 7.04 of the Purchase Agreement
(an “Indemnity Claim”), Purchaser may request payment from the Escrow Account by
giving written notice to the Escrow Agent and Seller (in each case in accordance
with the provisions of Section 8 below) of such Indemnity Claim (any written
notice of an Indemnity Claim being referred to as an “Indemnity Claim Notice”).
Each Indemnity Claim Notice shall clearly state that a Purchaser Indemnified
Party has paid or incurred Losses for which such Person is entitled to
indemnification under the Purchase Agreement. The Indemnity Claim Notice shall
state the method of computation of such Indemnity Claim and the amount thereof,
if ascertainable, shall specify in reasonable detail each individual item of
Loss included in such amount, the date such item was paid or incurred, and the
basis for any anticipated liability, and shall refer to the provisions of the
Purchase Agreement in respect of which such Indemnity Claim shall have occurred.
It is understood by the parties hereto that the Escrow Agent shall have no duty
or obligation to verify or otherwise determine Purchaser’s rights under the
Purchase Agreement.
 
(b) If, from time to time, (i) Seller determines that it is entitled to payment
pursuant to Section 2.07(a), Section 2.07(b)(i)(A) or Section 2.07(b)(i)(C) of
the Purchase Agreement or (ii) Purchaser determines that it is entitled to
payment pursuant to Section 2.07(b)(i)(B), Section 2.07(b)(i)(D) or Section
2.07(b)(i)(E) (such claims are referred to herein individually as a “Section
2.07 Claim”), Seller or Purchaser, as the case may be, may request payment from
the Escrow Account by giving written notice to the Escrow Agent and the other
party (in each case in accordance with the provisions of Section 8 below) of
such Section 2.07 Claim (any written notice of a Section 2.07 Claim being
referred to as an “Section 2.07 Claim Notice”). Each Section 2.07 Claim Notice
shall (i) clearly state (A) the method of computation of such Section 2.07
Claim, (B) the amount thereof and (C) the basis for the determination of the
Seller or the Purchaser, as the case may be, and (ii) shall either be (A) signed
by both Seller and Purchaser or (B) if not signed by both Seller and Purchaser,
contain a statement of the Neutral Auditors that supports the determination of
the Seller or the Purchaser, as the case may be. It is understood by the parties
hereto that the Escrow Agent shall have no duty or obligation to verify or
otherwise determine Seller’s or Purchaser’s rights under the Purchase Agreement.
 
3

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(c) Seller shall have the right to dispute any Indemnity Claim against the
Escrow Account, and each of Seller and Purchaser shall have the right to dispute
any Section 2.07 Claim against the Escrow Account during the forty-five (45)
calendar day period following the date of its receipt of a copy of a Claim
Notice (the “Objection Period”) by delivering to the Escrow Agent and Purchaser
written notice (an “Objection Notice”) that Seller disputes the matter(s) set
forth in such Indemnity Claim Notice or Section 2.07 Claim Notice, as the case
may be, either with respect to the validity or the amount of the Indemnity Claim
or the Section 2.07 Claim, as the case may be (or both). The Objection Notice
shall include the basis, with reasonable detail, of the objection.
 
(d) If on or prior to the last day of the Objection Period, the Escrow Agent has
not received an Objection Notice (i) from Seller with respect to an Indemnity
Claim made by Purchaser, or (ii) from either Seller or Purchaser, as the case
may be, with respect to a Section 2.07 Claim made by the other party, the
Indemnity Claim stated in the related Indemnity Claim Notice or the Section 2.07
Claim specified in the related Section 2.07 Claim Notice shall be conclusively
deemed to be approved by Seller and the Purchaser and the Escrow Agent shall on
the next banking day thereafter pay to Purchaser, or its designee, or the
Seller, or its designee, as the case may be, from the Escrow Amount the amount
specified in such Indemnity Claim Notice or Section 2.07 Claim Notice, as the
case may be.
 
(e) If on or prior to the last day of the Objection Period, the Escrow Agent
shall have received (i) from Seller an Objection Notice with respect to an
Indemnity Claim or portion of an Indemnity Claim made by Purchaser, or (ii) from
Seller or Purchaser, as the case may be, an Objection Notice with respect to a
Section 2.07 Claim or portion of a Section 2.07 Claim made by Seller or
Purchaser, as the case may be, then such Indemnity Claim or Section 2.07 Claim
(or disputed portion thereof) shall be deemed to be an “Open Claim”, and the
Escrow Agent shall reserve within the Escrow Amount an amount equal to the
amount of the Open Claim (which amount for each Open Claim is referred to herein
as a “Claim Reserve”). The Escrow Agent shall on the next banking day after
receiving an Objection Notice pay to Purchaser, or its designee, or the Seller,
or its designee, from the Escrow Amount the amount of the undisputed portion, if
any, of such Indemnity Claim or Section 2.07 Claim, as the case may be.
 
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(f) The amount constituting the Claim Reserve for each Open Claim shall be paid
by the Escrow Agent from the Escrow Account only in accordance with (i) a joint
written instruction executed and delivered by Purchaser and Seller directing
delivery of the Escrow Account or any portion thereof (a “Joint Instruction”) or
(ii) a final non-appealable order of a court of competent jurisdiction or a
ruling by an arbitrator, in either case directing delivery of the Claim Reserve
or any portion thereof (each a “Final Determination”), together with an opinion
of counsel to the effect that such order is final and non-appealable and from a
court of competent jurisdiction or that such arbitration ruling is final and
non-appealable.
 
(g) On the earlier of such date as (i) Purchaser and Seller deliver a joint
written notice to the Escrow Agent authorizing the immediate termination of the
Escrow Account, and (ii) the date of the 18th month anniversary of the date
hereof (the “Indemnification Escrow Amount Termination Date”), the Escrow Agent
shall release from the Escrow Account and deliver to the Seller an amount equal
to the Escrow Amount together with any interest earned thereon, minus the amount
of (i) any Indemnity Claim or Claims that have been set forth in an
Indemnification Notice pursuant to Article VII of the Purchase Agreement and
Section 4(a) hereof and (ii) any distributions of the Escrow Fund in accordance
with Section 2.07 of the Purchase Agreement and Section 4(b) hereof (whether or
not such Indemnity Claim(s) or Section 2.07 Claim(s) have been determined to be
valid as of such date (the portion of the Escrow Amount that has not been
released to the Seller is referred to as the “Escrow Balance”), and the Escrow
Balance shall be retained in escrow pending Adjudication of such Claim(s)in
accordance with Section 2.08 of the Purchase Agreement and Section 4(e) hereof.
 
(h) Any amounts to be distributed by the Escrow Agent to either Purchaser or
Seller shall be distributed by wire transfer of immediately available funds to
accounts designated by the recipients. From time to time, the Escrow Agent may
receive written instructions from Purchaser and Seller regarding the disposition
of all or a portion of the Specific Indemnity Escrow Amount. Once the entire
balance of the Specific Indemnity Escrow Amount has been distributed, it shall
be terminated.
 
5. Duties of Escrow Agent.
 
(a) The Escrow Agent shall not be under any duty to give the Escrow Account held
by it hereunder any greater degree of care than it gives other similar escrow
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement. Un-invested funds held hereunder shall not earn or
accrue interest.
 
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(b) The Escrow Agent shall not be liable, except for its own gross negligence or
willful misconduct and, except with respect to claims based upon such gross
negligence or willful misconduct that are successfully asserted against the
Escrow Agent, the other parties hereto shall jointly and severally indemnify and
hold harmless the Escrow Agent (and any successor Escrow Agent) from and against
any and all losses, liabilities, claims, actions, damages and expenses,
including reasonable attorneys’ fees and disbursements, arising out of and in
connection with this Agreement. Without limiting the foregoing, the Escrow Agent
shall in no event be liable in connection with its investment or reinvestment of
any cash held by it hereunder in good faith in accordance with the terms hereof,
including, without limitation, any liability for any delays (not resulting from
its gross negligence or willful misconduct) in the investment or reinvestment of
the Escrow Account, or any loss of interest incident to any such delays. The
obligations of the other parties hereto to the Escrow Agent under this paragraph
shall survive the termination of this Agreement and the resignation or removal
of the Escrow Agent.
 
(c) The Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing from any court or
other governmental authority delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated therein or the
propriety or validity of the service thereof, notwithstanding that such judgment
or order may subsequently be reversed, modified, annulled, set aside or vacated.
The Escrow Agent shall have no responsibility to inquire into or determine the
genuineness, authenticity, or sufficiency of any securities, checks, or other
documents or instruments submitted to it in connection with its duties
hereunder. The Escrow Agent shall also be entitled to deem the signatories of
any documents or instruments submitted to it hereunder as being those purported
to be authorized to sign such documents or instruments on behalf of the parties
hereto, and shall be entitled to rely upon the genuineness of the signatures of
such signatories without inquiry and without requiring substantiating evidence
of any kind.
 
(d) The Escrow Agent may act pursuant to the advice of counsel with respect to
any matter relating to this Agreement and shall not be liable for any action
taken or omitted by it in good faith in accordance with such advice. If the
Escrow Agent becomes involved in litigation on account of this Agreement, it
shall have the right to retain counsel and shall have a first lien on the
property deposited hereunder for any and all costs, attorneys’ fees, charges,
disbursements, and expenses in connection with such litigation; and shall be
entitled to reimburse itself therefor out of the property deposited hereunder,
and if it shall be unable to reimburse itself from the property deposited
hereunder, the other parties hereto jointly and severally agree to pay to the
Escrow Agent on demand its reasonable charges, reasonable attorneys’ fees,
disbursements, and out-of-pocket expenses in connection with such litigation.
 
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(e) The Escrow Agent does not have any interest in the Escrow Account deposited
hereunder, except as otherwise provided in Sections 5(d) and 5(j) hereof, but is
serving as escrow holder only and having only possession thereof. Any payments
of income from the Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. The parties hereto will
provide Escrow Agent with appropriate Internal Revenue Service Forms W-9 for tax
identification number certification, or non-resident alien certifications. This
Section 5(e) and Section 5(b) shall survive notwithstanding any termination of
this Agreement or the resignation or removal of the Escrow Agent.
 
(f) The Escrow Agent makes no representation as to the validity, value,
genuineness or the collectibility of any security or other document or
instrument held by or delivered to it.
 
(g) The Escrow Agent shall not be called upon to advise any party as to the
wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
 
(h) The Escrow Agent (and any successor Escrow Agent) may at any time resign as
such by delivering the Escrow Account to any successor Escrow Agent jointly
designated by the other parties hereto in writing, or to any court of competent
jurisdiction, whereupon the Escrow Agent shall be discharged of and from any and
all further obligations arising in connection with this Agreement. The
resignation of the Escrow Agent will take effect on the earlier of (i) the
appointment of a successor (including a court of competent jurisdiction) or (ii)
the day which is thirty (30) calendar days after the date of delivery of its
written notice of resignation to the other parties hereto. If at that time the
Escrow Agent has not received a designation of a successor Escrow Agent, the
Escrow Agent’s sole responsibility after that time shall be to retain and
safeguard the Escrow Account until receipt of a designation of a successor
Escrow Agent or a Joint Instruction or Final Determination.
 
(i) In the event of any disagreement between the other parties hereto resulting
in adverse claims or demands being made in connection with the Escrow Account or
in the event that the Escrow Agent is in doubt as to what action it should take
hereunder, the Escrow Agent shall be entitled to retain the Escrow Account until
the Escrow Agent shall have received (i) a Final Determination or (ii) a Joint
Instruction, in which event the Escrow Agent shall disburse the Escrow Account
in accordance with such Final Determination or Joint Instruction. The Escrow
Agent shall act on such Final Determination or Joint Instruction without further
question.
 
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(j) In the event that any escrow property shall be attached, garnished, or
levied upon by any court order, or the delivery thereof shall be stayed or
enjoined by an order of a court, or any order, judgment or decree shall be made
or entered by any court order affecting the property deposited under this
Agreement, or any part thereof, the Escrow Agent is hereby expressly authorized,
in its sole discretion, to obey and comply with all writs, orders or decrees so
entered or issued, which it is advised by legal counsel of its own choosing is
binding upon it, whether with or without jurisdiction, and in the event that the
Escrow Agent obeys or complies with any such writ, order or decree it shall not
be liable to any of the parties hereto or to any other person, firm or
corporation, by reason of such compliance notwithstanding such writ, order or
decree be subsequently reversed, modified annulled, set aside or vacated.
 
(k) Any corporation or association into which the Escrow Agent may be converted
or merged, or with which it may be consolidated, or to which it may sell or
transfer its corporate trust business and assets as a whole or in part, or any
corporation or association resulting from any such conversion, sale, merger,
consolidation or transfer to which it is a party, shall be and become the
successor Escrow Agent hereunder and vested with all of the title to the whole
property or trust estate and all of the trusts, powers, immunities, privileges,
protections and all other matters as was its predecessor, without the execution
or filing of any instrument or any further act, deed or conveyance on the part
of any of the parties hereto, anything herein to the contrary notwithstanding.
 
6. Limited Responsibility. This Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this agreement against the
Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Agreement.
 
7. Taxes; Escrow Income.
 
(a) Purchaser and Seller hereby acknowledge that, for federal and state income
tax purposes, all Escrow Income shall be deemed income of Seller. The Escrow
Agent shall be entitled to request and receive appropriate forms executed by
Seller with respect to the Escrow Income. The Escrow Agent shall be responsible
for reporting any Escrow Income earned to the Internal Revenue Service. The
Escrow Agent shall add the Escrow Income to the Escrow Account as it accrues.
 
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(b) Seller is required to prepare and file any and all income or other tax
returns applicable to the Escrow Account with the Internal Revenue Service and
all required state and local departments of revenue in all years income is
earned in any particular tax year as and to the extent required under the
provisions of the Code.
 
(c) Any taxes payable on income earned from the investment of any sums held in
the Escrow Account shall be paid by Seller, whether or not the income was
distributed by the Escrow Agent during any particular year as and to the extent
required under the provisions of the Code.
 
(d) The Escrow Agent shall have no responsibility for the preparation and/or
filing of any tax or information return with respect to any transaction, whether
or not related to the Agreement that occurs outside the Escrow Account.
 
8. Bank Accounts for Payment by Escrow Agent. Any payments by the Escrow Agent
hereunder to Seller shall be made to such bank account of which Seller shall
have given written notice to the Escrow Agent and Purchaser. Any payments by the
Escrow Agent hereunder to Purchaser shall be made to such bank account of which
Purchaser shall have given written notice to the Escrow Agent and Seller.
 
9. Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (a) when personally delivered,
(b) when transmitted via telecopy (or other facsimile device) to the number set
out below if the sender on the same day sends a confirming copy of such notice
by a recognized international overnight air courier service (charges prepaid),
or (c) the second business day following the day (except if not a business day
then the next business day) on which the same has been delivered prepaid to a
recognized international overnight air courier service. Notices, demands and
communications, in each case to the respective parties, shall be sent to the
applicable address set forth below, unless another address has been previously
specified in writing:
 
If to the Seller, to:
 
Expert Security Services, Inc.
1100 Wicomico Street, Ste 545
Baltimore, MD 21230
Attention: Andrew Maggio
Telephone: (410) 796-0871
Email: amaggio@essinv.com
 
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with a copy to:

Jeffrey L. Forman
Kauffman and Forman, P.A.
406 W. Pennsylvania Avenue
Towson, Maryland  21204
Telephone: (410) 823-5700
Email: forman@comcast.net 

If to the Purchaser, to:
 
Command Security Corp.
P.O. Box 340
1133 Route 55, Suite D
Lagrangeville, New York 12540
Attention: Barry Regenstein, President
Telephone: (845) 454-3703 x 46
Email: BRegenstein@commandsecurity.com

with a copy to:

Dewey & LeBoeuf LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Andrew Hulsh, Esq.
Telephone: (212) 259-8284
Email: ahulsh@dl.com

or, in each case, to such other person or address as any party shall furnish to
the other parties in writing. Notice given by personal delivery or overnight
courier shall be effective upon actual receipt. Notice given by telecopy shall
be confirmed by appropriate answer back and shall be effective upon actual
receipt if received during the recipient’s normal business hours, or at the
beginning of the recipient’s next business day if not received during the
recipient’s normal business hours.
 
10. Counterparts. This Agreement may be executed in one or more counterparts,
all of which taken together shall constitute one and the same instrument.
 
11. Section Headings. The headings and captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption or heading had been used herein or therein.
 
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12. Banking Days. If any date on which the Escrow Agent is required to make an
investment or a delivery pursuant to the provisions hereof is not a banking day,
then the Escrow Agent shall make such investment or delivery on the next
succeeding banking day.
 
13. Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
 
14. Exclusive Agreement and Modification. This Agreement and the Purchase
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, whether written or oral, relating to such subject
matter in any way. The Escrow Agent shall have only those duties as are
specifically provided herein, which shall be deemed purely ministerial in
nature, and shall under no circumstance be deemed a fiduciary for any of the
parties to this Agreement. The Escrow Agent shall neither be responsible for,
nor chargeable with, knowledge of the terms and conditions of any other
agreement, instrument or document between the other parties hereto, in
connection herewith, including without limitation the Purchase Agreement. This
Agreement sets forth all matters pertinent to the escrow contemplated hereunder,
and no additional obligations of the Escrow Agent shall be inferred from the
terms of this Agreement or any other Agreement. IN NO EVENT SHALL THE ESCROW
AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING
OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM THE
ESCROW AGENT’S FAILURE TO ACT IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS
AGREEMENT, OR (ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW AGENT
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
 
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15. Assigns and Assignment. Neither this Agreement nor any of the rights or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of each of the other parties, which consent shall not be
unreasonably withheld, conditioned or delayed; provided that Purchaser shall
have the right to assign all or certain provisions of this Agreement, or any
interest herein, and may delegate any duty or obligation hereunder, without the
consent of any of the other parties, to (i) any Affiliate of Purchaser, (ii) any
purchaser of any or all of the assets or capital stock (whether by merger,
recapitalization, reorganization or otherwise) of Purchaser or (iii) any of
Purchaser’s financing sources as collateral; provided further, that the Escrow
Agent shall have the right to assign this Agreement to a successor Escrow Agent
hereunder; and provided, further, that Seller shall have the right to assign all
or certain provisions of this Agreement, or any interest herein, and may
delegate any duty or obligation hereunder, without the consent of any of the
other parties, to any Affiliate of Seller or any purchaser of any or all of the
assets or capital stock (whether by merger, recapitalization, reorganization or
otherwise) of Seller. This Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective heirs,
successors and permitted assigns. Any attempted assignment in violation of the
terms of this Section 15 shall be null and void, ab initio. No assignment of the
interest of any of the parties hereto shall be binding upon the Escrow Agent
unless and until written evidence of such assignment in form satisfactory to the
Escrow Agent shall be filed with and acknowledged by the Escrow Agent.
 
16. Governing Law. All issues and questions concerning the construction,
validity, interpretation and enforceability of this Agreement and the exhibits
and schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
 
17. Execution by the Escrow Agent. The execution and delivery of this Agreement
by the Escrow Agent shall constitute a receipt for the Escrow Amount.
 
18. Third-Party Beneficiaries. The terms and provisions of this Agreement are
intended solely for the benefit of the parties hereto, and their respective
successors and assigns, and nothing in this Agreement is intended or shall be
construed to give any other Person any legal or equitable right, remedy or claim
under, or in respect of, this Agreement or any provision contained herein.
 
* * * * *
 
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement on
the date first written above.
 

       
COMMAND SECURITY CORPORATION
 
   
   
  By:    

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Name:
  Title:

 

       
EXPERT SECURITY SERVICES, INC.
 
   
   
  By:    

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Name:
  Title:

       
DEUTSCHE BANK, as Escrow Agent
 
   
   
  By:    

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Name:
  Title:

 
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EXHIBIT D
 
EXPERT SECURITY SERVICES, INC.

BILL OF SALE AND ASSIGNMENT

This BILL OF SALE AND ASSIGNMENT (this “Bill of Sale”), dated as of January 1,
2008, is delivered by the undersigned pursuant to the Asset Purchase Agreement,
dated as of January 1, 2008 (the “Agreement”), among Command Security
Corporation, a New York corporation, Expert Security Services, Inc. a Maryland
corporation, and the shareholders of Expert Security Services, Inc. All terms
used, but not defined, in this Bill of Sale shall have the meanings ascribed to
such terms in the Agreement.
 
I. Acquired Assets
 
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Satco does hereby sell, transfer, convey, assign and
deliver to Satco Purchaser, free and clear of all Liens, other than Permitted
Exceptions, all of the assets, properties and right, whether real, personal,
tangible or intangible, of every kind, nature and description of the Seller with
respect to, or used in connection with, the Business, other than the Excluded
Assets, including without limitation:
 
1. all Computer Equipment, machinery, furniture, fixtures, equipment and other
tangible personal property owned by the Seller (the “Owned Tangible Property”),
including without limitation that listed and described on Schedule 1.02(a) and
the Seller’s rights under all related warranties;
 
2. all of the Seller’s right, title and interest in and to the Leased Tangible
Property, including without limitation that listed and described on Schedule
1.02(b);
 
3. all of the Seller’s right, title and interest in, to and under the Contracts,
including without limitation those listed on Schedule 5.11(a);
 
4. all of the Seller’s right, title and interest in, to and under the Leases
listed on Schedule 5.11(b);
 
5. all client, customer, lead, mailing, circulation and related lists, and all
other lists, accounts, books and records of the Seller (including without
limitation those relating to (i) proprietary research and other databases, (ii)
the purchase of materials, supplies or services, and (iii) the production and
sale of products or services, including all correspondence and other files), and
all other existing records of the Seller, and all computerized records, together
with the related documentation used in connection therewith;
 
6. all Governmental Authorizations, including without limitation those listed
and described on Schedule 5.24;
 
7. any sales, excise or other licenses or registrations issued to or held by the
Seller necessary for the operation of the Business, all of which are listed on
Schedule 1.02(i); and
 
all goodwill of the Seller specific to the Business.
 
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provided, however, that in no event shall any Excluded Asset be an Acquired
Asset.
 
TO HAVE AND TO HOLD said properties, rights, assets, business and goodwill, as a
going concern, unto the Purchaser, its successors and assigns, to and for its
use forever.
 
AND, Seller does hereby warrant, covenant and agree that it:
 
(a) has good and marketable title to the Acquired Assets hereby sold,
transferred, conveyed, assigned and delivered, subject only to Permitted
Encumbrances; and
 
(b) will warrant and defend the sale of said properties, rights and assets
against all and every Person or Persons whomsoever claiming or to claim against
any or all of the same, subject to the terms and provisions of the Agreement.
 
II. Excluded Assets
 
Notwithstanding anything to the contrary contained herein, the following
properties, assets and contracts of Satco (collectively, the “Excluded Assets”)
are not part of the sale and purchase contemplated by this Bill of Sale, are
excluded from the Acquired Assets and shall remain the properties and assets of
Seller after the Closing:
 
1. all cash on hand and in banks and other cash items and equivalents of the
Seller;
 
2. the Seller’s corporate charters, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, corporate
minute books, and other books and records relating to internal corporate matters
and any other books and records of the Seller (i) not related to the Business
(which shall not include financial and taxation books and records of the Seller
related to the Business), (ii) relating to financial relationships with the
Seller’s lenders or Affiliates, or (iii) that the Seller is required by law to
retain;
 
3. all employee benefit plans, programs and arrangements, and all assets, rights
and claims thereunder, and other commitments of the Seller relating to
employees, whether written or oral, express or implied including, without
limitation, the Benefit Plans;
 
4. any claims, rights and interest in and to any refunds of federal or local
franchise, income or other Taxes or fees of any nature whatsoever which relate
solely to the period up to and including the Closing Date;
 
5. all capital stock of the Seller;
 
6. that certain 1999 Toyota model RAV 4 heretofore used by Seller in the
Business;
 
7. all claims of the Seller against third Persons relating to the Excluded
Assets, whether choate or inchoate, known or unknown, contingent or
non-contingent, or otherwise arising from or relating to periods prior to the
Closing Date; and
 
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8. all rights of the Seller under this Agreement or any Related Document;
 
9. all insurance policies relating to the Business;
 
10. all prepaid expenses and deposits of the Seller with third parties in
respect of the Business;
 
11. all claims of the Seller, including but not limited to claims under the
Seller’s insurance policies, causes of action and choses in action; and
 
12. all Accounts Receivable.
 
This Bill of Sale shall be binding upon Seller and its successors and permitted
assigns pursuant to the Agreement, and shall inure to the benefit of and be
enforceable by Purchaser and its successors and permitted assigns pursuant to
the Agreement.
 
This Bill of Sale shall be governed by and construed in accordance with the laws
of the State of New York without regard to conflicts of laws principles.
 
From time to time following the date hereof, at the request of Purchaser, Seller
shall and shall cause its Affiliates, directors, officers, employees, agents and
representatives to execute, deliver, file and record any and all agreements,
instruments, certificates or other documents and take such other actions as may
be reasonably necessary to consummate or implement the transactions contemplated
by this Bill of Sale.
 
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IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed and
delivered by its duly authorized representative as of the date first above
written.
 

       
EXPERT SECURITY SERVICES, INC.
 
   
   
  By:    

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Name:
  Title:

 
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