UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
---------------
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-18684
Command Security Corporation
(Exact name of registrant as specified in its charter)
New York 14-1626307
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Lexington Park, LaGrangeville, New York 12540
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 454-3703
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practical date: 7,199,206 (as of November 8,1996).
<PAGE>
COMMAND SECURITY CORPORATION
INDEX
PART I. Financial Information Page No.
--------
Item 1. Financial Statements
Condensed Statements of Operations -
three months and six months ended
September 30, 1996 and 1995 (unaudited) 2
Condensed Balance Sheets -
September 30,1996 and March 31, 1996
(unaudited) 3
Condensed Statements of Stockholders' Equity -
six months ended September 30, 1996 and 1995
(unaudited) 4
Condensed Statements of Cash Flows -
six months ended September 30, 1996 and 1995
(unaudited) 5 - 6
Notes to Condensed Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 10 - 12
PART II. Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
1
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
COMMAND SECURITY CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ---------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 12,721,075 $ 14,228,641 $ 24,721,864 $ 29,131,094
Cost of revenue 10,364,688 12,302,422 20,404,845 25,047,439
------------ ------------ ------------ ------------
Gross profit 2,356,387 1,926,219 4,317,019 4,083,655
Service contract revenue (note 1) 361,580 374,385 689,352 682,272
------------ ------------ ------------ ------------
2,717,967 2,300,604 5,006,371 4,765,927
------------ ------------ ------------ ------------
Operating expenses
General and administrative expenses 1,879,846 2,176,364 3,515,169 4,199,973
Amortization of intangibles 437,493 301,474 883,284 606,060
Provision for doubtful accounts 161,950 70,434 225,036 159,305
------------ ------------ ------------ ------------
2,479,289 2,548,272 4,623,489 4,965,338
------------ ------------ ------------ ------------
Operating profit/(loss) 238,678 (247,668) 382,882 (199,411)
Interest income 69,071 38,222 128,872 67,825
Interest expense (223,592) (302,791) (505,512) (563,740)
Equipment dispositions (13,770) (10,756) (25,738) (14,003)
------------ ------------ ------------ ------------
Income/(loss) before income taxes 70,387 (522,993) (19,496) (709,329)
Provision for income taxes -0- -0- -0- -0-
------------ ------------ ------------ ------------
Net income/(loss) 70,387 (522,993) (19,496) (709,329)
Preferred stock dividends (32,291) (71,271) (64,582) (71,271)
------------ ------------ ------------ ------------
Net income/(loss) applicable to
common shareholders $ 38,096 $ (594,264) $ (84,078) $ (780,600)
============ ============ ============ ============
Net income/(loss) per common share $ .01 $ (.09) $ (.01) $ (.12)
============ ============ ============ ============
Weighted average number
of common and common
equivalent shares outstanding 6,814,749 6,633,932 6,789,897 6,633,932
============ ============ ============ ============
</TABLE>
2
<PAGE>
See accompanying notes to condensed financial statements.
COMMAND SECURITY CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
Sept. 30, March 31,
1996 1996
------------ ------------
<S> <C> <C>
Current assets:
Accounts receivable - net $ 12,242,278 $ 12,320,412
Notes receivable, current maturities - net 200,041 260,547
Prepaid expenses 1,109,422 1,176,972
Other receivables - net 324,538 285,469
------------ ------------
Total current assets 13,876,279 14,043,400
------------ ------------
Property and equipment - net 1,082,341 975,832
------------ ------------
Other assets:
Notes and accounts receivable
due after one year - net 258,138 210,659
Intangible assets - net 5,775,197 6,270,440
Deferred income taxes 300,541 300,541
Other assets 882,103 583,542
------------ ------------
Total other assets 7,215,979 7,365,182
------------ ------------
Total assets $ 22,174,599 $ 22,384,414
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 1,207,147 $ 913,944
Current maturities of long-term debt 1,645,646 1,938,273
Current maturities of obligations under capital leases 39,714 102,811
Short-term borrowings 7,006,116 6,465,827
Accounts payable 707,106 629,710
Due to service companies 416,434 641,944
Accrued payroll and other expenses 2,678,377 3,131,923
------------ ------------
Total current liabilities 13,700,540 13,824,432
Deferred gain 101,510 133,303
Self-insurance reserves 395,997 428,423
Long-term debt due after one year 1,066,587 1,178,962
Obligations under capital leases due after one year 44,475 15,543
------------ ------------
15,309,109 15,580,663
------------ ------------
Redeemable, convertible Series A preferred stock 1,679,107 1,614,525
------------ ------------
Stockholders' equity:
Common stock, $.0001 par value 827 812
Additional paid-in capital 9,822,063 9,805,425
Retained earnings/(deficit) (4,633,507)
Treasury stock at cost (3,000) (3,000)
------------ ------------
Total stockholders' equity 5,186,383 5,189,226
------------ ------------
Total liabilities and stockholders' equity $ 22,174,599 $ 22,384,414
============ ============
</TABLE>
3
<PAGE>
See accompanying notes to condensed financial statements.
COMMAND SECURITY CORPORATION
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Retained
Preferred Common Paid-In Earnings Treasury
Stock Stock Capital (Deficit) Stock
----------- --------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1995 $ 1,495,065 $ 799 $10,121,721 $(5,125,661) $(3,000)
Deferred stock compensation 4,300
Stock registration costs (100,163)
Preferred stock dividends 71,271 (71,271)
Net loss - six months ended
September 30, 1995 (709,329)
----------- --------- ----------- ----------- -------
Balance at September 30, 1995 1,566,336 799 9,954,587 (5,834,990) (3,000)
Stock registration costs (36,273)
Common stock issued/(returned)
- Accrued fees 15 (15)
- Retention settlement (2) (64,685)
Preferred stock dividends 48,189 (48,189)
Net income - six months ended
March 31,1996 1,220,979
----------- --------- ----------- ----------- -------
Balance at March 31, 1996 1,614,525 812 9,805,425 (4,614,011) (3,000)
Exercise of common stock put (218,765)
Common stock issued 15 299,985
Preferred stock dividends 64,582 (64,582)
Net loss - six months ended
September 30, 1996 (19,496)
----------- --------- ----------- ----------- -------
Balance at September 30, 1996 $ 1,679,107 $ 827 $ 9,822,063 $(4,633,507) $(3,000)
=========== ========= =========== =========== =======
</TABLE>
4
<PAGE>
See accompanying notes to condensed financial statements.
COMMAND SECURITY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
Sept. 30, Sept. 30,
1996 1995
----------- ----------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (19,496) $ (709,329)
Adjustments to reconcile net loss to
net cash provided by/(used in) operating activities:
Depreciation and amortization 1,060,716 786,291
Provision for doubtful accounts 225,036 159,305
Loss on equipment dispositions 25,736 14,003
Self-insurance reserves 74,395 8,685
(Increase)/decrease in receivables,
prepaid expenses and deposits (206,638)
Increase/(decrease) in accounts payable
and other current liabilities (815,186) 392,379
----------- ----------
Net cash provided by/(used in) operating activities 344,563 (2,550,466)
----------- ----------
Cash flows from investing activities:
Purchases of equipment (38,017) (55,678)
Proceeds from sale of equipment 27,569 6,352
Purchase of intangible assets (123,365) (57,372)
Notes issued (161,206) (49,500)
Principal collections on notes receivable 132,081 76,741
---------- ----------
Net cash used in investing activities (162,938) (79,457)
----------- ----------
Cash flows from financing activities:
Net borrowings on line-of-credit 579,889 2,518,243
Increase in cash overdrafts 293,203 866,064
Principal payments on other borrowings (990,731) (615,248)
Principal payments on capital lease obligations (63,986) (38,973)
Stock registration costs -0- (100,163)
---------- ----------
Net cash provided by/(used in) financing activities (181,625) 2,629,923
----------- ----------
Net decrease in cash
and cash equivalents -0- -0-
Cash and cash equivalents
at beginning of period -0- -0-
Cash and cash equivalents
----------- ----------
at end of period $ -0- $ -0-
=========== ==========
</TABLE>
5
<PAGE>
See accompanying notes to condensed financial statements.
(Continued)
COMMAND SECURITY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash paid during the six months ended September 30 for:
1996 1995
----------- -----------
Interest $ 514,539 $ 579,216
Supplemental Schedule of Non-Cash Investing and Financing Activities
For the six months ended September 30, 1996 and 1995, the Company purchased
transportation and office equipment with direct installment and lease financing
of $327,157 and $110,982, respectively.
For the six months ended September 30, 1996 and 1995, the Company accrued
dividends of $64,582 and $71,271, respectively, on its Series A convertible
preferred stock. These charges to paid-in capital and credits to preferred stock
have been excluded in the condensed statement of cash flows.
In June, 1996, the Company negotiated a settlement with NSC Shareholder Trust in
connection with a put offer given for common stock issued in consideration for
the purchase of customer accounts. The resultant charge to paid-in capital and
intangibles of $218,765 and $3,512, respectively, and credit to notes payable of
$222,277 have been excluded in the condensed statement of cash flows.
In July, 1996, the Company entered into a non-compete agreement with its former
Treasurer for $180,000. This charge to intangible assets and credit to notes
payable has been excluded in the condensed statement of cash flows.
In August, 1996, the Company purchased certain guard service accounts for a
total consideration of $606,164. The Company paid $115,000, issued two
short-term notes for $191,164 and issued 150,000 shares of its common stock at a
capitalized value of $300,000. The issuance of the notes and the common stock
have been excluded from the purchase of intangible assets in the condensed
statement of cash flows.
In November, 1996, the Company finalized an agreement reached with ISS
International Service System, Inc., whereby it has adjusted the notes payable to
ISS from $1,000,000 to $500,000 in consideration for lost accounts and
settlement of certain other claims. The resultant decreases in intangibles of
$410,000 and notes payable of $500,000, offset by a net increase in accrued
expenses of $90,000, have been excluded in the condensed statement of cash
flows.
6
<PAGE>
See accompanying notes to condensed financial statements.
COMMAND SECURITY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's financial statements for
the year ended March 31, 1996.
The financial statements for the interim periods shown in this report are not
necessarily indicative of results to be expected for the fiscal year. In the
opinion of management, the information contained herein reflects all adjustments
necessary to summarize fairly the results of operations, financial position,
stockholders' equity and cash flows at September 30, 1996, and for the period
then ended. All such adjustments are of a normal recurring nature.
1.) Service Companies:
The following is a summary of the service companies' activities for the
three months and six months ended September 30, 1996 and 1995,
respectively, the components of which have been excluded from the Company's
financial statements:
Three Months Ended Six Months Ended
---------------------- ----------------------
June 30, June 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Service companies' guard
service revenue $4,201,413 $5,378,758 $7,955,446 $9,831,368
Cost of revenue 3,476,589 4,505,088 6,600,564 8,230,393
---------- ---------- ---------- ----------
Gross profit 724,824 873,670 1,354,882 1,600,975
Service companies' share
of gross profit 472,579 542,547 878,641 993,479
---------- ---------- ---------- ----------
252,245 331,123 476,241 607,496
Other service revenue 109,335 43,262 213,111 74,776
---------- ---------- ---------- ----------
Total service contract revenue $ 361,580 $ 374,385 $ 689,352 $ 682,272
========== ========== ========== ==========
7
<PAGE>
(Continued)
COMMAND SECURITY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
2.) Short-Term Notes Payable:
In February, 1995, the Company entered into an agreement with The CIT
Group/Finance, Inc. ("CIT") under a revolving loan and security agreement
(the "agreement"). The agreement, as amended on December 1, 1995, provides
for a discretionary line of credit of up to 82.5% of eligible accounts
receivable, as defined in the agreement, but in no event in excess of $10
million. At September 30, 1996, the Company had used $6,544,093 of this
line, representing virtually 100% of its maximum borrowing capacity.
Interest is payable monthly, at 2% above prime (10.25% at September 30,
1996). The line is collateralized by customer accounts receivable and
substantially all other assets of the Company. The term of the agreement is
two years, expiring in February, 1997.
3.) Income/(loss) per Share:
Income/(loss) per common share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period, including the dilutive effect, if any, of warrants and stock
options outstanding. Warrants and stock options outstanding were excluded
from the computation for each period presented because their effect was
antidilutive.
4.) Contingent Liabilities:
The nature of the Company's business subjects it to claims or litigation
alleging that it is liable for damages as a result of the conduct of its
employees or others. The Company insures against such claims and suits
through policies with third-party insurance companies. Such policies have
limits of $1,000,000 per occurrence and $2,000,000 in the aggregate. In
addition, the Company has obtained an excess liability policy that covers
claims for an additional $25,000,000 in the aggregate. The Company retains
the risk for the first $50,000 per occurrence. The Company has included
liabilities of $396,000 and $428,000 for the estimated losses incurred
under these risk retentions at September 30 and March 31, 1996,
respectively, in the Company's financial statements.
The Company has guaranteed certain installment loans extended to various
service companies by Capital Resources Company. The total outstanding
balance on such loans as of September 30, 1996, was approximately $785,000.
An action was commenced against the Company and the City of New York on or
about August 20, 1992. This action seeks $3 million in damages together
with $9 million in punitive damages arising from injuries allegedly
sustained by the plaintiff as a result of an assault by one of the
Company's guards, while said guard was on duty. This suit has been turned
over to the insurance carrier for defense. Insurance coverage is limited to
$6 million covering this claim. Punitive damages, if any, may not be
covered under the Company's insurance policy. The Company denies any
culpability and asserts an affirmative defense that its liability, if any,
does not exceed 50% of the liability of all defendants and hence seeks
apportionment of liability. Management is of the opinion that the results
of this litigation will not have a material effect on the Company's
financial condition or results of operations.
8
<PAGE>
(Continued)
COMMAND SECURITY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
4.) Contingent Liabilities: (continued)
In August, 1992, the Company commenced action against a former service
company client for non-payment of obligations owed by the service company
to the Company. At approximately the same time, the service company
initiated suit for non-performance of the Company in connection with the
terms of the service agreement seeking compensatory damages. Management has
reviewed both suits with legal counsel and is of the opinion that the
likelihood of loss on the suit against the Company is remote. Accordingly,
no adjustment has been made to the accompanying financial statements. In
addition, management is of the opinion that all amounts due to the Company
from the former service company are for bona fide claims for services
provided by the Company and are collectable, subject to the financial
viability of the service company and the value of the related collateral.
Amounts due from this service company, which approximate $495,000 plus
interest and legal fees, have been fully reserved.
In October, 1996, the Company reached an agreement with ISS International
Service System, Inc. (ISS) to settle all pending issues in connection with
its October, 1993, acquisition of certain security guard assets. Under the
terms of the agreement, the purchase price of the assets has been adjusted
and the amount owed by the Company to ISS has been reduced from $1,000,000
to $500,000, $100,000 of which was paid at the time of the agreement. The
remaining $400,000 is due on or before January 31, 1997. ISS has agreed to
release the stock of William C. Vassell, the Company's Chairman of the
Board, which it held as collateral in exchange for 238,000 newly issued
shares of the Company's common stock. The stock will be held in escrow and
is subject to adjustment based on market value until the remaining balance
is paid in full. One of the Company's directors, Peter T. Kikis, has
entered into an agreement with ISS whereby he will pay the $400,000 due to
ISS on January 31, 1997, and receive all of the escrowed shares in the
event the Company does not pay the $400,000 when due. In this case, the
director may at any time within 90 days of receipt of such shares tender
the shares to the Company in return for payment of all amounts paid to ISS
under the guarantee.
The Private Placement Memorandum issued in connection with the Company's
1993 Private Placement and the interim financial reports for the first
three quarters in the fiscal years ended March 31, 1994 and 1995, filed by
the Company contained financial information which has since been restated.
It is possible that the purchasers of Units pursuant to the 1993 offering
and the purchasers of shares in connection with the offerings that were
consummated in February, 1995, may make a claim for, among other things,
rescission of their investment, which totaled $4,000,000 in the 1993
offering and approximately $4,160,000 in the 1995 offerings, plus interest,
alleging, in each case, as the basis, the above-mentioned restatements.
Other causes of action against the Company based on federal and/or state
securities laws are also possible. Additional expenditures in the form of
damages and fees, if any, are not quantifiable. No such claims have been
received by the Company to date. If the Company were to become involved in
litigation arising from these circumstances, the Company's results of
operations and financial condition may be materially adversely affected due
to the drain on cash and management resources. Management is of the opinion
that the probability of claims and a resultant negative impact on the
Company's operations and financial condition is diminishing with time.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
The following should be read in conjunction with the Company's financial
statements and the related notes thereto.
Revenue decreased by $1,507,566 for the quarter ended September 30, 1996 to
$12,721,075 from $14,228,641 for the quarter ended September 30, 1995. Of this
decrease, $213,374 represents revenue generated by the Company's Boston
operation during the quarter ended September 30, 1995 that was sold in October,
1995 and approximately $960,000 is the result of contracts that were not renewed
during the year due to low margins. The remaining decrease of approximately
$330,000 is due to the loss, as of October 1, 1995, of a large aviation
consortium contract that generated revenue of approximately $590,000 during the
three months ended September 30, 1995 offset by the acquisition of Security
Management Services, Inc. which closed on August 30, 1996 and generated revenue
of approximately $240,000 during September, 1996.
For the six months ended September 30, 1996 revenue decreased by $4,409,230 to
$24,721,864 from $29,131,094 for the six months ended September 30, 1995. Of
this decrease, $450,000 represents revenue generated by the Company's Boston
operation during the quarter ended September 30, 1995, approximately $1,860,000
resulted from contracts that were not renewed during the six months due to low
margins, approximately $1,200,000 is due to the loss of an aviation consortium
contract, with the remaining variance of $900,000 is due to other contract
cancellations net of new contracts starts of $1,140,000 offset by the
acquisition of Security Management Services, Inc. which generated revenue of
approximately $240,000 during September, 1996.
Gross profit increased by $430,168 to $2,356,387 or 18.5% of revenue for the
quarter ended September 30, 1996, compared to $1,926,219 or 13.5% of revenue for
the quarter ended September 30, 1995. Gross profit decreased by $204,089 as a
result of lower revenue, offset by $634,257 resulting from lower direct costs.
This decrease in direct costs is primarily the result of lower labor costs
($135,200), lower payroll taxes and insurance expense ($268,700) and lower union
benefits ($294,522) offset by higher uniform expense ($56,900) and higher costs
in other expense categories of ($7,300).
Gross profit increased by $233,364 to $4,317,019 or 17.5% of revenue for the six
months ended September 30, 1996, compared to $4,083,655 or 14.0% of revenue for
the six months ended September 30, 1995. Gross profit decreased by $618,100 as a
result of lower revenue, offset by $851,449 resulting from lower direct costs.
This decrease in direct costs is primarily the result of lower payroll taxes and
insurance expense ($692,436) and lower union benefits ($310,900) offset by
higher uniform expense ($76,950) and higher costs in other expense categories
($74,930).
The Company provides payroll and billing services and accounts receivable
financing through contracts with service company clients for a percentage of the
revenue or gross profit generated from their business. The Company owns the
accounts receivable and, depending on the individual contract, may be the
employer of record. The caption "Service Contract Revenue" represents the income
earned on the Service Agreements.
Service contract revenue decreased by $12,805 to $361,580 in the quarter ended
September 30, 1996 from $374,385 in the quarter ended September 30, 1995.
$78,878 of this decrease is attributable to lower fees earned from existing
contracts due to contract terminations offset by higher fees earned from the
Company's non-employer of record program of $66,073.
Service contract revenue increased by $7,080 to $689,352 for the six months
ended September 30, 1996 from $682,272 for the same period last year. This
increase is due to higher fees earned from the Company's non-employer of record
program of $138,335 offset by lower fees earned from existing employer of record
contracts due to contract terminations.
10
<PAGE>
(Continued)
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
General and administrative expenses decreased by $296,518 to $1,879,846 for the
quarter ended September 30, 1996 from $2,176,364 for the quarter ended September
30, 1995. The major areas of decrease are salaries ($324,474), rent and
utilities ($43,359), insurance expense ($15,093), bank fees ($11,311) offset by
higher professional fees ($100,536). Higher professional fees are the result of
legal fees incurred in connection with the settlement with ISS (See Note 4 to
"Notes to Condensed Financial Statements").
General and administrative expenses decreased by $684,804 to $3,515,169 for the
six months ended September 30, 1996 from $4,199,973 for the six months ended
September 30, 1995. The major areas of decrease are salaries ($432,177), rent
and utilities ($88,049), travel and entertainment ($19,569), insurance expense
($69,501), professional fees ($32,867) and bank fees ($37,640).
Amortization of intangibles increased by $136,019 to $437,019 for the quarter
ended September 30, 1996 compared to $301,474 for the prior year's quarter.
Amortization expense increased by $277,224 to $883,284 for the six months ended
September 30, 1996 compared to $606,060 for the same period in the last fiscal
year. These increases are the result of management's re-evaluation, during the
quarter ended June 30, 1996, of the useful lives of the customer lists acquired
from ISS in October, 1993. Based on the contract retention since the
acquisition, the Company has reduced the useful life from 15 years to 5 years.
This increase in amortization will recur each quarter until the ISS intangible
is fully amortized.
The provision for bad debts increased by $91,516 to $161,950 for the quarter
ended September 30, 1996 from $70,434 for the quarter ended September 30, 1995
and by $65,731 to $ 225,036 for the six months ended September 30, 1996 from
$159,305 for the six months ended September 30, 1995. These increases are the
result of write-offs in connection the settlement of a long outstanding accounts
receivable from a major client ($55,000), as well as the establishment of a
reserve for disputed amounts due from a governmental agency with which the
Company has a substantial contract ($34,000).
Interest expense decreased by $79,199 to $223,592 for the quarter ended
September 30, 1996 from $302,791 for the comparable quarter of the prior year
and by $58,228 to $505,512 for the six months ended September 30, 1996 from
$563,740 for the six months ended September 30, 1996. Both of these decreases
are primarily due to the reversal of previously accrued interest expense of
$64,000 in connection with the Company's settlement agreement with ISS
International Service System, Inc. (ISS), in October, 1996 under which all
pending issues between the two companies, including interest on the note payable
to ISS, were settled (See Note 4 to "Notes to Condensed Financial Statements").
Interest income increased by $30,849 to $69,071 for the quarter ended September
30, 1996 and by $61,047 to $128,872 for the six months ended September 30, 1996
resulting from increased finance charges earned as part of the Company's
non-employer of record service agreement program.
Loss on equipment dispositions primarily represents older vehicles sold or
retired.
Liquidity and Capital Resources
The Company pays its guard employees and those of its Service Agreement Clients
on a weekly basis, while its customers and the customers of service company
clients pay for the services of such employees generally between 50 to 60 days
after billing by the Company. In order to provide funds for payment to its guard
employees, on February 24, 1995, the Company entered into a commercial revolving
loan arrangement with CIT Group/Credit Finance (CIT). Under this agreement,
borrowings may be made in an amount up to 80% of eligible accounts receivable,
but in no event more than $10,000,000.
11
<PAGE>
(Continued)
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
During the quarter ended December 31,1995, this agreement was amended to
increase the borrowing availability from 80% to 82.5%. Outstanding balances bear
interest at per annum rate of 2% in excess of the "prime rate" and are
collateralized by a pledge of the Company's accounts receivable and other
assets. Prior to the existing agreement, the Company utilized a commercial
revolving loan agreement with another institutional lender.
At September 30, 1996, the Company had borrowed $6,544,093 or approximately
60.3% of its billed accounts receivable (after allowance for bad debts, but
before accrued and unbilled receivables) and virtually 100% of its maximum
borrowing capacity based on the definition of "eligible accounts receivable"
under the terms of the revolving loan arrangement.
Generally, the Company borrows a high percentage of its available borrowing,
which can fluctuate materially from day to day due to changes in the status of
the factors used to determine availability (such as billing, payments and aging
of accounts receivable).
The Company is currently in discussions with CIT and other financial
institutions for the renewal of the facility. CIT has expressed their
willingness to renew the current facility, which expires February 24, 1997, at
terms that are no less favorable than provided for by the current agreement.
The Company entered into a subordinated loan arrangement on February 24, 1995,
with Deltec Development Corporation (Deltec) pursuant to which the Company
borrowed $1,500,000, the proceeds of which were used primarily to acquire the
assets of United Security Group Inc. (United). The subordinated loan has a term
of four years, calls for quarterly principal and interest payments and bears
interest at fourteen percent (14%) per annum. It is collateralized, on a
subordinated basis, by all the Company's assets, properties and other revenue.
The balance due Deltec at September 30, 1996 was $937,500.
In October, 1996, the Company reached an agreement with ISS International
Service System, Inc. (ISS) to settle all pending issues in connection with its
October, 1993 acquisition of certain security guard assets. Under the terms of
the agreement, the purchase price of the assets has been adjusted and the amount
owed by the Company to ISS has been reduced from $1,000,000 to $500,000,
$100,000 of which was paid at the time of the agreement. The remaining $400,000
is due on or before January 31, 1997. ISS has agreed to release the stock of
William C. Vassell, the Company's Chairman of the Board, which it held as
collateral in exchange for 238,000 newly issued shares of the Company's stock.
The stock will be held in escrow and is subject to adjustment based on market
value until the remaining balance is paid in full. In addition, payment of the
remaining balance of $400,000 has been personally guaranteed by one of the
Company's directors, Peter T. Kikis (See Note 4 to "Notes to Condensed Financial
Statements").
The Company anticipates that funds required to pay the remaining balance of
$400,000 will come from internally generated cash flow. In addition, the Company
believes that it is likely that it will receive an insurance rebate, currently
estimated to be approximately $600,000, during the quarter ended March 31, 1996.
The Company finances vehicle purchases typically over three years and insurance
through short-term borrowings. The Company has no additional lines of credit
other than discussed herein.
The Company has no present material commitments for capital expenditures.
12
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings
Reference is made to footnote 4 to the condensed financial statements
presented herein.
Item 6. Exhibits and Reports on Form 8-K
(1) Exhibits:
4.8 Form of Warrant (10,000) to Gregory Miller E-1
4.9 Form of Warrant (10,000) to Peter J. Nekos E-2
4.10 Form of Warrant (150,000) to Peter T. Kikis E-3
4.11 Form of Warrant (35,000) to H. Richard Dickinson E-4
4.12 Amendment to Non-Qualified Stock Option
Certificate & Agreement for Debra Miller E-5
4.13 Fourth Amendment to Non-Qualified Stock Option
Certificate & Agreement for Gordon Robinett
dated July 23, 1996 E-6
4.14 Fourth Amendment to April 8, 1991 Warrant Agreement
of Gordon Robinett dated July 23, 1996 E-7
4.15 Fourth Amendment to May 15, 1992 Warrant Agreement
of Gordon Robinett dated July 23, 1996 E-8
10.41 Covenant Not to Compete for Gordon Robinett
dated July 23, 1996 E-9
10.42 Employment Agreement for H. Richard Dickinson
dated August 1, 1996 E-10
(2) Reports on Form 8-K
During the quarter, the Company filed two forms 8-K, dated September 10,
1996, and September 25, 1996, respectively, both reporting certain press
releases.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMAND SECURITY CORPORATION
Date: November 13, 1996 By: /s/ William C. Vassell
---------------------- -----------------------------------------
William C. Vassell, Chairman of the Board
By: /s/ H. Richard Dickinson
-----------------------------------------
H. Richard Dickinson,
Principal Financial Officer
14
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT OR REGULATION
AND NOTIFICATION UNDER SUCH ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
No. 9 Warrant to Purchase 10,000 Shares
of Common Stock
WARRANT TO PURCHASE COMMON STOCK
of
COMMAND SECURITY CORPORATION
Void after September 30, 1999
This certifies that, for value received, Gregory J. Miller (the "Holder"),
is entitled, subject to the terms set forth below, at any time before September
30, 1999 (subject to earlier redemption as provided in Section 1(b) below), to
purchase from Command Security Corporation, a New York corporation (the
"Company"), with its principal office at Route 55, Lexington Park,
Lagrangeville, NY 12540, 10,000 shares (the "Shares") of common stock, $.0001
par value of the Company, upon surrender hereof, at the principal office of the
Company, with the Election to Purchase form attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States, or otherwise
as hereinafter provided, at a price equal to $1.875 per full Share. (Such price
hereinafter referred to as the "Purchase Price"). The Purchase Price, number and
character of such Shares are subject to adjustment as provided below, and the
term "Shares" shall mean, unless the context otherwise requires, the stock and
other securities and property at the time receivable upon the exercise of this
Warrant. The term "Warrants" as used herein shall include this Warrant and any
warrants delivered or deliverable in substitution or exchange thereof as
provided herein.
1. (a) Exercise. This Warrant may be exercised at any time or from time to time,
on any business day for up to the number of Shares called for hereby, by
surrendering it at the principal office of the Company, with the Election to
Purchase form duly executed, together with payment in cash or by certified or
official bank check, payable to the order of the Company, of the sum obtained by
multiplying (i) the number of Shares indicated on the Election to Purchase form
by (ii) the appropriate Purchase Price. This Warrant may be exercised for less
than the full number of Shares at the time called for hereby, but not for less
than 1,000 Shares unless the number of Shares called for on the face is less
than 1,000 in which event the minimum number will be
<PAGE>
the number of Shares called for on the face. Upon a partial exercise this
Warrant shall be surrendered, and a new Warrant of the same tenor and for the
purchase of the number of such Shares not purchased upon such exercise shall be
issued by the Company to Holder. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
Shares issuable upon such exercise shall be treated for all purposes as the
holder of such Shares of record as of the close of business on such date. As
soon as practicable on or after such date, the Company shall issue and deliver
to the person or persons entitled to receive the same a certificate or
certificates for the number of full Shares issuable upon such exercise, together
with cash, in lieu of any fraction of a Share, equal to such fraction of the
current market value of one full Share. If surrendered by mail, the date of
surrender shall be the date the Warrant is mailed consistent with the
requirements for notice as described in Section 7.
(b) This Warrant is subject to the Company's call for redemption at $0.10
per Share which may be exercised at any time beginning April 30, 1994 if, at any
time following March 31, 1994, either (i) the mean of the closing market price
quotations for the Shares over 20 consecutive trading days is at least $6.00, or
(ii) the closing market price quotations for the Shares is at least $6.00 for
ten consecutive trading days. Upon notice, as provided in Section 7 herein, of
the Company's call for redemption, the Holder shall have 30 days in which to
exercise this Warrant. Effective 5:00 PM of the 30th day following said notice
(the "Termination Date") if the Warrant has not been fully exercised, the
Warrant shall, terminate and become the right to receive only $0.10 per Share
remaining unexercised. Payment therefor shall be made by the Company within 30
days of the Termination Date. All other rights and interests under the Warrant
will terminate effective immediately, upon the Termination Date; provided,
however, if such payment is not timely made by the Company, all rights and
interests under the Warrant shall be reinstated in full.
2. Payment of Taxes. All Shares issued upon the exercise of this Warrant
shall be validly issued, fully paid and nonassessable, and the Company shall pay
all taxes and other governmental charges that may be imposed in respect of the
issue or delivery thereof. The Company shall not be required, however, to pay
any tax or other charge imposed in connection with any transfer involved in the
issue of any certificate for Shares in any name other than that of the
registered Holder of the Warrant surrendered in connection with the purchase of
such Shares, and in such case the Company shall not be required to issue or
deliver any stock certificate until such tax or other charge has been paid or it
has been established to the Company's satisfaction that no tax or other charge
is due.
<PAGE>
3. Protection Against Dilution. The Shares covered by this Warrant and the
Purchase Price payable therefor shall be subject to appropriate adjustment as
follows:
(a) If a Share dividend is declared on the Shares, or if an increase or
decrease has been effected in the number of outstanding Shares by reason of
subdivision of such Shares or combination of such Shares into a lesser number,
the number of Shares which may thereafter be purchased under this Warrant shall
be the number of Shares which would have been received by the Holder on such
dividend, subdivision or combination had the Holder been the Holder of record of
the number of Shares then under this Warrant but not theretofore purchased and
issued.
(b) If there is any other capital reorganization or reclassification of
the stated capital of the Company, or any consolidation or merger of the Company
with any other corporation or corporations, or the sale or distribution of all
or substantially all of the Company's property and assets, adequate provision
shall be made by the Company so that there shall remain and be substituted under
this Warrant the Shares, securities, or assets which would have been issuable or
payable in respect of or in exchange for the Shares then remaining under this
Warrant and not theretofore purchased and issued hereunder, as if the Holder of
this Warrant had been the owner of such Shares on the applicable record date.
(c) If any of the events described in Sections 3(a) or (b) occur, the
Purchase Price shall be adjusted to that price determined by multiplying the
then current Purchase Price by a fraction (x) the numerator of which shall be
the total number of outstanding Shares immediately prior to such event and (y)
the denominator of which shall be the total number of outstanding Shares
immediately after such event.
4. Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to it (in the exercise of reasonable discretion) of the ownership
of and the loss, theft, destruction or mutilation of any Warrant and (in the
case of mutilation) upon surrender and cancellation thereof, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor.
5. Reservation of Stock. The Company shall at all times reserve and keep
available for issue upon the exercise of Warrants such number of its authorized
but unissued Shares as will be sufficient to permit the exercise in full of all
outstanding Warrants.
6. (a) Restrictions on Transfer. The Holder of this Warrant, by acceptance
hereof, agrees that, absent an effective notification under Regulation A or
registration statement, in either case under the Securities Act of 1933, as
amended (the "Act"), covering the disposition of the Warrant or Shares issued or
issuable upon exercise hereof, such Holder will not sell or
<PAGE>
transfer any or all of such Warrant or Shares, as the case may be, without first
providing the Company with an opinion of counsel (which may be counsel for the
Company) to the effect that such sale or transfer will be exempt from the
registration and prospectus delivery requirements of the Act. Such Holder
consents to the Company making a notation on its records giving instructions to
any transfer agent of the Warrant or such Shares in order to implement such
restrictions on transferability.
(b) Transfer Restriction Legend. Each certificate for Shares issued upon
exercise of this Warrant, unless at the time of exercise such Common Stock is
registered under the Act, shall bear a legend in substantially the following
form on the face thereof:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 ("THE ACT") AND ARE "RESTRICTED SECURITIES" AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO
BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate subject to a
registration statement) shall also bear such legend unless, in the opinion of
counsel to the Company, the securities represented thereby may be transferred as
contemplated by such Holder without violation of the registration requirements
of the Act.
7. Notices. All notices and other communications from the Company to the
Holder of this Warrant shall be mailed by first-class registered or certified
mail, postage-prepaid, to the address furnished to the Company in writing by the
last Holder of this Warrant who shall have furnished an address to the Company
in writing. Notice shall be deemed given immediately upon delivery to the U.S.
Postal Service in accordance with this section.
8. No Rights as Shareholder; Limitation of Liability. This Warrant shall
not entitle any Holder hereof to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
hereof to purchase Shares, and no mere enumeration herein of the rights or
privileges of the Holder hereof, shall give rise to any liability of such Holder
for the purchase price of the Shares issuable on exercise of this Warrant or as
a shareholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company. No provision of this Warrant and no right or
option granted or conferred hereunder shall in any way limit,
<PAGE>
affect, or abridge the exercise by the Company of any of its corporate rights or
powers to recapitalize, amend its certificate of incorporation, reorganize,
consolidate or merge with or into another corporation, or to transfer all or any
part of its property or assets, or the exercise of any other of the corporate
rights and powers of the Company.
9. Change; Waiver. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Notwithstanding anything herein to the
contrary, the Company reserves the right to unilaterally and without prior
notice, to reduce the Purchase Price or to extend the term of this Warrant, or
both.
10. Headings. The headings in this Warrant are for purposes of convenience
in reference only, and shall not be deemed to constitute a part thereof.
11. Law Governing. This Warrant is delivered in New York and shall be
construed and enforced in accordance with and governed by the laws of such
State.
Dated: October 4, 1996
COMMAND SECURITY CORPORATION
By: _________________________
William C. Vassell, Chairman
<PAGE>
ELECTION TO PURCHASE
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant and purchases __________ of the number of Shares of common stock of
Command Security Corporation purchasable with this Warrant, and herewith makes
payment therefor, all at the price and on the terms and conditions specified in
this Warrant.
Dated: __________ _______________
Warrant Number
_____________________________
signature of registered owner
_____________________________
printed name
_____________________________
street address
_____________________________
city, state and zip
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT OR REGULATION
AND NOTIFICATION UNDER SUCH ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
No. 8 Warrant to Purchase 10,000 Shares
of Common Stock
WARRANT TO PURCHASE COMMON STOCK
of
COMMAND SECURITY CORPORATION
Void after September 30, 2001
This certifies that, for value received, Peter J. Nekos (the "Holder"), is
entitled, subject to the terms set forth below, at any time before September 30,
2001 (subject to earlier redemption as provided in Section 1(b) below), to
purchase from Command Security Corporation, a New York corporation (the
"Company"), with its principal office at Route 55, Lexington Park,
Lagrangeville, NY 12540, 10,000 shares (the "Shares") of common stock, $.0001
par value of the Company, upon surrender hereof, at the principal office of the
Company, with the Election to Purchase form attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States, or otherwise
as hereinafter provided, at a price equal to $1.875 per full Share. (Such price
hereinafter referred to as the "Purchase Price"). The Purchase Price, number and
character of such Shares are subject to adjustment as provided below, and the
term "Shares" shall mean, unless the context otherwise requires, the stock and
other securities and property at the time receivable upon the exercise of this
Warrant. The term "Warrants" as used herein shall include this Warrant and any
warrants delivered or deliverable in substitution or exchange thereof as
provided herein.
1. (a) Exercise. This Warrant may be exercised at any time or from time to time,
on any business day for up to the number of Shares called for hereby, by
surrendering it at the principal office of the Company, with the Election to
Purchase form duly executed, together with payment in cash or by certified or
official bank check, payable to the order of the Company, of the sum obtained by
multiplying (i) the number of Shares indicated on
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT OR REGULATION
AND NOTIFICATION UNDER SUCH ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
No. 11 Warrant to Purchase 150,000 Shares
of Common Stock
WARRANT TO PURCHASE COMMON STOCK
of
COMMAND SECURITY CORPORATION
Void after September 30, 1999
This certifies that, for value received, Peter T. Kikis (the "Holder"), is
entitled, subject to the terms set forth below, at any time before September 30,
1999 (subject to earlier redemption as provided in Section 1(b) below), to
purchase from Command Security Corporation, a New York corporation (the
"Company"), with its principal office at Route 55, Lexington Park,
Lagrangeville, NY 12540, 150,000 shares (the "Shares") of common stock, $.0001
par value of the Company, upon surrender hereof, at the principal office of the
Company, with the Election to Purchase form attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States, or otherwise
as hereinafter provided, at a price equal to $1.875 per full Share. (Such price
hereinafter referred to as the "Purchase Price"). The Purchase Price, number and
character of such Shares are subject to adjustment as provided below, and the
term "Shares" shall mean, unless the context otherwise requires, the stock and
other securities and property at the time receivable upon the exercise of this
Warrant. The term "Warrants" as used herein shall include this Warrant and any
warrants delivered or deliverable in substitution or exchange thereof as
provided herein.
1. (a) Exercise. This Warrant may be exercised at any time or from time to time,
on any business day for up to the number of Shares called for hereby, by
surrendering it at the principal office of the Company, with the Election to
Purchase form duly executed, together with payment in cash or by certified or
official bank check, payable to the order of the Company, of the sum obtained by
multiplying (i) the number of Shares indicated on
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT OR REGULATION
AND NOTIFICATION UNDER SUCH ACT COVERING SUCH SECURITIES OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
No. 10 Warrant to Purchase 35,000 Shares
of Common Stock
WARRANT TO PURCHASE COMMON STOCK
of
COMMAND SECURITY CORPORATION
Void after September 30, 2001
This certifies that, for value received, H. Richard Dickinson (the
"Holder"), is entitled, subject to the terms set forth below, at any time before
September 30, 2001 (subject to earlier redemption as provided in Section 1(b)
below), to purchase from Command Security Corporation, a New York corporation
(the "Company"), with its principal office at Route 55, Lexington Park,
Lagrangeville, NY 12540, 35,000 shares (the "Shares") of common stock, $.0001
par value of the Company, upon surrender hereof, at the principal office of the
Company, with the Election to Purchase form attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States, or otherwise
as hereinafter provided, at a price equal to $1.875 per full Share. (Such price
hereinafter referred to as the "Purchase Price"). The Purchase Price, number and
character of such Shares are subject to adjustment as provided below, and the
term "Shares" shall mean, unless the context otherwise requires, the stock and
other securities and property at the time receivable upon the exercise of this
Warrant. The term "Warrants" as used herein shall include this Warrant and any
warrants delivered or deliverable in substitution or exchange thereof as
provided herein.
1. (a) Exercise. This Warrant may be exercised at any time or from time to time,
on any business day for up to the number of Shares called for hereby, by
surrendering it at the principal office of the Company, with the Election to
Purchase form duly executed, together with payment in cash or by certified or
official bank check, payable to the order of the Company, of the sum obtained by
multiplying (i) the number of Shares indicated on the Election to Purchase form
by (ii) the appropriate Purchase
AMENDMENT TO NON-OUALIFIED STOCK OPTION
CERTIFICATE AND AGREEMENT
Amendment made as of this 4th day of October, 1996 by and between COMMAND
SECURITY CORPORATION, a New York corporation (the "Company") and DEBRA MILLER
("Miller").
WITNESSETH
WHEREAS, the parties have entered into a Non-Qualified Stock Option
Certificate and Agreement dated as of May 6, 1992 (the "Non-Qualified Stock
Option Agreement") pursuant to which an option to purchase 7,500 shares of
common stock of the Company at $3.81 per share has been issued to Miller;
WHEREAS, by mutual agreement between the Company's Board of Directors
pursuant to a special meeting of the Board of Directors held on the 4th day of
October, 1996 and Miller, the Company and Miller agreed that the Non-Qualified
Stock Option Certificate and Agreement be amended.
In consideration of the premises and mutual agreements herein set forth
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree to amend the Non-Qualified Stock Option
Agreement as follows:
1. The exercise price is hereby amended to be $2.25 (the fair market value
of the Company's shares as of approximately October 4, 1996).
2. The expiration date of the Non-Qualified Stock Option Certificate and
Agreement is hereby amended to December 31, 1999.
2. This amendment shall be effective immediately.
3. Except as otherwise specifically provided in this amendment, all other
terms and provisions of the Non-Qualified Stock Option Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this third amendment as of
the date first written above.
COMMAND SECURITY CORPORATION
By:___________________________
William C. Vassell,
Chairman of the Board
___________________________
Debra Miller
FOURTH AMENDMENT TO NON-OUALIFIED STOCK
OPTION CERTIFICATE AND AGREEMENT
Amendment made as of this 23rd day of July by and between COMMAND SECURITY
CORPORATION, a New York corporation (the Company") and GORDON ROBINETT
("Robinett").
WITNESSETH
WHEREAS, the parties have entered into a Non-Qualified Stock Option
Certificate and Agreement dated as of July 19, 1990, as amended on September 28,
1992, June 28, 1993, and August 13, 1993 (the "Non-Qualified Stock Option
Agreement") pursuant to which an option to purchase 107,500 shares of common
stock of the Company at $5.00 per share has been issued to Robinett;
WHEREAS, by mutual agreement between the Company's Board of Directors
pursuant to a special meeting of the Board of Directors held on the 15th day of
July, 1996 and Robinett, the Company and Robinett agreed that the Non-Qualified
Stock Option Certificate and Agreement be amended.
In consideration of the premises and mutual agreements herein set forth
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree to amend the Non-Qualified Stock Option
Agreement as follows:
1. The exercise price is hereby amended to be $2.50 (the fair market value
of the Company's shares as of approximately July 15, 1996).
2. The expiration date of the Non-Qualified Stock Option Certificate and
Agreement is hereby amended to July 19, 2000.
2. This amendment shall be effective immediately.
3. Except as otherwise specifically provided in this amendment, all other
terms and provisions of the Non-Qualified Stock Option Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this third amendment as of
the date first written above.
COMMAND SECURITY CORPORATION
By:___________________________
William C. Vassell,
Chairman of the Board
__________________________
Gordon Robinett
FOURTH AMENDMENT TO APRIL 8, 1991 WARRANT AGREEMENT
Amendment made as of this 23rd day of July 1996 by and between COMMAND
SECURITY CORPORATION, a New York corporation (the "Company") and GORDON ROBINETT
("Robinett").
WITNESSETH
WHEREAS, the parties have entered into a Warrant Agreement dated as of
April 8, 1991, as amended on September 28, 1992, June 28, 1993, and August 13,
1993 (the "Warrant Agreement") pursuant to which a warrant to purchase 60,000
shares of common stock of the Company at $3.375 per share has been issued to
Robinett;
WHEREAS, by mutual agreement between the Company's Board of Directors
pursuant to a special meeting of the Board of Directors held on the 15th day of
July, 1996 and Robinett, the Company and Robinett agreed that the Warrant
Agreement be amended.
In consideration of the premises and mutual agreements herein set forth
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree to amend the Warrant Agreement as
follows:
1. The exercise price is hereby amended to be $2.50 (the fair market value
of the Company's shares as of approximately July 15, 1996).
2. The expiration date of the Warrant Agreement and Warrant Certificate is
hereby amended to July 19, 2000.
3. The proper officers of the Company are hereby authorized and directed
to execute such documents and instruments and to amend the warrant certificate
executed in connection with the Warrant Agreement and take other such action as
is necessary or appropriate to implement the amendment herein. This amendment
shall be effective immediately.
4. Except as otherwise specifically provided in this amendment, all other
terms and provisions of the Warrant Agreement shall remain in full force and
effect.
In WITNESS WHEREOF, the parties have executed this second amendment as of
the date first written above.
COMMAND SECURITY CORPORATION
By: _______________________
William C. Vassell
Chairman of the Board
_______________________
Gordon Robinett
<PAGE>
AMENDMENT TO WARRANT CERTIFICATE
Pursuant to the Fourth Amendment to the Warrant Agreement, the Warrant
Certificate #2, which evidences the grant to Gordon Robinett of warrants to
purchase 60,000 shares of common stock of Command Security Corporation (the
"Company"), is amended to change the exercise price to $2.50 and the expiration
date to July 19, 2000.
This amendment to Warrant Certificate #2 shall be attached to the Warrant
Certificate by order of the Board of Directors of the Company and signed by its
Chairman of the Board.
This amendment is dated the 23rd day of July, 1996.
COMMAND SECURITY CORPORATION
By: _________________________
William C. Vassell
Chairman of the Board
_________________________
Gordon Robinett
FOURTH AMENDMENT TO MAY 15, 1992 WARRANT AGREEMENT
Amendment made as of this 23rd day of July, 1996 by and between COMMAND
SECURITY CORPORATION, a New York corporation (the "Company") and GORDON ROBINETT
("Robinett").
WITNESSETH
WHEREAS, the parties have entered into a Warrant Agreement dated as of May
15, 1992, as amended on September 28, 1992, June 28, 1993, and August 13, 1993
(the "Warrant Agreement") pursuant to which a warrant to purchase 60,000 shares
of common stock of the Company at $3.88 per share has been issued to Robinett;
WHEREAS, by mutual agreement between the Company's Board of Directors
pursuant to a special meeting of the Board of Directors held on the 15th day of
July, 1996 and Robinett, the Company and Robinett agreed that the Warrant
Agreement be amended.
In consideration of the premises and mutual agreements herein set forth
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree to amend the Warrant Agreement as
follows:
1. The exercise price is hereby amended to be $2.50 (the fair market value
of the Company's shares as of approximately July 15, 1996).
2. The expiration date of the Warrant Agreement and Warrant Certificate is
hereby amended to July 19, 2000.
3. This amendment shall be effective immediately.
4. Except as otherwise specifically provided in this amendment, all other
terms and provisions of the Warrant Agreement shall remain in full force and
effect.
In WITNESS WHEREOF, the parties have executed this second amendment as of
the date first written above.
COMMAND SECURITY CORPORATION
By: ________________________
William C. Vassell
Chairman of the Board
________________________
Gordon Robinett
<PAGE>
AMENDMENT TO WARRANT CERTIFICATE
Pursuant to the Fourth Amendment to the Warrant Agreement, the Warrant
Certificate #4, which evidences the grant to Gordon Robinett of warrants to
purchase 60,000 shares of common stock of Command Security Corporation (the
"Company"), is amended to change the exercise price to $2.50 and the expiration
date to July 19, 2000.
This amendment to Warrant Certificate #4 shall be attached to the Warrant
Certificate by order of the Board of Directors of the Company and signed by its
Chairman of the Board.
This amendment is dated the 23rd day of July, 1996.
COMMAND SECURITY CORPORATION
By: _________________________
William C. Vassell
Chairman of the Board
_________________________
Gordon Robinett
COVENANT NOT TO COMPETE
This Covenant not to compete is made this 23rd day July, 1996 by and
between Command Security Corporation, a New York corporation (the "Company"),
and Gordon Robinett ("Robinett").
WHEREAS the Company and Robinett have mutually agreed to the termination
of Robinett's employment and employment Agreement dated ____, as amended; and
WHEREAS, the Company desires to protect its interests and its client list,
trade secrets and other intangibles;
NOW, THEREFORE the parties agree as follows:
1. Term of Agreement. This Agreement shall be for a period ending on July
19, 2000.
2. Payment. In consideration of Robinett's Agreement not to compete with
the Company as defined below, the Company shall pay the following non-refundable
payments to Robinett: $22,500 upon execution of this Agreement, $22,500 within
45 days thereafter and six additional installments of $22,500 each on April 1,
1997; October 1, 1997; April 1, 1998; October 1, 1998; April 1, 1999; and
October 1, 1999. In addition, the exercise price under Robinett's option and
warrants covering 227,500 shares of the Company's common stock will be reduced
to $2.50 per share and be exercisable until July 19, 2000. In the event of a
breach of this Agreement by Robinett, the Company's obligation to make payments
hereunder shall cease and any unexercised option or warrant shall revert to its
original terms with respect to exercise price.
2.1 As long as Robinett and his immediate family members and assigns are
not in breach of this Agreement, Robinett shall receive health insurance
coverage during the term of this Agreement on the same basis as the Company's
senior executive officers without charge and which shall not be less coverage
than exists upon the date of execution of this Agreement.
3. Event of Death. In the event Robinett dies during the term of this
Agreement, provided his immediate family members and assigns comply with this
Agreement, the payments due to Robinett in accordance with this Agreement shall
be paid to such immediate family members or assigns.
4. Non-Compete. Robinett agrees that during the term of this Agreement he
will not engage (as an individual or as a stockholder, trustee, partner,
financier, agent, employee, consultant, independent consultant or representative
of any person, firm, corporation or association) or have any interest, direct or
indirect, in any business in competition with the business of the Company as
conducted as of the date hereof; provided that this Covenant Not to Compete
shall not prevent Robinett from acquiring and holding not more than 2% of the
outstanding shares of any corporation engaged in such competitive business if
such shares are available to the general public on a national securities
exchange.
4.1 The foregoing Covenant Not to Compete shall extend to the immediate
family members and assigns of Robinett such that if any of them engage in any
business in competition with the business of the Company, the payments due
hereunder as well as this Agreement shall terminate immediately.
4.3 In the event of a breach of any covenant contained in this Covenant
Not to Compete by Robinett or his immediate family members or assigns, the
Company shall be entitled to an injunction restraining such breach in addition
to any other remedies provided by law or equity if the continued breach would
result in additional damage to the Company.
4.4 No assignment of this Agreement will release Robinett or his immediate
family members from their obligation to comply with this Agreement.
5. Non-Disclosure and Non-Solicitation. Robinett and his immediate family
members or assigns will not, at any time, other than for the benefit of the
Company, exploit, publish or disclose any non-public confidential or proprietary
information or trade secrets relating to the business of the Company
<PAGE>
except: as required by law; to the Company's outside auditors or legal counsel;
in respect of required financial or other disclosure; to members of the
Company's Board of Directors; and to persons within the Company believed by
Robinett, in good faith, to be authorized to receive same. All documents and
copies thereof, containing any of the same, in the possession of Robinett or his
immediate family members as the result of his employment or consulting with the
Company or any of its subsidiaries shall remain the property of the Company, and
shall be surrendered to the Company.
5.1 Definitions. For the purposes of this paragraph 5, the following
definitions shall apply:
5.1.1 "Company" - Command Security Corporation and each of its
subsidiaries;
5.1.2 "Client" - Any person or entity, other than a "Major Client" as
defined below, with which the Company has, as of sixty days prior to the date of
this Agreement up to and including the date of its termination, a guard service
Agreement (pursuant to which the Company provides back office services to such
person or entity);
5.1.3 "Key Employee" - any officer, branch manager or client or account
manager of the Company employed by the Company as of sixty days prior to the
date of this Agreement up to and including the date of its termination;
5.1.4 "Major Client" - All Service Agreement Clients, as of sixty days
prior to the date of this Agreement up to and including the date of its
termination;
5.1.5 "Solicit" - Any personal communication by Robinett (whether in
person, in writing, by telephone or otherwise) for the purpose of (i)
encouraging any Client, Major Client, or Key Employee to terminate or alter its
business relationship with the Company, or (ii) interfering with the business
relationship between the Company and any Client, Major Client or Key Employee.
5.1.6 "Robinett" - Includes Robinett as well as his immediate family
members and assigns.
5.2 During the term of this Agreement and for a period of twelve (12)
months following the date of its termination, Robinett shall not Solicit any
Client.
5.3 During the term of this Agreement and for a period of eighteen (18)
months following the date of its termination, Robinett shall not Solicit any
Major Client.
5.4 During the term of this Agreement and for the first twelve (12) months
following the date of its termination, Robinett shall not Solicit any Key
Employee; provided that if such Key Employee is associated with, or involved in
servicing the account of, any Major Client, such prohibition shall extend for
eighteen (18) months following the date of this Agreement's termination.
5.5 During the term of this Agreement and for the first twenty-four (24)
months following its termination, Robinett shall not directly or indirectly
employ any Key Employee without the prior written consent of the Company.
6. Notices. All notices and consents required or desired to be given
pursuant hereto shall be in writing and shall be deemed properly given if
delivered to the addressee by overnight courier, in person, or if mailed, by
registered or certified mail, return receipt requested, to the following
addresses:
(a) If to the Company, then at its headquarters at Route 55,
Lexington Park, Lagrangeville, New York 12540.
(b) If to Robinett, then at his home address at 6 Bate Road,
Craryville, New York 12521.
6.1 Any address specified above may be changed by notice given, as herein
provided, by the party hereto whose address is being changed to the other party
hereto.
6.2 If any such notice or consent is delivered in person, the date of
delivery shall be deemed the date of such notice or consent; and if any notice
or consent is mailed, the date of receipt of the mailing shall be deemed the
date of such notice and consent.
7. Amendment, Breach and Waiver. This Agreement may not be amended or
modified in any manner, except by an instrument in writing signed by both
parties hereto and approved by the Board
<PAGE>
of Directors of the Company. The failure of either party hereto to enforce at
any time any of the provisions of this Agreement shall in no way be construed to
be a waiver of any such provision or any other provision, or of the right of
such party thereafter to enforce each and every such provision or other
provision in the event of subsequent breach.
8. Agreement Binding Upon Successors. This Agreement shall inure to the
benefit of, and shall be binding upon the Company, its successors and assigns,
and upon Robinett, his heirs, executors, administrators and legal
representatives.
9. Construction/Entire Agreement. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to its principles or conflicts of laws.
9.1 This Agreement contains the entire Agreement of the parties with
respect to the subject matter hereof and supersedes all prior Agreements or
understandings among the parties with respect thereto.
10. Judgment on Default. Provided Robinett or his immediate family members
or assigns have not violated any of the non-compete, non-disclosure and
non-solicitation provisions of this Agreement, in the event the Company
continues in default after the notice and expiration of the cure period of
Section 10.2, in any of its payment obligations to Robinett pursuant to this
Agreement, any and all amounts to be paid to him for the remainder of the term
of this Agreement shall become immediately due and payable. Notwithstanding any
such payments Robinett and his immediate family members and assigns shall remain
subject to and in compliance with the non-compete, non-disclosure and
non-solicitation provisions of this Agreement. Upon any breach thereof all
accelerated payments will be returned to Command immediately.
10.1 Subject to the terms of Section 10.2, upon such default, the Company
hereby confesses judgment for said amount, together with interest from the date
of the default at the prime rate as published in the Wall Street Journal, as
well as all costs, disbursements and attorneys fees incurred by Robinett and
authorizes entry thereof against the Company in said amount in a County within
the State of New York wherein it has its principal place of business.
10.2 The Affidavit of Confession of Judgment executed simultaneously
herewith, a copy of which is annexed hereto, will be delivered to and held in
accordance with an escrow agreement between the parties and Herzog, Engstrom &
Koplovitz, (the "Escrow Agent"). Upon receipt by the Escrow Agent of a written
notice from Robinett of a default in any payment due to Robinett hereunder, the
Escrow Agent shall notify the Company of its receipt of such notice. In the
event the Escrow Agent does not receive evidence, within seven (7) days
thereafter, that the unaccelerated installment payment due to Robinett has been
paid by the Company (the Company having the right to cure any default without
acceleration within such period) the Escrow Agent shall release the Affidavit of
Confession of Judgment to Robinett. The parties hereto agree to indemnify and
hold harmless the Escrow Agent from any liability in the performance of its
duties hereunder, gross negligence excepted.
11. Other Agreements. Robinett agrees not to terminate the Liquidation
Assistance Agreements dated February 24, 1995, by and between him and Deltec
Development Corporation and The CIT Group/Credit Finance, Inc. Robinett agrees
that his employment Agreement with the Company and any and all other contractual
obligations of the Company to him, except as described herein, are terminated.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
23rd day of July, 1996.
___________________________________
Gordon Robinett
<PAGE>
COMMAND SECURITY CORPORATION
By:________________________________
William C. Vassell
Chairman of the Board
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made as of August 1, 1996 by and between COMMAND
SECURITY CORPORATION, a New York corporation (the "Company"), and H. RICHARD
DICKINSON, a resident of Morristown, New Jersey ("Dickinson").
WITNESSETH THAT:
In consideration of the mutual covenants hereinafter contained, the
parties hereto agree as follows:
1. Employment Term.
1.1 Subject to earlier termination of this Agreement as hereinafter
provided, the Company hereby employs Dickinson, and Dickinson hereby agrees to
serve the Company, as hereinafter set forth, for the period commencing on the
date hereof and terminating on September 31, 1998 (such period being herein
referred to as the "Term").
1.2 Commencing nine (9) months prior to the expiration date of the
Term, the Company and Dickinson shall enter into discussions of the terms and
conditions to govern any renewal hereof.
2. Office; Duties.
2.1 Dickinson is appointed and shall serve the Company during the
Term as Executive Vice President and Chief Financial Officer ("CFO") of the
Company and shall have the duties set forth in Appendix A annexed hereto. If
Dickinson's duties are changed in a way that materially varies from the duties
customarily understood to be commensurate with those offices (or either of them)
Dickinson may at his election by notice in writing to the Company treat such
variation as a termination without cause, Dickinson's employment hereunder shall
terminate thirty (30) days after the giving of such notice if in the first
eighteen (18) months of the Term, or six (6) months after the giving of such
notice if after the first eighteen (18) months of the Term, and the Company
shall pay to and provide Dickinson the amounts and benefits provided described
in Section 2.4 hereof. Notwithstanding the foregoing, this section is not
intended to extend the Term of this Agreement.
2.2 Dickinson's primary office shall be located in New York City,
with his time apportioned between the Company's New York City office and the
Lagrangeville, New York, office as appropriate. He shall not be required to
relocate his residence from New Jersey.
2.3 This agreement may be terminated by the Company for any reason
whatsoever, at any time prior to expiration of the Term hereof. In the event the
Agreement is to be terminated for Cause, as hereinafter defined, or without
Cause during the first eighteen (18) months of the Term, the Company must
provide at least thirty (30) days prior notice of termination; in all other
cases, the Company must provide at least six (6) months prior written notice of
termination. For the purposes of this Agreement, "Cause" shall mean conviction
of a crime involving moral turpitude; dishonesty, willful misconduct or breach
of fiduciary duty, provided that the dishonesty, willful misconduct or breach of
fiduciary duty, as the case may be, involves personal profit to Dickinson of at
least $25,000 at the expense of the Company; or a final cease and desist order
issued by the Securities and Exchange Commission or state securities regulator,
that prohibits Dickinson from performing his principal duties under this
Agreement (provided that such a cease and desist order shall not be deemed
"Cause" if the actions or omissions underlying the order were taken or omitted
by Dickinson with the approval of the Company's board of directors.)
2.4 In the event this Agreement is terminated by the Company without
Cause during the Term, the Company shall pay to Dickinson as severance pay (i)
an amount determined by multiplying his "Base Monthly Compensation" by the
number of months which remain in the the term including the month of termination
(the "Unexpired Balance of the Term") - for example, if Dickinson were
terminated
<PAGE>
effective on October, 15, 1997, the amount would be calculated as follows: Base
monthly Compensation x 12 without deduction (other than withholding and other
typical payroll deductions); (ii) plus, at the Company's election, either the
continuation of any then existing coverage, on the same terms in effect at
termination, of Dickinson's health, life, disability and medical insurance for
the Unexpired Balance of the Term or the prompt payment to Dickinson of an
after-tax amount sufficient to continue same; and (iii) the Bonus provided in
Section 3.2. The payments provided in (i) above shall be made in twelve
successive equal monthly installments commencing the month following the month
in which the termination becomes effective. "Base Monthly Compensation" shall
mean Base Compensation in effect at the time of the event triggering payment
divided by twelve.
2.5 It is distinctly understood and agreed that, Dickinson's death
or disability after this Agreement has been terminated without cause shall have
no effect on the Company's obligations under Sections 2.4 (i) and (iii).
3. Compensation,
3.1 In consideration of the services rendered by Dickinson to the
Company in any capacity under this Agreement during Term and subject to the
provisions of Sections 5 and 6 below, the Company shall pay Dickinson "Base
Compensation" of One Hundred Thirty Thousand Dollars ($130,000.00 per annum)
payable in accordance with the Company's payroll practices for executives in
effect from time to time.
3.2 The Company shall annually pay a. bonus to Dickinson in respect
of each full fiscal year of the Company (commencing with respect to the fiscal
year of the Company ending March 31, 1997) equal to five (5%) percent of the
"pre-tax operating profit of the Company" (as hereinafter defined) for the
fiscal year then ended in excess of $500,000 but less than $1,000,000 and 1% of
the "pre-tax operating profit of the Company" in excess of $1,000,000. Payment
of the bonus shall be made within thirty (30) days of the date on which the
Company receives, from the outside auditors it retains ("Accountants"), the
determination of the "pre-tax operating profit of the Company" for the year in
question calculated by the Accountants. A copy of the Accountants, calculation
of the bonus shall accompany payment of the bonus. In the event this Agreement
expires or is terminated for any reason (other than Cause), the Bonus for the
fiscal year ending after such expiration or termination shall be prorated in
accordance with the number of months elapsed from the beginning of the fiscal
year that ended to the effective date of expiration or termination, as the case
may be, but including for proration purposes the month in which such effective
date occurs.
3.3 As used in Section 3.2, the term "pre-tax operating profit of
the Company" shall mean, with respect to any fiscal year, the pre-tax profit of
the Company for such year, calculated in accordance with generally accepted
accounting principles consistently applied, but. with the following adjustments:
a. Exclusion of any capital gains or losses.
b. Exclusion of the within bonus computed pursuant to Section 3.2 as an
expense in computing the "pre-tax operating profit of the Company".
c. Exclusion of Federal income taxes and state and local income and
franchise taxes.
The foregoing list of adjustments is intended to be representative,
but not necessarily exhaustive,, in determining the "pre-tax operating profit of
the Company", and the parties hereto expressly authorize the Accountants to
delete or add adjustments to the list depending on the financial affairs of the
Company and the Accountants' understanding of the objectives of Section 3.2 and
this Section 3.3, which objectives include the total exclusion of any
extraordinary items not resulting from the ordinary course of the Company's
business from the determination of "pre-tax operating profit of the Company".
3.4 Dickinson shall have the right to draw from the Company advances
against his bonus for each fiscal year during the Term in an amount not to
exceed for such fiscal year, the bonus payable based upon fifty (50%) percent of
the estimated "pre-tax operating profit of the Company" for such applicable
fiscal year (the "Advance Draw"). The Board of Directors of the Company shall
compute the
<PAGE>
Advance Draw, for each applicable fiscal year within 60 days of the beginning of
such fiscal year and any such computation shall be final and binding upon the
parties hereto. The advances of Dickinson shall be made on the last day of each
quarter during the applicable fiscal year in an amount equal to one-quarter of
the Advance Draw. Such advances will be deemed to be taken against Dickinson's
right at the close of each applicable fiscal year to the bonus as set forth in
Section 3.2 and consequently any amount payable to him as a bonus will be
reduced by the amount advanced through the end of the applicable fiscal year. To
the extent that advances exceed the amount payable to Dickinson as a bonus for
such fiscal year as set forth in Section 3.2, he shall pay the difference to the
Company by check within thirty (30) days of the date on which he receives from
the Company, the determination of the "pre-tax operating profit of the Company"
for the year in question, calculated by the Accountants. This repayment
obligation will survive the expiration or termination of this Agreement for any
reason and the repayment amount may be set-off against any amounts due
Dickinson.
3.5 The determination by the Accountants of the definition and the
calculation of "pre-tax operating profit of the Company" shall, with the
exception of any adjustment not specifically enumerated in Section 3.3(a), (b)
or (c), be final, binding and conclusive upon the parties hereto and shall
except as aforesaid not be subject to the arbitration under Section 10 or to a
court proceeding.
3.6 Notwithstanding anything herein to the contrary, all payments
under this Agreement shall be subject to applicable withholding and other taxes.
3.7 Dickinson, if elected or appointed a director shall receive no
additional compensation therefor and shall resign at the request of the Board of
Directors upon termination of his employment.
4. Benefits.
4.1 During the Term, in addition to receiving the payments described
in Section 3 hereof, Dickinson, to the extent he is eligible (as any other
eligible executive of the Company), shall have the right to participate in any
and all group life, hospital, medical and disability insurance plans, and in any
retirement, pension or death benefit plans (hereinafter such plans are
collectively referred to as the "Company Benefit Plans"), now or hereafter
maintained by the Company during the Term and generally offered by the Company
to its executive employees. Notwithstanding anything herein to the contrary,
Dickinson agrees that he shall not be entitled to participate in, and, he shall
be specifically excluded from the 1990 Stock Option Plan of the Company.
5. Disability,
5.1 In the event that during the term hereof Dickinson shall suffer
a "Disability", as hereinafter defined, the Company's obligations under this
Agreement. shall be unaffected; provided however that if such Disability
continues for a period of three consecutive months, (the "Three Month Period")
the Company's obligations under this Agreement shall terminate except that
Dickinson shall be entitled to (i) Base Compensation for a period of nine months
thereafter (the "Nine Month Period") payable monthly during the Nine Month
Period, and (ii) the Bonus under Section 3.2 prorated to the end of such Three
Month Period; provided further that the amounts provided in clause (i) above
shall not be paid, in whole or in part, to Dickinson for (x) any periods in
respect of which Dickinson shall be receiving disability benefits under either
an "Individual Disability Policy" (as hereinafter defined) or a "Group Policy"
(as hereinafter defined), it being the intention of the parties that any such
Policy shall be the primary source of such benefits after the passage of any
"waiting period" thereunder; or (y) any periods after the expiration of the Term
of this Agreement; provided further that if the Company has made payments to
Dickinson pursuant to clause (i), above, during and in respect of periods within
the Nine Month Period ("Company Paid Periods") and Dickinson shall during the
Nine Month Period or thereafter receive disability payments under any such
Policy in respect of any Company Paid Periods, Dickinson shall return to the
Company the net amounts received by him (such return being a reduction in
compensation) from the Company in respect of the Company Paid Periods. If
Dickinson should die during the
<PAGE>
Three Month Period the provisions of Section 6 shall govern instead of Section 5
from and after the date of death.
5.2 Dickinson agrees to make himself available for examination from
time to time on prior reasonable notice to a licensed physician appointed by the
Company at the Company's expense; in the event that there is a dispute as to
whether Dickinson has suffered a Disability, and the Company appointed physician
and Dickinson's physician fail to agree, the dispute shall be conclusively
determined by a third physician appointed mutually by the Company physician and
Dickinson's physician. The fees of such third physician shall be borne in equal
shares by Dickinson and the Company.
5.3 Disability shall mean a condition caused by physical injury or
physical or mental illness or disease that renders Dickinson unable to perform
his duties hereunder.
5.4 Dickinson may purchase an individual disability insurance policy
(an "Individual Disability Policy") and an amount equal to 1/12th of the annual
premium therefor (the "Policy Premium") shall be paid to Dickinson as
compensation monthly in the same manner as Base Compensation as provided in
Section 3.1; provided however that if the Company shall make such insurance
available to Dickinson on a group basis (a "Group Policy") providing
substantially similar coverage, the Company's obligation in respect of the
Policy Premium shall cease from and after the date such coverage becomes
available; should the Company thereafter cease making such a Group Policy
available, the Company's obligation in respect of the Policy Premium shall be
renewed.
6. Death. If Dickinson shall die at any time during the Term, this
Agreement shall terminate as of the close of the month in which the death
occurs. The Company shall pay to Dickinson's legal representatives an amount
equal to his Base Compensation through the end of the month in which death
occurs. In addition, the Company shall pay to his legal representative (i) the
Bonus payable pursuant to Section 3.2, prorated to the close of the month in
which death occurs, and (ii) his Base Monthly Compensation multiplied by six
(6), payable in a lump sum within sixty (6 0) days of the close of the month in
which death occurs. In no event will Dickinson also receive a death benefit
payment if death occurs during the Nine Month Period defined in Section 5.1.
7. Vacation Dickinson shall annually be entitled to a period of paid
vacation consisting of three (3) weeks.
8. Expenses
8.1 In addition to the payments described in Section 3 hereof, the
Company shall pay for or reimburse Dickinson for the reasonable expenses
incurred by him which are directly related to the Company's business, including
expenses for entertainment, travel and similar items, upon presentation by
Dickinson of an itemized account of such expenditures. Air travel expenses
directly related to the business of the Company shall be deemed "reasonable"
within the meaning of this Section 8.1 only if the travel is via business or a
lesser class. The Company's obligations hereunder shall survive the expiration
or earlier termination of this Agreement with respect to any expense properly
incurred by Dickinson prior to the expiration or sooner termination of this
Agreement, as the case may be.
8.2 The Company will provide Dickinson with a 1995 Buick Park Avenue
or comparable automobile and pay for all operating and parking expenses during
the Term.
9. Non-Disclosure and Non-Solicitation
9.1 Dickinson will not, at any time, other than for the benefit of
the Company, exploit, publish or disclose any non-public confidential or
proprietary information or trade secrets relating to the business of the Company
except: in pursuit of his duties hereunder; as required by law; to the Company's
outside auditors or legal counsel; in respect of required financial or other
disclosure; to members of the Company's Board of Directors; and to persons
within the Company believed by Dickinson, in good faith, to be authorized to
receive same. All documents and copies thereof, containing any of the
<PAGE>
same, in the possession of Dickinson as the result of his employment with the
Company or any of its subsidiaries shall be and remain the property of the
Company, and shall be surrendered to the Company upon termination of Dickinson's
employment.
9.2.1 Definitions. For the purposes of this paragraph 9.2, the
following definitions shall apply:
9.2.1.1 "Company" -- Command Security Corporation and each of its
subsidiaries.
9.2.1.2 "Client" -- Any person or entity, other than a "Major
Client" as defined below, with which the Company has, as of sixty days prior to
the date of termination of Dickinson up to and including the date of
termination, a guard service agreement (pursuant to which the Company provides
such person or entity with security guard services) or a service contract,
(pursuant to which the Company provides back office services to such person or
entity).
9.2.1.3 " Key Employee" -- any officer, branch manager or client or
account manager of the Company employed by the Company as of sixty days prior to
the date of termination of Dickinson up to and including the date of
termination;
9.2.1.4 "Major Clients" -- Park City Estates, Foreign Airlines
Operators Committee, British Airways, Wakefern Food Corporation and any Client
generating revenue of $500,000 per year, or more, with respect to guard service
agreements or $1.0 million per year with respect to service contract clients, as
of sixty days prior to the date of termination of Dickinson up to and including
the date of termination;
9.2.1.5 "Solicit" -- Any personal communication by Dickinson
(whether in person, in writing, by telephone or otherwise) for the purpose of
(i) encouraging any Client, Major Client, or Key Employee to terminate or alter
its business relationship with the Company, or (ii) interfering with the
business relationship between the Company and any Client, Major Client or Key
Employee.
9.2.2 During the Term and for the first twelve months following the
date of termination of Dickinson, Dickinson shall not Solicit any Client.
9.2. 3 During the Term and for a period of eighteen (18) months
following the date of termination of Dickinson, Dickinson shall not Solicit any
Major Client.
9.2.4 During the Term and for the first twelve months following the
date of termination of Dickinson, Dickinson shall not Solicit any Key Employee;
provided that if such Key Employee is associated with, or involved in servicing
the account of, any Major Client, such prohibition shall extend for eighteen
months following the date of Dickinson's termination.
9.2.5 During the Term and for the first twenty-four (24) months
following the termination of Dickinson, Dickinson shall not directly or
indirectly employ any Key Employee without the prior written consent of the
Company to be given or withheld in its sole discretion. It is expressly,
understood that the employment of a Key Employee by an employer of Dickinson
will not, in and of itself, constitute a breach of this Agreement.
10. Arbitration.
10.1 Subject to the provisions of the next paragraph of this Section
10, any controversy or claim (other than as provided in Section 3.5, a
controversy or claim arising out of or related to the determination by the
Accountants of the definition or calculation of "pre-tax operating profit")
arising out of or relating to this Agreement, or to performance hereunder, or to
the breach hereof, shall be settled by arbitration in the State, City and County
of New York in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
10.2 Notwithstanding the provisions of the initial sentence of this
Section 10, in the event the Company seeks to enforce the specific performance
of Section 9 by Dickinson, or to enjoin Dickinson from violating any term,
covenant or provision set forth in Section 9, whether or not the Company couples
to its demand for specific performance or for injunctive. relief a demand for
damages, the Company at its election may institute and prosecute proceedings in
any court of competent jurisdiction. In the event the court in which the Company
has instituted proceedings, as permitted by the immediately preceding sentence,
refuses or fails to grant to the Company equitable relief and the court has not
yet passed on the issue of whether the Company should be awarded damages, then
the Company shall, without prejudicing its right to renew in court a demand for
specific performance or injunctive relief
<PAGE>
for the same or another alleged breach by Dickinson of the provisions of Section
9, have the right to remove the issue of damages from the court and refer such
issue to arbitration.
11. Notices.
11.1 All notices and consents required or desired to. be given
pursuant hereto shall be in writing and shall be deemed properly given if
delivered to the addressee, in person, or if mailed, by registered or certified
mail, return receipt requested, to the following addresses:
(a) If to the Company, then at its headquarters at Route 55,
Lexington Park, Lagrangeville, New York 12540, with a copy to David J.
Pollitzer, Esq., Herzog, Engstrom & Koplovitz, P.C., 99 Pine Street, Albany, NY
12207.
(b) If to Dickinson, then at his home address at 12 Harwich Road,
Morristown, NJ 07960, with a copy to John R. Sachs, Jr., Ohrenstein and Brown,
230 Park Avenue, New York, NY 10169.
11.2 Any address specified above may be changed by notice given, as
herein provided, by the party hereto whose address is being changed to the other
party hereto.
11.3 If any such notice or consent is delivered in person, the date
of delivery shall be deemed the date of such notice or consent; and if any
notice or consent is mailed, the date of mailing shall be deemed the date of
such notice or consent.
12. Amendment; No Waiver. This Agreement may not be discharged,
amended or modified in any manner, except by an instrument in writing signed by
both parties hereto and approved by the Board of Directors of the Company. The
failure of either party hereto to enforce at any time any of the provisions of
this Agreement shall in no way be construed to be a waiver of any such provision
or any other provision, or of the right of such party thereafter to enforce each
and every such provision or other provision in the event of a subsequent breach.
13. Agreement--Binding Upon Successors, This Agreement shall inure
to the benefit of, and shall be binding upon the Company, its successors and
assigns; it shall be binding upon Dickinson and inure to the benefit of his
heirs, executors, administrators and legal representatives. The performance of
Dickinson hereunder may not be delegated.
14. Legal Fees. In any action, proceeding or arbitration pursuant
hereto or in connection herewith, the prevailing party, if any, shall be
determined by the trier of fact based upon a balancing of the outcome of all the
issues raised therein. The other party shall immediately reimburse to the
prevailing party, if any, all costs and expenses, including reasonable counsel
fees and disbursements, incurred in connection with such action, proceeding or
arbitration.
15. No Set-Off. Any payment to be made by the Company to or for the
benefit of Dickinson hereunder shall, with the exception of normal payroll
deductions and Dickinson's pay back obligations under Sections 3.4 and 5.1, if
any, be made without deduction or set-off of any kind.
16. Construction. 16.1 This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to its principles of conflicts of laws.
16.2 Whenever this Agreement requires a proration of a bonus for
part of a fiscal year, the "pre-tax operating profit of the Company" to be used
in making such prorata calculation shall be equal to the "pre-tax operating
profit of the Company" for the fiscal year in which falls the part thereof to be
prorated multiplied by a fraction the numerator of which is the number of days
in such fiscal year being prorated and the denominator of which is 365 days. If
a necessary date for an event falls other than at the end of a month, the
proration shall take effect as of the last day of the month in which the event
occurs.
16.3 Nothing in this Agreement shall be construed as limiting such
rights to which Dickinson may be entitled as a matter of law, such as COBRA.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
H. Richard Dickinson
/s/
COMMAND SECURITY CORPORATION
By: /s/
William C. Vassell
Chairman of the Board
<PAGE>
APPENDIX A
The duties of Executive Vice President and of Chief Financial Officer are
those that are determined by the Board of Directors of the Company so long as
such duties are commensurate with each of those offices.
Notwithstanding the foregoing or any provisions in the By-laws, Dickinson
will not have the powers and functions of the President absent a specific
resolution of the Company's Board of Directors authorizing such powers and
functions.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> (1,207)
<SECURITIES> 0
<RECEIVABLES> 13,683
<ALLOWANCES> 1,241
<INVENTORY> 0
<CURRENT-ASSETS> 13,876
<PP&E> 2,799
<DEPRECIATION> 1,717
<TOTAL-ASSETS> 22,175
<CURRENT-LIABILITIES> 13,701
<BONDS> 9,803
1,679
0
<COMMON> 1
<OTHER-SE> 5,186
<TOTAL-LIABILITY-AND-EQUITY> 22,175
<SALES> 0
<TOTAL-REVENUES> 25,411
<CGS> 0
<TOTAL-COSTS> 20,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 225
<INTEREST-EXPENSE> 506
<INCOME-PRETAX> (19)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
