EXHIBIT 10.42
THE CIT GROUP/BUSINESS CREDIT, INC. 212 382-7000
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
February 2, 2005
[LOGO OMITTED]
WAIVER AND AMENDMENT LETTER
COMMAND SECURITY CORPORATION
Xxxxx 00, Xxxxxxxxx Xxxx
XxXxxxxxxxxxx, Xxx Xxxx 00000
We refer to the Financing Agreement between us dated December 12, 2003, as
amended (the "Financing Agreement"). Further reference is made to the Notice of
Default/Reservation of Rights letter dated September 2, 2004 sent by us to you
(herein the "Notice of Default"). Capitalized terms used herein and defined in
the Financing Agreement shall have the same meanings as set forth therein unless
otherwise specifically defined herein.
You have advised us that you are in violation of the financial covenant set
forth in Section 7, Paragraph 7.10 of the Financing Agreement as a result of
your failure to maintain a Fixed Charge Coverage Ratio as more fully set forth
in Section 7 for the months of August 2004, September 2004, October 2004 and
November 2004. You have further advised us that as a result of GCM Security
Partners acquiring the stock of the Company (i) Xxxxxxx Xxxxxxx is no longer the
chairman of the Board of Directors and Chief Executive Officer of the Company
and (ii) Xxxxxx Xxxxxx is no longer the Chief Financial Officer of the Company.
Xxxxx Xxxxxxxxxx has replaced both of such individuals and is the current Chief
Financial Officer and Chief Operating Officer.
This letter is to confirm that we hereby waive compliance with (a) said
financial covenant solely with respect to such fiscal periods and (b) Sections
10.1(i) and (j) and Section 7.14 of the Financing Agreement with respect to the
change in the ownership and management of the Company, and to further confirm
that (i) the failure to comply with said financial covenant and change in the
management and stock ownership of the Company shall not constitute Defaults
and/or Events of Default under the Financing Agreement, and (ii) we hereby waive
any and all rights we may have to accelerate any of the Obligations and exercise
any other remedies against you or the Collateral as a result thereof.
In addition, we hereby (i) rescind and revoke the Notice of Default effective as
of February 1, 2005 and (ii) confirm that we shall cease charging the Default
Rate of Interest effective as of January 1, 2005. Commencing on January 1, 2005
we shall charge interest in accordance with the applicable provisions of the
Financing Agreement.
In addition, effective as of February 1, 2005, the Financing Agreement shall be,
and hereby is, amended as follows:
(a) The following definitions shall be added to Section 1 of the Financing
Agreement in the proper alphabetical order:
"GCM GROUP" shall mean GCM Security Partners LLC and all of its partners,
members and/or equity holders.
"GEMINI" shall mean Xxxxxxx, Xxxxxxx & Associates LLC, D/B/A Gemini
Security Services, a New Jersey limited liability company.
"GEMINI ASSIGNMENT AGREEMENT" shall mean the Assignment of Service
Agreement Non-Employer of Record, dated February 4, 2005 , among Gemini,
the Company and CIT.
"GEMINI RECEIVABLES" shall mean the Trade Accounts Receivable of Gemini
that are subject to the Gemini Service Agreement and to which the Company
has a valid, first priority security interest which it has, in turn,
assigned to CIT.
"GEMINI SERVICE AGREEMENT" shall mean the Service Agreement Non-Employer
of Record, dated February 4, 2005, as amended, among the Company, Gemini
and Xxxxxxx Xxxxx.
(b) The definition of "Eligible Accounts Receivable" contained in Section 1 of
the Financing Agreement shall be, and hereby is, amended by deleting the word
"and" in the first sentence thereof where it appears preceding "(xv)", and by
adding the following text immediately preceding the period at the end of such
definition:
"; and (xvi) with respect to Gemini Receivables, the Gemini Service
Agreement and Gemini Assignment shall be in full force and effect provided
that amounts deemed eligible hereunder shall not exceed $300,000 in the
aggregate at any time."
(c) Section 7, Paragraph 7.10 of the Financing Agreement shall be, and hereby
is, amended in its entirety to read as follows:
"Until termination of this Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Company will, as of
the last day of each month, maintain a Fixed Charge Coverage Ratio of not
less than 1.10:1:00. The Fixed Charge Coverage Ratio shall be calculated,
as of any date of determination, based upon the preceding twelve (12)
months, provided that (i) such ratio shall be calculated as of December
31, 2004 for the one (1) month period then ended and (ii) prior to the
completion of the first twelve (12) months following December 1, 2004 such
calculation shall be based on the number of full calendar months since
December 1, 2004 with such results to be cumulative for such period."
(d) Sections 10.1(i) and (j) shall be and each hereby is amended in its entirety
to read as follows:
"(i) the Chief Financial Officer and/or Chief Operating Officer of the
Company resigns and such position is not filled with a replacement
reasonably satisfactory to CIT within thirty (30) days thereafter."
"(j) If at any time the Continuing Directors cease to constitute at least
a majority of the members of the Company's Board of Directors. For
purposes of this section, the Company's "Continuing Directors" shall mean
Messrs. Xxxxx Xxxxxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx
Xxxx and Xxxxxx Xxxxx."
(e) Section 10.1 shall be and hereby is amended by the addition thereto of
clause "(n)" as follows:
"(n) at any time the Gemini Receivables form a part of the Borrowing Base
the Gemini Service Agreement or Gemini
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Assignment Agreement shall be terminated or not otherwise be in full force
or effect, or Gemini, the Company or any other party thereto (other than
CIT) shall breach any warranty, representation or covenant contained
therein."
(f) Section 12.6 of the Financing Agreement shall be, and hereby is, amended to
provide that notices to the Company under clause "(B)" thereof shall be sent to
Xxxxx Xxxxxxxxxx, Chief Operating Officer and Chief Financial Officer.
(g) The definition of "Collateral" as set forth in Section 1 of the Financing
Agreement shall be, and hereby is, and hereby is amended by the addition thereto
of "the Gemini Service Agreement and the Gemini Receivables", and the Company
hereby confirms that it has collaterally assigned to, and hereby grants to CIT,
a security interest in and lien upon the Gemini Service Agreement and all
present and future Gemini Receivables.
(h) Section 6.1 of the Financing Agreement shall be, and hereby is amended by
the deletion therefrom after clause "(f)" of the word "and", and the insertion
of the phrase "Gemini Receivables and the Gemini Service Agreement; and" as
clause "(g)" and relettering existing clause "(g)" as clause "(h)".
(i) Section 7.14 of the Financing Agreement shall be, and hereby is, amended in
its entirety to read as follows:
"7.14. Any replacement of the Chief Financial Officer and/or Chief
Operating Officer of the Company shall be reasonably satisfactory to CIT.
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(j) In addition, the Company and CIT agree that the Gemini Service Agreement and
the Gemini Receivables are to be treated in a similar fashion under the
Financing Agreement as the TBV Service Agreement and the TBV Receivables, and in
furtherance thereof it is hereby mutually agreed that all references to "TBV",
"TBV Service Agreement" and "TBV Receivables" shall be amended to also refer to
and include "Gemini", "Gemini Service Agreement" and "Gemini Receivables", as
the case may be, including but not limited to the following:
(1) the definition of "Accounts" shall be, and hereby is, amended by
adding the phrase "Gemini Receivables and"
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immediately prior to the phrase "TBV Receivables" on the third line
thereof;
(2) the definition of "Eligible Accounts Receivables" shall be, and hereby
is, amended by adding the phrase "or Gemini" immediately after the phrase
"TBV" in clause "(v)" thereof;
(3) the definition of "Eligible Unbilled Accounts Receivables" shall be,
and hereby is, amended by adding the phrase "and the Gemini Receivables"
immediately after the phrase "TBV Receivables" in the parenthetical on the
second line thereof;
(4) the definition of "Permitted Encumbrances" shall be, and hereby is
amended by adding the phrase "and/or the Gemini Service Agreement"
immediately after the phrase "TBV Service Agreement" as contained in the
parenthetical in clause "(g)" thereof;
(5) the definition of "Trade Accounts Receivable" shall be, and hereby is
amended by deleting the word "and" in the first sentence thereof where it
appears preceding "(b)", and by adding the phrase "and (c) the Gemini
Receivables" at the end thereof just prior to the period;
(6) Section 3.2 of the Financing Agreement shall be, and hereby is,
amended by adding the phrase "or Gemini's" after the phrase "TBV's" and
prior to the phrase "customers" on the eleventh line thereof;
(7) Section 3.3 of the Financing Agreement shall be, and hereby is,
amended as follows:
(x) by adding the phrase "and the Gemini Receivables" after the
phrase "TBV Receivables" in the parenthetical on the third line
thereof; (y) by adding the phrase "and/or Gemini" after the phrase
"TBV" on the third line thereof; and (z) by adding the phrase
"and/or the Gemini Receivables as the case may be" after the phrase
"TBV Receivables" in the parenthetical on the fourth line thereof.
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(8) Section 6.10 of the Financing Agreement shall be, and hereby is,
amended as follows:
(x) by adding the phrase "or the Gemini Service Agreement" after the
phrase "TBV Service Agreement" on the second line thereof; (y) by
adding the phrase "and/or the Gemini Service Agreement" after the
phrase "TBV Service Agreement on the fourth; and (z) by adding the
phrase "and/or Gemini, as the case may be" after the phrase "TBV" on
the last line thereof.
(9) Section 7.6 of the Financing Agreement shall be and hereby is amended
by adding the phrase "or Gemini (in respect of the Gemini Receivables)"
after the phrase "TBV (in respect of the TBV Receivables)".
(10) Section 7.8 of the Financing Agreement shall be, and hereby is,
amended by adding the phrase "and the other parties to the Gemini Service
Agreement have complied with all the terms of the Gemini Service
Agreement" after the phrase "the other parties to the TBV Service
Agreement have complied with all terms of the TBV Service Agreement" and
prior to the parenthetical at the end of such Section.
(11) Section 7.9(g) of the Financing Agreement shall be, and hereby is,
amended by adding the phrase "and to Gemini, pursuant to the terms of the
Gemini Service Agreement" after the phrase "to TBV, pursuant to the terms
of the TBV Service Agreement" on the last line thereof.
(k) Notwithstanding any provision to the contrary contained in the Financing
Agreement, until we notify you to the contrary (which notice may be given by us
at any time in our sole discretion), it is hereby mutually agreed that any and
all payments, remittances and/or collections from Delta Airlines ("Delta
Collections") shall be paid directly to the Company, and shall not be deposited
into CIT's lockbox or collection accounts maintained under the Financing
Agreement or otherwise turned over or paid to CIT for application to the
Company's Obligations under the Financing Agreement. Until we notify you to the
contrary hereunder, all such Delta Collections shall be retained by you and
deposited into the Company's operating bank account. Notwithstanding the
foregoing arrangement, the Delta Collections and the Accounts due and to become
due from Delta Airlines giving rise to such Delta Collections are, and shall, at
all times continue to be, subject to our security interest, lien and all of our
rights under the Financing Agreement. You agree to notify Delta Airlines of the
arrangements between us and take all other actions reasonably requested by us to
implement such arrangements. You shall not be responsible for, nor shall you be
in default under the Financing Agreement as a result of, Delta Airlines failure
to comply with our arrangement, provided that (x) you have complied with our
requests hereunder and (y) we may, in our sole discretion, return to Delta
Airlines any and all Delta Collections received by us after February 28, 2005.
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Notwithstanding any provision to the contrary contained herein, the
effectiveness of all terms and provisions of this Waiver and Amendment Letter
pertaining solely the inclusion of Gemini Receivables in the definition of
Eligible Accounts Receivable and CIT making loans and/or advances against such
Gemini Receivables shall be conditioned upon (A) the execution and delivery to
CIT by the Company, Gemini and Xxxxxxx Xxxxx of the Gemini Assignment Agreement
including but not limited to Gemini's acknowledgment thereof together with a
copy of the executed Gemini Service Agreement and all other agreements and
documents requested by CIT including but not limited to authorizing board of
directors resolutions (all in form and substance satisfactory to CIT) and (B)
completion to CIT's satisfaction of all lien searches and filings (including but
not limited to the recording of all UCC financing statements requested by CIT)
against the Company and Gemini.
In consideration of (i) our execution of this Waiver and Amendment Letter you
agree to (x) pay to us an Accommodation Fee of $10,000 and (y) reimburse us upon
demand for all Out-of-Pocket Expenses incurred by us in connection with this
Waiver and Amendment Letter and the transactions contemplated herein and (ii)
the preparation of this Waiver and Amendment Letter by our in-house legal
department and facilities you agree to pay to us a Documentation Fee of $405.00.
Such fees and expenses shall be due and payable on the date hereof and may (at
our option) be charged to your Revolving Loans Account on the respective due
dates thereof.
Except to the extent set forth herein, no other waiver of, or change in any of
the terms, provisions or conditions of the Financing Agreement is intended or
implied. Except to the extent set forth herein, this agreement shall not
constitute a waiver of any other existing Defaults or Events of Default under
the Financing Agreement (whether or not we have knowledge thereof), and shall
not constitute a waiver of any future Defaults or Events of Default whatsoever.
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If the foregoing is in accordance with your understanding of our agreement,
kindly so indicate by signing and returning the enclosed copy of this letter.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By: ____________________________________
Name: __________________________________
Title: _________________________________
Read and Agreed to:
COMMAND SECURITY CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
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