COMMAND SECURITY CORP (Form: 10-Q, Received: 02/17/2009 15:52:22)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2008

¨ 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 incorporation or organization)	(I.R.S. Employer Identification No.)

Lexington Park
LaGrangeville, New York	12540
(Address of principal executive offices)	(Zip Code)

(845) 454-3703

(Registrant's telephone number, including area code)

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 ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer x

Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of outstanding shares of the registrant’s common stock as of February 6, 2009 was 10,797,216.

		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Statements of Income - three and nine months ended December 31, 2008 and 2007 (unaudited)	3

	Condensed Consolidated Balance Sheets - December 31, 2008 (unaudited) and March 31, 2008	4

	Condensed Consolidated Statements of Changes in Stockholders' Equity - nine months ended December 31, 2008 and 2007 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows - nine months ended December 31, 2008 and 2007 (unaudited)	6-7

	Notes to Condensed Consolidated Financial Statements	8-12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13-20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21

Item 4.	Controls and Procedures	21

PART II.	OTHER INFORMATION

Item 1A.	Risk Factors	22

Item 6.	Exhibits	22

SIGNATURES		23

Exhibit 31.1	Certification of Edward S. Fleury
Exhibit 31.2	Certification of Barry I. Regenstein
Exhibit 32.1	§1350 Certification of Edward S. Fleury
Exhibit 32.2	§1350 Certification of Barry I. Regenstein

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

COMMAND SECURITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended						Nine Months Ended
	December 31			December 31			December 31			December 31
	2008			2007			2008			2007

Revenues	$	32,760,473		$	30,225,328		$	98,415,570		$	88,922,998

Cost of revenues		28,033,460			26,073,598			84,027,213			76,804,358

Gross profit		4,727,013			4,151,730			14,388,357			12,118,640

Operating expenses
General and administrative		4,107,122			3,362,716			11,372,126			9,927,373
Provision (recoveries) for doubtful accounts, net		61,670			66,005			214,335			(152,755	)
		4,168,792			3,428,721			11,586,461			9,774,618

Operating income		558,221			723,009			2,801,896			2,344,022

Interest income		9,966			13,401			25,759			61,243
Interest expense		(114,377	)		(196,239	)		(371,258	)		(626,306	)

Gain on sale of available for-sale securities		—			—			—			50,007
Equipment dispositions		—			300			8,812			1,188

Income before income taxes		453,810			540,471			2,465,209			1,830,154

Provision for income taxes		205,000			—			1,060,000			275,000

Net income	$	248,810		$	540,471		$	1,405,209		$	1,555,154

Net income per common share
Basic	$	.02		$	.05		$	.13		$	.15
Diluted	$	.02		$	.05		$	.12		$	.14

Weighted average number of common shares outstanding
Basic		10,775,916			10,727,191			10,763,449			10,727,191
Diluted		11,349,993			11,379,450			11,390,625			11,326,613

See accompanying notes to condensed consolidated financial statements

COMMAND SECURITY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,			March 31,
	2008			2008
	(Unaudited)
ASSETS

Current assets:

Cash and cash equivalents	$	320,647		$	146,782
Accounts receivable, net of allowance for doubtful accounts of $1,040,391 and $1,020,442, respectively		22,582,717			20,097,835
Prepaid expenses		3,977,245			2,680,751
Other assets		1,579,342			1,910,163
Total current assets		28,459,951			24,835,531

Furniture and equipment at cost, net		656,283			559,665

Other assets:
Intangible assets, net		5,009,770			4,049,273
Restricted cash		82,577			302,736
Other assets		3,133,843			3,039,244
Total other assets		8,226,190			7,391,253

Total assets	$	37,342,424		$	32,786,449

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Checks issued in advance of deposits	$	585,731		$	1,962,314
Current maturities of long-term debt		—			5,901
Current maturities of obligations under capital leases		63,101			17,100
Short-term borrowings		12,418,102			8,752,433
Accounts payable		358,329			1,025,963
Accrued expenses and other liabilities		8,169,826			6,974,784
Total current liabilities		21,595,089			18,738,495

Insurance reserves		585,276			670,617
Obligations under capital leases, due after one year		125,540			17,588
Total liabilities		22,305,905			19,426,700

Stockholders’ equity:
Preferred stock, Series A, $.0001 par value		—			—
Common stock, $.0001 par value		1,079			1,076
Accumulated other comprehensive loss		(131,076	)		(240,270	)
Additional paid-in capital		16,087,311			15,924,947
Accumulated deficit		(920,795	)		(2,326,004	)
Total stockholders’ equity		15,036,519			13,359,749

Total liabilities and stockholders’ equity	$	37,342,424		$	32,786,449

See accompanying notes to condensed consolidated financial statements

COMMAND SECURITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

					Accumulated
					Other			Additional
	Preferred		Common		Comprehensive			Paid-In		Accumulated
	Stock		Stock		Income (Loss)			Capital		Deficit


Balance at March 31, 2007	$	—	$	1,014	$	12,550		$	13,889,861	$	(4,799,589	)

Issuance of 614,246 shares for acquisition				61					1,784,939

Stock compensation cost									218,050

Other comprehensive income (loss) (a)						(139,649	)

Net income - nine months ended December 31, 2007											1,555,154

Balance at December 31, 2007		—		1,075		(127,099	)		15,892,850		(3,244,435	)

Options exercised				1					10,247

Stock compensation cost									21,850

Other comprehensive income (loss) (a)						(113,171	)

Net income – three months ended March 31, 2008											918,431

Balance at March 31, 2008		—		1,076		(240,270	)		15,924,947		(2,326,004	)

Options exercised				3					53,998

Stock compensation cost									108,366

Other comprehensive income (loss) (a)						109,194

Net income – nine months ended December 31, 2008											1,405,209

Balance at December 31, 2008	$	—		1,079	$	(131,076	)	$	16,087,311	$	(920,795	)

(a) – Represents unrealized gain (loss) on marketable securities.

See accompanying notes to condensed consolidated financial statements

COMMAND SECURITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine months ended December 31,
	2008			2007
Cash flow from operating activities:
Net income	$	1,405,209		$	1,555,154
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization		590,309			514,977
Provision (recoveries) for doubtful accounts, net		19,949			(152,755	)
Gain on equipment dispositions		(8,812	)		(1,188	)
Gain on sale of investments		—			(50,007	)
Stock based compensation costs		108,366			218,050
Insurance reserves		(85,341	)		289,352
Deferred income taxes		(5,000	)		(37,000	)
Restricted cash		220,159			(221,330	)
Increase in receivables, prepaid expenses
and other current assets		(3,450,907	)		(3,296,278	)
Increase in accounts payable and other current liabilities		527,409			1,051,152
Net cash used by operating activities		(678,659	)		(129,873	)

Cash flows from investing activities:
Purchases of equipment		(111,250	)		(132,096	)
Proceeds from equipment dispositions		8,812			1,188
Acquisition of businesses		(1,358,438	)		(1,775,596	)
Proceeds from sale of investments		—			149,096
Net cash used in investing activities		(1,460,876	)		(1,757,408	)

Cash flows from financing activities:
Net advances on line-of-credit		3,665,669			2,148,260
Decrease in checks issued in advance of deposits		(1,376,583	)		(45,940	)
Proceeds from option exercises		53,998			—
Debt issuance costs		—			(113,472	)
Principal payments on other borrowings		(5,901	)		(127,216	)
Principal payments on capital lease obligations		(23,783	)		(13,400	)
Net cash provided by financing activities		2,313,400			1,848,232

Net change in cash and cash equivalents		173,865			(39,049	)

Cash and cash equivalents, beginning of period		146,782			220,040

Cash and cash equivalents, end of period	$	320,647		$	180,991

See accompanying notes to condensed consolidated financial statements

COMMAND SECURITY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Supplemental Disclosures of Cash Flow Information

Cash paid during the nine months ended December 31 for:

	2008		2007

Interest	$	374,138	$	625,108
Income taxes		1,165,926		919,723

Supplemental Schedule of Non-Cash Investing and Financing Activities

During the nine months ended December 31, 2008, we purchased security equipment with lease financing of $177,736. This amount has been excluded from the purchases of equipment on the condensed consolidated statements of cash flows presented.

During the nine months ended December 31, 2007, we acquired a security services business for a purchase price of $3,400,000. At the closing, we paid $1,615,000 of the purchase price in cash and issued 614,246 shares of our common stock, valued at an aggregate amount of $1,785,000 for the remaining balance of the purchase price. The issuance of these shares of our common stock has been excluded from investing and financing activities on the condensed consolidated statements of cash flows presented.

During the nine months ended December 31, 2007, we received available-for-sale securities in connection with our claim related to the bankruptcy filing of Northwest Airlines in the amount of $366,988 which is included as a bad debt recovery in the accompanying condensed consolidated statements of income. This amount has been excluded from investing activities on the condensed consolidated statements of cash flows presented.

See accompanying notes to condensed consolidated financial statements

COMMAND SECURITY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements presented herein have not been audited, and have been prepared in accordance with the instructions to Form 10-Q which do not include all of the information and note disclosures required by generally accepted accounting principles in the United States. These financial statements should be read in conjunction with our consolidated financial statements and notes thereto as of and for the fiscal year ended March 31, 2008. In this discussion, the words “Company,” “we,” “our,” “us” and terms of similar import should be deemed to refer to Command Security Corporation.

The condensed consolidated financial statements for the interim period shown in this report are not necessarily indicative of our results to be expected for the fiscal year ending March 31, 2009 or for any subsequent period. In the opinion of our management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation of the financial statements included in this quarterly report. All such adjustments are of a normal recurring nature.

1.	Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("SFAS No. 157"), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued Staff Position (“FSP”) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of FAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The adoption of SFAS No.157 did not have a material impact on our consolidated financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159 permits entities to choose to measure certain financial assets and financial liabilities at fair value. The stated objective of SFAS No. 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The adoption of SFAS No.159 did not have a material impact on our condensed consolidated financial statements.

In December 2007, the FASB issued SFAS 141 (Revised 2007), "Business Combinations." SFAS 141(R) will significantly change the accounting for business combinations. Under SFAS 141(R), an acquiring entity will be required to recognize, with limited exceptions, all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value. SFAS 141(R) will change the accounting treatment for certain specific acquisition-related items including, among other items: (1) expensing acquisition-related costs as incurred, (2) valuing noncontrolling interests at fair value at the acquisition date, and (3) expensing restructuring costs associated with an acquired business. SFAS 141(R) also includes a substantial number of new disclosure requirements. SFAS 141(R) is to be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company will adopt the provisions of SFAS 141(R) as of April 1, 2009.

COMMAND SECURITY CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

2.	Short-Term Borrowings:

Until March 21, 2006, we were parties to a financing agreement (the “Agreement”) with CIT Group/Business Credit, Inc. (“CIT”) that had a term of three years ending December 12, 2006 and provided for borrowings in an amount up to 85% of our eligible accounts receivable, as defined in the Agreement, but in no event more than $15,000,000. The Agreement also provided for advances against unbilled revenues (primarily monthly invoiced accounts) although this benefit was offset by a reserve against all outstanding payroll checks. Borrowings under the Agreement bore interest at the prime rate (as defined in the Agreement) plus 1.25% per annum, on the greater of: (i) $5,000,000 or (ii) the average of the net balances owed by us to CIT in the loan account at the close of each day during the applicable month for which interest was calculated. Costs to close the loan totaled $279,963 and are being amortized over the three year life of the Agreement, as extended (see below).

On March 22, 2006, we entered into an Amended and Restated Financing Agreement with CIT (the “Amended and Restated Agreement”), which provided for borrowings as noted above, but in no event more than $12,000,000. The Amended and Restated Agreement provided for a letter of credit sub-line in an aggregate amount of up to $1,500,000. Under the Amended and Restated Agreement, letters of credit were subject to a two percent (2%) per annum fee on the face amount of each letter of credit. The Amended and Restated Agreement provided for interest to be calculated on the outstanding principal balance of the revolving loans at the prime rate (as defined in the Amended and Restated Agreement) plus .25%, if our EBITDA (as defined in the Amended and Restated Agreement) was equal to or less than $500,000 for the most recently completed fiscal quarter; otherwise, the outstanding principal balance bore interest at the prime rate. For LIBOR loans, interest was calculated on the outstanding principal balance of the LIBOR loans at the LIBOR rate (as defined in the Amended and Restated Agreement) plus 2.75%, if our EBITDA was equal to or less than $500,000 for the most recently completed fiscal quarter; otherwise, the outstanding principal balance bore interest at the LIBOR rate plus 2.50%.

On April 12, 2007, we entered into an amendment to the Amended and Restated Agreement (“the Amended Agreement”). Under the Amended Agreement, the aggregate amount that we could borrow from CIT under the credit facility was increased from $12,000,000 to $16,000,000, and CIT also provided us with a $2,400,000 acquisition advance to fund the cash requirements associated with the acquisition of a security services business. Further, the Amended Agreement extended the maturity date of this credit facility to December 12, 2008, reduced certain fees and availability reserves and increased the letter of credit sub-line to an aggregate amount of up to $3,000,000. Under the Amended Agreement, letters of credit are subject to a one and three-quarters percent (1.75%) per annum fee on the face amount of each letter of credit. The Amended Agreement provides that interest is calculated on the outstanding principal balance of the revolving loans at the prime rate (as defined in the Amended Agreement) less .25%. For LIBOR loans, interest will be calculated on the outstanding principal balance of the LIBOR loans at the LIBOR rate (as defined in the Amended Agreement) plus 2.0%.

On October 10, 2008, we amended the Amended Agreement to extend the maturity date of the CIT credit facility to December 31, 2008 and to reduce the written notice period required to terminate the Amended Agreement from 60 days to 30 days.

COMMAND SECURITY CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

On November 24, 2008, we amended the Amended Agreement to extend the maturity date of the CIT credit facility to March 31, 2009. The amendment also provides for interest to be calculated on the outstanding principal balance of the revolving loans at prime rate (as defined in the Amended Agreement) plus 3.50%. For LIBOR loans, interest will be calculated on the outstanding principal balance of the LIBOR loans at the LIBOR rate (as defined in the Amended Agreement) plus 3.50%. In addition, the Company agreed to pay CIT a fee (the “Amendment Fee”) in consideration for the extension provided to the Company under this amendment in the amount of $20,000. The Amendment Fee is payable as follows: (i) If the Obligations (as defined in the Amended Agreement) are paid in full on or before January 31, 2009, the entire Amendment Fee shall be forgiven; (ii) If the Obligations (as defined in the Amended Agreement) are not paid on or before January 31, 2009, a portion of the Amendment Fee in the amount of $7,500 must be paid on or before February 1, 2009; (iii) If the Obligations (as defined in the Amended Agreement) are paid in full on or before February 27, 2009, then the unpaid balance of the Amendment Fee shall be forgiven; and (iv) If the Obligations (as defined in the Amended Agreement) are not paid on or before February 27, 2009, then the unpaid balance of the Amendment Fee must be paid on or before March 2, 2009.

As of December 31, 2008, the interest rate for revolving loans was 6.75%. Closing costs for the Amended Agreement totaled $158,472, including $125,000 payable to the lender, with $45,000 due at closing, $40,000 due six months after closing and $40,000 due twelve months after closing. Legal costs incurred in connection with the transaction were $33,472. All of these costs are being amortized over the remaining life of the Amended Agreement.

At December 31, 2008, we had borrowed $12,418,102 in revolving loans and had $147,000 of letters of credit outstanding representing approximately 79% of our maximum borrowing capacity under the Amended Agreement based on our “eligible accounts receivable” (as defined under the Amended Agreement) as of such date. For the nine months ended December 31, 2008, we were in compliance with all covenants under the Amended Agreement.

We have relied on our borrowings from CIT under our credit facility to finance our working capital requirements and, to a lesser extent, for acquisitions. During November and December 2008, our management had discussions with, and received term sheets from a number of financial institutions with respect to a new credit facility. Based on our review of the various alternatives presented by these financial institutions and input received from our management, our board of directors approved the selection of the proposal for a credit facility from Wells Fargo, National Association, acting through its Wells Fargo Business Credit operating division (“Wells Fargo”). On February 12, 2009, we entered into a new $20,000,000 credit facility with Wells Fargo, as described in Note 9.

COMMAND SECURITY CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

Other assets consist of the following:

	December 31,			March 31,
	2008			2008

Workers’ compensation insurance	$	1,411,030		$	1,622,489
Other receivables		66,906			138,413
Security deposits		185,041			247,122
Deferred tax asset		2,610,253			2,605,253
Other		439,955			336,130
		4,713,185			4,949,407
Current portion		(1,579,342	)		(1,910,163	)

Total non-current portion	$	3,133,843		$	3,039,244

4.	Accrued Expenses and Other Liabilities:

Accrued expenses and other liabilities consist of the following:

	December 31,		March 31,
	2008		2008

Payroll and related expenses	$	4,316,705	$	4,048,102
Taxes and fees payable		3,295,241		2,139,846
Accrued interest payable		41,823		46,659
Other		516,057		740,177

Total	$	8,169,826	$	6,974,784

In September 2008, we completed the acquisition of substantially all of the assets of Eagle International Group, LLC (“EIG”) and International Security & Safety Group, LLC (“ISSG”), providers of security services primarily in Broward and Palm Beach counties in Florida. EIG and ISSG have an aggregate of approximately 200 employees and estimated combined annual sales of approximately $5,000,000 for calendar 2008. The combined cash purchase price for these businesses was approximately $1,200,000, subject to reduction in the event that certain revenue targets are not met.

6.	Insurance Reserves:

We have an insurance policy covering workers’ compensation claims in states where we perform services. Estimated accrued liabilities are based on our historical loss experience and the ratio of claims paid to our historical payout profiles. Charges for estimated workers’ compensation related losses incurred and included in cost of sales were $517,697 and $385,927, and $1,429,635 and $1,296,602, for the three and nine months ended December 31, 2008 and 2007, respectively.

The nature of our business also subjects us to claims or litigation alleging that we are liable for damages as a result of the conduct of our employees or others. We insure against such claims and suits through general liability policies with third-party insurance companies. Such policies have limits of $7,000,000 per occurrence for claims related to our non-aviation business with an additional excess umbrella policy of $5,000,000. On the aviation related business, we have a policy with a $30,000,000 limit per occurrence. We retain the risk for the first $25,000 per occurrence on the non-aviation related policy which includes airport wheelchair and electric cart operations and $5,000 on the aviation related policy except for $25,000 for damage to aircraft and $100,000 for skycap operations. Estimated accrued liabilities are based on specific reserves in connection with existing claims as determined by third party risk management consultants and actuarial factors and the timing of reported claims. These are all factored into estimated losses incurred but not yet reported to us.

Cumulative amounts estimated to be payable by us with respect to pending and potential claims for all years in which we are liable under our general liability retention and workers’ compensation policies have been accrued as liabilities. Such accrued liabilities are necessarily based on estimates; thus, our ultimate liability may exceed or be less than the accrued amounts. The methods of making such estimates and establishing the resultant accrued liability are reviewed continually and any adjustments resulting therefrom are reflected in current results of operations.

7.	Net Income per Common Share:

Under the requirements of Statement of Financial Accounting Standards No. 128, “Earnings Per Share,” the dilutive effect of our common shares that have not been issued, but that may be issued upon the exercise or conversion, as the case may be, of rights or options to acquire such common shares, is excluded from the calculation for basic earnings per share. Diluted earnings per share reflects the additional dilution that would result from the issuance of our common shares if such rights or options were exercised or converted, as the case may be, and is presented for the three and nine months ended December 31, 2008 and 2007.

The nature of our business is such that there is a significant volume of routine claims and lawsuits that are issued against us, the vast majority of which never lead to substantial damages being awarded. We maintain general liability and workers’ compensation insurance coverage that we believe is appropriate to the relevant level of risk and potential liability. Some of the claims brought against us could result in significant payments; however, the exposure to us under general liability is limited to the first $25,000 per occurrence on the non-aviation, airport wheelchair and electric cart operations related claims and $5,000 per occurrence on the aviation related claims except for $25,000 for damage to aircraft and $100,000 for skycap operations. Any punitive damage award would not be covered by the general liability insurance policy. The only other potential impact would be on future premiums, which may be adversely affected by an unfavorable claims history.

In addition to such cases, we have been named as a defendant in several uninsured employment related claims that are pending before various courts, the Equal Employment Opportunities Commission or various state and local agencies. We have instituted policies to minimize these occurrences and monitor those that do occur. At this time, we are unable to determine the impact on the financial position and results of operations that these claims may have, should the investigations conclude that they are valid.

9.	Subsequent Event:

On February 12, 2009, we entered into a new $20,000,000 credit facility with Wells Fargo (the “Credit Agreement”). This new credit facility, which matures in February 2012, contains customary affirmative and negative covenants, including, among other things, covenants requiring us to maintain certain financial ratios. This new facility replaces our existing $16,000,000 revolving credit facility with CIT, and will be used to refinance outstanding indebtedness under that facility, to pay fees and expenses in connection therewith and, thereafter, for working capital (including acquisitions), letters of credit and other general corporate purposes.

The Credit Agreement provides for a letter of credit sub-line in an aggregate amount of up to $3,000,000. The Credit Agreement also provides for interest to be calculated on the outstanding principal balance of the revolving loans at the prime rate (as defined in the Credit Agreement) plus 1.50%. For LIBOR loans, interest will be calculated on the outstanding principal balance of the LIBOR loans at the LIBOR rate (as defined in the Credit Agreement) plus 2.75%. In addition, the Credit Agreement provides a performance pricing provision whereby if certain conditions are met (as defined in the Credit Agreement) the interest rates charged shall be reduced by 0.25%.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed consolidated financial statements and the related notes contained in this quarterly report.

Forward Looking Statements

Certain of our statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this quarterly report and, in particular, those under the heading “Outlook,” contain forward-looking statements. The words “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “plans,” “intend” and “continue,” or the negative of these words or other variations on these words or comparable terminology typically identify such statements. These statements are based on our management’s current expectations, estimates, forecasts and projections about the industry in which we operate generally, and other beliefs of and assumptions made by our management, some or many of which may be incorrect. In addition, other written or verbal statements that constitute forward-looking statements may be made by us or on our behalf. While our management believes these statements are accurate, our business is dependent upon general economic conditions and various conditions specific to the industries in which we operate. Moreover, we believe that the current business environment is more challenging and difficult than it has been in the past several years, if not longer. Many of our customers, particularly those that are primarily involved in the aviation industry, are currently experiencing substantial financial and business difficulties as a result of a generally poor economic environment, and the relatively high price of oil and the corresponding substantial increase in their operating costs in particular. If the business of any substantial customer or group of customers fails or is materially and adversely affected by these factors, they may seek to substantially reduce their expenditures for our services. These factors could cause our actual results to differ materially from the forward-looking statements that we have made in this quarterly report. Further, other factors, including, but not limited to, those relating to the shortage of qualified labor, competitive conditions, and adverse changes in economic conditions of the various markets in which we operate, could adversely impact our business, operations and financial condition and cause our actual results to fail to meet our expectations, as expressed in the forward-looking statements that we have made in this quarterly report. These forward-looking statements are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult for us to predict. We undertake no obligation to update publicly any of these forward-looking statements, whether as a result of new information, future events or otherwise.

As provided for under the Private Securities Litigation Reform Act of 1995, we wish to caution shareholders and investors that the important factors under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission with respect to our fiscal year ended March 31, 2008 could cause our actual results and experience to differ materially from our anticipated results or other expectations expressed in our forward-looking statements in this quarterly report.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We believe the following critical accounting policies affect the significant estimates and judgments used in the preparation of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned domestic subsidiaries. All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. Estimates are used when accounting for certain items such as allowances for doubtful accounts, depreciation and amortization, income tax assets and insurance reserves. Estimates are based on historical experience, where applicable or other assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results may differ from those estimates under different assumptions or conditions.

We record revenues as services are provided to our customers. Revenues are generated primarily from our aviation and security services, which we typically bill at hourly rates. These rates may vary depending on base, overtime and holiday time worked.

We periodically evaluate the requirement for providing for billing adjustments and/or credit losses on our accounts receivable. We provide for billing adjustments where management determines that there is a likelihood of a significant adjustment for disputed billings. Criteria used by management to evaluate the adequacy of the allowance for doubtful accounts include, among others, the creditworthiness of the customer, current trends, prior payment performance, the age of the receivables and our overall historical loss experience. Individual accounts are charged off against the allowance as management deems them as uncollectible.

Intangible assets are stated at cost and consist primarily of customer lists and borrowing costs that are being amortized on a straight-line basis over three to ten years and goodwill which is reviewed annually for impairment. The life assigned to customer lists acquired is based on management’s estimate of the attrition rate of our customers. The attrition rate is estimated based on historical contract longevity and management’s operating experience. We test for impairment annually or when events and circumstances warrant such a review, if sooner. Any potential impairment is evaluated based on anticipated undiscounted future cash flows and actual customer attrition in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

General liability estimated accrued liabilities are calculated on an undiscounted basis based on actual claim data and estimates of incurred but not reported claims developed utilizing historical claim trends. Projected settlements and incurred but not reported claims are estimated based on pending claims, historical trends and data.

Workers’ compensation annual premiums are based on the incurred losses as determined at the end of the coverage period, subject to minimum and maximum premium. Estimated accrued liabilities are based on our historical loss experience and the ratio of claims paid to our historical payout profiles.

Income taxes are based on income (loss) for financial reporting purposes and reflect a current tax liability (asset) for the estimated taxes payable (recoverable) in the current year tax return and changes in deferred taxes. Deferred tax assets or liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax laws and rates. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the asset will not be realized.

Accounting for Stock Options

In December 2002 the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, (“SFAS 148”), "Accounting for Stock-Based Compensation-Transition and Disclosure", an amendment of SFAS No. 123, (“SFAS 123”), “Accounting for Stock-Based Compensation” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation. Since SFAS 148 was adopted during our fiscal year ended March 31, 2003, we could elect to adopt any of the three transitional recognition provisions. We adopted the prospective method of accounting for stock-based compensation.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which replaced SFAS 123. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values at grant date and the recognition of the related expense over the period in which the share-based compensation vests. We were required to adopt the provisions of SFAS 123R effective July 1, 2005 and use the modified-prospective transition method. Under the modified-prospective method, we recognize compensation expense in our financial statements issued subsequent to the date of adoption for all share-based payments granted, modified or settled after July 1, 2005. The adoption of SFAS 123R resulted in a non-cash charge of $108,366 and $218,050 for stock compensation cost for the nine months ended December 31, 2008 and 2007, respectively. Such non-cash charge would have been the same under the provisions of SFAS 148.

Results of Operations

Our revenues increased $2,535,145 and $9,492,572, or 8.4% and 10.7%, for the three and nine months ended December 31, 2008, respectively, compared with the corresponding periods of the prior year. The increases in revenues for the three and nine month periods ended December 31, 2008 were due mainly to: (i) expanded security services provided to new and existing customers, including a major medical center, a New York based hospital center, a major international commercial bank, a large grocery market distribution center in California and a company that provides merchandising and distribution services to a major grocery retailer in New Jersey, resulting in additional aggregate revenues of approximately $1,500,000 and $7,100,000, respectively; (ii) the acquisitions of security services businesses in Florida (September 2008) and Maryland (January 2008) that generated aggregate revenues of approximately $1,500,000 and $2,700,000, respectively; and (iii) expanded aviation services to new and existing customers at our terminal operations at Los Angeles International Airport in California and John F. Kennedy International Airport and LaGuardia Airport in New York, that generated additional aggregate revenues of approximately $600,000 and $3,400,000, respectively. The increases in revenues were partially offset by: (i) the loss of revenues at seven domestic airport locations resulting from a change in government regulations that requires the Transportation Security Administration (“TSA”) to provide certain document verification services that we formerly provided at these airports of approximately $600,000 and $2,500,000, respectively; and (ii) several of our airline customers continuing to reduce capacity within their systems which resulted in reductions of service hours that we provided to such carriers.

Our gross profit increased by $575,283 and $2,269,717, or 13.9% and 18.7%, for the three and nine months ended December 31, 2008, respectively, compared with the corresponding periods of the prior year. The increases in gross profit for the three and nine month periods resulted primarily from: (i) the acquisitions of security services businesses in Florida (September 2008) and Maryland (January 2008); (ii) expanded security services provided to new and existing customers as described above; (iii) expanded aviation services provided to new and existing customers at John F. Kennedy International Airport and LaGuardia Airport in New York and (iv) lower costs associated with our general liability insurance programs. The increases in our gross profit were partially offset by the loss to the TSA of certain document verification services and airline capacity reductions, described above.

General and Administrative Expenses

Our general and administrative expenses increased by $744,406 and $1,444,753, or 22.1% and 14.6%, for the three and nine months ended December 31, 2008, respectively, compared with the corresponding periods of the prior year. The increases in general and administrative expenses resulted primarily from higher: (i) administrative payroll and related costs of approximately $400,000 and $1,100,000, respectively, associated primarily with expanded operations, including the acquisitions in Florida and Maryland noted above, additional investment in our sales and marketing group and the addition of a Chief Executive Officer; (ii) professional and related fees and (iii) insurance related costs. The increase for the three months ended December 31, 2008 also reflects settlement of an employment related claim. The increase in our general and administrative expenses for the nine months ended December 31, 2008 was partially offset by reductions of approximately $175,000 resulting mainly from: (i) lower stock compensation costs; and (ii) the absence in the current year period of expenses associated with our initial listing of our common shares on the American Stock Exchange in the prior year.

Provision for Doubtful Accounts

The provision for doubtful accounts decreased by $4,335 for the three months ended December 31, 2008 and increased $367,090 for the nine months ended December 31, 2008 compared with the corresponding periods of the prior year. The increase in our provision for doubtful accounts for the nine months ended December 31, 2008 reflects the recovery of approximately $369,000 attributable to the value of the stock that we received under our claim related to the bankruptcy filing of Northwest Airlines in the corresponding period of the prior year.

We periodically evaluate the requirement for providing for billing adjustments and/or credit losses on our accounts receivable. We provide for billing adjustments where our management determines that there is a likelihood of a significant adjustment for disputed billings. Criteria used by management to evaluate the adequacy of the allowance for doubtful accounts include, among others, the creditworthiness of the customer, current trends, prior payment performance, the age of the receivables and our overall historical loss experience. Individual accounts are charged off against the allowance as management deems them as uncollectible. We do not know if bad debts will increase in future periods nor does our management believe that the increase during the nine months ended December 31, 2008 compared with the corresponding period of the prior year is necessarily indicative of a trend.

Interest income which principally represents interest earned on: (i) cash balances and (ii) trust funds for potential future workers’ compensation claims, decreased for the three and nine months ended December 31, 2008 compared with the same periods of the prior year as a result of lower trust fund balances due to favorable trending for potential future workers’ compensation claims, as well as a reduction in the rate at which interest accrues on such balances.

Interest expense decreased by $81,862 and $255,048 for the three and nine months ended December 31, 2008, respectively, compared with the corresponding periods of the prior year. The decreases for the three and nine month periods ended December 31, 2008 were due mainly to lower weighted average interest rates under our commercial revolving loan agreement.

Equipment Dispositions

Equipment dispositions are a result of the sale of vehicles, office equipment and security equipment at prices above or below book value.

The gains on equipment dispositions for the nine months ended December 31, 2008 were primarily due to the disposition of Company vehicles at amounts in excess of their respective book values.

Provision for income taxes

Provision for income taxes increased by $205,000 and $785,000 for the three and nine months ended December 31, 2008, respectively, compared with the corresponding periods of the prior year due mainly to the recognition of deferred tax assets in the prior year periods and increases in our pre-tax earnings for the nine months ended December 31, 2008.

Liquidity and Capital Resources

We pay employees and administrative service clients on a weekly basis, while customers pay for services generally within 60 days after we bill them. We maintain a commercial revolving loan arrangement, currently with CIT Group/Business Credit, Inc. (“CIT”), to fund our payroll and operations.

Our principal use of short-term borrowings is for carrying accounts receivable. Our short-term borrowings have supported the increase in accounts receivable associated with: (i) our ongoing expansion and organic growth; (ii) the October 1, 2006 change in a majority of Delta Airline’s billing and payment terms from monthly invoices prepaid in advance to weekly invoices due in thirty (30) days and (iii) our acquisitions of Eagle International Group, LLC and International Security & Safety Group, LLC, Expert Security Services, Inc. and Brown Security Industries, Inc. on September 12, 2008, January 1, 2008 and April 12, 2007, respectively. We intend to continue to use our short-term borrowings to support our working capital requirements.

We believe that our existing funds, cash generated from operations, and existing sources of and access to financing are adequate to satisfy our working capital, capital expenditure and debt service requirements for the foreseeable future, as described below under the heading “CIT Revolving Loan.” However, we cannot assure you that this will be the case, and we may be required to obtain alternative or additional financing to maintain and expand our existing operations through the sale of our securities, an increase in our credit facilities or otherwise. The failure by us to obtain such financing, if needed, would have a material adverse effect upon our business, financial condition and results of operations.

Until March 21, 2006, we were parties to a financing agreement (the “Agreement”) with CIT that had a term of three years ending December 12, 2006 and provided for borrowings in an amount up to 85% of our eligible accounts receivable, as defined in the Agreement, but in no event more than $15,000,000. The Agreement also provided for advances against unbilled revenues (primarily monthly invoiced accounts) although this benefit was offset by a reserve against all outstanding payroll checks. Borrowings under the Agreement bore interest at the prime rate (as defined in the Agreement) plus 1.25% per annum on the greater of: (i) $5,000,000 or (ii) the average of the net balances owed by us to CIT in the loan account at the close of each day during the applicable month for which interest was calculated. Costs to close the loan totaled $279,963 and are being amortized over the three year life of the Agreement; as extended (see below).

On April 12, 2007, we entered into an amendment to the Amended and Restated Agreement (the “Amended Agreement”). Under the Amended Agreement, the aggregate amount that we could borrow from CIT under the credit facility was increased from $12,000,000 to $16,000,000, and CIT also provided us with a $2,400,000 acquisition advance to fund the cash requirements associated with the acquisition of a security services business. Further, the Amended Agreement extended the maturity date of this credit facility to December 12, 2008, reduced certain fees and availability reserves and increased the letter of credit sub-line to an aggregate amount of up to $3,000,000. Under the Amended Agreement, letters of credit are subject to a one and three-quarters percent (1.75%) per annum fee on the face amount of each letter of credit. The Amended Agreement provides that interest is calculated on the outstanding principal balance of the revolving loans at the prime rate (as defined in the Amended Agreement) less .25%. For LIBOR loans, interest is calculated on the outstanding principal balance of the LIBOR loans at the LIBOR rate (as defined in the Amended Agreement) plus 2.0%.

As of December 31, 2008, the interest rate for revolving loans was 6.75%. Closing costs for the Amended Agreement totaled $158,472, including $125,000 payable to CIT, with $45,000 due at closing, $40,000 due six months after closing and $40,000 due twelve months after closing. Legal costs incurred in connection with the transaction were $33,472. All of these costs are being amortized over the remaining life of the Amended Agreement.

At December 31, 2008, we had borrowed $12,418,102 in revolving loans and had $147,000 of letters of credit outstanding representing approximately 79% of our maximum borrowing capacity under the Amended Agreement based on our “eligible accounts receivable” (as defined under the Amended Agreement) as of such date. However, as our business grows and the amount of eligible accounts receivable increases (as to which no assurance can be given), up to an additional $3,434,898 could be available to borrow under the Amended Agreement.

The agreements that relate to this facility contain various other financial and non-financial covenants, including a fixed charge covenant. If we breach a covenant, CIT has the right to immediately request the repayment in full of all borrowings under the Amended Agreement. For the nine months ended December 31, 2008, we were in compliance with all covenants under the Amended Agreement.

Wells Fargo Revolving Credit Facility

During the nine months ended December 31, 2008, we increased our short-term borrowings principally to support higher accounts receivable associated with our ongoing expansion and organic growth.

We have no additional lines of credit other than described above.

We have no present material commitments for capital expenditures.

Working capital increased by $767,826 to $6,864,862 as of December 31, 2008, from $6,097,036 as of March 31, 2008. We experienced checks issued in advance of deposits (defined as checks drawn in advance of future deposits) of $585,731 at December 31, 2008, compared with $1,962,314 at March 31, 2008. Cash balances and book overdrafts can fluctuate materially from day to day depending on such factors as collections, timing of billing and payroll dates, and are covered via advances from the revolving loan as checks are presented for payment.

Future revenues will be largely dependent upon our ability to gain additional business from new and existing customers in our security and aviation services divisions at acceptable margins while minimizing terminations of contracts with existing customers. Our security services division has started to experience both organic and transactional growth over recent quarters after a reduction over the past few years as contracts with unacceptable margins were cancelled. Our current focus is on increasing revenue while our marketing and sales team and branch managers work to develop new business and retain profitable contracts. The airline industry continues to increase its demand for third party services provided by us; however, several of our airline customers have continued to reduce capacity within their system which results in reductions of service hours provided by us to such carriers. Additionally, our aviation services division is continually subject to government regulation, which has adversely affected us in the past with the federalization of the pre-board screening services and most recently with the ongoing federalization of the document verification process at several of our domestic airport locations.

Our gross profit margin increased during the nine months ended December 31, 2008 to 14.6% of revenues compared with 13.6% for the corresponding period last year. We expect our gross profit margins to average between 14.0% and 15.0% of revenue for fiscal year 2009 based on current business conditions. Management expects gross profit to remain under pressure due primarily to continued price competition. However, management expects these effects to be moderated by continued operational efficiencies resulting from better management of our cost structures, improved workers’ compensation experience ratings, workflow process efficiencies associated with our newly integrated financial software system and higher contributions from our continuing new business development.

Our cost reduction program is expected to reduce certain of our operating and general and administrative expenses for both the remainder of fiscal 2009 and future periods. Additional cost reduction opportunities are being pursued as they are determined.

The aviation services division represents approximately 57% of our total revenue, and Delta, at annual billings of approximately $19,000,000, is the largest customer of our aviation division representing, on an annual basis, approximately 25% of the revenues from our aviation services division and 14% of our total revenues. Due to the existing limitations under the Amended Agreement with CIT, we have been limited to borrowing against Delta’s accounts receivable of up to (but not exceeding) approximately $2,060,000, so long as such accounts do not remain unpaid for more than 60 days from the invoice date. In the event of a bankruptcy by another airline customer(s), our earnings and liquidity could be adversely affected to the extent of the accounts receivable with such airline(s), as well as from lost future revenues if such airline(s) cease operations or reduce their requirements from us.

As described above on February 12, 2009, we entered into a new $20,000,000 credit facility (the “Credit Agreement”) with Wells Fargo. As of the close of business on February 12, 2009, our cash availability was approximately $4,600,000, which we believe is sufficient to meet our needs for the foreseeable future barring any increase in reserves imposed by Wells Fargo. We believe that our existing funds, cash generated from operations, and existing sources of and access to financing are adequate to satisfy our working capital, capital expenditure and debt service requirements for the foreseeable future as described above under the heading “Liquidity and Capital Resources – Wells Fargo Revolving Credit Facility.” However, we cannot assure you that this will be the case, and we may be required to obtain alternative or additional financing to maintain and expand our existing operations through the sale of our securities, an increase in our credit facilities or otherwise. As of the date of this quarterly report and for the past several months, the financial markets generally, and the credit markets in particular, are and have been experiencing substantial turbulence and turmoil, and extreme volatility, both in the United States and, increasingly, in other markets worldwide. The current market situation has resulted generally in substantial reductions in available loans to a broad spectrum of businesses, increased scrutiny by lenders of the credit-worthiness of borrowers, more restrictive covenants imposed by lenders upon borrowers under credit and similar agreements and, in some cases, increased interest rates under commercial and other loans. If we require alternative or additional financing at this or any other time, we cannot assure you that such financing will be available upon commercially acceptable terms or at all. If we fail to obtain additional financing when and if required by us, our business, financial condition and results of operations would be materially adversely affected.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the nine months ended December 31, 2008, we did not hold a portfolio of securities instruments for either trading or speculative purposes. Periodically, we hold securities instruments for other than trading purposes. Due to the short-term nature of our investments, we believe that we have no material exposure to changes in the fair value as a result of market fluctuations.

We are exposed to market risk in connection with changes in interest rates, primarily in connection with outstanding balances under our revolving line of credit with Wells Fargo, which was entered into for purposes other than trading purposes. Based on our average outstanding balances during the nine months ended December 31, 2008, a 1% change in the prime and/or LIBOR lending rates could impact our financial position and results of operations by approximately $25,000 over the remainder of our fiscal year ending March 31, 2009. For additional information on the revolving line of credit with Wells Fargo, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources –Wells Fargo Revolving Credit Facility.”

Reference is made to Item 2 of Part I of this quarterly report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward Looking Statements.”

Item 4. Controls and Procedures

We maintain “disclosure controls and procedures”, as such term is defined under Rule 13a-15(e) of the Securities Exchange Act of 1934, that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective at the reasonable assurance level.

An evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2008. There have been no changes in our internal control over financial reporting that occurred during the third quarter of fiscal 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

There have been no changes to our risk factors from those disclosed in our Annual Report on Form 10-K for our fiscal year ended March 31, 2008 and Form 10-Q for the quarter ended September 30, 2008.

Exhibit 10.1 Wells Fargo Business Credit, Credit and Security Agreement dated February 12, 2009.

Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .

Exhibit 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.1 Press Release, dated February 12, 2009 announcing December 31, 2008 financial results.

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: February 17, 2009	By:	/ s/ Edward S. Fleury
		Edward S. Fleury
		Chief Executive Officer
		(Principal Executive Officer)

		/ s/ Barry I. Regenstein
		Barry I. Regenstein
		President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

WELLS FARGO BUSINESS CREDIT

CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT (the “Agreement”) is dated February 12, 2009, and is entered into among Command Security Corporation , a New York corporation (“CSC”), Command Security Services, Inc. , a New York corporation (“CSS”), Strategic Security Services, Inc. , a California corporation (“SSS”), Rodgers Police Patrol, Inc. , a California corporation (“RPP”; RPP, CSC, CSS and SSS, individually and collectively, jointly and severally, are referred to herein as “Borrower”), and Wells Fargo Bank, National Association (as more fully defined in Exhibit A, “Wells Fargo”), acting through its Wells Fargo Business Credit operating division.

Borrower has asked Wells Fargo to provide it with a $20,000,000 revolving line of credit (the “Line of Credit”) for working capital purposes (including the repayment of certain of Borrower’s existing indebtedness) and to facilitate the issuance of letters of credit. Wells Fargo is agreeable to meeting Borrower’s request, provided that Borrower agrees to the terms and conditions of this Agreement.

For purposes of this Agreement, capitalized terms not otherwise defined in the Agreement shall have the meaning given them in Exhibit A.

1.	AMOUNT AND TERMS OF THE LINE OF CREDIT

1.1	Line of Credit; Limitations on Borrowings; Termination Date; Use of Proceeds.

(a)

Line of Credit and Limitations on Borrowing . Wells Fargo shall make Advances to Borrower under the Line of Credit that, together with the L/C Amount, shall not at any time exceed in the aggregate the lesser of (i) $20,000,000 (the “Maximum Line Amount”), or (ii) the Borrowing Base limitations described in Section 1.2. Within these limits, Borrower may periodically borrow, prepay in whole or in part, and re-borrow. Wells Fargo has no obligation to make an Advance during a Default Period or at any time Wells Fargo reasonably believes that the making of an Advance would result in an Event of Default.

(b)

Maturity and Termination Dates . Lead Borrower may request Advances from the date that the conditions set forth in Section 3 are satisfied until the earlier of: (i) February 12, 2012 (the “Maturity Date”), (ii) the date Lead Borrower terminates the Line of Credit, or (iii) the date Wells Fargo terminates the Line of Credit following an Event of Default (The earliest of these dates is the “Termination Date”).

(c)	Use of Line of Credit Proceeds . Borrower shall use the proceeds of each Advance and each Letter of Credit to refinance certain existing indebtedness and for ongoing working capital purposes.

(d)	Revolving Note . Borrower’s obligation to repay Advances, regardless of how initiated under Section 1.3, shall be evidenced by a revolving promissory note (as renewed, amended or replaced from time to time, the “Revolving Note”).

1.2	Borrowing Base; Mandatory Prepayment.

(a)	Borrowing Base . The borrowing base (the “Borrowing Base”) is an amount equal to:

(i) 85% or such lesser percentage of Eligible Billed Accounts as Wells Fargo in its reasonable commercial judgment may deem appropriate, including, without limitation, in the event Dilution on the date of determination is in excess of four percent (4.0%), plus

(ii) 75% or such lesser percentage of Eligible Unbilled Accounts as Wells Fargo in its reasonable commercial judgment may deem appropriate, including, without limitation, in the event Dilution on the date of determination is in excess of four percent (4.0%), less

(iii) the Borrowing Base Reserve, less

(iv) the outstanding amount of any Indebtedness of Borrower that is not otherwise described in this Section 1 and that is then due and owing to Wells Fargo, including Indebtedness that Wells Fargo in its sole discretion finds on the date of determination to be equal to Wells Fargo’s net credit exposure with respect to any swap, derivative, foreign exchange, hedge, deposit, treasury management or similar transaction or arrangement extended to Borrower by Wells Fargo, and any Indebtedness owed by Borrower to Wells Fargo Merchant Services, L.L.C., but excluding Indebtedness incurred by Borrower under any credit card arrangements between Borrower and Wells Fargo or any Affiliates.

Notwithstanding the foregoing, at no time shall (A) the outstanding balances of all Eligible Foreign Accounts included in the Borrowing Base exceed $3,500,000, or (B) the outstanding Advances supported by Eligible Foreign Accounts exceed $2,975,000.

(b)

Mandatory Prepayment; Overadvances . If unreimbursed Advances evidenced by the Revolving Note plus the L/C Amount exceed the Borrowing Base or the Maximum Line Amount at any time, then Borrower shall immediately prepay the Revolving Note in an amount sufficient to eliminate the excess, and if payment in full of the Revolving Note is insufficient to eliminate this excess and the L/C Amount continues to exceed the Borrowing Base, then Borrower shall deliver cash to Wells Fargo in an amount equal to the remaining excess for deposit to the Special Account, unless in each case, Wells Fargo has delivered to Borrower an Authenticated Record consenting to the Overadvance prior to its occurrence, in which event the Overadvance shall be temporarily permitted on such terms and conditions as Wells Fargo in its sole discretion may deem appropriate, including the payment of additional fees or interest, or both.

1.3	Procedures for Line of Credit Advances.

(a)	Advances to Operating Account . Advances shall be credited to Lead Borrower’s demand deposit account maintained with Wells Fargo (the “Operating Account”), unless the parties agree in a Record Authenticated by both of them to disburse to another account.

(i) Advances upon Borrower’s Request . Advances may be funded upon Lead Borrower’s request. No request will be deemed received until Wells Fargo acknowledges receipt, and Lead Borrower, if requested by Wells Fargo, confirms the request in an Authenticated Record. Borrower shall repay all Advances to Borrower, even if the Person requesting the Advance on behalf of Borrower lacked authorization.

-2-

(A) Base Rate Advances . If Borrower wants a Base Rate Advance, Lead Borrower shall make the request no later than 11:59 a.m. Eastern Time on the Business Day on which it wants the Base Rate Advance to be funded, which request shall specify the principal Advance amount being requested.

(B) LIBOR Advances . If Borrower wants a LIBOR Advance, Lead Borrower shall make the request no later than 11:59 a.m. Eastern Time on the Business Day on which Borrower wants the LIBOR Advance to be funded, which request shall specify both the principal Advance amount and Interest Period being requested. No more than 3 separate LIBOR Advance Interest Periods may be outstanding at any time. Each LIBOR Advance shall be in multiples of $500,000 and in the minimum amount of at least $500,000. LIBOR Advances are not available for Advances made through the Loan Manager Service, and shall not be available during Default Periods.

(b)

Advances to Pay Costs and Expenses or Indebtedness Due . Wells Fargo may initiate a Base Rate Advance on the Line of Credit and apply the proceeds of such Base Rate Advance (i) to reimburse Wells Fargo for any costs or expenses incurred by Wells Fargo pursuant to Section 5.27 or Section 7.7 or (ii) to repay any Indebtedness then due and payable to Wells Fargo under the Loan Documents or (iii) to reimburse Wells Fargo for any indemnity amounts paid by Wells Fargo under the CIT Payoff Letter.

1.3A	LIBOR Advances.

(a)	Funding Advances as LIBOR Advances for Fixed Interest Periods . Borrower may obtain an Advance as a LIBOR Advance for three or six periods (each period an “Interest Period”, as more fully defined in Exhibit A).

(b)

Procedure for Converting Base Rate Advances to LIBOR Advances . Lead Borrower may request that all or any part of an outstanding Base Rate Advance be converted to a LIBOR Advance, provided that no Default Period is in effect, and that Wells Fargo receives the request no later than 11:59 a.m. Eastern Time on the Business Day on which Borrower wishes the conversion to become effective. Each request shall (i) specify the principal amount of the Base Rate Advance to be converted, (ii) the Business Day of conversion, and (iii) the Interest Period desired. The request shall be confirmed in an Authenticated Record if requested by Wells Fargo. Each conversion to a LIBOR Advance shall be in multiples of $500,000 and in the minimum amount of at least $500,000.

(c)

Expiring LIBOR Advance Interest Periods . Unless Lead Borrower requests a new LIBOR Advance, or prepays an outstanding LIBOR Advance at the expiration of an Interest Period, Wells Fargo shall convert each LIBOR Advance to a Base Rate Advance on the last day of the expiring Interest Period. If no Default Period is in effect, Lead Borrower may request that all or part of any expiring LIBOR Advance be renewed as a new LIBOR Advance, provided that Wells Fargo receives the request no later than 11:59 a.m. Eastern Time on the Business Day immediately preceding the Business Day that constitutes the first day of the new Interest Period. Each request shall specify the principal amount of the expiring LIBOR Advance to be continued and Interest Period desired, and shall be confirmed in an Authenticated Record if requested by Wells Fargo. Each renewal of a LIBOR Advance shall be in multiples of $500,000 and in the minimum amount of at least $500,000.

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(d)

Quotation of LIBOR Advance Interest Rates . Wells Fargo shall, with respect to any request for a new or renewal LIBOR Advance, or the conversion of a Base Rate Advance to a LIBOR Advance, provide Lead Borrower with a LIBOR quote for each Interest Period identified by Lead Borrower on the Business Day on which the request was made, if the request is received by Wells Fargo no later than 11:59 a.m. Eastern Time of the Business Day on which Lead Borrower has requested that the LIBOR Advance be made effective. If Lead Borrower does not immediately accept a LIBOR quote, the quoted rate shall expire and any subsequent request for a LIBOR quote shall be subject to redetermination by Wells Fargo.

(e)

Taxes and Regulatory Costs . Borrower shall also pay Wells Fargo with respect to any LIBOR Advance all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority that are related to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, the assessment rates imposed by the Federal Deposit Insurance Corporation, or similar costs imposed by any domestic or foreign governmental authority or resulting from compliance by Wells Fargo with any request or directive (whether or not having the force of law) from any central bank or other governmental authority that are related to LIBOR but not otherwise included in the calculation of LIBOR. In determining which of these amounts are attributable to an existing LIBOR Advance, any reasonable allocation made by Wells Fargo among its operations shall be deemed conclusive and binding.

1.4	Collection of Accounts and Application to Revolving Note.

(a)

The Collection Account . Borrower has granted a security interest to Wells Fargo in the Collateral, including all of Borrower’s Accounts. Except as otherwise agreed by Borrower and Wells Fargo in an Authenticated Record, all Proceeds of Accounts and other Collateral, upon receipt or collection (including, for a period of ninety (90) days after the closing, funds received in the CIT Collection Account) shall be deposited each Business Day into the Collection Account. Funds so deposited (“Account Funds”) are the property of Wells Fargo, and may only be withdrawn from the Collection Account by Wells Fargo.

(b)

Payment of Accounts by Borrower’s Account Debtors . Borrower shall instruct all account debtors to make payments either directly to the Lockbox for deposit by Wells Fargo directly to the Collection Account, or instruct them to deliver such payments to Wells Fargo by wire transfer, ACH, or other means as Wells Fargo may direct for deposit to the Collection Account or for direct application to the Line of Credit. If Borrower receives a payment or the Proceeds of Collateral directly, Borrower will promptly deposit the payment or Proceeds into the Collection Account. Until deposited, it will hold all such payments and Proceeds in trust for Wells Fargo without commingling with other funds or property. All deposits held in the Collection Account shall constitute Proceeds of Collateral and shall not constitute the payment of Indebtedness.

(c)

Application of Payments to Revolving Note . Wells Fargo will withdraw Account Funds deposited to the Collection Account and pay down borrowings on the Line of Credit by applying them to the Revolving Note on the first Business Day following the Business Day of deposit to the Collection Account, or, if payments are received by Wells Fargo that are not first deposited to the Collection Account pursuant to any treasury management service provided to Borrower by Wells Fargo, such payments shall be applied to the Revolving Note as provided in the Master Agreement for Treasury Management Services and the relevant service description. Provided that no Default Period exists, Wells Fargo shall apply such payments to the Base Rate Advances with any excess being applied as directed by Lead Borrower. During a Default Period, such payments shall be applied as determined by Wells Fargo in its sole discretion.

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1.5	Interest and Interest Related Matters.

(a)	Interest Rates Applicable to Line of Credit . Except as otherwise provided in this Agreement, the unpaid principal amount of each Advance evidenced by the Revolving Note shall accrue interest at an annual interest rate calculated as follows:

Base Rate

Advances = the Base Rate plus the Prime Rate Applicable Margin, which interest rate shall change whenever the Base Rate changes

LIBOR Advance Rate for Three or Six Month Interest Periods

Advances = LIBOR plus the LIBOR Advance Rate Applicable Margin (the “LIBOR Advance Rate”)

Multiple Advances under the Line of Credit may simultaneously accrue interest at both the Base Rate and at the LIBOR Advance Rate, subject to the limitations of Section 1.3(a)(i).

The Prime Rate Applicable Margin and the LIBOR Advance Rate Applicable Margin each shall be reduced by one-quarter of one percent (0.25%) effective on April 1, 2009 (the “Interest Rate Reduction Effective Date”). If (i) Borrower’s audited consolidated annual financial statements for Borrower’s 2009 fiscal year in accordance with Section 5.1(a) hereof indicate that Borrower failed to achieve consolidated Net Income in Borrower’s 2009 fiscal year of at least 75% of the Net Income for Borrower’s 2009 fiscal year projected in the financial projections delivered to Wells Fargo pursuant to Section G(3) of Exhibit C hereto prior to the funding of the initial Advance, (ii) Borrower fails to timely deliver Borrower’s audited consolidated annual financial statements for Borrower’s 2009 fiscal year in accordance with Section 5.1(a) hereof or (iii) Wells Fargo determines that Borrower’s audited consolidated annual financial statements for Borrower’s 2009 fiscal year have materially misstated Borrower’s financial condition, then Wells Fargo may retroactively increase the Prime Rate Applicable Margin and the LIBOR Advance Rate Applicable Margin by one-quarter of one percent (0.25%) effective from the Interest Rate Reduction Effective Date and charge Borrower such additional interest.

(b)	[ Reserved ].

(c)

Default Interest Rate . Commencing on the day an Event of Default occurs, through and including the date confirmed by Wells Fargo in a Record as the date that the Event of Default has been cured or waived (each such period a “Default Period”), or at any time following the Termination Date, in Wells Fargo’s sole discretion and without waiving any of its other rights or remedies, the principal amount of the Revolving Note shall bear interest at a rate that is three percent (3.00%) above the contractual rate set forth in Section 1.5(a) (the “Default Rate”), or any lesser rate that Wells Fargo may deem appropriate, starting on the first day of the month in which the Default Period begins through the last day of that Default Period, or any shorter time period to which Wells Fargo may agree in an Authenticated Record.

(d)

Interest Accrual on Payments Applied to Revolving Note . Payments received by Wells Fargo shall be applied to the Revolving Note as provided in Section 1.4(c), but the principal amount paid down shall continue to accrue interest through the end of the first Business Day following the Business Day that the payment was applied to the Revolving Note.

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(e)

Usury . No interest rate shall be effective which would result in a rate greater than the highest rate permitted by law and Borrower is and shall be liable only for the payment of such highest rate as allowed by law.Payments in the nature of interest and other charges made under any Loan Documents or any other document or agreement described in or related to this Agreement that are later determined to be in excess of the limits imposed by applicable usury law will be deemed to be a payment of principal, and the Indebtedness shall be reduced by that amount so that such payments will not be deemed usurious.

1.6

Fees.

(a)	Closing Fee . Borrower shall pay Wells Fargo a one-time closing fee of $100,000, which shall be fully earned and payable upon the execution of this Agreement.

(b)

Unused Line Fee . Borrower shall pay Wells Fargo an annual unused line fee of fifteen one-hundredths of one percent (0.15%) of the daily average of the Maximum Line Amount reduced by outstanding Advances and the L/C Amount (the “Unused Amount”), from the date of this Agreement to and including the Termination Date, which unused line fee shall be payable quarterly in arrears on the first day of each fiscal quarter and on the Termination Date.

(c)

Collateral Exam Fees . Borrower shall pay Wells Fargo fees in connection with any collateral exams, audits or inspections (“Field Exams”) conducted by or on behalf of Wells Fargo (including Field Exams conducted prior to the initial Advance hereunder), at the current rates established from time to time by Wells Fargo for its customers generally as its collateral exam fees (which fees are currently $1,000.00 per each 8 hour day per collateral examiner (whether the Field Exam shall have been conducted by a Wells Fargo employee or a third party contractor), together with all actual out-of-pocket costs and expenses (which may include the expenses, but no fees of any third party contractor other than the foregoing $1,000.00 daily fee) incurred in conducting any Field Exam; provided, however, that so long as no Event of Default shall have occurred and be continuing, Borrower shall not be obligated to reimburse Wells Fargo for more than four (4) Field Exams during any calendar year; and provided further that in the event that during the period commencing on the date of this Agreement and ending on the first anniversary thereof (i) no Event of Default has occurred and (ii) each of the collateral exams received by Wells Fargo during such period has been in all material respects in form and substance reasonably satisfactory to Wells Fargo, then from and after the first anniversary date of this Agreement, provided no Event of Default shall have occurred and be continuing, Borrower shall not be obligated to reimburse Wells Fargo for more than three (3) Field Exams during any calendar year.

(d) [ Reserved ].

(e)

Collateral Monitoring Service Fees . Borrower shall pay Wells Fargo fees in connection with any service conducted by or on behalf of Wells Fargo for purposes of identifying ineligible Collateral, calculating the Borrowing Base, and performing related collateral monitoring services at the rates established from time to time by Wells Fargo for its customers generally (which fees currently include a one-time initial set-up fee of $800 for each receivable aging that is being monitored (which fee shall also be payable in the event Borrower changes the format of its aging reporting), and a monthly fee of $125 for each such aging), which fees shall be due and payable monthly in arrears on the first day of the month and on the Termination Date.

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(f)

Line of Credit Termination and/or Reduction Fees. If (i) Wells Fargo terminates the Line of Credit during a Default Period, or if (ii) Lead Borrower terminates the Line of Credit on a date prior to the Maturity Date, or if (iii) Borrower and Wells Fargo agree to reduce the Maximum Line Amount, then Borrower shall pay Wells Fargo as liquidated damages a termination or reduction fee in an amount equal to a percentage of the Maximum Line Amount (or the reduction of the Maximum Line Amount, as the case may be) calculated as follows: (A) three percent (3.00%) if the termination or reduction occurs on or before the first anniversary of the date of this Agreement; (B) one percent (1.00%) if the termination or reduction occurs after the first anniversary of the date of this Agreement, but on or before the second anniversary of the date of this Agreement; and (C) one-half of one percent (0.50%) if the termination or reduction occurs after the second anniversary of the date of this Agreement. Notwithstanding the foregoing, if Borrower refinances the Line of Credit with financing provided by Wells Fargo or its Affiliates after the date which 18 months from the date of this Agreement, Borrower’s obligation to pay the fee required hereby shall be waived.

(g)

Overadvance Fees . Borrower shall pay a $500 Overadvance fee for each day that an Overadvance exists which was not agreed to by Wells Fargo in an Authenticated Record prior to its occurrence; provided that Wells Fargo’s acceptance of the payment of such fees shall not constitute either consent to the Overadvance or waiver of the resulting Event of Default; and provided further that Borrower shall not be obligated to pay such Overadvance fee if the Indebtedness is accruing interest at the Default Rate due to the occurrence of an Event of Default arising under Section 6.1(c) and no other Event of Default then exists and is continuing. Borrower shall pay additional Overadvance fees and interest in such amounts and on such terms as Wells Fargo in its sole discretion may consider appropriate for any Overadvance to which Wells Fargo has specifically consented in an Authenticated Record prior to its occurrence.

(h)

Treasury Management Fees . Borrower will pay service fees to Wells Fargo for treasury management services provided pursuant to the Master Agreement for Treasury Management Services or any other agreement entered into by the parties, in the amount prescribed in Wells Fargo’s current service fee schedule.

(i)

Letter of Credit Fees . Borrower shall pay a fee with respect to each Letter of Credit issued by Wells Fargo of one and three-quarters percent (1.75%) of the Aggregate Face Amount of such Letter of Credit accruing daily from and including the date the Letter of Credit is issued until the date that it either expires or is returned, which shall be payable monthly in arrears on the first day of each month and on the date that the Letter of Credit either expires or is returned; and following an Event of Default, this fee shall increase to four and three-quarters percent (4.75%) of the Aggregate Face Amount, commencing on the first day of the fiscal month in which the Default Period begins and continuing through the last day of such Default Period, or any shorter time period that Wells Fargo in its sole discretion may deem appropriate, without waiving any of its other rights and remedies.

(j)

Letter of Credit Administrative Fees . Borrower shall pay all administrative fees charged by Wells Fargo in connection with the honoring of drafts under any Letter of Credit, and any amendments to or transfers of any Letter of Credit, and any other activity with respect to the Letters of Credit at the then current rates published by Wells Fargo for such services rendered on behalf of its customers generally.

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(k)

ACH Fees . Borrower agrees to pay to the Lender all fees charged to Wells Fargo by ACH in connection with the transfer of funds in the Collateral Account and/or the Lockbox at the rates charged to its customers generally. Such fees are currently in the amount of Twenty ($20.00) Dollars for each ACH initiated by or for the account of Borrower to a third party. There shall be no such ACH fee on internal transfers within Wells Fargo.

(l)

Wire Transfer Fees . Twenty ($20.00) Dollars for each wire transfer initiated by or for the account of Borrower to a third party. Prior to the date on which the Collection Account and Borrower’s operating account have been established at Wells Fargo, Twenty ($20.00) Dollars for each wire transfer initiated by or for the account of Borrower within Wells Fargo. After the date on which the Collection Account and Borrower’s operating account have been established at Wells Fargo, there shall be no such wire transfer fees on internal transfers within Wells Fargo.

( m)	ADP . Borrower agrees to pay to the Lender all fees charged to Wells Fargo by ADP in connection with the transfer of funds in the Collateral Account and/or the Lockbox. Such fees are currently in the amount of Two Hundred ($200.00) Dollars per month.

(n)

Other Fees and Charges . Wells Fargo may impose additional fees and charges during a Default Period for waiving an Event of Default. All such fees and charges shall be imposed at Wells Fargo’s sole discretion following oral notice to Lead Borrower on either an hourly, periodic, or flat fee basis, and in lieu of or in addition to imposing interest at the Default Rate, and Borrower’s request for an Advance following such notice shall constitute Borrower’s agreement to pay such fees and charges.

(o)

LIBOR Advance Breakage Fees . Borrower may prepay any LIBOR Advance at any time in any amount, whether voluntarily or by acceleration; provided , however , that if the LIBOR Advance is prepaid, Borrower shall pay Wells Fargo upon demand a LIBOR Advance breakage fee equal to the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Interest Period matures, calculated as follows for each such month:

(i)

Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the applicable Interest Period.

(ii)

Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Interest Period at LIBOR in effect on the date of prepayment for new loans made for such term in a principal amount equal to the amount prepaid.

(iii)

If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.

Borrower acknowledges that prepayment of the Revolving Note may result in Wells Fargo incurring additional costs, expenses or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses or liabilities. Borrower agrees to pay the above-described LIBOR Advance breakage fee and agrees that this amount represents a reasonable estimate of the LIBOR Advance breakage costs, expenses and/or liabilities of Wells Fargo.

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1.7	Interest Accrual; Principal and Interest Payments; Computation.

(a)

Interest Payments and Interest Accrual . Accrued and unpaid interest under the Revolving Note on Base Rate Advances shall be due and payable on the first day of each month (each an "Interest Payment Date") and on the Termination Date, and shall be paid in the manner provided in Section 1.4(c). Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of Advance to the Interest Payment Date. Interest accruing on any LIBOR Advance shall be due and payable on the last day of the applicable Interest Period and on the Termination Date; provided, however, for Interest Periods in excess of one month, interest shall nevertheless be due and payable monthly on the last day of each month, and on the last day of the Interest Period.

(b)	Payment of Revolving Note Principal . The principal amount of the Revolving Note shall be paid from time to time as provided in this Agreement, and shall be fully due and payable on the Termination Date.

(c)	Payments Due on Non-Business Days . If an Interest Payment Date or the Termination Date falls on a day which is not a Business Day, payment shall be made on the next Business Day, and interest shall continue to accrue during that time period.

(d)	Computation of Interest and Fees . Interest accruing on the unpaid principal amount of the Revolving Note and fees payable under this Agreement shall be computed on the basis of the actual number of days elapsed in a year of 360 days.

(e)

Liability Records . Wells Fargo shall maintain accounting and bookkeeping records of all Advances and payments under the Line of Credit and all other Indebtedness due to Wells Fargo in such form and content as Wells Fargo in its sole discretion deems appropriate. Wells Fargo’s calculation of current Indebtedness shall be presumed correct unless proven otherwise by Borrower. Upon Wells Fargo’s request, Lead Borrower will admit and certify in a Record the exact principal balance of the Indebtedness that Borrower then believes to be outstanding. Any billing statement or accounting provided by Wells Fargo shall be conclusive and binding unless Lead Borrower notifies Wells Fargo in a detailed Record of Borrower’s intention to dispute the billing statement or accounting within 45 days of receipt.

1.8	Termination, Reduction or Non-Renewal of Line of Credit by Borrower; Notice.

(a)

Termination by Borrower . Borrower may terminate or reduce the Line of Credit at any time prior to the Maturity Date, if Lead Borrower (i) delivers an Authenticated Record notifying Wells Fargo of its intentions at least 30 days prior to the proposed effective date of such termination or reduction, (ii) pays to Wells Fargo the termination or reduction fee set forth in Section 1.6(f), and (iii) pays the Indebtedness in full or down to the reduced Maximum Line Amount. Any reduction in the Maximum Line Amount shall be in multiples of $1,000,000.

(b)

Termination by Borrower without Advance Notice . If Lead Borrower fails to deliver Wells Fargo timely notice of its intention to terminate the Line of Credit or reduce the Maximum Line Amount as provided in Section 1.8(a), Borrower may nevertheless terminate the Line of Credit or reduce the Maximum Line Amount and pay the Indebtedness in full or down to the reduced Maximum Line Amount if it (i) pays the termination or reduction fee set forth in Section 1.6(f), and (ii) pays interest calculated at the Default Rate on the Revolving Note commencing on the 30 th day prior to the proposed Termination Date or reduction date and continuing through the date that Wells Fargo receives delivery of an Authenticated Record giving it actual notice of Borrower’s intention to terminate or reduce the Line of Credit.

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1.9	Letters of Credit

(a)

Issuance of Letters of Credit; Amount . Wells Fargo, subject to the terms and conditions of this Agreement, shall issue, on or after the date that Wells Fargo is obligated to make its first Advance under this Agreement and prior to the Termination Date, one or more irrevocable standby or documentary letters of credit (each, a “Letter of Credit”, and collectively, “Letters of Credit”) for Borrower’s account. Wells Fargo will not issue any Letter of Credit if the face amount of the Letter of Credit would exceed the lesser of: (i) $3,000,000 less the L/C Amount, or (ii) the Borrowing Base, less an amount equal to aggregate unreimbursed Advances plus the L/C Amount.

(b)

Additional Letter of Credit Documentation . Prior to requesting issuance of a Letter of Credit, Borrower shall first execute and deliver to Wells Fargo a Standby Letter of Credit Agreement or a Commercial Letter of Credit Agreement, as applicable, an L/C Application, and any other documents that Wells Fargo may reasonably request, which shall govern the issuance of the Letter of Credit and Borrower’s obligation to reimburse Wells Fargo for any related Letter of Credit draws (the “Obligation of Reimbursement”).

(c)	Expiration . No Letter of Credit shall be issued that has an expiry date that is later than one (1) year from the date of issuance, or the Maturity Date in effect on the date of issuance, whichever is earlier.

(d)

Obligation of Reimbursement During Default Periods . If Borrower is unable, due to the existence of a Default Period or for any other reason, to obtain an Advance to pay any Obligation of Reimbursement, Borrower shall pay Wells Fargo on demand and in immediately available funds, the amount of the Obligation of Reimbursement together with interest, accrued from the date presentment of the underlying draft until reimbursement in full at the Default Rate. Wells Fargo is authorized, alternatively and in its sole discretion, to make an Advance in an amount sufficient to discharge the Obligation of Reimbursement and pay all accrued but unpaid interest and fees with respect to the Obligation of Reimbursement.

1.10

Special Account. If the Line of Credit is terminated for any reason while a Letter of Credit is outstanding, or if after prepayment of the Revolving Note the L/C Amount exceeds the Borrowing Base, then Borrower shall promptly pay Wells Fargo in immediately available funds for deposit to the Special Account, an amount equal, as the case may be, to either (a) the L/C Amount plus any anticipated fees and costs payable pursuant to Sections 1.6(i) and 1.6(j) hereof or the other Loan Documents, or (b) the amount by which the L/C Amount exceeds the Borrowing Base. If Borrower fails to pay these amounts promptly, then, notwithstanding that an Event of Default may then exist or may arise therefrom, Wells Fargo may in its sole discretion make an Advance to pay these amounts and deposit the proceeds to the Special Account. The Special Account shall be an interest bearing account maintained with Wells Fargo or any other financial institution acceptable to Wells Fargo. For as long as the L/C Amount continues to exceed the Borrowing Base after prepayment of the Revolving Note and/or after the termination of the Line of Credit, Wells Fargo may in its sole discretion apply amounts on deposit in the Special Account to the Indebtedness. Borrower may not withdraw amounts deposited to the Special Account until the Line of Credit has been terminated and all outstanding Letters of Credit have either been returned to Wells Fargo or have expired and the Indebtedness has been fully paid, provided Wells Fargo shall promptly remit amounts on deposit in the Special Account at the direction of Borrower following the date on which the L/C Amount no longer exceeds the Borrowing Base, provided no Event of Default has occurred and is continuing and provided that the Line of Credit has not been terminated.

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1.11	Designation of Lead Borrower as Borrower’s Agent.

(a) Each Borrower hereby irrevocably designates and appoints Command Security Corporation as that Borrower’s agent (Command Security Corporation, in such capacity, is referred to herein as the “Lead Borrower”) to obtain Advances and Letters of Credit hereunder, the proceeds of which shall be available for those uses as those set forth herein. As the disclosed principal for its agent, each Borrower shall be obligated to Wells Fargo on account of Advances so made and Letters of Credit so issued hereunder as if made directly by Wells Fargo to that Borrower, notwithstanding the manner by which such Advance and Letters of Credit are recorded on the books and records of the Lead Borrower and of any Borrower.

(b) The Lead Borrower shall act as a conduit for each Borrower (including itself, as “Borrower”) on whose behalf the Lead Borrower has requested an Advance. The Lead Borrower shall cause the transfer of the proceeds of each Advance to the Person(s) constituting Borrower on whose behalf such Advance was obtained. Wells Fargo shall have no obligation to see to the application of such proceeds.

(c) If, for any reason, and at any time during the term of this Agreement, Borrower, including the Lead Borrower, as agent, shall be unable to, or prohibited from carrying out the terms and conditions of this Agreement (as determined by Wells Fargo in Wells Fargo’s sole and absolute discretion), then Wells Fargo may make Advances directly to, and cause the issuance of Letters of Credit directly for the account of such of the Persons constituting Borrower as Wells Fargo determines to be expedient, which Advances may be made without regard to the procedures otherwise included herein.

(d) Each Borrower shall remain liable to Wells Fargo for the payment and performance of all Obligations (which payment and performance shall continue to be secured by all Collateral granted by each Borrower) notwithstanding any determination by Wells Fargo to cease making Advances or causing Letters of Credit to be issued to or for the benefit of any Borrower.

(e) The authority of the Lead Borrower to request Advances on behalf of, and to bind, Borrower, shall continue unless and until Wells Fargo acts as provided in subparagraph (c), above, or Wells Fargo actually receives written notice of: (i) the termination of such authority, and (ii) the subsequent appointment of a successor Lead Borrower, which notice is signed by the respective Presidents of each Borrower (other than the President of the Lead Borrower being replaced) then eligible for borrowing under this Agreement; and written notice from such successive Lead Borrower (i) accepting such appointment; (ii) acknowledging that such removal and appointment has been effected by the respective Presidents of Borrower eligible for borrowing under this Agreement; and (iii) acknowledging that from and after the date of such appointment, the newly appointed Lead Borrower shall be bound by the terms hereof, and that as used herein, the term “Lead Borrower” shall mean and include the newly appointed Lead Borrower.

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2.	SECURITY INTEREST AND OCCUPANCY OF BORROWER’S PREMISES

2.1

Grant of Security Interest . Borrower hereby pledges, assigns and grants to Wells Fargo, for the benefit of Wells Fargo and as agent for Wells Fargo Merchant Services, L.L.C., a Lien and security interest (collectively referred to as the “Security Interest”) in the Collateral, as security for the payment and performance of all Indebtedness. Following request by Wells Fargo, Borrower shall grant Wells Fargo, for the benefit of Wells Fargo and as agent for Wells Fargo Merchant Services, L.L.C., a Lien and security interest in all commercial tort claims that it may have against any Person.

2.2

Notifying Account Debtors and Other Obligors; Collection of Collateral. Wells Fargo may at any time (whether or not a Default Period then exists) deliver a Record giving an account debtor or other Person obligated to pay an Account, a General Intangible, or other amount due, notice that the Account, General Intangible, or other amount due has been assigned to Wells Fargo for security and must be paid directly to Wells Fargo. Borrower shall join in giving such notice and shall Authenticate any Record giving such notice upon Wells Fargo’s request. After Borrower or Wells Fargo gives such notice, and upon the occurrence and during the continuance of an Event of Default, (i) Wells Fargo may, but need not, in Wells Fargo’s or in Borrower’s name, demand, sue for, collect or receive any money or property at any time payable or receivable on account of, or securing, such Account, General Intangible, or other amount due, or grant any extension to, make any compromise or settlement with or otherwise agree to waive, modify, amend or change the obligations (including collateral obligations) of any account debtor or other obligor and (ii) Wells Fargo may, in Wells Fargo’s name or in Borrower’s name, as Borrower’s agent and attorney-in-fact, notify the United States Postal Service to change the address for delivery of Borrower’s mail to any address designated by Wells Fargo, otherwise intercept Borrower’s mail, and receive, open and dispose of Borrower’s mail, applying all Collateral as permitted under this Agreement and holding all other mail for Borrower’s account or forwarding such mail to Borrower’s last known address.

2.3

Assignment of Insurance. As additional security for the Indebtedness, Borrower hereby assigns to Wells Fargo and to Wells Fargo Merchant Services, L.L.C., all rights of Borrower under every policy of insurance covering the Collateral and all business records and other documents relating to it, and all monies (including proceeds and refunds) that may be payable under any policy, and Borrower hereby directs the issuer of each policy to pay all such monies directly to Wells Fargo. During any Default Period, Wells Fargo may (but need not), in Wells Fargo’s or Borrower’s name, execute and deliver proofs of claim, receive payment of proceeds and endorse checks and other instruments representing payment of the policy of insurance, and adjust, litigate, compromise or release claims against the issuer of any policy. Any monies received under any insurance policy assigned to Wells Fargo, other than liability or workers’ compensation insurance policies, or received as payment of any award or compensation for condemnation or taking by eminent domain, shall be paid to Wells Fargo and, as determined by Wells Fargo in its sole discretion, either be applied to prepayment of the Indebtedness or disbursed to Borrower.

2.4	Borrower’s Premises

(a)

Wells Fargo’s Right to Occupy Borrower’s Premises . Borrower hereby grants to Wells Fargo the right, at any time during a Default Period and without notice or consent, to take exclusive possession of all locations where Borrower conducts its business or has any rights of possession, including the locations described on Exhibit B (the “Premises”), until the earlier of (i) payment in full and discharge of all Indebtedness and termination of the Line of Credit, or (ii) final sale or disposition of all items constituting Collateral and delivery of those items to purchasers.

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(b)	Wells Fargo’s Use of Borrower’s Premises . During a Default Period, Wells Fargo may use the Premises to store, process, manufacture, sell, use, and liquidate or otherwise dispose of items that are Collateral, and for any other incidental purposes deemed appropriate by Wells Fargo in good faith.

(c)

Borrower’s Obligation to Reimburse Wells Fargo . Wells Fargo shall not be obligated to pay rent or other compensation for the possession or use of any Premises during a Default Period, but if Wells Fargo elects to pay rent or other compensation, during a Default Period, to the owner of any Premises in order to have access to the Premises during a Default Period, then Borrower shall promptly reimburse Wells Fargo all such amounts, as well as all taxes, fees, charges and other expenses at any time payable by Wells Fargo with respect to the Premises by reason of the execution, delivery, recordation, performance or enforcement of any terms of this Agreement.

2.5

License. Without limiting the generality of any other Security Document, Borrower hereby grants to Wells Fargo a non-exclusive, worldwide and royalty-free license to use or otherwise exploit all Intellectual Property Rights of Borrower for the purpose of: (a) completing the manufacture of any in-process materials during any Default Period so that such materials become saleable Inventory, all in accordance with the same quality standards previously adopted by Borrower for its own manufacturing and subject to Borrower’s reasonable exercise of quality control; and (b) selling, leasing or otherwise disposing of any or all Collateral during any Default Period.

2.6	Financing Statements.

(a)

Authorization to File . Borrower authorizes Wells Fargo to file financing statements describing Collateral to perfect Wells Fargo’s Security Interest in the Collateral, and Wells Fargo may describe the Collateral as “all personal property” or “all assets” or describe specific items of Collateral including commercial tort claims as Wells Fargo may consider necessary or useful to perfect the Security Interest. All financing statements filed before the date of this Agreement to perfect the Security Interest were authorized by Borrower and are hereby re-authorized. Following the termination of the Line of Credit and payment of all Indebtedness, Wells Fargo shall, at Borrower’s expense and within the time periods required under applicable law, release or terminate any filings or other agreements that perfect the Security Interest.

(b)

Termination . Wells Fargo shall, at Borrower’s expense, release or terminate any filings or other agreements that perfect the Security Interest, provided that there are no suits, actions, proceedings or claims pending or threatened against any Indemnitee under this Agreement with respect to any Indemnified Liabilities (in which event Wells Fargo shall release the lien upon receipt by Wells Fargo of an indemnity reasonably satisfactory to Wells Fargo and reasonable security from Borrower in respect thereof (provided no security shall be required with respect to threatened claims)), upon Wells Fargo’s receipt of the following, in form and content reasonably satisfactory to Wells Fargo: (i) cash payment in full of all Indebtedness under the Loan Documents, (ii) evidence that the commitment of Wells Fargo to make Advances under the Line of Credit or under any other facility with Borrower has been terminated, (iii) a release of all claims against Wells Fargo by Borrower relating to Wells Fargo’s performance and obligations under the Loan Documents, and (iv) an agreement by Borrower to indemnify Wells Fargo for any payments received by Wells Fargo that are applied to the Indebtedness as a final payoff that may subsequently be required as a matter of law to be returned or otherwise not paid for any reason.

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2.7	Setoff. Wells Fargo may at any time, in its sole discretion and without demand or notice to anyone, setoff any liability owed to Borrower by Wells Fargo against any Indebtedness, whether or not due.

2.8

Collateral Related Matters. This Agreement does not contemplate a sale of Accounts or chattel paper, and, as provided by law, Borrower is entitled to any surplus and shall remain liable for any deficiency. Wells Fargo’s duty of care with respect to Collateral in its possession (as imposed by law) will be deemed fulfilled if it exercises reasonable care in physically keeping such Collateral, or in the case of Collateral in the custody or possession of a bailee or other third Person, exercises reasonable care in the selection of the bailee or third Person, and Wells Fargo need not otherwise preserve, protect, insure or care for such Collateral. Wells Fargo shall not be obligated to preserve rights Borrower may have against prior parties, to liquidate the Collateral at all or in any particular manner or order or apply the Proceeds of the Collateral in any particular order of application. Wells Fargo has no obligation to clean-up or prepare Collateral for sale. Borrower waives any right it may have to require Wells Fargo to pursue any third Person for any of the Indebtedness.

2.9

Notices Regarding Disposition of Collateral. If notice to Borrower of any intended disposition of Collateral or any other intended action is required by applicable law in a particular situation, such notice will be deemed commercially reasonable if given in the manner specified in Section 7.4 at least ten calendar days before the date of intended disposition or other action.

3.	CONDITIONS PRECEDENT

3.1

Conditions Precedent to Initial Advance and Issuance of Initial Letter of Credit. Wells Fargo’s obligation to make the initial Advance or issue the first Letter of Credit shall be subject to the condition that Wells Fargo shall have received this Agreement and each of the Loan Documents, and any document, agreement, or other item described in or related to this Agreement, and all fees and information described in Exhibit C, executed and in form satisfactory to Wells Fargo.

3.2

Additional Conditions Precedent to All Advances and Letters of Credit. Wells Fargo’s obligation to make any Advance (including the initial Advance) or issue any Letter of Credit shall be subject to the further additional conditions: (a) that the representations and warranties described in Exhibit D are correct in all material respects on the date of the Advance or the issuance of the Letter of Credit, except to the extent that such representations and warranties relate solely to an earlier date; and (b) that no event has occurred and is continuing, or would result from the requested Advance or issuance of the Letter of Credit that would result in or constitute an Event of Default.

4.	REPRESENTATIONS AND WARRANTIES

To induce Wells Fargo to enter into this Agreement, Borrower makes the representations and warranties described in Exhibit D. Any request for an Advance will be deemed a representation by Borrower that all representations and warranties described in Exhibit D are true, correct, and complete in all material respects as of the time of the request, unless they relate exclusively to an earlier date. Borrower shall be permitted to update the Pending Jurisdiction Schedule (solely to remove jurisdictions from such Schedule), Schedule (i) of the Employee Benefits Plan Schedule, the Labor Agreements Schedule and Schedule (iii) and Schedule (iv) (with respect to clauses B and C thereof) of the Environmental Matters Schedule, all as set forth on Exhibit D, the Intellectual Property Disclosures Schedule and the Chief Executive Office/Principal Place of Business Schedule, from time to time by promptly providing copies of such updated Schedules to Wells Fargo.

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COVENANTS

So long as the Indebtedness remains unpaid, or the Line of Credit has not been terminated, Borrower shall comply with each of the following covenants, unless Wells Fargo shall consent otherwise in an Authenticated Record delivered to Lead Borrower.

5.1	Reporting Requirements. Lead Borrower shall deliver to Wells Fargo the following information, compiled where applicable using GAAP consistently applied, in form and content reasonably acceptable to Wells Fargo:

(a)

Annual Financial Statements . As soon as available and in any event within 120 days after Borrower’s fiscal year end, Borrower’s audited consolidated financial statements prepared and certified without qualification by an independent certified public accountant acceptable to Wells Fargo, which shall include Borrower’s consolidated balance sheet, income statement, and statement of retained earnings and cash flows prepared, if requested by Wells Fargo, on a consolidated and consolidating basis to include Borrower’s Subsidiaries (it being understood that any consolidating financial statements will not be certified by such accountants). The annual financial statements shall be accompanied by a certificate (the “Compliance Certificate”) in the form of Exhibit E that is signed by Borrower’s chief financial officer.

Each Compliance Certificate that accompanies an annual financial statement shall also be accompanied by copies of all management letters prepared by Borrower’s accountants.

(b)

Monthly Financial Statements . As soon as available and in any event within 30 days after the end of each month, a Borrower prepared balance sheet, and income statement prepared for that month and for the year–to-date period then ended, prepared, if requested by Wells Fargo, on a consolidated and consolidating basis to include Borrower’s Subsidiaries in accordance with GAAP, and stating in comparative form the figures for the corresponding date and periods in the prior fiscal year, subject to year-end adjustments. The financial statements shall be accompanied by a Compliance Certificate in the form of Exhibit E that is signed by Borrower’s chief financial officer.

(c)

Collateral Reports . No later than 10 days after each month end (or more frequently if Wells Fargo shall request it), detailed agings of Borrower’s accounts receivable and accounts payable and a calculation of Borrower’s Accounts and Eligible Accounts as of the end of that month. Accounts receivable agings shall be submitted by Borrower to Wells Fargo through Wells Fargo’s Commercial Electronic Office ® (“ CEO ®”) and Borrower shall pay Wells Fargo all processing fees charged by Wells Fargo in connection with the processing of the accounts receivable agings reports through the CEO ® portal at the current rates published by Wells Fargo for such services rendered on behalf of its customers generally.

(d)

Projections . No later than 30 days prior to each fiscal year end, Borrower’s projected balance sheet and income statement and statement of cash flows for each month of the next fiscal year, certified as accurate by Borrower’s chief financial officer and accompanied by a statement of assumptions and supporting schedules and information.

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(e)

Supplemental Reports . Weekly, or more frequently if Wells Fargo requests, Wells Fargo’s standard form of “daily collateral report”, together with receivables schedules, collection reports, scheduling activity reports, and, with respect to Eligible Accounts, daily, copies of the new invoices having the two highest balances (of the invoices, if any, which have balances of $20,000 or greater) and related back-up information (provided the foregoing shall not restrict Wells Fargo’s general right to request, and Borrower’s obligation to deliver to Wells Fargo, copies of any invoice(s) with respect to Eligible Accounts), as reasonably requested by Wells Fargo.

(f)	Litigation . No later than three Business Days after discovery, a Record notifying Wells Fargo of any litigation or other proceeding before any court or governmental agency which seeks a monetary recovery against Borrower in excess of $150,000.

(g)

Intellectual Property . (i) No later than 10 days before it acquires material Intellectual Property Rights, a Record notifying Wells Fargo of Borrower’s intention to acquire such rights and promptly upon receipt, copies of all registrations and filings with respect to Borrower’s Intellectual Property Rights; (ii) except for transfers permitted under Section 5.18, no later than 10 days before it disposes of material Intellectual Property Rights, a Record notifying Wells Fargo of Borrower’s intention to dispose of such rights, along with copies of all proposed documents and agreements concerning the disposal of such rights as requested by Wells Fargo; (iii) promptly upon discovery, a Record notifying Wells Fargo of (A) any Infringement of Borrower’s material Intellectual Property Rights by any Person, (B) claims that Borrower is Infringing another Person’s Intellectual Property Rights and (C) any threatened cancellation, termination or material limitation of Borrower’s material Intellectual Property Rights.

(h)

Defaults . No later than three Business Days after learning of the occurrence of any Event of Default or an event which, with the passage of time or notice or both, would constitute and Event of Default, a Record notifying Wells Fargo of the Event of Default and the steps being taken by Borrower to cure the Event of Default.

(i)	Disputes . Promptly upon discovery, a Record notifying Wells Fargo of any disputes or claims by Borrower’s customers exceeding $50,000 individually or $250,000 in the aggregate during any fiscal year.

(j)	Changes in Officers and Directors . Promptly following occurrence, a Record notifying Wells Fargo of any change in the persons constituting Borrower’s Officers and Directors.

(k)

Commercial Tort Claims . Other than those disclosed on Exhibit F, promptly upon discovery, a Record notifying Wells Fargo of any commercial tort claims brought by Borrower against any Person, including the name and address of each defendant, a summary of the facts, an estimate of Borrower’s damages, copies of any complaint or demand letter submitted by Borrower, and such other information as Wells Fargo may reasonably request.

(l)	Reports to Owners . Promptly upon distribution, copies of all financial statements, reports and proxy statements which Borrower shall have sent to its Owners.

(m)	Violations of Law . No later than three Business Days after discovery of any violation, a Record notifying Wells Fargo of Borrower’s violation of any law, rule or regulation, the non-compliance with which could reasonably be expected to have a Material Adverse Effect on Borrower.

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(n)

Pension Plans . (i) Promptly upon discovery, and in any event within 30 days after Borrower knows or has reason to know that any Reportable Event with respect to any Pension Plan has occurred, a Record authenticated by Borrower’s chief financial officer notifying Wells Fargo of the Reportable Event in detail and the actions which Borrower proposes to take to correct the deficiency, together with a copy of any related notice sent to the Pension Benefit Guaranty Corporation; (ii) promptly upon discovery, and in any event within 10 days after Borrower fails to make a required quarterly Pension Plan contribution under Section 412(m) of the IRC, a Record authenticated by Borrower’s chief financial officer notifying Wells Fargo of the failure in detail and the actions that Borrower will take to cure the failure, together with a copy of any related notice sent to the Pension Benefit Guaranty Corporation; and (iii) promptly upon discovery, and in any event within 10 days after Borrower receives written notice from any Multiemployer Plan Sponsor concerning any withdrawal, partial withdrawal, reorganization or other event under any Multiemployer Plan under Sections 4201 or 4243 of ERISA, a Record authenticated by Borrower’s chief financial officer notifying Wells Fargo of the details of the event and the actions that Borrower proposes to take in response.

(o)

Other Reports . From time to time, with reasonable promptness, all customer lists, receivables schedules, collection reports, deposit records, invoices to account debtors and back-up relating thereto, and such other materials, reports, records or information as Wells Fargo may reasonably request, including copies of Borrower’s state and federal income tax returns and all schedules and other information relating thereto.

(p)

Late Charges. In the event that Borrower fails to provide Wells Fargo with any of the information required by this Section 5.1 in accordance with the provisions hereof, and without derogating Wells Fargo’s rights upon the occurrence of a Default or an Event of Default, Borrower shall pay to Wells Fargo a fee in the amount of $200.00 per day for each separate item that Borrower has failed to provide to Wells Fargo in accordance with the provisions of this Section 5.1; provided, however, that Borrower shall not be obligated to pay such late charges if the Indebtedness is accruing interest at the Default Rate due to the occurrence of an Event of Default arising under Section 6.1(b)(i) or Section 6.1(b)(ii) for failure to deliver the applicable reports and no other Event of Default then exists and is continuing.

5.2	Financial Covenants. Borrower agrees to comply with the financial covenants described below, which shall be calculated using GAAP consistently applied, except as they may be otherwise modified by the following capitalized definitions:

(a)	Minimum Debt Service Coverage Ratio . Borrower shall maintain, as of each fiscal quarter end calculated for the twelve (12) month period ending on the last day of such fiscal quarter, a Debt Service Coverage Ratio of not less than 1.20 to 1.00.

(b)	Maximum Debt to Book Net Worth Ratio . Borrower shall maintain, as of each fiscal quarter end, a ratio of its Debt to Book Net Worth of not greater than 3.00 to 1.00.

(c)	Capital Expenditures . Borrower shall not incur or contract to incur Capital Expenditures of more than $750,000 in the aggregate during any fiscal year (commencing with Borrower’s fiscal year commencing April 1, 2009), or more than $150,000 in any one transaction.

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5.3	Other Liens and Permitted Liens.

(a)

Other Liens; Permitted Liens . Borrower shall not create, incur or suffer to exist any Lien upon any of its assets, now owned or later acquired, as security for any indebtedness, with the exception of the following (each a “Permitted Lien”; collectively, “Permitted Liens”): (i) statutory liens of landlords (provided that the landlords for Borrower’s Premises located at 3180 University Avenue, Suite 110, San Diego, California 92104 and 1133 Route 55, Suite D, Lagrangeville, New York 12540 shall have waived any such liens to the satisfaction of Wells Fargo) and liens of carriers, warehousemen, bailees, mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and for amounts not yet due (or which are being contested in good faith, by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens) and with respect to which adequate reserves or other appropriate provisions are being maintained by the Borrower in accordance with GAAP; (ii) deposits made (and the liens thereon) in the ordinary course of business of Borrower (including, without limitation, security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money obligations), statutory obligations and other similar obligations arising as a result of progress payments under government contracts; (iii) in the case of real property, covenants, restrictions, rights, easements (including, without limitation, reciprocal easement agreements and utility agreements) and minor defects or irregularities in title, variation and other restrictions, charges or encumbrances (whether or not recorded) which, in the aggregate, do not materially interfere with Borrower’s business or operations as presently conducted; (iv) liens of judgment creditors provided such liens do not exceed, in the aggregate, at any time, $250,000 (excluding judgments bonded or insured to the reasonable satisfaction of Wells Fargo); (v) tax liens in respect of taxes which are not yet due and payable or which are being diligently contested in good faith by the Borrower by appropriate proceedings, and which liens are not (a) filed on any public records, (b) senior to the liens of Wells Fargo or (c) for taxes due the United States of America or any state thereof having similar priority statutes; (vi) Liens in existence on the date of this Agreement that are described in Exhibit F; (vii) the Security Interest and Liens created by the Security Documents; and (viii) purchase money Liens relating to the acquisition of Equipment not exceeding the lesser of cost or fair market value, not exceeding $75,000 for any one purchase or $200,000 in the aggregate during any fiscal year, and so long as no Default Period is then in existence and none would exist immediately after such acquisition and provided that such Liens attach only to the assets acquired with the proceeds of such purchase money indebtedness.

(b)

Financing Statements . Except with respect to Permitted Liens, Borrower shall not authorize the filing of any financing statement by any Person as Secured Party with respect to any of Borrower’s assets, other than Wells Fargo. Borrower shall not amend any financing statement filed by Wells Fargo as Secured Party except as permitted by law.

5.4

Indebtedness. Borrower shall not incur, create, assume or permit to exist any indebtedness or liability on account of deposits or letters of credit issued on Borrower’s behalf, or advances or any indebtedness for borrowed money of any kind, whether or not evidenced by an instrument, except : (a) Indebtedness described in this Agreement; (b) indebtedness of Borrower described in Exhibit F; (c) deferred taxes and trade payables incurred in the ordinary course of business; and (d) intercompany loans among the Persons constituting “Borrower” hereunder; and (e) indebtedness secured by Permitted Liens relating to purchase money indebtedness described in Section 5.3(a)(viii).

5.5

Guaranties. Borrower shall not assume, guarantee, endorse or otherwise become directly or contingently liable for the obligations of any Person, except : (a) the endorsement of negotiable instruments by Borrower for deposit or collection or similar transactions in the ordinary course of business; and (b) guaranties, endorsements and other direct or contingent liabilities in connection with the obligations of other Persons in existence on the date of this Agreement and described in Exhibit F.

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5.6

Investments and Subsidiaries. Except as otherwise expressly permitted by Sections 5.4, 5.5, 5.18 and 5.19, Borrower shall not make or permit to exist any loans or advances to, or make any investment or acquire any interest whatsoever in, any Person or Subsidiary, including any partnership or joint venture, nor purchase or hold beneficially any stock or other securities or evidence of indebtedness of any Person or Subsidiary, except :

(a)

Investments in direct obligations of the United States of America or any of its political subdivisions whose obligations constitute the full faith and credit obligations of the United States of America and have a maturity of one year or less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by Standard & Poor’s Ratings Services or “P-1” or “P-2” by Moody’s Investors Service or certificates of deposit or bankers’ acceptances having a maturity of one year or less issued by members of the Federal Reserve System having deposits in excess of $100,000,000 (which certificates of deposit or bankers’ acceptances are fully insured by the Federal Deposit Insurance Corporation);

(b)	Intercompany loans among the Persons constituting “Borrower” hereunder.

(c)	Travel advances or loans to Borrower’s Officers and employees not exceeding an aggregate of $50,000 during any fiscal year;

(d)	Prepaid rent not exceeding three (3) months or security deposits in the ordinary course of business; and

(e)	Current investments in those Subsidiaries in existence on the date of this Agreement which are identified on Exhibit D.

5.7

Dividends and Distributions. Borrower shall not declare or pay any dividends (other than dividends payable solely in stock of Borrower) on any class of its stock, or make any payment on account of the purchase, redemption or retirement of any shares of its stock, or other securities or evidence of its indebtedness or make any distribution regarding its stock, either directly or indirectly, except that CSC may declare and pay dividends in the ordinary course of its business with respect to its Series A Convertible Preferred Stock, provided that (i) the aggregate amount of such dividends does not exceed in any fiscal quarter $41,000 and (ii) immediately before and after giving effect to the making of such dividend (A) no Event of Default shall have occurred and be continuing, and (B) Borrower shall have at least $500,000 in availability immediately before and after giving effect to the making of each such dividend.

5.8	Salaries. Borrower shall not pay excessive or unreasonable salaries, bonuses, commissions, consultant fees or other compensation.

5.9	Key Person. Borrower shall retain at least two of the three Key Persons in their respective positions with Borrower unless a replacement reasonably satisfactory to Wells Fargo is made for each departing Key Person within 120 days after the departure from Borrower of the second departing Key Person.

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5.10	Books and Records; Collateral Examination; Inspection and Appraisals.

(a)

Books and Records; Inspection . Borrower shall keep complete and accurate books and records with respect to the Collateral and Borrower’s business and financial condition and any other matters that Wells Fargo may reasonably request, in accordance with GAAP. Borrower shall permit any employee, attorney, accountant or other agent of Wells Fargo, upon reasonable notice, to audit, review, make extracts from and copy any of its books and records at any time during ordinary business hours, and to discuss Borrower’s affairs with any of its Directors, Officers, employees, or agents.

(b)

Authorization to Borrower’s Agents to Make Disclosures to Wells Fargo . Borrower authorizes all accountants and other Persons acting as its agent to disclose and deliver, if requested by Wells Fargo, to Wells Fargo’s employees, accountants, attorneys and other Persons acting as its agent, at Borrower’s reasonable expense, all financial information, books and records, work papers, management reports and other information in their possession regarding Borrower.

(c)

Collateral Exams and Inspections . Borrower shall permit Wells Fargo’s employees, accountants, attorneys or other Persons acting as its agent, upon reasonable notice, to examine and inspect any Collateral or any other property of Borrower at any time on Premises of Borrower during ordinary business hours subject to Section 1.6(c).

(d)

Collateral Appraisals . Wells Fargo may also obtain, from time to time , an appraisal of Borrower’s Collateral by an appraiser acceptable to Wells Fargo in its sole discretion. Notwithstanding the foregoing, so long as no Default Period exists, Borrower shall only be obligated to reimburse Wells Fargo for the reasonable costs of one such appraisal during any one fiscal year.

5.11	Account Verification; Payment of Permitted Liens.

(a)

Account Verification . Wells Fargo or its agents may (i) contact account debtors and other obligors at any time to verify Borrower’s Accounts; (ii) require Borrower to send requests for verification of Accounts or send notices of assignment of Accounts to account debtors and other obligors and (iii) upon the occurrence and continuance of an Event of Default, bill or invoice any account debtor of Borrower’s unbilled Accounts.

(b)	Covenant to Pay Permitted Liens . Borrower shall pay in the ordinary course of business each account payable due to any Person holding a Permitted Lien (as a result of such payable) on any Collateral.

5.12	Compliance with Laws.

(a)

General Compliance with Applicable Law; Use of Collateral . Borrower shall (i) comply, and cause each Subsidiary to comply, with the requirements of applicable laws and regulations, the non-compliance with which would have a Material Adverse Effect on its business or its financial condition and (ii) use and keep the Collateral, and require that others use and keep the Collateral, only for lawful purposes, without violation of any federal, state or local law, statute or ordinance, the violation of which could reasonably be expected to have a Material Adverse Effect on the Collateral; provided that the Borrower may contest any acts, rules, regulations, orders and directions of such bodies or officials in any reasonable manner which will not, in Wells Fargo’s reasonable opinion, materially and adversely affect Wells Fargo’s rights or priority in the Collateral.

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(b)

Compliance with Federal Regulatory Laws . Borrower shall (i) prohibit, and cause each Subsidiary to prohibit, any Person that is an Officer from being listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control ("OFAC"), the Department of the Treasury or included in any Executive Orders, (ii) not use the proceeds of the Line of Credit or any other financial accommodation extended by Wells Fargo in any way that violates any foreign asset control regulations of OFAC or other applicable law, (iii) provide such information to Wells Fargo in regard to Borrower as Wells Fargo shall reasonably request from time to time in order for Wells Fargo to comply with all its obligations under applicable Bank Secrecy Act laws and regulations, as amended from time to time, the USA Patriot Act and Wells Fargo’s related policies and procedures.

(c)

Compliance with Environmental Laws . Borrower shall (i) comply, and cause each Subsidiary to comply, with the requirements of applicable Environmental Laws and obtain and comply with all permits, licenses and similar approvals required by them, the non-compliance with which could reasonably be expected to have a Material Adverse Effect on the operation and business of Borrower and (ii) not generate, use, transport, treat, store or dispose of any Hazardous Substances in such a manner as to create any material liability under any Environmental Law.

(d)

Borrower shall not be deemed to have breached any provision of this Section 5.12 or paragraph (p) of Exhibit D if (i) the failure to comply with the requirements of this Section 5.12 resulted from good faith error or innocent omission, (ii) the Borrower promptly commences and diligently pursues a cure of such breach, and (iii) such failure is cured within thirty (30) days following the Borrower’s receipt of notice of such failure, or if such breach cannot in good faith be cured within thirty (30) days, then such breach is cured within a reasonable time frame based upon the extent and nature of the breach and the necessary remediation (but not to exceed ninety (90) days) and in conformity with any applicable consent order, consensual agreement and applicable law.

5.13

Payment of Taxes and Other Claims. Borrower shall pay or discharge, when due, (including after any extension period) and cause each Subsidiary to pay or discharge, when due , (a) all taxes, assessments and governmental charges levied or imposed upon it or upon its income or profits, upon any properties belonging to it (including the Collateral) or upon or against the creation, perfection or continuance of the Security Interest, prior to the date on which penalties attach, (b) all federal, state and local taxes required to be withheld by it, and (c) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon any properties of Borrower, although Borrower shall not be required to pay any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which proper reserves have been made.

5.14	Maintenance of Collateral and Properties.

(a)

Borrower shall keep and maintain the Collateral and all of its other properties necessary or useful in its business in good condition, repair and working order (normal wear and tear excepted), although Borrower may discontinue the operation and maintenance of any properties if Borrower believes that such discontinuance is desirable to the conduct of its business. Borrower shall take all commercially reasonable steps necessary to protect and maintain its material Intellectual Property Rights if failure to do so could reasonably be expected to have a Material Adverse Effect on Borrower.

(b)

Borrower shall defend the Collateral against all Liens, claims and demands of all third Persons claiming any interest in the Collateral. Borrower shall keep all Collateral free and clear of all Liens except Permitted Liens. Borrower shall take all commercially reasonable steps necessary to prosecute any Person Infringing its material Intellectual Property Rights and to defend itself against any Person accusing it of Infringing any Person’s Intellectual Property Rights if failure to do so could reasonably be expected to have a Material Adverse Effect on Borrower.

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5.15

Insurance. Borrower shall at all times maintain insurance with insurers reasonably acceptable to Wells Fargo, in such reasonable amounts and on such terms (including deductibles) as are at all times reasonably satisfactory to Wells Fargo including, as applicable and without limitation, hazard coverage on an “all risks” basis for all tangible Collateral, and theft and physical damage coverage for Collateral consisting of motor vehicles. All insurance policies must contain an appropriate lender’s interest endorsement or clause, and name Wells Fargo as an additional insured and are subject to the rights of any holders of Permitted Liens holding claims senior to Wells Fargo.

5.16	Preservation of Existence. Borrower shall preserve and maintain its existence and all of its rights, privileges and franchises necessary in the normal conduct of its business.

5.17	Delivery of Instruments, etc. Upon request by Wells Fargo, Borrower shall promptly deliver to Wells Fargo in pledge all instruments, documents and chattel paper constituting Collateral, endorsed or assigned by Borrower.

5.18

Sale or Transfer of Assets; Suspension of Business Operations. Except as otherwise expressly permitted in Section 5.19, Borrower shall not sell, lease, assign, transfer or otherwise dispose of (a) the stock of any Subsidiary, (b) all or a substantial part of its assets, or (c) any Collateral or any interest in Collateral (whether in one transaction or in a series of transactions) to any other Person other than the sale or other disposition of Inventory or other non-material assets not constituting Accounts in the ordinary course of business and shall not liquidate, dissolve or suspend any material business operations. Borrower shall not transfer any part of its ownership interest in any material Intellectual Property Rights and shall not permit its rights as licensee of material Licensed Intellectual Property to lapse, except that Borrower may transfer such rights or permit them to lapse if it has reasonably determined that such Intellectual Property Rights are no longer useful in its business. If Borrower transfers any material Intellectual Property Rights for value, Borrower shall pay the Proceeds to Wells Fargo for application to the Indebtedness. Borrower shall not license any other Person to use any of Borrower’s material Intellectual Property Rights, except that Borrower may grant licenses in the ordinary course of its business in connection with sales of Inventory or other non-material assets not constituting Accounts or the provision of services to its customers.

5.19

Consolidation and Merger; Asset Acquisitions. Borrower shall not consolidate with or merge into any other entity, or permit any other entity to merge into it, or acquire (in a transaction analogous in purpose or effect to a consolidation or merger) all or substantially all of the assets of any other entity, except consolidation or merger of any Subsidiary into another Subsidiary or into the Borrower is permitted, provided the surviving entity is a “Borrower” hereunder.

5.20

Sale and Leaseback. Borrower shall not enter into any arrangement, directly or indirectly, with any other Person pursuant to which Borrower shall sell or transfer any real or personal property, whether owned now or acquired in the future, and then rent or lease all or part of such property or any other property which Borrower intends to use for substantially the same purpose or purposes as the property being sold or transferred.

5.21	Restrictions on Nature of Business. Borrower will not engage in any line of business materially different from that presently engaged in by Borrower, and will not purchase, lease or otherwise acquire assets not related to its business.

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5.22	Accounting. Borrower will not adopt any material change in accounting principles except as required by GAAP, consistently applied. Borrower will not change its fiscal year unless it has given Wells Fargo at least sixty (60) days prior written notice.

5.23	[Reserved]

5.24

Pension Plans. Except as disclosed to Wells Fargo in a Record prior to the date of this Agreement, neither Borrower nor any ERISA Affiliate will (a) adopt, create, assume or become party to any Pension Plan, (b) become obligated to contribute to any Multiemployer Plan, (c) incur any obligation to provide post-retirement medical or insurance benefits with respect to employees or former employees (other than benefits required by law) or (d) amend any Plan in a manner that would materially increase its funding obligations.

5.25

Place of Business; Name. Borrower will not (i) transfer its chief executive office or principal place of business, or move, relocate, close or sell any business Premises, (ii) permit any tangible Collateral or any records relating to the Collateral to be located in any state or area in which, in the event of such location, a financing statement covering such Collateral would be required to be, but has not in fact been, filed in order to perfect the Security Interest, or (iii) change its name or jurisdiction of organization, unless (a) Borrower provides Wells Fargo thirty (30) days prior written notice thereof, and (b) Borrower executes and delivers, prior to or simultaneously with any such actions, any and all documents and agreements required to maintain the perfection and priority of all security interests and liens granted by Wells Fargo hereunder.

5.26	Constituent Documents; Borrower will not amend its Constituent Documents in a manner adverse to Wells Fargo without Wells Fargo’s prior written consent.

5.27

Performance by Wells Fargo. If Borrower fails to perform or observe any of its obligations under this Agreement at any time, Wells Fargo may, upon reasonable notice to Borrower, but need not, perform or observe them on behalf of Borrower and may, but need not, take any other actions which Wells Fargo may reasonably deem necessary to cure or correct this failure; and Borrower shall pay Wells Fargo upon demand the amount of all costs and expenses (including reasonable attorneys’ fees and legal expense) incurred by Wells Fargo in performing these obligations, together with interest on these amounts at the Default Rate.

5.28

Wells Fargo Appointed as Borrower’s Attorney in Fact. To facilitate Wells Fargo’s performance or observance of Borrower’s obligations under this Agreement, Borrower hereby irrevocably appoints Wells Fargo and Wells Fargo’s agents, as Borrower’s attorney in fact (which appointment is coupled with an interest), effective upon the occurrence of an Event of Default, with the right (but not the duty) to create, prepare, complete, execute, deliver, endorse or file on behalf of Borrower any instruments, documents, assignments, security agreements, financing statements, applications for insurance and any other agreements or any Record required to be obtained, executed, delivered or endorsed by Borrower in accordance with the terms of this Agreement.

5.29

Maintenance of Deposit and Securities Accounts at Wells Fargo. Borrower shall maintain each of its deposit accounts, securities accounts and other investment accounts with Wells Fargo; provided, however, that Borrower may maintain the accounts listed on Exhibit G hereto for up to sixty (60) days after the date of this Agreement provided that the amount on deposit in each particular account does not exceed the amount specified for such account on Exhibit G hereto; and provided, further that Borrower may maintain the CIT Collection Account for a period of ninety (90) days after the date of this Agreement.

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6.	EVENTS OF DEFAULT AND REMEDIES

6.1	Events of Default. An “Event of Default” means any of the following:

(a)	Borrower fails to pay any the amount of any Indebtedness on the date that it becomes due and payable;

(b)

Borrower fails to (i) observe or perform any covenant or agreement of Borrower set forth in Sections 5.1(a), (b) or (h), 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.10, 5.15, 5.16, 5.18, 5.19, 5.20, 5.21, 5.22, 5.24 or 5.25, (ii) observe or perform any covenant or agreement of Borrower set forth in Section 5.1 (c) or (d) and such failure continues for a period of three (3) Business Days from the date of such failure; or (iii) observe or perform any covenant or agreement of Borrower set forth in this Agreement (other than a section that is expressly dealt with elsewhere in this Section 6.1 or in this Agreement) hereof and such failure continues for a period of 15 days from the date of such failure;

(c)	An Overadvance arises and continues for a period of three (3) Business Days as the result of any reduction in the Borrowing Base, or arises in any manner or on terms not otherwise approved of in advance by Wells Fargo in a Record that it has Authenticated;

(d)	An event of default or termination event (however defined) (after giving effect to any applicable grace or cure periods) occurs under any swap, derivative, foreign exchange, hedge or any similar transaction or arrangement entered into between Borrower and Wells Fargo;

(e)	A Change of Control shall occur;

(f)

Borrower becomes insolvent or admits in a Record an inability to pay debts as they mature, or Borrower makes an assignment for the benefit of creditors; or Borrower applies for or consents to the appointment of any receiver, trustee, or similar officer for the benefit of Borrower, or for any of their properties;

(g)

Borrower files a petition under any chapter of the United States Bankruptcy Code or under the laws of any other jurisdiction naming Borrower as debtor; or any such petition is instituted against Borrower; or Borrower institutes (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, debt arrangement, dissolution, liquidation or similar proceeding under the laws of any jurisdiction; or any such proceeding is instituted (by petition, application or otherwise) against Borrower; or any receiver, trustee or similar officer is appointed without the application or consent of Borrower provided that a proceeding instituted against Borrower or such appointment shall not constitute an Event of Default if such proceeding or appointment is dismissed, terminated or vacated within thirty (30) days of commencement;

(h)

Any representation or warranty made by Borrower in this Agreement, or by Borrower (or any of its Officers) in any agreement, certificate, instrument or financial statement or other statement delivered to Wells Fargo in connection with this Agreement is untrue or misleading in any material respect when delivered to Wells Fargo;

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(i)

A final, non-appealable arbitration award, judgment, or decree or order for the payment of money in an amount in excess of $250,000 which is not insured or subject to indemnity, is entered against Borrower and which is unstayed for more than ten (10) Business Days; or any judgment, writ, warrant of attachment or execution or similar process is issued or levied against a substantial part of the property of Borrower and such judgment, writ or warrant is not released or is unstayed for more than ten (10) Business Days;

(k)

Borrower is in default with respect to any bond, debenture, note or other evidence of material indebtedness issued by Borrower, having a principal amount in excess of $250,000 that is held by any third Person other than Wells Fargo, or under any instrument under which any such evidence of indebtedness has been issued or by which it is governed, or under any material lease or other contract, and the applicable grace period, if any, has expired;

(l)	Borrower liquidates, dissolves, terminates or suspends its business operations or otherwise fails to operate its business in the ordinary course, or unless permitted pursuant to Section 5.19 hereof, merges with another Person; or sells or attempts to sell all or substantially all of its assets;

(m)	Borrower fails to pay any indebtedness or obligation owed to Wells Fargo which is unrelated to the Line of Credit or this Agreement as it becomes due and payable;

(n)

Any Director or Officer of Borrower is indicted for a felony offense under state or federal law, unless, with respect to felonies other than felonies involving fraud, such Director is removed from Borrower’s Board of Directors or such Officer’s employment with Borrower is terminated, in each case within one hundred twenty (120) days of the date of the related indictment, or Borrower hires an Officer or appoints a Director who has been convicted of any felony offense under state or federal law; and

(o)

Any Reportable Event, which Wells Fargo in good faith believes to constitute sufficient grounds for termination of any Pension Plan or for the appointment of a trustee to administer any Pension Plan, has occurred and is continuing 30 days after Borrower gives Wells Fargo a Record notifying it of the Reportable Event; or a trustee is appointed by an appropriate court to administer any Pension Plan; or the Pension Benefit Guaranty Corporation institutes proceedings to terminate or appoint a trustee to administer any Pension Plan; or Borrower or any ERISA Affiliate files for a distress termination of any Pension Plan under Title IV of ERISA; or Borrower or any ERISA Affiliate fails to make any quarterly Pension Plan contribution required under Section 412(m) of the IRC, which Wells Fargo in good faith believes may, either by itself or in combination with other failures, result in the imposition of a Lien on Borrower’s assets in favor of the Pension Plan; or any withdrawal, partial withdrawal, reorganization or other event occurs with respect to a Multiemployer Plan which could reasonably be expected to result in a material liability by Borrower to the Multiemployer Plan under Title IV of ERISA.

6.2	Rights and Remedies. During any Default Period, Wells Fargo may in its discretion exercise any or all of the following rights and remedies:

(a)	Wells Fargo may terminate the Line of Credit and decline to make Advances, and terminate any services extended to Borrower under the Master Agreement for Treasury Management Services;

(b)

Wells Fargo may declare the Indebtedness to be immediately due and payable and accelerate payment of the Revolving Note, and all Indebtedness shall immediately become due and payable, without presentment, notice of dishonor, protest or further notice of any kind, all of which Borrower hereby expressly waives;

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(c)	Wells Fargo may, without notice to Borrower, apply any money owing by Wells Fargo to Borrower to payment of the Indebtedness;

(d)

Wells Fargo may exercise and enforce any rights and remedies available upon default to a secured party under the UCC, including the right to take possession of Collateral, proceeding with or without judicial process (without a prior hearing or notice of hearing, which Borrower hereby expressly waives) and sell, lease or otherwise dispose of Collateral for cash or on credit (with or without giving warranties as to condition, fitness, merchantability or title to Collateral, and in the event of a credit sale, Indebtedness shall be reduced only to the extent that payments are actually received), and Borrower will upon Wells Fargo’s demand assemble the Collateral and make it available to Wells Fargo at any place designated by Wells Fargo which is reasonably convenient to both parties;

(e)	Wells Fargo may exercise and enforce its rights and remedies under any of the Loan Documents and any other document or agreement described in or related to this Agreement, including, without limitation, billing or invoicing any account debtor in respect of Borrower’s unbilled Accounts;

(f)	Borrower will pay Wells Fargo upon demand in immediately available funds an amount equal to the Aggregate Face Amount plus any anticipated costs and fees under Sections 1.6(i) and 1.6(j) hereof or any other Loan Document for deposit to the Special Account pursuant to Section 1.10; and

(g)	Wells Fargo may exercise any other rights and remedies available to it by law or agreement.

6.3

Immediate Default and Acceleration. Following the occurrence of an Event of Default described in Section 6.1(f) or (g), the Line of Credit shall immediately terminate and all of Borrower’s Indebtedness shall immediately become due and payable without presentment, demand, protest or notice of any kind.

7.	MISCELLANEOUS

7.1

No Waiver; Cumulative Remedies. No delay or any single or partial exercise by Wells Fargo of any right, power or remedy under the Loan Documents, or under any other document or agreement described in or related to this Agreement, shall constitute a waiver of any other right, power or remedy under the Loan Documents or granted by Borrower to Wells Fargo under other agreements or documents that are unrelated to the Loan Documents. No notice to or demand on Borrower in any circumstance shall entitle Borrower to any additional notice or demand in any other circumstances. The remedies provided in the Loan Documents or in any other document or agreement described in or related to this Agreement are cumulative and not exclusive of any remedies provided by law. Wells Fargo shall comply with applicable law in connection with a disposition of Collateral, and such compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

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7.2

Amendment; Consents and Waivers; Authentication. No amendment or modification of any Loan Documents, or any other document or agreement described in or related to this Agreement, or consent to or waiver of any Event of Default, or consent to or waiver of the application of any covenant or representation set forth in any of the Loan Documents, or any other document or agreement described in or related to this Agreement, or any release of Wells Fargo’s Security Interest in any Collateral, shall be effective unless it has been agreed to by Wells Fargo and Borrower and memorialized in a Record that: (a) specifically states that it is intended to amend or modify specific Loan Documents, or any other document or agreement described in or related to this Agreement, or waive any Event of Default or the application of any covenant or representation of any terms of specific Loan Documents, or any other document or agreement described in or related to this Agreement, or is intended to release Wells Fargo’s Security Interest in specific Collateral; and (b) is Authenticated by the signature of an authorized employee of both parties, or by an authorized employee of Wells Fargo with respect to a consent or waiver. The terms of an amendment, consent or waiver memorialized in any Record shall be effective only to the extent, and in the specific instance, and for the limited purpose to which Wells Fargo and Borrower have agreed.

7.3

Execution in Counterparts; Delivery of Counterparts. This Agreement and all other Loan Documents, or any other document or agreement described in or related to this Agreement, and any amendment or modification to them may be Authenticated by the parties in any number of counterparts, each of which, once authenticated and delivered in accordance with the terms of this Section 7.3, will be deemed an original, and all such counterparts, taken together, shall constitute one and the same instrument. Delivery by fax or by encrypted e-mail or e-mail file attachment of any counterpart to any Loan Document Authenticated by an authorized signature will be deemed the equivalent of the delivery of the original Authenticated instrument. Borrower shall send the original Authenticated counterpart to Wells Fargo by first class U.S. mail or by overnight courier, but Borrower’s failure to deliver a Record in this form shall not affect the validity, enforceability, and binding effect of this Agreement or the other Loan Documents, or any other document or agreement described in or related to this Agreement.

7.4	Notices, Requests, and Communications; Confidentiality. Except as otherwise expressly provided in this Agreement:

(a)

Delivery of Notices, Requests and Communications . (1) Any notice, request, demand, or other communication by either party that is required under the Loan Documents, or any other document or agreement described in or related to this Agreement, to be in the form of a Record (but excluding any Record containing information Borrower must report to Wells Fargo under Section 5.1) may be delivered (i) in person, (ii) by first class U.S. mail, (iii) by overnight courier of national reputation, or (iv) by fax, or the Record may be sent as an Electronic Record and delivered (v) by an encrypted e-mail, or (vi) through Wells Fargo’s CEO ® portal or other secure electronic channel to which the parties have agreed. (2) Pursuant to Section 5.1, any information that Borrower is required to deliver under Section 5.1 in the form of a Record may be delivered to Wells Fargo (i) in person, or by (ii) first class U.S. mail, (iii) overnight courier, or (iv) fax, or the Record may be sent as an Electronic Record (v) by encrypted e-mail, or (vi) through the file upload service of Wells Fargo’s CEO ® portal or other secure electronic channel to which the parties have agreed.

(b)

Addresses for Delivery . Delivery of any Record under the Loan Documents shall be made to the appropriate address set forth on the last page of this Agreement (which either party may modify by a Record sent to the other party), or through Wells Fargo’s CEO ® portal or other secure electronic channel to which the parties have agreed.

(c)

Date of Receipt . Each Record sent pursuant to the terms of this Section 7.4 will be deemed to have been received on (i) the date of delivery if delivered in person, (ii) the date deposited in the mail if sent by mail, (iii) the date delivered to the courier if sent by overnight courier, (iv) the date of transmission if sent by fax, or (v) the date of transmission, if sent as an Electronic Record by electronic mail or through Wells Fargo’s CEO ® portal or similar secure electronic channel to which the parties have agreed; except that any request for an Advance or any other notice, request, demand or other communication from Borrower required under Section 1, and any request for an accounting under Section 9-210 of the UCC, will not be deemed to have been received until actual receipt by Wells Fargo on a Business Day in accordance with the terms of this Agreement.

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(d)

Authentication of Borrower Information Records . Borrower shall Authenticate any Record delivered (i) in person, or by U.S. mail, overnight courier, or fax, by the signature of the Officer or employee of Borrower who prepared the Record; (ii) as an Electronic Record sent via encrypted e-mail, by the signature of the Officer or employee of Borrower who prepared the Record by any file format signature that is reasonably acceptable to Wells Fargo, or by a separate certification signed and sent by fax; or (iii) as an Electronic Record via the file upload service of Wells Fargo’s CEO ® portal or similar secure electronic channel to which the parties have agreed, through such credentialing process as Wells Fargo and Borrower may agree to under the CEO ® agreement.

(e)

Certification of Borrower Information Records . Any Record (including any Electronic Record) Authenticated and delivered to Wells Fargo under this Section 7.5 will be deemed to have been certified as materially true, correct, and complete by Borrower and each Officer or employee of Borrower who prepared and Authenticated the Record on behalf of Borrower, and may be legally relied upon by Wells Fargo without regard to method of delivery or transmission.

(f)

Confidentiality of Borrower Information Records Sent by Unencrypted E-mail . Borrower acknowledges that if it sends an Electronic Record to Wells Fargo without encryption by e-mail or as an e-mail file attachment, there is a risk that the Electronic Record may be received by unauthorized Persons, and that by so doing it will be deemed to have accepted this risk and the consequences of any such unauthorized disclosure. Borrower acknowledges that it may deliver Electronic Records containing Borrower information to Wells Fargo by e-mail pursuant to any encryption tool acceptable to Wells Fargo and Borrower, or through Wells Fargo’s CEO ® portal file upload service without risk of unauthorized disclosure.

7.5	[ Reserved] .

7.6

Further Documents. Borrower will from time to time execute, deliver, endorse and authorize the filing of any instruments, documents, conveyances, assignments, security agreements, financing statements, control agreements and other agreements that Wells Fargo may reasonably request in order to secure, protect, perfect or enforce the Security Interest or Wells Fargo’s rights under the Loan Documents, or any other document or agreement described in or related to this Agreement (but any failure to request or assure that Borrower executes, delivers, endorses or authorizes the filing of any such item shall not affect or impair the validity, sufficiency or enforceability of the Loan Documents, or any other document or agreement described in or related to this Agreement, and the Security Interest, regardless of whether any such item was or was not executed, delivered or endorsed in a similar context or on a prior occasion).

7.7

Costs and Expenses. Borrower shall pay on demand all costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred by Wells Fargo in connection with the Indebtedness, this Agreement, the Loan Documents, or any other document or agreement described in or related to this Agreement, and the transactions contemplated by this Agreement, including all such costs, expenses and fees incurred in connection with the negotiation, preparation, execution, delivery, amendment, administration, performance, collection and enforcement of the Indebtedness and all such documents and agreements and the creation, perfection, protection, satisfaction, foreclosure or enforcement of the Security Interest.

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7.8

Indemnity. In addition to its obligation to pay Wells Fargo’s expenses under the terms of this Agreement, Borrower shall indemnify, defend and hold harmless Wells Fargo, its parent Wells Fargo & Borrower, and any of its affiliates and successors, and all of their present and future Officers, Directors, employees, attorneys and agents (each an “Indemnitee”) from and against any of the following (collectively, “Indemnified Liabilities”):

(a)	Any and all transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of the Loan Documents, or any other document or agreement described in or related to this Agreement or the making of the Advances;

(b)	Any claims, loss or damage to which any Indemnitee may be subjected if any representation or warranty contained in Exhibit D proves to be incorrect in any respect or as a result of any violation of the covenants contained in Section 5.12; and

(c)

Any and all other liabilities, losses, damages, penalties, judgments, suits, claims, costs and expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel) in connection with this Agreement and any other investigative, administrative or judicial proceedings, whether or not such Indemnitee shall be designated a party to such proceedings, which may be imposed on, incurred by or asserted against any such Indemnitee, to the extent any of the foregoing is related to or arising out of or in connection with the Loan Documents and/or the making of the Advances, or the use or intended use of the proceeds of the Advances, with the exception of any Indemnified Liability caused by the gross negligence or willful misconduct of an Indemnitee.

(d)

If any investigative, judicial or administrative proceeding described in this Section is brought against any Indemnitee, Wells Fargo shall promptly notify Borrower in writing, and upon the Indemnitee’s request, Borrower, or counsel designated by Borrower and satisfactory to the Indemnitee, will resist and defend the action, suit or proceeding to the extent and in the manner directed by the Indemnitee, at Borrower’s sole cost and expense. Each Indemnitee will use its best efforts to cooperate in the defense of any such action, suit or proceeding. If this agreement to indemnify is held to be unenforceable because it violates any law or public policy, Borrower shall nevertheless make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities to the extent permissible under applicable law. Borrower’s obligations under this Section shall survive the termination of this Agreement and the discharge of Borrower’s other obligations under this Agreement.

7.9

Retention of Borrower’s Records. Wells Fargo shall have no obligation to maintain Electronic Records or retain any documents, schedules, invoices, agings, or other Records delivered to Wells Fargo by Borrower in connection with the Loan Documents, or any other document or agreement described in or related to this Agreement for more than 30 days after receipt by Wells Fargo. If there is a special need to retain specific Records, Borrower must notify Wells Fargo of its need to retain or return such Records with particularity, which notice must be delivered to Wells Fargo in accordance with the terms of this Agreement at the time of the initial delivery of the Record to Wells Fargo.

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7.10

Binding Effect; Assignment; Complete Agreement. The Loan Documents, or any other document or agreement described in or related to this Agreement, shall be binding upon and inure to the benefit of Borrower and Wells Fargo and their respective successors and assigns, except that Borrower shall not have the right to assign its rights under this Agreement or any interest in this Agreement without Wells Fargo’s prior consent, which must be confirmed in a Record Authenticated by Wells Fargo. To the extent permitted by law, Borrower waives and will not assert against any assignee any claims, defenses or set-offs which Borrower could assert against Wells Fargo. This Agreement shall also bind all Persons who become a party to this Agreement as a borrower. This Agreement, together with the Loan Documents, or any other document or agreement described in or related to this Agreement, comprises the complete and integrated agreement of the parties on the subject matter of this Agreement and supersedes all prior agreements, whether oral or evidenced in a Record. To the extent that any provision of this Agreement contradicts other provisions of the Loan Documents other than this Agreement, or any other document or agreement described in or related to this Agreement, this Agreement shall control.

7.11

Confidentiality. Wells Fargo agrees that material, non-public information regarding Borrower and its Subsidiaries, their operations, assets and existing and contemplated business plans shall be treated by Wells Fargo in a confidential manner, shall not be used for the purpose of competing with Borrower, and shall not be disclosed by Wells Fargo to Persons who are not parties to this Agreement, except (i) to its accountants, lawyers, and other advisors, and with each business unit and line of business within Wells Fargo and each direct and indirect subsidiary of Wells Fargo, who shall be advised of the confidential nature of such information; (ii) as may be required by statute, decision, or judicial or administrative order, rule or regulation; and (iii) as requested or required by any governmental authority pursuant to any subpoena or other legal process.

7.12	Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining terms of this Agreement.

7.13	Headings. Section and subsection headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

7.14

Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. The Loan Documents (other than real estate related documents, if any) shall be governed by and construed in accordance with the substantive laws (other than conflict laws) of the Commonwealth of Massachusetts. The parties to this Agreement (a) consent to the personal jurisdiction of the state and federal courts located in the Commonwealth of Massachusetts in connection with any controversy related to this Agreement; (b) waive any argument that venue in any such forum is not convenient; (c) agree that any litigation initiated by Wells Fargo or Borrower in connection with this Agreement or the other Loan Documents may be venued in either the state or federal courts located in the City of Boston, County of Suffolk , Commonwealth of Massachusetts; and (d) agree that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

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7.15	Joint and Several Liability .

(a)

Borrower is defined collectively to include all Persons named as “Borrower” herein; provided, however, that any references herein to “any Borrower”, “each Borrower” or similar references, shall be construed as a reference to each individual Person named as Borrower herein. Each Person so named shall be jointly and severally liable for all of the obligations of the other Persons named as “Borrower” under this Agreement and the other Loan Documents. Each Borrower, individually, expressly understands, agrees and acknowledges that the Advances and Letters of Credit would not be made available on the terms herein in the absence of the collective credit of all of the Persons named as Borrower herein, the joint and several liability of all such Persons, and the cross-collateralization of the collateral of all such Persons. Accordingly, each Borrower, individually, acknowledges that the benefit to each of the Persons named as Borrower as a whole constitutes reasonably equivalent value, regardless of the amount of the Advances and/or Letters of Credit actually borrowed by, advanced to, or the amount of collateral provided by, any individual Borrower. In addition, each Person named as Borrower herein hereby acknowledges and agrees that all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in this Agreement shall be applicable to and shall be binding upon and measured and enforceable individually against each Person named as Borrower herein as well as all such Persons when taken together. By way of illustration, but without limiting the generality of the foregoing, the terms of Section 6 of this Agreement are to be applied to each individual Person named as Borrower herein (as well as to all such Persons taken as a whole), such that the occurrence of any of the events described in Section 6 of this Agreement as to any Person named as Borrower herein shall constitute an Event of Default even if such event has not occurred as to any other Persons named as Borrower or as to all such Persons taken as a whole.

(b)

Notwithstanding any provisions of this Agreement to the contrary, it is intended that the joint and several nature of the liability of each Borrower for the payment of the Indebtedness evidenced by the Loan Documents and the performance of the obligations pursuant to the Loan Documents (collectively, the “Obligations”) and the Liens granted by Borrower to secure the Obligations, not constitute a Fraudulent Conveyance (as defined below). Consequently, Wells Fargo and each Borrower agree that if the liability of a Borrower for the Obligations, or any Liens granted by such Borrower securing the Obligations would, but for the application of this sentence, constitute a Fraudulent Conveyance, the liability of such Borrower and the Liens securing such liability shall be valid and enforceable only to the maximum extent that would not cause such liability or such Lien to constitute a Fraudulent Conveyance, and the liability of such Borrower and this Agreement shall automatically be deemed to have been amended accordingly. For purposes hereof, the term “Fraudulent Conveyance” means a fraudulent conveyance under Section 548 of Chapter 11 of Title II of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the applicable provisions of any fraudulent conveyance or fraudulent transfer law or similar law of any State, as in effect from time to time.

(c)

Wells Fargo is hereby authorized, without notice or demand (except as otherwise specifically required under this Agreement) and without affecting the liability of any Borrower hereunder, at any time and from time to time, to (i) renew, extend or otherwise increase the time for payment of the Obligations; (ii) with the written agreement of any Borrower, accelerate or otherwise change the terms relating to the Obligations or otherwise modify, amend or change the terms of this Agreement, the Revolving Note, any Letter of Credit or any other Loan Document now or hereafter executed by any Borrower and delivered to Wells Fargo; (iii) accept partial payments of the Obligations; (iv) take and hold any collateral for the payment of the Obligations or for the payment of any guaranties of the Obligations and exchange, enforce, waive and release any such collateral; (v) after the occurrence and during the continuance of an Event of Default, apply any such collateral and direct the order or manner of sale thereof that Wells Fargo, in its sole discretion, may determine; and (vi) after the occurrence and during the continuance of an Event of Default, settle, release, compromise, collect or otherwise liquidate the Obligations and any collateral therefor in any manner, all surety defenses being hereby waived by each Borrower.

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(d)

(1) Each Borrower hereby agrees that, except as hereinafter provided, its obligations hereunder shall be unconditional, irrespective of (i) the absence of any attempt to collect the Obligations from any obligor or other action to enforce the same; (ii) the waiver or consent by Wells Fargo with respect to any provision of any instrument evidencing the Obligations, or any part thereof, or any other agreement heretofore, now or hereafter executed by a Borrower and delivered to Wells Fargo; (iii) failure by Wells Fargo to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for the Obligations; (iv) the institution of any proceeding under the Bankruptcy Code, or any similar proceeding, by or against a Borrower or Wells Fargo’s election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code; (v) any borrowing or grant of a security interest by a Borrower as debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Wells Fargo’s claim(s) for repayment of any of the Obligations; or (vii) any other circumstance other than payment in full of the Obligations which might otherwise constitute a legal or equitable discharge or defense of a guarantor or surety.

(2) The Persons constituting Borrower hereby agree, as between themselves, that to the extent that Wells Fargo shall have received from any Borrower any Recovery Amount (as defined below), then the paying Borrower shall have a right of contribution against each other Borrower in an amount equal to such other Borrower’s contributive share of such Recovery Amount; provided, however, that in the event any Borrower suffers a Deficiency Amount (as defined below), then the Borrower suffering the Deficiency Amount shall be entitled to seek and receive contribution from and against the other Borrowers in an amount equal to the Deficiency Amount; and provided further, that in no event shall the aggregate amounts so reimbursed by reason of the contribution of any Borrower equal or exceed an amount that would, if paid, constitute or result in a Fraudulent Conveyance. Until all Obligations have been paid and satisfied in full, after the occurrence and during the continuance of an Event of Default, no payment made by or for the account of a Borrower including, without limitation, a payment made by such Borrower on behalf of the liabilities of any other Borrower, shall entitle such Borrower, by subrogation or otherwise, to any payment from such other Borrower or from or out of such other Borrower’s property. The right of each Borrower to receive any contribution under this Section 7.15 or by subrogation or otherwise from any other Borrower shall be subordinate in right of payment to the Obligations and such Borrower shall not exercise any right or remedy against such other Borrower or any property of such other Borrower by reason of any performance of such Borrower of its joint and several obligations hereunder, until the Obligations have been indefeasibly paid and satisfied in full, and no Borrower shall exercise any right or remedy with respect to this Section 7.15 until the Obligations have been indefeasibly paid and satisfied in full. As used in this Section 7.15, the term “Recovery Amount” means the amount of proceeds received by or credited to Wells Fargo from the exercise of any remedy of Wells Fargo under this Agreement or the other Loan Documents, including, without limitation, the sale of any collateral. As used in this Section 7.15, the term “Deficiency Amount” means any amount that is less than the entire amount a Borrower is entitled to receive by way of contribution or subrogation from, but that has not been paid by, the other Persons constituting Borrower in respect of any Recovery Amount attributable to the Borrower entitled to contribution, until the Deficiency Amount has been reduced to zero through contributions and reimbursements made under the terms of this Section 7.15 or otherwise.

(3) Each Borrower agrees to the provisions of the Loan Documents and hereby waives notice of (i) any loans or advances or other financial accommodations made by Wells Fargo to any Borrower, (ii) acceptance of the Loan Documents, (iii) any amendment or extension of the Revolving Note, any Letter of Credit, this Agreement or any other Loan Document, (iv) the execution and delivery by any Borrower and Wells Fargo, of any other loan or credit agreement or of any Borrower’s execution and delivery of any promissory note or other document arising under the Loan Documents, (v) the occurrence of (A) any breach by any Borrower of any of the terms or conditions of this Agreement or any of the other Loan Documents, or (B) an Event of Default, (vi) Wells Fargo’s transfer or disposition of any collateral for the Obligations, or any part thereof, (vii) the sale or foreclosure (or the posting or advertising for the sale or foreclosure) of any collateral for the Obligations, (viii) protest, proof of non-payment or default by any Borrower, or (ix) any other action at any time taken or omitted by Wells Fargo and, generally, all demands and notices of every kind in connection with this Agreement, the Loan Documents, any documents or agreements evidencing, securing or relating to the Obligations.

(4) Subject to paragraph 7.15(d)(2) above, (a) for so long as any Obligation of any Borrower to Wells Fargo, including without limitation any portion of the Loans remains outstanding, Borrower hereby unconditionally and irrevocably waives, releases and abrogates, after the occurrence and during the continuance of an Event of Default, any and all rights it may now or hereafter have under any agreement, at law or in equity (including, without limitation, any law subrogating such Borrower to the rights of Wells Fargo), to assert any claim against or seek contribution, indemnification or any other form of reimbursement from any other Borrower for the payment of any or all of the Obligations for any payment made by any Borrower under or in connection with this Agreement or otherwise and (b) for so long as any portion of the Obligations remains outstanding, Borrower hereby unconditionally and irrevocably waives, releases and abrogates, after the occurrence and during the continuance of an Event of Default, any and all rights it may now or hereafter have under any agreement, at law or in equity (including, without limitation, any law subrogating such Borrower to the rights of Wells Fargo), to assert any claim against or seek contribution, indemnification or any other form of reimbursement from any Borrower of any or all of the Obligations for any payment made by such Borrower under or in connection with this Agreement, the other Loan Documents, or otherwise.

(5) Without limiting the generality of the foregoing, or of any other waiver or other provision set forth in this Agreement, each Borrower hereby absolutely, knowingly, unconditionally, and expressly waives any and all claim, defense or benefit arising directly or indirectly under any one or more of Sections 2787 to 2855 inclusive of the California Civil Code or any similar law of California.

BORROWER AND WELLS FARGO WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAIING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

COMMAND SECURITY CORPORATION			WELLS FARGO BANK, NATIONAL ASSOCIATION

By:			By:

Its:			Its:

COMMAND SECURITY SERVICES, INC.

By:

Its:

STRATEGIC SECURITY SERVICES, INC.

By:

Its:

RODGERS POLICE PATROL, INC.

By:

Its:

BORROWER AND WELLS FARGO have executed this Agreement as a sealed instrument under the laws of the Commonwealth of Massachusetts through their authorized officers as of the date set forth above.

WELLS FARGO BANK, NATIONAL ASSOCIATION		COMMAND SECURITY CORPORATION

By:		By:


		Its
	Its Vice President
		By:


		Its

Wells Fargo Bank, National Association

MAC-
		Fax: ______________________________
		Attention: ______________________________
Fax: ______________________________		e-mail: _________________________________
Attention: Mr. John P. Nuzzo		Federal Employer Identification No.
e-mail: John.P.Nuzzo@wellsfargo.com
		Organizational Identification No.



		COMMAND SECURITY SERVICES, INC.

		By:


		Its

		By:


		Its




		Fax: ______________________________
		Attention: ______________________________
		e-mail: _________________________________
		Federal Employer Identification No.

		Organizational Identification No.

			STRATEGIC SECURITY SERVICES, INC.

			By:


			Its

			By:


			Its




			Fax: ______________________________
			Attention: ______________________________
			e-mail: _________________________________
			Federal Employer Identification No.

			Organizational Identification No.


			RODGERS POLICE PATROL, INC.

			By:


			Its

			By:


			Its




			Fax: ______________________________
			Attention: ______________________________
			e-mail: _________________________________
			Federal Employer Identification No.

			Organizational Identification No.

$20,000,000

February 12, 2009

FOR VALUE RECEIVED , the undersigned, COMMAND SECURITY CORPORATION, a New York corporation (“CSC”), COMMAND SECURITY SERVICES, INC., a New York corporation (“CSS”), STRATEGIC SECURITY SERVICES, INC., a California corporation (“SSS”) and RODGERS POLICE PATROL, INC., a California corporation (“RPP”; RPP, CSC, CSS and SSS, individually and collectively, jointly and severally, are referred to herein as “Borrower”), hereby promise to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), acting through its WELLS FARGO BUSINESS CREDIT operating division, on the Termination Date described in the Credit and Security Agreement dated February 12, 2009 (as amended from time to time, the “Agreement”) and entered into between Wells Fargo and Borrower, at Wells Fargo’s office at 300 Commercial Street, Boston, Massachusetts 02109, or at any other place designated at any time by the holder, in lawful money of the United States of America and in immediately available funds, the principal sum of Twenty Million Dollars ($20,000,000) or the aggregate unpaid principal amount of all Advances under the Line of Credit made by Wells Fargo to Borrower under the terms of the Agreement, together with interest on the principal amount computed on the basis of actual days elapsed in a 360-day year, from the date of this Revolving Note until this Revolving Note is fully paid at the rate from time to time in effect under the terms of the Agreement. Principal and interest accruing on the unpaid principal balance amount of this Revolving Note shall be due and payable as provided in the Agreement. This Revolving Note may be prepaid only in accordance with the Agreement.

This Revolving Note is the Revolving Note referred to in the Agreement, and is subject to the terms of the Agreement, which provides, among other things, for the acceleration of this Revolving Note. This Revolving Note is secured, among other things, by the Agreement and the Security Documents as defined in the Agreement, and by any other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements that may subsequently be given for good and valuable consideration as security for this Revolving Note.

Borrower shall pay all costs of collection, including reasonable attorneys’ fees and legal expenses if this Revolving Note is not paid when due, whether or not legal proceedings are commenced.

Presentment or other demand for payment, notice of dishonor and protest are expressly waived.

Borrower has executed this Revolving Note as a sealed instrument under the laws of the Commonwealth of Massachusetts through its authorized officer as of the date set forth above

	COMMAND SECURITY CORPORATION

	By:
	Name:
	Its:

	COMMAND SECURITY SERVICES, INC.

	By:
	Name:
	Its:


	STRATEGIC SECURITY SERVICES, INC.

	By:
	Name:
	Its:


	RODGERS POLICE PATROL, INC.

	By:
	Name:
	Its:

Exhibit A to Credit and Security Agreement

“Account Funds” is defined in Section 1.4(a).

“Accounts” shall have the meaning given it under the UCC.

“Advance” and “Advances” means an advance or advances under the Line of Credit.

Company Contact:
Barry Regenstein, President
Command Security Corporation
845-454-3703

/s/ Barry I. Regenstein
Barry I. Regenstein
President and Chief Financial Officer

By:	/s/ Edward S. Fleury

	Edward S. Fleury
	Chief Executive Officer

	Three Months Ended December 31,				Nine Months Ended December 31,
	2008		2007		2008		2007

Revenues	$	32,760,473	$	30,225,328	$	98,415,570	$	88,922,998

Operating income		558,221		723,009		2,801,896		2,344,022

Other expense		104,411		182,538		336,687		513,868

Provision for income taxes		205,000		—		1,060,000		275,000

Net income	$	248,810	$	540,471	$	1,405,209	$	1,555,154

Net income per common share
Basic	$	0.02	$	0.05	$	0.13	$	0.15
Diluted	$	0.02	$	0.05	$	0.12	$	0.14

Weighted average number of common shares outstanding
Basic		10,775,916		10,727,191		10,763,449		10,727,191
Diluted		11,349,993		11,379,450		11,390,625		11,326,613

	December 31, 2008		March 31, 2008
Balance Sheet Highlights	(Unaudited)		(Audited)

Cash	$	320,647	$	146,782
Accounts receivable		22,582,717		20,097,835
Total current assets		28,459,951		24,835,531
Total assets		37,342,424		32,786,449
Total current liabilities		21,595,089		18,738,495
Short-term debt		12,418,102		8,758,334
Total liabilities		22,305,905		19,426,700
Stockholders’ equity		15,036,519		13,359,749
Total liabilities and stockholders’ equity	$	37,342,424	$	32,786,449