Exhibit 10.7


 


Stockholders
Agreement dated as of December 24, 2003 (this “Agreement”),
among (i) Atlantic Express Transportation Group Inc., a New York corporation
(the “Company”) and (ii) all Persons receiving shares of the Common
Stock (as hereinafter defined) of the Company pursuant to the Plan (as
hereinafter defined), including without limitation the parties identified on
the signature pages hereof and any parties identified on the signature pages of
any joinder agreements executed and delivered pursuant to Section 8.2
of this Agreement (each an “Investor”, and together, the “Investors”).


 


Witnesseth:


 


Whereas, the First Amended Joint Plan of Reorganization of the Company
and its debtor subsidiaries, dated July 21, 2003, filed in those certain
Chapter 11 cases identified as Case No. 02-42560 (PCB) and confirmed on
September 5, 2003  by order of the
United States Bankruptcy Court for the Southern District of New York (the “Plan”)
provides that the Company will enter into a stockholders agreement with the Investors
relating, among other things, to the rights of Investors in respect of the
Common Stock (as defined below).


 


Whereas, as of the date hereof, the Investors are the holders of 100%
of the Common Stock pursuant to the Plan.


 


In consideration of the foregoing and of their mutual covenants set
forth in this Agreement, the parties hereby agree as follows:


 


Article I

Definitions


 


1.1.                              Definitions.
The following terms, as used herein, have the following meanings:


 


“Advice” shall have the meaning as specified in Section 6.3.


 


“Agreement” shall have the meaning as specified in the Preamble.


 


“Affiliate” means, as to any Person, any other Person directly
or indirectly Controlling, Controlled by or under direct or indirect common
Control with such Person; provided that the Company and its subsidiaries shall
not, solely as a result of such Person owning Common Stock of the Company or
designating a director on the Board of Directors, be deemed Affiliates of such
Person for the purposes of this Agreement.


 


“Approved Sale” shall have the meaning specified in Section 5.3(a).


 


“Board of Directors” means the Board of Directors of the
Company.


 


“Certificate of Incorporation” means the Certificate of
Incorporation of the Company, as amended and in effect from time to time.


 

















 


“Common Stock” means the common stock, par value $0.001 per
share, of the Company.


 


“Common Stock Equivalents” shall have the meaning specified in Section 5.1(a).


 


“Control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of securities, partnership interests or
by contract, assignment or otherwise. The terms “Controls”, “Controlling” and
“Controlled” shall have meanings correlative to the foregoing.


 


“Corporate Transaction” shall have the meaning specified in Section 5.3(a).


 


“Demand Registration” shall have the meaning as set forth in Section 6.2(a).


 


“Electing Holder” shall have the meaning as specified in Section 5.2(a).


 


“GSC” means GSCP II Holdings (AE), LLC, GSC Recovery II, L.P.
and GSC Partners CDO Fund, Limited and their respective Affiliates.


 


“GSC Designated Directors” shall have the meaning as specified
in Section 4.1(a)(i).


 


“GSC Minimum Common Stock Ownership” shall have the meaning as
specified in Section 4.1(a)(i).


 


“HSR Act” shall have the meaning specified in Section 5.1(c).


 


“Initial Public Offering” means the first to occur of: (i) a
sale of Common Stock for the account of the Company in a firmly underwritten
public offering registered under the Securities Act of 1933, as amended
(excluding registration statements filed on Form S-8, or any similar successor
form or another form used for a purpose similar to the intended use for such
forms), and underwritten by a nationally recognized investment bank approved by
vote of a majority of the Board of Directors and (ii) the listing of the Common
Stock on a national securities exchange or authorization for quotation on the
Nasdaq National Market System or any successor thereto.


 


“Investors” shall have the meaning as specified in the Preamble.


 


“Losses” shall have the meaning as specified in Section 6.8.


 


“NASD” shall have the meaning as specified in Section 6.3(g).


 


“1933 Act” means the Securities Act of 1933, as amended and in
effect from time to time.


 


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“1934 Act” means the Securities Exchange Act of 1934, as amended
and in effect from time to time.


 


“Notice of Offer” means any bona fide written offer from a
Proposed Section 5.2(a) Purchaser to purchase or otherwise acquire for
value issued and outstanding shares of Common Stock from an Investor, which
offer shall identify the proposed transferee or transferees, the Common Stock
covered thereby, all terms and conditions of the offer and, in the case of an
offer pursuant to which the consideration consists in whole or in part of
consideration other than cash, a description of the non-cash component of such
consideration.


 


“Original 10% Holder” shall have the meaning as specified in Section 5.2(a).


 


“Person” means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.


 


“Personal Obligations” shall have the meaning as specified in Section 5.3(b).


 


“Piggyback Registration” shall have the meaning as specified in Section 6.1(a).


 


“Regulatory Compliance” shall have the meaning as specified in Section 5.1(c).


 


“Proposed Section 5.1(a) Purchaser” shall have the meaning
as specified in Section 5.1(a).


 


“Proposed Section 5.2(a) Purchaser” shall have the meaning
as specified in Section 5.2(a).


 


“Pro Rata Portion” means, with respect to one or more Investors,
the ratio of (a) the number of shares of Common Stock then owned by each
such Investor to (b) the total number of shares of Common Stock
outstanding.


 


“Qualified IPO” means a bona fide public offering of Common
Stock pursuant to an effective registration statement filed under the 1933 Act
which results in proceeds to the Company of at least $50,000,000 and which
results in the listing or quotation of the Common Stock on a national
securities exchange or automated quotation system.


 


“Registrable Securities” means any shares of Common Stock held
by an Investor and any other securities issued or issuable with respect to the
Common Stock by way of a stock split, stock dividend, reclassification,
subdivision or reorganization, recapitalization or similar event.


 


“Registration and Registrations” shall have the meanings as
specified in Section 6.3.


 


“Sale of Stock” shall have the meaning specified in Section 5.3(a).


 


3

















 


“SEC” means the United States Securities and Exchange Commission.


 


“Selling 10% Holder” shall have the meaning as specified in Section 5.2(a).


 


“Senior Credit Facility” shall mean the Credit Agreement, dated
December    , entered into among the Company, Atlantic
Express Transportation Corp., Congress Financial Corporation and the other
parties thereto, as amended and in effect from time to time, including without
limitation any refinancing or replacement thereof.


 


“Standby Commitment” shall have the meaning as specified in Section 4.3(c).


 


“Tag Along Right” shall have the meaning as specified in Section 5.2(a).


 


“Transfer” means any assignment, transfer, sale, conveyance,
pledge, hypothecation or other disposition.


 


Article II

Representations and Warranties


 


Each of the parties hereby severally represents and warrants to each of
the other parties as follows:


 


2.1.                              Authority;
Enforceability. Such party has the legal capacity or corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. Such party (in the case of the parties that are not natural persons)
is duly organized and validly existing under the laws of its jurisdiction of
organization, and the execution of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
action. No other act or proceeding, corporate or otherwise, on its part is
necessary to authorize the execution of this Agreement or the consummation of
any of the transactions contemplated hereby. This Agreement has been duly
executed by such party and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with the terms of this Agreement, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity (whether applied by
a court of law or of equity).


 


2.2.                              No
Breach. Neither the execution of this agreement nor the performance by such
party of its obligations hereunder nor the consummation of the transactions
contemplated hereby does or will:


 


(a)                                  in
the case of parties that are not natural persons, conflict with or violate its
certificate of incorporation, bylaws or other organizational documents;


 


(b)                                 violate,
conflict with or result in the breach or termination of, or otherwise give any
other person the right to accelerate, renegotiate or terminate or receive any
payment or constitute a default or an event of default (or an event which with
notice, lapse of time, or both,


 


4

















 


would constitute a default or event of default) under the terms of, any
material contract or agreement to which it is a party or by which it or any of
its assets or operations are bound or affected; or


 


(c)                                  constitute
a violation by such party of any laws, rules or regulations of any
governmental, administrative or regulatory authority or any judgments, orders,
rulings or awards of any court, arbitrator or other judicial authority or any
governmental, administrative or regulatory authority.


 


2.3.                              Consents.
No consent, waiver, approval, authorization, exemption, registration, license
or declaration is required to be made or obtained by such party, other than
those which have been made or obtained, in connection with (i) the execution or
enforceability of this Agreement or (ii) the consummation of any of the
transactions contemplated hereby.


 


Article III

Share Transfers


 


3.1.          Transfers by
Investors. No Investor shall Transfer to any Person who is not a party to
this Agreement any Common Stock now or hereafter owned by such Investor unless
the transferee of any such Investor shall join in this Agreement by executing a
joinder agreement substantially in the form attached hereto as Exhibit A.
The foregoing restriction on Transfer shall not apply to (i) a Transfer of
Common Stock in acccordance with Section 5.3; (ii) a Transfer of Common
Stock by an Investor pursuant to an effective registration statement under the
1933 Act; or (iii) a Transfer of all or any of such Common Stock in a bona fide
pledge of such Common Stock to a financial institution to secure borrowings as
permitted by applicable law; provided that such Transfer shall not
result in a violation of the provisions of Article II, that the Investor shall
be able to fulfill its obligations under the provisions of this Agreement and
the Certificate of Incorporation, and that contemporaneously with such pledge
such financial institution agrees that upon any foreclosure on such pledge it
and any transferee shall be bound by the obligations of the Investor under this
Agreement and the Certificate of Incorporation.


 


3.2.                              Transfers
to Comply with Laws. Notwithstanding any contrary provision herein, no
Investor may Transfer or offer to Transfer any shares of Common Stock (or
solicit any offers to Transfer any shares of Common Stock), except in
compliance with the 1933 Act and rules and regulations promulgated thereunder
and in compliance with any applicable state securities laws and rules and
regulations promulgated thereunder.


 


3.3.                              Improper
Transfer. Any attempt to Transfer any shares of Common Stock not in
accordance with this Agreement shall be null and void and the Company will not
give nor permit the Company’s transfer agent to give any effect to such attempted
Transfer in its stock records


 


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3.4.                              Restrictive
Legend. Each certificate evidencing shares of Common Stock shall contain in
substance the following restrictive legend in addition to any other legend:


 


THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (A) THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS, OR (B) IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO ATLANTIC EXPRESS TRANSPORTATION GROUP INC. (THE “COMPANY”),
REGISTRATION UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.


 


THIS SECURITY IS ALSO SUBJECT TO THE TERMS
AND CONDITIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF
DECEMBER    , 2003, AS AMENDED FROM TIME TO TIME TO WHICH
THE COMPANY IS A PARTY AND WHICH IS BINDING ON ALL SHAREHOLDERS, WHICH CONTAINS RESTRICTIONS ON TRANSFER HEREOF AND A PROVISION THAT MAY REQUIRE THE
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE TO SELL SUCH
SECURITIES UNDER CERTAIN CIRCUMSTANCES, COPIES OF WHICH
ARE ON FILE AT THE OFFICES OF THE COMPANY AND MAY BE OBTAINED UPON REQUEST.


 


Article IV

Voting and Election of Directors


 


4.1.                              Board
of Directors. Each of the Investors severally agrees that in exercising its
voting rights on the election of directors, whether or not at an annual or
special meeting of the Company and whether or not at an adjourned meeting, such
Investor shall vote its shares of the voting Common Stock for, and each of the
Investor and the Company agrees that it will take all other necessary actions
within its control to cause the nomination and the election of, the individuals
to the Board of Directors as follows:


 


(a)                                  The
Board of Directors shall consist of at least three (3) directors so long as GSC
and its Affiliates are the record holders of at least 35% of the Common Stock
issued under the Plan (subject to adjustment from time to time for stock
splits, stock dividends, stock combinations, reclassifications and similar
transactions and adjustments in the event of further stock issuances), with:


 


(i)                                     a majority of the
Board of Directors designated by GSC so long as GSC and its Affiliates are the
record holders of at least 35% of the Common Stock issued under the Plan
(subject to adjustment from time to time for stock splits, stock dividends,
stock combinations, reclassifications and similar transactions and adjustments
in the event of further stock issuances) (the “GSC Minimum Common Stock
Ownership”), and at least one director so long as GSC and its Affiliates
are the record holders of at least 10% of the Common Stock issued under the
Plan (subject to adjustment from time to time for stock splits, stock
dividends, stock combinations, reclassifications and similar transactions and
adjustments in the event of further stock issuances); such directors being
herein referred to as the “GSC Designated Directors”); and GSC shall
have the right to


 


6

















 


remove and replace any GSC Designated Director at any time and a
vacancy in a seat belonging to a GSC Designated Director, whether by
resignation or otherwise, shall be filled by GSC so long as GSC and its
Affiliates are the record holders of the number of shares necessary to
designate such director as set forth in this Section 4.1(a)(i); and


 


(ii)                                  the Chief Executive
Officer of the Company.


 


It is understood that the foregoing shall not
limit the rights of GSC and its Affiliates to vote their shares of the Common
Stock as they shall elect for any members of the Board of Directors other than
the GSC Designated Directors and the Chief Executive Officer of the Company.


 


4.2.                              Directors’
and Officers’ Insurance. The Company shall use its reasonable best efforts
to obtain and maintain directors’ and officers’ insurance on such terms and in
such amounts as are customary for companies of its type.


 


4.3.                              Minority
Stockholder Protections. The Company will not, without approval of the
holders of a majority of Common Stock that is not owned by GSC or its
Affiliates:


 


(a)                                  redeem
or repurchase any shares of Common Stock unless each holder of Common Stock may
participate on a pro rata basis;


 


(b)                                 pay
a dividend or distribution on the Common Stock unless such dividend or
distribution is paid to all holders of Common Stock on a pro rata basis;


 


(c)                                  engage (or permit any
subsidiary to engage) in any transactions with a director, an officer or an
Affiliate including financing transactions unless (a) such transaction is
approved by a majority of the members of the Board of Directors who have no
financial interest in such transaction and are not Affiliates of any person who
has a financial interest in such transaction, and (b) such transaction is fair
to the Company or its subsidiaries, as the case may be, from a financial point
of view or on terms no less favorable to the Company or its subsidiaries than
those that could be obtained at the time of such transaction in arm’s-length
dealings with a party who is not an Affiliate (which fairness or favorable
terms may be conclusively established by the Company with an opinion of a
nationally recognized investment banking firm); provided, however,
the above restrictions shall not apply to (a) transactions between the Company
and its subsidiaries, (b) employment arrangements approved by the Board of
Directors with individuals who are operating officers or employees of the
Company or its subsidiaries, (c) transactions in which all holders of Common
Stock participate on a pro rata basis, (d) payment of reasonable
fees and expense reimbursement to the members of the Board of Directors on an
equal basis, (e) transactions and arrangements approved pursuant to the Plan,
(f) transactions contemplated by the express terms of this Agreement, including
without limitation the payment of fees pursuant to Section 5.5
hereof, and (g) the issuance by the Company or its subsidiaries of securities
in which GSC and its Affiliates do not purchase more than (I) where the
preemptive rights set forth in Section 5.1 do not apply, any amount
of securities as GSC or its Affiliates may agree to purchase under any
“standby” commitment entered into by the Company or its subsidiary with GSC or
its


 


7

















 


Affiliates where such standby commitment has been offered pro rata
to all holders of more than 10% of the Common Stock (a “Standby Commitment”),
or (II) where the preemptive rights set forth in Section 5.1 do
apply, the amount of such securities which GSC and its Affiliates are entitled
to purchase by reason of such preemptive rights plus any amount of such
additional securities as GSC or its Affiliates may agree to purchase under any
Standby Commitment; or


 


(d)                                 any
amendments or modifications to the Certificate of Incorporation or bylaws of
the Company which modify or expressly limit in any material respect, or
conflicts in any material respect with, the terms of this Agreement.


 


Article V

Rights of Certain Investors


 


5.1.                              Preemptive
Rights.


 


(a)                                  Except
as provided in Section 5.1(b), if the Company at any time or from
time to time proposes to issue any shares of Common Stock or any other
securities convertible into, exercisable for, or otherwise entitling the holder
thereof to acquire, Common Stock by exchange or the exercise of options,
warrants or rights (“Common Stock Equivalents”) at a price that is less
than fair market value (as determined in good faith by the Board of Directors),
the Company shall give written notice thereof to each Investor. Such notice
shall contain the amount of Common Stock Equivalents to be issued, the identity
of the Person to whom the Common Stock Equivalents are proposed to be issued
(the “Proposed Section 5.1(a) Purchaser”) if then known by the
Company and any other pertinent terms of the proposed issuance (including the
terms of such Common Stock Equivalents) and shall also contain an irrevocable
offer to each Investor to purchase, at the purchase price at which the Company
initially proposes to issue such Common Stock Equivalents, its Pro Rata Portion
of such Common Stock Equivalents. At any time within thirty (30) days after
receipt of the notice provided for in the previous sentence, an Investor may
accept the offer made to it in such notice on substantially the same terms (and
consisting of the same combination of Common Stock Equivalents, if the offer of
Common Stock Equivalents consists of more than one type of security and the
terms of the offer of Common Stock Equivalents require that Investors purchase
such Common Stock Equivalents in a prorated strip), by furnishing notice
thereof to the Company. If an Investor shall fail to respond to the Company
within thirty (30) days of receipt of the Company’s notice to Investors of the
proposed issuance described above, such failure shall be regarded as a
rejection of such Investor’s right to exercise such Investor’s preemptive
rights provided in this Article V.


 


(b)                                 Section 5.1(a)
shall not apply to (i) the grant of employee stock options or other convertible
securities to purchase Common Stock pursuant to an employee stock option plan,
stock purchase plan, or similar benefit program or agreement, where the primary
purpose is not to raise additional equity capital for the Company; (ii) the
issuance of any Common Stock Equivalents in order to effect any joint venture
arrangement, merger, consolidation or other acquisition of any Person,
business, division or assets, which joint venture, merger, consolidation or
other acquisition has been approved by the Board of Directors, and (iii) the
issuance of any Common Stock or convertible securities to a landlord of, or any
insurance surety or insurance


 


8

















 


provider for, or equipment lessor or lender to, the Company, which
issuance has been approved by the Board of Directors and provided that such
landlord, surety, insurer, lessor or lender is not GSC or an Affiliate of GSC.


 


(c)                                  The
closing of the purchase of Common Stock Equivalents accepted for purchase
pursuant to Section 5.1(a) shall take place simultaneously with the
closing of the sale of the Common Stock Equivalents to the Proposed
Section 5.1(a) Purchaser, or, if there is no Proposed Section 5.1(a)
Purchaser, at such time and place upon which the Investors (based on a majority
of the Common Stock Equivalents that such Investors have agreed to purchase)
who have accepted for purchase Common Stock Equivalents as provided in this
Article V may agree; provided, however, that such closing
shall be subject to a reasonable extension as to an Investor if the purchase by
the Investor is subject to compliance with any applicable law related to the
issuance of the Common Stock Equivalents to such Investor (“Regulatory
Compliance”), including any necessary filings or notices and the expiration
or termination of any waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”), or any similar
applicable state antitrust or applicable state securities laws, provided that
(i) such Regulatory Compliance does not unreasonably delay the issuance the
Common Stock Equivalents and the attainment by the Company of the benefits of
such financing and (ii) such Investor uses reasonably commercial efforts to
effect such Regulatory Compliance as soon as possible.


 


(d)                                 In
the event an Investor fails to exercise the preemptive right provided in this Section 5.1
within the thirty (30) day period described above, the Company shall have
ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of Common Stock Equivalents covered thereby shall be closed, if
at all, within (60) days from the date of said agreement) to sell the Common
Stock Equivalents not elected to be purchased by such Investor or the other
Investors pursuant to Section 5.1(a), at or above the price and
upon the terms no more favorable to the Proposed Section 5.1(a) Purchaser
than specified in the Company’s notice. In the event the Company has not sold
the Common Stock Equivalents or entered into an agreement to sell the Common
Stock Equivalents within such ninety (90) day period (or has not sold and
issued the Common Stock Equivalents in accordance with the foregoing within
sixty (60) days from the date of said agreement), the Company shall not
thereafter issue or sell any Common Stock Equivalents without first offering
such Common Stock Equivalents to the Investors in the manner provided above.


 


(e)                                  If
the Investor’s acquisition of Common Stock Equivalents upon exercise of its
rights under this Article V would be subject to Regulatory
Compliance, the Company and such Investor each will take such actions as may be
reasonable required promptly to comply with such Regulatory Compliance. The
Company and such Investor each will pay their respective costs that each incurs
in complying with the obligations set forth in this Sextion 5.1(e);
provided, however, that the HSR filing fee and any other Regulatory Compliance
governmental fees (other than governmental fees which are not applicable to all
Investors generally) shall be paid by the Company. It shall be a condition
precedent to the acquisition of Common Stock Equalivents by any Investor that
either (i) no filing under the HSR Act by such Investor is required in
connection with such acquisition or (ii) any applicable waiting period under
the HSR Act has expired or been terminated. If the applicable waiting period
under the HSR Act has not expired


 


9

















 


or been terminated by the time of the closing of the sale of Common
Stock Equivalents to a Proposed Section 5.1(a) Purchaser, or if there is
no Proposed Section 5.2(a) Purchaser, within ninety (90) days after the
filing of the HSR Report, or if such Investor and the Company agree to withdraw
the HSR Report, or if such Investor chooses not to file an HSR Report, then the
Company will use its reasonable best efforts to afford to such Investor the
benefits intended to be provided by this Article V by granting to such Investor
the right to acquire, on the same terms as the Common Stock Equivalents
originally to be acquired, other securities of the Company having substantially
the same rights, privileges and preferences as the Common Stock Equivalents
originally to be acquired, except that such other securities will not possess
voting rights and will be convertible into the Common Stock Equivalents that
such Investor was to acquire originally pursuant to this Article IV.


 


5.2. Tag-Along Right.


 


(a)                                  Subject
to Sections 5.2(b) and 5.2(c), if an Investor holding more than 10% of
the outstanding Common Stock which Common Stock was received by such Investor
pursuant to the Plan (each an “Original 10% Holder”) (including without
limitation GSC and its Affiliates at such time as GSC and its Affiliates have
ceased to have the GSC Minimum Common Stock Ownership but own in excess of 10%
of the outstanding Common Stock) shall receive and determine to accept a Notice
of Offer from a Person (a “Proposed Section 5.2(a) Purchaser”) to
purchase or otherwise acquire in a transaction or series of related
transactions any of its Common Stock (in such case the Original 10% Holder
shall be referred to as the “Selling 10% Holder”), each other Original
10% Holder shall have the right to participate in such transaction in the
manner set forth in this Section 5.2. The Selling 10% Holder shall,
promptly after its receipt of a Notice of Offer, send a copy thereof to the
Company and the other Original 10% Holders. Each such other Original 10% Holder
shall have the right (the “Tag-Along Right”) to cause the Selling 10%
Holder to condition its sale to the Proposed Section 5.2(a) Purchaser of
any Common Stock owned by the Selling 10% Holder on the simultaneous purchase
by the Proposed Section 5.2(a) Purchaser of such amount of Common Stock
owned by such Original 10% Holder that such Original 10% Holder (the “Electing
Holder”) may designate by written notice delivered to the Selling 10%
Holder within twenty (20) days following the date on which the Notice of Offer
is sent to such Electing Holder; provided, however, that no
Electing Holder may so designate for purchase an amount of Common Stock greater
than that number of shares of Common Stock that is the subject of the Notice of
Offer owned by such Electing Holder multipied by its Pro Rata Portion. In the
event that the Proposed Section 5.2(a) Purchaser does not wish to purchase
more than the number of shares listed in the Notice of Offer, the number of
shares of Common Stock to be sold by the Selling 10% Holder shall be reduced to
accommodate the participation of the Electing Holders. The purchase price for
each share of the Common Stock sold by each Electing Holder pursuant to this Section 5.2
and the terms of such purchase shall be the same as are set forth in the Notice
of Offer or, in the case of the terms of such purchase other than price, as
otherwise agreed by the Selling 10% Holder with the Section 5.2(a)
Purchaser in any definitive purchase and sale agreement; however, an Electing
Holder shall have the right to withdraw from participation in the sale if the
material terms of the definitive purchase and sale agreement differ in any
material respect with the material terms set forth in the Notice of Offer. No
seller shall receive, in connection with sales pursuant to this Section, any
material consideration (including without limitation, any investment banking or
financial advisory fees)


 


10

















 


which is not shared with each other seller in proporation to the number
of shares sold by each. As soon as practicable after such sale, all sale
proceeds relating to the Common Stock of each Electing Holder shall be remitted
to such Electing Holder. In the event any potential Electing Holder fails to
exercise its Tag-Along Right within the aforementioned twenty (20) day period,
the Selling 10% Holder shall have the period commencing upon the expiration of
such twenty (20) day period up to and including the 120th day after
such expiration in which to sell the Common Stock to be sold pursuant to such
Notice of Offer, without any obligation to condition the sale thereof on the
purchase by the Proposed Section 5.2(a) Purchaser of any Common Stock
owned by such potential Electing Holder, at a price not higher than that contained
in the Notice of Offer and on terms no more favorable to the Selling 10% Holder
than that contained in the Notice of Offer. If, at the end of such period the
sale has not been completed, this Section 5.2 shall again apply to
sales of Common Stock by any Original 10% Holder, including the Selling 10%
Holder.


 


(b)                                 The
provisions of Section 5.2(a) shall apply in the case of Transfers
by GSC and its Affiliates only (i) to the extent that the transfer of shares of
Common Stock result in GSC and its Affiliates owning or controlling less than
50% of the Common Stock (subject to adjustment from time to time for stock
splits, stock dividends, stock combinations, reclassifications and similar
transactions and adjustments in the event of further stock issuances) or (ii)
if, immediately prior to such transfer by GSC and its Affiliates, GSC and its
Affiliates own or control less than 50% of the Common Stock (subject to
adjustment from time to time for stock splits, stock dividends, stock
combinations, reclassifications and similar transactions and adjustments in the
event of further stock issuances). So long as GSC and its Affiliates have the
GSC Minimum Common Stock Ownership, GSC and its Affiliates shall have the right
to participate in any transaction or series or transactions in which any
Original 10% Holder transfers Common Stock, such participation to be in amount
equal to one-third of the amount of shares proposed to be transferred by such
Original 10% Holder (and the number of shares proposed to be sold by the such Original
10% Holder other than GSC and its Affiliates shall be reduced if necessary to
accommodate the participation of GSC and its Affiliates).


 


(c)                                  The
following Transfers shall not be subject to the Tag-Along Right: (i) Transfers
by an Original 10% Holder (including without limitation GSC) to its Affiliates,
provided that such Affiliate shall agree to be bound by this Agreement, and
(ii) Transfers pursuant to an effective registration statement under the 1933
Act which are effected pursuant to a public distribution.


 


5.3.                              Drag-Along
Right.


 


(a)                                  Approved
Sale. If GSC shall propose a sale of the Company to a party that is not GSC
or an Affiliate of GSC, pursuant to a sale of all or substantially all of the
Company’s assets, an amalgamation, a scheme of arrangement, a merger or
consolidation, a recapitalization or reorganization (each of the foregoing a “Corporate
Transaction”), or a sale of a majority or more of the issued and
outstanding shares of Common Stock (a “Sale of Stock”), on terms
approved by GSC (each of a Corporate Transaction or a Sale of Stock, an “Approved
Sale”), the Approved Sale shall be effected and each Investor shall be provided not less that fifteen
(15) days’ written notice of such Approved Sale, which notice shall set forth
the name and address of


 


11

















 


the proposed purchaser and the material terms
(including without limitation the proposed structure of the Approved Sale and
the consideration and the method of payment thereof) and conditions of the
Approved Sale, and each Investor shall, with
respect to his or its Common Stock (and any other voting securities of the
Company) over which such Investor has voting control or otherwise “beneficial
ownership” (as defined under the 1934 Act):


 


(i)                                     in the case of a
Corporate Transaction, vote (at a stockholders’ meeting which has been duly
called or, if so requested by GSC, by written consent) all of his, her or its
Common Stock and other voting securities of the Company for, consent to, take
all necessary and desirable actions to consummate and not dissent from, object
to or otherwise impede the consummation of the Approved Sale and waive all
dissenter’s rights, appraisal rights and similar rights in connection with such
Corporate Transaction; and


 


(ii)                                  in the case of a Sale
of Stock, agree to sell and sell all of its Common Stock and rights to acquire
Common Stock on the terms and conditions of the Approved Sale.


 


(b)                                 Required
Actions. Without limiting the obligation of the Investors under Section 5.3(a)
hereof, each Investor shall take all necessary or desirable actions reasonably
requested by GSC in connection with the consummation of the Approved Sale, and
each Investor shall make the same representations and warranties, and enter
into the same purchase agreement, indemnities and other documents and
agreements as are entered into or made by GSC in its capacity as a holder of
shares the Common Stock (subject to clauses (i) through (iv) below). In
any Approved Sale, (i) each Investor shall be obligated to make representations
and warranties as to such Investor’s title to and ownership of Common Stock,
authorization, execution and delivery of relevant documents by such Investor,
enforceability of relevant agreements against such Investor and other matters
relating to such Investor and the Company and enter into covenants in respect
of the transfer of such Investor’s Common Stock or otherwise in connection with
such applicable sale (such representations and warranties and covenants,
collectively, “Personal Obligations”), and enter into indemnification
obligations with respect to breach of any of the foregoing, in each case to the
extent that each other Investor is similarly obligated; provided, that
no Investor shall be obligated to enter into indemnification obligations with
respect to any of the foregoing to the extent relating to any other Investor or
another Investor’s Common Stock, (ii) no Investor will be obligated to make any
representations and warranties relating to the business or capitalization of,
or any other matter relating to, the Company and its subsidiaries, other than
Personal Obligations, unless such representations and warranties are made only
to the extent of such Investor’s actual knowledge, provided that each Investor
may be required to enter into indemnification obligations (which need not be
limited to the knowledge of such Investor) in respect of covenants of the
Company or representations and warranties made by the Company or the Investors
as a group, if any, relating to the business, assets, financial condition,
results of operations, prospects or capitalization of, or any other matter
relating to, any of the Company and its subsidiaries, to the same extent that
GSC in its capacity as an Investor enters into such indemnification obligations
on a pro
rata basis, (iii) unless required by the proposed purchaser, no
Investor will be liable in respect of any indemnity obligations pursuant to any
Approved Sale in an aggregate amount in excess of an amount equal to the
product of the aggregate


 


12

















 


indemnification liability of all Investors as a group and such
Investor’s percentage ownership of the Common Stock as of immediately prior to
the effectiveness of such Approved Sale; however, if the proposed purchaser
requires that the Investors be jointly and severally liable in respect of
indemnification obligations to the proposed purchaser, the Investors shall
enter into an indemnification and contribution agreement among themselves in
order to give effect to such limitation on a several and proportionate basis,
(iv) Investors shall not be
obligated to participate in an Approved Sale unless they are provided an
opinion of counsel to the effect that the sale in connection with such Approved
Sale is not in violation of the registration or qualification requirements of
federal or applicable state securities laws, and (v) no Investor shall be required to agree to, or be
subject to, a non-competition covenant or similar restriction, except that Investors may be subject to confidentiality
restrictions with respect to information of the Company and its direct and
indirect subsidiaries and to no-shop or similar provisions with respect to
their investment in the Company.


 


(c)                                  Conditions
to Investor’s Obligations. The obligations of the Investors pursuant to
this Section 5.3 with respect to an Approved Sale are subject to
the satisfaction of the following conditions: (i) upon the consummation of the
Approved Sale, each Investor will receive the same consideration, if any, on an
equal per share of Common Stock basis as every other Investor; and (ii) if
Investors are given an option as to the form and amount of consideration to be
received, each Investor will be given the same option per share of Common
Stock.


 


(d)                                 Expenses
of Approved Sale. Investors shall not be obligated to pay any expenses
incurred in connection with an approved sale, except that to the extent any
expenses are incurred by the Company or by GSC for the benefit of all Investors
and are not otherwise paid by the Company or the acquiring party, the aggregate
proceeds available for distribution upon consummation of the Approved Sale
shall be reduced by the amount of such expenses and the consideration received
by each Investor shall be reduced proportionately on an equal per share basis.
The Company shall promptly reimburse GSC, upon demand, for any reasonable
out-of-pocket expenses (including without limitation professional and
investment banking fees) incurred by GSC for the benefit of all Investors
relating to the Approved Sale, whether or not the closing of an Approved Sale
shall have occurred. For purposes of this Section 5.3(d), expenses
incurred in exercising reasonable efforts to take all necessary actions in
connection with the consummation of an Approved Sale in accordance with Section 5.3
shall be deemed to be for the benefit of all Investors. Expenses incurred by
any Investor other than as set forth in this Section 5.3(d) will be
on its own behalf, will not be considered expenses of the transaction hereunder
and will be the responsibility of such Investor.


 


(e)                                  Termination.
This Section 5.3 will terminate and cease to be of any force and
effect upon the first to occur of (i) the consummation of an Approved Sale in
compliance with the terms of this Agreement, or (ii) GSC and its Affiliates
ceasing to be the record holders of at least 35% of the Common Stock issued
under the Plan (subject to adjustment from time to time for stock splits, stock
dividends, stock combinations, reclassifications and similar transactions and
adjustments in the event of further stock issuances).


 


13

















 


5.5.                              Management
Fee. So long as GSC shall own any shares of the Common Stock, the Company
shall pay in cash to GSC an aggregate annual management fee of $500,000. Such
payment shall accrue, with interest at the annual rate of interest paid from
time to time by the Company or its subsidiaries, as applicable, under the
Senior Credit Facility (or if there be no Senior Credit Facility, the highest
rate that would have been payable from time to time under the most recent
Senior Credit Facility), to the extent that the current cash payment of the
annual management fee, or the distribution to the Company by subsidiaries of
the Company of funds necessary to enable the Company pay the annual management
fee, is not allowed under the Senior Credit Facility.


 


Article VI

Registration Rights


 


6.1.                              Piggyback
Registration.


 


(a)                                  If,
at any time, the Company proposes to register any of its Common Stock under the
1933 Act in connection with the offering of such Common Stock (except pursuant
to a registration statement filed on Form S-4 or on Form S-8 or such other
forms as shall be prescribed under the 1933 Act for the same purposes or for
any exchange offer) (a “Piggyback Registration”), the Company shall
provide written notice to each Investor of its intention so to do at least
forty-five (45) days prior to the anticipated filing date. Upon the written
request of any Investor given within twenty (20) days after the providing of
any such notice by the Company, the Company shall use reasonable best efforts
to cause to be registered under the 1933 Act all of the Registrable Securities
held by such Investor that have been so requested to be registered, subject to
the provisions of Section 6.1(c).


 


(b)                                 If
the Company in its sole discretion decides a Piggyback Registration shall be
underwritten, the Company shall have sole discretion in the selection of any
underwriter or underwriters to manage such Piggyback Registration.


 


(c)                                  If
the managing underwriter or underwriters of a Piggyback Registration advise the
Company in writing that in its or their opinion the number of Registrable
Securities proposed to be sold in such Piggyback Registration exceeds the
number which can be sold, or adversely affects the price at which the
securities are to be sold in such offering, the Company will include in such
registration only the number of Registrable Securities which, in the opinion of
such underwriter or underwriters, can be sold in such offering and which will
not adversely affect the price thereof. In the event that the contemplated
distribution does not involve an underwritten offering, the determination that
the inclusion of such Registrable Securities shall adversely affect the price
or the number of securities which may be sold by the Company in such offering
may be made by the Company in its reasonable judgment. The Registrable
Securities so included in such Piggyback Registration shall be apportioned (i)
first, to any shares of Common Stock that the Company proposes to sell and (ii)
second, pro
rata
among any shares of Registrable Securities that any Investors propose to sell,
according to the total amount of Registrable Securities requested for inclusion
by said Investors, or in such other proportions as shall mutually be agreed to
among such Investors.


 


14

















 


6.2.                              Demand
Registration.


 


(a)                                  Subsequent
to the earlier of the first anniversary of the date of this Agreement or the
180th day following a Qualified IPO, GSC may at any time and from
time to time make a written request to the Company for registration (a “Demand
Registration”), under and in accordance with the 1933 Act, of all or part
of its Registrable Securities, upon receipt of which the Company shall promptly
cause (and in any event within sixty (60) days after receipt of such request)
to be prepared and filed a registration statement under the 1933 Act covering
the Registrable Securities requested to be registered pursuant to this Section.
Within twenty (20) days after receipt of such request, the Company will provide
written notice of such registration request to all Investors who are holders of
Registrable Securities and the Company will include in such registration all
Registrable Securities of such Investors with respect to which the Company has
received written requests for inclusion therein within twenty (20) days after
the providing of such written notice. All requests made pursuant to this subsection will
specify the number of Registrable Securities to be registered and the intended
methods of disposition thereof; provided, however, that the
Company may, if the Board of Directors so determines in the exercise of its
reasonable judgment, that due to a pending or contemplated material
acquisition, disposition, financing or other transaction it would be
inadvisable to effect such Demand Registration at such time, defer such Demand
Registration for a single period not to exceed 90 days; provided that the
Company may not exercise this right more than once in any twelve-month period.


 


(b)                                 GSC
shall be entitled to three Demand Registrations with respect to the Common
Stock held by them, and the expenses of such registrations shall be borne by
the Company. A Demand Registration shall not be counted as a Demand
Registration hereunder until the registration statement to such Demand
Registration has been declared effective and maintained for a period of at
least six months, or such shorter period if all Registrable Securities included
therein have been sold. The Company shall not be obligated to effect more than
one Demand Registration in any 12-month period.


 


(c)                                  If
requested by GSC, any Demand Registration shall be underwritten and GSC shall
select the underwriter or underwriters to manage such Demand Registration.


 


(d)                                 The
Company shall be entitled to include in any registration statement referred to
in this Section 6.2, for sale in accordance with the method of
disposition specified by GSC, shares of Common Stock to be sold by the Company
for its own account. If the managing underwriter or underwriters of a Demand
Registration advise the Company in writing that in its or their opinion the
number of Registrable Securities proposed to be sold in such Demand Registration
exceeds the number which can be sold, or adversely affects the price at which
the securities are to be sold, in such offering, the Company will include in
such registration only the number of Registrable Securities which, in the
opinion of such underwriter or underwriters, can be sold in such offering and
which will not adversely affect the price thereof. In the event that the
contemplated distribution does not involve an underwritten offering, the
determination that the inclusion of such Registrable Securities shall adversely
affect the price or the number of securities which may be sold by the Company
in such offering may be made by GSC in its reasonable judgment. The Registrable
Securities so included in such Demand Registration shall


 


15

















 


be apportioned (i)  first, to
any shares of Registrable Securities that GSC and its Affiliates propose to
sell, (ii) second, pro rata among any shares of Registrable
Securities that any other Investors propose to sell, according to the total
amount of Registrable Securities requested for inclusion by said other
Investors, or in such other proportions as shall mutually be agreed to among
such other Investors, and (iii) third, to any shares of Common Stock that the Company
proposes to sell. Except for registration statements on Form S-4 or on Form S-8
or such other forms as shall be prescribed under the 1933 Act for the same
purposes or for any exchange offer, the Company will not file with the SEC any
other registration statement under the 1933 Act with respect to its securities,
whether for its own account or that of other Investors, from the date of
receipt of a notice from GSC pursuant to Section 6.2(a) until the
completion of the period of distribution of the registration statement
contemplated thereby (unless the request for Demand Registration under Section 6.2(a)
has been withdrawn by GSC, in which case the Company may file such other
registration statements after any such withdrawal).


 


(e)                                  The
provisions of this Section 6.2 shall apply so long as GSC and its
Affiliates are the record holders of at least 20% of the Common Stock issued
under the Plan (subject to adjustment from time to time for stock splits, stock
dividends, stock combinations, reclassifications and similar transactions and
adjustments in the event of further stock issuances).


 


6.3.                              Registration
Procedures. It shall be a condition precedent to the obligations of the
Company and any underwriter or underwriters to take any action pursuant to this
Article VI that the Investors requesting inclusion in any Piggyback
Registration or Demand Registration (each, a “Registration,” and
collectively, the “Registrations”) shall furnish to the Company such
information regarding them, the Registrable Securities held by them, the
intended method of disposition of such Registrable Securities, and such
agreements regarding indemnification, disposition of such securities and the
other matters referred to in this Article VI as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company. With respect to any Registration which includes
Registrable Securities held by an Investor, the Company shall, subject to the
provisions of this Article VI, as expeditiously as practicable:


 


(a)                                  prepare
and file with the SEC a registration statement on the appropriate form
prescribed by the SEC and use its reasonable best efforts to cause such
registration statement to become effective;


 


(b)                                 immediately
notify each Investor participating in the Registration and, if applicable, any
underwriter or underwriters of the Registrable Securities covered by the
Registration of any stop order threatened or issued by the SEC and take all
actions reasonably required to prevent the entry of a stop order or if entered
to have it rescinded or otherwise removed;


 


(c)                                  prepare
and file with the SEC such amendments, post-effective amendments and
supplements to such registration statement, and any documents required to be
incorporated by reference therein, as may be necessary to keep the registration
statement effective until the distribution of Registrable Securities shall have
been completed or until the expiration of 180 days (or such longer period as
the Company may agree on) after the effective


 


16

















 


date, whichever is earlier; cause the prospectus to be supplemented by
any required prospectus supplement and, as so supplemented, to be filed pursuant
to Rule 424 under the 1933 Act (or any successor rule); and comply with the
provisions of the 1933 Act applicable to it with respect to the disposition of
all Registrable Securities covered by such registration statement during the
applicable period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement or supplement to the
prospectus;


 


(d)                                 furnish
to the Investors participating in the Registration and, if applicable, to the
underwriter or underwriters of the Registrable Securities covered by the
Registration such number of copies of the registration statement and any
post-effective amendment thereto, the prospectus (including each preliminary
prospectus and any amendments or supplements thereto), any exhibits or
documents incorporated by reference in the foregoing items and such other
documents as such Investors or underwriter or underwriters, if any, may
reasonably request in order to facilitate the disposition of the securities
being sold by the Investors;


 


(e)                                  on
or prior to the date on which the registration statement is declared effective,
use its reasonable best efforts to register or qualify, and cooperate with such
Investor, the underwriter or underwriters, if any, and their counsel in
connection with the registration or qualification of the Registrable Securities
covered by the registration statement for offer and sale under the securities
or blue sky laws of each state and other jurisdiction of the United States as
such Investor or managing underwriter or underwriters, if any, may reasonably
request (considering the nature or size of the offering and the expense and
time involved in such qualification or registration), and to do any and all
other reasonable acts or things which may be necessary or advisable to enable
the disposition in all such jurisdictions of the Registrable Securities covered
by the applicable registration statement; provided, however, that
the Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process in any such jurisdiction where
it is not then so subject;


 


(f)                                    notify
each Investor participating in the Registration and, if applicable, the
underwriter or underwriters of the Registrable Securities covered by the
Registration, at any time when a prospectus is required to be delivered under
the 1933 Act, of any event as a result of which the prospectus or any document
incorporated therein by reference contains an untrue statement of a material
fact or omits to state any material fact necessary to make the statements
therein not misleading in light of the circumstances under which such
statements were made, and prepare a supplement or amendment to the prospectus
or any such document incorporated therein so that thereafter the prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in light
of the circumstances under which such statements were made;


 


(g)                                 use
its reasonable best efforts to cause the Registrable Securities covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including,
without limitation, the National Association of Securities Dealers, Inc. (the “NASD”),
as may be necessary to enable the seller or sellers thereof or the underwriter
or underwriters, if any, to consummate the disposition of such Registrable
Securities;


 


17

















 


(h)                                 use
its reasonable best efforts to cause the Registrable Securities covered by the
registration statement to be listed or quoted (as the case may be) on any
national securities exchange or automated quotation system on which any Common
Stock is listed or quoted, and to provide a transfer agent and registrar for
such securities covered by such registration statement no later than the
effective date of such registration statement;


 


(i)                                     enter
into such customary agreements (including an underwriting agreement in
customary form) reasonably satisfactory to the Company and take all other
actions in connection with those agreements as the Investors participating in
the Registration and, if applicable, the underwriter or underwriters of the
Registrable Securities covered by the Registration, if any, reasonably request
to expedite or facilitate the disposition of the Registrable Securities;


 


(j)                                     give
the Investors who hold Registrable Securities registered under such
registration statement, the underwriter or underwriters, if any, and their
respective counsel and accountants, the timely opportunity to participate in
the preparation of such registration statement, each prospectus included
therein or filed with the SEC and each amendment or supplement to the foregoing
items, and give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be reasonably necessary or advisable, in the opinion of each of such
Investors and such underwriters’ respective counsel, to conduct appropriate due
diligence as contemplated by the 1933 Act;


 


(k)                                  use
its reasonable best efforts to provide to the Investors and underwriter or
underwriters, if any, with legal opinions and “cold comfort” letters in
customary form and substance as the Investors participating in the Registration
and, if applicable, the underwriter or underwriters of the Registrable
Securities covered by the Registration reasonably request; and


 


(l)                                     use
its reasonable best efforts to comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as reasonably
practicable, an earnings statement complying with the provisions of Section 11(a)
of the 1933 Act and covering the period of at least twelve months, beginning
with the first fiscal quarter beginning after the effective date of the
registration statement.


 


The Investors, upon receipt of any notice from the Company that the
prospectus prepared pursuant to Section 6(c) above contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein not misleading, will forthwith discontinue
disposition of the Registrable Securities until the Investors receive copies of
a supplemented or amended prospectus or until they are advised in writing (the
“Advice”) by the Company that the use of the prospectus may be resumed,
and have received copies of any supplemented or amended prospectus, and, if so
directed by the Company, each Investor shall, or shall request the managing
underwriter or underwriters, if any, to, deliver to the Company all copies,
other than permanent file copies then in such Investor’s possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the time periods
mentioned in Section 6(c) shall be


 


18

















 


extended by the number of days during the period from and including any
date of the giving of such notice to and including the date when each seller of
Registrable Securities covered by such registration statement shall have received
the copies of the supplemented or amended prospectus contemplated by the immediately
preceding sentence or the Advice.


 


6.4.                              Registration
Expenses. Except where this Agreement specifies otherwise, in the case of
any Registration, the Company shall bear all expenses in connection with its
obligations in connection therewith, including, without limitation, the
expenses of preparing any registration statement, commission and state “blue
sky” filing, registration and qualification fees and expenses (including,
without limitation, fees and expenses of counsel in connection with blue sky
surveys), fees and expenses associated with filings required to be made with
the NASD, fees and expenses of counsel for the Company (one firm of counsel
selected by GSC or, if GSC is not a selling stockholder, the holders of a
majority of the Registrable Securities included in the registration statement)
for all selling stockholders and independent public accountants (including,
without limitation, the cost of providing any legal opinions or “cold comfort”
letters)), and all printing costs and expenses; provided, however,
that the Company shall not be responsible for the underwriting discounts and
commissions or placement fees of underwriters directly attributable to the Registrable
Securities included in such Registration.


 


6.5.                              Participation
in Registration. No Investor may participate in any Registration hereunder
unless such Investor (a) agrees to sell its securities on the basis provided in
any underwriting arrangements approved by the Company or GSC, as the case may
be, and (b) completes and executes all questionnaires, powers of attorney,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements. Nothing in this Section 6.5
shall be construed to create any additional rights regarding the registration
of Registrable Securities in any Person otherwise than as set forth in this
Article VI.


 


6.6.                              Delay
of Registration. No Investor shall have any right to take any action to
restrain, enjoin, or otherwise delay any Registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.


 


6.7.                              Specific
Performance. The parties agree that the recovery of damages would not be an
adequate remedy for the breach of the covenants of the Company contained in
this Article VI and, accordingly, agree that the Investors shall be
entitled to specific performance of the obligations contained herein.


 


6.8.                              Indemnification
by the Company. In connection with any registration statement filed to
effect a Registration pursuant to this Agreement, the Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law, each
Investor which is a holder of Registrable Securities participating in such a
Registration hereunder, its officers, directors, partners and Affiliates, each
underwriter of such Registrable Securities and each Person who Controls such
Investor or underwriter against all losses, claims, damages, liabilities and
expenses (as incurred or suffered and including, but not limited to, any and
all expenses incurred in investigating, preparing or defending any litigation
or proceeding, whether commenced or threatened, or any claim whatsoever) (“Losses”)
which arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement or


 


19

















 


any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
or by any untrue or alleged untrue statement of a material fact included in any
prospectus forming a part of such registration statement or preliminary
prospectus or final prospectus, or any amendment or supplement thereof or any
omission or alleged omission to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such
Investor or underwriter or its representative with respect to such Person
expressly for use therein.


 


6.9.                              Indemnification
by Holders of Registrable Securities. In connection with any registration
statement filed pursuant to this Agreement to effect a Registration, each
Investor which is a holder of Registrable Securities participating in such
Registration agrees, severally and not jointly, to (and, as a condition
precedent to the filing of such registration statement, the Company may require
an undertaking reasonably satisfactory to it from each such participating
Investor and from any prospective underwriter therefor agreeing to) indemnify,
to the fullest extent permitted by law, the Company, each officer of the
Company who signs the registration statement, each director of the Company, and
each Person who Controls the Company against any Losses which arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in such registration statement or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or by any untrue or alleged untrue
statement of a material fact included in any prospectus forming a part of such
registration statement or preliminary prospectus or final prospectus, or any
amendment or supplement thereof or any omission or alleged omission to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, to the extent,
but only to the extent, that such untrue statement or omission is contained in
any information with respect to such Investor so furnished in writing to the
Company by such Investor or its representative expressly for use therein; provided,
however, that no such Investor shall be responsible for Losses in excess
of the net proceeds to be received by such Investor from the sale of
Registrable Securities covered by the applicable registration statement. The
Company shall be entitled to receive indemnities from underwriters, selling
brokers, dealer-managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information with respect to such Persons so furnished in writing by
such Persons specifically for inclusion in any prospectus or registration
statement.


 


6.10.                        Conduct
of Indemnification Proceedings. Each Person entitled to indemnification
hereunder will (a) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification or contribution pursuant
to this Agreement and (b) permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party; provided, however, that any Person entitled to
indemnification hereunder shall have the right to employ separate counsel and
to participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such Person unless (x) the indemnifying
party has agreed in writing to pay such fees and expenses, (y) the indemnifying
party shall have failed to assume the defense of such claim and employ counsel
reasonably satisfactory to such Person or (z) in the reasonable judgment of
such Person, based upon advice


 


20

















 


of its counsel, a conflict of interest may exist between such Person
and the indemnifying party with respect to such claims (in which case, if the
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such Person); provided, further, that an
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim on behalf of all indemnified parties shall not be obligated to pay
the fees and expenses of more than one counsel (in addition to local counsel)
for all indemnified parties. If the indemnifying party assumes the defense, or
is not, pursuant to clause (z) above, entitled to assume the defense, it shall not
be subject to any liability for any settlement or compromise made by the
indemnified party without its consent (but such consent shall not be
unreasonably withheld). No indemnifying party will be permitted to consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
indemnified party of a release from all liability in respect to such claim or
litigation. In addition, without the consent of the indemnified party (which
consent will not be unreasonably withheld), no indemnifying party will be
permitted to consent to entry of any judgment or enter into any settlement
which provides for any action on the part of the indemnified party other than
the payment of money damages which are to be paid in full by the indemnifying
party. Likewise, no indemnified party may enter into any settlement without the
consent of the indemnifying party (which consent may not be unreasonably
withheld). If requested by the indemnifying party, the indemnified party agrees
to cooperate with the indemnifying party and its counsel in contesting any
claim which the indemnifying party elects to contest.


 


6.11.                        Contribution.
If the indemnification provided for in this Article VI from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any Losses, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party, on the one hand, and such indemnified party, on the other hand, or, if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect the relative benefits received by and fault of the
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the actions which resulted in such Losses, as well as
any other relevant equitable considerations. The relative benefit shall be
determined by reference to, among other things, the amount of net proceeds
received by each party from the offering to which such contribution relates.
The relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
Losses referred to above shall be deemed to include, without limitation, any
legal or other fees, costs or expenses reasonably incurred by such party in
connection with any investigation or proceeding. Notwithstanding anything to
the contrary in the foregoing, no Investor shall be responsible for Losses in
excess of the net proceeds to be received by such Investor from the sale of
Registrable Securities covered by such registration statement.


 


21

















 


The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.11 were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. The
obligations of the Investors to contribute in this Section 6.11 are
several in proportion to the net proceeds received from the sale of Registrable
Securities by each such Investor and not joint.


 


6.12.                        Current
Public Information. With a view to making available the benefits of certain
rules and regulations of the SEC which may permit the sale of Registrable
Securities to the public without registration, the Company agrees to use its
reasonable best efforts, after the Company has become subject to the requirements
of the 1934 Act due to registration of its securities under Section 12 of
the 1934 Act, to: (a) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1934 Act; and (b) furnish to
any holder of Registrable Securities, during the term of this Agreement and
after the Company has been subject to the requirements of the 1934 Act for at
least ninety (90) days, forthwith upon request, (i) a written statement by the
Company that it has complied with the current public information and reporting
requirements of Rule 144 under the 1933 Act and the 1934 Act to which it is
subject and (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company.


 


Article VII


Termination


 


7.1.                              Termination.
Except as otherwise provided herein with respect to certain specific
provisions, this Agreement shall terminate upon the earliest to occur of: (a)
the consummation of (i) a sale of all or substantially all of the Company’s
assets, (ii) an amalgamation, a scheme of arrangement, a merger or
consolidation, a recapitalization or reorganization having the effect of a sale
of all or substantially all of the Company’s assets, or (iii) a transaction in
which Investors have sold 100% of the Common Stock, (b) the mutual agreement of
the parties hereto; and (c) with respect to any party hereto other than the
Company, such party ceasing to own any Common Stock.


 


Article VIII


Miscellaneous


 


8.1.                              Notices.
All notices, requests and other communications to any party hereunder shall be
in writing (including facsimile or similar writing) and shall be given to such
party at its address or facsimile number set forth on the signature pages
hereof, or the signature page of any joinder agreement executed and delivered
pursuant to Section 8.2 of this Agreement or such other address or
facsimile number as such party may hereafter specify for the purpose by notice
to the party sending the communication. Each such notice, request or other
communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this
Section and receipt is confirmed, (b) if given by mail, three (3)
business days after such communication is deposited in the mail registered or
certified, return receipt requested,


 


22

















 


with postage prepaid, addressed as aforesaid, (c) if given by an
overnight delivery service, one (1) business day after such communication is
deposited with a reputable, overnight delivery service, postage or delivery
charges prepaid, addressed as aforesaid, or (d) if given by any other
means, when delivered at the address specified in this Section.


 


8.2.                              Additional
Parties. Only Persons (other than the initial signatories hereto) that
execute a joinder agreement in the form of Exhibit A shall be deemed to
be Investors. Except to the extent limited in any joinder agreement, each
Person that so becomes an Investor after the date hereof shall be entitled to
all rights and privileges of an Investor as if such Investor had been an
original signatory to this Agreement.


 


8.3.                              Amendments
and Waivers. Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Company, by the Investors holding, in the aggregate, at least 90% of the
outstanding shares of Common Stock held by the Investors and by GSC (so long as
GSC and its Affiliates have the GSC Minimum Common Stock Ownership). Any
amendment or waiver effected in accordance with this Section 8.3
shall be binding upon each Investor, each future Investor and the Company. Upon
the effectuation of each such amendment or waiver, the Company shall promptly
give written notice thereof to the Investors who have not previously consented
thereto in writing.


 


8.4.                              Successors
and Assigns. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that no assignment of
rights under this Agreement will be valid unless made in connection with a
contemporaneous Transfer of Common Stock; and provided, further,
that upon any such assignment, the assignee shall comply with Section 8.2
hereof. The Company may not assign or otherwise transfer any of its rights
under this Agreement.


 


8.5.                              Captions.
The captions of this Agreement are included for convenience of reference only,
do not constitute a part hereof and shall be disregarded in the construction
hereof.


 


8.6.                              Counterparts.
This Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument.


 


8.7.                              Governing
Law; Venue; Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY,
COUNTY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY
TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ANY AND


 


23

















 


ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.


 


8.8.                              Severability.
Any term or provision of this Agreement which is invalid or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement, or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.


 


8.9.                              Additional
Covenants. The parties hereto undertake, generally, to execute all such
agreements and other instruments and to do all such other acts as are necessary
or appropriate to give full effect to the terms, conditions and provisions of
this Agreement and to make them binding upon the parties hereto.


 


8.10.                        Entire
Agreement. This Agreement is intended by the parties as a final expression
of their agreement, and is intended to be a complete and exclusive agreement
and understanding of the parties hereto in respect of the subject matter
contained herein.


 


[Signature Pages Follow]


 


24

















 


In witness whereof, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.


 


 


	
   

  	
   

  	
   

  	
  Atlantic Express
  Transportation Group Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ DOMENIC GATTO

  
	
   

  	
   

  	
   

  	
  Print name:

  	
  Domenic Gatto

  
	
   

  	
   

  	
   

  	
  Print title:

  	
  President, CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address:

  	
  7 North Street

  Staten Island, New York 10302

  Attention: President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Investors

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GSCP II Holdings
  (AE), LLC

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ SANJAY H. PATEL

  	
   

  	
   

  	
   

  
	
  Print name:

  	
  Sanjay H. Patel

  	
   

  	
   

  	
   

  
	
  Print title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  12 East 49th Street, Suite 3200

  New York, New York 10017

  Attention: Sanjay H. Patel
Facsimile:     212.884-6184

  E-mail:

  spatel@gscpartners.com

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GSC Recovery II,
  L.P.

  	
   

  	
  GSC Partners CDO
  Fund, Limited

  
	
  By:

  	
  GSC Recovery II GP, L.P., its General

  Partner

  	
   

  	
  By:

  	
  GSC Partners CDO Investors, L.P., its

  General Partner

  
	
  By:

  	
  GSC RII, LLC, its General Partner

  	
   

  	
  By:

  	
  GSC Partners CDO GP, L.P., its
  General

  Partner

  
	
  By:

  	
  GSCP (NJ) Holdings, L.P., its sole

  Member

  	
   

  	
  By:

  	
  GSC CDO, LLC, its General Partner

  
	
  By:

  	
  GSCP (NJ), Inc., its General Partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ SANJAY H. PATEL

  	
   

  	
  By:

  	
  /s/ SANJAY H. PATEL

  
	
  Print name:

  	
  Sanjay H. Patel

  	
   

  	
  Print name:

  	
  Sanjay H. Patel

  
	
  Print title:

  	
   

  	
   

  	
  Print title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  12 East 49th Street, Suite 3200

  New York, New York 10017

  Attention: Sanjay H. Patel
Facsimile:     212.884-6184

  E-mail:

  spatel@gscpartners.com

  	
   

  	
  Address:

  	
  12 East 49th Street, Suite 3200

  New York, New York 10017

  Attention: Sanjay H. Patel
Facsimile:     212.884-6184

  E-mail:

  spatel@gscpartners.com

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stockholders
  Agreement

  
														



 


25

















 


	
  ML CBO VIII
  (Cayman) Ltd.

  	
   

  	
   

  
	
  ML CBO XXIV
  (Cayman) Ltd.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ ZACHARAY A. HAMEL

  	
   

  	
   

  	
   

  
	
   

  	
  Zachary A. Hamel

  	
   

  	
   

  	
   

  
	
   

  	
  Manager

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  10801 Martin Blvd., Suite 220

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Overland Park, Kansas 66212

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Kevin Birzer

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  913-345-2763

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  E-mail:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  hkbirzer@fountaincapital.com

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  gmurphy@fountaincapital.com

  	
   

  	
   

  	
   

  	
   

  	
   

  
														



 


26

















 


Exhibit
A to Stockholders Agreement


 


Form of Joinder Agreement


 


This Joinder Agreement is made and entered into by the undersigned
with reference to the following facts:


 


A.                                   I
am acquiring simultaneously with the execution of this Joinder Agreement
[     ] shares of the Common Stock (the “Shares”)
of Atlantic Express Transportation Group Inc. (the “Company”); and


 


B.                                     As a condition to
the acquisition of the Shares, I have agreed to join in a Atockholders
Agreement dated as of          
  , 2003, as amended from time to time (the “Stockholders
Agreement”), a copy of which has been furnished to me, among the Company
and the Investors party thereto.


 


I therefore agree as follows:


 


1.                                       I
hereby join in the Stockholders Agreement and agree to be bound by all of the
terms and provisions thereof as though I were an original party thereto and
were included in the definition of Investor, as used therein.


 


2.                                       I
hereby consent that the certificate or certificates to be issued to me
representing the Shares shall bear the restrictive legend set forth in
Section 3.4 of the Stockholders Agreement.


 


3.                                       I
hereby make the representations and warranties set forth in Article II of
the Stockholders Agreement as if such representations and warranties were set
forth in this Joinder Agreement in full.


 


[Signature Page Follows]


 

















 


In witness whereof, the undersigned has executed this agreement this
     day of
        ,
      .


 


 


	
   

  	
  [Name]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print name:

  	
   

  
	
   

  	
  Print title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  [Address]

  
	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile:

  	
   

  	
   

  
	
   

  	
   

  	
  E-mail:

  	
   

  	
   

  
							



 


Joinder Agreement


 


2