Exhibit
10.1


 


EXECUTION


 


SECOND AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT


 


by and among


 


ATLANTIC EXPRESS
TRANSPORTATION CORP.


and the other
parties named on the signature pages hereto


as Borrowers


 


and


 


Jersey Bus Sales,
Inc.


Central New York
Reorganization Corp.


as Guarantors


 


CONGRESS FINANCIAL
CORPORATION


as Agent


 


and


 


THE LENDERS FROM
TIME TO TIME PARTY HERETO


as Lenders


 


Dated:
April 22, 2004


 

















 


TABLE OF CONTENTS


 


	
  SECTION 1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  CREDIT FACILITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Revolving Loans.

  	
   

  
	
  2.2

  	
  Letter of Credit Accommodations and LC
  Advances.

  	
   

  
	
  2.3

  	
  Joint and Several Liability.

  	
   

  
	
  2.4

  	
  Commitments.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  INTEREST AND FEES

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Interest.

  	
   

  
	
  3.2

  	
  Fees.

  	
   

  
	
  3.3

  	
  Changes in Laws and Increased Costs of
  Loans.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Conditions Precedent to Initial Loans and
  Letter of Credit Accommodations.

  	
   

  
	
  4.2

  	
  Conditions Precedent to All Loans and
  Letter of Credit Accommodations.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  GRANT AND PERFECTION OF SECURITY INTEREST

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Grant of Security Interest.

  	
   

  
	
  5.2

  	
  Perfection of Security Interests.

  	
   

  
	
  5.3

  	
  Exclusions from Collateral

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  COLLECTION AND ADMINISTRATION

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Borrowers’ Loan Accounts

  	
   

  
	
  6.2

  	
  Statements

  	
   

  
	
  6.3

  	
  Collection of Accounts.

  	
   

  
	
  6.4

  	
  Payments.

  	
   

  
	
  6.5

  	
  Authorization to Make Loans

  	
   

  
	
  6.6

  	
  Use of Proceeds

  	
   

  
	
  6.7

  	
  Appointment of Administrative Borrower as
  Agent for Requesting Loans and Receipts of Loans and Statements.

  	
   

  
	
  6.8

  	
  Pro Rata Treatment

  	
   

  
	
  6.9

  	
  Sharing of Payments, Etc.

  	
   

  
	
  6.10

  	
  Settlement Procedures.

  	
   

  
	
  6.11

  	
  Obligations Several; Independent Nature of
  Lenders’ Rights

  	
   

  



 


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  SECTION 7.

  	
  COLLATERAL REPORTING AND COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Collateral Reporting.

  	
   

  
	
  7.2

  	
  Accounts Covenants.

  	
   

  
	
  7.3

  	
  Intentionally Deleted.

  	
   

  
	
  7.4

  	
  Equipment and Real Property Covenants

  	
   

  
	
  7.5

  	
  Power of Attorney

  	
   

  
	
  7.6

  	
  Right to Cure

  	
   

  
	
  7.7

  	
  Access to Premises

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Corporate Existence, Power and Authority

  	
   

  
	
  8.2

  	
  Name; State of Organization; Chief
  Executive Office; Collateral Locations.

  	
   

  
	
  8.3

  	
  Financial Statements; No Material Adverse
  Change

  	
   

  
	
  8.4

  	
  Priority of Liens; Title to Properties

  	
   

  
	
  8.5

  	
  Tax Returns

  	
   

  
	
  8.6

  	
  Litigation

  	
   

  
	
  8.7

  	
  Compliance with Other Agreements and Applicable
  Laws.

  	
   

  
	
  8.8

  	
  Environmental Compliance.

  	
   

  
	
  8.9

  	
  Employee Benefits

  	
   

  
	
  8.10

  	
  Bank Accounts

  	
   

  
	
  8.11

  	
  Intellectual Property

  	
   

  
	
  8.12

  	
  Subsidiaries; Affiliates; Capitalization;
  Solvency.

  	
   

  
	
  8.13

  	
  Labor Disputes.

  	
   

  
	
  8.14

  	
  Restrictions on Subsidiaries

  	
   

  
	
  8.15

  	
  Material Contracts

  	
   

  
	
  8.16

  	
  Payable Practices

  	
   

  
	
  8.17

  	
  Inventory

  	
   

  
	
  8.18

  	
  Interrelated Businesses

  	
   

  
	
  8.19

  	
  Accuracy and Completeness of Information

  	
   

  
	
  8.20

  	
  Survival of Warranties; Cumulative

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  AFFIRMATIVE AND NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Maintenance of Existence.

  	
   

  
	
  9.2

  	
  New Collateral Locations

  	
   

  
	
  9.3

  	
  Compliance with Laws, Regulations, Etc.

  	
   

  
	
  9.4

  	
  Payment of Taxes and Claims

  	
   

  
	
  9.5

  	
  Insurance

  	
   

  
	
  9.6

  	
  Financial Statements and Other Information.

  	
   

  
	
  9.7

  	
  Sale of Assets, Consolidation, Merger,
  Dissolution, Etc.

  	
   

  
	
  9.8

  	
  Encumbrances

  	
   

  
	
  9.9

  	
  Indebtedness

  	
   

  
	
  9.10

  	
  Loans,
  Investments, Etc.

  	
   

  
	
  9.11

  	
  Dividends and Redemptions

  	
   

  



 


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  9.12

  	
  Transactions with Affiliates

  	
   

  
	
  9.13

  	
  Compliance with ERISA

  	
   

  
	
  9.14

  	
  End of Fiscal Years; Fiscal Quarters

  	
   

  
	
  9.15

  	
  Change in Business

  	
   

  
	
  9.16

  	
  Limitation of Restrictions Affecting
  Subsidiaries

  	
   

  
	
  9.17

  	
  Minimum EBITDA

  	
   

  
	
  9.18

  	
  Minimum Excess Availability

  	
   

  
	
  9.19

  	
  Capital Expenditures

  	
   

  
	
  9.20

  	
  License Agreements.

  	
   

  
	
  9.21

  	
  After Acquired Real Property

  	
   

  
	
  9.22

  	
  Senior Management

  	
   

  
	
  9.23

  	
  Costs and Expenses

  	
   

  
	
  9.24

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  EVENTS OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Events of Default

  	
   

  
	
  10.2

  	
  Remedies.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
  JURY TRIAL WAIVER; OTHER WAIVERS

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Governing Law; Choice of Forum; Service of
  Process; Jury Trial Waiver.

  	
   

  
	
  11.2

  	
  Waiver of Notices

  	
   

  
	
  11.3

  	
  Amendments and Waivers.

  	
   

  
	
  11.4

  	
  Waiver of Counterclaims

  	
   

  
	
  11.5

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
  THE AGENT.

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Appointment, Powers and Immunities

  	
   

  
	
  12.2

  	
  Reliance by Agent

  	
   

  
	
  12.3

  	
  Events of Default.

  	
   

  
	
  12.4

  	
  Congress in its Individual Capacity

  	
   

  
	
  12.5

  	
  Indemnification

  	
   

  
	
  12.6

  	
  Non-Reliance on Agent and Other Lenders

  	
   

  
	
  12.7

  	
  Failure to Act

  	
   

  
	
  12.8

  	
  Additional Loans

  	
   

  
	
  12.9

  	
  Concerning the Collateral and the Related
  Financing Agreements

  	
   

  
	
  12.10

  	
  Field Audit, Examination Reports and other Information; Disclaimer by
  Lenders

  	
   

  
	
  12.11

  	
  Collateral Matters.

  	
   

  
	
  12.12

  	
  Agency for Perfection

  	
   

  
	
  12.13

  	
  Successor Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
  TERM OF AGREEMENT; MISCELLANEOUS.

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Term.

  	
   

  



 


iii

















 


	
  13.2

  	
  Interpretative Provisions.

  	
   

  
	
  13.3

  	
  Notices

  	
   

  
	
  13.4

  	
  Partial Invalidity

  	
   

  
	
  13.5

  	
  Confidentiality.

  	
   

  
	
  13.6

  	
  Successors

  	
   

  
	
  13.7

  	
  Assignments; Participations.

  	
   

  
	
  13.8

  	
  Entire Agreement

  	
   

  
	
  13.9

  	
  Counterparts, Etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.

  	
  ACKNOWLEDGMENT AND RESTATEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Existing Obligations

  	
   

  
	
  14.2

  	
  Acknowledgment of Security Interests.

  	
   

  
	
  14.3

  	
  Existing Agreements

  	
   

  
	
  14.4

  	
  Restatement.

  	
   

  
	
  14.5

  	
  Release

  	
   

  



 


iv

















 


INDEX TO


EXHIBITS AND SCHEDULES


 


	
  Exhibit A

  	
  Form of Assignment and Acceptance

  
	
   

  	
   

  
	
  Exhibit B

  	
  Information Certificate

  
	
   

  	
   

  
	
  Exhibit C

  	
  Form of Compliance Certificate

  
	
   

  	
   

  
	
  Schedule 1.32

  	
  Reorganization Charges
  Including Management Bonuses

  
	
   

  	
   

  
	
  Schedule 1.45

  	
  Existing Agreements

  
	
   

  	
   

  
	
  Schedule 1.46

  	
  Existing Letters of
  Credit

  
	
   

  	
   

  
	
  Schedule 1.80

  	
  Noteholder Agreements

  
	
   

  	
   

  
	
  Schedule 1.89

  	
  Permitted Holders

  



 


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SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT


 


This Second Amended and Restated Loan and Security Agreement dated
April 22, 2004 is entered into by and among Atlantic Express
Transportation Corp. a New York corporation (“AETC”), Amboy Bus Co., Inc., a
New York corporation (“Amboy”), Atlantic Express Coachways, Inc., a New Jersey
corporation (“Coachways”), Atlantic Express of L.A., Inc. a California
corporation (“AELA”), Atlantic Express of Missouri Inc,. a Missouri corporation
(“AE Missouri”), Atlantic Express of New Jersey, Inc.,  a New Jersey corporation (“AENJ”), Atlantic
Express of Pennsylvania, Inc.,  a
Delaware corporation (“AEP”), Atlantic-Hudson, Inc. a New York corporation
(“AH”), Atlantic Paratrans, Inc. a New York corporation (“AP”), Atlantic
Paratrans of NYC, Inc. a New York corporation (“APNY”), Atlantic Queens Bus
Corp. a New York corporation (“AQ”), Block 7932, Inc. a New York corporation
(“Block”), Brookfield Transit Inc., a New York corporation (“Brookfield”),
Courtesy Bus Co., Inc., a New York corporation (“Courtesy”), G.V.D. Leasing
Co., Inc. a New York corporation (“GVD”), 180 Jamaica Corp. a New York
corporation (“Jamaica”), Merit Transportation Corp. a New York corporation
(“Merit”), Metro Affiliates, Inc., a New York corporation (“Metro”),
Metropolitan Escort Service, Inc. a New York corporation (“Escort”), Midway
Leasing Inc. a New York corporation (“Midway”), Staten Island Bus, Inc. a New
York corporation (“SI-Bus”), Temporary Transit Service, Inc. a New York
corporation (“TTS”), 201 West Sotello Realty, Inc. a California corporation
(“Sotello”), Wrightholm Bus Line, Inc. a Vermont corporation (“Wrightholm”),
Jersey Business Land Co., Inc., a New Jersey corporation (“JBL”), Atlantic
Transit Corp. a New York corporation (“ATC”), Airport Services, Inc. a
Massachusetts corporation (“Airport”), Atlantic Express New England, Inc. a
Massachusetts corporation (“AE-NE”), Atlantic Express of California, Inc. a
California corporation (“AE-CA”), Atlantic Express of Illinois, Inc. an
Illinois corporation (“AE-I”), Atlantic Paratrans of Arizona, Inc. an Arizona corporation
(“AP-AZ”), Fiore Bus Service, Inc. a Massachusetts corporation (“Fiore”), Groom
Transportation, Inc. a Massachusetts corporation (“Groom”), James McCarthy Limo
Service, Inc. a Massachusetts corporation (“Limo”), K. Corr, Inc. a New York
corporation (“Corr”), McIntire Transportation, Inc. a Massachusetts corporation
(“McIntire”), Mountain Transit, Inc. a Vermont corporation (“Mountain”), R.
Fiore Bus Service, Inc. a Massachusetts corporation (“FBS”), Raybern Bus
Service, Inc. a New York corporation (“RBS”), Raybern Capital Corp. a New York
corporation (“RBC”), Raybern Equity Corp. a New York corporation (“REC”),
Robert L. McCarthy & Son, Inc. a Massachusetts corporation (“McCarthy”),
T-NT Bus Service, Inc., a New York corporation (“TNT”), Transcomm, Inc., a
Massachusetts corporation (“Transcomm”) and Winsale, Inc., a New Jersey
corporation (“Winsale”, and together with Parent, Coachways, Amboy, AELA, AE
Missouri,  AENJ, AEP, AP, APNY, AQ,
Block, Brookfield, Courtesy, GVD, Jamaica, Merit,  Metro, Escort, Midway, SI-Bus, TTS, Sotello, Wrightholm, ATC,
Airport, AE-NE, AE-CA, AE-I, AP-AZ, Fiore, Groom, Limo, Corr, McIntire,
Mountain, JBL, FBS,  RBS, RBC, REC,  McCarthy, TNT, and Transcomm, each
individually a “Borrower” and collectively, “Borrowers”), and Central New York
Reorganization Corp. (f/k/a Central New York Coach Sales & Service, Inc.),
a New York corporation (“Central”), Jersey Bus Sales, Inc., a New Jersey
corporation (“Jersey” and together with Central, each individually a
“Guarantor” and collectively, “Guarantors”), the parties hereto from time to
time as lenders, whether by execution of this Agreement or an Assignment and
Acceptance (each individually, a “Lender”


 

















 


and collectively, “Lenders”) and Congress
Financial Corporation, a Delaware corporation, in its capacity as agent for
Lenders (in such capacity, “Agent”).


 


W I T N E S S E T H:


 


WHEREAS, Agent, Lenders, Borrowers and Borrowers’ Agent have entered
into financing arrangements pursuant to which Lenders have made and may make
loans and advances and provide other financial accommodations to Borrowers as
set forth in the Amended and Restated Loan and Security Agreement, dated
December 24, 2004, by and among Lenders, Agent, Borrowers and Guarantors (
the “Existing Loan Agreement”, and together with all agreements, documents and
instruments at any time executed and/or delivered in connection therewith or
related thereto, as from time to time amended, modified, supplemented,
extended, renewed, restated or replaced, collectively, the “Existing Financing
Agreements”);


 


WHEREAS, Borrowers and Obligors (as defined below) have requested that
Agent, and Lenders amend and restate the Existing Loan Agreement and continue
the existing financing arrangements with Borrowers pursuant to which Lenders
may make loans and provide other financial accommodations to Borrowers; and


 


WHEREAS, Agent, and Lenders have agreed to amend and restate the
Existing Loan Agreement and each Lender (severally and not jointly) has agreed
to continue to make such loans and provide such other financial accommodations
to Borrowers on a pro  rata basis according to its Commitment (as
defined below) on the terms and conditions set forth herein and Agent has
agreed to continue to act as agent for Lenders on the terms and conditions set
forth herein and the other Financing Agreements;


 


NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:


 


SECTION 1.  DEFINITIONS


 


For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:


 


1.1                                 “Accounts”
shall mean, as to each Borrower and Guarantor, all present and future rights of
such Borrower and Guarantor to payment of a monetary obligation, whether or not
earned by performance, which is not evidenced by chattel paper or an
instrument, (a) for property that has been or is to be sold, leased, licensed,
assigned, or otherwise disposed of, (b) for services rendered or to be
rendered, (c) for a secondary obligation incurred or to be incurred, or (d)
arising out of the use of a credit or charge card or information contained on
or for use with the card.


 


1.2                                 “Adjusted
Eurodollar Rate” shall mean, with respect to each Interest Period for any
Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to the
next one-sixteenth (1/16) of one (1%) percent) determined by dividing (a) the
Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i) one
(1) minus (ii) the Reserve Percentage. 
For purposes hereof, “Reserve Percentage” shall mean the reserve
percentage, expressed as a


 


2

















 


decimal, prescribed by any United States or
foreign banking authority for determining the reserve requirement which is or
would be applicable to deposits of United States dollars in a non-United States
or an international banking office of Reference Bank used to fund a Eurodollar Rate
Loan or any Eurodollar Rate Loan made with the proceeds of such deposit,
whether or not the Reference Bank actually holds or has made any such deposits
or loans.  The Adjusted Eurodollar Rate
shall be adjusted on and as of the effective day of any change in the Reserve
Percentage.


 


1.3                                 “AETG”
shall mean Atlantic Express Transportation Group Inc., a New York corporation.


 


1.4                                 “Administrative
Borrower” shall mean Parent, in its capacity as Administrative Borrower on
behalf of itself and the other Borrowers pursuant to Section 6.7 hereof
and it successors and assigns in such capacity.


 


1.5                                 “Administrative
Expense Reserve” shall mean a Reserve in the amount equal to the lesser of (a)
$1,000,000 or (b) the amount of administrative expenses set forth in the Plan
have not be paid which shall be in effect at all times except during such
periods of time when the Special Reserve is in effect.


 


1.6                                 “Affiliate”
shall mean, with respect to a specified Person, any other Person which directly
or indirectly, through one or more intermediaries, controls or is controlled by
or is under common control with such Person, and without limiting the
generality of the foregoing, includes (a) any Person which beneficially owns or
holds five (5%) percent or more of any class of Voting Stock of such Person or
other equity interests in such Person, (b) any Person of which such Person
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock or in which such Person beneficially owns or holds five (5%) percent or more
of the equity interests and (c) any director or executive officer of such
Person.  For the purposes of this
definition, the term “control” (including with correlative meanings, the terms
“controlled by” and “under common control with”), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of Voting Stock, by agreement or otherwise.  The term “Affiliate” shall not be deemed to
include any holder of a Noteholder Warrant solely as a consequence of its
ownership of any Noteholder Warrants.


 


1.7                                 “Agent”
shall mean Congress Financial Corporation, in its capacity as agent on behalf
of Lenders pursuant to the terms hereof and any replacement or successor agent
hereunder.


 


1.8                                 “Agent
Payment Account” shall mean account no. 5000000030279 of Agent at Wachovia
Bank, National Association, or such other account of Agent as Agent may from
time to time designate to Administrative Borrower as the Agent Payment Account
for purposes of this Agreement and the other Financing Agreements.


 


1.9                                 “Assignment
and Acceptance” shall mean an Assignment and Acceptance substantially in the
form of Exhibit A attached hereto (with blanks appropriately completed)


 


3

















 


delivered to Agent in connection with an
assignment of a Lender’s interest hereunder in accordance with the provisions
of Section 13.7 hereof.


 


1.10                           “Atlantic
North” shall mean Atlantic North Casualty Company, a Vermont corporation.


 


1.11                           “Bankruptcy
Code” shall mean the United States Bankruptcy Code, being Title 11 of the
United States Code, as the same now exists or may from time to time hereafter
be amended, modified, recodified or supplemented, together with all official
rules, regulations and interpretations thereunder or related thereto.


 


1.12                           “Benefit
Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA)
which any Borrower or Guarantor sponsors, maintains, or to which it makes, is
making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years.


 


1.13                           “Blocked
Accounts” shall have the meaning set forth in Section 6.3 hereof.


 


1.14                           “Borrowing
Base” shall mean, at any time the amount equal to the lesser of:


 


(a)                                  eighty-five (85%) percent of the
aggregate Net Amount of Eligible Accounts of all Borrowers minus
Reserves;


 


or


 


(b)                                 $20,000,000.


 


1.15                           “Business
Day” shall mean any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the
State of New York, or the State of North Carolina, and a day on which Agent is
open for the transaction of business, except that if a determination of a
Business Day shall relate to any Eurodollar Rate Loans, the term Business Day
shall also exclude any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.


 


1.16                           “Capital
Expenditures” shall mean all expenditures made after the date hereof for any
fixed or capital assets (including without limitation, motor vehicles and
buses) or improvements, or for replacements, substitutions or additions
thereto, which have a useful life of more than one (1) year, including, but not
limited to, the direct or indirect acquisition of such assets by way of
increased product service charges, offset items or otherwise and shall include
payments in respect of Capital Leases.


 


1.17                           “Capital
Leases” shall mean, as applied to any Person, any lease of (or any agreement
conveying the right to use) any property (whether real, personal or mixed) by
such Person as lessee which in accordance with GAAP, is required to be
reflected as a liability on the balance sheet of such Person.


 


1.18                           “Capital
Stock” shall mean, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of such Person’s
capital stock


 


4

















 


or partnership, limited liability company or
other equity interests at any time outstanding, and any and all rights,
warrants or options exchangeable for or convertible into such capital stock or
other interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).


 


1.19                           “Cash
Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a
maturity date of ninety (90) days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the
United States of America is pledged in support thereof; (b) certificates of
deposit or bankers’ acceptances with a maturity of ninety (90) days or less of
any financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with
a maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower or Guarantor) organized under the laws of any State
of the United States of America or the District of Columbia and rated at least
A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill
Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.; (d)
repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and
undivided profits of not less than $250,000,000; (e) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within ninety (90) days or less
from the date of acquisition; provided, that, the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985; and (f) investments in
money market funds and mutual funds which invest substantially all of their
assets in securities of the types described in clauses (a) through (e) above.


 


1.20                           “Change
of Control” shall mean (a) the transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of any Borrower or
Guarantor to any Person or group (as such term is used in Section 13(d)(3)
of the Exchange Act), other than as permitted in Section 9.7 hereof; (b)
the liquidation or dissolution of any Borrower or Guarantor or the adoption of
a plan by the stockholders of any Borrower or Guarantor relating to the
dissolution or liquidation of such Borrower or Guarantor, other than as
permitted in Section 9.7 hereof; (c) the acquisition by any Person or
group (as such term is used in Section 13(d)(3) of the Exchange Act),
except for one or more Permitted Holders, of beneficial ownership, directly or
indirectly, of more than fifty (50%) percent of the aggregate voting power of
the total outstanding Voting Stock of Parent or AETG or the Board of Directors
of Parent or AETG; (d) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of any Borrower or Guarantor (together with any new directors who
have been appointed by any Permitted Holder, or whose nomination for election
by the stockholders of Parent or AETG, as the case may be, was approved by a
vote of at least sixty-six and two-thirds (66 2/3%) percent of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of AETG or
Parent then still in office;  (e) the
failure of AETG to own directly or indirectly at least 51% of the voting power
of


 


5

















 


the total outstanding Voting Stock of Parent
or (f) the failure of Parent to own directly or indirectly one hundred (100%)
percent of the voting power of the total outstanding Voting Stock of any other
Borrower or Guarantor.


 


1.21                           “Chapter
11 Cases” shall mean the Chapter 11 cases of the Chapter 11 Borrowers under the
Bankruptcy Code referred to as In re Metro Affiliates, Inc., et al., Case No.
02 B 42560(PCB), Jointly Administered, which were pending in the Bankruptcy
Court.


 


1.22                           “Code”
shall mean the Internal Revenue Code of 1986, as the same now exists or may
from time to time hereafter be amended, modified, recodified or supplemented,
together with all rules, regulations and interpretations thereunder or related
thereto.


 


1.23                           “Collateral”
shall have the meaning set forth in Section 5 hereof.


 


1.24                           “Collateral
Access Agreement” shall mean an agreement in writing, in form and substance
satisfactory to Agent, from any lessor of premises to any Borrower or
Guarantor, or any other person to whom any Collateral is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located,
pursuant to which such lessor, consignee or other person, inter alia,
acknowledges the first priority security interest of Agent in such Collateral,
agrees to waive any and all claims such lessor, consignee or other person may,
at any time, have against such Collateral, whether for processing, storage or
otherwise, and agrees to permit Agent access to, and the right to remain on,
the premises of such lessor, consignee or other person so as to exercise
Agent’s rights and remedies and otherwise deal with such Collateral and in the
case of any consignee or other person who at any time has custody, control or
possession of any Collateral, acknowledges that it holds and will hold
possession of the Collateral for the benefit of Agent and Lenders and agrees to
follow all instructions of Agent with respect thereto.


 


1.25                           “Commitment”
shall mean, at any time, as to each Lender, the principal amount set forth
below such Lender’s signature on the signatures pages hereto designated as the
Commitment or on Schedule 1 to the Assignment and Acceptance Agreement
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 13.7 hereof, as the same may be adjusted from time
to time in accordance with the terms hereof; sometimes being collectively
referred to herein as “Commitments”.


 


1.26                           “Confirmation
Order” shall mean the Order and Judgment Confirming the First Amended Joint
Plan of Reorganization of Metro Affiliates, Inc. and its Subsidiaries issued by
the Bankruptcy Court and entered on September 4, 2003 in the Chapter 11
Cases.


 


1.27                           “Congress”
shall mean Congress Financial Corporation, a Delaware corporation, in its
individual capacity, and its successors and assigns.


 


1.28                           “Credit
Facility” shall mean the Loans and Letter of Credit Accommodations provided to
or for the benefit of any Borrower pursuant to Sections 2.1 and 2.2 hereof.


 


1.29                           “Default”
shall mean an act, condition or event which with notice or passage of time or
both would constitute an Event of Default.


 


6

















 


1.30                           “Defaulting
Lender” shall have the meaning set forth in Section 6.10 hereof.


 


1.31                           “Deposit
Account Control Agreement” shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Agent, the Borrower or Guarantor
with a deposit account at any bank and the bank at which such deposit account
is at any time maintained which provides that such bank will comply with
instructions originated by Agent directing disposition of the funds in the
deposit account without further consent by such Borrower or Guarantor and such
other terms and conditions as Agent may require.


 


1.32                           “EBITDA”
shall mean, for any period, net income or loss of the Parent and its
Subsidiaries before income or loss from discontinued operations for such
period, determined on a consolidated basis in accordance with GAAP, plus (a) to
the extent deducted in computing such consolidated net income or loss, without
duplication, the sum of (i) income tax expense, (ii) Interest Expense, (iii)
depreciation and amortization expense, and (iv) non-cash extraordinary or
nonrecurring losses or non-recurring expenses including non-cash impairment
charges, (v) Reorganization Expenses incurred by Parent and its Subsidiaries,
including up to a maximum of $1,050,000 in respect of management exit bonuses
payable to the persons and up to the amounts set forth on Schedule 1.32
hereto, and (vi) cash capital contributions to the Parent pursuant to
Section 9.17 hereof,  minus (b) to
the extent added in computing such consolidated net income or loss, without
duplication, extraordinary or non-recurring income or gains.


 


1.33                           “Eligible
Accounts” shall mean Accounts created by a Borrower which are and continue to
be acceptable to Agent based on the criteria set forth below.  In general, Accounts shall be Eligible
Accounts if:


 


(a)                                  such Accounts arise from the actual
and bona fide sale and delivery of goods by such Borrower or rendition of
services by such Borrower in the ordinary course of its business which
transactions are completed in accordance with the terms and provisions
contained in any documents related thereto;


 


(b)                                 such Accounts are not unpaid more
than ninety (90) days after the date of the original invoice for them;


 


(c)                                  such Accounts comply with the terms
and conditions contained in Section 7.2(b) of this Agreement;


 


(d)                                 such Accounts do not arise from
sales on consignment, guaranteed sale, sale and return, sale on approval, or
other terms under which payment by the account debtor may be conditional or
contingent;


 


(e)                                  the chief executive office of the
account debtor with respect to such Accounts is located in the United States of
America or Canada (provided, that, at any time promptly upon Agent’s request,
such Borrower shall execute and deliver, or cause to be executed and delivered,
such other agreements, documents and instruments as may be required by Agent to
perfect the security interests of Agent in those Accounts of an account debtor
with its chief executive office or principal place of business in Canada in
accordance with the applicable laws of the Province of Canada in which such
chief executive office or principal place of business is located and take or
cause to be taken such other and further actions as Agent may request to


 


7

















 


enable Agent as secured party with
respect thereto to collect such Accounts under the applicable Federal or
Provincial laws of Canada) or, at Agent’s option, if the chief executive office
and principal place of business of the account debtor with respect to such
Accounts is located other than in the United States of America or Canada, then
if either: (i) the account debtor has delivered to such Borrower an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Agent and
payable only in the United States of America and in U.S. dollars, sufficient to
cover such Account, in form and substance satisfactory to Agent and if required
by Agent, the original of such letter of credit has been delivered to Agent or
Agent’s agent and the issuer thereof, and such Borrower has complied with the
terms of Section 5.2(f) hereof with respect to the assignment of the proceeds
of such letter of credit to Agent or naming Agent as transferee beneficiary
thereunder, as Agent may specify, or (ii) such Account is subject to credit
insurance payable to Agent issued by an insurer and on terms and in an amount
acceptable to Agent, or (iii) such Account is otherwise acceptable in all
respects to Agent (subject to such lending formula with respect thereto as
Agent may determine);


 


(f)                                    such Accounts do not consist of
progress billings (such that the obligation of the account debtors with respect
to such Accounts is conditioned upon such Borrower’s satisfactory completion of
any further performance under the agreement giving rise thereto), bill and hold
invoices or retainage invoices, except (i) as to bill and hold invoices, if
Agent shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Agent, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice, and (ii) in the sole determination of Agent, retainage invoices in
respect of which the New York City Department of Education is the account
debtor and for which Agent has received evidence, satisfactory to Agent, that
all services to be performed by such Borrower have been completed;


 


(g)                                 the account debtor with respect to
such Accounts has not asserted a counterclaim, defense or dispute and is not
owed any amounts that may give rise to any right of setoff or recoupment
against such Accounts (but the portion of the Accounts of such account debtor
in excess of the amount at any time and from time to time owed by such Borrower
to such account debtor or claimed owed by such account debtor may be deemed
Eligible Accounts),


 


(h)                                 there are no facts, events or
occurrences which would impair the validity, enforceability or collectability
of such Accounts or reduce the amount payable or delay payment thereunder;


 


(i)                                     such Accounts are subject to the
first priority, valid and perfected security interest of Agent and any goods
giving rise thereto are not, and were not at the time of the sale thereof,
subject to any liens except those permitted in this Agreement that are subject
to an intercreditor agreement in form and substance satisfactory to Agent
between the holder of such security interest or lien and Agent;


 


(j)                                     neither the account debtor nor any
officer or employee of the account debtor with respect to such Accounts is an
officer, employee, agent or other Affiliate of any Borrower or Guarantor;


 


8

















 


(k)                                  the account debtors with respect to
such Accounts are not any foreign government, the United States of America, any
State, political subdivision, department, agency or instrumentality thereof,
unless, if the account debtor is the United States of America, any State,
political subdivision, department, agency or instrumentality thereof, upon
Agent’s request, the Federal Assignment of Claims Act of 1940, as amended or
any similar State or local law, if applicable, has been complied with in a
manner satisfactory to Agent;


 


(l)                                     there are no proceedings or actions
which are threatened or pending against the account debtors with respect to
such Accounts which might result in any material adverse change in any such
account debtor’s financial condition (including, without limitation, any
bankruptcy, dissolution, liquidation, reorganization or similar proceeding);


 


(m)                               such Accounts of a single account
debtor or its Affiliates do not constitute more than twenty-five (25%) percent
(or fifty (50%) percent in the case of Accounts owed by the New York City
Department of Education) of all otherwise Eligible Accounts, net of retainages
included therein (but the portion of the Accounts not in excess of such
percentage may be deemed Eligible Accounts);


 


(n)                                 such Accounts are not owed by an
account debtor who has Accounts unpaid more than ninety (90) days after the
date of the original invoice for them which constitute more than fifty (50%)
percent of the total Accounts of such account debtor;


 


(o)                                 the account debtor is not located in
a state requiring the filing of a Notice of Business Activities Report or
similar report in order to permit such Borrower to seek judicial enforcement in
such State of payment of such Account, unless such Borrower has qualified to do
business in such state or has filed a Notice of Business Activities Report or
equivalent report for the then current year or such failure to file and
inability to seek judicial enforcement is capable of being remedied without any
material delay or material cost;


 


(p)                                 such Accounts are owed by account
debtors whose total indebtedness to such Borrower does not exceed the credit
limit with respect to such account debtors as determined by such Borrower from
time to time, to the extent such credit limit as to any account debtor is
established consistent with the current practices of such Borrower as of the
date hereof and such credit limit is acceptable to Agent (but the portion of
the Accounts not in excess of such credit limit may be deemed Eligible
Accounts); and


 


(q)                                 such Accounts are owed by account
debtors deemed creditworthy at all times by Agent.


 


The criteria for Eligible
Accounts set forth above may only be changed and any new criteria for Eligible
Accounts may only be established by Agent in good faith based on either: (i) an
event, condition or other circumstance arising after the date hereof, or (ii)
an event, condition or other circumstance existing on the date hereof to the
extent Agent has no written notice thereof from a Borrower prior to the date
hereof, in either case under clause (i) or (ii) which adversely affects or
could reasonably be expected to adversely affect the Accounts in the good faith
determination of Agent.  Any Accounts
which are not Eligible Accounts shall nevertheless be part of the Collateral.


 


9

















 


1.34                           “Eligible
Transferee” shall mean (a) any Lender, (b) the parent company of any Lender
and/or any Affiliate of such Lender which is at least fifty (50%) percent owned
by such Lender or its parent company; (c) any person (whether a corporation,
partnership, trust or otherwise) that is engaged in the business of making,
purchasing, holding or otherwise investing in bank loans and similar extensions
of credit in the ordinary course of its business and is administered or managed
by a Lender or with respect to any Lender that is a fund which invests in bank
loans and similar extensions of credit, any other fund that invests in bank
loans and similar extensions of credit and is managed by the same investment
advisor as such Lender or by an Affiliate of such investment advisor, and in
each case is approved by Agent; and (d) any other commercial bank, financial
institution or “accredited investor” (as defined in Regulation D under the
Securities Act of 1933) approved by Agent, provided, that, (i) neither any
Borrower nor any Guarantor or any Affiliate of any Borrower or Guarantor shall
qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness
which is in any way subordinated in right of payment to any other Indebtedness
of any Borrower or Guarantor shall qualify as an Eligible Transferee, except as
Agent may otherwise specifically agree.


 


1.35                           “Environmental
Laws” shall mean all foreign, Federal, State and local laws (including common
law), legislation, rules, codes, licenses, permits (including any conditions
imposed therein), authorizations, judicial or administrative decisions,
injunctions or agreements between any Borrower or Guarantor and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use,
storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. 
The term “Environmental Laws” includes (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Federal
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act,
the Federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal
and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974,
(ii) applicable state counterparts to such laws and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to
any Hazardous Materials.


 


1.36                           “Equipment”
shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s now owned and hereafter acquired equipment, wherever located,
including machinery, data processing and computer equipment (whether owned or
licensed and including embedded software), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.


 


1.37                           “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, together with
all rules, regulations and interpretations thereunder or related thereto.


 


10

















 


1.38                           “ERISA
Affiliate” shall mean any person required to be aggregated with any Borrower,
any Guarantor or any of its or their respective Subsidiaries under Sections
414(b), 414(c), 414(m) or 414(o) of the Code.


 


1.39                           “ERISA
Event” shall mean (a) any “reportable event”, as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with
respect to a Benefit Plan; (b) the adoption of any amendment to a Benefit Plan
that would require the provision of security pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence
with respect to any Benefit Plan of an “accumulated funding deficiency” (as
defined in Section 412 of the Code or Section 302 of ERISA), whether
or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Benefit Plan; (e) the occurrence of a
“prohibited transaction” with respect to which any Borrower, Guarantor or any
of its or their respective Subsidiaries is a “disqualified person” (within the meaning
of Section 4975 of the Code) or with respect to which any Borrower,
Guarantor or any of its or their respective Subsidiaries could otherwise be
liable; (f) a complete or partial withdrawal by any Borrower, Guarantor or any
ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is
treated as such a withdrawal or notification that a Multiemployer Plan is in
reorganization; (g) the filing of a notice of intent to terminate, the
treatment of a Benefit Plan amendment as a termination under Section 4041
or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit
Guaranty Corporation to terminate a Benefit Plan; (h) an event or condition
which might reasonably be expected to constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Benefit Plan; (i) the imposition of any liability under Title IV of ERISA,
other than the Pension Benefit Guaranty Corporation premiums due but not
delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or
any ERISA Affiliate in excess of $500,000 and (j) any other event or condition
with respect to a Benefit Plan including any Benefit Plan subject to Title IV
of ERISA maintained, or contributed to, by any ERISA Affiliate that could
reasonably be expected to result in liability of any Borrower in excess of
$500,000.


 


1.40                           “Eurodollar
Rate” shall mean with respect to the Interest Period for a Eurodollar Rate
Loan, the interest rate per annum equal to the arithmetic average of the rates
of interest per annum (rounded upwards, if necessary, to the next one-sixteenth
(1/16) of one (1%) percent) at which Reference Bank is offered deposits of
United States dollars in the London interbank market (or other Eurodollar Rate
market selected by a Borrower or Administrative Borrower on behalf of such
Borrower and approved by Agent) on or about 9:00 a.m. (New York time)
two (2) Business Days prior to the commencement of such Interest Period in
amounts substantially equal to the principal amount of the Eurodollar Rate
Loans requested by and available to such Borrower in accordance with this
Agreement, with a maturity of comparable duration to the Interest Period
selected by or on behalf of a Borrower.


 


1.41                           “Eurodollar
Rate Loans” shall mean any Loans or portion thereof on which interest is
payable based on the Adjusted Eurodollar Rate in accordance with the terms
hereof.


 


1.42                           “Event
of Default” shall mean the occurrence or existence of any event or condition
described in Section 10.1 hereof.


 


11

















 


1.43                           “Excess
Availability” shall mean, the amount, as determined by Agent, calculated at any
date, equal to: (a) the Borrowing Base minus (b) the sum of:  (i) the amount of all then outstanding and
unpaid Obligations (but not including for this purpose any outstanding Letter
of Credit Accommodations or LC Advances), plus (ii) the aggregate amount of all
then outstanding and unpaid trade payables and other obligations(but, solely
for purposes of calculating Excess Availability for purposes of
Section 4.1(h),excluding obligations consisting of unpaid obligations to
professionals in connection with the Chapter 11 Cases and the Plan) of such
Borrower which are outstanding more than sixty (60) days past due as of such
time (other than trade payables or other obligations being contested or
disputed by such Borrower in good faith), plus (iii) without duplication, the
amount of checks issued by such Borrower to pay trade payables and other
obligations which are more than sixty (60) days past due as of such time (other
than trade payables or other obligations being contested or disputed by such
Borrower in good faith), but not yet sent.


 


1.44                           “Exchange
Act” shall mean the Securities Exchange Act of 1934, together with all rules,
regulations and interpretations thereunder or related thereto.


 


1.45                           “Existing
Agreements” shall mean, collectively, the following (each as amended, modified
or supplemented prior to the date hereof): (a) the Amended and Restated Loan and
Security Agreement, dated December 24, 2003, by and among Agent, Borrowers
and Guarantors, and (b) the other agreements listed on Schedule 1.45
hereto.


 


1.46                           “Existing
Letters of Credit” shall mean, collectively, the letters of credit issued for
the account of a Borrower or Guarantor or for which such Borrower or Guarantor
is otherwise liable listed on Schedule 1.46 hereto, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.


 


1.47  “Fee Letter” shall mean
the letter agreement, dated of even date herewith, by and among Borrowers,
Guarantors and Agent, setting forth certain fees payable by Borrowers to Agent
for the benefit of itself and Lenders, as the same now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.


 


1.48                           “Financing
Agreements” shall mean, collectively, this Agreement and all notes, guarantees,
security agreements, deposit account control agreements, investment property
control agreements, intercreditor agreements and all other agreements,
documents and instruments now or at any time hereafter executed and/or
delivered by any Borrower or Obligor in connection with this Agreement.


 


1.49                           “GAAP”
shall mean generally accepted accounting principles in the United States of
America as in effect from time to time as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board which are applicable to the circumstances
as of the date of determination consistently applied, except that, for purposes
of Sections 9.17, 9.18 and 9.19 hereof, GAAP shall be determined on the basis
of such principles in effect on the date hereof and consistent with those used
in the preparation of the most recent audited financial statements delivered to
Agent prior to the date hereof.


 


12

















 


1.50                           “Governmental
Authority” shall mean any nation or government, any state, province, or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.


 


1.51                           “Guarantors”
shall mean, collectively, the following (together with their respective
successors and assigns):  (a)  Jersey; and (b) Central; each sometimes
being referred to herein individually as a “Guarantor”.


 


1.52                           “Hazardous
Materials” shall mean any hazardous, toxic or dangerous substances, materials
and wastes, including hydrocarbons (including naturally occurring or man-made
petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde
insulation, radioactive materials, biological substances, polychlorinated
biphenyls, pesticides, herbicides and any other kind and/or type of pollutants
or contaminants (including materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that
are or become classified as hazardous or toxic under any Environmental Law).


 


1.53                           “Indebtedness”
shall mean, with respect to any Person, any liability, whether or not
contingent, (a) in respect of borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds, notes, debentures or similar instruments; (b)
representing the balance deferred and unpaid of the purchase price of any
property or services (except any such balance that constitutes an account payable
to a trade creditor (whether or not an Affiliate) created, incurred, assumed or
guaranteed by such Person in the ordinary course of business of such Person in
connection with obtaining goods, materials or services that is not overdue by
more than ninety (90) days, unless the trade payable is being contested in good
faith); (c) all obligations as lessee under leases which have been, or should
be, in accordance with GAAP recorded as Capital Leases; (d) any contractual
obligation, contingent or otherwise, of such Person to pay or be liable for the
payment of any indebtedness described in this definition of another Person,
including, without limitation, any such indebtedness, directly or indirectly
guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such
indebtedness, obligation or liability or any security therefor, or to provide
funds for the payment or discharge thereof, or to maintain solvency, assets,
level of income, or other financial condition; (e) all obligations with respect
to redeemable stock and redemption or repurchase obligations under any Capital
Stock or other equity securities issued by such Person; (f) all reimbursement
obligations and other liabilities of such Person with respect to surety bonds
(whether bid, performance or otherwise), letters of credit, banker’s
acceptances, drafts or similar documents or instruments issued for such
Person’s account; (g) all indebtedness of such Person in respect of
indebtedness of another Person for borrowed money or indebtedness of another
Person otherwise described in this definition which is secured by any
consensual lien, security interest, collateral assignment, conditional sale,
mortgage, deed of trust, or other encumbrance on any asset of such Person,
whether or not such obligations, liabilities or indebtedness are assumed by or
are a personal liability of such Person, all as of such time; (h) all
obligations, liabilities and indebtedness of such Person (marked to market)
arising under swap agreements, cap agreements and collar agreements and other
agreements or arrangements designed to protect such person against fluctuations
in interest rates or currency or commodity


 


13

















 


values; (i) all obligations owed by such
Person under License Agreements with respect to non-refundable, advance or
minimum guarantee royalty payments; and (j) the principal and interest portions
of all rental obligations of such Person under any synthetic lease or similar
off-balance sheet financing where such transaction is considered to be borrowed
money for tax purposes but is classified as an operating lease in accordance
with GAAP.


 


1.54                           “Information
Certificate” shall mean, collectively, the Information Certificates of
Borrowers and Guarantors constituting Exhibit B hereto containing material
information with respect to Borrowers and Guarantors, their respective
businesses and assets provided by or on behalf of Borrowers and Guarantors to
Agent in connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.


 


1.55                           “Intellectual
Property” shall mean, as to each Borrower and Guarantor, such Borrower’s and
Guarantor’s now owned and hereafter arising or acquired:  patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, trade names, trade styles, trademark and service
mark applications, and licenses and rights to use any of the foregoing; all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to sue for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints,
surveys, reports, manuals, and operating standards; goodwill (including any
goodwill associated with any trademark or the license of any trademark);
customer and other lists in whatever form maintained; trade secret rights,
copyright rights, rights in works of authorship, domain names and domain name
registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.


 


1.56                           “Intercreditor
Agreement” shall mean the Intercreditor Agreement, dated of even date herewith,
by and among Agent and Noteholder Collateral Agent,  as acknowledged and agreed to by Borrowers and Guarantor, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.


 


1.57                           “Interest
Expense” shall mean, for any period, as to any Person, all of the following as
determined in accordance with GAAP:  (a)
total interest expense of such Person and its Subsidiaries on a consolidated
basis for such period, whether paid or accrued (including the interest
component of Capital Leases for such period), including, without limitation,
all bank fees, commissions, discounts and other fees and charges owed with
respect to letters of credit (but excluding amortization of discount and amortization
of deferred financing fees paid in cash in connection with the transactions
contemplated hereby and interest (payable by addition to principal or in the
form of property other than cash), and any other interest expense not payable
in cash) and fees payable pursuant to Section 3.2 hereof, minus (b) any
net payments received by such Person and its Subsidiaries on a consolidated
basis during such period as interest income received in respect of its
investments in cash.


 


1.58                           “Interest
Period” shall mean for any Eurodollar Rate Loan, a period of approximately one
(1), two (2), or three (3) months duration as any Borrower (or Administrative
Borrower on behalf of such Borrower) may elect, the exact duration to be
determined in accordance with the customary practice in the applicable
Eurodollar Rate market; provided, that,


 


14

















 


such Borrower (or Administrative Borrower on
behalf of such Borrower) may not elect an Interest Period which will end after
the last day of the then-current term of this Agreement.


 


1.59                           “Interest
Rate” shall mean,


 


(a)                                  Subject to clause (b) of this
definition below:


 


(i)                                     as to Loans which are Prime Rate
Loans, a rate equal to one (1%) percent per annum in excess of the Prime Rate,


 


(ii)                                  as to Loans which are Eurodollar
Rate Loans, a rate equal to three and one-quarter (3.25%)  percent per annum in excess of the Adjusted
Eurodollar Rate (in each case, based on the Eurodollar Rate applicable for the Interest
Period selected by a Borrower, or by Administrative Borrower on behalf of such
Borrower, as in effect three (3) Business Days after the date of receipt by
Agent of the request of or on behalf of such Borrower for such Eurodollar Rate
Loans in accordance with the terms hereof, whether such rate is higher or lower
than any rate previously quoted to any Borrower or Guarantor).


 


(b)                                 Notwithstanding anything to the
contrary contained in clause (a) of this definition, the Interest Rate shall
mean (i) the rate of three (3%) percent per annum in excess of the Prime Rate
as to Loans which are Prime Rate Loans, and (ii) the rate of five and
one-quarter (5.25%) percent per annum in excess of the Adjusted Eurodollar Rate
as to Eurodollar Rate Loans, at Agent’s option, or at the written direction of Required
Lenders, without notice, (A) either (1) for the period on and after the date of
termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid and satisfied in full in immediately available funds, or (2)
for the period from and after the date of the occurrence of any Event of
Default, and for so long as such Event of Default is continuing as determined
by Agent and (B)on the Revolving Loans to any Borrower at any time outstanding
in excess of the Borrowing Base or on LC Advances to any Borrower at any time
outstanding in excess of the Letter of Credit Facility Limit (whether or not
such excess(es) arise or are made with or without Agent’s or any Lender’s
knowledge or consent and whether made before or after an Event of Default).


 


1.60                           “Inventory”
shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s now owned and hereafter existing or acquired goods, wherever
located, which (a) are leased by such Borrower or Guarantor as lessor; (b) are
held by such Borrower for sale or lease or to be furnished under a contract of
service; (c) are furnished by such Borrower or Guarantor under a contract of
service; or (d) consist of raw materials, work in process, finished goods or
materials used or consumed in its business.


 


1.61                           “Investment
Property Control Agreement” shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Agent, any Borrower or Guarantor
(as the case may be) and any securities intermediary, commodity intermediary or
other person who has custody, control or possession of any investment property
of such Borrower or Guarantor acknowledging that such securities intermediary,
commodity intermediary or other person has custody, control or possession of
such investment property on behalf of Agent, that it will comply with
entitlement orders originated by Agent with respect to such investment
property, or other instructions of Agent, or (as the case may be) apply any
value distributed on account of any


 


15

















 


commodity contract as directed by Agent, in
each case, without the further consent of such Borrower or Guarantor and
including such other terms and conditions as Agent may require.


 


1.62                           “LC
Advances” shall mean any payments made by Agent on behalf of Lenders in respect
of amounts drawn under Letter of Credit Accommodations or funded obligations
incurred by Agent or any Lender in respect of any Letter of Credit
Accommodations, including without limitation, any of the same made after
termination or non-renewal of this Agreement or the other Financing Agreements
with respect to any Letter of Credit Accommodations extended prior to such
termination or non-renewal.


 


1.63                           “Lenders”
shall mean the financial institutions who are signatories hereto as Lenders and
other persons made a party to this Agreement as a Lender in accordance with
Section 13.7 hereof, and their respective successors and assigns; each
sometimes being referred to herein individually as a “Lender”.


 


1.64                           “Letter
of Credit Accommodations” shall mean, collectively,  the letters of credit, merchandise purchase or other guaranties
which are from time to time either (a) issued or opened by Agent or any Lender
for the account of any Borrower or Obligor or (b) with respect to which Agent
or Lenders have agreed to indemnify the issuer or guaranteed to the issuer the
performance by any Borrower or Obligor of its obligations to such issuer
(including, without limitation, the Existing Letters of Credit); sometimes being
referred to herein individually as “Letter of Credit Accommodation”.


 


1.65                           “Letter
of Credit Availability” shall mean, at any time, the Letter of Credit Facility
Limit minus the sum of (a) the aggregate outstanding amount of Letter of Credit
Accommodations and (b) the aggregate outstanding principal amount of LC
Advances.


 


1.66                           “Letter
of Credit Facility Limit” shall mean $10,000,000; as permanently reduced by the
amount of any LC Advances which are repaid.


 


1.67                           “License
Agreements” shall have the meaning set forth in Section 8.11 hereof.


 


1.68                           “Loans”
shall mean the Revolving Loans and LC Advances.


 


1.69                           “Material
Adverse Effect” shall mean a material adverse effect on (a) the financial
condition, business, performance, prospects, or operations of Borrowers or the
legality, validity or enforceability of this Agreement or any of the other
Financing Agreements; (b) the legality, validity, enforceability, perfection or
priority of the security interests and liens of Agent upon the Collateral; (c)
the Collateral or its value, (d) the ability of Borrowers, taken as a whole, to
repay the Obligations or of Borrowers, taken as a whole, to perform their
obligations under this Agreement or any of the other Financing Agreements as
and when to be performed; or (e) the ability of Agent or any Lender to enforce
the Obligations or realize upon the Collateral or otherwise with respect to the
rights and remedies of Agent and Lenders under this Agreement or any of the
other Financing Agreements.


 


1.70                           “Material
Contract” shall mean (a) any contract or other agreement (other than the
Financing Agreements), written or oral, of any Borrower or Guarantor involving
monetary liability by any Borrower or Guarantor to any Person in an amount in
excess of $2,000,000 in


 


16

















 


any fiscal year of Borrowers, (b) any
contract or other agreement, written or oral, of any Borrower or Guarantor
involving the performance of services by any Borrower or Guarantor for any
Person where the monetary liability of such Person is in an amount in excess of
$7,500,000 in any fiscal year, and (c) any other contract or other agreement
(other than the Financing Agreements), whether written or oral, to which any
Borrower or Guarantor is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto would have a Material
Adverse Effect.


 


1.71                           “Maximum
Credit” shall mean the amount equal to the sum of the Revolving Loan Limit plus
the Letter of Credit Facility Limit (without giving effect to any repayments of
LC Advances).


 


1.72                           “Mortgages”
shall mean, individually and collectively, each of the following (as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced):  (a) the
Amended and Restated Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing by Metro, Midway and Atlantic-Queens in favor of
Agent as set forth in that certain Spreader, Subordination, Amendment and
Restatement of Mortgages, dated as of December 24, 2003, with respect to
the Real Property and related assets of such Borrower located in Ridgewood, New
York, Staten Island, New York, Bronx, New York, Medford, New York, Setauket,
New York and Oceanside, New York, (b) the Amended and Restated Mortgage,
Assignment of Leases and Rents, Security Agreement and Fixture Filing by JBL in
favor of Agent as set forth in that certain Spreader, Subordination, Amendment
and Restatement of Mortgages, dated as of December 24, 2003, with respect
to the Real Property and related assets of such Borrower located in
Southampton, New Jersey, (c) the Amended and Restated Deed of Trust, Assignment
of Leases and Rents, Security Agreement and Fixture Filing by Atlantic-Missouri
in favor of Agent as set forth in that certain Spreader, Subordination,
Amendment and Restatement of Mortgages, dated as of December 24, 2003,
with respect to the Real Property and related assets of such Borrower located
in St. Louis, Missouri and (d) the Amended and Restated Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing by
Sotello in favor of Agent as set forth in that certain Spreader, Subordination,
Amendment and Restatement of Mortgages, dated as of December 24, 2003,
with respect to the Real Property and related assets of such Borrower located
in Los Angeles, California.


 


1.73                           “Multiemployer
Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3)
of ERISA which is or was at any time during the current year or the immediately
preceding six (6) years contributed to by any Borrower, Guarantor or any ERISA
Affiliate.


 


1.74                           “Net
Amount of Eligible Accounts” shall mean, as to any Borrower, the gross amount
of the Eligible Accounts of such Borrower less (a) sales, excise or similar
taxes included in the amount thereof and (b) returns, discounts, claims,
credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed with respect thereto.


 


1.75                           “Net
Cash Proceeds” shall mean the aggregate cash proceeds payable to any Borrower
or Guarantor (and received by Agent) in respect of the sale price for any
asset(s) (including, without limitation, Capital Stock) of such Borrower or
Guarantor, net of the direct costs relating to such sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), taxes paid or payable as a result thereof, and amounts


 


17

















 


required to be applied to the repayment of
Indebtedness secured by a lien on the asset or assets that are the subject of
such sale.  Net Cash Proceeds shall
exclude any non-cash proceeds received from any sale but shall include such
proceeds when and as converted by any Borrower or Guarantor to cash and
received by Agent in accordance with the terms hereof.


 


1.76                           “New
York City Department of Education Contract” shall mean contracts for
transportation services entered into between the New York City Department of
Education and, respectively, Amboy, SI-Bus and AQ under contract serial numbers
0070, 8108, 9888, 0065, 0075 and 4515.


 


1.77                           “Non-Vehicle
Capital Expenditures” shall mean all expenditures for, or contracts for
expenditures for, any fixed or capital assets other than with respect to buses
and other transportation vehicles (including, but not limited to, tooling) or
improvements, or for replacements, substitutions or additions thereto, which
have a useful life of more than one (1) year, including, but not limited to,
the direct or indirect acquisition of such assets by way of offset items or
otherwise and shall include the principal amount of Capital Leases.


 


1.78                           “Note
Indenture” shall mean the Indenture, dated of even date herewith, made by
Parent, as Issuer, The Bank of New York, as Trustee and the guarantors named
therein, as same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.


 


1.79                           “Noteholder
Agreements” shall mean, collectively, the following (as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced):  (a) the Note Indenture;
(b) the Senior Notes; (c) the agreements, documents and instruments set forth
on Schedule 1.80 hereto; and (d) all other agreements, documents and
instruments at any time executed and/or delivered by Borrower or any Person
with, to or in favor of Noteholder Collateral Agent in connection therewith or
related thereto; sometimes being referred to herein individually as a
“Noteholder Agreement”.


 


1.80                           “Noteholder
Collateral Agent” shall mean The Bank of New York,  and its successors and assigns.


 


1.81                           “Noteholder
Debt” shall mean all obligations, liabilities and indebtedness of every kind,
nature and description owing by Parent or any Borrower or Guarantor to
Noteholder Collateral Agent and Noteholders, including principal, interest,
charges, fees, premiums, indemnities, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, arising under
the Noteholder Agreements.


 


1.82                           “Noteholder
Warrants” shall mean the warrants to purchase up to 115,000 share of the common
stock of Parent, which warrants are issued in connection with the issuance of
the Senior Notes and governed by the terms of the Noteholder Agreements.


 


1.83                           “Noteholders”
shall mean the holders of the Senior Notes and their respective successors and
assigns.


 


1.84                           “Obligations”
shall mean shall mean any and all Loans, Letter of Credit Accommodations and
all other obligations, liabilities and indebtedness of every kind, nature and


 


18

















 


description owing by any or all of Borrowers
to Agent or any Lender and/or any of their Affiliates, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, arising under this
Agreement or any of the other Financing Agreements, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to such Borrower under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, or secured or unsecured.


 


1.85                           “Obligor”
shall mean any guarantor, endorser, acceptor, surety or other person liable on
or with respect to the Obligations or who is the owner of any property which is
security for the Obligations (including, without limitation, Guarantors), other
than Borrowers.


 


1.86                           “Parent”
shall mean Atlantic Express Transportation Corp., a New York corporation, and
its successors and assigns.


 


1.87                           “Participant”
shall mean any financial institution that acquires and holds a participation in
the interest of any Lender in any of the Loans and Letter of Credit
Accommodations in conformity with the provisions of Section 13.7 of this
Agreement governing participations.


 


1.88                           “Permitted
Holders” shall mean the persons listed on Schedule 1.89 hereto and their
respective successors and assigns.


 


1.89                           “Person”
or “person” shall mean any individual, sole proprietorship, partnership,
corporation (including any corporation which elects subchapter S status under
the Code), limited liability company, limited liability partnership, business
trust, unincorporated association, joint stock corporation, trust, joint
venture or other entity or any government or any agency or instrumentality or
political subdivision thereof.


 


1.90                           “Plan”
shall mean the First Amended Joint Plan of Reorganization of Atlantic Express
and its Subsidiaries dated July 21, 2003, as confirmed by order of the
Bankruptcy Court on September 4, 2003 and any amendments, supplements or
modifications thereto.


 


1.91                           “Prime
Rate” shall mean the rate from time to time publicly announced by Wachovia
Bank, National Association, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.


 


1.92                           “Prime
Rate Loans” shall mean any Loans or portion thereof on which interest is
payable based on the Prime Rate in accordance with the terms hereof.


 


1.93                           “Pro
Rata Share” shall mean as to any Lender, the fraction (expressed as a
percentage) the numerator of which is such Lender’s Commitment and the
denominator of which is the aggregate amount of all of the Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.7 hereof; provided, that, if the Commitments have


 


19

















 


been terminated, the numerator shall be the
unpaid amount of such Lender’s Loans and its interest in the Letter of Credit
Accommodations and the denominator shall be the aggregate amount of all unpaid
Loans and Letter of Credit Accommodations.


 


1.94                           “Provision
for Taxes” shall mean an amount equal to all taxes imposed on or measured by
net income, whether Federal, State, Provincial, county or local, and whether
foreign or domestic, that are paid or payable by any Person in respect of any
period in accordance with GAAP.


 


1.95                           “Real
Property” shall mean all now owned and hereafter acquired real property of each
Borrower and Guarantor, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located, including the
real property and related assets more particularly described in the Mortgages.


 


1.96                           “Receivables”
shall mean all of the following now owned or hereafter arising or acquired
property of each Borrower and Guarantor: (a) all Accounts; (b) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (c) all payment
intangibles of such Borrower or Guarantor; (d) letters of credit, indemnities,
guarantees, security or other deposits and proceeds thereof issued payable to
any Borrower or Guarantor or otherwise in favor of or delivered to any Borrower
or Guarantor in connection with any Account; or (e) all other accounts, contract
rights, chattel paper, instruments, notes, general intangibles and other forms
of obligations owing to any Borrower or Guarantor, whether from the sale and
lease of goods or other property, licensing of any property (including
Intellectual Property or other general intangibles), rendition of services or
from loans or advances by any Borrower or Guarantor or to or for the benefit of
any third person (including loans or advances to any Affiliates or Subsidiaries
of any Borrower or Guarantor) or otherwise associated with any Accounts,
Inventory or general intangibles of any Borrower or Guarantor (including,
without limitation, choses in action, causes of action, tax refunds, tax refund
claims, any funds which may become payable to any Borrower or Guarantor in
connection with the termination of any Benefit Plan or other employee benefit
plan and any other amounts payable to any Borrower or Guarantor from any
Benefit Plan or other employee benefit plan, rights and claims against carriers
and shippers, rights to indemnification, business interruption insurance and
proceeds thereof, casualty or any similar types of insurance and any proceeds
thereof and proceeds of insurance covering the lives of employees on which any
Borrower or Guarantor is a beneficiary).


 


1.97                           “Records”
shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s present and future books of account of every kind or nature,
purchase and sale agreements, invoices, ledger cards, bills of lading and other
shipping evidence, statements, correspondence, memoranda, credit files and
other data relating to the Collateral or any account debtor, together with the
tapes, disks, diskettes and other data and software storage media and devices,
file cabinets or containers in or on which the foregoing are stored (including
any rights of any Borrower or Guarantor with respect to the foregoing
maintained with or by any other person).


 


20

















 


1.98                           “Reference
Bank” shall mean Wachovia Bank, National Association, or such other bank as
Agent may from time to time designate.


 


1.99                           “Register”
shall have the meaning set forth in Section 13.7 hereof.


 


1.100                     “Reorganization
Expenses” shall mean reorganization expenses and charges incurred by Parent and
its Subsidiaries in connection with the Chapter 11 Cases not to exceed
$21,050,000, including exit bonuses in a maximum amount not to exceed
$1,050,000, professional fees, commitment and extension fees for
debtor-in-possession financing, fees paid to the United States Trustee and
expenses in connection with the preparation and negotiation of the exit
financing.


 


1.101                     “Required
Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate
sixty-six and two-thirds (66 2/3%) percent or more of the aggregate of the
Commitments of all Lenders, or if the Commitments shall have been terminated,
Lenders to whom at least sixty-six and two-thirds (66 2/3%) percent of the then
outstanding Obligations are owing.


 


1.102                     “Reserves”
shall mean as of any date of determination, such amounts as Agent may from time
to time establish and revise in good faith reducing the amount of Loans and
Letter of Credit Accommodations which would otherwise be available to any
Borrower under the lending formula(s) provided for herein:  (a) to reflect events, conditions,
contingencies or risks which, as determined by Agent in good faith, adversely
affect, or would have a reasonable likelihood of adversely affecting, either
(i) the Collateral or any other property which is security for the Obligations
or its value or (ii) the assets, business or prospects of any Borrower or
Obligor or (iii) the security interests and other rights of Agent or any Lender
in the Collateral (including the enforceability, perfection and priority thereof)
or (b) to reflect Agent’s good faith belief that any collateral report or
financial information furnished by or on behalf of any Borrower or Obligor to
Agent is or may have been incomplete, inaccurate or misleading in any material
respect or (c) to reflect outstanding Letter of Credit Accommodations as
provided in Section 2.2 hereof or (d) in respect of any state of facts
which Agent determines in good faith constitutes a Default or an Event of
Default.  Without limiting the
generality of the foregoing, Reserves may be established to reflect that
dilution with respect to the Accounts (based on the ratio of the aggregate
amount of non-cash reductions in Accounts for any period to the aggregate
dollar amount of the sales of Borrower for such period) as calculated by Agent
for any period is or is reasonably anticipated to be greater than five (5%)
percent.  Without limiting the
generality of the foregoing, the term “Reserves” as used herein shall include,
in addition to and not in limitation of the foregoing, the Special Reserve and
the Administrative Expense Reserve. To the extent Agent may revise the lending
formulas used to determine the Borrowing Base or establish new criteria or
revise existing criteria for Eligible Accounts so as to address any circumstances,
condition, event or contingency in a manner satisfactory to Agent, Agent shall
not establish a Reserve for the same purpose. 
The amount of any Reserve established by Agent shall have a reasonable
relationship to the event, condition or other matter which is the basis for
such reserve as determined by Agent in good faith.


 


1.103                     “Revolving
Loan Limit” shall mean $20,000,000.


 


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1.104                     “Revolving
Loans” shall mean the loans now or hereafter made by or on behalf of any Lender
or by Agent for the account of any Lender on a revolving basis pursuant to the
Credit Facility (involving advances, repayments and readvances) as set forth in
Section 2.1 hereof.


 


1.105                     “Rolling
Stock” shall mean all motor vehicles and buses of Borrowers and Guarantors,
whether now owned or hereafter acquired.


 


1.106                     “Senior
Notes” shall mean Parent’s 12% Senior Secured Notes due 2008 and Parent’s
Senior Secured Floating Rate Notes due 2008, issued pursuant to the Note
Indenture.


 


1.107                     “Solvent”
shall mean, at any time with respect to any Person, that at such time such
Person (a) is able to pay its debts as they mature and has (and has a
reasonable basis to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).


 


1.108                     “Special
Agent Advances” shall have the meaning set forth in Section 12.11 hereof.


 


1.109                     “Special
Reserve” shall mean a Reserve established by Agent, at its option, in the
amount of $2,500,000 on July 1st of each calendar year, which
Special Reserve shall be reduced to $1,500,000 on August 1st of
the same calendar year (provided, that, no Default or Event of Default shall
exist or have occurred and be continuing on such date and immediately after
giving effect to any such release) and released on October 1 of the same
calendar year, provided, that, no Default or Event of Default shall exist or
have occurred and be continuing on the date of and immediately after giving
effect to such release.


 


1.110                     “Subsidiary”
or “subsidiary” shall mean, with respect to any Person, any corporation,
limited liability company, limited liability partnership or other limited or
general partnership, trust, association or other business entity of which an
aggregate of at least a majority of the outstanding Capital Stock or other
interests entitled to vote in the election of the board of directors of such
corporation (irrespective of whether, at the time, Capital Stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency), managers, trustees or other
controlling persons, or an equivalent controlling interest therein, of such
Person is, at the time, directly or indirectly, owned by such Person and/or one
or more subsidiaries of such Person, provided, that, for purposes of this
Agreement, Atlantic North shall not be considered a Subsidiary of Parent except
as otherwise expressly provided herein.


 


1.111                     “Termination
Date” shall have the meaning set forth in Section 13.1 hereof.


 


22

















 


1.112                     “UCC”
shall mean the Uniform Commercial Code as in effect in the State of New York,
and any successor statute, as in effect from time to time (except that terms
used herein which are defined in the Uniform Commercial Code as in effect in
the State of New York on the date hereof shall continue to have the same
meaning notwithstanding any replacement or amendment of such statute except as
Agent may otherwise determine).


 


1.113                     “Voting
Stock” shall mean with respect to any Person, (a) one (1) or more classes of
Capital Stock of such Person having general voting powers to elect at least a
majority of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.


 


SECTION 2.  CREDIT FACILITIES


 


2.1                                 Revolving
Loans.


 


(a)                                  Subject to and upon the terms and
conditions contained herein, each Lender severally (and not jointly) agrees to
make its Pro Rata Share of Revolving Loans to each Borrower from time to time
in amounts requested by such Borrower (or Administrative Borrower on behalf of
such Borrower) up to the amount outstanding at any time equal to the Borrowing
Base.


 


(b)                                 Agent may, in its discretion, from
time to time, upon not less than five (5) days prior notice to Administrative
Borrower, reduce the lending formula with respect to Eligible Accounts.  The amount of any decrease in the lending
formulas shall have a reasonable relationship to the event, condition or
circumstance which is the basis for such decrease as determined by Agent in
good faith.  In determining whether to
reduce the lending formula, Agent may consider events, conditions, contingencies
or risks which are also considered in determining Eligible Accounts, or in
establishing Reserves.


 


(c)                                  Except in Agent’s discretion, with
the consent of all Lenders, or as otherwise provided herein, (i) the aggregate
amount of the Loans, and the Letter of Credit Accommodations outstanding at any
time shall not exceed the Maximum Credit, (ii) the aggregate principal amount
of the Revolving Loans outstanding at any time shall not exceed the Borrowing
Base, and (iii) the aggregate outstanding amount of Letter of Credit
Accommodations and LC Advances shall not exceed the Letter of Credit Facility
Limit, then in effect.


 


(d)                                 In the event that the aggregate
principal amount of the Revolving Loans outstanding to Borrowers exceeds the
Borrowing Base, or the aggregate amount of the outstanding Letter of Credit
Accommodations and LC Advances exceeds the Letter of Credit Facility Limit,
then in effect, such event shall not limit, waive or otherwise affect any
rights of Agent or Lenders in such circumstances or on any future occasions and
Borrowers shall, upon demand by Agent, which may be made at any time or from
time to time, immediately repay to Agent the entire amount of any such
excess(es) for which payment is demanded.


 


23

















 


2.2                                 Letter of Credit Accommodations and LC Advances.


 


(a)                                  Subject to and upon the terms and
conditions contained herein, at the request of a Borrower (or Administrative
Borrower on behalf of such Borrower), Agent agrees, for the ratable risk of
each Lender according to its Pro Rata Share, to provide or arrange for Letter
of Credit Accommodations for the account of such Borrower containing terms and
conditions acceptable to Agent and the issuer thereof .  Any payments made by or on behalf of Agent
or any Lender to any issuer thereof and/or related parties in connection with
the Letter of Credit Accommodations provided to or for the benefit of a
Borrower shall constitute LC Advances to such Borrower pursuant to this
Section 2 (or Revolving Loans or Special Agent Advances, as the case may
be).


 


(b)                                 In addition to any charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations, Borrowers shall pay to Agent, for the benefit of Lenders, a
letter of credit fee at a rate equal to two (2%) percent per annum, on the
daily outstanding balance of the Letter of Credit Accommodations for the
immediately preceding month (or part thereof), payable in arrears as of the
first day of each succeeding month, except that Agent may, and upon the written
direction of Required Lenders shall, require Borrowers to pay to Agent for the
ratable benefit of Lenders such letter of credit fee, at a rate equal to four
(4%) percent per annum on such daily outstanding balance for: (i) the period
from and after the date of termination hereof until Agent and Lenders have
received full and final payment of all Obligations (notwithstanding entry of a
judgment against any Borrower) and (ii) the period from and after the date of
the occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Agent. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrowers to pay such fee shall survive the termination
of this Agreement.


 


(c)                                  The Borrower requesting such Letter
of Credit Accommodation (or Administrative Borrower on behalf of such Borrower)
shall give Agent two (2) Business Days’ prior written notice of such Borrower’s
request for the issuance of a Letter of Credit Accommodation.  Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit Accommodation
requested, the effective date (which date shall be a Business Day and in no
event shall be a date less than ten (10) days prior to the end of the then
current term of this Agreement) of issuance of such requested Letter of Credit
Accommodation, whether such Letter of Credit Accommodations may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit
Accommodation is to expire (which date shall be a Business Day), the purpose
for which such Letter of Credit Accommodation is to be issued, and the
beneficiary of the requested Letter of Credit Accommodation.  The Borrower requesting the Letter of Credit
Accommodation (or Administrative Borrower on behalf of such Borrower) shall
attach to such notice the proposed terms of the Letter of Credit Accommodation.


 


(d)                                 In addition to being subject to the
satisfaction of the applicable conditions precedent contained in Section 4
hereof and the other terms and conditions contained herein, no Letter of Credit
Accommodations shall be available unless each of the following conditions
precedent have been satisfied in a manner satisfactory to Agent:  (i) the Borrower requesting such Letter of
Credit Accommodation (or Administrative Borrower on behalf of such Borrower)
shall have delivered to the proposed issuer of such Letter of Credit
Accommodation at such times and in such manner as such proposed issuer may
require, an application, in form and substance satisfactory to such proposed
issuer and Agent, for the issuance of the Letter of Credit


 


24

















 


Accommodation
and such other documents as may be required pursuant to the terms thereof, and
the form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Agent and such proposed issuer, (ii) as of the date of
issuance, no order of any court, arbitrator or other Governmental Authority
shall purport by its terms to enjoin or restrain money center banks generally
from issuing letters of credit of the type and in the amount of the proposed
Letter of Credit Accommodation, and no law, rule or regulation applicable to
money center banks generally and no request or directive (whether or not having
the force of law) from any Governmental Authority with jurisdiction over money
center banks generally shall prohibit, or request that the proposed issuer of
such Letter of Credit Accommodation refrain from, the issuance of letters of
credit generally or the issuance of such Letters of Credit Accommodation; and
(iii) the Letter of Credit Availability, on the date of the proposed issuance
of any Letter of Credit Accommodations, shall be equal to or greater than an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Agent with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation or LC
Advance, a Reserve shall be established in the applicable amount set forth in
Section 2.2(d)(iii).


 


(e)                                  Except in Agent’s discretion, with
the consent of all Lenders, the amount of all outstanding Letter of Credit
Accommodations, all LC Advances and all other commitments and obligations made
or incurred by Agent or any Lender in connection therewith shall not at any
time exceed the Letter of Credit Facility Limit then in effect.


 


(f)                                    Borrowers and Guarantors shall
indemnify and hold Agent and Lenders harmless from and against any and all
losses, claims, damages, liabilities, costs and expenses which Agent or any
Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation, except for such losses, claims, damages, liabilities,
costs or expenses that are a direct result of the gross negligence or wilful
misconduct of Agent or any Lender as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.  Each Borrower and Guarantor assumes all
risks with respect to the acts or omissions of the drawer under or beneficiary
of any Letter of Credit Accommodation and for such purposes the drawer or
beneficiary shall be deemed such Borrower’s agent.  Each Borrower and Guarantor assumes all risks for, and agrees to
pay, all foreign, Federal, State and local taxes, duties and levies relating to
any goods subject to any Letter of Credit Accommodations or any documents,
drafts or acceptances thereunder.  Each
Borrower and Guarantor hereby releases and holds Agent and Lenders harmless
from and against any acts, waivers, errors, delays or omissions, whether caused
by any Borrower, Guarantor, by any issuer or correspondent or otherwise with
respect to or relating to any Letter of Credit Accommodation, except for the
gross negligence or wilful misconduct of Agent or any Lender as determined
pursuant to a final, non-appealable order of a court of competent
jurisdiction.  The provisions of this
Section 2.2(f) shall survive the payment of Obligations and the
termination of this Agreement.


 


(g)                                 Each Borrower and Guarantor hereby
irrevocably authorizes and directs any issuer of a Letter of Credit
Accommodation to name such Borrower or Guarantor as the account party therein
and to deliver to Agent all instruments, documents and other writings and


 


25

















 


property received by issuer pursuant
to the Letter of Credit Accommodations and to accept and rely upon Agent’s
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit Accommodations or the applications therefor.  Nothing contained herein shall be deemed or
construed to grant any Borrower or Guarantor any right or authority to pledge
the credit of Agent or any Lender in any manner.  Agent and Lenders shall have no liability of any kind with
respect to any Letter of Credit Accommodation provided by an issuer other than
Agent or any Lender unless Agent has duly executed and delivered to such issuer
the application or a guarantee or indemnification in writing with respect to
such Letter of Credit Accommodation. 
Borrowers and Guarantors shall be bound by any reasonable interpretation
made in good faith by Agent, or any other issuer or correspondent under or in
connection with any Letter of Credit Accommodation or any documents, drafts or
acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of any Borrower or Guarantor.


 


(h)                                 So long as no Event of Default
exists or has occurred and is continuing, a Borrower may (i) approve or resolve
any questions of non-compliance of documents, (ii) give any instructions as to
acceptance or rejection of any documents or goods, (iii) execute any and all
applications for steamship or airway guaranties, indemnities or delivery
orders, and (iv) with Agent’s consent, grant any extensions of the maturity of,
time of payment for, or time of presentation of, any drafts, acceptances, or
documents, and agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letter of Credit Accommodations, or documents, drafts or
acceptances thereunder or any letters of credit included in the Collateral.


 


(i)                                     At any time an Event of Default
exists or has occurred and is continuing, Agent shall have the right and
authority to, and Borrowers shall not, without the prior written consent of
Agent, (i) approve or resolve any questions of non-compliance of documents,
(ii) give any instructions as to acceptance or rejection of any documents or goods,
(iii) execute any and all applications for steamship or airway guaranties,
indemnities or delivery orders, (iv) grant any extensions of the maturity of,
time of payments for, or time of presentation of, any drafts, acceptances, or
documents, and (v) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of
any of the applications, Letter of Credit Accommodations, or documents, drafts
or acceptances thereunder or any letters of credit included in the
Collateral.  Agent may take such actions
either in its own name or in any Borrower’s name.


 


(j)                                     Any rights, remedies, duties or
obligations granted or undertaken by any Borrower or Guarantor to any issuer or
correspondent in any application for any Letter of Credit Accommodation, or any
other agreement in favor of any issuer or correspondent relating to any Letter
of Credit Accommodation, shall be deemed to have been granted or undertaken by
such Borrower or Guarantor to Agent for the ratable benefit of Lenders.  Any duties or obligations undertaken by
Agent to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement by Agent in favor of any issuer or
correspondent to the extent relating to any Letter of Credit Accommodation,
shall be deemed to have been undertaken by Borrowers and Guarantors to Agent
for the ratable benefit of Lenders and to apply in all respects to Borrowers
and Guarantors.


 


26

















 


(k)                                  Immediately upon the issuance or
amendment of any Letter of Credit Accommodation, each Lender shall be deemed to
have irrevocably and unconditionally purchased and received, without recourse
or warranty, an undivided interest and participation to the extent of such
Lender’s Pro Rata Share of the liability with respect to such Letter of Credit
Accommodation (including, without limitation, all Obligations with respect
thereto).


 


(l)                                     Each Borrower is irrevocably and
unconditionally obligated, without presentment, demand or protest, to pay to
Agent any amounts paid by an issuer of a Letter of Credit Accommodation with
respect to such Letter of Credit Accommodation (whether through the borrowing
of LC Advances in accordance with Section 2.2(a) or otherwise).  In the event that any Borrower fails to pay
Agent on the date of any payment under a Letter of Credit Accommodation in an
amount equal to the amount of such payment, such Borrower shall be deemed to
have automatically requested an LC Advance in such amount and Agent shall
promptly notify each Lender of the unreimbursed amount of such payment and each
Lender agrees, upon one (1) Business Day’s notice, to fund to Agent the
purchase of its participation in the LC Advance in an amount equal to its Pro
Rata Share.  The obligation of each
Lender to deliver to Agent an amount equal to its respective participation
pursuant to the foregoing sentence is absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or continuance of any Event
of Default, the failure to satisfy any other condition set forth in
Section 4 or any other event or circumstance.  If such amount is not made available by a Lender when due, Agent
shall be entitled to recover such amount on demand from such Lender with
interest thereon, for each day from the date such amount was due until the date
such amount is paid to Agent at the interest rate provided for in
Section 6.10(d) hereof.  To the
extent that the making of a LC Advance would cause the Letter of Credit Facility
Limit to be exceeded, Borrower shall be deemed to have requested a Revolving
Loan, in the same amount.


 


(m)                               As of the date of this Agreement,
after giving effect to the outstanding Existing Letters of Credit, the
aggregate outstanding amount of Letter of Credit Accommodations is $3,500,000,
and there are no outstanding LC Advances.


 


2.3                                 Joint
and Several Liability.  Each Borrower shall be jointly and severally
liable for all amounts due to Agent and Lenders under this Agreement and the
other Financing Agreements, regardless of which Borrower actually receives the
Loans or Letter of Credit Accommodations hereunder or the amount of such Loans
received or the manner in which Agent or any Lender accounts for such Loans,
Letter of Credit Accommodations or other extensions of credit on its books and
records.  All references herein or in
any of the other Financing Agreements to any of the obligations of Borrowers to
make any payment hereunder or thereunder shall constitute joint and several
obligations of Borrowers.  The
Obligations with respect to Loans made to a Borrower, and the Obligations
arising as a result of the joint and several liability of a Borrower hereunder,
with respect to Loans made to the other Borrower, shall be separate and
distinct obligations, but all such other Obligations shall be primary
obligations of all Borrowers.  The
Obligations arising as a result of the joint and several liability of a
Borrower hereunder with respect to Loans, Letter of Credit Accommodations or
other extensions of credit made to the other Borrower shall, to the fullest
extent permitted by law, be unconditional irrespective of (a) the validity or
enforceability, avoidance or subordination of the Obligations of the other
Borrower or of any promissory note or other document evidencing all or any part
of the Obligations of the other Borrower, (b) the absence of any attempt to
collect the


 


27

















 


Obligations from the
other Borrower, any Obligor or any other security therefor, or the absence of
any other action to enforce the same, (c) the waiver, consent, extension,
forbearance or granting of any indulgence by Agent or any Lender with respect
to any provisions of any instrument evidencing the Obligations of the other
Borrower, or any part thereof, or any other agreement now or hereafter executed
by the other Borrower and delivered to Agent or any Lender, (d) the failure by
Agent or any Lender to take any steps to perfect and maintain its security
interest in, or to preserve its rights and maintain its security or collateral
for the Obligations of the other Borrower, (e) the election of Agent and
Lenders in any proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code, (f) the
disallowance of all or any portion of the claim(s) of Agent or any Lender for
the repayment of the Obligations of the other Borrower under Section 502
of the Bankruptcy Code, or (g) any other circumstances which might constitute a
legal or equitable discharge or defense of an Obligor or of the other
Borrower.  With respect to the
Obligations arising as a result of the joint and several liability of a
Borrower hereunder with respect to Loans, Letter of Credit Accommodations or
other extensions of credit made to the other Borrower hereunder, each Borrower
waives, until the Obligations shall have been paid in full and this Agreement
shall have been terminated, any right to enforce any right of subrogation or
any remedy which Agent or any Lender now has or may hereafter have against any
Borrower or Obligor and any benefit of, and any right to participate in, any
security or collateral given to Agent or any Lender.  At any time an Event of Default exists or has occurred and is
continuing, Agent may proceed directly and at once, without notice, against any
Borrower to collect and recover the full amount, or any portion of the
Obligations, without first proceeding against the other Borrower or any other
Person, or against any security or collateral for the Obligations.  Each Borrower consents and agrees that Agent
and Lenders shall be under no obligation to marshall any assets in favor of
Borrower(s) or against or in payment of any or all of the Obligations.


 


2.4                                 Commitments.  The
aggregate amount of each Lender’s Pro Rata Share of the Revolving Loans, LC
Advances and Letter of Credit Accommodations shall not exceed the amount of
such Lender’s Commitment, as the same may from time to time be amended in
accordance with the provisions hereof.


 


SECTION 3.  INTEREST AND FEES


 


3.1                                 Interest.


 


(a)                                  Borrowers shall pay to Agent, for
the benefit of Lenders, interest on the outstanding principal amount of the
Revolving Loans and Reimbursement Obligations at the Interest Rate.  All interest accruing hereunder on and after
the date of any Event of Default or termination hereof shall be payable on
demand.


 


(b)                                 Each Borrower (or Administrative
Borrower on behalf of such Borrower) may from time to time request Eurodollar
Rate Loans or may request that Prime Rate Loans be converted to Eurodollar Rate
Loans or that any existing Eurodollar Rate Loans continue for an additional
Interest Period.  Such request from a
Borrower (or Administrative Borrower on behalf of such Borrower) shall specify
the amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans
to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate
Loans to be continued (subject to the limits set forth below) and the Interest
Period to be


 


28

















 


applicable to such Eurodollar Rate
Loans.  Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Agent of
such a request from a Borrower (or Administrative Borrower on behalf of such
Borrower), such Eurodollar Rate Loans shall be made or Prime Rate Loans shall
be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall
continue, as the case may be, provided, that, (i) no Default or Event of
Default shall exist or have occurred and be continuing, (ii) no party hereto
shall have sent any notice of termination of this Agreement, (iii) such
Borrower (or Administrative Borrower on behalf of such Borrower) shall have
complied with such customary procedures as are established by Agent and
specified by Agent to Administrative Borrower from time to time for requests by
Borrowers for Eurodollar Rate Loans, (iv) no more than four (4) Interest
Periods may be in effect at any one time, (v) the aggregate amount of the
Eurodollar Rate Loans must be in an amount not less than $25,000,000 or an
integral multiple of $1,000,000 in excess thereof, (vi) the maximum amount of
the Eurodollar Rate Loans in the aggregate at any time requested by Borrowers
shall not exceed the amount equal to eighty (80%) percent of the lowest principal
amount of the Revolving Loans which it is anticipated will be outstanding
during the applicable Interest Period, in each case as determined by Agent in
good faith (but with no obligation of Agent or Lenders to make such Revolving
Loans), and (vii) Agent and each Lender shall have determined that the Interest
Period or Adjusted Eurodollar Rate is available to Agent and such Lender and
can be readily determined as of the date of the request for such Eurodollar
Rate Loan by such Borrower.  Any request
by or on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime
Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate
Loans shall be irrevocable. 
Notwithstanding anything to the contrary contained herein, Agent and
Lenders shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Agent and Lenders had purchased such deposits to fund the Eurodollar Rate
Loans.


 


(c)                                  Any Eurodollar Rate Loans shall
automatically convert to Prime Rate Loans upon the last day of the applicable
Interest Period, unless Agent has received and approved a request to continue
such Eurodollar Rate Loan at least three (3) Business Days prior to such last
day in accordance with the terms hereof. 
Any Eurodollar Rate Loans shall, at Agent’s option, upon notice by Agent
to Parent, be subsequently converted to Prime Rate Loans in the event that this
Agreement shall terminate or not be renewed. 
Borrowers shall pay to Agent, for the benefit of Lenders, upon demand by
Agent (or Agent may, at its option, charge any loan account of any Borrower)
any amounts required to compensate any Lender or Participant for any loss
(including loss of anticipated profits), cost or expense incurred by such
person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate
Loans pursuant to any of the foregoing.


 


(d)                                 Interest shall be payable by Borrowers
to Agent, for the account of Lenders, monthly in arrears not later than the
first day of each calendar month and shall be calculated on the basis of a
three hundred sixty (360) day year and actual days elapsed.  The interest rate on non-contingent Obligations
(other than Eurodollar Rate Loans) shall increase or decrease by an amount
equal to each increase or decrease in the Prime Rate effective on the first day
of the month after any change in such Prime Rate is announced based on the
Prime Rate in effect on the last day of the month in which any such change
occurs.  In no event shall charges
constituting interest payable by Borrowers to Agent and Lenders exceed the
maximum amount


 


29

















 


or the rate permitted under any
applicable law or regulation, and if any such part or provision of this
Agreement is in contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto.


 


3.2                                 Fees.


 


(a)                                  Borrowers shall pay to Agent, for
the account of Lenders, monthly an unused line fee at a rate equal to one-half
of one (.50%) percent per annum calculated upon the amount by which the Maximum
Credit exceeds the average daily principal balance of the outstanding Loans and
Letter of Credit Accommodations during the immediately preceding month (or part
thereof) while this Agreement is in effect and for so long thereafter as any of
the Obligations are outstanding, which fee shall be payable on the first day of
each month in arrears.


 


(b)                                 Borrowers shall pay to Agent, for
its own account, monthly a servicing fee in an amount equal to $10,000 in
respect of the services of Agent with respect to the Revolving Loans for each
month (or part thereof) while the Loan Agreement remains in effect and for so
long thereafter as any of the Obligations are outstanding.  Such fee shall be fully earned as of and
payable in advance on the date hereof and on the first day of each month
hereafter.


 


(c)                                  Borrowers agree to pay to Agent the
other fees and amounts set forth in the Fee Letter in the amounts and at the
times specified therein.


 


3.3                                 Changes in Laws and Increased Costs of Loans.


 


(a)                                  If after the date hereof, either (i)
any change in, or in the interpretation of, any law or regulation is
introduced, including, without limitation, with respect to reserve
requirements, applicable to Lender or any banking or financial institution from
whom any Lender borrows funds or obtains credit (a “Funding Bank”), or (ii) a
Funding Bank or any Lender complies with any future guideline or request from
any central bank or other Governmental Authority or (iii) a Funding Bank or any
Lender determines that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof has or would have the effect described below, or a Funding Bank or any
Lender complies with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, and in the case of any event set forth in this clause (iii),
such adoption, change or compliance has or would have the direct or indirect
effect of reducing the rate of return on any Lender’s capital as a consequence
of its obligations hereunder to a level below that which Lender could have
achieved but for such adoption, change or compliance (taking into consideration
the Funding Bank’s or Lender’s policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, and the result of any of the
foregoing events described in clauses (i), (ii) or (iii) is or results in an
increase in the cost to any Lender of funding or maintaining the Loans, the
Letter of Credit Accommodations or its Commitment, then Borrowers and
Guarantors shall from time to time upon demand by Agent pay to Agent additional
amounts sufficient to indemnify Lenders against such increased cost on an
after-tax basis (after taking into account applicable deductions and credits in
respect of the


 


30

















 


amount indemnified).  A certificate as to the amount of such
increased cost shall be submitted to Administrative Borrower by Agent and shall
be conclusive, absent manifest error.


 


(b)                                 If prior to the first day of any
Interest Period, (i) Agent shall have determined in good faith (which
determination shall be conclusive and binding upon Borrowers and Guarantors)
that, by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, (ii) Agent has received notice from the Required Lenders that
the Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to Lenders of making or
maintaining Eurodollar Rate Loans during such Interest Period, or (iii) Dollar
deposits in the principal amounts of the Eurodollar Rate Loans to which such
Interest Period is to be applicable are not generally available in the London
interbank market, Agent shall give telecopy or telephonic notice thereof to
Administrative Borrower as soon as practicable thereafter, and will also give
prompt written notice to Administrative Borrower when such conditions no longer
exist.  If such notice is given (A) any
Eurodollar Rate Loans requested to be made on the first day of such Interest
Period shall be made as Prime Rate Loans, (B) any Loans that were to have been
converted on the first day of such Interest Period to or continued as
Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans
and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last
day of the then-current Interest Period thereof, to Prime Rate Loans.  Until such notice has been withdrawn by
Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor
shall any Borrower (or Administrative Borrower on behalf of any Borrower) have
the right to convert Prime Rate Loans to Eurodollar Rate Loans.


 


(c)                                  Notwithstanding any other provision
herein, if the adoption of or any change in any law, treaty, rule or regulation
or final, non-appealable determination of an arbitrator or a court or other
Governmental Authority or in the interpretation or application thereof
occurring after the date hereof shall make it unlawful for Agent or any Lender
to make or maintain Eurodollar Rate Loans as contemplated by this Agreement,
(i) Agent or such Lender shall promptly give written notice of such
circumstances to Administrative Borrower (which notice shall be withdrawn
whenever such circumstances no longer exist), (ii) the commitment of such
Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans
as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith
be canceled and, until such time as it shall no longer be unlawful for such
Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a
commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is
requested and (iii) such Lender’s Loans then outstanding as Eurodollar Rate
Loans, if any, shall be converted automatically to Prime Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law.  If any such conversion of a Eurodollar Rate
Loan occurs on a day which is not the last day of the then current Interest
Period with respect thereto, Borrowers and Guarantors shall pay to such Lender
such amounts, if any, as may be required pursuant to Section 3.3(d) below.


 


(d)                                 Borrowers and Guarantors shall
indemnify Agent and each Lender and to hold Agent and each Lender harmless from
any loss or expense which Agent or such Lender may sustain or incur as a
consequence of (i) default by Borrower in making a borrowing of, conversion
into or extension of Eurodollar Rate Loans after such Borrower (or
Administrative


 


31

















 


Borrower on behalf of such Borrower)
has given a notice requesting the same in accordance with the provisions of
this Loan Agreement, (ii) default by any Borrower in making any prepayment of a
Eurodollar Rate Loan after such Borrower has given a notice thereof in
accordance with the provisions of this Agreement, and (iii) the making of a
prepayment of Eurodollar Rate Loans on a day which is not the last day of an
Interest Period with respect thereto. 
With respect to Eurodollar Rate Loans, such indemnification may include
an amount equal to the excess, if any, of (A) the amount of interest which
would have accrued on the amount so prepaid, or not so borrowed, converted or
extended, for the period from the date of such prepayment or of such failure to
borrow, convert or extend to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, convert or extend, the Interest Period
that would have commenced on the date of such failure) in each case at the
applicable rate of interest for such Eurodollar Rate Loans provided for herein
over (B) the amount of interest (as determined by such Agent or such Lender)
which would have accrued to Agent or such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
Eurodollar market.  This covenant shall
survive the termination or non-renewal of this Loan Agreement and the payment
of the Obligations.


 


SECTION 4.  CONDITIONS PRECEDENT


 


4.1                                 Conditions Precedent to Initial Loans and Letter of Credit Accommodations..  Each of the following is a condition
precedent to Agent and Lenders making the initial Loans and providing the
initial Letter of Credit Accommodations hereunder:


 


(a)                                  Agent shall have received, in form
and substance satisfactory to Agent, all releases, terminations and such other
documents as Agent may request to evidence and effectuate the (i) termination
by the Term Loan Lenders (as such term is defined in the Existing Loan
Agreement) of their respective financing arrangements with Borrowers and
Guarantors and the termination and release by it or them, as the case may be,
of any interest in and to any assets and properties of each Borrower and
Guarantor, duly authorized, executed and delivered by it or each of them,
including, but not limited to, (A) UCC termination statements for all UCC
financing statements previously filed by it or any of them or their
predecessors, as secured party and any Borrower or Guarantor, as debtor; and
(B) satisfactions and discharges of any mortgages, deeds of trust or deeds to
secure debt by any Borrower or Guarantor in favor of it or any of them, in form
acceptable for recording with the appropriate Governmental Authority (but
excluding any liens releases relating to Rolling Stock), or (ii) assignment of
the Term Loan Debt (as such term is defined in the Existing Loan Agreement) or
security interest in favor of them to the Noteholder Collateral Agent;


 


(b)                                 Intentionally Deleted;


 


(c)                                  no motion, action or proceeding
shall be pending against any Borrower or Guarantor (or their predecessors) by
any creditor or other party-in-interest in the Bankruptcy Court or in any other
court of competent jurisdiction which would if successful have a Material
Adverse Effect;


 


(d)                                 all requisite corporate action and
proceedings in connection with this Agreement and the other Financing
Agreements shall be satisfactory in form and substance to


 


32

















 


Agent, and Agent shall have received
all information and copies of all documents, including records of requisite
corporate action and proceedings which Agent may have requested in connection
therewith, such documents where requested by Agent or its counsel to be
certified by appropriate corporate officers or Governmental Authority (and
including a copy of the certificate of incorporation of each Borrower and
Guarantor certified by the Secretary of such Borrower or Guarantor, as the case
may be, which shall set forth the same complete corporate name of such Borrower
or Guarantor as is set forth herein and such document as shall set forth the
organizational identification number of each Borrower or Guarantor, if one is
issued in its jurisdiction of incorporation);


 


(e)                                  no material adverse change shall
have occurred in the assets, business or prospects of Borrowers since the date
of Agent’s latest field examination (not including for this purpose the field
review referred to in clause (g) below) and no change or event shall have
occurred which would impair the ability of any Borrower or Obligor to perform
its obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Agent or any Lender to enforce the Obligations or
realize upon the Collateral;


 


(f)                                    Agent shall have completed a field
review of the Records and such other information with respect to the Collateral
as Agent may require to determine the amount of Loans available to Borrowers
(including, without limitation, or roll-forwards of Accounts in a manner satisfactory
to Agent, together with such supporting documentation as may be necessary or
appropriate, and other documents and information that will enable Agent to
accurately identify and verify the Collateral), the results of which in each
case shall be satisfactory to Agent, not more than three (3) Business Days
prior to the date hereof;


 


(g)                                 Agent shall have received, in form
and substance satisfactory to Agent, all consents, waivers, acknowledgments and
other agreements from third persons which Agent may deem necessary or desirable
in order to permit, protect and perfect its security interests in and liens
upon the Collateral or to effectuate the provisions or purposes of this
Agreement and the other Financing Agreements, including, without limitation, Collateral
Access Agreements by owners and lessors of leased premises of each Borrower and
by processors and warehouses at which Collateral is located;


 


(h)                                 the Excess Availability as
determined by Agent, as of the date hereof, shall be not less than $5,000,000
after giving effect to the outstanding Loans and the Loans to be made in
connection with the transactions hereunder;


 


(i)                                     Agent shall have received, in form
and substance satisfactory to Agent, Deposit Account Control Agreements by and
among Agent, each Borrower and Guarantor, as the case may be and each bank
where such Borrower (or Guarantor) has a deposit account as provided for in
Section 5.2 hereof, in each case, duly authorized, executed and delivered
by such bank and Borrower or Guarantor, as the case may be (or Agent shall be
the bank’s customer with respect to such deposit account as Agent may specify);


 


(j)                                     Agent shall have received the
Intercreditor Agreement, in form and substance satisfactory to Agent and
Lenders, as duly authorized, executed and delivered by Noteholder Collateral
Agent, Borrowers and Guarantor;


 


33

















 


(k)                                  Agent shall have received (i)
evidence, in form and substance satisfactory to Agent, that Parent has received
not less than $115,000,000 in immediately available funds as the proceeds of
the Senior Notes pursuant to the terms of the Noteholder Agreements, on terms
and conditions satisfactory to Agent and its counsel, and (ii)  for application to the Obligations
outstanding under the Existing Loan Agreement, an amount equal to (A) the
outstanding amount of Loans in respect of Existing Fleet Availability (together
with accrued but unpaid interest thereon), (B) the principal amount of any
outstanding Vehicle Cap Ex Loans (together with accrued and unpaid interest
thereon) and (C) the amount necessary, after the repayment of the Obligations
described in clauses (A) and (B) immediately above, such that the amount of
Loans outstanding hereunder does not exceed $20,000,000;


 


(l)                                     Agent shall have received the Note
Agreement and all related agreements, documents and instruments, which shall
each be in form and substance satisfactory to Agent;


 


(m)                               Agent shall have received evidence,
in form and substance satisfactory to Agent, that Agent has a valid perfected
first priority security interest in all of the Collateral except as otherwise
permitted herein;


 


(n)                                 Agent shall have received and
reviewed lien and judgment search results for the jurisdiction of incorporation
of each Borrower and Guarantor, the jurisdiction of the chief executive office
of each Borrower and Guarantor and all jurisdictions in which assets of
Borrowers and Guarantors are located, which search results shall be in form and
substance satisfactory to Agent;


 


(o)                                 Agent shall have received, in form
and substance satisfactory to Agent, a valid and effective title insurance
policy issued by a company and agent acceptable to Agent: (i) insuring the
priority, amount and sufficiency of the Mortgages, (ii) insuring against
matters that would be disclosed by surveys and (iii) containing any legally
available endorsements, assurances or affirmative coverage requested by Agent
for protection of its interests;


 


(p)                                 Agent shall have received copies of
the Employment Contracts between Parent and each of Domenic Gatto and Nat
Schlenker, each of which shall be in form and substances satisfactory to Agent
and satisfy the requirements of Section 9.22 hereof;


 


(q)                                 Agent shall have received evidence
of insurance and loss payee endorsements required hereunder and under the other
Financing Agreements, in form and substance satisfactory to Agent, and
certificates of insurance policies and/or endorsements naming Agent as loss
payee;


 


(r)                                    Agent shall have received, in form
and substance satisfactory to Agent, such opinion letters of counsel to
Borrowers and Guarantors with respect to the Financing Agreements, and such
other matters as Agent may request; and


 


(s)                                  the other Financing Agreements and
all instruments and documents hereunder and thereunder shall have been duly
executed and delivered to Agent, in form and substance satisfactory to Agent.


 


34

















 


4.2                                 Conditions Precedent to All Loans and Letter of Credit Accommodations..  Each of the following is an additional
condition precedent to the Loans and/or providing Letter of Credit
Accommodations to Borrowers, including the initial Loans and Letter of Credit
Accommodations and any future Loans and Letter of Credit Accommodations:


 


(a)                                  all representations and warranties
contained herein and in the other Financing Agreements shall be true and
correct with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto,
except to the extent that such representations and warranties expressly relate
solely to an earlier date (in which case such representations and warranties
shall have been true and accurate on and as of such earlier date);


 


(b)                                 no law, regulation, order, judgment
or decree of any Governmental Authority shall exist, and no action, suit,
investigation, litigation or proceeding shall be pending or threatened in any
court or before any arbitrator or Governmental Authority, which (i) purports to
enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or
providing the Letter of Credit Accommodations, or (B) the consummation of the
transactions contemplated pursuant to the terms hereof or the other Financing
Agreements or (ii) has or has a reasonable likelihood of having a Material
Adverse Effect; and


 


(c)                                  no Default or Event of Default shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after
giving effect thereto.


 


SECTION 5.  GRANT AND PERFECTION OF SECURITY INTEREST


 


5.1                                 Grant
of Security Interest.  To secure payment and performance of all
Obligations, each Borrower and Guarantor hereby grants to Agent, for itself and
the benefit of Lenders, a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Agent, for itself and the
benefit of Lenders, as security, all personal and real property and fixtures,
and interests in property and fixtures, of each Borrower and Guarantor, whether
now owned or hereafter acquired or existing, and wherever located (together
with all other collateral security for the Obligations at any time granted to
or held or acquired by Agent or any Lender, collectively, the “Collateral”),
including:


 


(a)                                  all Accounts;


 


(b)                                 all general intangibles, including,
without limitation, all Intellectual Property;


 


(c)                                  all goods, including, without
limitation, Inventory and Equipment;


 


(d)                                 all Real Property and fixtures;


 


(e)                                  all chattel paper, including,
without limitation, all tangible and electronic chattel paper;


 


35

















 


(f)                                    all instruments, including, without
limitation, all promissory notes;


 


(g)                                 all documents;


 


(h)                                 all deposit accounts;


 


(i)                                     all letters of credit, banker’s
acceptances and similar instruments and including all letter-of-credit rights;


 


(j)                                     all supporting obligations and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Receivables and other Collateral, including
(i) rights and remedies under or relating to guaranties, contracts of
suretyship, letters of credit and credit and other insurance related to the
Collateral, (ii) rights of stoppage in transit, replevin, repossession,
reclamation and other rights and remedies of an unpaid vendor, lienor or
secured party, (iii) goods described in invoices, documents, contracts or
instruments with respect to, or otherwise representing or evidencing,
Receivables or other Collateral, including returned, repossessed and reclaimed
goods, and (iv) deposits by and property of account debtors or other persons
securing the obligations of account debtors;


 


(k)                                  all (i) investment property
(including securities, whether certificated or uncertificated, securities
accounts, security entitlements, commodity contracts or commodity accounts) and
(ii) monies, credit balances, deposits and other property of any Borrower or
Guarantor now or hereafter held or received by or in transit to Agent, any
Lender or its Affiliates or at any other depository or other institution from
or for the account of any Borrower or Guarantor, whether for safekeeping,
pledge, custody, transmission, collection or otherwise;


 


(l)                                     all commercial tort claims,
including, without limitation, those identified in the Information Certificate;


 


(m)                               to the extent not otherwise
described above, all Receivables;


 


(n)                                 all Records; and


 


(o)                                 all products and proceeds of the
foregoing, in any form, including insurance proceeds and all claims against
third parties for loss or damage to or destruction of or other involuntary
conversion of any kind or nature of any or all of the other Collateral.


 


5.2                                 Perfection of Security Interests.


 


(a)                                  Each Borrower and Guarantor
irrevocably and unconditionally authorizes Agent (or its agent) to file at any
time and from time to time such financing statements with respect to the
Collateral naming Agent or its designee as the secured party and such Borrower
or Guarantor as debtor, as Agent may require, and including any other
information with respect to such Borrower or Guarantor or otherwise required by
part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as
Agent may determine, together with any amendment and continuations with respect
thereto, which authorization shall apply to all financing statements filed on,
prior to or after the date hereof.  Each
Borrower and Guarantor hereby ratifies and approves all financing statements
naming Agent or its designee as secured party and 


 


36

















 


such Borrower or Guarantor, as the
case may be, as debtor with respect to the Collateral (and any amendments with
respect to such financing statements) filed by or on behalf of Agent prior to
the date hereof and ratifies and confirms the authorization of Agent to file
such financing statements (and amendments, if any).  Each Borrower and Guarantor hereby authorizes Agent to adopt on
behalf of such Borrower and Guarantor any symbol required for authenticating
any electronic filing.  In the event
that the description of the collateral in any financing statement naming Agent
or its designee as the secured party and any Borrower or Guarantor as debtor
includes assets and properties of such Borrower or Guarantor that do not at any
time constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by such Borrower or Guarantor to the extent of
the Collateral included in such description and it shall not render the
financing statement ineffective as to any of the Collateral or otherwise affect
the financing statement as it applies to any of the Collateral.  In no event shall any Borrower or Guarantor
at any time file, or permit or cause to be filed, any correction statement or
termination statement with respect to any financing statement (or amendment or
continuation with respect thereto) naming Agent or its designee as secured
party and such Borrower or Guarantor as debtor.


 


(b)                                 Each Borrower and Guarantor does not
have any chattel paper (whether tangible or electronic) or instruments as of
the date hereof, except as set forth in the Information Certificate.  In the event that any Borrower or Guarantor
shall be entitled to or shall receive any chattel paper or instrument after the
date hereof, Borrowers and Guarantors shall promptly notify Agent thereof in
writing.  Promptly upon the receipt
thereof by or on behalf of any Borrower or Guarantor (including by any agent or
representative), such Borrower or Guarantor shall deliver, or cause to be
delivered to Agent, all tangible chattel paper and instruments that such
Borrower or Guarantor has or may at any time acquire, accompanied by such
instruments of transfer or assignment duly executed in blank as Agent may from
time to time specify, in each case except as Agent may otherwise agree.  At Agent’s option, each Borrower and
Guarantor shall, or Agent may at any time on behalf of any Borrower or
Guarantor, cause the original of any such instrument or chattel paper to be
conspicuously marked in a form and manner acceptable to Agent with the
following legend referring to chattel paper or instruments as applicable: “This
[chattel paper][instrument] is subject to the security interest of Congress
Financial Corporation, as Agent and any sale, transfer, assignment or
encumbrance of this [chattel paper][instrument] violates the rights of such
secured party.”


 


(c)                                  In the event that any Borrower or
Guarantor shall at any time hold or acquire an interest in any electronic
chattel paper or any “transferable record” (as such term is defined in
Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or in Section 16 of the Uniform Electronic Transactions Act
as in effect in any relevant jurisdiction), such Borrower or Guarantor shall
promptly notify Agent thereof in writing. 
Promptly upon Agent’s request, such Borrower or Guarantor shall take, or
cause to be taken, such actions as Agent may request to give Agent control of
such electronic chattel paper under Section 9-105 of the UCC and control
of such transferable record under Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or, as the case may be,
Section 16 of the Uniform Electronic Transactions Act, as in effect in
such jurisdiction.


 


(d)                                 Each Borrower and Guarantor does not
have any deposit accounts as of the date hereof, except as set forth in the
Information Certificate.  Borrowers and
Guarantors


 


37

















 


shall not, directly or indirectly,
after the date hereof open, establish or maintain any deposit account unless
each of the following conditions is satisfied: 
(i) Agent shall have received not less than five (5) Business Days prior
written notice of the intention of any Borrower or Guarantor to open or
establish such account which notice shall specify in reasonable detail and
specificity acceptable to Agent the name of the account, the owner of the
account, the name and address of the bank at which such account is to be opened
or established, the individual at such bank with whom such Borrower or
Guarantor is dealing and the purpose of the account, (ii) the bank where such
account is opened or maintained shall be acceptable to Agent, and (iii) on or
before the opening of such deposit account, such Borrower or Guarantor shall as
Agent may specify either (A) deliver to Agent a Deposit Account Control
Agreement with respect to such deposit account duly authorized, executed and
delivered by such Borrower or Guarantor and the bank at which such deposit
account is opened and maintained or (B) arrange for Agent to become the
customer of the bank with respect to the deposit account on terms and
conditions acceptable to Agent. The terms of this subsection (d) shall not
apply to deposit accounts specifically and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the
benefit of any Borrower’s or Guarantor’s salaried employees.


 


(e)                                  No Borrower or Guarantor owns or
holds, directly or indirectly, beneficially or as record owner or both, any
investment property, as of the date hereof, or have any investment account,
securities account, commodity account or other similar account with any bank or
other financial institution or other securities intermediary or commodity
intermediary as of the date hereof, in each case except as set forth in the
Information Certificate.


 


(i)                                     In the event that any Borrower or
Guarantor shall be entitled to or shall at any time after the date hereof hold
or acquire any certificated securities, such Borrower or Guarantor shall
promptly endorse, assign and deliver the same to Agent, accompanied by such
instruments of transfer or assignment duly executed in blank as Agent may from
time to time specify.  If any securities
other than the Capital Stock of a Subsidiary, now or hereafter acquired by any
Borrower or Guarantor are uncertificated and are issued to such Borrower or
Guarantor or its nominee directly by the issuer thereof, such Borrower or
Guarantor shall immediately notify Agent thereof and shall as Agent may
specify, either (A) cause the issuer to agree to comply with instructions from
Agent as to such securities, without further consent of any Borrower or
Guarantor or such nominee, or (B) arrange for Agent to become the registered
owner of the securities.


 


(ii)                                  Borrowers and Guarantors shall not,
directly or indirectly, after the date hereof open, establish or maintain any
investment account, securities account, commodity account or any other similar
account (other than a deposit account) with any securities intermediary or
commodity intermediary unless each of the following conditions is satisfied:
(A) Agent shall have received not less than five (5) Business Days prior
written notice of the intention of such Borrower or Guarantor to open or
establish such account which notice shall specify in reasonable detail and
specificity acceptable to Agent the name of the account, the owner of the
account, the name and address of the securities intermediary or commodity
intermediary at which such account is to be opened or established, the
individual at such intermediary with whom such Borrower or Guarantor is dealing
and the purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Agent, and (C) on or before the opening


 


38

















 


of such investment account,
securities account or other similar account with a securities intermediary or
commodity intermediary, such Borrower or Guarantor shall as Agent may specify
either (1) execute and deliver, and cause to be executed and delivered to
Agent, an Investment Property Control Agreement with respect thereto duly
authorized, executed and delivered by such Borrower or Guarantor and such
securities intermediary or commodity intermediary or (2) arrange for Agent to
become the entitlement holder with respect to such investment property on terms
and conditions acceptable to Agent.


 


(f)                                    Borrowers and Guarantors are not the
beneficiary or otherwise entitled to any right to payment under any letter of
credit, banker’s acceptance or similar instrument as of the date hereof, except
as set forth in the Information Certificate. 
In the event that any Borrower or Guarantor shall be entitled to or
shall receive any right to payment under any letter of credit, banker’s
acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower or Guarantor shall promptly
notify Agent thereof in writing.  Such
Borrower or Guarantor shall immediately, as Agent may specify, either (i)
deliver, or cause to be delivered to Agent, with respect to any such letter of
credit, banker’s acceptance or similar instrument, the written agreement of the
issuer and any other nominated person obligated to make any payment in respect
thereof (including any confirming or negotiating bank), in form and substance
satisfactory to Agent, consenting to the assignment of the proceeds of the
letter of credit to Agent by such Borrower or Guarantor and agreeing to make
all payments thereon directly to Agent or as Agent may otherwise direct or (ii)
cause Agent to become, at Borrowers’ expense, the transferee beneficiary of the
letter of credit, banker’s acceptance or similar instrument (as the case may
be).


 


(g)                                 Borrowers and Guarantors do not have
any commercial tort claims as of the date hereof, except as set forth in the
Information Certificate.  In the event
that any Borrower or Guarantor shall at any time after the date hereof have any
commercial tort claims in excess of $1,000,000, such Borrower or Guarantor
shall promptly notify Agent thereof in writing, which notice shall (i) set
forth in reasonable detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by such Borrower or Guarantor to Agent
of a security interest in such commercial tort claim (and the proceeds
thereof).  In the event that such notice
does not include such grant of a security interest, the sending thereof by such
Borrower or Guarantor to Agent shall be deemed to constitute such grant to
Agent. Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein.  Without limiting the
authorization of Agent provided in Section 5.2(a) hereof or otherwise
arising by the execution by such Borrower or Guarantor of this Agreement or any
of the other Financing Agreements, Agent is hereby irrevocably authorized from
time to time and at any time to file such financing statements naming Agent or
its designee as secured party and such Borrower or Guarantor as debtor, or any
amendments to any financing statements, covering any such commercial tort claim
as Collateral. In addition, each Borrower and Guarantor shall promptly upon
Agent’s request, execute and deliver, or cause to be executed and delivered, to
Agent such other agreements, documents and instruments as Agent may require in
connection with such commercial tort claim.


 


(h)                                 Borrowers and Guarantors do not have
any goods, documents of title or other Collateral in the custody, control or
possession of a third party as of the date hereof, except as set forth in the
Information Certificate and except for goods located in the United States in


 


39

















 


transit to a location of a Borrower
or Guarantor permitted herein in the ordinary course of business of such
Borrower or Guarantor in the possession of the carrier transporting such
goods.  In the event that any goods,
documents of title (other than in respect of Rolling Stock) or other Collateral
are at any time after the date hereof in the custody, control or possession of
any other person not referred to in the Information Certificate or such
carriers, Borrowers and Guarantors shall promptly notify Agent thereof in
writing.  Promptly upon Agent’s request,
Borrowers and Guarantors shall deliver to Agent a Collateral Access Agreement
duly authorized, executed and delivered by such person and the Borrower or
Guarantor that is the owner of such Collateral.


 


(i)                                     Borrowers and Guarantors shall take
any other actions reasonably requested by Agent from time to time to cause the
attachment, perfection and first priority of (except to the extent otherwise
permitted in Section 9.8 hereof), and the ability of Agent to enforce, the
security interest of Agent in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC or other applicable
law, to the extent, if any, that any Borrower’s or Guarantor’s signature
thereon is required therefor, (ii) causing Agent’s name to be noted as secured
party on any Certificate of Title for a titled good if such notation is a
condition to attachment, perfection or priority of, or ability of Agent to
enforce, the security interest of Agent in such Collateral, (iii) complying
with any provision of any statute, regulation or treaty of the United States as
to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of Agent to enforce, the
security interest of Agent in such Collateral, (iv) obtaining the consents and
approvals of any Governmental Authority or third party, including, without
limitation, any consent of any licensor, lessor or other person obligated on Collateral,
and taking all actions required by any earlier versions of the UCC or by other
law, as applicable in any relevant jurisdiction.


 


5.3                                 Exclusions
from Collateral. 
Notwithstanding anything to the contrary set forth in Section 5.1
above, the types or items of Collateral described in such Section shall
not include:


 


(a)                                  any rights or interests in any
contract, lease, permit, license, charter or license agreement covering real or
personal property, as such, if under the terms of such contract, lease, permit,
license, charter or license agreement, or applicable law with respect thereto,
the valid grant of a security interest or lien therein to Agent and Lenders is
prohibited and such prohibition has not been or is not waived or the consent of
the other party to such contract, lease, permit, license, charter or license
agreement has not been or is not otherwise obtained or under applicable law
such prohibition cannot be waived; provided, that, the foregoing exclusion
shall in no way be construed (i) to apply if any such prohibition is
unenforceable under Sections 9-406, 9-407 or 9-408 of the UCC or other
applicable law or (ii) so as to limit, impair or otherwise affect Agent’s
unconditional continuing security interests in and liens upon any rights or interests
of such Borrower or Guarantor in or to monies due or to become due under any
such contract, lease, permit, license, charter or license agreement (including
any Receivables);


 


(b)                                 any Equipment which is, or at the
time of any Borrower’s or Guarantor’s acquisition thereof shall be, subject to
a purchase money mortgage or other purchase money lien or security interest
(including Capital Leases) permitted under Section 9.8 hereof if the valid
grant of a security interest or lien to Lender in such item of Equipment is
prohibited by the terms


 


40

















 


of the agreement between such
Borrower or Guarantor and the holder of such purchase money mortgage or other
purchase money lien or security interest or under applicable law and such
prohibition has not been or is not waived, or the consent of the holder of the
purchase money mortgage or other purchase money lien or security interest has
not been or is not otherwise obtained, or under applicable law such prohibition
cannot be waived;


 


(c)                                  any Real Property or leasehold
interests in real property of Borrower located at 2015 Route 206, Bordentown,
New Jersey and any real estate fixtures of Borrower located at 2015 Route 206,
Bordentown, New Jersey;


 


(d)                                 all Rolling Stock; and


 


(e)                                  all Capital Stock of Parent and its
Subsidiaries.


 


SECTION 6.  COLLECTION AND ADMINISTRATION


 


6.1                                 Borrowers’
Loan Accounts. 
Agent shall maintain one or more loan account(s) on its books in which
shall be recorded (a) all Loans, Letter of Credit Accommodations and other
Obligations and the Collateral, (b) all payments made by or on behalf of any
Borrower or Guarantor and (c) all other appropriate debits and credits as
provided in this Agreement, including fees, charges, costs, expenses and interest.  All entries in the loan account(s) shall be
made in accordance with Agent’s customary practices as in effect from time to
time.


 


6.2                                 Statements.  Agent shall render to Administrative
Borrower each month a statement setting forth the balance in the Borrowers’
loan account(s) maintained by Agent for Borrowers pursuant to the provisions of
this Agreement, including principal, interest, fees, costs and expenses.  Each such statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and Guarantors and
conclusively binding upon Borrowers and Guarantors as an account stated except
to the extent that Agent receives a written notice from Administrative Borrower
of any specific exceptions of Administrative Borrower thereto within thirty
(30) days after the date such statement has been received by Parent.  Until such time as Agent shall have rendered
to Administrative Borrower a written statement as provided above, the balance
in any Borrower’s loan account(s) shall be presumptive evidence of the amounts
due and owing to Agent and Lenders by Borrowers and Guarantors.


 


6.3                                 Collection
of Accounts.


 


(a)                                  Borrowers shall establish and
maintain, at their expense, blocked accounts or lockboxes and related blocked
accounts (in either case, “Blocked Accounts”), as Agent may specify, with such
banks as are acceptable to Agent into which Borrowers shall promptly deposit
and direct their respective account debtors to directly remit all payments on
Receivables and all payments constituting proceeds of Inventory or other
Collateral in the identical form in which such payments are made, whether by
cash, check or other manner.  Borrowers
shall deliver, or cause to be delivered to Agent a Deposit Account Control
Agreement duly authorized, executed and delivered by each bank where a Blocked
Account is maintained as provided in Section 5.2 hereof or at any time and
from time to time Agent may become the bank’s customer with respect


 


41

















 


to any of the Blocked Accounts and
promptly upon Agent’s request, Borrowers shall execute and deliver such
agreements and documents as Agent may require in connection therewith. Each
Borrower and Guarantor agrees that all payments made to such Blocked Accounts
or other funds received and collected by Agent or any Lender, whether in
respect of the Receivables, as proceeds of Inventory or other Collateral or
otherwise shall be treated as payments to Agent and Lenders in respect of the
Obligations and therefore shall constitute the property of Agent and Lenders to
the extent of the then outstanding Obligations.


 


(b)                                 For purposes of calculating the
amount of the Revolving Loans available to each Borrower, such payments will be
applied (conditional upon final collection) to the Obligations on the Business
Day of receipt by Agent of immediately available funds in the Agent Payment
Account provided such payments and notice thereof are received in accordance
with Agent’s usual and customary practices as in effect from time to time and
within sufficient time to credit such Borrower’s loan account on such day, and
if not, then on the next Business Day. 
For the purposes of calculating interest on the Obligations, such payments
or other funds received will be applied (conditional upon final collection) to
the Obligations one (1) Business Day following the date of receipt of
immediately available funds by Agent in the Agent Payment Account provided such
payments or other funds and notice thereof are received in accordance with
Agent’s usual and customary practices as in effect from time to time and within
sufficient time to credit such Borrower’s loan account on such day, and if not,
then on the next Business Day.  In the event
that at any time or from time to time there are no Loans outstanding, Agent
shall be entitled to an administrative fee in an amount equivalent to the
Interest Rate for Prime Rate Loans (on a per annum basis) multiplied by the
amount of the funds received in the Blocked Account for such day as calculated
by Agent in accordance with its customary practice. The economic benefit of the
timing in the application of payments (and the administrative charge with
respect thereto, if applicable) shall be for the sole benefit of Agent.


 


(c)                                  Each Borrower and Guarantor and
their respective shareholders, directors, employees, agents, Subsidiaries or
other Affiliates shall, acting as trustee for Agent, receive, as the property
of Agent, any monies, checks, notes, drafts or any other payment relating to
and/or proceeds of Accounts or other Collateral which come into their
possession or under their control and immediately upon receipt thereof, shall
deposit or cause the same to be deposited in the Blocked Accounts, or remit the
same or cause the same to be remitted, in kind, to Agent.  In no event shall the same be commingled
with any Borrower’s or Guarantor’s own funds. 
Borrowers agree to reimburse Agent on demand for any amounts owed or
paid to any bank or other financial institution at which a Blocked Account or
any other deposit account or investment account is established or any other
bank, financial institution or other person involved in the transfer of funds
to or from the Blocked Accounts arising out of Agent’s payments to or
indemnification of such bank, financial institution or other person.  The obligations of Borrowers to reimburse
Agent for such amounts pursuant to this Section 6.3 shall survive the
termination of this Agreement.


 


6.4                                 Payments.


 


(a)                                  All Obligations shall be payable to
the Agent Payment Account as provided in Section 6.3 or such other place
as Agent may designate from time to time. 
Agent shall apply payments received or collected from any Borrower or
Guarantor or for the account of


 


42

















 


any Borrower or Guarantor (including
the monetary proceeds of collections or of realization upon any Collateral) as
follows: first, to pay any fees, indemnities or expense reimbursements then due
to Agent and Lenders from any Borrower or Guarantor; second, to pay interest
due in respect of any Loans (and including any Special Agent Advances); third,
to pay or prepay principal in respect of Special Agent Advances; fourth, to pay
principal due in respect of the Loans; fifth, to pay or prepay any other
Obligations whether or not then due, in such order and manner as Agent
determines.  Notwithstanding anything to
the contrary contained in this Agreement, (i) unless so directed by
Administrative Borrower, or unless a Default or an Event of Default shall exist
or have occurred and be continuing, Agent shall not apply any payments which it
receives to any Eurodollar Rate Loans, except (A) on the expiration date of the
Interest Period applicable to any such Eurodollar Rate Loans or (B) in the
event that there are no outstanding Prime Rate Loans and (ii) to the extent any
Borrower uses any proceeds of the Loans or Letter of Credit Accommodations to
acquire rights in or the use of any Collateral or to repay any Indebtedness used
to acquire rights in or the use of any Collateral, payments in respect of the
Obligations shall be deemed applied first to the Obligations arising from Loans
and Letter of Credit Accommodations that were not used for such purposes and
second to the Obligations arising from Loans and Letter of Credit
Accommodations the proceeds of which were used to acquire rights in or the use
of any Collateral in the chronological order in which such Borrower acquired
such rights in or the use of such Collateral.


 


(b)                                 At Agent’s option, all principal,
interest, fees, costs, expenses and other charges provided for in this
Agreement or the other Financing Agreements may be charged directly to the loan
account(s) of any Borrower maintained by Agent.  Borrowers and Guarantors shall make all payments to Agent and
Lenders on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind.  If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Agent or any Lender is required to surrender or return
such payment or proceeds to any Person for any reason, then the Obligations
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by Agent or such Lender.  Borrowers and Guarantors shall be liable to
pay to Agent, and do hereby indemnify and hold Agent and Lenders harmless for
the amount of any payments or proceeds surrendered or returned.  This Section 6.4(b) shall remain
effective notwithstanding any contrary action which may be taken by Agent or
any Lender in reliance upon such payment or proceeds.  This Section 6.4 shall survive the payment of the
Obligations and the termination of this Agreement.


 


6.5                                 Authorization
to Make Loans. 
Agent and Lenders are authorized to make the Loans and provide the
Letter of Credit Accommodations based upon telephonic or other instructions
received from anyone purporting to be an officer of Administrative Borrower or
any Borrower or other authorized person or, at the discretion of Agent, if such
Loans are necessary to satisfy any Obligations.  All requests for Loans or Letter of Credit Accommodations
hereunder shall specify the date on which the requested advance is to be made
or Letter of Credit Accommodations established (which day shall be a Business
Day) and the amount of the requested Loan. 
Requests received after 1:00 p.m. New York time on any day shall be
deemed to have been made as of the opening of business on the immediately
following Business Day.  All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively


 


43

















 


presumed to have been made to, and at the request of
and for the benefit of, any Borrower or Guarantor when deposited to the credit
of any Borrower or Guarantor or otherwise disbursed or established in
accordance with the instructions of any Borrower or Guarantor or in accordance
with the terms and conditions of this Agreement.


 


6.6                                 Use of
Proceeds. 
Borrowers shall use the initial proceeds of the Loans provided by Agent
to Borrowers hereunder only for: (a) payments to each of the persons listed in
the disbursement direction letter furnished by Borrowers to Agent on or about
the date hereof and (b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements.  All other Loans made or
Letter of Credit Accommodations provided to or for the benefit of any Borrower
pursuant to the provisions hereof shall be used by such Borrower only for
general operating, working capital and other proper corporate purposes of such
Borrower not otherwise prohibited by the terms hereof.  None of the proceeds will be used, directly
or indirectly, for the purpose of purchasing or carrying any margin security or
for the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose
which might cause any of the Loans to be considered a “purpose credit” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System, as amended.


 


6.7                                 Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of
Loans and Statements.


 


(a)                                  Each Borrower hereby irrevocably
appoints and constitutes Administrative Borrower as its agent to request and
receive Loans and Letter of Credit Accommodations pursuant to this Agreement
and the other Financing Agreements from Agent or any Lender in the name or on
behalf of such Borrower.  Agent and
Lenders may disburse the Loans to such bank account of Administrative Borrower
or a Borrower or otherwise make such Loans to a Borrower and provide such
Letter of Credit Accommodations to a Borrower as Administrative Borrower may
designate or direct, without notice to any other Borrower or Obligor.  Notwithstanding anything to the contrary
contained herein, Agent may at any time and from time to time require that
Loans to or for the account of any Borrower be disbursed directly to an
operating account of such Borrower.


 


(b)                                 Administrative Borrower hereby
accepts the appointment by Borrowers to act as the agent of Borrowers pursuant
to this Section 6.7. Administrative Borrower shall ensure that the
disbursement of any Loans to each Borrower requested by or paid to or for the
account of Parent, or the issuance of any Letter of Credit Accommodations for a
Borrower hereunder, shall be paid to or for the account of such Borrower.


 


(c)                                  Each Borrower and other Guarantor
hereby irrevocably appoints and constitutes Administrative Borrower as its
agent to receive statements on account and all other notices from Agent and
Lenders with respect to the Obligations or otherwise under or in connection
with this Agreement and the other Financing Agreements.


 


(d)                                 Any notice, election,
representation, warranty, agreement or undertaking by or on behalf of any other
Borrower or any Guarantor by Administrative Borrower shall be deemed for all
purposes to have been made by such Borrower or Guarantor, as the case may be,


 


44

















 


and shall be binding upon and
enforceable against such Borrower or Guarantor to the same extent as if made
directly by such Borrower of Guarantor.


 


(e)                                  No purported termination of the
appointment of Administrative Borrower as agent as aforesaid shall be
effective, except after ten (10) days’ prior written notice to Agent.


 


6.8                                 Pro
Rata Treatment. 
Except to the extent otherwise provided in this Agreement:  (a) the making and conversion of Loans shall
be made among the Lenders based on their respective Pro Rata Shares as to the
Loans and (b) each payment on account of any Obligations to or for the account
of one or more of Lenders in respect of any Obligations due on a particular day
shall be allocated among the Lenders entitled to such payments based on their
respective Pro Rata Shares and shall be distributed accordingly.


 


6.9                                 Sharing
of Payments, Etc.


 


(a)                                  Each Borrower and Guarantor agrees
that, in addition to (and without limitation of) any right of setoff, banker’s
lien or counterclaim Agent or any Lender may otherwise have, each Lender shall
be entitled, at its option (but subject, as among Agent and Lenders, to the
provisions of Section 12.3(b) hereof), to offset balances held by it for
the account of such Borrower or Guarantor at any of its offices, in dollars or
in any other currency, against any principal of or interest on any Loans owed
to such Lender or any other amount payable to such Lender hereunder, that is
not paid when due (regardless of whether such balances are then due to such
Borrower or Guarantor), in which case it shall promptly notify Administrative
Borrower and Agent thereof; provided, that, such Lender’s failure to give such
notice shall not affect the validity thereof.


 


(b)                                 If any Lender (including Agent)
shall obtain from any Borrower or Guarantor payment of any principal of or
interest on any Loan owing to it or payment of any other amount under this
Agreement or any of the other Financing Agreements through the exercise of any
right of setoff, banker’s lien or counterclaim or similar right or otherwise
(other than from Agent as provided herein), and, as a result of such payment,
such Lender shall have received more than its Pro Rata Share of the principal
of the Loans or more than its share of such other amounts then due hereunder or
thereunder by any Borrower or Guarantor to such Lender than the percentage
thereof received by any other Lender, it shall promptly pay to Agent, for the
benefit of Lenders, the amount of such excess and simultaneously purchase from
such other Lenders a participation in the Loans or such other amounts,
respectively, owing to such other Lenders (or such interest due thereon, as the
case may be) in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all Lenders shall share the benefit of
such excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) in accordance with their
respective Pro Rata Shares or as otherwise agreed by Lenders.  To such end all Lenders shall make
appropriate adjustments among themselves (by the resale of participation sold
or otherwise) if such payment is rescinded or must otherwise be restored.


 


(c)                                  Each Borrower and Guarantor agrees
that any Lender purchasing a participation (or direct interest) as provided in
this Section may exercise, in a manner consistent with this Section, all
rights of setoff, banker’s lien, counterclaim or similar rights with respect to


 


45

















 


such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.


 


(d)                                 Nothing contained herein shall
require any Lender to exercise any right of setoff, banker’s lien,
counterclaims or similar rights or shall affect the right of any Lender to
exercise, and retain the benefits of exercising, any such right with respect to
any other Indebtedness or obligation of any Borrower or Guarantor.  If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section applies, such Lender shall, to the extent
practicable, assign such rights to Agent for the benefit of Lenders and, in any
event, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section to share
in the benefits of any recovery on such secured claim.


 


6.10                           Settlement
Procedures.


 


(a)                                  In order to administer the Credit
Facility in an efficient manner and to minimize the transfer of funds between
Agent and Lenders, Agent may, at its option, subject to the terms of this
Section, make available, on behalf of Lenders, the full amount of the Loans
requested or charged to any Borrower’s loan account(s) or otherwise to be
advanced by Lenders pursuant to the terms hereof, without requirement of prior
notice to Lenders of the proposed Loans.


 


(b)                                 With respect to all Loans made by
Agent on behalf of Lenders as provided in this Section, the amount of each
Lender’s Pro Rata Share of the outstanding Loans shall be computed weekly, and
shall be adjusted upward or downward on the basis of the amount of the
outstanding Loans as of 5:00 p.m. New York time on the Business Day immediately
preceding the date of each settlement computation; provided, that, Agent
retains the absolute right at any time or from time to time to make the above
described adjustments at intervals more frequent than weekly, but in no event
more than twice in any week.  Agent
shall deliver to each of the Lenders after the end of each week, or at such
lesser period or periods as Agent shall determine, a summary statement of the
amount of outstanding Loans for such period (such week or lesser period or
periods being hereinafter referred to as a “Settlement Period”).  If the summary statement is sent by Agent
and received by a Lender prior to 12:00 p.m. New York time, then such Lender
shall make the settlement transfer described in this Section by no later
than 3:00 p.m. New York time on the same Business Day and if received by a
Lender after 12:00 p.m. New York time, then such Lender shall make the
settlement transfer by not later than 3:00 p.m. New York time on the next Business
Day following the date of receipt.  If,
as of the end of any Settlement Period, the amount of a Lender’s Pro Rata Share
of the outstanding Loans is more than such Lender’s Pro Rata Share of the
outstanding Loans as of the end of the previous Settlement Period, then such
Lender shall forthwith (but in no event later than the time set forth in the
preceding sentence) transfer to Agent by wire transfer in immediately available
funds the amount of the increase. 
Alternatively, if the amount of a Lender’s Pro Rata Share of the
outstanding Loans in any Settlement Period is less than the amount of such
Lender’s Pro Rata Share of the outstanding Loans for the previous Settlement
Period, Agent shall forthwith transfer to such Lender by wire transfer in
immediately available funds the amount of the decrease.  The obligation of each of the Lenders to
transfer such funds and effect such settlement shall be irrevocable and
unconditional and without recourse to or warranty by Agent.  Agent and each


 


46

















 


Lender agrees to mark its books and
records at the end of each Settlement Period to show at all times the dollar
amount of its Pro Rata Share of the outstanding Loans and Letter of Credit
Accommodations.  Each Lender shall only
be entitled to receive interest on its Pro Rata Share of the Loans to the
extent such Loans have been funded by such Lender.  Because the Agent on behalf of Lenders may be advancing and/or
may be repaid Loans prior to the time when Lenders will actually advance and/or
be repaid such Loans, interest with respect to Loans shall be allocated by
Agent in accordance with the amount of Loans actually advanced by and repaid to
each Lender and the Agent and shall accrue from and including the date such
Loans are so advanced to but excluding the date such Loans are either repaid by
Borrowers or actually settled with the applicable Lender as described in this
Section.


 


(c)                                  To the extent that Agent has made
any such amounts available and the settlement described above shall not yet
have occurred, upon repayment of any Loans by a Borrower, Agent may apply such
amounts repaid directly to any amounts made available by Agent pursuant to this
Section.  In lieu of weekly or more frequent
settlements, Agent may, at its option, at any time require each Lender to
provide Agent with immediately available funds representing its Pro Rata Share
of each Loan, prior to Agent’s disbursement of such Loan to Borrower.  In such event, all Loans under this
Agreement shall be made by the Lenders simultaneously and proportionately to
their Pro Rata Shares.  No Lender shall
be responsible for any default by any other Lender in the other Lender’s
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender be increased or decreased as a result of the default by any other Lender
in the other Lender’s obligation to make a Loan hereunder.


 


(d)                                 If Agent is not funding a particular
Loan to a Borrower (or Administrative Borrower for the benefit of such
Borrower) pursuant to this Section on any day, Agent may assume that each
Lender will make available to Agent such Lender’s Pro Rata Share of the Loan
requested or otherwise made on such day and Agent may, in its discretion, but
shall not be obligated to, cause a corresponding amount to be made available to
or for the benefit of such Borrower on such day.  If Agent makes such corresponding amount available to a Borrower
and such corresponding amount is not in fact made available to Agent by such
Lender, Agent shall be entitled to recover such corresponding amount on demand
from such Lender together with interest thereon for each day from the date such
payment was due until the date such amount is paid to Agent at the Federal
Funds Rate for each day during such period (as published by the Federal Reserve
Bank of New York or at Agent’s option based on the arithmetic mean determined
by Agent of the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by each of the three
leading brokers of Federal funds transactions in New York City selected by
Agent) and if such amounts are not paid within three (3) Business Days of
Agent’s demand, at the highest Interest Rate provided for in Section 3.1
hereof applicable to Prime Rate Loans. 
During the period in which such Lender has not paid such corresponding
amount to Agent, notwithstanding anything to the contrary contained in this
Agreement or any of the other Financing Agreements, the amount so advanced by
Agent to or for the benefit of any Borrower shall, for all purposes hereof, be
a Loan made by Agent for its own account. 
Upon any such failure by a Lender to pay Agent, Agent shall promptly
thereafter notify Administrative Borrower of such failure and Borrowers shall
pay such corresponding amount to Agent for its own account within five (5)
Business Days of Administrative Borrower’s receipt of such notice.  A Lender who fails to pay Agent its Pro Rata
Share of any Loans made available by the Agent on such Lender’s behalf, or any
Lender who


 


47

















 


fails to pay any other amount owing
by it to Agent, is a “Defaulting Lender”. 
Agent shall not be obligated to transfer to a Defaulting Lender any
payments received by Agent for the Defaulting Lender’s benefit, nor shall a
Defaulting Lender be entitled to the sharing of any payments hereunder
(including any principal, interest or fees). 
Amounts payable to a Defaulting Lender shall instead be paid to or
retained by Agent.  Agent may hold and,
in its discretion, relend to a Borrower the amount of all such payments
received or retained by it for the account of such Defaulting Lender.  For purposes of voting or consenting to
matters with respect to this Agreement and the other Financing Agreements and
determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a
“Lender” and such Lender’s Commitment shall be deemed to be zero (0).  This Section shall remain effective
with respect to a Defaulting Lender until such default is cured.  The operation of this Section shall not
be construed to increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by any Borrower or Obligor of their duties
and obligations hereunder.


 


(e)                                  Nothing in this Section or
elsewhere in this Agreement or the other Financing Agreements shall be deemed
to require Agent to advance funds on behalf of any Lender or to relieve any
Lender from its obligation to fulfill its Commitment hereunder or to prejudice
any rights that any Borrower may have against any Lender as a result of any
default by any Lender hereunder in fulfilling its Commitment.


 


6.11                           Obligations
Several;
Independent Nature of Lenders’ Rights.  The obligation of each Lender hereunder is
several, and no Lender shall be responsible for the obligation or commitment of
any other Lender hereunder.  Nothing
contained in this Agreement or any of the other Financing Agreements and no
action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity.  The amounts
payable at any time hereunder to each Lender shall be a separate and
independent debt, and subject to Section 12.3 hereof, each Lender shall be
entitled to protect and enforce its rights arising out of this Agreement and it
shall not be necessary for any other Lender to be joined as an additional party
in any proceeding for such purpose.


 


SECTION 7.  COLLATERAL REPORTING AND COVENANTS


 


7.1                                 Collateral
Reporting.


 


(a)                                  Borrowers shall provide Agent with
the following documents in a form satisfactory to Agent:


 


(i)                                     on a daily basis, a schedule of
sales made, credits issued and cash received;


 


(ii)                                  as soon as possible after the end of
each month (but in any event within ten (10) Business Days after the end
thereof), on a monthly basis or more frequently as Agent may request, (A)
agings of accounts payable and accounts receivable separately identifying
retainage amounts, and (B) reports with respect to contract renewals,
terminations and new contracts constituting Material Contracts,


 


48

















 


(iii)                               upon Agent’s request, (A) copies of
customer statements and credit memos, remittance advices and reports, and
copies of deposit slips and bank statements, and (B) such other reports as to
the Collateral as Agent shall request from time to time.


 


(b)                                 If any Borrower’s or Guarantor’s
records or reports of the Collateral are prepared or maintained by an
accounting service, contractor, shipper or other agent, such Borrower and
Guarantor hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Agent and to
follow Agent’s instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.


 


7.2                                 Accounts
Covenants.


 


(a)                                  Borrowers shall notify Agent
promptly of: (i) any material delay in any Borrower’s performance of any of its
material obligations to any account debtor or the assertion of any material
claims, offsets, defenses or counterclaims by any account debtor, or any
material disputes with account debtors, or any settlement, adjustment or
compromise thereof, (ii) all material adverse information known to any Borrower
or Guarantor relating to the financial condition of any account debtor and
(iii) any event or circumstance which, to the best of any Borrower’s or
Guarantor’s knowledge, would cause Agent to consider any then existing Accounts
as no longer constituting Eligible Accounts. 
No credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor without Agent’s consent,
except in the ordinary course of a Borrower’s or Guarantor’s business in
accordance with practices and policies previously disclosed in writing to Agent
and except as set forth in the schedules delivered to Agent pursuant to
Section 7.1(a) above.  So long as
no Event of Default exists or has occurred and is continuing, Borrowers and Guarantors
shall settle, adjust or compromise any claim, offset, counterclaim or dispute
with any account debtor.  At any time
that an Event of Default exists or has occurred and is continuing, Agent shall,
at its option, have the exclusive right to settle, adjust or compromise any
claim, offset, counterclaim or dispute with account debtors or grant any
credits, discounts or allowances.


 


(b)                                 With respect to each Account: (i)
the amounts shown on any invoice delivered to Agent or schedule thereof
delivered to Agent shall be true and complete, (ii) no payments shall be made
thereon except payments immediately delivered to Agent pursuant to the terms of
this Agreement, (iii) no credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted to any account debtor except as
reported to Agent in accordance with this Agreement and except for credits,
discounts, allowances or extensions made or given in the ordinary course of
each Borrower’s business in accordance with practices and policies previously
disclosed to Agent, (iv) there shall be no setoffs, deductions, contras,
defenses, counterclaims or disputes existing or asserted with respect thereto
except as reported to Agent in accordance with the terms of this Agreement, (v)
none of the transactions giving rise thereto will violate any applicable
foreign, Federal, State or local laws or regulations, all documentation
relating thereto will be legally sufficient under such laws and regulations and
all such documentation will be legally enforceable in accordance with its
terms.


 


(c)                                  Agent shall have the right at any
time or times, in Agent’s name or in the name of a nominee of Agent, to verify
the validity, amount or any other matter relating to any


 


49

















 


Receivables or other Collateral, by
mail, telephone, facsimile transmission or otherwise.  When no Event of Default has occurred and is continuing, Agent
shall give Administrative Borrower at least one (1) Business Day’s prior
telephonic notice of any such verification.


 


7.3                                 Intentionally
Deleted.


 


7.4                                 Equipment
and Real Property Covenants.  With respect to the Equipment and Real Property owned by any
Borrower or Guarantor: (a) upon Agent’s request, Borrowers and Guarantors
shall, at their expense at any time or times as Agent may request on or after
an Event of Default, deliver or cause to be delivered to Agent written
appraisals as to the Real Property in form, scope and methodology acceptable to
Agent and by an appraiser acceptable to Agent, addressed to Agent and upon
which Agent is expressly permitted to rely; (b) Borrowers shall maintain the
vehicles in accordance with the maintenance system utilized by Borrowers on the
date hereof and otherwise in a manner acceptable to Agent; each Borrower shall
keep the Equipment in good order, repair, running and marketable condition
(ordinary wear and tear excepted); (c) Borrowers and Guarantors shall use the
Equipment and Real Property with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
all applicable laws; (d) the Equipment is and shall be used in the business of
Borrowers and Guarantors and not for personal, family, household or farming
use; (e) Borrowers and Guarantors shall not remove any Equipment from the
locations set forth or permitted herein, except to the extent necessary to have
any Equipment repaired or maintained in the ordinary course of its business or
to move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of such Borrower or Guarantor in the ordinary course of
business; (f) the Equipment is now and shall remain personal property and
Borrowers and Guarantors shall not permit any of the Equipment to be or become
a part of or affixed to real property; and (g) each Borrower and Guarantor
assumes all responsibility and liability arising from the use of the Equipment
and Real Property.


 


7.5                                 Power
of Attorney.  Each
Borrower and Guarantor hereby irrevocably designates and appoints Agent (and
all persons designated by Agent) as such Borrower’s and Guarantor’s true and
lawful attorney-in-fact, and authorizes Agent, in such Borrower’s, Guarantor’s
or Agent’s name, to: (a) at any time an Event of Default exists or has occurred
and is continuing (i) demand payment on Receivables or other Collateral, (ii)
enforce payment of Receivables by legal proceedings or otherwise, (iii)
exercise all of such Borrower’s or Guarantor’s rights and remedies to collect
any Receivable or other Collateral, (iv) sell or assign any Receivable upon
such terms, for such amount and at such time or times as the Agent deems
advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi)
discharge and release any Receivable, (vii) prepare, file and sign such
Borrower’s or Guarantor’s name on any proof of claim in bankruptcy or other
similar document against an account debtor or other obligor in respect of any
Receivables or other Collateral, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an
address designated by Agent, and open and dispose of all mail addressed to such
Borrower or Guarantor and handle and store all mail relating to the Collateral;
(ix) prepare, complete and execute any documents on behalf of any Borrower or
Guarantor, as the case may be, in order to issue a manufacturer’s statement of
origin, manufacturer’s certificate of origin and other certificates,
statements, bills of sale or other


 


50

















 


evidence of the transfer by any Borrower or Guarantor,
as the case may be, of any vehicle of Borrower or Guarantor, as the case may
be, and in order to cause a certificate of title with respect to any vehicle to
be issued,  and (x) do all acts and
things which are necessary, in Agent’s determination, to fulfill such
Borrower’s or Guarantor’s obligations under this Agreement and the other
Financing Agreements and (b) at any time to (i) take control in any manner of
any item of payment in respect of Receivables or constituting Collateral or
otherwise received in or for deposit in the Blocked Accounts or otherwise
received by Agent or any Lender, (ii) have access to any lockbox or postal box
into which remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral are sent or received, (iii) endorse
such Borrower’s or Guarantor’s name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Agent and any
Lender and deposit the same in Agent’s account for application to the
Obligations, (iv) endorse such Borrower’s or Guarantor’s name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Receivable or any goods pertaining thereto or any other Collateral,
including any warehouse or other receipts, or bills of lading and other
negotiable or non-negotiable documents, (v) clear Inventory the purchase of
which was financed with Letter of Credit Accommodations through U.S. Customs or
foreign export control authorities in such Borrower’s or Guarantor’s name,
Agent’s name or the name of Agent’s designee, and to sign and deliver to
customs officials powers of attorney in such Borrower’s or Guarantor’s name for
such purpose, and to complete in such Borrower’s or Guarantor’s or Agent’s
name, any order, sale or transaction, obtain the necessary documents in
connection therewith and collect the proceeds thereof, and (vi) sign such
Borrower’s or Guarantor’s name on any verification of Receivables and notices
thereof to account debtors or any secondary obligors or other obligors in respect
thereof.  Each Borrower and Guarantor
hereby releases Agent and Lenders and their respective officers, employees and
designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of Agent’s or any Lender’s own gross negligence or wilful
misconduct as determined pursuant to a final non-appealable order of a court of
competent jurisdiction.


 


7.6                                 Right to
Cure.  Agent may,
at its option, upon notice to Administrative Borrower, (a) cure any default by
any Borrower or Guarantor under any material agreement with a third party that
affects the Collateral, its value or the ability of Agent to collect, sell or
otherwise dispose of the Collateral or the rights and remedies of Agent or any
Lender therein or the ability of any Borrower or Guarantor to perform its
obligations hereunder or under any of the other Financing Agreements, (b) pay
or bond on appeal any judgment entered against any Borrower or Guarantor,
and/or (c) discharge taxes, liens, security interests or other encumbrances at
any time levied on or existing with respect to the Collateral and pay any
amount, incur any expense or perform any act which, in Agent’s judgment, is
necessary or appropriate to preserve, protect, insure or maintain the
Collateral and the rights of Agent and Lenders with respect thereto.  Agent may add any amounts so expended to the
Obligations and charge any Borrower’s account therefor, such amounts to be
repayable by Borrowers on demand.  Agent
and Lenders shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of any Borrower or Guarantor. 
Any payment made or other action taken by Agent or any Lender under this
Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.


 


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7.7                                 Access
to Premises.  From
time to time as requested by Agent, at the cost and expense of Borrowers, (a)
Agent or its designee (accompanied by no more than one (1) representative of
each Lender) shall have complete access to all of each Borrower’s and
Guarantor’s premises during normal business hours and after notice to Parent,
or at any time and without notice to Administrative Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of each Borrower’s
and Guarantor’s books and records, including the Records, and (b) each Borrower
and Guarantor shall promptly furnish to Agent such copies of such books and
records or extracts therefrom as Agent may request, and Agent or any Lender or
Agent’s designee may use during normal business hours such of any Borrower’s
and Guarantor’s personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Receivables and realization of
other Collateral.


 


SECTION 8.  REPRESENTATIONS AND WARRANTIES


 


Each Borrower and
Guarantor hereby represents and warrants to Agent and Lenders the following
(which shall survive the execution and delivery of this Agreement), the truth
and accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations to Borrowers:


 


8.1                                 Corporate
Existence,
Power and Authority. 
Each of Borrower, Guarantor, and Atlantic North is a corporation duly
organized and in good standing under the laws of its state of incorporation and
is duly qualified as a foreign corporation and in good standing in all states
or other jurisdictions where the nature and extent of the business transacted
by it or the ownership of assets makes such qualification necessary, except for
those jurisdictions in which the failure to so qualify would not have a
material adverse effect on such Borrower’s or Guarantor’s or Atlantic North’s
financial condition, results of operation or business or the rights of Agent in
or to any of the Collateral.  The
execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder (a) are
all within each Borrower’s and Guarantor’s corporate powers, (b) have been duly
authorized, (c) are not in contravention of law or the terms of any Borrower’s
or Guarantor’s certificate of incorporation, by-laws, or other organizational
documentation, or any indenture, agreement or undertaking to which any Borrower
or Guarantor is a party or by which any Borrower or Guarantor or its property
are bound and (d) will not result in the creation or imposition of, or require
or give rise to any obligation to grant, any lien, security interest, charge or
other encumbrance upon any property of any Borrower or Guarantor other than in
favor of the Agent, the Lenders, the Noteholder Collateral Agent and the
Noteholders as permitted in Section 9.8 hereof.  This Agreement and the other Financing Agreements to which any
Borrower or Guarantor is a party constitute legal, valid and binding
obligations of such Borrower and Guarantor enforceable in accordance with their
respective terms.


 


8.2                                 Name;
State of Organization;
Chief Executive Office; Collateral Locations.


 


(a)                                  The exact legal name of each
Borrower and Guarantor is as set forth on the signature page of this Agreement
and in the Information Certificate.  No
Borrower or


 


52

















 


Guarantor has, during the five years
prior to the date of this Agreement, been known by or used any other corporate
or fictitious name or been a party to any merger or consolidation, or acquired
all or substantially all of the assets of any Person, or acquired any of its
property or assets out of the ordinary course of business, except as set forth
in the Information Certificate.


 


(b)                                 Each Borrower and Guarantor is an
organization of the type and organized in the jurisdiction set forth in the
Information Certificate.  The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such Borrower
or Guarantor has none and accurately sets forth the federal employer
identification number of each Borrower and Guarantor.


 


(c)                                  The chief executive office and
mailing address of each Borrower and Guarantor and each Borrower’s and
Guarantor’s Records concerning Accounts are located only at the address
identified as such in the Information Certificate and its only other places of
business and the only other locations of Collateral, if any, are the addresses
set forth in Schedule 8.2 to the Information Certificate, subject to the
rights of any Borrower or Guarantor to establish new locations in accordance
with Section 9.2 below.  The
Information Certificate correctly identifies any of such locations which are
not owned by a Borrower or Guarantor and sets forth the owners and/or operators
thereof.


 


8.3                                 Financial Statements; No Material Adverse Change.  All financial statements relating to AETG,
any Borrower or Guarantor which have been or may hereafter be delivered by any
Borrower or Guarantor to Agent and Lenders have been prepared in accordance
with GAAP (except as to any interim financial statements, to the extent such
statements are subject to normal year-end adjustments and do not include any
notes) and fairly present in all material respects the financial condition and
the results of operation of such Borrower and Guarantor as at the dates and for
the periods set forth therein.  Except
as disclosed in any interim financial statements furnished by Borrowers and
Guarantors to Agent prior to the date of this Agreement, there has been no act,
condition or event which has had or is reasonably likely to have a Material
Adverse Effect since the date of the most recent audited financial statements
of any Borrower or Guarantor furnished by any Borrower or Guarantor to Agent
prior to the date of this Agreement.


 


8.4                                 Priority of Liens; Title to Properties.  The security interests and liens granted to
Agent under this Agreement and the other Financing Agreements constitute valid
and perfected first priority liens and security interests in and upon the
Collateral subject only to the liens indicated on Schedule 8.4 to the
Information Certificate and the other liens permitted under Section 9.8
hereof.  Each Borrower and Guarantor has
good and marketable fee simple title to or valid leasehold interests in all of
its Real Property and good, valid and merchantable title to all of its other
properties and assets subject to no liens, mortgages, pledges, security
interests, encumbrances or charges of any kind, except those granted to Agent
and such others as are specifically listed on Schedule 8.4 to the
Information Certificate or permitted under Section 9.8 hereof.


 


8.5                                 Tax Returns.  AETG and each Borrower and Guarantor has
filed, or caused to be filed, in a timely manner all tax returns, reports and
declarations which are required to be filed by it.  All information in such tax returns, reports and declarations is
complete and


 


53

















 


accurate in all material respects.  Except to the extent discharged under the
Plan or to the extent the Plan provides that such taxes are not required to be
paid when due, AETG and each Borrower and Guarantor has paid or caused to be
paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to AETG, such
Borrower or Guarantor and with respect to which adequate reserves have been set
aside on its books and taxes set forth in Schedule E to the Information
Certificate.  Adequate provision has
been made for the payment of all accrued and unpaid Federal, State, county,
local, foreign and other taxes whether or not yet due and payable and whether
or not disputed.


 


8.6                                 Litigation.  Except as set forth on Schedule 8.6 to
the Information Certificate, (a) there is no investigation by any Governmental
Authority pending, or to the best of any Borrower’s or Guarantor’s knowledge
threatened, against or affecting AETG, any Borrower or Guarantor, its or their
assets or business and (b) there is no action, suit, proceeding or claim by any
Person pending, or to the best of any Borrower’s or Guarantor’s knowledge
threatened, against AETG, any Borrower or Guarantor or its or their assets or
goodwill, or against or affecting any transactions contemplated by this
Agreement, in each case, which if adversely determined against AETG, such
Borrower or Guarantor has or could reasonably be expected to have a Material
Adverse Effect.


 


8.7                                 Compliance with Other Agreements and Applicable Laws.


 


(a)                                  Borrowers and Guarantors are not in
default in any respect under, or in violation in any respect of the terms of,
any material agreement, contract, instrument, lease or other commitment to
which it is a party or by which it or any of its assets are bound other than
such defaults occurring prior to the commencement of the Chapter 11 Cases.  Borrowers and Guarantors are in compliance
in all material respects with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority relating to their
respective businesses, including, without limitation, those set forth in or
promulgated pursuant to the Occupational Safety and Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as
amended, and the rules and regulations thereunder, and all Environmental Laws.


 


(b)                                 Borrowers and Guarantors have
obtained all material permits, licenses, approvals, consents, certificates,
orders or authorizations of any Governmental Authority required for the lawful
conduct of its business (the “Permits”). 
All of the Permits are valid and subsisting and in full force and
effect.  There are no actions, claims or
proceedings pending or to the best of any Borrower’s or Guarantor’s knowledge,
threatened that seek the revocation, cancellation, suspension or modification
of any of the Permits.


 


8.8                                 Environmental
Compliance.


 


(a)                                  Except as set forth on
Schedule 8.8 to the Information Certificate, Borrowers, Guarantors and any
Subsidiary of any Borrower or Guarantor have not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates in any material respect any applicable
Environmental Law or Permit, and the


 


54

















 


operations of Borrowers, Guarantors
and any Subsidiary of any Borrower or Guarantor complies in all material
respects with all Environmental Laws and all Permits.


 


(b)                                 Except as set forth on
Schedule 8.8 to the Information Certificate, there has been no
investigation by any Governmental Authority or any proceeding, complaint,
order, directive, claim, citation or notice by any Governmental Authority or
any other person nor is any pending or to the best of any Borrower’s or
Guarantor’s knowledge threatened, with respect to any non-compliance with or
violation of the requirements of any Environmental Law by any Borrower or
Guarantor and any Subsidiary of any Borrower or Guarantor or the release, spill
or discharge, threatened or actual, of any Hazardous Material or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which adversely affects or could reasonably be
expected to adversely affect in any material respect any Borrower or Guarantor
or its or their business, operations or assets or any properties at which such
Borrower or Guarantor has transported, stored or disposed of any Hazardous Materials.


 


(c)                                  Except as set forth on
Schedule 8.8 to the Information Certificate, Borrowers, Guarantors and
their Subsidiaries have no material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.


 


(d)                                 Borrowers, Guarantors and their
Subsidiaries have all Permits required to be obtained or filed in connection
with the operations of Borrowers and Guarantors under any Environmental Law and
all of such licenses, certificates, approvals or similar authorizations and
other Permits are valid and in full force and effect.


 


8.9                                 Employee
Benefits


 


(a)                                  Except with respect to a delinquency
in filing reports with respect to a 401(k) plan, neither Parent, any Borrower
nor any Subsidiary of a Borrower has engaged in any transaction in connection
with which Parent, such Borrower or such Subsidiary or any of their ERISA
Affiliates could be subject to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code,
including any accumulated funding deficiency described in Section 8.9(c)
hereof and any deficiency with respect to vested accrued benefits described in
Section 8.9(d) hereof which could reasonably be expected to result in
liabilities to any Borrower or Guarantor in an aggregate amount in excess of
$100,000.


 


(b)                                 No liability to the Pension Benefit
Guaranty Corporation has been or is expected by Parent, any Borrower or any
Subsidiary of a Borrower to be incurred with respect to any employee pension
benefit plan of Parent, such Borrower or any such Subsidiary or any of its
ERISA Affiliates.  There has been no
reportable event (within the meaning of Section 4043(c) of ERISA) or any
other event or condition with respect to any employee pension benefit plan of
Parent, any such Borrower or any such Subsidiary or any of their ERISA
Affiliates which presents a risk of termination of any such plan by the Pension
Benefit Guaranty Corporation.


 


55

















 


(c)                                  Except as set forth in the
pre-petition claim of Division 1181 A.T.U. New York Welfare Fund and Division
1181 A.T.U. New York Employees Pension Fund which claim has been settled
pursuant to the Order Approving Compromise and Settlement with Division 1181
A.T.U. New York Welfare Fund and Division 1181 A.T.U. New York Employees
Pension Fund, dated October 2, 2003, full payment has been made of all
amounts which Parent, any Borrower or any Subsidiary of a Borrower or any of
their ERISA Affiliates is required under Section 302 of ERISA and
Section 412 of the Code to have paid under the terms of each employee
pension benefit plan as contributions to such plan as of the last day of the
most recent fiscal year of such plan ended prior to the date hereof, and no
accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to
any employee pension benefit plan, including any penalty or tax described in
Section 8.9(a) hereof and any deficiency with respect to vested accrued
benefits described in Section 8.9(d) hereof which could reasonably be
expected to result in liabilities to any Borrower or Guarantor in an aggregate
amount in excess of $500,000.


 


(d)                                 The current value of all vested
accrued benefits under all employee pension benefit plans maintained by Parent,
any Borrower or any Subsidiary of a Borrower that are subject to Title IV of
ERISA does not exceed the current value of the assets of such plans allocable
to such vested accrued benefits, including any penalty or tax described in
Section 8.8(a) hereof and any accumulated funding deficiency described in
Section 8.8(c) hereof.  The terms
“current value” and “accrued benefit” have the meanings specified in ERISA
which could reasonably be expected to result in liabilities to any Borrower or
Guarantor in an aggregate amount of $500,000.


 


(e)                                  Except as set forth on
Schedule 8.9 hereof, none of Parent, any Borrower or any Subsidiary of a
Borrower or any of their ERISA Affiliates is or has ever been obligated to
contribute to any “multiemployer plan” (as such term is defined in
Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.


 


8.10                           Bank
Accounts.  All of
the deposit accounts, investment accounts or other accounts in the name of or
used by any Borrower or Guarantor maintained at any bank or other financial
institution are set forth on Schedule 8.10 to the Information Certificate,
subject to the right of each Borrower and Guarantor to establish new accounts
in accordance with Section 5.2 hereof.


 


8.11                           Intellectual
Property.  Each
Borrower and Guarantor owns or licenses or otherwise has the right to use all
Intellectual Property necessary for the operation of its business as presently
conducted or proposed to be conducted. 
As of the date hereof, Borrowers and Guarantors do not have any
Intellectual Property registered, or subject to pending applications, in the
United States Patent and Trademark Office or any similar office or agency in
the United States, any State thereof, any political subdivision thereof or in
any other country, other than those described in Schedule 8.11 to the
Information Certificate and has not granted any licenses with respect thereto
other than as set forth in Schedule 8.11 to the Information
Certificate.  No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights.  To the best of any Borrower’s and Guarantor’s knowledge, no
slogan or other advertising device, product, process, method, substance or
other Intellectual Property or goods bearing or using any Intellectual Property


 


56

















 


presently contemplated to be sold by or employed by
any Borrower or Guarantor infringes any patent, trademark, servicemark,
tradename, copyright, license or other Intellectual Property owned by any other
Person presently and no claim or litigation is pending or threatened against or
affecting any Borrower or Guarantor contesting its right to sell or use any
such Intellectual Property. 
Schedule 8.11 to the Information Certificate sets forth all of the
agreements or other arrangements of each Borrower and Guarantor pursuant to
which such Borrower or Guarantor has a license or other right to use any
trademarks, logos, designs, representations or other Intellectual Property
(other than generally commercially available computer software) owned by
another person as in effect on the date hereof and the dates of the expiration
of such agreements or other arrangements of such Borrower or Guarantor as in
effect on the date hereof (collectively, together with such agreements or other
arrangements as may be entered into by any Borrower or Guarantor after the date
hereof, collectively, the “License Agreements” and individually, a “License
Agreement”).  No trademark, servicemark,
copyright or other Intellectual Property at any time used by any Borrower or
Guarantor which is owned by another person, or owned by such Borrower or
Guarantor subject to any security interest, lien, collateral assignment, pledge
or other encumbrance in favor of any person other than Agent, is affixed to any
Eligible Vehicle or Eligible New Vehicle, except (a) to the extent permitted
under the term of the license agreements listed on Schedule 8.11 to the
Information Certificate and (b) to the extent the sale of Inventory to which
such Intellectual Property is affixed is permitted to be sold by such Borrower
or Guarantor under applicable law (including the United States Copyright Act of
1976).


 


8.12                           Subsidiaries; Affiliates; Capitalization; Solvency.


 


(a)                                  Each Borrower and Guarantor does not
have any direct or indirect Subsidiaries or Affiliates and is not engaged in
any joint venture or partnership except as set forth in Schedule 8.12 to
the Information Certificate.


 


(b)                                 Each Borrower and Guarantor is the
record and beneficial owner of all of the issued and outstanding shares of
Capital Stock of each of the Subsidiaries listed on Schedule 8.12 to the
Information Certificate as being owned by such Borrower or Guarantor and there
are no proxies, irrevocable or otherwise, with respect to such shares and no
equity securities of any of the Subsidiaries are or may become required to be
issued by reason of any options, warrants, rights to subscribe to, calls or
commitments of any kind or nature and there are no contracts, commitments,
understandings or arrangements by which any Subsidiary is or may become bound
to issue additional shares of it Capital Stock or securities convertible into
or exchangeable for such shares , other than pursuant to the Noteholder
Warrants.


 


(c)                                  The issued and outstanding shares of
Capital Stock of each Borrower and Guarantor are directly and beneficially
owned and held by the persons indicated in the Information Certificate, and in
each case all of such shares have been duly authorized and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances
of any kind.


 


(d)                                 Borrowers and Guarantors, on a
consolidated basis, will be Solvent after the Effective Date, the creation of
the Obligations, the security interests of Agent and the other transaction
contemplated hereunder.


 


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8.13                           Labor
Disputes.


 


(a)                                  Set forth on Schedule 8.13 to
the Information Certificate is a list (including dates of termination) of all
collective bargaining or similar agreements between or applicable to each
Borrower and Guarantor and any union, labor organization or other bargaining
agent in respect of the employees of any Borrower or Guarantor on the date
hereof.


 


(b)                                 There is (i) no significant unfair
labor practice complaint pending against any Borrower or Guarantor or, to the
best of any Borrower’s or Guarantor’s knowledge, threatened against it, before
the National Labor Relations Board, and no significant grievance or significant
arbitration proceeding arising out of or under any collective bargaining
agreement is pending on the date hereof against any Borrower or Guarantor or,
to best of any Borrower’s or Guarantor’s knowledge, threatened against it, and
(ii) no significant strike, labor dispute, slowdown or stoppage is pending against
any Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s
knowledge, threatened against any Borrower or Guarantor except the
strike on April 22, 2004 by the employees of Atlantic Paratrans of NYC,
Inc. who are members of Local 1181 of the Amalgamated Transit Union AFL-CIO.


 


8.14                           Restrictions
on Subsidiaries. 
Except for restrictions contained in this Agreement or any other
agreement with respect to Indebtedness of any Borrower or Guarantor permitted
hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on any Borrower or Guarantor or any of its Subsidiaries
other than Atlantic North Casualty Corp. and Atlantic Conn. Transit Inc. which
prohibit or otherwise restrict (a) the transfer of cash or other assets (i)
between any Borrower or Guarantor and any of its or their Subsidiaries or (ii)
between any Subsidiaries of any Borrower or Guarantor or (b) the ability of any
Borrower or Guarantor or any of its or their Subsidiaries to incur Indebtedness
or grant security interests to Agent or any Lender in the Collateral.


 


8.15                           Material
Contracts. 
Schedule 8.15 to the Information Certificate sets forth all
Material Contracts to which any Borrower or Guarantor is a party or is bound as
of the date hereof.  Borrowers and
Guarantors have delivered true, correct and complete copies of such Material
Contracts to Agent on or before the date hereof.  Borrowers and Guarantors are not in breach or in default in any
material respect of or under any Material Contract other than a breach or
default occurring prior to the commencement of the Chapter 11 Cases and have
not received any notice of the intention of any other party thereto to
terminate any Material Contract.


 


8.16                           Payable
Practices.  Each
Borrower and Guarantor have not made any material change in the historical
accounts payable practices from those in effect immediately prior to the date
hereof.


 


8.17                           Inventory.  Jersey holds substantially all buses and
other transportation vehicles owned by them for sale or lease and each is in
the business of selling goods of that kind.


 


8.18                           Interrelated
Businesses. 
Borrowers and Guarantors make up a related organization of various
entities constituting one single and economic enterprise so that Borrowers and
Guarantor share an identity of interests such that any benefit received by any
one of them benefits the others.  Each
Borrower and Guarantor renders services to or for the benefit


 


58

















 


of the other Borrowers and/or Guarantors, as the case
may be, purchases or sells and supplies goods to or from or for the benefit of
the other Borrowers and Guarantors (including, without limitation, the payment
by Borrowers and Guarantors of Indebtedness of the other Borrowers and
Guarantors) and provide administrative, marketing, payroll and management
services to or for the benefit of the other Borrowers and Guarantors.  Borrowers and Guarantors have centralized
accounting and legal services, and common officers and directors.


 


8.19                           Accuracy
and Completeness of Information.  All information furnished by or on behalf of
any Borrower or Guarantor in writing to Agent or any Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material
fact necessary in order to make such information not misleading.  No event or circumstance has occurred which
has had or could reasonably be expected to have a Material Adverse Affect,
which has not been fully and accurately disclosed to Agent in writing prior to
the date hereof.


 


8.20                           Survival
of Warranties; Cumulative. 
All representations and warranties contained in this Agreement or any of
the other Financing Agreements shall survive the execution and delivery of this
Agreement and shall be deemed to have been made again to Agent and Lenders on
the date of each additional borrowing or other credit accommodation hereunder
and shall be conclusively presumed to have been relied on by Agent and Lenders
regardless of any investigation made or information possessed by Agent or any
Lender.  The representations and
warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which any Borrower or Guarantor shall now or
hereafter give, or cause to be given, to Agent or any Lender.


 


SECTION 9.  AFFIRMATIVE AND NEGATIVE COVENANTS


 


9.1                                 Maintenance
of Existence.


 


(a)                                  Each Borrower and Guarantor shall,
at all times, to preserve, renew and keep in full force and effect its
corporate existence and rights and franchises with respect thereto and maintain
in full force and effect all licenses, trademarks, tradenames, approvals,
authorizations, leases, contracts and Permits necessary to carry on the
business as presently or proposed to be conducted, except as permitted in
Section 9.7 hereto.


 


(b)                                 No Borrower or Guarantor shall change
its name unless each of the following conditions is satisfied: (i) Agent shall
have received not less than thirty (30) days prior written notice from
Administrative Borrower of such proposed change in its corporate name, which
notice shall accurately set forth the new name; and (ii) Agent shall have
received a copy of the amendment to the Certificate of Incorporation of such
Borrower or Guarantor providing for the name change certified by the Secretary
of State of the jurisdiction of incorporation or organization of such Borrower
or Guarantor as soon as it is available.


 


(c)                                  No Borrower or Guarantor shall
change its chief executive office or its mailing address or organizational
identification number (or if it does not have one, shall not


 


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acquire one) unless Agent shall have
received not less than thirty (30) days’ prior written notice from
Administrative Borrower of such proposed change, which notice shall set forth
such information with respect thereto as Agent may require and Agent shall have
received such agreements as Agent may reasonably require in connection
therewith.  No Borrower or Guarantor
shall change its type of organization, jurisdiction of organization or other
legal structure.


 


9.2                                 New
Collateral Locations. 
Each Borrower and Guarantor may only open any new location within the
continental United States provided such Borrower or Guarantor (a) gives Agent
twenty (20) days prior written notice of the intended opening of any such new
location (or as soon as practically possible but in any event no later than
five (5) days after Borrower or any Collateral is located at such location) and
(b) executes and delivers, or causes to be executed and delivered, to Agent
such agreements, documents, and instruments as Agent may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location.


 


9.3                                 Compliance with Laws, Regulations, Etc.


 


(a)                                  Each
Borrower and Guarantor shall, and shall cause any Subsidiary (including Atlantic
North) to, at all times, comply in all material respects with all laws, rules,
regulations, licenses, approvals, orders and other Permits applicable to it and
duly observe all requirements of any foreign, Federal, State or local
Governmental Authority, including ERISA, the Code, the Occupational Safety and
Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, and all statutes, rules, regulations, orders, permits and stipulations
relating to environmental pollution and employee health and safety, including
all of the Environmental Laws.


 


(b)                                 Borrowers and Guarantors shall give
written notice to Agent immediately upon any Borrower’s or Guarantor’s receipt
of any notice of, or any Borrower’s or Guarantor’s otherwise obtaining knowledge
of, (i) the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with
respect to: (A) any non-compliance with or violation of any Environmental Law
by any Borrower or Guarantor or (B) the release, spill or discharge, threatened
or actual, of any Hazardous Material other than in the ordinary course of
business and other than as permitted under any applicable Environmental Law, in
each case, which has or would reasonably be expected to have a Material Adverse
Effect. Copies of all environmental surveys, audits, assessments, feasibility
studies and results of remedial investigations shall be promptly furnished, or
caused to be furnished, by such Borrower or Guarantor to Agent.  Each Borrower and Guarantor shall take
prompt action to respond to any material non-compliance with any of the
Environmental Laws and shall regularly report to Agent on such response.


 


(c)                                  Without limiting the generality of
the foregoing, whenever Agent reasonably determines that there is
non-compliance, or any condition which requires any action by or on behalf of
any Borrower or Guarantor in order to avoid any non-compliance, with any
Environmental Law, Borrowers shall, at Agent’s request and Borrowers’ expense:
(i) cause an independent environmental engineer reasonably acceptable to Agent
to conduct such tests of the site where non-compliance or alleged
non-compliance with such Environmental Laws has


 


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occurred as to such non-compliance
and prepare and deliver to Agent a report as to such non-compliance setting
forth the results of such tests, a proposed plan for responding to any
environmental problems described therein, and an estimate of the costs thereof
and (ii) provide to Agent a supplemental report of such engineer whenever the
scope of such non-compliance, or such Borrower’s or Guarantor’s response
thereto or the estimated costs thereof, shall change in any material respect.


 


(d)                                 Each Borrower and Guarantor shall
indemnify and hold harmless Agent and Lenders and their respective directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including reasonable attorneys’ fees and expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property
of any Borrower or Guarantor and the preparation and implementation of any
closure, remedial or other required plans. 
All representations, warranties, covenants and indemnifications in this
Section 9.3 shall survive the payment of the Obligations and the termination
of this Agreement.


 


9.4                                 Payment
of Taxes and Claims. 
Except to the extent discharged under the Plan or to the extent the Plan
provides that such taxes, assessments, contributions or charges are not
required to be paid when due, each Borrower and Guarantor shall, and shall
cause any Subsidiary to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to such
Borrower, Guarantor or Subsidiary, as the case may be, and with respect to
which adequate reserves have been set aside on its books.  Each Borrower and Guarantor shall be liable
for any tax or penalties imposed on Agent or any Lender as a result of the
financing arrangements provided for herein and each Borrower and Guarantor
agrees to indemnify and hold Agent harmless with respect to the foregoing, and
to repay to Agent, for the benefit of Lenders, on demand the amount thereof, and
until paid by such Borrower or Guarantor such amount shall be added and deemed
part of the Loans, provided, that, nothing contained herein shall be construed
to require any Borrower or Guarantor to pay any income or franchise taxes
attributable to the income of Lenders from any amounts charged or paid
hereunder to Lenders. The foregoing indemnity shall survive the payment of the
Obligations and the termination of this Agreement.


 


9.5                                 Insurance.  Each Borrower and Guarantor shall, and shall
cause any Subsidiary to, at all times, maintain with financially sound and
reputable insurers insurance with respect to the Collateral against loss or
damage and all other insurance of the kinds and in the amounts customarily
insured against or carried by corporations of established reputation engaged in
the same or similar businesses and similarly situated.  Said policies of insurance shall be
reasonably satisfactory to Agent as to form, amount and insurer.  Borrowers and Guarantors shall furnish
certificates, policies or endorsements to Agent as Agent shall reasonably
require as proof of such insurance, and, if any Borrower or Guarantor fails to
do so, Agent is authorized, but not required, to obtain such insurance at the
expense of Borrowers.  All policies
shall provide for at least thirty (30) days prior written notice to Agent of
any cancellation or reduction of coverage and that Agent may act as attorney
for each Borrower and Guarantor in obtaining, and at any


 


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time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance.  Borrowers and Guarantors shall cause Agent
to be named as a loss payee and an additional insured (but without any
liability for any premiums) under such insurance policies and Borrowers and
Guarantors shall obtain non-contributory lender’s loss payable endorsements to
all insurance policies in form and substance satisfactory to Agent.  Such lender’s loss payable endorsements
shall specify that the proceeds of such insurance shall be payable to Agent as
its interests may appear and further specify that Agent and Lenders shall be
paid regardless of any act or omission by any Borrower, Guarantor or any of its
or their Affiliates. Without limiting any other rights of Agent or Lenders, any
insurance proceeds received by Agent at any time may be applied to payment of
the Obligations, whether or not then due, in any order and in such manner as
Agent and Required Lenders may determine. 
Upon application of such proceeds to the Loans, Loans may be available
subject and pursuant to the terms hereof to be used for the costs of repair or
replacement of the Collateral lost or damages resulting in the payment of such
insurance proceeds.


 


9.6                                 Financial
Statements and Other Information.


 


(a)                                  Each Borrower and Guarantor shall,
and shall cause any Subsidiary to, keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of such Borrower, Guarantor and its
Subsidiaries in accordance with GAAP. 
Borrowers and Guarantors shall promptly furnish to Agent and Lenders all
such financial and other information as Agent shall reasonably request relating
to the Collateral and the assets, business and operations of Borrowers and
Guarantors, and Borrower shall notify the auditors and accountants of Borrowers
and Guarantors that Agent is authorized to obtain such information directly
from them.  Without limiting the foregoing,
Borrowers and Guarantors shall furnish or cause to be furnished to Agent (with
copies to sent to Lenders by Agent), the following: (i) within forty-five (45)
days (or within fifty (50) days if such fiscal month is the end of a fiscal
quarter, if Borrowers have received a filing extension from the Securities and
Exchange Commission with respect to the filing of its quarterly report for that
period) after the end of each fiscal month (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders’ equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of Parent and its
Subsidiaries as of the end of and through such fiscal month, certified to be
correct by the chief financial officer of Parent, subject to normal year-end
adjustments and no footnotes and accompanied by a compliance certificate
substantially in the form of Exhibit C hereto, along with a schedule in a
form satisfactory to Agent of the calculations used in determining, as of the
end of such month, whether Borrowers and Guarantors are in compliance with the
covenants set forth in Sections 9.17, 9.18 and 9.19 of this Agreement for such
month and (ii) within ninety (90) days (or within 105 days, if the Borrowers
have received a filing extension from the Securities and Exchange Commission
with respect to their annual report) after the end of each fiscal year, audited
consolidated financial statements and unaudited consolidating financial
statements of Parent and its Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders’ equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Parent and its Subsidiaries as of the end of and for such fiscal
year, together with the unqualified opinion of independent certified public
accountants with respect to the audited consolidated financial statements,
which accountants


 


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shall be an independent accounting
firm selected by Borrowers and acceptable to Agent, that such audited
consolidated financial statements have been prepared in accordance with GAAP,
and present fairly the results of operations and financial condition of Parent
and its Subsidiaries as of the end of and for the fiscal year then ended.


 


(b)                                 Borrowers and Guarantors shall
promptly notify Agent in writing of the details of (i) any loss, damage,
investigation, action, suit, proceeding or claim relating to Collateral having
a value of more than $500,000 or which if adversely determined would result in
any material adverse change in any Borrower’s or Guarantor’s business,
properties, assets, goodwill or condition, financial or otherwise, (ii) any
Material Contract being terminated or amended or any new Material Contract
entered into (in which event Borrowers and Guarantors shall provide Agent with
a copy of such Material Contract), (iii) any order, judgment or decree in
excess of $1,000,000 shall have been entered against any Borrower or Guarantor
any of its or their properties or assets, (iv) any notification of a material
violation of laws or regulations received by any Borrower or Guarantor, (v) any
ERISA Event, and (vi) the occurrence of any Default or Event of Default.


 


(c)                                  Borrowers and Guarantors shall
promptly after the sending or filing thereof furnish or cause to be furnished
to Agent copies of all reports which any Borrower or Guarantor sends to its
stockholders generally and copies of all reports and registration statements
which any Borrower or Guarantor files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.


 


(d)                                 Administrative Borrower shall
furnish or cause to be furnished to Agent such budgets, forecasts, projections
and other information respecting the Collateral and the business of Borrowers
and Guarantors, as Agent may, from time to time, reasonably request.  Agent is hereby authorized to deliver a copy
of any financial statement or any other information relating to the business of
Borrowers and Guarantors to any court or other Governmental Authority or to any
Lender or Participant or prospective Lender or Participant or any Affiliate of
any Lender or Participant. Each Borrower and Guarantor hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Agent, at
Borrowers’ expense, copies of the financial statements of any Borrower and
Guarantor and any reports or management letters prepared by such accountants or
auditors on behalf of any Borrower or Guarantor and to disclose to Agent and
Lenders such information as they may have regarding the business of any
Borrower and Guarantor.  Any documents,
schedules, invoices or other papers delivered to Agent or any Lender may be
destroyed or otherwise disposed of by Agent or such Lender one (1) year after
the same are delivered to Agent or such Lender, except as otherwise designated
by Administrative Borrower to Agent or such Lender in writing.


 


9.7                                 Sale of
Assets, Consolidation, Merger, Dissolution, Etc.  Each Borrower and Guarantor shall not, and
shall not permit any Subsidiary to, directly or indirectly,


 


(a)                                  merge into or with or consolidate
with any other Person or permit any other Person to merge into or with or
consolidate with it except that any wholly-owned Subsidiary of any Borrower may
merge with and into or consolidate with any other wholly-owned Subsidiary of
Borrower (other than Atlantic North), provided, that, each of the following
conditions is satisfied as determined by Agent in good faith:  (i) Agent shall have received not


 


63

















 


less than ten (10) Business Days’
prior written notice of the intention of such Subsidiaries to so merge or
consolidate, which notice shall set forth in reasonable detail satisfactory to
Agent, the persons that are merging or consolidating, which person will be the
surviving entity, the locations of the assets of the persons that are merging
or consolidating, and the material agreements and documents relating to such
merger or consolidation, (ii) Agent shall have received such other information
with respect to such merger or consolidation as Agent may reasonably request,
(iii) as of the effective date of the merger or consolidation and after giving
effect thereto, no Default or Event of Default shall exist or have occurred,
(iv) Agent shall have received, true, correct and complete copies of all
agreements, documents and instruments relating to such merger or consolidation,
including, but not limited to, the certificate or certificates of merger to be
filed with each appropriate Secretary of State (with a copy as filed promptly
after such filing), (v) the surviving corporation shall be a Borrower and
expressly confirm, ratify and assume the Obligations and the Financing
Agreements to which it is a party in writing, in form and substance
satisfactory to Agent, and Borrowers and Guarantors shall execute and deliver
such other agreements, documents and instruments as Agent may request in
connection therewith;


 


(b)                                 sell, issue, assign, lease, license,
transfer, abandon or otherwise dispose of any Capital Stock or Indebtedness to any
other Person or any of its assets to any other Person, except for


 


(i)                                     sales of Inventory in the ordinary
course of business,


 


(ii)                                  transfers of vehicles from any
Borrower or Guarantor to any other Borrower consistent with current practices
in effect on the date hereof, and provided, that, any such transfer is effected
subject to the existing lien on such vehicle in favor of Agent and Lenders,


 


(iii)                               the sale or other disposition of
worn-out or obsolete Equipment or Equipment no longer used or useful in the
business of any Borrower or Guarantor so long as any proceeds are paid to Agent
and applied to the Obligations in accordance with Section 6.4 hereof to
the extent Obligations are outstanding;


 


(iv)                              the sale of the assets of Jersey and
JBL, relating to Jersey’s bus sales business, including, without limitation,
the Real Property located at 2015 Route 206, Bordentown, New Jersey so long as
all of the Net Cash Proceeds of such sale are paid to Agent which proceeds
shall be applied to reduce the amount of Revolving Loans outstanding;


 


(v)                                 the lease(s) from time to time
entered into by Borrowers, as lessors, in respect of the Real Property located
at 3 North Street, Staten Island, New York and 200 Sidney Street, St. Louis,
Missouri, consistent with current practices of Borrowers as in effect on date
hereof; and


 


(vi)                              the issuance and sale by any
Borrower or Guarantor of Capital Stock of such Borrower or Guarantor after the
date hereof; provided, that, (A) Agent shall have received not less than ten
(10) Business Days’ prior written notice of such issuance and sale by such
Borrower or Guarantor, which notice shall specify the parties to whom such
shares are to be


 


64

















 


sold, the terms of such sale, the
total amount which it is anticipated will be realized from the issuance and
sale of such stock and the Net Cash Proceeds which it is anticipated will be
received by such Borrower or Guarantor from such sale, (B) such Borrower or
Guarantor shall not be required to pay any cash dividends or repurchase or
redeem such Capital Stock or make any other payments in respect thereof, except
as otherwise permitted in Section 9.11 hereof, (C) the terms of such
Capital Stock, and the terms and conditions of the purchase and sale thereof,
shall not include any terms that include any limitation on the right of any
Borrower to request or receive Loans or Letter of Credit Accommodations or the
right of any Borrower and Guarantor to amend or modify any of the terms and
conditions of this Agreement or any of the other Financing Agreements or
otherwise in any way relate to or affect the arrangements of Borrowers and
Guarantors with Agent and Lenders or are more restrictive or burdensome to any
Borrower or Guarantor than the terms of any Capital Stock in effect on the date
hereof, (D) at least, eighty-five (85%) percent of the consideration for such
sale, is in the form of cash or cash equivalents, (E) all of the proceeds of
the sale and issuance of such Capital Stock shall be paid to Agent for
application to the Obligations in such order and manner as Agent and Required
Lenders may determine and (F) as of the date of such issuance and sale and
after giving effect thereto, no Default or Event of Default shall exist or have
occurred; provided, that the foregoing conditions shall not apply to the
issuance of Capital Stock pursuant to the Noteholder Warrants;


 


(vii)                           the issuance by Parent of Capital
Stock pursuant to the terms of the Noteholder Warrants (as in effect on the
date hereof); and


 


(viii)                        wind up, liquidate or dissolve,
except, that, Jersey or Atlantic North may wind up, liquidate or dissolve,
provided, that, each of the following conditions is satisfied as determined by
Agent: (i) no Borrower or Obligor shall assume any obligations or liabilities
as a result of such winding up, liquidation or dissolution, or otherwise become
liable in respect of any obligations or liabilities of the Person which is
winding up, liquidating or dissolving, (ii) all assets such Person which is
winding up, liquidating or dissolving shall be promptly distributed to its
shareholders or partners, as the case may be, and (iii) on the date of and
after giving effect to any such winding-up, dissolution or liquidation, no
Event of Default shall exist or have occurred; and


 


(c)                                  agree to do any of the foregoing.


 


9.8                                 Encumbrances.  Each Borrower and Guarantor shall not, and
shall not permit any Subsidiary to, create, incur, assume or suffer to exist
any security interest, mortgage, pledge, lien, charge or other encumbrance of
any nature whatsoever on any of its assets or properties, including the
Collateral, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any security interest or lien
with respect to any such assets or properties, except:


 


(a)                                  the security interests and liens of
Agent for itself and the benefit of Lenders;


 


(b)                                 liens securing the payment of taxes,
assessments or other governmental charges or levies either not yet overdue or
the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower, or Guarantor or


 


65

















 


Subsidiary, as the case may be and
with respect to which adequate reserves have been set aside on its books;


 


(c)                                  non-consensual statutory liens
(other than liens securing the payment of taxes) arising in the ordinary course
of such Borrower’s, Guarantor’s or Subsidiary’s business to the extent: (i)
such liens secure Indebtedness which is not overdue or (ii) such liens secure
Indebtedness relating to claims or liabilities which are fully insured and
being defended at the sole cost and expense and at the sole risk of the insurer
(subject to deductibles) or being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower, Guarantor or
such Subsidiary, in each case prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been set
aside on its books;


 


(d)                                 zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of Real Property
which do not interfere in any material respect with the use of such Real
Property or ordinary conduct of the business of such Borrower, Guarantor or
such Subsidiary as presently conducted thereon or materially impair the value
of the Real Property which may be subject thereto;


 


(e)                                  purchase money security interests in
Equipment (including Capital Leases) and purchase money mortgages on Real
Property to secure Indebtedness permitted under Section 9.9(b) hereof;


 


(f)                                    pledges and deposits of cash by any
Borrower or Guarantor after the date hereof in the ordinary course of business
in connection with the payment of deductibles in respect of automobile
liability insurance, workers’ compensation, unemployment insurance and other
types of social security benefits consistent with the current practices of such
Borrower or Guarantor as of the date hereof;


 


(g)                                 pledges and deposits of cash by any
Borrower or Guarantor after the date hereof to secure the performance of
tenders, bids, leases, trade contracts (other than for the repayment of
Indebtedness), statutory obligations and other similar obligations in each case
in the ordinary course of business consistent with the current practices of
such Borrower or Guarantor as of the date hereof; provided, that, in connection
with any performance bonds issued by a surety or other person, the issuer of
such bond shall have waived in writing any rights in or to, or other interest
in, any of the Collateral in an agreement, in form and substance satisfactory
to Agent;


 


(h)                                 liens arising from (i) operating
leases and the precautionary UCC financing statement filings in respect thereof
and (ii) equipment or other materials which are not owned by any Borrower or
Guarantor located on the premises of such Borrower or Guarantor (but not in
connection with, or as part of, the financing thereof) from time to time in the
ordinary course of business and consistent with current practices of such
Borrower or Guarantor and the precautionary UCC financing statement filings in
respect thereof;


 


(i)                                     the security interests in and
mortgages and liens upon the Collateral and the Rolling Stock in favor of
Noteholder Collateral Agent to secure the Noteholder Debt,


 


66

















 


provided, that, the security
interests in and mortgages and liens upon the Collateral (other than certain
Real Properties of Borrowers) in favor of Noteholder Collateral Agent are and
shall at all times be subject and subordinate to the security interests, and
liens in such Collateral of Agent pursuant to the terms of the Intercreditor
Agreement;


 


(j)                                     judgments and other similar liens
arising in connection with court proceedings that do not constitute an Event of
Default, provided, that, (i) such liens are being contested in good faith and
by appropriate proceedings diligently pursued, (ii) adequate reserves or other
appropriate provision, if any, as are required by GAAP have been made therefor,
(iii) a stay of enforcement of any such liens is in effect and (iv) Agent may
establish a Reserve with respect thereto;


 


(k)                                  pledges and deposits of cash by any
Borrower or Guarantor or their respective Subsidiaries in the ordinary course
of business in an amount not in excess of the amounts set forth in
Section 9.9 (l) and otherwise consistent with the current practices of
such Borrower or Guarantor as of the date hereof to secure Indebtedness
permitted under Section 9.9(l) hereof; and


 


(l)                                     the security interests and liens set
forth on Schedule 8.4 to the Information Certificate.


 


9.9                                 Indebtedness.  Each Borrower and Guarantor shall not, and
shall not permit any Subsidiary to, incur, create, assume, become or be liable
in any manner with respect to, or permit to exist, any Indebtedness, or
guarantee, assume, endorse, or otherwise become responsible for (directly or
indirectly), the Indebtedness, performance, obligations or dividends of any
other Person, except:


 


(a)                                  the Obligations;


 


(b)                                 (i) purchase money Indebtedness
(including Capital Leases) existing on the date hereof and listed on
Schedule 9.9 of the Information Certificate to the extent secured by
purchase money security interests in Equipment (including Capital Leases), so
long as such security interests do not apply to any property of such Borrower,
Guarantor or Subsidiary other than the Equipment so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Equipment so
acquired, as the case may be, and (ii) purchase money Indebtedness (including
Capital Leases) arising after the date hereof to the extent secured by purchase
money security interests in Equipment (including Capital Leases but excluding
Indebtedness permitted in Section 9.9(h) hereof ) so long as the aggregate
principal amount of any such Indebtedness incurred after the date hereof does
not exceed the sum of (A) $5,000,000 plus (B) the lesser of (1) the amount of
any purchase money Indebtedness referred to in clause (i) above which is repaid
after the date hereof or (2) $3,500,000 outstanding at anytime, and so long as
such security interests do not apply to any property of such Borrower,
Guarantor or Subsidiary other than the Equipment so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Equipment so
acquired, as the case may be;


 


(c)                                  guarantees by any Borrower or
Guarantor of the Obligations of the other Borrowers or Guarantors in favor of
Agent for the benefit of Lenders;


 


67

















 


(d)                                 the Indebtedness of any Borrower or
Guarantor to any other Borrower or Guarantor pursuant to loans by any Borrower
or Guarantor permitted under Section 9.10(g) hereof;


 


(e)                                  unsecured Indebtedness of any
Borrower or Guarantor arising after the date hereof to any third person (but
not to any other Borrower or Guarantor), provided, that, each of the following
conditions is satisfied as determined by Agent: (i) such Indebtedness shall be
on terms and conditions acceptable to Agent and shall be subject and
subordinate in right of payment to the right of Agent and Lenders to receive
the prior indefeasible payment and satisfaction in full payment of all of the
Obligations pursuant to the terms of an intercreditor agreement between Agent
and such third party, in form and substance satisfactory to Agent, (ii) Agent
shall have received not less than ten (10) days prior written notice of the
intention of such Borrower or Guarantor to incur such Indebtedness, which
notice shall set forth in reasonable detail satisfactory to Agent the amount of
such Indebtedness, the person or persons to whom such Indebtedness will be
owed, the interest rate, the schedule of repayments and maturity date with
respect thereto and such other information as Agent may request with respect
thereto, (iii) Agent shall have received true, correct and complete copies of
all agreements, documents and instruments evidencing or otherwise related to
such Indebtedness, (iv) except as Agent may otherwise agree in writing, all of
the proceeds of the loans or other accommodations giving rise to such
Indebtedness shall be paid to Agent for application to the Obligations in such
order and manner as Agent and Required Lenders may determine, (v) as of the
date of incurring such Indebtedness and after giving effect thereto, no Default
or Event of Default shall exist or have occurred, (vi) such Borrower and
Guarantor shall not, directly or indirectly, (A) amend, modify, alter or change
the terms of such Indebtedness or any agreement, document or instrument related
thereto, except, that, such Borrower or Guarantor may, after prior written
notice to Agent, amend, modify, alter or change the terms thereof so as to
extend the maturity thereof, or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such Indebtedness (other than
pursuant to payments thereof), or to reduce the interest rate or any fees in
connection therewith, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness (except pursuant to regularly scheduled payments
permitted herein), or set aside or otherwise deposit or invest any sums for
such purpose, and (vii) Borrowers and Guarantors shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by any
Borrower or Guarantor or on its behalf promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf concurrently with the
sending thereof, as the case may be;


 


(f)                                    Indebtedness to the Noteholders
evidenced by or arising under the Noteholder Agreements (as in effect on the
date hereof), provided, that:


 


(i)                                     the principal amount of such
Indebtedness shall not exceed $115,000,000, as provided in the Noteholder
Agreements (as in effect on the date hereof), less the aggregate amount of all
repayments, repurchases or redemptions thereof, whether optional or mandatory,
plus interest thereon (including any PIK Notes (as such term is defined in the
Noteholder Agreements)) at the rate provided in the Noteholder Agreements as in
effect on the date hereof,


 


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(ii)                                  as of the date hereof, no event of
default, or event which with notice or passage of time or both would constitute
an event of default exists, or has occurred under the Noteholder Agreements,


 


(iii)                               Agent shall have received true,
correct and complete copies of all of the Noteholder Agreements, as duly
authorized, executed and delivered by the parties thereto,


 


(iv)                              Borrowers and Guarantors shall not,
directly or indirectly, make, or be required to make, any payments in respect
of such Indebtedness, except, that, Borrower may make regularly scheduled
payments of interest, payments for Excess Cash Flow Offers or Net Proceeds
Offers (as such terms are defined in the Noteholder Agreements) and fees in
respect of the Noteholder Debt in accordance with the terms of the Noteholder
Agreements, as in effect on the date hereof,


 


(v)                                 Borrowers and Guarantors shall not,
directly or indirectly, (A) amend, modify, alter or change any of the terms of
such Indebtedness or any of the Noteholder Agreements as in effect on the date
hereof, to amend, modify, alter or change the terms thereof so as to do any of
the following: (1) shorten the maturity thereof, (2) increase the principal
amount of such Indebtedness, (3) increase the frequency of the scheduled
payments of interest or principal in respect of such Indebtedness, (4) increase
the interest rate or any fees in connection therewith, or (5) amend the
Noteholder Agreements to include additional events of default or modify the
provisions thereof so as to make the terms or conditions of the Noteholder
Agreements more burdensome or restrictive then the terms as in effect on the
date hereof or (B) make payments of principal or redeem, retire, defease,
purchase or otherwise acquire such Indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, except as permitted in clause (iv)
above, and


 


(vi)                              Borrowers shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by any
Borrower or Guarantor or on its behalf promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf concurrently with the
sending thereof, as the case may be;


 


(g)                                 guarantees of any Borrower or
Guarantor of the Indebtedness of any other Borrower or Guarantor, provided,
that,  such guaranteed Indebtedness is
permitted under this Section 9.9;


 


(h)                                 Intentionally Deleted;


 


(i)                                     the Indebtedness of any Borrower or
Guarantor to a surety or other person, 
in connection with the issuance of any performance bonds issued by such
person consistent with the current practices of such Borrower or Guarantor as
of the date hereof; provided, that, the conditions of Section 9.8(g)
hereof have, in the determination of Agent been satisfied;


 


(j)                                     the Indebtedness set forth on
Schedule 9.9 to the Information Certificate; provided, that, (i) Borrowers
and Guarantors may only make regularly scheduled payments of principal and
interest in respect of such Indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such Indebtedness as in
effect on the date hereof, except, that, in connection with the sale of the
assets permitted in Section 9.7(b)(iv),


 


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Borrowers and Guarantors may pay the
full amount of the Indebtedness of JBL to Thomas Denney for the purchase money
mortgage for the real property located at 2015 Route 206, Bordentown, New
Jersey and the full amount of any Indebtedness of Jersey, (ii) Borrowers and
Guarantors shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such Indebtedness or any agreement, document or instrument
related thereto as in effect on the date hereof except, that, Borrowers and
Guarantors may, after prior written notice to Agent, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness (other than pursuant to payments thereof), or to reduce
the interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrowers and
Guarantors shall furnish to Agent all notices or demands in connection with
such Indebtedness either received by any Borrower or Guarantor or on its
behalf, promptly after the receipt thereof, or sent by any Borrower or
Guarantor or on its behalf, concurrently with the sending thereof, as the case
may be;


 


(k)                                  any Indebtedness of Borrowers,
Guarantors or any of their respective Subsidiaries under futures or forward
hedging contracts or similar contractual arrangements intended to protect a
Person against fluctuations in the price of fuel used the business of Borrowers
and Guarantors; provided, that, such arrangements are not for speculative
purposes and are unsecured; and


 


(l)                                     any Indebtedness of Borrowers,
Guarantors or any of their respective Subsidiaries in respect of the financing
of insurance premiums incurred in the ordinary course conduct of their
respective businesses consistent with current practices in effect on the date
hereof, provided, that, such Indebtedness is not secured by any assets of any
Borrower, Guarantor or their respective Subsidiaries except for cash deposits
in an aggregate amount not in excess of the amount equal to two months’ of
premiums in respect of the insurance policies subject to the financing.


 


9.10                           Loans, Investments, Etc.  Each Borrower and Guarantor shall not, and
shall not permit any Subsidiary to, directly or indirectly, make any loans or
advance money or property to any person, or invest in (by capital contribution,
dividend or otherwise) or purchase or repurchase the Capital Stock or
Indebtedness or all or a substantial part of the assets or property of any
person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:


 


(a)                                  the endorsement of instruments for
collection or deposit in the ordinary course of business;


 


(b)                                 investments in cash or Cash
Equivalents, provided, that, (i) no Loans are then outstanding and (ii) the
terms and conditions of Section 5.2 hereof shall have been satisfied with
respect to the deposit account, investment account or other account in which
such cash or Cash Equivalents are held;


 


(c)                                  the existing equity investments of
each Borrower and Guarantor as of the date hereof in its Subsidiaries,
provided, that, no Borrower or Guarantor shall have any further


 


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obligations or liabilities to make
any capital contributions or other additional investments or other payments to
or in or for the benefit of any of such Subsidiaries;


 


(d)                                 loans and advances by any Borrower
or Guarantor to employees of such Borrower or Guarantor not to exceed the
principal amount of $100,000 in the aggregate at any time outstanding for: (i)
reasonably and necessary work-related travel or other ordinary business
expenses to be incurred by such employee in connection with their work for such
Borrower or Guarantor, (ii) reasonable and necessary relocation expenses of
such employees (including home mortgage financing for relocated employees), and
(iii) for any purpose in compliance with all applicable laws, other than the
purposes specified in clauses (i) and (ii) above, provided, that, the principal
amount of all such loans and advances made to employees pursuant to this clause
(iii) does not exceed the aggregate principal amount of $50,000 at any time
outstanding;


 


(e)                                  stock or obligations issued to any
Borrower or Guarantor by any Person (or the representative of such Person) in
respect of Indebtedness of such Person owing to such Borrower or Guarantor in
connection with the insolvency, bankruptcy, receivership or reorganization of
such Person or a composition or readjustment of the debts of such Person;
provided, that, the original of any such stock or instrument evidencing such
obligations shall be promptly delivered to Agent, upon Agent’s request,
together with such stock power, assignment or endorsement by such Borrower or
Guarantor as Agent may request;


 


(f)                                    obligations of account debtors to
any Borrower or Guarantor arising from Accounts which are past due evidenced by
a promissory note made by such account debtor payable to such Borrower or
Guarantor; provided, that, promptly upon the receipt of the original of any
such promissory note by such Borrower or Guarantor, such promissory note shall
be endorsed to the order of Agent by such Borrower or Guarantor and promptly
delivered to Agent as so endorsed;


 


(g)                                 loans by a Borrower or Guarantor to
another Borrower or Guarantor after the date hereof, provided, that,
as to all of such loans, (i) the Indebtedness arising pursuant to any such loan
shall not be evidenced by a promissory note or other instrument, unless the
single original of such note or other instrument is promptly delivered to Agent
upon its request to hold as part of the Collateral, with such endorsement
and/or assignment by the payee of such note or other instrument as Agent may
require, (ii) as of the date of any such loan and after giving effect thereto,
the Borrower or Guarantor making such loan shall be Solvent, and (iii) as of
the date of any such loan and after giving effect thereto, no Default or Event
of Default shall exist or have occurred and be continuing,


 


(h)                                 the loans and advances (other than
loans and advances between a Borrower or Guarantor to another Borrower or
Guarantor) set forth on Schedule 9.10 to the Information Certificate;
provided, that, as to such loans and advances, Borrowers and Guarantors shall
not, directly or indirectly, amend, modify, alter or change the terms of such
loans and advances or any agreement, document or instrument related thereto and
Borrowers and Guarantors shall furnish to Agent all notices or demands in
connection with such loans and advances either received by any Borrower or
Guarantor or on its behalf, promptly after the receipt thereof, or sent by any
Borrower or Guarantor or on its behalf, concurrently with the sending thereof,
as the case may be,


 


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(i)                                     loans and advances and other
investments in Atlantic North but only to the extent necessary under applicable
law to permit such entity to pay the insurance deductible obligations of Parent
and its Subsidiaries consistent with current practices of Borrowers and
Guarantors in effect on the date hereof, and


 


(j)                                     the purchase by any Borrower of all
of the Capital Stock of any Person with its chief executive office and
substantially all of its assets in the United States, provided, that, each of
the following conditions is satisfied as determined by Agent:


 


(i)                                     Agent shall have received not less
than thirty (30) days’ prior written notice of the proposed acquisition and
such information with respect thereto as Agent may request, including (A) the
proposed date of the acquisition, (B) the name, address, jurisdiction of
incorporation and federal employer identification number of the person whose
Capital Stock is being purchased, (C) a list and description of the assets of
the Person whose Capital Stock is being purchased (including the addresses of
the locations thereof and whether such locations are owned, leased or operated
by a thirty party, and if leased or operated by a third party, the name and
address of the lessor or third party), and (D) the total purchase price for the
Capital Stock to be purchased (and the terms of payment of such purchase price),


 


(ii)                                  as of the date of such purchase and
after giving effect thereto, no Event of Default or act, condition or event
which with notice or passage of time or both would constitute an Event of
Default, shall exist or have occurred and be continuing,


 


(iii)                               promptly upon Agent’s request, such
Borrower shall deliver, or cause to be delivered to Agent, true, correct and
complete copies of all agreements, documents and instruments relating to such
acquisition,


 


(iv)                              promptly upon such acquisition, such
Borrower shall cause the Person whose Capital Stock is being purchased to
execute and deliver to Agent, in form and substance satisfactory to Agent:  (A) an absolute and unconditional guarantee
of payment of all of the Obligations, (B) a general security agreement granting
to Agent specify a first priority security interest in and lien upon all of the
assets and properties of such Person (other than as permitted under
Section 9.8 hereof), (C) related UCC financing statements and (D) such
other agreements, documents and instruments as Agent, may reasonably require,


 


(v)                                 promptly upon Agent’s request, such
Borrower shall execute and deliver, or cause to be executed and delivered, to
Agent such other agreements, documents and instruments in connection with such
acquisition as Agent may reasonably request, including, without limitation, UCC
financing statements, Collateral Access Agreements and any amendments or
supplements hereto,


 


(vi)                              the assets and properties of the
Person whose Capital Stock is being acquired by such Borrower shall be
substantially consistent with, and related to, the business of such Borrower as
currently conducted as of the date hereof,


 


(vii)                           the assets of the Person whose
Capital Stock is being acquired by Borrower (and the Capital Stock) shall be
free and clear of any security interest, mortgage,


 


72

















 


pledge, lien, or other encumbrance
and Agent shall have received evidence satisfactory to it of the same (other
than security interests and liens permitted under Section 9.8 hereof),


 


(viii)                        the acquisition by such Borrower of
such Capital Stock shall not violate any law or regulation or any order or
decree of any court or Governmental Authority in any respect and shall not and
will not conflict with or result in the breach of, or constitute a default in
any respect under, any agreement, document or instrument to which such Borrower
is a party or may be bound, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the property of such Borrower (other
than as permitted under Section 9.8 hereof) or any Affiliate or violate
any provision of the Certificate of Incorporation or By-Laws of Such Borrower;


 


(ix)                                such purchase shall be on
commercially reasonable prices and terms and in a bona fide arms’ length
transaction with a person other than an Affiliate,


 


(x)                                   such Borrower shall not become
obligated with respect to any Indebtedness, nor any of their property become
subject to any security interest, mortgage, pledge, lien, charge, or other
encumbrance pursuant to such acquisition unless Borrower could incur such
Indebtedness or create such security interest, mortgage, pledge, lien, charge,
or other encumbrance hereunder or under the other Financing Agreements,


 


(xi)                                Agent shall have received, in form
and substance reasonably satisfactory to Agent, (A) evidence that Agent has
first priority valid and perfected security interests in and liens upon the
assets of the Person whose Capital Stock is being acquired subject to any security
interests and liens as permitted in Section 9.8 hereof, (B) all Collateral
Access Agreements and other consents, waivers, acknowledgments and other
agreements from third persons which Agent may reasonably deem necessary or
desirable in order to permit, protect and perfect its security interests in and
liens upon the assets of the Person whose Capital Stock is being acquired, (C)
the agreement of the seller consenting to the collateral assignment by such
Subsidiary of all rights and remedies and claims for damages of such Subsidiary
relating to the Collateral (including, without limitation, any bulk sales
indemnification) under the agreements, documents and instruments relating to
such acquisition and (D) such other agreements, documents and instruments as
Agent may reasonably request in connection therewith,


 


(xii)                             in no event shall the total amount
of payments by all Borrowers in any calendar year in connection with any one
acquisition or series of related acquisitions under this Section 9.10(i)
exceed the sum of (A) $5,000,000 plus (B) the amount equal to the difference
between (1) the amount of the Excess Cash Flow Offer (as such term is defined
in the Note Indenture), if any, made during the immediately preceding calendar
year and (2) the amount of such Excess Cash Flow Offer accepted by the
Noteholders (in accordance with the Note Indenture in effect on the date
hereof).


 


(xiii)                          as of the date of such acquisition
and after giving effect thereto (including the payment of all costs related to
such acquisition), the Excess Availability of Borrowers shall be not less than
$4,000,000,


 


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(xiv)                         not less than fifteen (15) days
prior to the date of such acquisition, Agent shall have received, in form and
substance satisfactory to Agent, projected financial statements of such
Borrower for the remaining portion of the then current year and for the
succeeding years after giving effect to the acquisition (including forecasted
income statements, cash flow statements and balance sheets) prepared on a
monthly basis as to the current year and the immediately succeeding year, all
in reasonable detail, together with such supporting information as Agent may
reasonably request, which projections shall represent such Borrower’s
reasonable best estimate of the future financial performance of such Borrower
for the periods set forth therein and shall have been prepared on the basis of
the assumptions set forth therein which Borrower believe are fair and
reasonable in light of current and reasonably foreseeable business conditions
(it being understood that such projections do not constitute a warranty as to
the future performance of Borrower and that actual results may vary from such
projections), and


 


(xv)                            upon the effective date of the
acquisition of such Capital Stock by such Borrower, Agent shall have received a
certificate duly executed and delivered by Borrower in form and substance
reasonably satisfactory to Agent, addressing all of the conditions set forth in
this Section 9.10(i) (as modified to refer to the applicable acquisition),
together with all schedules thereto, with respect to the acquisition of such
assets and the representations and warranties contained therein shall be true
and correct in all material respects.


 


9.11                           Dividends
and Redemptions. 
Each Borrower and Guarantor shall not, directly or indirectly, declare
or pay any dividends on account of any shares of class of any Capital Stock of
such Borrower or Guarantor now or hereafter outstanding, or set aside or otherwise
deposit or invest any sums for such purpose, or redeem, retire, defease,
purchase or otherwise acquire any shares of any class of Capital Stock (or set
aside or otherwise deposit or invest any sums for such purpose) for any
consideration or apply or set apart any sum, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to do
any of the foregoing, except that:


 


(a)                                  any Borrower or Guarantor may
declare and pay such dividends or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of Capital Stock for consideration in
the form of shares of common stock (so long as after giving effect thereto no
Change of Control or other Default or Event of Default shall exist or occur);


 


(b)                                 Borrowers and Guarantors may pay
dividends to the extent permitted in Section 9.12 below;


 


(c)                                  any Subsidiary of a Borrower or
Guarantor may pay dividends to a Borrower;


 


(d)                                 Borrowers and Guarantors may
repurchase Capital Stock consisting of common stock held by employees pursuant
to any employee stock ownership plan thereof upon the termination, retirement
or death of any such employee in accordance with the provisions of such plan,
provided, that, as to any such repurchase, each of the following conditions is
satisfied: (i) as of the date of the payment for such repurchase and after
giving effect thereto, no Default or Event of Default shall exist or have
occurred and be continuing, (ii) such repurchase shall be paid with funds
legally available therefor, (iii) such repurchase shall not violate any law or


 


74

















 


regulation or the terms of any
indenture, agreement or undertaking to which such Borrower or Guarantor is a
party or by which such Borrower or Guarantor or its or their property are
bound, and (iv) the aggregate amount of all payments for such repurchases in
any calendar year shall not exceed $500,000.


 


9.12                           Transactions
with Affiliates. 
Each Borrower and Guarantor shall not, directly or indirectly:


 


(a)                                  purchase, acquire or lease any
property from, or sell, transfer or lease any property to, any officer,
director or other Affiliate of such Borrower or Guarantor, except in the
ordinary course of and pursuant to the reasonable requirements of such
Borrower’s or Guarantor’s business (as the case may be) and upon fair and
reasonable terms no less favorable to such Borrower or Guarantor than such
Borrower or Guarantor would obtain in a comparable arm’s length transaction
with an unaffiliated person; or


 


(b)                                 make any payments (whether by
dividend, loan or otherwise) of management, consulting or other fees for
management or similar services, or of any Indebtedness owing to any officer,
employee, shareholder, director or any other Affiliate of such Borrower or
Guarantor, except (i) reasonable compensation to officers, employees and
directors for services rendered to such Borrower or Guarantor in the ordinary
course of business, (ii) payments by any such Borrower or Guarantor to AETG for
actual and necessary reasonable out-of-pocket legal and accounting, insurance,
marketing, payroll and similar types of services paid for by AETG on behalf of
such Borrower or Guarantor, in the ordinary course of their respective
businesses or as the same may be directly attributable to such Borrower or
Guarantor, provided, that the aggregate amount of such payments in any fiscal
year of Parent does not exceed $250,000, (iii) payments by any such Borrower or
Guarantor to Parent for payment of taxes by or on behalf of AETG, in accordance
with the Tax Sharing Agreement (as in effect on the date hereof), (iv) annual
premiums paid to Atlantic North in the ordinary course of business for
insurance in accordance with current practices in effect on the date hereof,
provided, that, such premiums do not exceed the annual aggregate deductibles on
Parent’s insurance policies then in effect, (v) management fees in an amount
not to exceed $500,000 annually paid to GSCP II Holdings, (AE), LLC, provided,
that, as of the date of any such payment and after giving effect to such
payment, no Default or Event of Default has occurred and is continuing, (vi)
the lease between Dom-Rich Assoc. LLP, as lessor, and Staten Island Bus, Inc.,
as lessee, as in effect as of the date hereof; (vii) management services by
AETC to Atlantic School Bus Corp. for which AETC is paid a reasonable
management fee; (viii) common insurance policies among Borrowers, Guarantors,
AETG and their Subsidiaries in accordance with past practice in effect on the
date hereof for which AETC is reimbursed the premiums and deductible
obligations attributable to such Affiliates of AETC, and (ix) distributions or
loans and advances to AETG in an aggregate amount not to exceed (A) $100,000 in
fiscal year 2004, (B) $105,000 in fiscal year 2005, (C) $110,000 in fiscal year
2006, (D) $115,000 in fiscal year 2007, provided, that, as of the
date of any such payment and after giving effect to such payment, no Default or
Event of Default has occurred and is continuing, and (x) payments in respect of
the Senior Notes in accordance with Section 9.9(f)(iv) hereof.


 


9.13                           Compliance
with ERISA.  Each
Borrower and Guarantor shall, and shall cause each of its ERISA Affiliates, to:
(a) maintain each Benefit Plan in compliance in all


 


75

















 


material respects with the applicable provisions of
ERISA, the Code and other Federal and State law; (b) cause each Benefit Plan
which is qualified under Section 401(a) of the Code to maintain such
qualification; (c) not terminate any of such Benefit Plans so as to incur any
material liability to the Pension Benefit Guaranty Corporation; (d) not allow
or suffer to exist any prohibited transaction involving any of such Benefit
Plans or any trust created thereunder which would subject such Borrower,
Guarantor or such ERISA Affiliate to a material tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the
Code or ERISA; (e)make all required contributions to any Benefit Plan which it
is obligated to pay under Section 302 of ERISA, Section 412 of the
Code or the terms of such Benefit Plan; (e) not allow or suffer to exist any
accumulated funding deficiency, whether or not waived, with respect to any such
Benefit Plan; or (f) allow or suffer to exist any occurrence of a reportable
event or any other event or condition which presents a material risk of
termination by the Pension Benefit Guaranty Corporation of any such Benefit
Plan that is a single employer plan, which termination could result in any material
liability to the Pension Benefit Guaranty Corporation.


 


9.14                           End
of Fiscal Years; Fiscal Quarters.  Each Borrower and Guarantor shall, for
financial reporting purposes, cause its, and each of its Subsidiaries’ (a)
fiscal years to end on June 30th of each year and (b) fiscal quarters to
end on September 30th, December 31st, March 31st and
June 30th of each year.


 


9.15                           Change
in Business.  Each
Borrower and Guarantor shall not engage in any business other than the business
of such Borrower or Guarantor on the date hereof and any business reasonably
related, ancillary or complimentary to the business in which such Borrower or
Guarantor is engaged on the date hereof.


 


9.16                           Limitation of Restrictions Affecting Subsidiaries.  Each Borrower and Guarantor shall not,
directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of such Borrower or Guarantor (other than Atlantic North and
Atlantic-Conn)) to (a) pay dividends or make other distributions or pay any
Indebtedness owed to such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor; (b) make loans or advances to such Borrower or Guarantor
or any Subsidiary of such Borrower or Guarantor, (c) transfer any of its
properties or assets to such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor; or (d) create, incur, assume or suffer to exist any lien
upon any of its property, assets or revenues, whether now owned or hereafter acquired,
other than encumbrances and restrictions arising under (i) applicable law, (ii)
this Agreement and the Noteholder Agreements, (iii) customary provisions
restricting subletting or assignment of any lease governing a leasehold
interest of such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (iv) customary restrictions on dispositions of real property
interests found in reciprocal easement agreements of such Borrower or Guarantor
or any Subsidiary of such Borrower or Guarantor, (v) any agreement relating to
permitted Indebtedness incurred by a Subsidiary of such Borrower or Guarantor
prior to the date on which such Subsidiary was acquired by such Borrower or
such Guarantor and outstanding on such acquisition date, (vi) restrictions contained
in purchase money Indebtedness permitted under Section 9.9 hereof to the
extent such restrictions prohibit the creation or incurrence of security
interests and liens on the assets purchased, and (vii) the extension or
continuation of contractual obligations in existence on the date hereof;
provided, that, any such encumbrances or restrictions contained in such
extension or continuation are no


 


76

















 


less favorable to Agent and Lenders than those encumbrances
and restrictions under or pursuant to the contractual obligations so extended
or continued.


 


9.17                           Minimum
EBITDA.  At the
end of each calendar month (for the twelve (12) consecutive month period then
ended), beginning with the month ending May 31, 2004, Parent and its
Subsidiaries shall have EBITDA of not less than $23,000,000.


 


9.18                           Minimum
Excess Availability. 
Commencing with the calendar year 2005 and each year thereafter,
Borrower shall maintain Excess Availability of at least $500,000 at all times
during the months of October, November and December.


 


9.19                           Capital
Expenditures. 
Parent and its Subsidiaries will not, directly or indirectly, make any
Capital Expenditures for the period commencing the date hereof and through
June 30, 2004, if at the time of such Capital Expenditure, or immediately
after giving effect thereto, the aggregate amount of Capital Expenditures
(including the proposed Capital Expenditure) made by the Parent and its
Subsidiaries during such period shall exceed $4,000,000.  After the first day of the Parent’s 2005
fiscal year, Parent and its Subsidiaries will not, directly or indirectly, make
any Capital Expenditure if at the time of such Capital Expenditure, or
immediately after giving effect thereto, the aggregate amount of Capital
Expenditures (including the proposed Capital Expenditure) made by the Parent
and its Subsidiaries since the first day of the Parent’s then current fiscal
year exceeds the sum of (a) $15,000,000, plus (b) if the aggregate amount of
Capital Expenditures made by the Parent and its Subsidiaries during the
immediately preceding fiscal year equaled less than $15,000,000, the amount
equal to (i) $15,000,000 million, minus (ii) the aggregate amount of Capital
Expenditures made by the Parent and its Subsidiaries during the Parent’s
immediately preceding fiscal year.


 


9.20                           License
Agreements.


 


(a)                                  Each Borrower and Guarantor shall
(i) promptly and faithfully observe and perform all of the material terms,
covenants, conditions and provisions of the material License Agreements to
which it is a party to be observed and performed by it, at the times set forth
therein, if any, (ii) not do, permit, suffer or refrain from doing anything
that could reasonably be expected to result in a default under or breach of any
of the terms of any material License Agreement, (iii) not cancel, surrender,
modify, amend, waive or release any material License Agreement in any material
respect or any term, provision or right of the licensee thereunder in any
material respect, or consent to or permit to occur any of the foregoing;
except, that, subject to Section 9.19(b) below, such Borrower or Guarantor
may cancel, surrender or release any material License Agreement in the ordinary
course of the business of such Borrower or Guarantor; provided, that, such
Borrower or Guarantor (as the case may be) shall give Agent not less than
thirty (30) days prior written notice of its intention to so cancel, surrender
and release any such material License Agreement, (iv) give Agent prompt written
notice of any material License Agreement entered into by such Borrower or
Guarantor after the date hereof, together with a true, correct and complete
copy thereof and such other information with respect thereto as Agent may
request, (v) give Agent prompt written notice of any material breach of any
obligation, or any default, by any party under any material License Agreement,
and deliver to Agent (promptly upon the receipt thereof by such Borrower or
Guarantor in the case of a notice


 


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to such Borrower or Guarantor and
concurrently with the sending thereof in the case of a notice from such
Borrower or Guarantor) a copy of each notice of default and every other notice
and other communication received or delivered by such Borrower or Guarantor in
connection with any material License Agreement which relates to the right of
such Borrower or Guarantor to continue to use the property subject to such
License Agreement, and (vi) furnish to Agent, promptly upon the request of
Agent, such information and evidence as Agent may reasonably require from time
to time concerning the observance, performance and compliance by such Borrower
or Guarantor or the other party or parties thereto with the material terms,
covenants or provisions of any material License Agreement.


 


(b)                                 Each Borrower and Guarantor will
either exercise any option to renew or extend the term of each material License
Agreement to which it is a party in such manner as will cause the term of such
material License Agreement to be effectively renewed or extended for the period
provided by such option and give prompt written notice thereof to Agent or give
Agent prior written notice that such Borrower or Guarantor does not intend to
renew or extend the term of any such material License Agreement or that the
term thereof shall otherwise be expiring, not less than sixty (60) days prior
to the date of any such non-renewal or expiration.  In the event of the failure of such Borrower or Guarantor to
extend or renew any material License Agreement to which it is a party, Agent
shall have, and is hereby granted, the irrevocable right and authority, at its
option, to renew or extend the term of such material License Agreement, whether
in its own name and behalf, or in the name and behalf of a designee or nominee
of Agent or in the name and behalf of such Borrower or Guarantor, as Agent
shall determine at any time that an Event of Default shall exist or have
occurred and be continuing.  Agent may,
but shall not be required to, perform any or all of such obligations of such
Borrower or Guarantor under any of the License Agreements, including, but not
limited to, the payment of any or all sums due from such Borrower or Guarantor
thereunder.  Any sums so paid by Agent
shall constitute part of the Obligations.


 


9.21                           After
Acquired Real Property.  If any Borrower or Guarantor hereafter acquires any Real
Property, fixtures or any other property that is of the kind or nature
described in the Mortgages and such Real Property, fixtures or other property
is adjacent to, contiguous with or necessary or related to or used in
connection with any Real Property then subject to a Mortgage, or if such Real
Property is not adjacent to, contiguous with or related to or used in
connection with such Real Property, then if such Real Property, fixtures or
other property at any location (or series of adjacent, contiguous or related
locations, and regardless of the number of parcels) has a fair market value in
an amount equal to or greater than $200,000 (or if a Default or Event of
Default exists, then regardless of the fair market value of such assets),
without limiting any other rights of Agent or any Lender, or duties or
obligations of any Borrower or Guarantor, promptly upon Agent’s request, such
Borrower or Guarantor shall execute and deliver to Agent a mortgage, deed of
trust or deed to secure debt, as Agent may determine, in form and substance
substantially similar to the Mortgages and as to any provisions relating to
specific state laws satisfactory to Agent and in form appropriate for recording
in the real estate records of the jurisdiction in which such Real Property or
other property is located granting to Agent a lien and mortgage on and security
interest in such Real Property, fixtures or other property subject only to the
first priority lien of the Noteholders until such time as the Noteholder Debt
has been paid in full (and except as such Borrower or Guarantor would otherwise
be permitted to incur hereunder


 


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or under the Mortgages or as otherwise consented to in
writing by Agent) and such other agreements, documents and instruments as Agent
may require in connection therewith.


 


9.22                           Senior
Management. 
Parent shall retain (a) Domenic Gatto as the Chief Executive (or in such
other senior management position satisfactory to Agent) through
December 31, 2006 and (b) Nathan Schlenker as Chief Financial Officer (or
in such other capacity as is mutually agreed to by Nathan Schlenker and Parent,
so long as his duties and responsibilities include oversight and final review
of the reporting of Collateral by Borrowers to Agent) through November 30,
2005.


 


9.23                           Costs
and Expenses. 
Borrowers and Guarantors shall pay to Agent on demand all costs,
expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, syndication,
administration, collection, liquidation, enforcement and defense of the
Obligations, Agent’s rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including:  (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) costs and expenses and
fees for insurance premiums, environmental audits, title insurance premiums,
surveys, assessments, engineering reports and inspections, appraisal fees and
search fees, costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Agent’s customary charges and fees with respect
thereto; (c) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (d) costs and expenses of
preserving and protecting the Collateral; (e) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Agent, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Agent or any Lender arising out of the transactions contemplated hereby and
thereby (including preparations for and consultations concerning any such
matters); (f) all out-of-pocket expenses and costs heretofore and from time to
time hereafter incurred by Agent during the course of periodic field
examinations of the Collateral and such Borrower’s or Guarantor’s operations,
plus a per diem charge of $850 per person per day; and (g) the fees and
disbursements of counsel (including legal assistants) to Agent (and Lenders, in
connection with the costs and expenses set forth in clause (e) above, after the
occurrence of an Event of Default, provided, that, Lenders select one counsel
to represent all Lenders) in connection with any of the foregoing.


 


9.24                           Further
Assurances.  At
the request of Agent at any time and from time to time, Borrowers and
Guarantors shall, at their expense, duly execute and deliver, or cause to be
duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary
or proper to evidence, perfect, maintain and enforce the security interests and
the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements.  Agent may at any time and
from time to time request a certificate from an officer of any Borrower or
Guarantor representing that all conditions precedent to the making of Loans


 


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and providing Letter of Credit Accommodations
contained herein are satisfied.  In the
event of such request by Agent, Agent and Lenders may, at Agent’s option, cease
to make any further Loans or provide any further Letter of Credit
Accommodations until Agent has received such certificate and, in addition,
Agent has determined that such conditions are satisfied.


 


SECTION 10.                                                                     EVENTS
OF DEFAULT AND REMEDIES


 


10.1                           Events
of Default.  The
occurrence or existence of any one or more of the following events are referred
to herein individually as an “Event of Default”, and collectively as “Events of
Default”:


 


(a)                                  (i) any Borrower fails to pay any of
the Obligations when due or (ii) any Borrower or Obligor fails to perform any
of the covenants contained in Sections 9.3, 9.4, 9.13, 9.14, 9.15, and 9.16 of
this Agreement and such failure shall continue for five (5) days; provided,
that, such five (5) day period shall not apply in the case of: (A) any failure
to observe any such covenant which is not capable of being cured at all or
within such five (5) day period or which has been the subject of a prior
failure within a six (6) month period or (B) an intentional breach by any
Borrower or Obligor of any such covenant or (iii) any Borrower or Obligor fails
to perform any of the terms, covenants, conditions or provisions contained in
this Agreement or any of the other Financing Agreements other than those
described in Sections 10.1(a)(i) and 10.1(a)(ii) above;


 


(b)                                 any representation, warranty or
statement of fact made by any Borrower or Guarantor to Agent in this Agreement,
the other Financing Agreements or any other written agreement, schedule,
confirmatory assignment or otherwise shall when made or deemed made be false or
misleading in any material respect;


 


(c)                                  any Obligor revokes or terminates or
purports to revoke or terminate or fails to perform any of the terms,
covenants, conditions or provisions of any guarantee, endorsement or other
agreement of such party in favor of Agent or any Lender;


 


(d)                                 any judgment for the payment of
money is rendered against any Borrower or Obligor in excess of $500,000 in any
one case or in excess of $1,000,000 in the aggregate (to the extent not covered
by insurance where the insurer has assumed responsibility in writing for such
judgment) and shall remain undischarged or unvacated for a period in excess of
thirty (30) days or execution shall at any time not be effectively stayed, or
any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against any Borrower or Obligor or any of
the Collateral having a value in excess of $500,000;


 


(e)                                  any Obligor (being a natural person
or a general partner of an Obligor which is a partnership) dies or any Borrower
or Obligor, which is a partnership, limited liability company, limited
liability partnership or a corporation, dissolves or suspends or discontinues
doing business;


 


(f)                                    any Borrower or Obligor makes an
assignment for the benefit of creditors, makes or sends notice of a bulk
transfer or calls a meeting of its creditors or principal creditors in
connection with a moratorium or adjustment of the Indebtedness due to them;


 


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(g)                                 a case or proceeding under the
bankruptcy laws of the United States of America now or hereafter in effect or
under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter
in effect (whether at law or in equity) is filed against any Borrower or
Obligor or all or any part of its properties and such petition or application
is not dismissed within thirty (30) days after the date of its filing or any
Borrower or Obligor shall file any answer admitting or not contesting such
petition or application or indicates its consent to, acquiescence in or
approval of, any such action or proceeding or the relief requested is granted
sooner;


 


(h)                                 a case or proceeding under the
bankruptcy laws of the United States of America now or hereafter in effect or
under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter
in effect (whether at a law or equity) is filed by any Borrower or Obligor or
for all or any part of its property;


 


(i)                                     any default in respect of any
Indebtedness of any Borrower or Obligor (other than (A) Indebtedness owing to
Agent and Lenders hereunder, and (B) the default in the payment of Indebtedness
owed by Borrowers to Thomas Denny in an amount not to exceed $855,730 so long
as Thomas Denny does not commence a legal proceeding against any Borrower or
Guarantor in respect of such Indebtedness), in any case in an amount in excess
of $500,000, which default continues for more than the applicable cure period,
if any, with respect thereto and/or is not waived in writing by the other
parties thereto or any default by any Borrower or Obligor under any Material
Contract, which default continues for more than the applicable cure period, if
any, with respect thereto and/or is not waived in writing by the other parties
thereto;


 


(j)                                     any material provision hereof or of
any of the other Financing Agreements shall for any reason cease to be valid,
binding and enforceable with respect to any party hereto or thereto (other than
Agent) in accordance with its terms, or any such party shall challenge the
enforceability hereof or thereof, or shall assert in writing, or take any
action or fail to take any action based on the assertion that any provision
hereof or of any of the other Financing Agreements has ceased to be or is
otherwise not valid, binding or enforceable in accordance with its terms, or
any security interest provided for herein or in any of the other Financing
Agreements shall cease to be a valid and perfected first priority security
interest in any of the Collateral purported to be subject thereto (except as otherwise
permitted herein or therein);


 


(k)                                  an ERISA Event shall occur which
results in or could reasonably be expected to result in liability of any
Borrower in an aggregate amount in excess of $500,000;


 


(l)                                     any Change of Control;


 


(m)                               the indictment by any Governmental
Authority, or as Agent may reasonably and in good faith determine, the
threatened indictment by any Governmental Authority of any Borrower or Obligor
of which any Borrower, Obligor or Agent receives notice, in either case, as to
which there is a reasonable possibility of an adverse determination, in the
good faith determination of Agent, under any criminal statute, or commencement
or threatened commencement of criminal or civil proceedings against such
Borrower or Obligor, pursuant to


 


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which statute or proceedings the
penalties or remedies sought or available include forfeiture of (i) any of the
Collateral having a value in excess of $500,000 or (ii) any other property of
any Borrower or Guarantor which is necessary or material to the conduct of its
business;


 


(n)                                 there shall be a Material Adverse
Effect;


 


(o)                                 the occurrence of an event of
default under the Plan or in respect of any payments due thereunder; or


 


(p)                                 there shall be an event of default
under any of the other Financing Agreements.


 


10.2                           Remedies.


 


(a)                                  At any time an Event of Default
exists or has occurred and is continuing, Agent and Lenders shall have all
rights and remedies provided in this Agreement, the other Financing Agreements,
the UCC and other applicable law, all of which rights and remedies may be
exercised without notice to or consent by any Borrower or Obligor, except as
such notice or consent is expressly provided for hereunder or required by
applicable law.  All rights, remedies
and powers granted to Agent and Lenders hereunder, under any of the other
Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Agent’s discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or Obligor of this
Agreement or any of the other Financing Agreements.  Subject to Section 12 hereof, Agent may, and at the
direction of the Required Lenders shall, at any time or times, proceed directly
against any Borrower or Obligor to collect the Obligations without prior recourse
to the Collateral.


 


(b)                                 Without limiting the generality of
the foregoing, at any time an Event of Default exists or has occurred and is
continuing, Agent may, at its option and shall upon the direction of the
Required Lenders, (i) upon notice to Administrative Borrower, accelerate the
payment of all Obligations and demand immediate payment thereof to Agent for
itself and the benefit of Lenders (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), and (ii) terminate the
Commitments and this Agreement (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), the Commitments and
any other obligation of the Agent or a Lender hereunder shall automatically
terminate).


 


(c)                                  Without limiting the foregoing, at
any time an Event of Default exists or has occurred and is continuing, Agent
may, in its discretion, and upon the direction of the Required Lenders, shall
(i) with or without judicial process or the aid or assistance of others, enter
upon any premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair
of all or any portion of the Collateral, (ii) require any Borrower or Obligor,
at Borrowers’ expense, to assemble and make available to Agent any part or all
of the Collateral at any place and time designated by Agent, (iii) collect,
foreclose, receive, appropriate, setoff and realize upon any and all Collateral,
(iv) remove any or all of the Collateral from any premises on or in which the
same may be located


 


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for the purpose of effecting the
sale, foreclosure or other disposition thereof or for any other purpose, (v)
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto, public or
private sales at any exchange, broker’s board, at any office of Agent or
elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon
credit or for future delivery, with the Agent having the right to purchase the
whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of any Borrower or
Obligor, which right or equity of redemption is hereby expressly waived and
released by Borrowers and Obligors and/or (vi) terminate this Agreement.  If any of the Collateral is sold or leased
by Agent upon credit terms or for future delivery, the Obligations shall not be
reduced as a result thereof until payment therefor is finally collected by
Agent.  If notice of disposition of
Collateral is required by law, ten (10) days prior notice by Agent to
Administrative Borrower designating the time and place of any public sale or
the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Borrowers and Obligors waive any other notice.  In the event Agent institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower
and Obligor waives the posting of any bond which might otherwise be required.
At any time an Event of Default exists or has occurred and is continuing, upon
Agent’s request, Borrowers will either, as Agent shall specify, furnish cash
collateral to the issuer to be used to secure and fund Agent’s reimbursement
obligations to the issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Agent for the Letter of Credit
Accommodations.  Such cash collateral
shall be in the amount equal to one hundred ten (110%) percent of the amount of
the Letter of Credit Accommodations plus the amount of any fees and expenses
payable in connection therewith through the end of the latest expiration date
of such Letter of Credit Accommodations.


 


(d)                                 At any time or times that an Event
of Default exists or has occurred and is continuing, Agent may, in its
discretion, and upon the direction of the Required Lenders, Agent shall enforce
the rights of any Borrower or Obligor against any account debtor, secondary
obligor or other obligor in respect of any of the Accounts or other
Receivables.  Without limiting the
generality of the foregoing, Agent may, in its discretion, and upon the
direction of the Required Lenders, Agent shall at such time or times (i) notify
any or all account debtors, secondary obligors or other obligors in respect
thereof that the Receivables have been assigned to Agent and that Agent has a
security interest therein and Agent may direct any or all accounts debtors,
secondary obligors and other obligors to make payment of Receivables directly
to Agent, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the account debtor or any secondary
obligors or other obligors in respect thereof without affecting any of the
Obligations,  (iii) demand, collect or
enforce payment of any Receivables or such other obligations, but without any
duty to do so, and Agent and Lenders shall not be liable for any failure to
collect or enforce the payment thereof nor for the negligence of its agents or
attorneys with respect thereto and (iv) take whatever other action Agent may
deem necessary or desirable for the protection of its interests and the
interests of Lenders.  At any time that
an Event of Default exists or has occurred and is continuing, at Agent’s
request, all invoices and statements sent to any account debtor shall state
that the Accounts and such other obligations have been assigned to Agent and
are payable directly and only to Agent and Borrowers and Obligors shall deliver
to Agent such


 


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originals of documents evidencing the
sale and delivery of goods or the performance of services giving rise to any
Accounts as Agent may require.  In the
event any account debtor returns Inventory when an Event of Default exists or
has occurred and is continuing, Borrowers shall, upon Agent’s request, hold the
returned Inventory in trust for Agent, segregate all returned Inventory from
all of its other property, dispose of the returned Inventory solely according
to Agent’s instructions, and not issue any credits, discounts or allowances
with respect thereto without Agent’s prior written consent.


 


(e)                                  To the extent that applicable law
imposes duties on Agent or any Lender to exercise remedies in a commercially
reasonable manner (which duties cannot be waived under such law), each Borrower
and Guarantor acknowledges and agrees that it is not commercially unreasonable
for Agent or any Lender (i) to fail to incur expenses reasonably deemed
significant by Agent or any Lender to prepare Collateral for disposition or
otherwise to complete raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain consents of any Governmental Authority
or other third party for the collection or disposition of Collateral to be
collected or disposed of, (iii) to fail to exercise collection remedies against
account debtors, secondary obligors or other persons obligated on Collateral or
to remove liens or encumbrances on or any adverse claims against Collateral, (iv)
to exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other persons, whether
or not in the same business as any Borrower or Guarantor, for expressions of
interest in acquiring all or any portion of the Collateral, (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets
of the types included in the Collateral or that have the reasonable capability
of doing so, or that match buyers and sellers of assets, (ix) to dispose of
assets in wholesale rather than retail markets, (x) to disclaim disposition
warranties, (xi) to purchase insurance or credit enhancements to insure Agent
or Lenders against risks of loss, collection or disposition of Collateral or to
provide to Agent or Lenders a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by Agent,
to obtain the services of other brokers, investment bankers, consultants and
other professionals to assist Agent in the collection or disposition of any of
the Collateral. Each Borrower and Guarantor acknowledges that the purpose of
this Section is to provide non-exhaustive indications of what actions or
omissions by Agent or any Lender would not be commercially unreasonable in the
exercise by Agent or any Lender of remedies against the Collateral and that
other actions or omissions by Agent or any Lender shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section. Without limitation of the foregoing, nothing contained in this
Section shall be construed to grant any rights to any Borrower or
Guarantor or to impose any duties on Agent or Lenders that would not have been
granted or imposed by this Agreement or by applicable law in the absence of
this Section.


 


(f)                                    For the purpose of enabling Agent to
exercise the rights and remedies hereunder, each Borrower and Obligor hereby
grants to Agent, to the extent assignable, an irrevocable, non-exclusive
license (exercisable at any time an Event of Default shall exist or


 


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have occurred and for so long as the
same is continuing) without payment of royalty or other compensation to any
Borrower or Obligor, to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by any Borrower or
Obligor, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or
stored and to all computer programs used for the compilation or printout
thereof.


 


(g)                                 Agent may apply the cash proceeds of
Collateral actually received by Agent from any sale, lease, foreclosure or
other disposition of the Collateral to payment of the Obligations, in
accordance with Section 6.4 hereof. 
Borrowers and Guarantors shall remain liable to Agent and Lenders for
the payment of any deficiency with interest at the highest rate provided for
herein and all costs and expenses of collection or enforcement, including
attorneys’ fees and expenses.


 


(h)                                 Without limiting the foregoing, upon
the occurrence of a Default or an Event of Default, (i) Agent and Lenders may,
at Agent’s option, and upon the occurrence of an Event of Default at the
direction of the Required Lenders, Agent and Lenders shall, without notice, (A)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrowers and/or (B) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Agent and Lenders to Borrowers and (ii) Agent may, at its option, establish
such Reserves as Agent determines, without limitation or restriction,
notwithstanding anything to the contrary contained herein.


 


SECTION 11.                                                                     JURY
TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW.


 


11.1                           Governing
Law;
Choice of Forum; Service of Process; Jury Trial Waiver.


 


(a)                                  The validity, interpretation and
enforcement of this Agreement and the other Financing Agreements (except as
otherwise provided therein) and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York but excluding
any principles of conflicts of law or other rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
New York.


 


(b)                                 Borrowers, Guarantors, Agent and
Lenders irrevocably consent and submit to the non-exclusive jurisdiction of the
Supreme Court of the State of New York, New York County and the United States
District Court for the Southern District of New York, whichever Agent may
elect, and waive any objection based on venue or forum non conveniens with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement
or any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Agent and Lenders shall


 


85

















 


have the right to bring any action or
proceeding against any Borrower or Guarantor or its or their property in the
courts of any other jurisdiction which Agent deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
any Borrower or Guarantor or its or their property).


 


(c)                                  Each Borrower and Guarantor hereby
waives personal service of any and all process upon it and consents that all
such service of process may be made by certified mail (return receipt
requested) directed to its address set forth herein and service so made shall
be deemed to be completed five (5) days after the same shall have been so
deposited in the U.S. mails, or, at Agent’s option, by service upon any
Borrower or Guarantor (or Administrative Borrower on behalf of such Borrower or
Guarantor) in any other manner provided under the rules of any such
courts.  Within thirty (30) days after
such service, such Borrower or Guarantor shall appear in answer to such
process, failing which such Borrower or Guarantor shall be deemed in default
and judgment may be entered by Agent against such Borrower or Guarantor for the
amount of the claim and other relief requested.


 


(d)                                 BORROWERS, GUARANTORS, AGENT AND
LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE
OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE.  BORROWERS,
GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER MAY
FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.


 


(e)                                  Agent and Lenders shall not have any
liability to any Borrower or Guarantor (whether in tort, contract, equity or
otherwise) for losses suffered by such Borrower or Guarantor in connection
with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Agent and such Lender, that
the losses were the result of acts or omissions constituting gross negligence
or willful misconduct.  In any such
litigation, Agent and Lenders shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.  Each Borrower and Guarantor:  (i) certifies that neither Agent, any Lender
nor any representative, agent or attorney acting for or on behalf of Agent or
any Lender has represented, expressly or otherwise, that Agent and Lenders
would not, in the event of litigation, seek to enforce any of the waivers
provided for in this Agreement or any of the other Financing Agreements and
(ii) acknowledges that in entering into this Agreement and the other Financing
Agreements, Agent


 


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and Lenders are relying upon, among
other things, the waivers and certifications set forth in this
Section 11.1 and elsewhere herein and therein.


 


11.2                           Waiver
of Notices.  Each
Borrower and Guarantor hereby expressly waives demand, presentment, protest and
notice of protest and notice of dishonor with respect to any and all
instruments and chattel paper, included in or evidencing any of the Obligations
or the Collateral, and any and all other demands and notices of any kind or
nature whatsoever with respect to the Obligations, the Collateral and this
Agreement, except such as are expressly provided for herein.  No notice to or demand on any Borrower or Guarantor
which Agent or any Lender may elect to give shall entitle such Borrower or
Guarantor to any other or further notice or demand in the same, similar or
other circumstances.


 


11.3                           Amendments
and Waivers.


 


(a)                                  Neither this Agreement nor any other
Financing Agreement nor any terms hereof or thereof may be amended, waived,
discharged or terminated unless such amendment, waiver, discharge or
termination is in writing signed by the Required Lenders (or at Agent’s option,
by Agent with the written authorization of the Required Lenders), and as to
amendments to any of the Financing Agreements to which Borrowers are a party
(other than with respect to any provision of Section 12 hereof), by
Borrowers; except, that, no such amendment, waiver, discharge or termination
shall:


 


(i)                                     reduce the interest rate or any fees
or extend the time of payment of principal, interest or any fees or reduce the
principal amount of any Loan or Letter of Credit Accommodations, in each case
without the consent of each Lender directly affected thereby,


 


(ii)                                  increase the Commitment of any
Lender over the amount thereof then in effect or provided hereunder, in each
case without the consent of the Lender directly affected thereby,


 


(iii)                               release any Collateral or Guarantor
(except as expressly required hereunder or under any of the other Financing
Agreements or applicable law and except as permitted under Section 9.7 or
Section 12.11(b) hereof), without the consent of all of Lenders,


 


(iv)                              reduce any percentage specified in
the definition of Required Lenders, without the consent of all of Lenders,


 


(v)                                 consent to the assignment or
transfer by any Borrower or Guarantor of any of their rights and obligations
under this Agreement, without the consent of all of Lenders,


 


(vi)                              amend, modify or waive any terms of
this Section 11.3 hereof, without the consent of all of Lenders,


 


(vii)                           increase the Maximum Credit without
the consent of each Lender; or


 


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(viii)                        increase the advance rates
constituting part of the Borrowing Base, without the consent of all of Lenders.


 


(b)                                 Agent and Lenders shall not, by any
act, delay, omission or otherwise be deemed to have expressly or impliedly
waived any of its or their rights, powers and/or remedies unless such waiver
shall be in writing and signed as provided herein.  Any such waiver shall be enforceable only to the extent
specifically set forth therein.  A
waiver by Agent or any Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Agent or any Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.


 


(c)                                  Notwithstanding anything to the
contrary contained in Section 11.3(a) above, in connection with any
amendment, waiver, discharge or termination, in the event that any Lender whose
consent thereto is required shall fail to consent or fail to consent in a
timely manner (such Lender being referred to herein as a “Non-Consenting
Lender”), but the consent of any other Lenders to such amendment, waiver,
discharge or termination that is required are obtained, if any, then Congress
shall have the right, but not the obligation, at any time thereafter, and upon
the exercise by Congress of such right, such Non-Consenting Lender shall have
the obligation, to sell, assign and transfer to Congress or such Eligible
Transferee as Congress may specify, the Commitment of such Non-Consenting
Lender and all rights and interests of such Non-Consenting Lender pursuant
thereto.  Congress shall provide the
Non-Consenting Lender with prior written notice of its intent to exercise its
right under this Section, which notice shall specify on date on which such
purchase and sale shall occur.  Such
purchase and sale shall be pursuant to the terms of an Assignment and
Acceptance (whether or not executed by the Non-Consenting Lender), except that
on the date of such purchase and sale, Congress, or such Eligible Transferee
specified by Congress, shall pay to the Non-Consenting Lender (except as
Congress and such Non-Consenting Lender may otherwise agree) the amount equal
to: (i) the principal balance of the Loans held by the Non-Consenting Lender
outstanding as of the close of business on the business day immediately preceding
the effective date of such purchase and sale, plus (ii) amounts accrued and
unpaid in respect of interest and fees payable to the Non-Consenting Lender to
the effective date of the purchase (but in no event shall the Non-Consenting
Lender be deemed entitled to any early termination fee), minus (iii) the amount
of the closing fee received by the Non-Consenting Lender pursuant to the terms
hereof or of any of the other Financing Agreements multiplied by the fraction,
the numerator of which is the number of months remaining in the then current
term of the Credit Facility and the denominator of which is the number of
months in the then current term thereof. 
Such purchase and sale shall be effective on the date of the payment of
such amount to the Non-Consenting Lender and the Commitment of the
Non-Consenting Lender shall terminate on such date.


 


(d)                                 The consent of Agent shall be
required for any amendment, waiver or consent affecting the rights or duties of
Agent hereunder or under any of the other Financing Agreements, in addition to
the consent of the Lenders otherwise required by this Section and the
exercise by Agent of any of its rights hereunder with respect to Reserves or
Eligible Accounts shall not be deemed an amendment to the advance rates provided
for in this Section 11.3.


 


11.4                           Waiver
of Counterclaims. 
Each Borrower and Guarantor waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any nature (other then


 


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compulsory counterclaims) in any action or proceeding
with respect to this Agreement, the Obligations, the Collateral or any matter
arising therefrom or relating hereto or thereto.


 


11.5                           Indemnification.  Each Borrower and Guarantor shall, jointly
and severally, indemnify and hold Agent and each Lender, and its officers,
directors, agents, employees, advisors and counsel and their respective
Affiliates (each such person being an “Indemnitee”), harmless from and against
any and all losses, claims, damages, liabilities, costs or expenses (including
attorneys’ fees and expenses) imposed on, incurred by or asserted against any
of them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including amounts paid in settlement, court
costs, and the fees and expenses of counsel except that Borrowers and
Guarantors shall not have any obligation under this Section 11.5 to
indemnify an Indemnitee with respect to a matter covered hereby resulting from
the gross negligence or wilful misconduct of such Indemnitee as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction
(but without limiting the obligations of Borrowers or Guarantors as to any other
Indemnitee).   To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this
Section may be unenforceable because it violates any law or public policy,
Borrowers and Guarantors shall pay the maximum portion which it is permitted to
pay under applicable law to Agent and Lenders in satisfaction of indemnified
matters under this Section.  To the
extent permitted by applicable law, no Borrower or Guarantor shall assert, and
each Borrower and Guarantor hereby waives, any claim against any Indemnitee, on
any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, any of the other Financing Agreements
or any undertaking or transaction contemplated hereby.  All amounts due under this
Section shall be payable upon demand. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.


 


SECTION 12.                                                                     THE
AGENT.


 


12.1                           Appointment,
Powers and Immunities.  Each Lender irrevocably designates, appoints
and authorizes Congress to act as Agent hereunder and under the other Financing
Agreements with such powers as are specifically delegated to Agent by the terms
of this Agreement and of the other Financing Agreements, together with such
other powers as are reasonably incidental thereto.  Agent (a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and in the other Financing Agreements,
and shall not by reason of this Agreement or any other Financing Agreement be a
trustee or fiduciary for any Lender; (b) shall not be responsible to Lenders
for any recitals, statements, representations or warranties contained in this
Agreement or in any of the other Financing Agreements, or in any certificate or
other document referred to or provided for in, or received by any of them
under, this Agreement or any other Financing Agreement, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Financing Agreement or any other document referred to or
provided for herein or therein or for any failure by any Borrower or any
Obligor or any other Person to perform any of its obligations hereunder or
thereunder; and (c) shall not be responsible to Lenders for any action taken or
omitted to be


 


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taken by it hereunder or under any other Financing
Agreement or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction. 
Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.  Agent may deem and treat the payee of any note as the holder
thereof for all purposes hereof unless and until the assignment thereof
pursuant to an agreement (if and to the extent permitted herein) in form and
substance satisfactory to Agent shall have been delivered to and acknowledged
by Agent.  The identification of Bank
One, NA and General Electric Capital Corporation, as co- documentation agents
shall not create any rights in favor of any of them in such capacity nor
subject them to any duties or obligations in such capacity.


 


12.2                           Reliance by
Agent.  Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telecopy,
telex, telegram or cable) believed by it to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by Agent.  As to any
matters not expressly provided for by this Agreement or any other Financing
Agreement, Agent shall in all cases be fully protected in acting, or in refraining
from acting, hereunder or thereunder in accordance with instructions given by
the Required Lenders or all of Lenders as is required in such circumstance, and
such instructions of such Agents and any action taken or failure to act
pursuant thereto shall be binding on all Lenders.


 


12.3                           Events of Default.


 


(a)                                  Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default or an Event of Default or
other failure of a condition precedent to the Loans and Letter of Credit
Accommodations hereunder, unless and until Agent has received written notice
from a Lender, or a Borrower specifying such Event of Default or any
unfulfilled condition precedent, and stating that such notice is a “Notice of
Default or Failure of Condition”.  In
the event that Agent receives such a Notice of Default or Failure of Condition,
Agent shall give prompt notice thereof to the Lenders.  Agent shall (subject to Section 12.7)
take such action with respect to any such Event of Default or failure of
condition precedent as shall be directed by the Required Lenders; provided,
that, unless and until Agent shall have received such directions, Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to or by reason of such Event of Default or failure of
condition precedent, as it shall deem advisable in the best interest of
Lenders.  Without limiting the
foregoing, and notwithstanding the existence or the occurrence of and continuance
of an Event of Default or any other failure to satisfy any of the conditions
precedent set forth in Section 4 of this Agreement to the contrary, the
Agent may, pursuant to Sections 12.8 and 12.11(a), but shall have no obligation
to, continue to make Loans and issue or cause to be issued Letter of Credit
Accommodations for the ratable account and risk of Lenders from time to time if
Agent believes making such Loans or issuing or causing to be issued such Letter
of Credit Accommodations is in the best interests of Lenders.


 


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(b)                                 Except with the prior written
consent of Agent, no Lender may assert or exercise any enforcement right or
remedy in respect of the Loans, Letter of Credit Accommodations or other
Obligations, as against any Borrower or Obligor or any of the Collateral or
other property of any Borrower or Obligor.


 


12.4                           Congress
in its Individual Capacity.  With respect to its Commitment and the Loans made and Letter of
Credit Accommodations issued or caused to be issued by it (and any successor
acting as Agent), so long as Congress shall be a Lender hereunder, it shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not acting as Agent, and the term “Lender” or
“Lenders” shall, unless the context otherwise indicates, include Congress in
its individual capacity as Lender hereunder. 
Congress (and any successor acting as Agent) and its Affiliates may
(without having to account therefor to any Lender) lend money to, make
investments in and generally engage in any kind of business with Borrowers (and
any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and
Congress and its Affiliates may accept fees and other consideration from any
Borrower or Guarantor and any of its Subsidiaries and Affiliates for services
in connection with this Agreement or otherwise without having to account for
the same to Lenders.


 


12.5                           Indemnification.  Lenders agree to indemnify Agent (to the
extent not reimbursed by Borrowers hereunder and without limiting any
obligations of Borrowers hereunder) ratably, in accordance with their Pro Rata
Shares, for any and all claims of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against Agent (including by any Lender) arising
out of or by reason of any investigation in or in any way relating to or
arising out of this Agreement or any other Financing Agreement or any other
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined
by a final non-appealable judgment of a court of competent jurisdiction.  The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this
Agreement.


 


12.6                           Non-Reliance
on Agent and
Other Lenders.  Each
Lender agrees that it has, independently and without reliance on Agent or other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrowers and Obligors and has
made its own decision to enter into this Agreement and that it will,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Financing Agreements.  Agent shall not be required to keep itself informed
as to the performance or observance by any Borrower or Obligor of any term or
provision of this Agreement or any of the other Financing Agreements or any
other document referred to or provided for herein or therein or to inspect the
properties or books of any Borrower or Obligor.  Agent will use reasonable efforts to provide Lenders with any
information received by Agent from any Borrower or Obligor which is required to
be provided to Lenders or deemed to be requested by Lenders hereunder and with
a copy of any Notice of Default or Failure of Condition received by Agent from
any Borrower or any Lender; provided, that, Agent shall not be liable to any
Lender


 


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for any failure to do so, except to the extent that
such failure is attributable to Agent’s own gross negligence or willful
misconduct as determined by a final non-appealable judgment of a court of
competent jurisdiction.  Except for
notices, reports and other documents expressly required to be furnished to
Lenders by Agent hereunder, Agent shall not have any duty or responsibility to
provide any Lender with any other credit or other information concerning the
affairs, financial condition or business of any Borrower or Obligor that may
come into the possession of Agent.


 


12.7                           Failure to
Act.  Except for
action expressly required of Agent hereunder and under the other Financing
Agreements, Agent shall in all cases be fully justified in failing or refusing
to act hereunder and thereunder unless it shall receive further assurances to
its satisfaction from Lenders of their indemnification obligations under
Section 12.5 hereof against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action.


 


12.8                           Additional
Loans.  Agent
shall not make any Revolving Loans or provide any Letter of Credit
Accommodations to any Borrower on behalf of Lenders intentionally and with
actual knowledge that such Revolving Loans or Letter of Credit Accommodations
would cause the aggregate amount of the total outstanding Revolving Loans and
Letter of Credit Accommodations to exceed the Borrowing Base, without the prior
consent of all Lenders, except, that, Agent may make such additional Loans or
provide such additional Letter of Credit Accommodations on behalf of Lenders,
intentionally and with actual knowledge that such Revolving Loans or Letter of
Credit Accommodations will cause the total outstanding Revolving Loans and
Letter of Credit Accommodations to exceed the Borrowing Base, as Agent may deem
necessary or advisable in its discretion, provided, that: (a) the total
principal amount of the additional Revolving Loans or additional Letter of
Credit Accommodations to any Borrower which Agent may make or provide after
obtaining such actual knowledge that the aggregate principal amount of the
Revolving Loans equal or exceed the Borrowing Bases plus the amount of Special
Agent Advances made pursuant to Section 12.11(a)(i) and (ii) hereof then
outstanding, shall not exceed the aggregate amount equal to five (5%) of the
Maximum Credit and shall not cause the total principal amount of the Loans and
Letter of Credit Accommodations to exceed the Maximum Credit and (b) no such
additional Revolving Loan or Letter of Credit Accommodation shall be
outstanding more than ninety (90) days after the date such additional Revolving
Loan or Letter of Credit Accommodation is made or issued (as the case may be),
except as the Required Lenders may otherwise agree.  Each Lender shall be obligated to pay Agent the amount of its Pro
Rata Share of any such additional Revolving Loans or Letter of Credit
Accommodations.


 


12.9                           Concerning the Collateral and the Related Financing Agreements.  Each Lender authorizes and directs Agent to
enter into this Agreement and the other Financing Agreements.  Each Lender agrees that any action taken by
Agent or Required Lenders in accordance with the terms of this Agreement or the
other Financing Agreements and the exercise by Agent or Required Lenders of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Lenders.


 


12.10                     Field Audit, Examination Reports and other
Information; Disclaimer by Lenders. 
By signing this Agreement, each Lender:


 


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(a)                                  is deemed to have requested that
Agent furnish such Lender, promptly after it becomes available, a copy of each
field audit or examination report and report with respect to the Borrowing Base
prepared or received by Agent (each field audit or examination report and
report with respect to the Borrowing Base being referred to herein as a
“Report” and collectively, “Reports”), appraisal and financial statements;


 


(b)                                 expressly agrees and acknowledges
that Agent (i) does not make any representation or warranty as to the accuracy
of any Report, appraisal or financial statement or (ii) shall not be liable for
any information contained in any Report, appraisal or financial statement;


 


(c)                                  expressly agrees and acknowledges
that the Reports are not comprehensive audits or examinations, that Agent or
any other party performing any audit or examination will inspect only specific
information regarding Borrowers and Guarantors and will rely significantly upon
Borrowers’ and Guarantors’ books and records, as well as on representations of
Borrowers’ and Guarantors’ personnel; and


 


(d)                                 agrees to keep all Reports
confidential and strictly for its internal use in accordance with the terms of
Section 13.5 hereof, and not to distribute or use any Report in any other
manner.


 


12.11                     Collateral
Matters.


 


(a)                                  Agent may, at its option, from time
to time, at any time on or after an Event of Default and for so long as the
same is continuing or upon any other failure of a condition precedent to the
Loans and Letter of Credit Accommodations hereunder, make such disbursements
and advances (“Special Agent Advances”) which Agent, in its sole discretion,
(i) deems necessary or desirable either to preserve or protect the Collateral
or any portion thereof or (ii) to enhance the likelihood or maximize the amount
of repayment by Borrowers and Guarantors of the Loans and other Obligations,
provided, that, the aggregate principal amount of the Special Agent Advances
pursuant to clauses (i) and (ii), plus the then outstanding principal amount of
the additional Loans and Letter of Credit Accommodations which Agent may make
or provide as set forth in Section 12.8 hereof, shall not exceed the
aggregate amount of five (5%) percent of the Maximum Credit and shall not cause
the total principal amount of Loans and Letters of Credit Accommodations to
exceed the Maximum Credit or (iii) to pay any other amount chargeable to any
Borrower or Guarantor pursuant to the terms of this Agreement or any of the
other Financing Agreements consisting of (A) costs, fees and expenses and (B)
payments to any issuer of Letter of Credit Accommodations.  Special Agent Advances shall be repayable on
demand and together with all interest thereon shall constitute Obligations
secured by the Collateral.  Special
Agent Advances shall not constitute Loans but shall otherwise constitute
Obligations hereunder.  Interest on
Special Agent Advances shall be payable at the Interest Rate then applicable to
Prime Rate Loans and shall be payable on demand.  Without limitation of its obligations pursuant to
Section 6.10, each Lender agrees that it shall make available to Agent,
upon Agent’s demand, in immediately available funds, the amount equal to such
Lender’s Pro Rata Share of each such Special Agent Advance.  If such funds are not made available to
Agent by such Lender, such Lender shall be deemed a Defaulting Lender and Agent
shall be entitled to recover such funds, on demand from such Lender together
with interest thereon for each day


 


93

















 


from the date such payment was due
until the date such amount is paid to Agent at the Federal Funds Rate for each
day during such period (as published by the Federal Reserve Bank of New York or
at Agent’s option based on the arithmetic mean determined by Agent of the rates
for the last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York City time) on that day by each of the three leading brokers of
Federal funds transactions in New York City selected by Agent) and if such
amounts are not paid within three (3) days of Agent’s demand, at the highest
Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate
Loans.


 


(b)                                 Lenders hereby irrevocably authorize
Agent, at its option and in its discretion to release any security interest in,
mortgage or lien upon, any of the Collateral (i) upon termination of the
Commitments and payment and satisfaction of all of the Obligations and delivery
of cash collateral to the extent required under Section 13.1 below, or
(ii) constituting property being sold or disposed of if Administrative Borrower
or any Borrower or Guarantor certifies to Agent that the sale or disposition is
made in compliance with Section 9.7 hereof (and Agent may rely conclusively
on any such certificate, without further inquiry), or (iii) constituting
property in which any Borrower or Guarantor did not own an interest at the time
the security interest, mortgage or lien was granted or at any time thereafter,
or (iv) having a value in the aggregate in any twelve (12) month period of less
than $2,000,000, and to the extent Agent may release its security interest in
and lien upon any such Collateral pursuant to the sale or other disposition
thereof, such sale or other disposition shall be deemed consented to by
Lenders, or (v) if required or permitted under the terms of any of the other
Financing Agreements, including any intercreditor agreement, or (vi) approved,
authorized or ratified in writing by all of Lenders.  Except as provided above, Agent will not release any security
interest in, mortgage or lien upon, any of the Collateral without the prior
written authorization of all of Lenders. Upon request by Agent at any time,
Lenders will promptly confirm in writing Agent’s authority to release
particular types or items of Collateral pursuant to this Section.


 


(c)                                  Without any manner limiting Agent’s
authority to act without any specific or further authorization or consent by
the Required Lenders, each Lender agrees to confirm in writing, upon request by
Agent, the authority to release Collateral conferred upon Agent under this
Section.  Agent shall (and is hereby
irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent upon any Collateral to the extent set forth above; provided,
that, (i) Agent shall not be required to execute any such document on terms
which, in Agent’s opinion, would expose Agent to liability or create any obligations
or entail any consequence other than the release of such security interest,
mortgage or liens without recourse or warranty and (ii) such release shall not
in any manner discharge, affect or impair the Obligations or any security
interest, mortgage or lien upon (or obligations of any Borrower or Guarantor in
respect of) the Collateral retained by such Borrower or Guarantor.


 


(d)                                 Agent shall have no obligation
whatsoever to any Lender or any other Person to investigate, confirm or assure
that the Collateral exists or is owned by any Borrower or Guarantor or is cared
for, protected or insured or has been encumbered, or that any particular items
of Collateral meet the eligibility criteria applicable in respect of the Loans
or Letter of Credit Accommodations hereunder, or whether any particular
reserves are appropriate, or that the liens and security interests granted to
Agent pursuant hereto or any of the Financing Agreements or otherwise have been
properly or sufficiently or lawfully created, perfected, protected or


 


94

















 


enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent in this Agreement
or in any of the other Financing Agreements, it being understood and agreed
that in respect of the Collateral, or any act, omission or event related
thereto, Agent may act in any manner it may deem appropriate, in its
discretion, given Agent’s own interest in the Collateral as a Lender and that
Agent shall have no duty or liability whatsoever to any other Lender.


 


12.12                     Agency
for Perfection. 
Each Lender hereby appoints Agent and each other Lender as agent and
bailee for the purpose of perfecting the security interests in and liens upon
the Collateral of Agent in assets which, in accordance with Article 9 of
the UCC can be perfected only by possession (or where the security interest of
a secured party with possession has priority over the security interest of
another secured party) and Agent and each Lender hereby acknowledges that it
holds possession of any such Collateral for the benefit of Agent as secured
party.  Should any Lender obtain
possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent’s request therefor shall deliver such Collateral to Agent
or in accordance with Agent’s instructions.


 


12.13                     Successor
Agent.  Agent may
resign as Agent upon thirty (30) days’ notice to Lenders and Parent. If Agent
resigns under this Agreement, the Required Lenders shall appoint from among the
Lenders a successor agent for Lenders. 
If no successor agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint, after consulting with Lenders and
Parent, a successor agent from among Lenders. 
Upon the acceptance by the Lender so selected of its appointment as
successor agent hereunder, such successor agent shall succeed to all of the
rights, powers and duties of the retiring Agent and the term “Agent” as used
herein and in the other Financing Agreements shall mean such successor agent
and the retiring Agent’s appointment, powers and duties as Agent shall be
terminated.  After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 12 shall
inure to its benefit as to any actions taken or omitted by it while it was
Agent under this Agreement.  If no successor
agent has accepted appointment as Agent by the date which is thirty (30) days
after the date of a retiring Agent’s notice of resignation, the retiring
Agent’s resignation shall nonetheless thereupon become effective and Lenders
shall perform all of the duties of Agent hereunder until such time, if any, as
the Required Lenders appoint a successor agent as provided for above.


 


SECTION 13.                                                                     TERM
OF AGREEMENT; MISCELLANEOUS.


 


13.1                           Term.


 


(a)                                  This Agreement and the other
Financing Agreements shall become effective as of the date set forth on the first
page hereof and shall continue in full force and effect for a term ending on
April 22, 2007 (the “Termination Date”). 
Borrowers may terminate this Agreement and the other Financing
Agreements at any time upon ten (10) days prior written notice to Agent (which
notice shall be irrevocable) and Agent may, at its option, and shall at the
direction of Required Lenders, terminate this Agreement (i) at any time on or
after an Event of Default or (ii) on March 1, 2005, in the event that at
least 70% of the routes currently serviced by Borrowers under the New York City
Department of Education Contract (as in effect on the date


 


95

















 


hereof) are not then still serviced
by Borrowers at rates satisfactory to Agent. 
Upon the Termination Date or any other effective date of termination of
the Financing Agreements, Borrowers shall pay to Agent all outstanding and
unpaid Obligations and shall furnish cash collateral to Agent (or at Agent’s
option, a letter of credit issued for the account of Borrowers and at
Borrowers’ expense, in form and substance satisfactory to Agent, by an issuer
acceptable to Agent and payable to Agent as beneficiary) in such amounts as
Agent determines are reasonably necessary to secure Agent and Lenders from
loss, cost, damage or expense, including attorneys’ fees and expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Agent or any Lender has not yet
received final and indefeasible payment and any continuing obligations of Agent
or any Lender pursuant to any Deposit Account Control Agreement.  The amount of such cash collateral (or
letter of credit, as Agent may determine) as to any Letter of Credit
Accommodations shall be in the amount equal to one hundred ten (110%) percent
of the amount of the Letter of Credit Accommodations plus the amount of any
fees and expenses payable in connection therewith through the end of the latest
expiration date of such Letter of Credit Accommodations.  Such payments in respect of the Obligations
and cash collateral shall be remitted by wire transfer in Federal funds to the Agent
Payment Account or such other bank account of Agent, as Agent may, in its
discretion, designate in writing to Administrative Borrower for such
purpose.  Interest shall be due until
and including the next Business Day, if the amounts so paid by Borrowers to the
Agent Payment Account or other bank account designated by Agent are received in
such bank account later than 12:00 noon, New York time.


 


(b)                                 No termination of this Agreement or
the other Financing Agreements shall relieve or discharge any Borrower or
Guarantor of its respective duties, obligations and covenants under this
Agreement or the other Financing Agreements until all Obligations have been
fully and finally discharged and paid, and Agent’s continuing security interest
in the Collateral and the rights and remedies of Agent and Lenders hereunder,
under the other Financing Agreements and applicable law, shall remain in effect
until all such Obligations have been fully and finally discharged and
paid.  Accordingly, each Borrower and
Guarantor waives any rights it may have under the UCC to demand the filing of
termination statements with respect to the Collateral and Agent shall not be
required to send such termination statements to Borrowers or Guarantors, or to
file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Obligations paid and
satisfied in full in immediately available funds.


 


(c)                                  If for any reason this Agreement is
terminated prior to the Termination Date, in view of the impracticality and
extreme difficulty of ascertaining actual damages and by mutual agreement of
the parties as to a reasonable calculation of Agent’s and each Lender’s lost
profits as a result thereof, Borrowers agree to pay to Agent for itself and the
ratable benefit of Lenders, upon the effective date of such termination, an
early termination fee in the amount equal to


 


96

















 




	
  Amount

  	
   

  	
  Period

  
	
   

  	
   

  	
   

  
	
  (i)

  	
  3% of Maximum Credit

  	
   

  	
  From the date hereof to
  and including the first anniversary of the date hereof

  
	
   

  	
   

  	
   

  	
   

  
	
  (ii)

  	
  2% of Maximum Credit

  	
   

  	
  From and after the
  first anniversary of the date hereof to and including the second anniversary
  of the date hereof

  
	
   

  	
   

  	
   

  	
   

  
	
  (iii)

  	
  1% of Maximum Credit

  	
   

  	
  From and after the
  second anniversary of the date hereof to but not including the third
  anniversary of the date hereof or if the term of this Agreement is extended,
  at any time prior to the end of the then current term.

  






 


Such early termination
fee shall be presumed to be the amount of damages sustained by Agent and Lenders
as a result of such early termination and Borrowers and Guarantors agree that
it is reasonable under the circumstances currently existing.  In addition, Agent and Lenders shall be
entitled to such early termination fee upon the occurrence of any Event of
Default described in Sections 10.1(g) and 10.1(h) hereof, even if Agent and
Lenders do not exercise the right to terminate this Agreement, but elect, at
their option, to provide financing to any Borrower or permit the use of cash
collateral under the United States Bankruptcy Code.  The early termination fee provided for in this Section 13.1
shall be deemed included in the Obligations.


 


13.2                           Interpretative
Provisions.


 


(a)                                  All terms used herein which are
defined in Article 1, Article 8 or Article 9 of the UCC shall
have the meanings given therein unless otherwise defined in this Agreement.


 


(b)                                 All references to the plural herein
shall also mean the singular and to the singular shall also mean the plural
unless the context otherwise requires.


 


(c)                                  All references to any Borrower,
Guarantor, Agent and Lenders pursuant to the definitions set forth in the
recitals hereto, or to any other person herein, shall include their respective
successors and assigns.


 


(d)                                 The words “hereof”, “herein”,
“hereunder”, “this Agreement” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.


 


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(e)                                  The word “including” when used in
this Agreement shall mean “including, without limitation” and the word “will”
when used in this Agreement shall be construed to have the same meaning and
effect as the word “shall”.


 


(f)                                    An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in accordance
with Section 11.3 or is cured in a manner satisfactory to Agent and
Required Lenders, if such Event of Default is capable of being cured as
determined by Agent and Required Lenders.


 


(g)                                 All references to the term “good
faith” used herein when applicable to Agent or any Lender shall mean,
notwithstanding anything to the contrary contained herein or in the UCC,
honesty in fact in the conduct or transaction concerned.  Borrowers and Guarantors shall have the
burden of proving any lack of good faith on the part of Agent or any Lender
alleged by any Borrower or Guarantor at any time.


 


(h)                                 Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed unless otherwise specifically provided
herein, in accordance with GAAP as consistently applied and using the same
method for inventory valuation as used in the preparation of the financial
statements of Parent most recently received by Agent prior to the date
hereof.  Notwithstanding anything to the
contrary contained in GAAP or any interpretations or other pronouncements by
the Financial Accounting Standards Board or otherwise, the term “unqualified
opinion” as used herein to refer to opinions or reports provided by accountants
shall mean an opinion or report that is not only unqualified but also does not
include any explanatory note or language, including any explanation,
supplemental comment or other comment concerning the ability of the applicable
person to continue as a going concern or otherwise.


 


(i)                                     In the computation of periods of
time from a specified date to a later specified date, the word “from” means
“from and including”, the words “to” and “until” each mean “to but excluding”
and the word “through” means “to and including”.


 


(i)                                     Unless otherwise expressly provided
herein, (i) references herein to any agreement, document or instrument shall be
deemed to include all subsequent amendments, modifications, supplements,
extensions, renewals, restatements or replacements with respect thereto, but only
to the extent the same are not prohibited by the terms hereof or of any other
Financing Agreement, and (ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, recodifying, supplementing or interpreting the statute or
regulation.


 


(j)                                     The captions and headings of this
Agreement are for convenience of reference only and shall not affect the
interpretation of this Agreement.


 


(i)                                     This Agreement and other Financing
Agreements may use several different limitations, tests or measurements to
regulate the same or similar matters. 
All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.


 


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(k)                                  This Agreement and the other
Financing Agreements are the result of negotiations among and have been
reviewed by counsel to Agent and the other parties, and are the products of all
parties.  Accordingly, this Agreement
and the other Financing Agreements shall not be construed against Agent or
Lenders merely because of Agent’s or any Lender’s involvement in their
preparation.


 


13.3                           Notices.  All notices, requests and demands hereunder
shall be in writing and deemed to have been given or made:  if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next Business Day, one (1)
Business Day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing.  All
notices, requests and demands upon the parties are to be given to the following
addresses (or to such other address as any party may designate by notice in
accordance with this Section):


 


	
  If to any Borrower or
  Guarantor:

  	
   

  	
  Atlantic Express
  Transportation Corp.

  
	
   

  	
   

  	
  7 North Street

  
	
   

  	
   

  	
  Staten Island, New York
  10302

  
	
   

  	
   

  	
  Attention: President

  
	
   

  	
   

  	
  Telephone No.: 718-442-7000

  
	
   

  	
   

  	
  Telecopy No.:   718-442-5105

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Silverman Sclar Byrne
  Shin & Byrne P.C.

  
	
   

  	
   

  	
  381 Park Avenue South

  
	
   

  	
   

  	
  New York, New York
  10016

  
	
   

  	
   

  	
  Attention: John Shin,
  Esq.

  
	
   

  	
   

  	
  Telephone No.:
  212-779-8600

  
	
   

  	
   

  	
  Telecopy No.:   212-779-8858

  
	
   

  	
   

  	
   

  
	
  If to Agent:

  	
   

  	
  Congress Financial
  Corporation

  
	
   

  	
   

  	
  1133 Avenue of the
  Americas

  
	
   

  	
   

  	
  New York, New York
  10036

  
	
   

  	
   

  	
  Attn: Portfolio Manager
  — Atlantic Express

  
	
   

  	
   

  	
  Telephone No.:
  212-840-2000

  
	
   

  	
   

  	
  Telecopy No.:   212-545-4283

  



 


13.4                           Partial
Invalidity.  If
any provision of this Agreement is held to be invalid or unenforceable, such
invalidity or unenforceability shall not invalidate this Agreement as a whole,
but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable and the rights and
obligations of the parties shall be construed and enforced only to such extent
as shall be permitted by applicable law.


 


13.5                           Confidentiality.


 


(a)                                  Agent and each Lender shall use all
reasonable efforts to keep confidential, in accordance with its customary
procedures for handling confidential information and safe and sound lending
practices, any non-public information supplied to it by any Borrower,


 


99



















 


Guarantor or AETG pursuant to this
Agreement which is clearly and conspicuously marked as confidential at the time
such information is furnished by such Borrower to Agent or such Lender,
provided, that, nothing contained herein shall limit the disclosure of any such
information: (i) to the extent required by statute, rule, regulation, subpoena
or court order, (ii) to bank examiners and other regulators in connection with
their ordinary course reviews of each Lender’s and their Affiliates business,
(iii) to bank examiners and other regulators, auditors and/or accountants,  in connection with any litigation to which
Agent or such Lender is a party, (iv) to any Lender or Participant (or
prospective Lender or Participant) or to any Affiliate of any Lender so long as
such Lender or Participant (or prospective Lender or Participant) or Affiliate
shall have been instructed to treat such information as confidential in
accordance with this Section 13.5, or (v) to counsel for Agent or any
Lender or Participant (or prospective Lender or Participant).


 


(b)                                 In the event that Agent or any
Lender receives a request or demand to disclose any confidential information
pursuant to any subpoena or court order, Agent or such Lender, as the case may
be, agrees (i) to the extent permitted by applicable law or if permitted by
applicable law, to the extent Agent or such Lender determines in good faith
that it will not create any risk of liability to Agent or such Lender, Agent or
such Lender will promptly notify Administrative Borrower of such request so
that Administrative Borrower may seek a protective order or other appropriate
relief or remedy and (ii) if disclosure of such information is required,
disclose such information and, subject to reimbursement by Borrowers of Agent’s
or such Lender’s expenses, cooperate with Administrative Borrower in the
reasonable efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to such portion of the disclosed
information which Administrative Borrower so designates, to the extent
permitted by applicable law or if permitted by applicable law, to the extent
Agent or such Lender determines in good faith that it will not create any risk
of liability to Agent or such Lender.


 


(c)                                  In no event shall this Section 13.5
or any other provision of this Agreement, any of the other Financing Agreements
or applicable law be deemed: (i) to apply to or restrict disclosure of
information that has been or is made public by any Borrower, Guarantor or any
third party or otherwise becomes generally available to the public other than
as a result of a disclosure in violation hereof, (ii) to apply to or restrict
disclosure of information that was or becomes available to Agent or any Lender
(or any Affiliate of any Lender) on a non-confidential basis from a person
other than a Borrower or Guarantor, (iii) to require Agent or any Lender to
return any materials furnished by a Borrower or Guarantor to Agent or a Lender
or  prevent Agent or a Lender from
responding to routine informational requests 
in accordance with the Code of Ethics for the Exchange of Credit
Information promulgated by The Robert Morris Associates or other applicable
industry standards relating to the exchange of credit information.  The obligations of Agent and Lenders under
this Section 13.5 shall supersede and replace the obligations of Agent and
Lenders under any confidentiality letter signed prior to the date hereof.


 


(d)                                 Notwithstanding anything to the
contrary set forth herein or in any of the other Financing Agreements or any
other written or oral understanding or agreement, (i) any obligations of
confidentiality contained herein, in any of the other Financing Agreements or
any such other understanding or agreement do not apply and have not applied
from the commencement of discussions between the parties to the tax treatment
and tax structure of the transactions contemplated herein (and any related
transactions or arrangements), and (ii) each party (and each of its employees,
representatives, or other agents) may disclose to any and all


 


100

















 


persons the tax treatment and tax
structuring of the transactions contemplated herein and all materials of any
kind (including opinions or other tax analyses) that are provided to such party
relating to such tax treatment and tax structure, all within the meaning of
Treasury Regulation Section 1.6011-4; provided, that, each
party recognizes that the privilege that it may, in its discretion, maintain
with respect to the confidentiality of a communication relating to the
transactions contemplated herein, including a confidential communication with
its attorney or a confidential communication with a federally authorized tax
practitioner under Section 7525 of the Internal Revenue Code, is not
intended to be affected by the foregoing. 
Borrowers and Guarantors do not intend to treat the Loans and related
transactions as being a “reportable transaction” (within the meaning of
Treasury Regulation Section 1.6011-4). 
In the event Borrowers or Guarantors determine to take any action
inconsistent with such intention, it will promptly notify Agent thereof.  Each Borrower and Guarantor acknowledges
that one or more of Lenders may treat its Loans as part of a transaction that
is subject to Treasury Regulation Section 1.6011-4 or
Section 301.6112-1, and the Agent and such Lender or Lenders, as
applicable, may file such IRS forms or maintain such lists and other records as
they may determine is required by such Treasury Regulations.


 


13.6                           Successors.  This Agreement, the other Financing
Agreements and any other document referred to herein or therein shall be
binding upon and inure to the benefit of and be enforceable by Agent, Lenders,
Borrowers, Guarantors and their respective successors and assigns, except that
no Borrower or Guarantor may assign its rights under this Agreement, the other
Financing Agreements and any other document referred to herein or therein
without the prior written consent of Agent and Lenders.  Any such purported assignment without such
express prior written consent shall be void. 
No Lender may assign its rights and obligations under this Agreement
without the prior written consent of Agent, except as provided in
Section 13.7 below. The terms and provisions of this Agreement and the
other Financing Agreements are for the purpose of defining the relative rights
and obligations of Borrowers, Guarantors, Agent and Lenders with respect to the
transactions contemplated hereby and there shall be no third party
beneficiaries of any of the terms and provisions of this Agreement or any of
the other Financing Agreements.


 


13.7                           Assignments; Participations.


 


(a)                                  Each Lender may, with the prior
written consent of Agent (which shall not be unreasonably withheld, provided,
that, Agent may withhold its consent to any assignment from a Lender to another
Lender if such Lender’s Commitment as a result of such assignment would exceed
that of the Commitment of Agent, individually, as a Lender), assign all or, if
less than all, a portion equal to at least $5,000,000 in the aggregate for the
assigning Lender, of such rights and obligations under this Agreement to one or
more Eligible Transferees (but not including for this purpose any assignments
in the form of a participation), each of which assignees shall become a party
to this Agreement as a Lender by execution of an Assignment and Acceptance;
provided, that, (A) such transfer or assignment will not be effective until
recorded by Agent on the Register, and (B) Agent shall have received for its sole
account payment of a processing fee from the assigning Lender or the assignee
in the amount of $5,000. Any Lender may assign its rights and delegate its
obligations under this Agreement and the other Financing Agreements, without
the prior written consent of or payment of any processing fee to Agent (but in
any event with notice to Agent) to any of its present and future Subsidiaries
or Affiliates.


 


101

















 


(b)                                 Agent shall maintain a register of
the names and addresses of Lenders, their Commitments and the principal amount
of their Loans (the “Register”).  Agent
shall also maintain a copy of each Assignment and Acceptance delivered to and
accepted by it and shall modify the Register to give effect to each Assignment
and Acceptance.  The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and any Borrowers, Obligors, Agent and Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes
of this Agreement.  The Register shall
be available for inspection by Administrative Borrower and any Lender at any
reasonable time and from time to time upon reasonable prior notice.


 


(c)                                  Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, the assignee thereunder shall be a party hereto and
to the other Financing Agreements and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations (including, without limitation, the
obligation to participate in Letter of Credit Accommodations) of a Lender
hereunder and thereunder and the assigning Lender shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement.


 


(d)                                 By execution and delivery of an
Assignment and Acceptance, the assignor and assignee thereunder confirm to and
agree with each other and the other parties hereto as follows:  (i) other than as provided in such
Assignment and Acceptance, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of the
other Financing Agreements furnished pursuant hereto, (ii) the assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any Borrower, Obligor or any of their
Subsidiaries or the performance or observance by any Borrower or Obligor of any
of the Obligations; (iii) such assignee confirms that it has received a copy of
this Agreement and the other Financing Agreements, together with such other
documents and information it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance, (iv) such
assignee will, independently and without reliance upon the assigning Lender,
Agent and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Financing Agreements, (v) such
assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Financing
Agreements as are delegated to Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto, and (vi) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the other Financing
Agreements are required to be performed by it as a Lender.  Agent and Lenders may furnish any
information concerning any Borrower or Obligor in the possession of Agent or
any Lender from time to time to assignees and Participants.


 


102

















 


(e)                                  Each Lender may sell participations
to one or more banks or other entities in or to all or a portion of its rights
and obligations under this Agreement and the other Financing Agreements
(including, without limitation, all or a portion of its Commitments and the
Loans owing to it and its participation in the Letter of Credit Accommodations,
without the consent of Agent or the other Lenders); provided, that, (i) such
Lender’s obligations under this Agreement (including, without limitation, its
Commitment hereunder) and the other Financing Agreements shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, and Borrowers,
Guarantors, the other Lenders and Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and the other Financing Agreements, and (iii)
the Participant shall not have any rights under this Agreement or any of the
other Financing Agreements (the Participant’s rights against such Lender in
respect of such participation to be those set forth in the agreement executed
by such Lender in favor of the Participant relating thereto) and all amounts
payable by any Borrower or Obligor hereunder shall be determined as if such
Lender had not sold such participation.


 


(f)                                    Nothing in this Agreement shall prevent
or prohibit any Lender from pledging its Loans hereunder to a Federal Reserve
Bank in support of borrowings made by such Lenders from such Federal Reserve
Bank; provided, that, no such pledge shall release such Lender from any of its
obligations hereunder or substitute any such pledgee for such Lender as a party
hereto.


 


(g)                                 Borrowers and Guarantors shall
assist Agent or any Lender permitted to sell assignments or participations
under this Section 13.7 in whatever manner reasonably necessary in order to
enable or effect any such assignment or participation, including (but not
limited to) the execution and delivery of any and all agreements, notes and
other documents and instruments as shall be requested and the delivery of
informational materials, appraisals or other documents for, and the
participation of relevant management in meetings and conference calls with,
potential Lenders or Participants. Borrowers shall certify the correctness,
completeness and accuracy, in all material respects, of all descriptions of
Borrowers and Guarantors and their affairs provided, prepared or reviewed by
any Borrower or Guarantor that are contained in any selling materials and all
other information provided by it and included in such materials.


 


13.8                           Entire
Agreement.  This
Agreement, the other Financing Agreements, any supplements hereto or thereto,
and any instruments or documents delivered or to be delivered in connection
herewith or therewith represents the entire agreement and understanding
concerning the subject matter hereof and thereof between the parties hereto,
and supersede all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written.  In the event of any inconsistency between
the terms of this Agreement and any schedule or exhibit hereto, the terms
of this Agreement shall govern.


 


13.9                           Counterparts, Etc..  This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall
be an original, but all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of this Agreement or any of
the other Financing Agreements by telefacsimile shall have the same force and
effect as the delivery of an original executed


 


103

















 


counterpart of this Agreement or any of such other
Financing Agreements.  Any party
delivering an executed counterpart of any such agreement by telefacsimile shall
also deliver an original executed counterpart, but the failure to do so shall
not affect the validity, enforceability or binding effect of such agreement.


 


SECTION 14.                                                                     ACKNOWLEDGMENT
AND RESTATEMENT


 


14.1                           Existing
Obligations. 
Borrowers and Guarantors each hereby acknowledges, confirms and agrees
that Borrower and Guarantor are indebted to Agent and Lenders for loans and
advances to Borrowers under the Existing Agreements, as of the close of
business on April 21, 2004, in the aggregate principal amount of
$                   
and the aggregate amount of $3,500,000 in respect of Letter of Credit
Accommodations (as defined in the Existing Agreements), together with all
interest accrued and accruing thereon (to the extent applicable), and all fees,
costs, expenses and other charges relating thereto, all of which are
unconditionally owing by Borrowers and Guarantors to Agent and Lenders, without
offset, defense or counterclaim of any kind, nature or description whatsoever.


 


14.2                           Acknowledgment
of Security
Interests.


 


(a)                                  Each Borrower and Guarantor  hereby acknowledges, confirms and agrees
that  Agent on behalf of Lenders shall
continue to have a security interest in and lien upon the Collateral heretofore
granted to Agent and Lenders pursuant to the Existing Agreements to secure the
Obligations, as well as any Collateral granted under this Agreement or under
any of the other Financing Agreements or otherwise granted to or held by Agent
or any Lender.


 


(b)                                 The liens and security interests of
Agent and Lenders in the Collateral shall be deemed to be continuously granted
and perfected from the earliest date of the granting and perfection of such
liens and security interests to Agent and Lenders, whether under the Existing
Agreements, this Agreement or any of the other Financing Agreements.


 


14.3                           Existing
Agreements.  Each
Borrower hereby acknowledges, confirms and agrees that:  (a) the Existing Agreements have been duly
executed and delivered by Borrowers and Guarantors and are in full force and
effect as of the date hereof and (b) the agreements and obligations of
Borrowers and Guarantors contained in the Existing Agreements constitute the
legal, valid and binding obligations of Borrowers and Guarantors enforceable against
each of them in accordance with their respective terms and Borrowers and
Guarantors have no valid defense to the enforcement of such obligations and (c)
Agent on behalf of Lenders is entitled to all of the rights and remedies
provided for in favor of Agent and Lenders in the Existing Agreements, as
amended and restated by this Agreement.


 


14.4                           Restatement.


 


(a)                                  Except
as otherwise stated in Section 14.2 hereof and this Section 14.4, as
of the date hereof, the terms, conditions, agreements, covenants,
representations and warranties set forth in the Existing Agreements are hereby
amended and restated in their entirety, and as so amended and restated,
replaced and superseded, by the terms, conditions, agreements, covenants,
representations and warranties
set forth in this Agreement and the other Financing Agreements.  The amendment and restatement contained
herein shall not, in any manner, be construed to


 


104

















 


constitute payment of, or impair, limit, cancel or
extinguish, or constitute a novation in respect of, the Indebtedness and other
obligations and liabilities of Borrowers or Guarantors evidenced by or arising
under the Existing Agreements, and the liens and security interests in the
Collateral (as such term is defined herein) of Agent and Lenders securing such
Indebtedness and other obligations and liabilities, which shall not in any
manner be impaired, limited, terminated, waived or released, but shall continue
in full force and effect in favor of Agent for the benefit of Lenders.


 


(b)                                 The principal amount of the Loans
and the amount of the Letters of Credit Accommodations outstanding as of the
date hereof under the Existing Agreements shall be allocated to the Loans and
Letter of Credit Accommodations hereunder in such manner and in such amounts as
Agent shall determine.


 


14.5                           Release.  Each Borrower and Guarantor for itself and
its successors and assigns does hereby remise, release, discharge and hold
Agent and Lenders, their respective officers, directors, agents and employees
and their respective predecessors, successors and assigns harmless from all
claims, demands, debts, sums of money, accounts, damages, judgments, financial
obligations, actions, causes of action, suits at law or in equity, of any kind
or nature whatsoever, whether or not now existing or known, which any Borrower,
Guarantor or their respective successors or assigns has had or may now or
hereafter claim to have against Agent, any Lender or their respective officers,
directors, agents and employees and their respective predecessors, successors
and assigns in any way arising from or connected with the Existing Agreement or
the arrangements set forth therein or transactions thereunder up to and
including the date hereof, except to the extent Administrative Borrower shall
notify Agent in writing of any specific exceptions to charges for interest,
fees, costs and expenses set forth in the most recent monthly statement of
Borrower’s loan account sent by Agent to Administrative Borrower prior to the
date hereof pursuant to the Existing Agreements within thirty (30) days after
the date hereof.


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]


 


105

















 


IN WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have
caused these presents to be duly executed as of the day and year first above
written.


 


	
  AGENT

  	
   

  	
  BORROWERS

  
	
   

  	
   

  	
   

  
	
  CONGRESS FINANCIAL CORPORATION

  	
   

  	
  Atlantic Express Transportation Corp.

  
	
   

  	
   

  	
  Amboy Bus Co., Inc.

  
	
  By:

  	
  /s/ HERB KORN

  	
   

  	
   

  	
  Atlantic Express Coachways, Inc.

  
	
   

  	
   

  	
  Atlantic Express of L.A. Inc.

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  	
  Atlantic Express of Missouri Inc.

  
	
   

  	
   

  	
  Atlantic Express of New Jersey, Inc.

  
	
   

  	
   

  	
  Atlantic Express of Pennsylvania, Inc.

  
	
   

  	
   

  	
  Atlantic-Hudson, Inc.

  
	
   

  	
   

  	
  Atlantic Paratrans, Inc.

  
	
   

  	
   

  	
  Atlantic Paratrans of NYC, Inc.

  
	
   

  	
   

  	
  Atlantic Queens Bus Corp.

  
	
   

  	
   

  	
  Block 7932, Inc.

  
	
   

  	
   

  	
  Brookfield Transit Inc.

  
	
   

  	
   

  	
  Courtesy Bus Co., Inc.

  
	
   

  	
   

  	
  Jersey Business Land Co., Inc.

  
	
   

  	
   

  	
  G.V.D. Leasing Co., Inc.

  
	
   

  	
   

  	
  180 Jamaica Corp.

  
	
   

  	
   

  	
  Merit Transportation Corp.

  
	
   

  	
   

  	
  Metro Affiliates, Inc.

  
	
   

  	
   

  	
  Metropolitan Escort Service, Inc.

  
	
   

  	
   

  	
  Midway Leasing Inc.

  
	
   

  	
   

  	
  Staten Island Bus, Inc.

  
	
   

  	
   

  	
  Temporary Transit Service, Inc.

  
	
   

  	
   

  	
  201 West Sotello Realty, Inc.

  
	
   

  	
   

  	
  Wrightholm Bus Line, Inc.

  
	
   

  	
   

  	
  Atlantic Transit Corp.

  
	
   

  	
   

  	
  Airport Services, Inc.

  
	
   

  	
   

  	
  Atlantic Express New England, Inc.

  
	
   

  	
   

  	
  Atlantic Express of California, Inc.

  
	
   

  	
   

  	
  Atlantic Express of Illinois, Inc.

  
	
   

  	
   

  	
  Atlantic Paratrans of Arizona, Inc.

  
	
   

  	
   

  	
  Fiore Bus Service, Inc.

  
	
   

  	
   

  	
  Groom Transportation, Inc.

  
	
   

  	
   

  	
  James McCarty Limo Service, Inc.

  
	
   

  	
   

  	
  K. Corr, Inc.

  
	
   

  	
   

  	
  McIntire Transportation, Inc.

  
	
   

  	
   

  	
  Mountain Transit, Inc.

  
	
   

  	
   

  	
  R. Fiore Bus Service, Inc.

  
	
   

  	
   

  	
  Raybern Bus Service, Inc.

  
						



 


[SIGNATURES CONTINUED ON FOLLOWING PAGE]


 

















 


	
   

  	
   

  	
  Raybern Capital Corp.

  
	
   

  	
   

  	
  Raybern Equity Corp.

  
	
   

  	
   

  	
  Robert L. McCarthy & Son, Inc.

  
	
   

  	
   

  	
  T-NT Bus Service, Inc.

  
	
   

  	
   

  	
  Transcomm, Inc.

  
	
   

  	
   

  	
  Winsale, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ JEROME S. DENTEE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  COO/Secretary

  	
   

  
						



 


	
  LENDER

  
	
   

  
	
  CONGRESS FINANCIAL CORPORATION

  
	
   

  
	
  By:

  	
  /s/ HERB KORN

  	
   

  
	
   

  
	
  Title:

  	
  Vice President

  	
   

  
	
   

  
	
  Commitment: $30,000,000

  
	
   

  
	
   

  
	
  GUARANTORS

  
	
   

  
	
  JERSEY BUS SALES, INC.

  
	
   

  
	
  By:

  	
  /s/ JEROME S. DENTE

  	
   

  
	
   

  
	
  Title:

  	
  Secretary

  	
   

  
	
   

  
	
  CENTRAL NEW YORK REORGANIZATION CORP.

  
	
   

  
	
  By:

  	
  /s/ JEROME S. DENTE

  	
   

  
	
   

  
	
  Title:

  	
  Secretary

  	
   

  
								



 

















 


EXHIBIT A


to


LOAN AND SECURITY AGREEMENT


ASSIGNMENT AND ACCEPTANCE AGREEMENT


 


This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and
Acceptance”) dated as of
                           ,
200   is made between
                                        
(the “Assignor”) and
                                   
(the “Assignee”).


 


W I T N E S S E T H:


 


WHEREAS, Congress Financial Corporation , in its capacity as agent
pursuant to the Loan Agreement (as hereinafter defined) acting for and on
behalf of the financial institutions which are parties thereto as lenders (in
such capacity, “Agent”), and the financial institutions which are parties to
the Loan Agreement as lenders (individually, each a “Lender” and collectively,
“Lenders”) have entered or are about to enter into financing arrangements
pursuant to which Agent and Lenders may make loans and advances and provide
other financial accommodations to
                      ,
                      ,
                      ,
and                       
(collectively, “Borrowers”) as set forth in the Loan and Security Agreement,
dated 
                     ,  20   , by and among
Borrowers, certain of their affiliates, Agent and Lenders (as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced, the “Loan Agreement”), and the other agreements, documents
and instruments referred to therein or at any time executed and/or delivered in
connection therewith or related thereto (all of the foregoing, together with
the Loan Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the “Financing Agreements”);


 


WHEREAS, as provided under the Loan Agreement, Assignor committed to
making Loans (the “Committed Loans”) to Borrowers in an aggregate amount not to
exceed
$                            
(the “Commitment”);


 


WHEREAS, Assignor wishes to assign to Assignee [part of the] [all]
rights and obligations of Assignor under the Loan Agreement in respect of its
Commitment in an amount equal to
$                            
(the “Assigned Commitment Amount”) on the terms and subject to the conditions
set forth herein and Assignee wishes to accept assignment of such rights and to
assume such obligations from Assignor on such terms and subject to such
conditions;


 


NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:


 


(1)                                  Assignment
and Acceptance.


 


(a) 
Subject to the terms and conditions of this Assignment and Acceptance,
Assignor hereby sells, transfers and assigns to Assignee, and  Assignee hereby purchases, assumes and
undertakes from Assignor, without recourse and without representation or
warranty


 

















 


(except as provided in this Assignment and
Acceptance) an interest in (i) the Commitment and each of the Committed Loans
of Assignor and (ii) all related rights, benefits, obligations, liabilities and
indemnities of the Assignor under and in connection with the Loan Agreement and
the other Financing Agreements, so that after giving effect thereto, the
Commitment of Assignee shall be as set forth below and the Pro Rata Share of
Assignee shall be
                
(     %) percent.


 


(b) 
With effect on and after the Effective Date (as defined in
Section 5 hereof), Assignee shall be a party to the Loan Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Lender under the Loan Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Commitment Amount.  Assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Agreement are
required to be performed by it as a Lender. 
It is the intent of the parties hereto that the Commitment of Assignor
shall, as of the Effective Date, be reduced by an amount equal to the Assigned
Commitment Amount and Assignor shall relinquish its rights and be released from
its obligations under the Loan Agreement to the extent such obligations have
been assumed by Assignee; provided, that, Assignor shall not relinquish its
rights under Sections 2.1, 6.4, 6.8  and
6.9 of the Loan Agreement to the extent such rights relate to the time prior to
the Effective Date.


 


(c) 
After giving effect to the assignment and assumption set forth herein,
on the Effective Date Assignee’s Commitment will be
$                            .


 


(d) 
After giving effect to the assignment and assumption set forth herein,
on the Effective Date Assignor’s Commitment will be
$                            
(as such amount may be further reduced by any other assignments by Assignor on
or after the date hereof).


 


2.                                       Payments.


 


(a) 
As consideration for the sale, assignment and transfer contemplated in
Section 1 hereof, Assignee shall pay to Assignor on the Effective Date in
immediately available funds an amount equal to
$                            ,
representing Assignee’s Pro Rata Share of the principal amount of all Committed
Loans.


 


(b) Assignee shall pay to Agent the
processing fee in the amount specified in Section 13.7(a) of the Loan
Agreement.


 


3.                                       Reallocation
of Payments.  Any interest, fees and
other payments accrued to the Effective Date with respect to the Commitment,
Committed Loans and outstanding Letter of Credit Accommodations shall be for
the account of Assignor.  Any interest,
fees and other payments accrued on and after the Effective Date with respect to
the Assigned Commitment Amount shall be for the account of Assignee.  Each of Assignor and Assignee agrees that it
will hold in trust for the other party any interest, fees and other amounts
which it may receive to which the other party is entitled pursuant to the
preceding sentence and pay to the other party any such amounts which it may
receive promptly upon receipt.


 


4.                                       Independent
Credit Decision.  Assignee  acknowledges that it has received a copy of
the Loan Agreement and the Schedules and Exhibits thereto, together with copies
of the most


 

















 


recent financial statements of 
                            
and its Subsidiaries, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter
into this Assignment and Acceptance and agrees that it will, independently and
without reliance upon Assignor, Agent or any Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit and legal decisions in taking or not taking action under the Loan
Agreement.


 


5.                                       Effective
Date; Notices.


 


(a) 
As between Assignor and Assignee, the effective date for this Assignment
and Acceptance shall be
                   ,
200   (the “Effective Date”); provided, that, the following
conditions precedent have been satisfied on or before the Effective Date:


 


(i) this Assignment and Acceptance shall be
executed and delivered by Assignor and Assignee;


 


(ii) 
the consent of Agent as required for an effective assignment of the
Assigned Commitment Amount by Assignor to Assignee shall have been duly
obtained and shall be in full force and effect as of the Effective Date;


 


(iii) 
written notice of such assignment, together with payment instructions,
addresses and related information with respect to Assignee, shall have been
given to Administrative Borrower and Agent;


 


(iv) 
Assignee shall pay to Assignor all amounts due to Assignor under this
Assignment and Acceptance; and


 


(v)  
the processing fee referred to in Section 2(b) hereof shall have
been paid to Agent.


 


(b) 
Promptly following the execution of this Assignment and Acceptance,
Assignor shall deliver to Administrative Borrower and Agent for acknowledgment
by Agent, a Notice of Assignment in the form attached hereto as
Schedule 1.


 


[6.                                   Agent.  [INCLUDE ONLY IF ASSIGNOR IS AN AGENT]


 


(a) 
Assignee hereby appoints and authorizes Assignor in its capacity as
Agent to take such action as agent on its behalf to exercise such powers under
the Loan Agreement as are delegated to Agent by Lenders pursuant to the terms
of the Loan Agreement.


 


(b) 
Assignee shall assume no duties or obligations held by Assignor in its
capacity as Agent under the Loan Agreement.]


 


7.                                       Withholding
Tax.  Assignee (a) represents and
warrants to Assignor, Agent and Borrowers that under applicable law and
treaties no tax will be required to be withheld by Assignee, Agent or Borrowers
with respect to any payments to be made to Assignee hereunder or under any of
the Financing Agreements,  (b) agrees to
furnish (if it is organized under the laws of any jurisdiction other than the
United States or any State thereof) to Agent and Borrowers prior


 

















 


to the time that Agent or Borrowers are
required to make any payment of principal, interest or fees hereunder,
duplicate executed originals of either U.S. Internal Revenue Service Form
W-8BEN or W-8ECI, as applicable (wherein Assignee claims entitlement to the
benefits of a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder) and agrees to provide
new such Forms upon the expiration of any previously delivered form or
comparable statements in accordance with applicable U.S. law and regulations
and amendments thereto, duly executed and completed by Assignee, and (c)agrees
to comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.


 


8.                                       Representations
and Warranties.


 


(a) 
Assignor represents and warrants that (i)it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any security interest, lien, encumbrance or other adverse
claim, (ii)it is duly organized and existing and it has the full power and
authority to take, and has taken, all action necessary to execute and deliver
this Assignment and Acceptance and any other documents required or permitted to
be executed or delivered by it in connection with this Assignment and
Acceptance and to fulfill its obligations hereunder, (iii)no notices to, or
consents, authorizations or approvals of, any Person are required (other than any
already given or obtained) for its due execution, delivery and performance of
this Assignment and Acceptance, and apart from any agreements or undertakings
or filings required by the Loan Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance, and (iv)this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignor, enforceable against Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights and to general equitable principles.


 


(b) 
Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any of the other Financing
Agreements or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto.  Assignor
makes no representation or warranty in connection with, and assumes no responsibility
with respect to, the solvency, financial condition or statements of Borrowers,
Guarantors or any of their respective Affiliates, or the performance or
observance by Borrowers, Guarantors or any other Person, of any of its
respective obligations under the Loan Agreement or any other instrument or
document furnished in connection therewith.


 


(c) 
Assignee represents and warrants that (i)it is duly organized and
existing and it has full power and authority to take, and has taken, all action
necessary to execute and deliver this Assignment and Acceptance and any other
documents required or permitted to be executed or delivered by it in connection
with this Assignment and Acceptance, and to fulfill its obligations hereunder,
(ii) no notices to, or consents, authorizations or approvals of, any Person are
required (other than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance, and apart from any
agreements or undertakings


 

















 


or filings required by the Loan Agreement, no
further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; and (iii) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the
legal, valid and binding obligation of Assignee, enforceable against Assignee
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors’ rights to general equitable principles.


 


9.                                       Further
Assurances.  Assignor and Assignee
each hereby agree to execute and deliver such other instruments, and take such
other action, as either party may reasonably request in connection with the
transactions contemplated by this Assignment and Acceptance, including the
delivery of any notices or other documents or instruments to Borrowers or
Agent, which may be required in connection with the assignment and assumption
contemplated hereby.


 


10.                                 Miscellaneous


 


(a) 
Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto.  No failure or delay by either party hereto
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof and any waiver of any breach of the provisions of this Assignment and
Acceptance shall be without prejudice to any rights with respect to any other
for further breach thereof.


 


(b) 
All payments made hereunder shall be made without any set-off or
counterclaim.


 


(c) 
Assignor and Assignee shall each pay its own costs and expenses incurred
in connection with the negotiation, preparation, execution and performance of
this Assignment and Acceptance.


 


(d) 
This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.


 


(e) 
THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF
                           .  Assignor and Assignee each irrevocably
submits to the non-exclusive jurisdiction of any State or Federal court sitting
in
                        
County,
                    
over any suit, action or proceeding arising out of or relating to this
Assignment and Acceptance and irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such
                          
State or Federal court.  Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.


 


(f) 
ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING
AGREEMENTS OR ANY


 

















 


RELATED DOCUMENTS AND AGREEMENTS OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).


 


IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment
and Acceptance to be executed and delivered by their duly authorized officers
as of the date first above written.


 


	
   

  	
  [ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					



 

















 


SCHEDULE 1


 


NOTICE OF ASSIGNMENT AND ACCEPTANCE


 


         ,
20   


 


Attn.:


 


Re:


 


Ladies and Gentlemen:


 


Congress Financial Corporation in its capacity as agent pursuant to the
Loan Agreement (as hereinafter defined) acting for and on behalf of the
financial institutions which are parties thereto as lenders (in such capacity,
“Agent”), and the financial institutions which are parties to the Loan
Agreement as lenders (individually, each a “Lender” and collectively,
“Lenders”) have entered or are about to enter into financing arrangements
pursuant to which Agent and Lenders may make loans and advances and provide
other financial accommodations to                        ,
                       ,
                       ,
and
                       
(collectively, “Borrowers”) as set forth in the Loan and Security Agreement,
dated
                       ,
2003, by and among Borrowers, certain of their affiliates, Agent and Lenders
(as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, the “Loan Agreement”), and the other
agreements, documents and instruments referred to therein or at any time
executed and/or delivered in connection therewith or related thereto (all of
the foregoing, together with the Loan Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, being collectively referred to herein as the “Financing
Agreements”).  Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Loan Agreement.


 


1.                                       We
hereby give you notice of, and request your consent to, the assignment by
                                              
(the “Assignor”) to
                                              
(the “Assignee”) such that after giving effect to the assignment Assignee shall
have an interest equal to                        
(       %) percent of the total Commitments
pursuant to the Assignment and Acceptance Agreement attached hereto (the
“Assignment and Acceptance”).  We
understand that the Assignor’s Commitment shall be reduced by
$                       ,
as the same may be further reduced by other assignments on or after the date
hereof.


 


2.                                       Assignee
agrees that, upon receiving the consent of Agent to such assignment, Assignee
will be bound by the terms of the Loan Agreement as fully and to the same
extent as if the Assignee were the Lender originally holding such interest
under the Loan Agreement.


 


3.                                       The
following administrative details apply to Assignee:


 

















 


	
  (A)

  	
  Notice address:

  
	
   

  	
   

  
	
   

  	
  Assignee name:

  
	
   

  	
  Address:

  
	
   

  	
  Attention:

  
	
   

  	
  Telephone:

  
	
   

  	
  Telecopier:

  
	
   

  	
   

  
	
  (B)

  	
  Payment instructions:

  
	
   

  	
   

  
	
   

  	
  Account No.:

  
	
   

  	
  At:

  
	
   

  	
   

  	
   

  
	
   

  	
  Reference:

  
	
   

  	
  Attention:

  



 


4.                                       You
are entitled to rely upon the representations, warranties and covenants of each
of Assignor and Assignee contained in the Assignment and Acceptance.


 


IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of
Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.


 


	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  [NAME OF
  ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF
  ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  
	
  ACKNOWLEDGED AND ASSIGNMENT

  
	
  CONSENTED TO:

  
	
   

  
	
  CONGRESS FINANCIAL CORPORATION

  
	
    as Agent

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
										



 

















 


EXHIBIT C


TO


LOAN AND SECURITY AGREEMENT


 


Compliance Certificate


 


To:                              Congress
Financial Corporation,


 as Agent


1133 Avenue of the Americas


NY, NY 10036


 


Ladies and Gentlemen:


 


I hereby certify to you pursuant to Section 9.6 of the Loan
Agreement (as defined below) as follows:


 


1.                                       I
am the duly elected Chief Financial Officer of
                       ,
a                        
corporation,                        ,
a
                       
corporation and
                       ,
a
                       
corporation (collectively, “Borrowers”). 
Capitalized terms used herein without definition shall have the meanings
given to such terms in the Loan and Security Agreement, dated
November   , 2003,  by
and among Congress Financial Corporation as agent for the financial
institutions party thereto as lenders (in such capacity, “Agent”) and the financial
institutions party thereto as lenders (collectively, “Lenders”), Borrowers and
certain of their affiliates (as such Loan and Security Agreement is amended,
modified or supplemented, from time to time, the “Loan Agreement”).


 


2.                                       I
have reviewed the terms of the Loan Agreement, and have made, or have caused to
be made under my supervision, a review in reasonable detail of the transactions
and the financial condition of Borrowers and Guarantors, during the immediately
preceding fiscal month.


 


3.                                       The
review described in Section 2 above did not disclose the existence during
or at the end of such fiscal month, and I have no knowledge of the existence
and continuance on the date hereof, of any condition or event which constitutes
a Default or an Event of Default, except as set forth on Schedule I attached
hereto.  Described on Schedule I
attached hereto are the exceptions, if any, to this Section 3 listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which any Borrower or Guarantor has taken, is taking, or
proposes to take with respect to such condition or event.


 


4.                                       I
further certify that, based on the review described in Section 2 above, no
Borrower or Guarantor has not at any time during or at the end of such fiscal
month, except as specifically described on Schedule II attached hereto or
as permitted by the Loan Agreement, done any of the following:


 


(a)                                  Changed its
respective corporate name, or transacted business under any trade name, style,
or fictitious name, other than those previously described to you and set forth
in the Financing Agreements.


 

















 


(b)                                 Changed the location
of its chief executive office, changed its jurisdiction of incorporation,
changed its type of organization or changed the location of or disposed of any
of its properties or assets (other than pursuant to the sale of Inventory in
the ordinary course of its business or as otherwise permitted by
Section 9.7 of the Loan Agreement), or established any new asset
locations.


 


(c)                                  Materially changed
the terms upon which it sells goods (including sales on consignment) or
provides services, nor has any vendor or trade supplier to any Borrower or
Guarantor during or at the end of such period materially adversely changed the
terms upon which it supplies goods to any Borrower or Guarantor.


 


(d)                                 Permitted or suffered
to exist any security interest in or liens on any of its properties, whether
real or personal, other than as specifically permitted in the Financing
Agreements.


 


(e)                                  Received any notice
of, or obtained knowledge of any of the following not previously disclosed to
Agent:  (i) the occurrence of any event
involving the release, spill or discharge of any Hazardous Material in
violation of applicable Environmental Law in a material respect or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
applicable Environmental Law by any Borrower or Guarantor in any material
respect or (B) the release, spill or discharge of any Hazardous Material in
violation of applicable Environmental Law in a material respect or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials in violation of applicable
Environmental Laws in a material respect or (D) any other environmental, health
or safety matter, which has a material adverse effect on any Borrower or
Guarantor or its business, operations or assets or any properties at which such
Borrower or Guarantor transported, stored or disposed of any Hazardous
Materials.


 


(f)                                    Become aware of,
obtained knowledge of, or received notification of, any breach or violation of
any material covenant contained in any instrument or agreement in respect of
Indebtedness for money borrowed by any Borrower or Guarantor.


 


5.                                       Attached
hereto as Schedule III are the calculations used in determining, as of the
end of such fiscal month whether Borrowers and Guarantors are in compliance
with the covenants set forth in Section 9.17 and Section 9.18 of the
Loan Agreement for such fiscal month.


 


The foregoing certifications are made and delivered this day of
                       ,
20    .


 


	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
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