Exhibit
4.2


 


NOTE
AND WARRANT PURCHASE AGREEMENT


 


among


 


ATLANTIC
EXPRESS TRANSPORTATION CORP.,


 


the entities identified herein
as


 


GUARANTORS,
and


 


AIRLIE
OPPORTUNITY CAPITAL MANAGEMENT, L.P.


 


 


March 3, 2005


 





















 


Table
of Contents


 


	
  ARTICLE 1 The Warrant

  	
   

  
	
   

  	
   

  
	
  Section 1.1

  	
  Stock Purchase Warrant

  	
   

  
	
  Section 1.2

  	
  Registration

  	
   

  
	
  Section 1.3

  	
  Replacement Warrant

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2 The Notes

  	
   

  
	
   

  	
   

  
	
  Section 2.1

  	
  Issuance of Notes

  	
   

  
	
  Section 2.2

  	
  Guarantees

  	
   

  
	
  Section 2.3

  	
  Collateral

  	
   

  
	
  Section 2.4

  	
  Pari Passu

  	
   

  
	
  Section 2.5

  	
  Interest

  	
   

  
	
  Section 2.6

  	
  Holder Lists

  	
   

  
	
  Section 2.7

  	
  Transfer and Exchange

  	
   

  
	
  Section 2.8

  	
  Replacement Notes

  	
   

  
	
  Section 2.9

  	
  Redemption

  	
   

  
	
  Section 2.10

  	
  Special Transfer Provisions

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3 Representations and
  Warranties

  	
   

  
	
   

  	
   

  
	
  Section 3.1

  	
  Due Organization; Authority; Binding
  Obligations.

  	
   

  
	
  Section 3.2

  	
  Liens.

  	
   

  
	
  Section 3.3

  	
  Accuracy and Completeness of Information.

  	
   

  
	
  Section 3.4

  	
  Survival of Warranties; Cumulative.

  	
   

  
	
   

  	
   

  
	
  ARTICLE 4 Closing Deliveries

  	
   

  
	
   

  	
   

  
	
  Section 4.1

  	
  Deliveries by the Company

  	
   

  
	
  Section 4.2

  	
  Deliveries by the Holder

  	
   

  
	
  Section 4.3

  	
  Expenses

  	
   

  
	
   

  	
   

  
	
  ARTICLE 5 Covenants

  	
   

  
	
   

  	
   

  
	
  Section 5.1

  	
  Performance under Transaction Documents

  	
   

  
	
  Section 5.2

  	
  Maintenance of Offices

  	
   

  
	
  Section 5.3

  	
  Covenants in the Indenture

  	
   

  
	
  Section 5.4

  	
  Compliance Certificate; Notice of Default

  	
   

  
	
  Section 5.5

  	
  Reports to Holders

  	
   

  
	
  Section 5.6

  	
  Waiver of Stay, Extension or Usury Laws

  	
   

  
	
  Section 5.7

  	
  Additional Subsidiary Guarantees

  	
   

  
	
  Section 5.8

  	
  Limitation on Change of Control

  	
   

  
	
  Section 5.9

  	
  Limitation on Asset Sales

  	
   

  
	
  Section 5.10

  	
  Impairment of Security Interest

  	
   

  
	
  Section 5.11

  	
  Limitation on Liens

  	
   

  
	
  Section 5.12

  	
  Real Estate Mortgages and Recordings

  	
   

  
	
  Section 5.13

  	
  Other Covenants

  	
   

  
	
  Section 5.14

  	
  Further Assurance

  	
   

  



 





















 


	
  ARTICLE 6 Successor Corporation

  	
   

  
	
   

  	
   

  
	
  Section 6.1

  	
  Merger, Consolidation and Sale of Assets

  	
   

  
	
  Section 6.2

  	
  Successor Corporation Substituted

  	
   

  
	
   

  	
   

  
	
  ARTICLE 7 Default and Remedies

  	
   

  
	
   

  	
   

  
	
  Section 7.1

  	
  Events of Default

  	
   

  
	
  Section 7.2

  	
  Rights of the Company

  	
   

  
	
  Section 7.3

  	
  Acceleration

  	
   

  
	
  Section 7.4

  	
  Other Remedies

  	
   

  
	
   

  	
   

  
	
  ARTICLE 8 Guarantees

  	
   

  
	
   

  	
   

  
	
  Section 8.1

  	
  Guarantees

  	
   

  
	
  Section 8.2

  	
  Release of a Guarantor

  	
   

  
	
  Section 8.3

  	
  Limitation of Guarantor’s Liability

  	
   

  
	
  Section 8.4

  	
  Guarantors May Consolidate, etc., on Certain
  Terms

  	
   

  
	
  Section 8.5

  	
  Contribution

  	
   

  
	
  Section 8.6

  	
  Waiver of Subrogation

  	
   

  
	
  Section 8.7

  	
  Evidence of Guarantee

  	
   

  
	
  Section 8.8

  	
  Waiver of Stay, Extension or Usury Laws

  	
   

  
	
   

  	
   

  
	
  ARTICLE 9 Miscellaneous

  	
   

  
	
   

  	
   

  
	
  Section 9.1

  	
  Notices

  	
   

  
	
  Section 9.2

  	
  Communications by Holders with Other
  Holders of Existing Notes

  	
   

  
	
  Section 9.3

  	
  Certificate and Opinion as to Conditions
  Precedent.

  	
   

  
	
  Section 9.4

  	
  Statements Required in Certificate or
  Opinion

  	
   

  
	
  Section 9.5

  	
  Legal Holidays

  	
   

  
	
  Section 9.6

  	
  Governing Law

  	
   

  
	
  Section 9.7

  	
  No Adverse Interpretation of Other
  Agreements

  	
   

  
	
  Section 9.8

  	
  No Recourse Against Others

  	
   

  
	
  Section 9.9

  	
  Successors

  	
   

  
	
  Section 9.10

  	
  Duplicate Originals

  	
   

  
	
  Section 9.11

  	
  Severability

  	
   

  
	
  Section 9.12

  	
  Waiver of Jury Trial

  	
   

  
	
  Section 9.13

  	
  Fees and Costs

  	
   

  
	
  Section 9.14

  	
  Cumulation, Receivership

  	
   

  
	
  Section 9.15

  	
  No Implied Waiver

  	
   

  
	
  Section 9.16

  	
  Binding Effect; Assignment

  	
   

  
	
  Section 9.17

  	
  Relationship of the Parties

  	
   

  
	
   

  	
   

  
	
  ARTICLE 10 Security Interests

  	
   

  
	
   

  	
   

  
	
  Section 10.1

  	
  Security Interest

  	
   

  
	
  Section 10.2

  	
  Recording and Opinions

  	
   

  
	
  Section 10.3

  	
  Release of Collateral

  	
   

  
	
  Section 10.4

  	
  Specified Releases of Collateral

  	
   

  
	
  Section 10.5

  	
  Release upon Satisfaction of all
  Outstanding Obligations

  	
   

  
	
  Section 10.6

  	
  Form and Sufficiency of Release

  	
   

  



 





















 


	
  ARTICLE 11 Definitions and Rules
  of Construction

  	
   

  
	
   

  	
   

  
	
  Section 11.1

  	
  Definitions

  	
   

  
	
  Section 11.2

  	
  Rules of Construction

  	
   

  



 





















 


THIS NOTE AND WARRANT
PURCHASE AGREEMENT is made as of the 3rd day of March,
2005 by and among (i) Atlantic Express Transportation Corp., a New York
corporation (collectively with its successors and assigns, the “Company”), (ii)
the Guarantors (as herein defined), and (iii) Airlie Opportunity Capital
Management, L.P., a Delaware limited partnership (“Airlie”).


 


RECITALS


 


Pursuant to that certain Second Amended and
Restated Loan and Security Agreement dated April 22, 2004 as amended
through the date hereof (the “Credit Agreement”) among the Company and certain
of its subsidiaries, as Borrowers (the “Borrowers”); certain other subsidiaries
of the Company, as Guarantors; the Persons identified therein as “Lenders” (the
“Lenders”); and Congress Financial Corporation (“Congress”), as Agent; the
Borrowers are indebted to the Lenders in an aggregate principal amount of up to
$30,000,000 (the “Credit Facility”).


 


The Company also has outstanding on the date
hereof $115,000,000 in aggregate principal amount of notes consisting of
$105,000,000 in aggregate principal amount of 12% Series A Senior Secured Notes
due 2008 and $10,000,000 in aggregate principal amount of 12% Series A Senior
Secured Floating Rate Notes due 2008 (collectively, the “Existing Notes”),
issued under that certain Indenture dated as of April 22, 2004 among the
Company, the Company’s subsidiaries identified therein as “Guarantors” (the “Guarantors”)
and The Bank of New York, as Trustee and Collateral Agent, providing, inter
alia, for the issuance of the Existing Notes (as amended and supplemented
through the date hereof and to be amended and supplemented through the Closing
Date, the “Indenture”). The Existing Notes are guaranteed (the “Existing
Guarantees”) by the Guarantors. In connection with their acquisition of the
Existing Notes, pursuant to that certain Warrant Agreement dated as of April 22,
2004 between the Company and The Bank of New York, as Warrant Agent (the “Existing
Warrant Agreement”), the Company issued to the holders of the Existing Notes
warrants to purchase up to an aggregate of 115,000 shares of the Company’s
common stock, par value $.01 per share, subject to certain anti-dilution
provisions set forth therein (the “Existing Warrants”).


 


Pursuant to the Credit Agreement, the amounts
due to the Lenders under the Credit Facility are secured by first priority
liens on certain assets and properties of the Company and its subsidiaries
identified in the Credit Agreement as “Collateral” on which holders of the
Existing Notes hold a second priority lien, and by second priority liens on
certain other items of Collateral which are subject to first priority liens in
favor of the holders of the Existing Notes. Pursuant to the Indenture and the
documents identified therein as “Security Documents” (the “Existing Security
Documents”), the amounts due under the Existing Notes and the Existing
Guarantees are secured by first priority liens on certain items of Collateral
on which the Lenders hold a second priority lien, and by second priority liens
on certain other items of Collateral which are subject to first priority liens
in favor of the Lenders. Provisions governing the respective priorities of the
liens on the Collateral in favor of the Lenders and the holders of the Existing
Notes, among other things, are set forth in that certain Intercreditor
Agreement dated as of April 22, 2004 (the “Intercreditor Agreement”)
between Congress, as Agent under the Credit Agreement, and The Bank of New
York, as Collateral Agent under the Indenture and the Existing Security
Documents.


 


1





















 


Subject to the terms and conditions set forth
herein, the Company has committed to issue and sell to Airlie, as the initial
Holder hereunder, one or more senior secured notes together with warrants to
purchase shares of the Company’s common stock for an aggregate purchase price
of Fifteen Million Dollars ($15,000,000.00). The obligations of the Company
under such notes will be guaranteed by the Guarantors and secured by third
priority liens on the Collateral, as herein provided, subject to the first and
second priority liens thereon in favor of the Lenders and holders of the
Existing Notes.


 


Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Indenture.


 


PROVISIONS


 


In consideration of the premises and the
covenants herein, the Company, the Guarantors and Airlie, as the initial
Holder, agree as set forth below.


 


ARTICLE 1


 


The Warrant


 


Section 1.1                                      Stock
Purchase Warrant.  At Closing, the
Company will issue and sell, and Airlie, as the initial Holder, will purchase,
a Stock Purchase Warrant in the form of Exhibit
1.1 hereto (collectively with all modifications, extensions,
renewals and replacements thereof and therefor, the “Warrant”), initially to
acquire 40,725 shares of the Company’s authorized but unissued common stock (“Warrant
Shares”), constituting five percent (5.0%) of the total outstanding capital
stock of the Company on a fully diluted basis on the Closing Date, with such
number of Warrant Shares being subject to certain anti-dilution and other
adjustments and provisions set forth or incorporated by reference in the
Warrant.


 


Section 1.2                                      Registration.  Without limiting in any way the generality of
the foregoing, each Holder shall be entitled to have its Warrant Shares
registered with the Securities and Exchange Commission under the Equity
Registration Rights Agreement dated the date hereof in the form attached as Exhibit 1.2 hereto among the Company,
its parent, Atlantic Express Transportation Group Inc. and Holder (the “Registration
Rights Agreement”).


 


Section 1.3                                      Replacement
Warrant.  If a mutilated Warrant is
surrendered to the Company by a Holder and the Company receives evidence to its
satisfaction of the destruction, loss or theft of the Warrant, the Company
shall issue a replacement Warrant to such Holder.  If required by the Company, an indemnity bond
must be supplied by such Holder that is sufficient in the judgment of the
Company to protect the Company from any loss that it may suffer if the Warrant
is replaced.  The Company may charge for
its expenses in replacing the Warrant.


 


ARTICLE 2


 


The Notes


 


Section 2.1                                      Issuance of Notes.  At the Closing, the Company will issue and
sell to Airlie ,as the initial Holder, and Airlie will purchase from the
Company a third priority senior


 


2





















 


secured promissory note (collectively, with all modifications,
extensions, renewals and replacements thereof and therefor, the “Note”), in the
form attached hereto as Exhibit 2.1.
The Note and the PIK Notes (defined below) are sometimes referred to
collectively herein as the “Notes”.  The
terms and provisions contained in the forms of the Notes annexed hereto as Exhibit 2.1 and Exhibit 2.5 shall constitute, and are
hereby expressly made, a part of this Agreement, and the Company and the
Guarantors, by their execution and delivery of this Agreement, expressly agree
to such terms and provisions and to be bound thereby.


 


Section 2.2                                      Guarantees .  At Closing, and as a condition to Airlie’s
obligation as the initial Holder to purchase the Notes and the Warrant, the
Guarantors shall execute and deliver this Agreement including the undertakings
set forth in Article 8 hereof (the “Guarantees”).


 


Section 2.3                                      Collateral. 
The Company’s and the Guarantors’ obligations hereunder and under the
Notes and the Guarantors’ obligations under the Guarantees shall be secured by
a third priority lien in favor of the Holders on each of the items of
Collateral in which the Lenders and the holders of the Existing Notes were
granted a first or second priority lien pursuant to the Credit Agreement or the
Existing Security Documents, respectively, other than the Noteholder Motor
Vehicle Collateral. Such third priority liens shall be granted at the Closing
pursuant to a Security Agreement to be executed and delivered by the Company,
the Guarantors and Airlie, as the initial Holder, in the form of Exhibit 2.3 hereto, and shall be
subordinate only to prior liens granted by the Company and the Guarantors to
(a) the Lenders to secure their respective obligations under the Credit
Agreement; and (b) to the Collateral Agent on behalf of the holders of the
Existing Notes to secure their respective obligations under the Indenture and
the Existing Security Documents and Permitted Liens.


 


Section 2.4                                      Pari Passu. 
For purposes of any covenant, amendment or waiver, or for any other issue
for which the vote or consent of the holders of the Existing Notes is required
or sought under the Indenture, the Note and the PIK Notes will be treated as “Notes”
under the Indenture as if they were Existing Notes, and each Holder will have a
proportionate right to vote on such issues, other than with respect to
registration rights applicable to the Existing Notes.


 


Section 2.5                                      Interest. 
Interest on the unpaid principal amount of the Note shall accrue at a
rate of ten percent (10.0%) per annum (“Base Interest”), and additional
interest (“PIK Interest”) on the unpaid principal amount of the Note shall
accrue at a rate of one percent (1.0%) per annum (“PIK Interest”), in each case
from the date of issuance of the Note until the entire principal amount thereof
shall have been paid in full, such Base Interest and PIK Interest to be
calculated and payable as and when provided in the Note. PIK Interest and
Additional PIK Interest (as defined in the Note) shall be payable by the
Company by issuing additional promissory notes (“PIK Notes”) to the Holders on
each Interest Payment Date in the principal amount of the PIK Interest or
Additional PIK Interest then due and payable, as provided in the Note. The PIK
Notes will be issued in the form attached as Exhibit 2.5.


 


Section 2.6                                      Holder Lists.  The Company shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of the Holders.  The
Company shall furnish to any Holder at such times as such Holder may request in


 


3





















 


writing a list as of such date and in such form as such Holder may
reasonably request of the names and addresses of each Holder.


 


Section 2.7                                      Transfer and Exchange.  Subject to compliance with the provisions of
this Section 2.7 and of Section 2.10 below, any Holder
may transfer all or any portion of the Notes held by it any time, and upon
issuance of new Notes to the transferee thereof as herein provided, such
transferee shall be entitled to all of the rights and have all of the
obligations of a Holder hereunder.  When
Notes are presented to the Company with a request to register the transfer of
such Notes or to exchange such Notes for an equal principal amount of Notes of
other authorized denominations, the Company shall register in its records the
transfer or make the exchange and issue a new Note or Notes equal in aggregate
principal amount to the aggregate principal amount of the Notes so transferred
or exchanged, as requested; provided, however, that the Notes
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Company, duly executed by the Holder thereof or his
attorney duly authorized in writing.  No
service charge shall be made for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Section 2.9, 4.8 or 4.9, in which event the Company shall
responsible for the payment of such taxes).


 


Section 2.8                                      Replacement Notes.  If a mutilated Note or PIK Note is
surrendered to the Company or if the Holder thereof claims in writing that such
Note or PIK Note has been lost, destroyed or wrongfully taken, then, the
Company shall issue a replacement Note or PIK Note, as the case may be, of like
tenor and principal amount. Except with respect to mutilated Notes, if required
by the Company, such Holder must provide an affidavit of lost certificate and
an indemnity bond or other indemnity, sufficient in the judgment of the
Company, to protect the Company from any loss which it may suffer if any such
Note is replaced. The Company may charge such Holder for its reasonable
out-of-pocket expenses in replacing a Note, including reasonable fees and
expenses of its counsel. Every replacement Note shall constitute an additional
obligation of the Company, entitled to the benefits of this Agreement.


 


Section 2.9                                      Redemption. 
The Company may, at its option, redeem all, but not less than all, of
the outstanding Notes, at any time before maturity. If the Company elects to
redeem the Notes hereunder, it shall, at least thirty (30) but not more than
sixty (60) days before the Redemption Date, mail or cause to be mailed to each
Holder a notice of redemption by first class mail, postage prepaid, stating the
Redemption Date; the Redemption Price and the amount of accrued interest, if
any, to be paid thereon; and the place where the Notes must be surrendered to
the Company to collect the Redemption Price plus accrued interest, if any. Once
notice of redemption of the Notes is mailed in accordance with this Section 2.9,
the Notes shall become irrevocably due and payable on the Redemption Date and
at the Redemption Price plus accrued interest, if any, to the Redemption Date.
Upon surrender to the Company for redemption hereunder, the Notes shall be paid
at the Redemption Price plus accrued interest thereon to the Redemption Date,
but installments of interest, the maturity of which is on or prior to the
Redemption Date, shall be payable to the Holders at the close of business on
the relevant Interest Payment Dates referred to in the Notes. Not later than
10:00 a.m. local time in the place of payment on the Redemption Date, the
Company shall pay to the Holders the Redemption Price


 


4





















 


plus accrued interest, if any, for all of the Notes duly surrendered in
immediately available funds. Unless the Company defaults in the payment of such
Redemption Price plus accrued interest, if any, as and when provided hereunder,
interest on the Notes shall cease to accrue on and after the applicable
Redemption Date, whether or not the Notes are presented for payment.


 


Section 2.10                                Transfer Restrictions


 


(a)                                  Each
Holder, by acceptance of any Note, acknowledges that such Note is being
acquired solely for such Holder’s own account and not as a nominee for any
other party, and for investment, and that such Holder will not offer, sell or
otherwise dispose of such Note except under circumstances that will not result
in a violation of the Securities Act or any state securities laws. Each Holder
of a Note, by acceptance thereof, hereby acknowledges that it must bear the
economic risk of this investment indefinitely unless such Note is registered
pursuant to the Securities Act, or an exemption from registration is available.
Each Holder represents and warrants that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests; that it is an “accredited investor” within the meaning of Rule
501(a) of Regulation D under the Securities Act; that it has had an opportunity
to discuss the Company’s business, management and financial affairs with
directors, officers and management of the Company and has had the opportunity
to review the Company’s operations and facilities; and that it has also had the
opportunity to ask questions of and receive answers from, the Company and its
management regarding the terms and conditions of this investment.


 


(b)                                 The
Notes shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):


 


THE SECURITIES REPRESENTED HEREBY HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.  SUCH SECURITIES AND ANY INTEREST HEREIN MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND APPLICABLE LAWS.


 


(c)                                  By
its acceptance of any Note bearing the foregoing legend, each Holder of such
Note acknowledges the restrictions on transfer of such Note set forth in this
Agreement and such legend and agrees that it shall transfer such Note only as
provided in this Agreement.


 


ARTICLE 3


 


Representations and
Warranties


 


To induce the Holders to enter into the
transactions contemplated herein and purchase the Notes and the Warrant, the
Company and each of the Guarantors represents and warrants to the Holders as
set out below. All representations and warranties in this Article shall
refer to facts as they exist on the date hereof and on the Closing Date and
shall survive the Closing to the extent provided in Section 3.4.


 


5





















 


Section 3.1                                      Due Organization; Authority;
Binding Obligations.  The Company
and each of the Guarantors is a corporation duly organized and in existence
under the laws of the state of its incorporation. The Company has full power
and authority to enter into this Agreement and the other Transaction Documents
to be entered into by it hereunder, to issue and sell the Warrant and the Notes
and to carry out the provisions hereof and thereof. Each of the Guarantors has
full power and authority to enter into this Agreement, the Guaranty and the
other Transaction Documents to which it is a party, to incur its obligations
hereunder and thereunder, and to carry out the provisions hereof and thereof.
The execution, delivery and performance by the Company and each of the
Guarantors of each of the Transaction Documents to which it is a party, and
consummation of the Contemplated Transactions (a) have been duly authorized,
(b) are not in contravention of law or the terms of the Company’s or any
Guarantor’s certificate of incorporation, by-laws, or other organizational
documentation, or any indenture, agreement or undertaking to which the Company
or any Guarantor is a party or by which the Company or any Guarantor or its
property are bound and (c) 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 the Company or any Guarantor
other than in favor of the Holders or as permitted hereunder.  This Agreement, the Notes and the other
Transaction Documents to which the Company or any Guarantor is a party
constitute legal, valid and binding obligations of the Company and such
Guarantor enforceable in accordance with their respective terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws relating to or affecting the
enforcement of creditors’ rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and the discretion of the court before which any proceeding
therefor may be brought.


 


Section 3.2                                      Liens. 
The security interests and liens granted to the Holders under this
Agreement and the Security Documents will, upon completion of the Mortgage
Perfection and upon the filing with the Office of the Secretary of State of the
jurisdiction of incorporation of each of the Company and the Guarantors of Form
UCC-1 financing statements with respect to each such debtor, naming the
Collateral Agent as secured party with respect to the Collateral held by such
debtor, constitute valid and perfected third priority liens and security
interests in and upon the Collateral subject only to the liens securing the
Credit Facility or the Existing Notes, and Permitted Liens.


 


Section 3.3                                      Accuracy and Completeness of
Information.  All information
furnished by or on behalf of the Company or any Guarantor in writing to any
Holder in connection with this Agreement or any of the other Transaction
Documents or any of the Contemplated Transactions, 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.  All reports and other
information required by law to have been filed by or on behalf of the Company
with the Commission have been so filed, and all reports and other information
filed with the Commission by or on behalf of the Company (whether or not such
filing is required by law) are complete and accurate in all material respects.


 


Section 3.4                                      Survival of Warranties;
Cumulative.  All representations
and warranties contained in this Agreement or any of the other Transaction
Documents shall survive


 


6





















 


the execution and delivery of this Agreement and shall expire on the
first anniversary of the Closing Date, except that the representations and
warranties contained in Section 3.1 shall expire at the end of the
applicable statutory limitations period. All representations and warranties
contained in this Agreement or any of the other Transaction Documents shall be
conclusively presumed to have been relied on by the Holders regardless of any
investigation made or information possessed by any of them.  The representations and warranties set forth
herein shall be cumulative and in addition to any other representations or
warranties which the Company or any Guarantor shall now or hereafter give, or
cause to be given, to the Holders.


 


ARTICLE 4


 


Closing Deliveries


 


Section 4.1                                      Deliveries by the Company.  At the Closing, the Company shall deliver to
Airlie, as the initial Holder, the following, in form and substance
satisfactory to Airlie:


 


(a)                                  This
Agreement, the Note, the Security Agreement, the Warrant and the Registration
Rights Agreement, in each case duly executed by the Company and the Guarantors
party thereto;


 


(b)                                 A
fully executed amendment or supplement to the Indenture, in form and substance
reasonably satisfactory to Airlie, reflecting such amendments and additions as
may be necessary or advisable to reflect the Contemplated Transactions;


 


(c)                                  Evidence
satisfactory in form and substance to Airlie that the Lenders shall have consented
to the Contemplated Transactions to the extent required under the Credit
Agreement, and that all consents required under the Indenture from the holders
of the Existing Notes and from any other Persons have been obtained and are in
effect;


 


(d)                                 The
following documents, duly certified, or the following certificates, as
applicable:


 


(i)                                     Resolutions
of the Board of Directors of the Company and each Guarantor authorizing (1) the
execution, delivery, and performance of the Transaction Documents to which it is
a party, (2) the consummation of the transactions contemplated by the
Transaction Documents to which it is a party, and (3) all other actions to be
taken by it in connection with the Transaction Documents;


 


(ii)                                  Certificates,
signed by the Secretary or an Assistant Secretary of the Company and of each
Guarantor, dated as of the Closing Date, as to (1) the incumbency, and
containing the specimen signatures of the Persons authorized to execute on its
behalf the Transaction Documents, together with evidence of the incumbency of
such Secretary or Assistant Secretary, and (2) the authenticity of its
Certificate of Incorporation and Bylaws; and


 


(iii)                               Certificates
signed by an officer of the Company and of each Guarantor as to the truth and
accuracy of its representations and warranties made in the Transaction
Documents.


 


7





















 


(e)                                  A
certificate of status or good standing of the Company and of each the
Guarantors (other than Inactive Subsidiaries) from its state of incorporation
in each case, dated within 30 days of the Closing Date.


 


(f)                                    The
Information Certificates (as defined in the Credit Agreement) delivered by the
Company and the Guarantors to the Lender pursuant to the Credit Agreement, with
all information required therein to be updated through the Closing Date.


 


(g)                                 An
opinion of counsel to the Company in form and substance reasonably acceptable
to Airlie.


 


Section 4.2                                      Deliveries by Airlie.  At the Closing, Airlie, as the initial
Holder,  shall deliver to the Company
this Agreement, the Security Agreement, and the Registration Rights Agreement
duly executed by Airlie, as the initial Holder, together with confirmation of
the wire transfer of Fifteen Million Dollars ($15,000,000.00) to the Company’s
account in accordance with wire transfer instructions previously delivered by
the Company to Airlie in writing .


 


Section 4.3                                      Expenses. 
At the Closing, the Company shall pay all of the reasonable fees, costs,
and expenses of Airlie in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other Transaction Documents,
including the reasonable fees and expenses of Airlie’s counsel.


 


ARTICLE 5


 


Covenants


 


Unless the Holders of a majority in principal
amount of the outstanding Notes otherwise give their prior written consent:


 


Section 5.1                                      Performance under
Transaction Documents.  The
Company and each Guarantor will perform all acts required under the Transaction
Documents as and when required thereunder.


 


Section 5.2                                      Maintenance of Offices.  The Company shall maintain an office or
agency in the Borough of Manhattan, The City of New York, where (a) Notes may
be presented or surrendered for transfer, redemption or exchange; (b) Notes may
be presented or surrendered for payment; and (c) notices and demands to or upon
the Company in respect of the Notes and this Agreement may be served. The
Company shall keep a register of the Notes and of their transfer and exchange.


 


Section 5.3                                      Covenants in the Indenture.  The covenants made by the Company or any of
the Guarantors in Sections 4.03, 4.04, 4.05, 4.07, 4.10, 4.11, 4.12, 4.13,
4.19, 4.20, 4.24, 4.25, 4.26 and 4.27 of the Indenture (as amended from time to
time thereunder subject to the provisions of Section 2.4 hereof),
are hereby incorporated by reference herein and shall be deemed to have been
made by the Company and each of the Guarantors to the Holders on and as of the
date hereof; provided, however, that references in such Sections to “Holders”
shall mean the Holders hereunder, and references therein to other capitalized
terms that are specifically


 


8





















 


defined herein shall have the meanings given to such terms in this
Agreement, and in the event of any other conflict or inconsistency between the
provisions of the Indenture so incorporated herein and the provisions hereof,
the provisions of this Agreement shall control.


 


Section 5.4                                      Compliance Certificate;
Notice of Default.  (a) The
Company and each Guarantor shall deliver to each Holder, within ninety (90)
days after the end of the Company’s fiscal year, an Officers’ Certificate
stating that a review of its activities during the preceding fiscal year has
been made under the supervision of the signing Officers (one of whom is the
principal executive officer, principal financial officer or principal
accounting officer) with a view to determining whether it has kept, observed,
performed and fulfilled its obligations under this Agreement and further
stating, as to each such Officer signing such certificate, that to the best of
such Officer’s actual knowledge such entity during such preceding fiscal year
has kept, observed, performed and fulfilled each and every condition and
covenant under this Agreement and no Default or Event of Default occurred during
such year and at the date of such certificate there is no Default or Event of
Default that has occurred and is continuing or, if such signers do know of such
Default or Event of Default, the certificate shall describe the Default or
Event of Default and its status with particularity. The Officers’ Certificate
shall also notify the Holders should the Company elect to change the manner in
which it fixes its fiscal year end.


 


(b)                                 The
annual financial statements delivered pursuant to Section 5.5 shall
be accompanied by a written report of the Company’s independent accountants
(who shall be a firm of established national reputation) that in conducting
their audit of such financial statements nothing has come to their attention
that would lead them to believe that the Company has violated any provisions
hereof insofar as they relate to accounting matters or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.


 


(c)                                  If
any Default or Event of Default has occurred and is continuing, the Company
shall deliver to each Holder, at its address set forth in Section 9.1
or in the Company’s register of the Notes, by registered or certified mail or
by telegram, telex or facsimile transmission followed by hard copy by
registered or certified mail an Officers’ Certificate specifying such event,
notice or other action and the status thereof within five (5) Business Days of
any such officer becoming aware of such occurrence (provided  that
such officers shall provide such certification at least annually whether or not
they know of any Default or Event of Default).


 


(d)                                 Not
later than the date of making any Restricted Payment pursuant to Section 4.10
of the Indenture, the Company shall deliver to each Holder a copy of the
Officers’ Certificate required under Section 4.06 thereof to be delivered
to the Trustee.


 


Section 5.5                                      Reports to Holders.  For so long as any of the Notes shall be
outstanding, the Company shall furnish to each Holder copies of (a) all reports
and financial information required to be delivered by it to the Trustee under Section 4.08
of the Indenture (as in effect on the date hereof and irrespective of any
subsequent amendment, supplement, defeasance or discharge thereof), or
otherwise delivered by it to the Trustee or the Warrant Agent or to the holders
of the Existing Notes or the Existing Warrants in connection with the Indenture
or the Existing Warrant Agreement; and (b) copies of all other notices,
certificates, supplemental


 


9





















 


indentures or agreements, amendments, fairness opinions, legal opinions
and other documents delivered by it to the Trustee, the Collateral Agent, the
Warrant Agent or the holders of the Existing Notes or of the Existing Warrants
in connection therewith; in each case promptly upon such delivery, provided
however, that such copies need not include documents relating solely to items
of collateral securing the Existing Notes which are not included in the
Collateral securing the Notes hereunder unless such documents concern the
disposition of any such items of collateral that are less than eight (8) years
old.


 


Section 5.6                                      Waiver of Stay, Extension or
Usury Laws.  The Company and each
of the Guarantors covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company and each of the Guarantors
from paying all or any portion of the principal of or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Agreement; and (to
the extent that it may lawfully do so) the Company and each of the Guarantors
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not hinder, delay or impede the execution of any power herein
granted to the Holders, but shall suffer and permit the execution of every such
power as though no such law had been enacted.


 


Section 5.7                                      Additional Subsidiary
Guarantees.  If the Company or
any of its Subsidiaries shall organize, acquire or otherwise invest in another
Domestic Restricted Subsidiary that is not a Guarantor, then such transferee or
acquired or other Subsidiary shall:


 


(a)                                  execute
and deliver to each Holder a supplemental guarantee in form reasonably
satisfactory to the Holders of a majority in principal amount of the
outstanding Notes pursuant to which such Subsidiary shall unconditionally
guarantee on a senior secured basis all of the Company’s obligations under the
Notes and this Agreement on the terms set forth herein;


 


(b)                                 if
required by the second paragraph of Section 5.11, (a) execute and
deliver to each Holder such amendments to the Security Documents as the Holders
of a majority in principal amount of the outstanding Notes deem necessary or
advisable in order to grant to the Holders a perfected first priority security
interest in the Capital Stock of such Subsidiary, subject to the Liens
permitted pursuant to the second paragraph Section 5.11, which are
owned by the Company or any Subsidiary and required to be pledged pursuant to
the Security Agreement, (b) deliver to the Holders the certificates
representing such Capital Stock, together with undated stock powers or
instruments of transfer, as applicable, endorsed in blank;


 


(c)                                  cause
such Subsidiary to take such other actions necessary or advisable to grant to
the Holders a perfected third priority security interest in the Collateral of
such Subsidiary, subject to Permitted Prior Liens, including the filing of
Uniform Commercial Code financing statements in such jurisdictions as may be
required by the Security Agreement or by law or as may be reasonably requested
by the Holders of a majority in principal amount of the outstanding Notes;


 


10





















 


(d)                                 take
such further action and execute and deliver such other documents specified in
this Agreement or otherwise reasonably requested by any Holder to effectuate
the foregoing; and


 


(e)                                  deliver
to each Holder an Opinion of Counsel that such supplemental guarantee and any
other documents required to be delivered have been duly authorized, executed
and delivered by such Subsidiary and constitute the legal, valid, binding and
enforceable obligations of such Subsidiary as provided for in this Agreement.


 


Thereafter, such Subsidiary shall be a Guarantor for all purposes of
this Agreement.


 


Section 5.8                                      Limitation on Change of Control.  (a) Upon the occurrence of a Change of
Control, the Company shall make an offer to purchase all outstanding Notes
pursuant to the requirements described in clause (b) below (the “Change
of Control Offer”) at a purchase price in cash equal to 101% of the
principal amount thereof on the date of purchase plus accrued and unpaid interest
(including PIK Interest) and Additional PIK Interest (which, for such purpose
shall be payable in cash), if any, to the date of purchase.


 


(b)                                 Within
thirty (30) days following the date upon which the Change of Control occurred
(the “Change of Control Date”), the Company shall send, by registered
first class mail, postage prepaid, an offer to each Holder, which offer shall
govern the terms of the Change of Control Offer. The notice to each Holder
shall contain all instructions and materials necessary to enable such Holder to
tender Notes pursuant to the Change of Control Offer. Such offer shall state:


 


(i)                                     that
the Change of Control Offer is being made pursuant to this Section 5.8
and that all Notes tendered and not withdrawn shall be accepted for payment;


 


(ii)                                  the
purchase price (including the amount of accrued interest) and the purchase date
(which shall be no earlier than thirty (30) days nor later than sixty (60) days
from the date such offer is mailed, other than as may be required by law) (the “Change
of Control Payment Date”);


 


(iii)                               that
any Note not tendered shall continue to accrue interest;


 


(iv)                              that,
unless the Company defaults in making payment therefor, any Note accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;


 


(v)                                 that
such Holder, if it elects to have a Note purchased pursuant to a Change of
Control Offer, shall be required to surrender the Note, with the form entitled “Option
of Holder to Elect Purchase” on the reverse of the Note completed, to the
Company at the address specified in the offer prior to the close of business on
the third Business Day prior to the Change of Control Payment Date;


 


(vi)                              that
such Holder shall be entitled to withdraw its election if the Company receives,
not later than five (5) Business Days prior to the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the


 


11





















 


principal amount of the Notes such Holder delivered for purchase and a
statement that such Holder is withdrawing its election to have such Notes
purchased;


 


(vii)                           that
if such Holder’s Notes are purchased only in part, such Holder shall be issued
new Notes in a principal amount equal to the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued
shall be in an original principal amount of $1,000, or integral multiples
thereof; and


 


(viii)                        the
circumstances and relevant facts regarding such Change of Control.


 


On or before the Change of Control Payment Date, the Company shall (i)
accept for payment all Notes or portions thereof properly tendered pursuant to
the Change of Control Offer, (ii) promptly pay the purchase price plus accrued
interest, if any, of all Notes or portions thereof so tendered to each Holder,
and (iii) promptly issue and mail to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered; provided  that
each such new Note shall be in a principal amount of $1,000 or an integral
multiple thereof. Any Notes not so accepted shall be promptly mailed by the
Company to the Holders thereof.


 


Notwithstanding anything to the contrary
contained herein, the Board of Directors of the Company may not waive the
Company’s obligation to offer to purchase the Notes pursuant to this Section 5.8.


 


The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Notes pursuant to a Change of
Control Offer. To the extent the provisions of any securities laws or
regulations conflict with the provisions under this Section 5.8,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this Section 5.8
by virtue thereof.


 


The Company shall not be required to make a
Change of Control Offer upon a Change of Control if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in compliance
with the requirements of this Section 5.8 and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.


 


It is the intention of the parties that the
provisions of this Section 5.8 provide the Holders and the Company
with the same rights and obligations with respect to a Change of Control Offer
and resulting sale of Notes as the holders of the Existing Notes and the
Company have with respect to a Change of Control Offer and resulting sale of
the Existing Notes under Section 4.15 of the Indenture, except to
the extent such provisions differ on the date hereof. Accordingly, if any of
such provisions of Section 4.15 of the Indenture are amended or
supplemented by vote of the holders of the Existing Notes (subject to the
provisions of Section 2.4 hereof), then the corresponding
provisions of this Section 5.8 (if any) shall be deemed to have
been similarly amended or supplemented to the extent necessary to maintain such
parity.


 


Section 5.9                                      Limitation on Asset Sales.  The provisions of Section 4.16 of the
Indenture (as amended from time to time thereunder, subject to the provisions
of Section 2.4 hereof)


 


12





















 


are hereby incorporated by reference herein and shall be deemed to have
been made by the Company and each of the Guarantors to the Holders on and as of
the date hereof, such that if an Asset Sale shall occur and a Net Proceeds
Offer under Section 4.16 of the Indenture shall be made, such Net Proceeds
Offer shall be extended as well to the Holders and shall include the Notes as
if the Notes were Existing Notes and each Holder shall have all of the rights
and benefits conferred upon the holders of Existing Notes under that Section 4.16.


 


Section 5.10                                Impairment of Security Interest.  Neither the Company nor any of its Restricted
Subsidiaries will take or omit to take any action which would materially
adversely affect or impair the Liens in favor of the Holders with respect to
the Collateral. Neither the Company nor any of its Restricted Subsidiaries
shall grant to any Person, or permit any Person to retain (other than the
Holders), any interest whatsoever in the Collateral other than Permitted Liens.
Neither the Company nor any of its Restricted Subsidiaries will enter into any
agreement that requires the proceeds received from any sale of Collateral to be
applied to repay, redeem, defease or otherwise acquire or retire any
Indebtedness of any Person, other than as permitted by the Note, the Security
Documents and the Intercreditor Agreement. The Company shall, and shall cause
each Guarantor to, at their sole cost and expense, execute and deliver all such
agreements and instruments as the Holders of a majority in principal amount of
the outstanding Notes shall reasonably request to more fully or accurately
describe the property intended to be Collateral or the obligations intended to
be secured by the Security Documents. The Company shall, and shall cause each
Restricted Subsidiary of the Company to, at their sole cost and expense, file
any such notice filings or other agreements or instruments as may be required
under applicable law to perfect the Liens created by the Security Documents at
such times and at such places as the Holders of a majority in principal amount
of the outstanding Notes may reasonably request, except that mortgage liens on
Collateral comprised of real property shall be recorded by the Collateral Agent
at the Holders’ expense, including, but not limited to, any and all mortgage
recording taxes to be paid in connection with the recordation of such
Mortgages.


 


Section 5.11                                Limitation on Liens.  The Company will not, and will not cause or
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or permit or suffer to exist any Liens (other than Permitted
Liens) of any kind against or upon any property or assets of the Company or any
of its Restricted Subsidiaries, other than the Capital Stock of any Subsidiary
of the Company to the extent permitted by the immediately following paragraph,
or any proceeds therefrom, or assign or otherwise convey any right to receive
income or profits therefrom.


 


The Company will not, and will not cause or
permit any of its Restricted Subsidiaries to, create, incur, assume or permit
or suffer to exist any Liens (other than Liens pursuant to clauses (1),
(4), (10),  (12),  (14) and (17) of the definition of
Permitted Liens) of any kind against or upon the Capital Stock of any
Subsidiary of the Company, unless all payments due under this Agreement and the
Notes are secured on an equal and ratable basis with the obligations so secured
until such time as such obligations are no longer secured by a Lien.


 


Section 5.12                                Real Estate Mortgages and
Recordings.  With respect to any
fee interest in the real property, (individually and collectively, the “Premises”),
owned by the Company or a Domestic Restricted Subsidiary on the Closing Date or
acquired by the Company or a Domestic Restricted Subsidiary after the Closing
Date with (1) a purchase price or (2) as of the


 


13





















 


date such real property is acquired, a Fair Market Value, of greater
than $200,000 (“Pledged Real Estate”):


 


(a)                                  the
Company will deliver to the Collateral Agent, as mortgagee, fully-executed
counterparts of Mortgages, duly executed by the Company or the applicable
Domestic Restricted Subsidiary,  against
the properties purported to be covered thereby;


 


(b)                                 the
Company will deliver to the Collateral Agent copies of all mortgagee’s title
insurance policies delivered to the Collateral Agent under the Indenture
pursuant to Section 4.23(2) thereof; and


 


(c)                                  the
Company will deliver to the Collateral Agent, with respect to each of the
covered Premises, the most recent survey of such Premises, together with copies
of each updated survey certification or affidavit delivered by the Company or
the Guarantors to the Collateral Agent under the Indenture pursuant to Section 4.23(3)
thereof.


 


The Company will use commercially reasonable
efforts to deliver all items required to be delivered pursuant to clauses (a),
(b) and (c) above, 90 days after the Closing Date (in the case of
real property owned by the Company or any Domestic Restricted Subsidiary as of
the Closing Date) and 90 days after the date of acquisition (in the case of
real property acquired by the Company or any Domestic Restricted Subsidiary
after the Closing Date). The Holders and the Collateral Agent shall be
responsible, at the sole cost and expense of the Holders, for the Mortgage
Perfection of such Mortgages and for any and all mortgage recording taxes to be
paid in connection with the recordation of such Mortgages.


 


Section 5.13                                Other Covenants.  The Company shall and shall cause each of the
Subsidiaries to comply in all respects with their respective obligations under
the Credit Facility and the Indenture including, without limitation, all
financial covenants set forth therein.


 


Section 5.14                                Further Assurance.  The Company and each of the Guarantors will
from time to time promptly execute and deliver to Holders or the Collateral
Agent such additional documents, and take such other reasonable steps, as the
Collateral Agent or the Holders of a majority in principal amount of the
outstanding Notes may reasonably require to carry out the purposes hereof and
of the other Transaction Documents, or to protect the Holders’ rights
thereunder.


 


ARTICLE 6


 


Successor Corporation


 


Section 6.1                                      Merger, Consolidation and
Sale of Assets.  The Company will
not, in a single transaction or series of related transactions, consolidate or
merge with or into any Person, or sell, assign, transfer, lease, convey or
otherwise dispose of (or cause or permit any Restricted Subsidiary of the
Company to sell, assign, transfer, lease, convey or otherwise dispose of) all
or substantially all of the Company’s assets (determined on a consolidated
basis for the Company and the Company’s Restricted Subsidiaries) whether as an
entirety or substantially as an entirety to any Person unless:


 


14





















 


(a)                                  either:


 


(i)                                     the
Company shall be the surviving or continuing corporation; or


 


(ii)                                  the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the properties and assets of
the Company and of the Company’s Restricted Subsidiaries substantially as an
entirety (the “Surviving Entity”):


 


(x)                                   shall
be a corporation organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia; and


 


(y)                                 shall
expressly assume, (i) by a supplemental written instrument in form and
substance satisfactory to the Holders of a majority in principal amount of the
outstanding Notes, executed and delivered to each Holder, the due and punctual
payment of the principal of, interest (including PIK Interest) and Additional PIK
Interest, if any, on all of the Notes and the performance of every covenant of
the Notes, this Agreement, the Warrant, the Security Documents and the
Registration Rights Agreement on the part of the Company to be performed or
observed thereunder and (ii) by amendment, supplement or other instrument (in
form and substance satisfactory to the Holders of a majority in principal
amount of the outstanding Notes), executed and delivered to each Holder, all
obligations of the Company under the Security Documents, and in connection
therewith shall cause such instruments to be filed and recorded in such
jurisdictions and take such other actions as may be required by applicable law
to perfect or continue the perfection of the Lien created under the Security
Documents on the Collateral owned by or transferred to the surviving entity;


 


(b)                                 immediately
after giving effect to such transaction on a pro forma basis and the assumption
contemplated by clause (a)(ii)(y) above (including giving effect to any
Indebtedness (including Acquired Indebtedness) incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, (a) shall have a Consolidated Net
Worth at least equal to the Consolidated Net Worth of the Company immediately
prior to such transaction and (b) shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the provisions of Section 4.12 of the Indenture incorporated herein by
reference;


 


(c)                                  immediately
after giving effect to such transaction and the assumption contemplated by clause
(a)(ii)(y) above (including, without limitation, giving effect to any
Indebtedness (including Acquired Indebtedness) incurred or anticipated to be
incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and


 


(d)                                 the
Company or the Surviving Entity, as the case may be, shall have delivered to
each Holder an Officers’ Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition and, if a


 


15





















 


supplemental written instrument is required in connection with such
transaction, such supplemental written instrument complies with the applicable
provisions of this Agreement and that all conditions precedent in this
Agreement relating to such transaction have been satisfied.


 


Notwithstanding the foregoing, (a) the merger
of the Company with an Affiliate incorporated solely for the purpose of
reincorporating the Company in another jurisdiction in the United States or any
State thereof of the District of Columbia shall be permitted and (b) the merger
of any Restricted Subsidiary of the Company into the Company or the transfer,
lease, conveyance or other disposition of all or substantially all of the
assets of a Restricted Subsidiary of the Company to the Company shall be permitted
so long as the Company delivers to each Holder an Officers’ Certificate stating
that the purpose of such merger, transfer, lease, conveyance or other
disposition is not to consummate a transaction that would otherwise be
prohibited by this covenant.


 


For purposes of the foregoing, the transfer
(by lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.


 


Section 6.2                                      Successor Corporation
Substituted.  Upon any
consolidation, combination or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing, in which the
Company is not the continuing corporation, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Agreement, the Notes,
the Warrant and the other Transaction Documents to which the Company is a party
with the same effect as if such surviving entity had been named as such.


 


ARTICLE 7


 


Default and Remedies


 


Section 7.1                                      Events of Default.  Each of the following is an “Event of
Default”:


 


(a)                                  the
Company or any Guarantor fails to pay interest (including PIK Interest) or
Additional PIK Interest, if any, on any Notes or any other amount (other than
principal for the Notes) when the same becomes due and payable and the default
continues for a period of thirty (30) days;


 


(b)                                 the
Company or any Guarantor fails to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered pursuant to
a Change of Control Offer or a Net Proceeds Offer);


 


(c)                                  a
default occurs in the observance or performance of any other representation,
warranty, covenant or agreement contained in this Agreement (other than the
payment of the principal or interest (including PIK Interest) or Additional PIK
Interest, if any, on


 


16





















 


any Note and other than a default in the observance or performance of Section 4.24
of the Indenture incorporated herein by reference in Section 5.3
hereof) or any Security Document which default continues for a period of 45
days after the Company receives written notice specifying the default (and
demanding that such default be remedied) from the Holders of a majority in
principal amount of the outstanding Notes (except in the case of a default with
respect to Section 6.1, which will constitute an Event of Default
with such notice requirement but without such passage of time requirement);


 


(d)                                 an
Event of Default under (and as defined in) the Indenture or any of the Existing
Notes shall occur and be continuing (other than an Event of Default thereunder
described elsewhere in this Section 7.1);


 


(e)                                  the
Company or any Guarantor fails to pay at final stated maturity (giving effect
to any applicable grace periods and any extensions thereof) the principal
amount of any other Indebtedness of the Company or any of its Restricted
Subsidiaries, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise cured
within 20 days from the date of acceleration) if the aggregate principal amount
of such other Indebtedness, together with the principal amount of any other
such Indebtedness in default for failure to pay principal at final maturity or
which has been accelerated (in each case with respect to which the 20-day
period described above has elapsed), exceeds $7.5 million or more at any time;


 


(f)                                    one
or more judgments in an aggregate amount in excess of $7.5 million (which are
not covered by a reputable and solvent third party insurer as to which such
insurer has not disclaimed coverage) shall have been rendered against the
Company or any of its Restricted Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 60 consecutive days after such
judgment or judgments become final and non-appealable;


 


(g)                                 the
Company or any Significant Subsidiary (A) commences a voluntary case or
proceeding under any Bankruptcy Code with respect to itself, (B) consents to
the entry of a judgment, decree or order for relief against it in an
involuntary case or proceeding under any Bankruptcy Code, (C) consents to the
appointment of a Custodian of it or for substantially all of its property, (D)
consents to or acquiesces in the institution of a bankruptcy or an insolvency
proceeding against it, (E) makes a general assignment for the benefit of its
creditors; or (F) takes any corporate action to authorize or effect any of the
foregoing;


 


(h)                                 a
court of competent jurisdiction enters a judgment, decree or order for relief
in respect of the Company or any Significant Subsidiary in an involuntary case
or proceeding under any Bankruptcy Code, which shall (A) approve as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
in respect of the Company or any Significant Subsidiary, (B) appoint a
Custodian of the Company or any Significant Subsidiary or for substantially all
of its property or (C) order the winding-up or liquidation of its affairs; and
such judgment, decree or order shall remain unstayed and in effect for a period
of sixty (60) consecutive days;


 


(i)                                     any
Security Document at any time for any reason shall cease to be in full force
and effect, or shall cease to grant any Holder the Liens, rights, powers and privileges
purported


 


17





















 


to be created thereby, superior to and prior to the rights of all third
Persons other than the holders of Permitted Liens and subject to no other Liens
except as expressly permitted by the applicable Security Document;


 


(j)                                     the
Company or any of the Subsidiaries, directly or indirectly, contest in any
manner the effectiveness, validity, binding nature or enforceability of any
Security Document; or


 


(k)                                  any
Guarantee of a Guarantor that is a Significant Subsidiary ceases to be in full
force and effect or any Guarantee of a Guarantor that is a Significant
Subsidiary is declared to be null and void and unenforceable or any Guarantee
of a Guarantor that is a Significant Subsidiary is found to be invalid or any
Guarantor that is a Significant Subsidiary denies its liability under its
Guarantee (other than by reason of the release of such Guarantor in accordance
with the terms hereof).


 


Section 7.2                                      Rights of the Company.  So long as no Event of Default has occurred
and is continuing, and subject to certain terms and conditions in this
Agreement, the Indenture, the Credit Agreement, the Security Documents and the
Intercreditor Agreement, the Company shall be entitled to receive all cash
dividends, interest and other payments made upon or with respect to the Capital
Stock of any of its Subsidiaries held as Collateral and to exercise any voting,
consensual and other rights pertaining to such Capital Stock. Upon the
occurrence and during the continuance of an Event of Default, subject to the
terms of the Intercreditor Agreement, upon notice from the Holders of a
majority in principal amount of the outstanding Notes, (a) all of the Company’s
rights to exercise such voting, consensual or other rights shall cease and all
such rights shall become vested in the Collateral Agent , which, to the extent
permitted by law, shall have the sole right to exercise such voting, consensual
or other rights, (b) all of the Company’s rights to receive all cash dividends,
interest and other payments made upon or with respect to the Collateral shall
cease, and such cash dividends, interest and other payments shall be paid to
the Collateral Agent, the Collateral Agent under the Indenture or the Lender,
and (c) the Collateral Agent may sell the Collateral or any part thereof in
accordance with the Security Documents, subject to the terms of the
Intercreditor Agreement. All funds distributed under the Security Documents by
the Collateral Agent shall be distributed by the Collateral Agent in accordance
with the provisions of the Intercreditor Agreement, the Indenture and this
Agreement.


 


Section 7.3                                      Acceleration.  (a) If an Event of Default (other than an
Event of Default specified in Sections 7.1(g) or (h) above with
respect to the Company) shall occur and be continuing and has not been waived,
each Holder may participate together with the holders of the Existing Notes
pursuant to Section 6.03 of the Indenture to the extent provided therein,
with respect to issuing or rescinding an “Acceleration Notice” as defined
therein. If such an “Acceleration Notice” is so issued,  then the principal of, accrued interest
(including PIK Interest and any Additional PIK Interest (which, for this
purpose, will be payable in cash), will become immediately due and payable, or
if there are any amounts outstanding under the Credit Agreement, it shall
become immediately due and payable upon the first to occur of an acceleration
under the Credit Agreement or five business days after receipt by the Company
and the Administrative Agent under the Credit Agreement of such Acceleration
Notice (but only if such Event of Default is then continuing).


 


18





















 


(b)                                 If
an Event of Default specified in Sections 7.1 (g) or (h) above
with respect to the Company occurs and is continuing, then all unpaid principal
of any accrued and unpaid interest on all of the outstanding Notes, including
PIK Interest and any Additional PIK Interest (which, for this purpose, will be
payable in cash), shall automatically become and be immediately due and payable
without any declaration or other act on the part of the Holders, the Trustee or
any holder of Existing Notes.


 


Section 7.4                                      Other Remedies.  If an Event of Default occurs and is continuing,
subject to the provisions of the Intercreditor Agreement, the Holders may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or interest (including PIK Interest and Additional PIK
Interest, if any) on the Notes or to enforce the performance of any provision
of the Notes, this Agreement, any Security Document or any Guarantee. A delay
or omission by any Holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.


 


ARTICLE 8


 


Guarantees


 


Section 8.1                                      Guarantees. 
Each Guarantor hereby fully, irrevocably and unconditionally, jointly
and severally, guarantees (such guarantee to be referred to herein as the “Guarantee”),
to the Holders and their respective successors and assigns that (i) the
principal of and interest (including PIK Interest and Additional PIK Interest,
if any), on the Notes shall be promptly paid in full when due, subject to any
applicable grace period, whether upon redemption pursuant to the terms of the
Notes, by acceleration or otherwise, and interest on the overdue principal, if
any, and interest on any interest, if any, to the extent lawful, of the Notes
and all other obligations of the Company to the Holders hereunder, thereunder
or under any Security Document or the Intercreditor Agreement shall be promptly
paid in full or performed, all in accordance with the terms hereof, thereof and
of the Security Documents and Intercreditor Agreement; and (ii) in case of any
extension of time of payment or renewal of any of the Notes or of any such
other obligations, the same shall be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, subject to
any applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above,
to the limitations set forth in Section 8.3. The Guarantee of each
Guarantor shall rank senior in right of payment to all subordinated
Indebtedness of such Guarantor and equal in right of payment with all other
senior obligations of such Guarantor, including borrowings or guarantees of
borrowings under the Credit Agreement and Indebtedness under the Indenture and
the Existing Notes. Each Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes, this Agreement, any Security Document or the
Intercreditor Agreement, the absence of any action to enforce the same, any
waiver or consent by the Holders with respect to any provisions hereof or
thereof, any release of any other Guarantor, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
Guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a


 


19





















 


proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that this Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes, this Agreement
and in this Guarantee. The obligations of each Guarantor are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under this Agreement, shall result in the obligations
of such Guarantor under the Guarantee not constituting a fraudulent conveyance
or fraudulent transfer under federal or state law. The net worth of any
Guarantor for such purpose shall include any claim of such Guarantor against
the Company for reimbursement and any claim against any other Guarantor for
contribution. Each Guarantor may consolidate with or merge into or sell its assets
to the Company or another Guarantor without limitation in accordance with Sections
6.1 and 5.9. If any Holder is required by any court or otherwise to return
to the Company, to any Guarantor, or any custodian, trustee, liquidator or
other similar official acting in relation to the Company or any Guarantor, any
amount paid by the Company or any Guarantor to such Holder, this Guarantee, to
the extent theretofore discharged, shall be reinstated in full force and
effect. Each Guarantor further agrees that, as between each Guarantor, on the
one hand, and the Holders, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 7
for the purposes of this Guarantee notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article 7, such obligations (whether or not due and
payable) shall forthwith become due and payable by each Guarantor for the
purpose of this Guarantee.


 


Section 8.2                                      Release of a Guarantor.  A Guarantor will be released from its
Guarantee (and may subsequently dissolve) without any action required on the
part of the Holders:


 


(a)                                  if
all of the Capital Stock issued by such Guarantor or all or substantially all
of the assets of such Guarantor are sold or otherwise disposed of (including by
way of merger or consolidation) to a Person other than the Company or any of
its Domestic Restricted Subsidiaries and the Company otherwise complies, to the
extent applicable, with the covenant described in Section 5.9 that
is required to be satisfied thereunder either prior to or concurrent with the
consummation of the applicable transaction, or


 


(b)                                 if
the Company designates such Guarantor as an Unrestricted Subsidiary in
accordance with Section 4.10 of the Indenture incorporated herein by
reference in Section 5.3 hereof, or


 


(c)                                  upon
payment in full of the principal of, accrued and unpaid interest (including PIK
Interest) and Additional PIK Interest, if any, on the Notes and all other
Obligations under the Notes, this Agreement, the Security Documents and the
Guarantees that are then due and payable, or


 


(d)                                 upon
the prior consent of the Holders of a majority in principal amount of the
outstanding Notes.


 


20





















 


The Holders shall promptly deliver an
appropriate instrument evidencing such release upon receipt of a request by the
Company accompanied by an Officers’ Certificate certifying as to the compliance
with this Section 8.2. Any Guarantor not so released remains liable
for the full amount of its Guarantee as provided in this Article 8.


 


Section 8.3                                      Limitation of Guarantor’s
Liability.  Each Guarantor and,
by its acceptance hereof, each Holder hereby confirms that it is the intention
of all such parties that the guarantee by such Guarantor pursuant to its
Guarantee not constitute a fraudulent transfer or conveyance for purposes of
any Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar Federal or state law. To effectuate the
foregoing intention, each Holder and such Guarantor hereby irrevocably agree
that the obligations of such Guarantor under the Guarantee shall be limited to
the maximum amount as shall, after giving effect to all other contingent and
fixed liabilities of such Guarantor and after giving effect to any collections
from or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to Section 8.5,
result in the obligations of such Guarantor under the Guarantee not
constituting such fraudulent transfer or conveyance.


 


Section 8.4                                      Guarantors May Consolidate,
etc., on Certain Terms.  Each
Guarantor (other than any Guarantor whose Guarantee is to be released in
accordance with the terms of the Guarantee and this Agreement in connection
with any transaction complying with Section 5.9) will not, and the
Company will not cause or permit any Guarantor to, consolidate with or merge
with or into any Person other than the Company or any other Guarantor unless:


 


(a)                                  the
entity formed by or surviving any such consolidation or merger (if other than
the Guarantor) or to which such sale, lease, conveyance or other disposition
shall have been made is a corporation organized and existing under the laws of
the United States or any State thereof, the District of Columbia or the
jurisdiction in which such Guarantor is organized;


 


(b)                                 such
entity assumes (a) by supplemental guarantee (in form and substance
satisfactory to the Holders of a majority in principal amount of the
outstanding Notes), executed and delivered to each Holder, all of the
obligations of the Guarantor under the Guarantee and, to the extent applicable,
the Intercreditor Agreement and (b) by amendment, supplement or other
instrument (in form and substance satisfactory to the Holders of a majority in
principal amount of the outstanding Notes) executed and delivered to each
Holder, all obligations of the Guarantor under the Security Documents and, to
the extent applicable, the Intercreditor Agreement; and in connection therewith
shall cause such instruments to be filed and recorded in such jurisdictions and
take such other actions as may be required by applicable law to perfect or
continue the perfection of the Lien created under the Security Documents on the
Collateral owned by or transferred to the surviving entity;


 


(c)                                  immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and


 


(d)                                 immediately
after giving effect to such transaction and the use of any net proceeds
therefrom on a pro forma basis, the Company could satisfy the provisions of Section 6.1(b).


 


21





















 


Any merger or consolidation of a Guarantor
with and into the Company (with the Company being the surviving entity) or
another Guarantor that is a Wholly Owned Subsidiary of the Company need only
comply with Section 6.1(d).


 


Section 8.5                                      Contribution.  In order to provide for just and equitable
contribution among the Guarantors, the Guarantors agree, inter se, that each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a pro  rata contribution from each other Guarantor
hereunder based on the net assets of each other Guarantor. The preceding
sentence shall in no way affect the rights of the Holders to the benefits of
this Agreement, the Notes or the Guarantees.


 


Section 8.6                                      Waiver of Subrogation.  Each Guarantor agrees that it shall not be
entitled to any right of subrogation in relation to any Holder in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.


 


Section 8.7                                      Evidence of Guarantee.  To evidence their guarantees to the Holders
set forth in this Article 8, each of the Guarantors hereby agrees
to execute the notation of Guarantee in substantially the form included in the
Notes. Each such notation of Guarantee shall be signed on behalf of each
Guarantor by an Officer or an assistant Secretary. An Officer (who shall, in
each case, have been duly authorized by all requisite corporate actions) of the
Guarantors shall execute the Guarantees by manual or facsimile signature.


 


Each Guarantor hereby agrees that its
Guarantee set forth in Section 8.1 shall remain in full force and
effect notwithstanding any failure to endorse on each Note a notation of such
Guarantee.


 


Section 8.8                                      Waiver of Stay, Extension or
Usury Laws.  Each Guarantor covenants
to the extent permitted by law that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury law or other law that would prohibit or
forgive such Guarantor from performing its Guarantee as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect
the covenants or the performance of this Guarantee; and each Guarantor hereby
expressly waives to the extent permitted by law all benefit or advantage of any
such law, and covenants that it shall not hinder, delay or impede the execution
of any power herein granted to the Holders, but shall suffer and permit the
execution of every such power as though no such law had been enacted.


 


ARTICLE 9


 


Miscellaneous


 


Section 9.1                                      Notices. 
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:


 


22





















 


if to the Company or any Guarantor:


 


Atlantic Express Transportation Corp.


7 North Street


Staten Island, NY 10451


Attention: Chief Executive Officer


 


If to the Airlie:


 


Airlie Opportunity Capital Management, L.P.


115 East Putnam Avenue


Greenwich, CT 06830


Attention: 
Adam Goodfriend


 


If to any other Holder:


 


To the address of such Holder shown in the
Company’s list of Holders maintained pursuant to Section 2.6.


 


The Company and any Holder, by written notice
to each other, may designate additional or different addresses for notices to
such Person. Any notice or communication to the Company or any Holder shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
faxed; and when the return receipt is delivered to the sender, if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address or a notice sent by mail to the Holders shall not be deemed to have
been given until actually received by each addressee).


 


Section 9.2                                      Communications by Holders
with Other Holders of Existing Notes. 
To the extent that it is to be treated hereunder in the same way as a
holder of Existing Notes would be treated under the Indenture, the Holders may
communicate pursuant to TIA Section 312(b) with other holders of Existing
Notes with respect to their respective rights hereunder, under the Notes or
under the Security Documents. The Company, the Trustee, the Collateral Agent
under the Indenture, the Registrar and any other Person shall have the
protection of TIA Section 312(c) with respect thereto.


 


Section 9.3                                      Certificate and Opinion as
to Conditions Precedent.  Upon
any request or application by the Company or any Guarantor to any Holder to
take any action under this Agreement or any Security Document, the Company
shall furnish to such Holder, upon request:


 


(a)                                  an
Officers’ Certificate, in form and substance reasonably satisfactory to such
Holder, stating that, in the opinion of the signers, all conditions precedent
to be performed by the Company or the applicable Guarantor (as the case may
be), if any, provided for in this Agreement or any Security Document relating
to the proposed action have been complied with; and


 


23





















 


(b)                                 an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent to be performed by the Company or the applicable Guarantor
(as the case may be), if any, provided for in this Agreement or any Security
Document relating to the proposed action have been complied with.


 


Section 9.4                                      Statements Required in
Certificate or Opinion.  Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Agreement or any Security Document, other than the
Officers’ Certificate required by Section 5.4, shall include:


 


(a)                                  a
statement that the Person making such certificate or opinion has read such
covenant or condition;


 


(b)                                 a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;


 


(c)                                  a
statement that, in the opinion of such Person, he has made such examination or
investigation as is reasonably necessary to enable him to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and


 


(d)                                 a
statement as to whether or not, in the opinion of each such Person, such
condition or covenant has been complied with.


 


Section 9.5                                      Legal Holidays.  A “Legal Holiday” used with respect to a
particular place of payment is a Saturday, a Sunday or a day on which banking
institutions in New York, New York or at such place of payment are not required
to be open. If a payment date is a Legal Holiday at such place, payment may be
made at such place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.


 


Section 9.6                                      Governing Law.  (a) THIS AGREEMENT, THE NOTES AND THE
GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. EACH OF
THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.


 


(b)                                 EACH
OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF
SUPREME COURT OF NEW YORK, NEW YORK COUNTY AND THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK, NEW YORK COUNTY AND WAIVES TRIAL BY JURY
IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT.


 


Section 9.7                                      No Adverse Interpretation of
Other Agreements.  Except as
otherwise provided herein, this Agreement may not be used to interpret another
indenture, obligations of the Company thereunder or debt agreement of the
Company or any of its


 


24





















 


Subsidiaries; and any such indenture, obligations of the Company
thereunder or debt agreement may not be used to interpret this Agreement.


 


Section 9.8                                      No Recourse Against Others.  An Affiliate, past, present or future
director, officer, employee, incorporator or stockholder of the Company or any
Guarantor, as such, shall not have any liability for any obligations of the
Company or the Guarantors under the Notes, the Guarantees, or this Agreement or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder, by accepting a Note, waives and releases all such
liability. Such waiver and release are part of the consideration for the issuance
of the Notes. The waiver may not be effective to waive liability under the
federal securities laws.


 


Section 9.9                                      Successors. 
All agreements of the Company and the Guarantors in this Agreement, the
Notes, and the Guarantees shall bind their successors. All agreements of the
Holders in this Agreement shall bind their respective successors and assigns.


 


Section 9.10                                Duplicate Originals.  All parties may sign any number of copies of
this Agreement. Each signed copy shall be an original, but all of them together
shall represent the same agreement.


 


Section 9.11                                Severability.  In case any one or more of the provisions in
this Agreement, the Notes or in the Guarantees shall be held invalid, illegal
or unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.


 


Section 9.12                                Waiver of Jury Trial.  EACH OF THE COMPANY AND THE GUARANTORS HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, THE NOTES, THE GUARANTEES, THE SECURITY DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.


 


Section 9.13                                Fees and Costs.  The Company shall pay:


 


(a)                                  All
third party closing costs, brokerage and other commissions, due diligence
costs, reasonable fees and expenses of Holders’ attorneys for their services,
all fees and expenses of the Collateral Agent and other reasonable fees and
expenses incurred by the Company or the Holders in connection with the
transactions contemplated by this Agreement;


 


(b)                                 All
of any Holder’s expenses of any nature which may be reasonably necessary,
either before or after a default hereunder, for the enforcement or preservation
of such Holder’s rights under this Agreement, the Notes, the Security
Documents, the Warrant, the Registration Rights Agreement or any other
agreement of the Company mentioned herein, including but not limited to
reasonable attorneys’ fees, appellate costs and fees, and costs incurred by
such Holder as a participant in any bankruptcy proceeding, workout, debt
restructuring, extension of maturity or document amendment, involving the
Company any Guarantor or any other obligor under the Notes; and


 


25





















 


(c)                                  All
reasonable costs and fees, including attorneys’ fees and expenses, incurred by
any Holder or its Affiliates in connection with any suit, action, claim or
other liability asserted against any Holder or its Affiliates by the Company,
arising out of this Agreement or any document or transaction related hereto in
which such parties do not prevail with respect to substantially all of their
claims.


 


Section 9.14                                Cumulation, Receivership.  None of the rights or remedies of any Holder
provided herein shall be exclusive, but each shall be cumulative with and in
addition to every other right or remedy of such Holder, now or hereafter
existing, at law or in equity, by statute, agreement or otherwise.  Subject to the provisions of the
Intercreditor Agreement, in any action under this Agreement, the Notes, the
Warrant or any other Transaction Document, the Holders shall be entitled to
appointment of a receiver to administer the Company, or all or any portion of
its assets as may be subject to Holders’ claims hereunder or thereunder.


 


Section 9.15                                No Implied Waiver.  No course of dealing between any Holder and
any other party hereto, or any failure or delay on the part of any Holder in
exercising any rights or remedies hereunder, shall operate as a waiver of any
rights or remedies of any Holder under this Agreement, as a holder of Existing
Notes under the Indenture or under any other applicable document.  No single or partial exercise of any rights
or remedies hereunder shall operate as a waiver or preclude the exercise of any
other rights or remedies hereunder.


 


Section 9.16                                Binding Effect; Assignment.  This Agreement will bind and accrue to the
benefit of the Company, the Guarantors, the Holders, and their respective
successors and assigns.  Any purchaser,
assignee, transferee or pledgee of the Warrant or any of the Notes, or any
document arising in connection with the transaction subject to this Agreement
(or any of them), sold, assigned, transferred, pledged or repledged by a Holder
shall forthwith become vested with and entitled to exercise all rights and remedies
provided herein to the Holders, as if said purchaser, assignee, transferee or
pledgee were originally named as a Holder in this Agreement.


 


Section 9.17                                Relationship of the Parties.  This Agreement provides, among other things,
for the sale and issuance of the Notes and the Warrant to the Holders.  The provisions herein for compliance with
financial covenants and delivery of financial statements are intended solely
for the benefit of Holders to protect their respective interests as holders of
the Notes in assuring payments of interest and repayment of principal, and as
warrant or stock holders in preserving their respective equity stakes in the
Company.  Nothing contained in this
Agreement shall be construed as permitting or obligating any Holder to act as
financial or business advisor or consultant to the Company, as creating any
fiduciary obligation on the part of any Holder to the Company, or as creating
any joint venture, agency, partnership or other relationship between the
parties, other than as explicitly and specifically stated in this Agreement.
The Company represents that it had the advice of experienced counsel of its own
choosing in connection with the negotiation and execution of this Agreement and
with respect to all matters contained herein.


 


26





















 


ARTICLE 10


 


Security Interests


 


Section 10.1                                Security Interest.  (a) To secure the due and punctual payment of
the principal of and interest (including PIK Interest) and Additional PIK
Interest, if any, on the Notes and amounts due hereunder and under the
Guarantees when and as the same shall be due and payable, whether on an
Interest Payment Date, by acceleration, purchase, repurchase, redemption or
otherwise, and interest on the overdue principal of and interest (to the extent
permitted by law), if any, on the Notes and the performance of all other
Obligations of the Company and the Guarantors to the Holders under this
Agreement, the Security Documents, the Guarantees and the Notes, the Company
and the Guarantors hereby covenant to cause the Security Documents to be
executed and delivered concurrently with this Agreement.


 


(b)                                 Each
Holder, by its acceptance of a Note, consents and agrees to the terms of each
Security Document and the Intercreditor Agreement, as the same may be in effect
or may be amended from time to time in accordance with their respective terms.
The Company shall, and shall cause each of its Domestic Restricted Subsidiaries
to, do or cause to be done all such actions and things as may be necessary or
proper, or as may be required by the provisions of the Security Documents. The
Company shall, and shall cause each of its Domestic Restricted Subsidiaries to,
take any and all actions required or as may be requested by the Holders of a majority
in principal amount of the outstanding Notes to cause the Security Documents to
create and maintain, as security for the Obligations contained in this
Agreement, the Notes, the Security Documents and the Guarantees valid and
enforceable, perfected (except for the Mortgage Perfection) security interests
in and on all the Collateral, in favor of the Collateral Agent, superior to and
prior to the rights of all third Persons (subject to Permitted Prior Liens),
and subject to no other Liens, in each case, except as expressly provided
herein, therein, or in the Intercreditor Agreement. This Article 10
is subject to the terms, limitations and conditions set forth in the
Intercreditor Agreement.


 


Section 10.2                                Recording and Opinions.  (a) The Company shall furnish to each Holder,
at such time as would be required by TIA Section 314(b) if the TIA were
applicable hereto, and promptly after the execution and delivery of any other
instrument of further assurance or amendment granting, perfecting, protecting,
preserving or making effective a security interest pursuant to any Security
Document, an Opinion of Counsel either (i) stating that, in the opinion of such
counsel, this Agreement and the Security Documents, financing statements and
fixture filings then executed and delivered, as applicable, and all other
instruments of further assurance or amendment then executed and delivered have
(other than those required for the Mortgage Perfection) been properly recorded,
registered and filed, and all certificates evidencing securities pledged to the
Holders under the Security Agreement have been delivered and duly endorsed in
blank, to the extent necessary to perfect the security interests created by
this Agreement and the Security Documents and reciting the details of such action
or referring to prior Opinions of Counsel in which such details are given, and
stating that as to such Security Documents and such other instruments, such
recording, registering, filing and delivery are the only recordings,
registerings, filings and deliveries necessary (together with those required
for the Mortgage Perfection) to perfect such security interest and that no
re-recordings, re-registerings, re-filings or redeliveries are necessary to
maintain such perfection, and further stating that all financing statements and
continuation statements have been executed and filed, and all such certificates
have been


 


27





















 


delivered, that are necessary fully to preserve and protect the rights
of and perfect such security interests of the Holders under the Security
Documents or (ii) stating that, in the Opinion of such Counsel, no such action
(other than actions required for the Mortgage Perfection) is necessary to
perfect any security interest created under this Agreement, the Notes or any of
the Security Documents as intended by this Agreement, the Notes and such
Security Documents.


 


(b)                                 Annually,
within thirty (30) days after May 1 of each year and beginning with the year
2005, the Company shall furnish to each Holder, an Opinion of Counsel, dated as
of such date, either (i) stating that: (A) in the opinion of such counsel,
action has been taken with respect to the registering, recording, filing,
re-recording, re-registering and refiling of financing statements, continuation
statements and other instruments and documents (other than those required for
the Mortgage Perfection), and delivery of all certificates, as are then
necessary to perfect or continue the perfection of the security interests
created by the Security Documents and reciting the details of such action or
referring to prior Opinions of Counsel in which such details are given; and (B)
based on relevant laws as in effect on the date of such Opinion of Counsel, all
financing statements, continuation statements and other documents have been
executed and (other than those required for the Mortgage Perfection) filed that
are necessary as of such date and during the succeeding twenty-four (24) months
fully to maintain, perfect or continue the perfection of such security
interests under the Security Documents with respect to the Collateral and to
maintain, preserve, and protect the rights of the Holders hereunder and under
the Security Documents or (ii) stating that, in the opinion of such counsel, no
such action (other than actions required for the Mortgage Perfection) is then
necessary to perfect or continue the perfection of such security interests.


 


Section 10.3                                Release of Collateral.  (a) Subject to the Intercreditor Agreement,
at any time when a Default or an Event of Default shall have occurred and be
continuing, no release of Collateral pursuant to the provisions of this
Agreement and the Security Documents shall be effective as against the Holders.


 


(b)                                 The
release of any Collateral from the terms of the Security Documents shall not be
deemed to impair the security under this Agreement in contravention of the
provisions hereof if and to the extent the Collateral is released pursuant to
this Agreement and the Security Documents or pursuant to the Intercreditor
Agreement.


 


(c)                                  Notwithstanding
any provision to the contrary herein, Collateral comprised of accounts
receivable, inventory or (prior to the occurrence and during the continuance of
an Event of Default) the proceeds of the foregoing shall be subject to release
upon sales of such inventory and collection of the proceeds of such accounts
receivable in the ordinary course of business. If requested in writing by the
Company, the Collateral Agent shall execute and deliver such documents,
instruments or statements and take such other action as the Company may request
to evidence or confirm that the Collateral falling under this Section 10.3
has been released from the Liens of each of the Security Documents.


 


Section 10.4                                Specified Releases of Collateral.  So long as no Default or Event of Default
exists, the Company and the Guarantors shall be entitled to obtain a full
release of items of Collateral (the “Released Interests”) from the security
interests created by this Agreement, the Notes and the Security Documents
simultaneous with any release of the Liens thereon in favor of the


 


28





















 


holders of the Existing Notes pursuant to an Asset Sale under Section 4.16
of the Indenture, as provided in Section 12.05 thereof. Upon the request
of the Company or any Guarantor and the furnishing of such documentation as the
Collateral Agent shall request to evidence compliance with the requirements of Section 12.05
of the Indenture with respect to such release, including copies of each of the
items required by Section 12.05(b) thereof, the Collateral Agent shall
forthwith take such action (at the request of and the expense of the Company or
such Guarantor, without recourse or warranty and without any representation of
any kind), including the delivery of appropriate UCC-3 termination statements,
to release and reconvey to the Company or such Guarantor all of the Released
Interests, and shall deliver such Released Interests in its possession to the
Company or such Guarantor.


 


Section 10.5                                Release upon Satisfaction of
all Outstanding Obligations.  The
Liens on, and pledges of, all Collateral hereunder and under the Security
Documents will also be terminated and released upon payment in full of the
principal of accrued and unpaid interest (including PIK Interest) and
Additional PIK Interest, if any, on the Notes and all other Obligations
hereunder, the Guarantees and the Security Documents that are due and payable
at or prior to the time such principal and accrued and unpaid interest, are
paid.


 


Section 10.6                                Form and Sufficiency of Release.  In the event that the Company or any
Guarantor has sold, exchanged, or otherwise disposed of or proposes to sell,
exchange or otherwise dispose of any portion of the Collateral that may be sold,
exchanged or otherwise disposed of by the Company or such Guarantor in
accordance with the terms of this Agreement and the Security Documents, and the
Company or such Guarantor requests the Collateral Agent to furnish a written
disclaimer, release or quitclaim of any interest in such property under this
Agreement and the Security Documents, the Collateral Agent shall execute,
acknowledge and deliver to the Company or such Guarantor (in proper form) such
an instrument promptly after satisfaction of the conditions set forth herein
for delivery of any such release. Notwithstanding the preceding sentence, all
purchasers and grantees of any property or rights purporting to be released
herefrom shall be entitled to rely upon any release executed by the Collateral
Agent hereunder as sufficient for the purpose of this Agreement and as
constituting a good and valid release of the property therein described from
the Lien of this Agreement or of the Security Documents.


 


ARTICLE 11


 


Definitions and Rules
of Construction


 


Section 11.1                                Definitions.  As used in this Agreement, the following
terms shall have the meanings ascribed to them below:


 


“Agreement” is defined as this Note
and Warrant Purchase Agreement and the exhibits and schedules hereto, as the
same may be amended, supplemented, extended, modified or replaced in accordance
with the terms hereof.


 


“Airlie” shall mean Airlie Opportunity
Capital Management, L.P., a Delaware limited partnership, or any of its
affiliates.


 


29





















 


“Closing” is defined as the
consummation of this Agreement, including the deliveries described in Article 3
hereof.


 


“Closing Date” shall mean the date
when the Closing occurs.


 


“Collateral” has the meaning set forth
in the Security Agreement.


 


“Collateral Agent” shall mean the
collateral agent for the Holders under the Security Documents, which shall
initially be Airlie Opportunity Capital Management, L.P.


 


“Company” shall have the definition
set out in the preamble hereof.


 


“Credit Agreement” shall have the
definition set out in the Recitals hereof.


 


“Credit Facility” shall have the
definition set out in the Recitals hereof.


 


“Contemplated Transactions” shall mean
the purchase and issuance of the Notes, the Guarantees and the Warrant
hereunder, the granting and perfection of the Liens in favor of the Holders
under the Security Documents and the other transactions contemplated hereunder
or under the other Transaction Documents.


 


“Default” means an event or condition
the occurrence of which is, or with the lapse of time or giving of notice or
both would be, an Event of Default.


 


“Exchange Act” is defined as the Securities
Exchange Act of 1934, as amended.


 


“Event of Default” shall have the
definition set out in Section 7.1 hereof.


 


“Existing Notes” shall have the
definition set out in the Recitals hereof.


 


“Existing Security Documents” shall
have the definition set out in the Recitals hereof.


 


“Existing Warrants” shall have the
definition set out in the Recitals hereof.


 


“GAAP” means accounting principles
generally accepted in the United States set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession of the
United States, which are in effect as of the Closing Date.


 


“Guarantors” shall mean (a) all
existing Domestic Subsidiaries of the Company and (b) each of the Company’s
Domestic Restricted Subsidiaries that in the future executes an agreement or
undertaking in which such Domestic Restricted Subsidiary agrees to be bound by
the terms of this Agreement as a Guarantor hereunder, but excluding Atlantic
North Casualty Company; provided  that any Person constituting a
Guarantor as described above shall cease to


 


30





















 


constitute a Guarantor when its respective Guarantee is released in
accordance with the terms hereof.


 


“Holder” shall mean Airlie and each
other Person to whom any of the Notes or Warrants are transferred hereunder and
in whose name any of the Notes or Warrants are registered on the Company’s
books hereunder.


 


“Indenture” shall have the definition
set out in the Recitals hereof.


 


“Inactive Subsidiaries” shall mean
Atlantic-Chittenango Real Property Corp.; Atlantic-Conn. Transit, Inc.;
Atlantic Paratrans of Colorado, Inc.; Atlantic Paratrans of Kentucky, Inc.;
Atlantic Paratrans of Pennsylvania, Inc.; Central New York Reorganization
Corp.; Jersey Bus Sales, Inc.; Atlantic Express of South Carolina, Inc.; and
Atlantic Paratrans of Arizona, Inc.


 


“Interest Payment Date” shall mean the
stated maturity of an installment of interest on the Notes.


 


 “Mortgages”
means the mortgages, deeds of trust, deeds to secure debt or other similar
documents delivered by the Company or any of its Domestic Restricted
Subsidiaries pursuant to the terms of this Agreement which create, in favor of
the Holders, Liens on any fee interest in Pledged Real Estate as collateral
security for the payment obligations of the Company under this Agreement and
Notes or of such Domestic Restricted Subsidiary under its Guarantee, as the
case may be.


 


“Mortgage Perfection” shall mean the
recording of the Mortgages necessary under applicable law for the perfection of
Liens granted by the Company or any Guarantor hereunder or under the Security
Documents in any Real Property.


 


“Motor Vehicles” shall mean all motor
vehicles, tractors, trailers and other like property, whether or not title
thereto is governed by a certificate of title or ownership.


 


“Note Purchase Documents” shall mean
this Agreement, the Security Agreement, and the Notes, and all modifications,
extensions, renewals and replacements thereof and therefor.


 


“Noteholder Motor Vehicle Collateral”
shall mean all of the Motor Vehicles owned by the Company or any of its
subsidiaries in which the Collateral Agent under the Indenture has a lien on
the proceeds of any disposition thereof.


 


“Notes” shall have the definition set
out in Section 2.1.


 


“Obligations” shall mean the
obligations of the Company and the Guarantors under this Agreement, the Notes
and the other Transaction Documents.


 


“Opinion of Counsel” means a written
opinion from legal counsel, who may be counsel for the Company, who is
reasonably acceptable to the Holders of a majority in principal amount of the
outstanding Notes.


 


31





















 


“Permitted Indebtedness” shall have
the meaning set forth in the Indenture, as amended to include all Indebtedness
of the Company and the Guarantors to the Holders under this Agreement, the
Notes and the other Transaction Documents.


 


“Permitted Liens” shall have the
meaning set forth in the Indenture, as amended to include all Liens securing
the Company’s and the Guarantors’ obligations under this Agreement, the Notes,
and the Guarantees.


 


“PIK Interest” shall have the
definition set out in Section 2.5.


 


“PIK Notes” shall have the definition
set out in Section 2.5.


 


“Pledged Real Estate” shall have the
definition set out in Section 4.12.


 


“Real Property” shall have the
definition set forth for such term in the Security Agreement.


 


“Redemption Date” shall mean, when
used with respect to any Note to be redeemed, the date fixed for redemption of
such Note pursuant to this Agreement and the Notes.


 


“Redemption Price” shall mean, when
used with respect to any Note to be redeemed thereunder, the principal amount
thereof, plus all accrued interest (including PIK Interest) and Additional PIK
Interest, if any, thereon.


 


“Registration Rights Agreement” shall
have the meaning set forth in Section 1.2 hereof.


 


“Released Interests” shall have the
meaning set forth in Section 9.4 hereof.


 


“Security Agreement” shall mean the
security agreement to be executed and delivered by the Company and the
Guarantors hereunder in the form attached hereto as Exhibit 2.3.


 


“Security Documents” means the
Intercreditor Agreement, the Security Agreement and all other security
agreements, pledge agreements, collateral assignments, mortgages, collateral
agency agreements, control agreements, deeds of trust or other grants or
transfers for security executed and delivered by the Company or any other
obligor creating (or purporting to create) a Lien upon Collateral in favor of
the Holders, in each case, as amended, modified, renewed, restated or replaced,
in whole or in part, from time to time, in accordance with its terms.


 


“Transaction Documents” shall mean the
Note Purchase Documents, the Warrant, the Registration Rights Agreement and all
other documents executed and delivered by the Company or any of the Guarantors
hereunder or otherwise in connection with the Contemplated Transactions.


 


“Warrant” shall have the meaning set
forth in Section 2.1 hereof.


 


 “Warrant
Shares” shall have the meaning set forth in Section 2.1 hereof.


 


32





















 


Section 11.2                                Rules of Construction.  Unless the context otherwise requires:


 


(a)                                  a
term has the meaning assigned to it;


 


(b)                                 an
accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;


 


(c)                                  “or”
is not exclusive;


 


(d)                                 words
in the singular include the plural, and words in the plural include the
singular;


 


(e)                                  “herein,”
“hereof” and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision;


 


(f)                                    all
references to sections or Articles refer to Sections or Articles of this
Agreement unless otherwise indicated; and


 


(g)                                 unless
otherwise defined or the context otherwise requires, terms for which meanings
are provided in this Agreement, shall have such meanings when used in each
other Transaction Document.


 


Balance of Page Intentionally Left Blank


 


33





















 


IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed as of the
date first above written.


 


	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
  ATLANTIC EXPRESS TRANSPORTATION CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Neil J. Abitabilo

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Neil J. Abitabilo

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  THE GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  180 JAMAICA CORP.

  	
   

  
	
   

  	
  201 WEST SOTELLO REALTY, INC.

  	
   

  
	
   

  	
  AIRPORT SERVICES, INC.

  	
   

  
	
   

  	
  AMBOY BUS CO., INC.

  	
   

  
	
   

  	
  ATLANTIC EXPRESS COACHWAYS, INC.

  	
   

  
	
   

  	
  ATLANTIC EXPRESS NEW ENGLAND, INC.

  	
   

  
	
   

  	
  ATLANTIC EXPRESS OF CALIFORNIA, INC.

  	
   

  
	
   

  	
  ATLANTIC EXPRESS OF ILLINOIS, INC.

  	
   

  
	
   

  	
  ATLANTIC EXPRESS OF L.A. INC.

  	
   

  
	
   

  	
  ATLANTIC EXPRESS OF MISSOURI INC.

  	
   

  
	
   

  	
  ATLANTIC EXPRESS OF NEW JERSEY, INC.

  	
   

  
	
   

  	
  ATLANTIC EXPRESS OF PENNSYLVANIA, INC.

  	
   

  
	
   

  	
  ATLANTIC EXPRESS OF SOUTH CAROLINA, INC.

  	
   

  
	
   

  	
  ATLANTIC PARATRANS OF ARIZONA, INC.

  	
   

  
	
   

  	
  ATLANTIC PARATRANS OF NYC, INC.

  	
   

  
	
   

  	
  ATLANTIC PARATRANS OF PENNSYLVANIA, INC.

  	
   

  
	
   

  	
  ATLANTIC PARATRANS, INC.

  	
   

  
	
   

  	
  ATLANTIC QUEENS BUS CORP.

  	
   

  
	
   

  	
  ATLANTIC TRANSIT, CORP.

  	
   

  
	
   

  	
  ATLANTIC-CHITTENANGO REAL PROPERTY CORP.

  	
   

  
	
   

  	
  ATLANTIC-CONN. TRANSIT, INC.

  	
   

  
	
   

  	
  ATLANTIC-HUDSON, INC.

  	
   

  
	
   

  	
  BLOCK 7932, INC.

  	
   

  
	
   

  	
  BROOKFIELD TRANSIT INC.

  	
   

  
	
   

  	
  CENTRAL NEW YORK REORGANIZATION CORP.

  	
   

  
	
   

  	
  COURTESY BUS CO., INC.

  	
   

  
	
   

  	
  FIORE BUS SERVICE, INC.

  	
   

  
	
   

  	
  GROOM TRANSPORTATION, INC.

  	
   

  
	
   

  	
  GVD LEASING CO., INC.

  	
   

  
	
   

  	
  JAMES MCCARTY LIMO SERVICE, INC.

  	
   

  
	
   

  	
  JERSEY BUS SALES, INC.

  	
   

  
	
   

  	
  JERSEY BUSINESS LAND CO., INC.

  	
   

  
	
   

  	
  K. CORR, INC.

  	
   

  
	
   

  	
  MCINTIRE TRANSPORTATION, INC.

  	
   

  
						



 





















 


	
   

  	
  MERIT TRANSPORTATION CORP.

  	
   

  
	
   

  	
  METRO AFFILIATES, INC.

  	
   

  
	
   

  	
  METROPOLITAN ESCORT SERVICE, INC.

  	
   

  
	
   

  	
  MIDWAY LEASING INC.

  	
   

  
	
   

  	
  MOUNTAIN TRANSIT, INC.

  	
   

  
	
   

  	
  R. FIORE BUS SERVICE, INC.

  	
   

  
	
   

  	
  RAYBERN BUS SERVICE, INC.

  	
   

  
	
   

  	
  RAYBERN CAPITAL CORP.

  	
   

  
	
   

  	
  RAYBERN EQUITY CORP.

  	
   

  
	
   

  	
  ROBERT L. MCCARTHY & SON, INC.

  	
   

  
	
   

  	
  STATEN ISLAND BUS, INC.

  	
   

  
	
   

  	
  TEMPORARY TRANSIT SERVICE, INC.

  	
   

  
	
   

  	
  T-NT BUS SERVICE, INC.

  	
   

  
	
   

  	
  TRANSCOMM, INC.

  	
   

  
	
   

  	
  WINSALE, INC.

  	
   

  
	
   

  	
  WRIGHTHOLM BUS LINE, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Neil J. Abitabilo

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Neil J. Abitabilo

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer 

  	
   

  
						



 





















 


	
   

  	
  AIRLIE OPPORTUNITY CAPITAL

  MANAGEMENT, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Adam Goodfriend

  	
   

  
	
   

  	
   

  	
  Name: Adam Goodfriend

  	
   

  
	
   

  	
   

  	
  Title: Managing Director

  	
   

  



 





















 


EXHIBITS


 


	
  Document

  	
   

  	
  Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Form of
  Warrant

  	
   

  	
  1.1

  	
   

  
	
  Form of
  Equity Registration Rights Agreement

  	
   

  	
  1.2

  	
   

  
	
  Form of Note

  	
   

  	
  2.1

  	
   

  
	
  Form of
  Security Agreement

  	
   

  	
  2.3

  	
   

  
	
  Form of PIK
  Note

  	
   

  	
  2.5