Exhibit
4.5


 




 


 





EQUITY
REGISTRATION RIGHTS AGREEMENT


 


DATED
AS OF MARCH 3, 2005


 


BY
AND AMONG


 


ATLANTIC
EXPRESS TRANSPORTATION CORP.


 


ATLANTIC
EXPRESS TRANSPORTATION GROUP, INC.


 


AND


 


AIRLIE
OPPORTUNITY CAPITAL MANAGEMENT, L.P.




 


 





 





















 


This Equity Registration Rights Agreement
(this “Agreement”) is made and entered into as of March 3, 2005, by and
among Atlantic Express Transportation Corp., a New York corporation (the “Company”),
Atlantic Express Transportation Group, Inc., a Delaware corporation (“Parent”),
and Airlie Opportunity Capital Management, L.P., a Delaware limited partnership
(the “Investor”).


 


WHEREAS, pursuant to the Note and Warrant
Purchase Agreement, dated the date hereof (the “Investment Agreement”), among
the Company, Parent and Investor, Investor has agreed to make a loan (the “Loan”)
to the Company in the principal amount of $15,000,000, in partial consideration
for which the Company has agreed to issue 40,725 warrants, each such warrant
representing the right to initially purchase one common share, par value $0.01
per share (the “Common Stock”) of the Company (collectively, the “Warrants”)
(the Common Stock issuable on exercise of the Warrants being referred to
collectively herein as the “Warrant Shares”); and


 


WHEREAS, it is a condition precedent to
Investor’s obligations to make the Loan and consummate the other transactions
contemplated by the Investment Agreement that the Company and Parent enter into
this Agreement.


 


NOW, THEREFORE to induce Investor to make the
Loan, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:


 


Section 1.                                            Definitions.


 


As used in this Agreement, the following
capitalized terms shall have the following meanings:


 


“Affiliate”: 
As defined in Rule 144 of the Securities Act.


 


“Closing Date”:  The date hereof.


 


“Effectiveness Date”: The 180th day after the
Closing Date.


 


“Exchange Act”:  The Securities Exchange Act of 1934, as
amended.


 


“Existing Equity Registration Rights
Agreement”: The Equity Registration Rights Agreement dated as of April 22,
2004 among the Company, Parent and Jeffries & Company, Inc.


 


“Filing Date”: The 90th day after the Closing
Date.


 


“Holder”: 
As defined in Section 2 hereof.


 


“NASD”: means the National Association of
Securities Dealers, Inc.


 





















 


“Person”: 
Any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, government or any
agency or political subdivision thereof or any other entity.


 


“Piggy-Back Registration”:  As defined in Section 6 hereof.


 


“Prospectus: 
The prospectus included in a Registration Statement at the time such
Registration Statement is declared effective, as supplemented by any prospectus
supplement, and all material incorporated by reference into such prospectus.


 


“Public Equity Offering”:  An underwritten offering of Common Stock or
common stock of the Parent pursuant to a registration statement that has been
declared effective by the SEC pursuant to the Securities Act (other than a
registration statement on Form S-8 or otherwise relating to equity securities
issuable under any employee benefit plan of the Company or the Parent).


 


“Registrable Securities”:  At any time, any of (i) the Warrant Shares
(whether or not the related Warrants have been exercised) and (ii) any other
securities issued or issuable with respect to any Warrant Shares by way of
stock dividends or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise.  As to any particular
Registrable Securities, such securities shall cease to be Registrable
Securities when (a) a Registration Statement with respect to the offering of
such securities by the Holder thereof shall have been declared effective under
the Securities Act and such securities shall have been disposed of by such
Holder pursuant to such Registration Statement, (b) such securities have been
sold to the public pursuant to Rule 144(k) (or any similar provisions then in
force, but not Rule 144A) promulgated under the Securities Act, (c) such
securities shall have been otherwise transferred by the Holder thereof and new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company or its transfer agent and
subsequent disposition of such securities shall not require registration or
qualification under the Securities Act or any similar state law then in force
or (d) such securities shall have ceased to be outstanding.


 


“Registrants”:  means, collectively, the Company and the
Parent in the case of a Registration Statement filed or to be filed registering
a Public Equity Offering of the Parent, upon which Registration Statement a
Holder is entitled pursuant to this Agreement to request inclusion of its
Registrable Securities for offer and sale thereunder.


 


“Registration Statement”:  Any registration statement of the Company
and/or the Parent relating to, or entitling a Holder to request, the
registration for resale of Registrable Securities, including the Prospectus
included therein, all amendments thereto (including post-effective amendments)
and all exhibits and all material incorporated by reference therein.


 


“Restricted Securities”: As defined in Rule
144 of the Securities Act.


 


“SEC”: 
The Securities and Exchange Commission.


 


“Securities Act”:  The Securities Act of 1933, as amended.


 


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“Shelf Registration Statement”:  As defined in Section 4 hereof.


 


“Warrant Shares”:  The Common Stock or other securities that any
Holder may acquire upon exercise of a Warrant, together with any other
securities which such Holder may acquire on account of any such securities,
including, without limitation, as the result of any dividend or other
distribution on Common Stock or any split or combination of such Common Stock
as provided for in the Warrant Agreement.


 


“Warrants”: 
The warrants of the Company issued and sold pursuant to the Investment
Agreement, together with any warrants issued in substitution or replacement
therefor.


 


Section 2.                                            Holders
of Registrable Securities.


 


A Person is deemed to be a Holder of
Registrable Securities (a “Holder”) whenever such Person owns Registrable
Securities or has the right to acquire such Registrable Securities by
exercising Warrants held by such Person, whether or not such acquisition has
actually been effected.


 


Section 3.                                            Registration
Procedures.


 


In connection with any Registration Statement
filed by the Company, the Company shall, and in connection with any
Registration Statement filed by the Parent, the Registrants, shall:


 


(a)                                  (i)                                     furnish
to the Holders, prior to the filing thereof with the SEC, a copy of the
Registration Statement (including all such documents incorporated therein by
reference) and each amendment thereof and each supplement, if any, to the
Prospectus, which documents will be subject to the review and comment of such
Holders in connection with such sale, if any, for a period of at least five
business days, and the Company or the Registrants (as the case may be) will not
file any such Registration Statement or related Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all
documents incorporated therein by reference) to which such selling Holders
shall reasonably object within five business days after the receipt thereof;
and (ii) include the names of the Holders who propose to sell Registrable
Securities pursuant to the Registration Statement as selling securityholders.  A selling Holder shall be deemed to have
reasonably objected to such filing if such Registration Statement, amendment,
related Prospectus or supplement, as applicable, as proposed to be filed,
contains an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading or fails to comply
with the applicable requirements of the Securities Act;


 


(b)                                 give
written notice to the Investor and the Holders:


 


(i)                                     when
the Registration Statement or any amendment thereto has been filed with the SEC
and when the Registration Statement or any post-effective amendment thereto has
become effective;


 


(ii)                                  of
any request by the SEC for amendments or supplements to the Registration
Statement or the Prospectus or for additional information;


 


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(iii)                               of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;


 


(iv)                              of
the receipt by the Company or the Registrants (as the case may be) or its or
their legal counsel of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and


 


(v)                                 of
the happening of any event that requires the Company or the Registrants (as the
case may be) to make changes in the Registration Statement or the Prospectus in
order that the Registration Statement or the Prospectus does not contain an
untrue statement of a material fact nor omit to state a material fact required
to be stated therein or necessary to make the statements therein (in the case
of the Prospectus, in light of the circumstances under which they were made)
not misleading;


 


(c)                                  make
every reasonable effort to obtain the withdrawal at the earliest possible time,
of any order suspending the effectiveness of the Registration Statement;


 


(d)                                 furnish
to each Holder, without charge, at least one copy of the Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference);


 


(e)                                  during
the period which the Registration Statement is effective, deliver to each
Holder, without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in the Registration Statement as such Holder
may reasonably request.  The Company or
the Registrants (as the case may be) consent, subject to the provisions of this
Agreement, to the use of the Prospectus by each of the Holders in connection
with the offering and sale of Registrable Securities;


 


(f)                                    prior
to any public offering of the Registrable Securities pursuant to any
Registration Statement, register or qualify or cooperate with the Holders and
their respective counsel in connection with the registration or qualification
of the Registrable Securities for offer and sale under the securities or “blue
sky” laws of such states of the United States as any Holder reasonably requests
in writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Registrable Securities;
provided, however, that the Company or the Registrants (as the case may be)
shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any action which
would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject;


 


(g)                                 cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing the Registrable Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and


 


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registered in such names as the Holders may
request a reasonable period of time prior to sales of the Registrable
Securities pursuant to such Registration Statement;


 


(h)                                 upon
the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b)
above during the period for which the Company or the Registrants (as the case
may be) are required to maintain an effective Registration Statement, promptly
prepare and file a post-effective amendment to the Registration Statement or a
supplement to the related Prospectus and any other required document so that,
as thereafter delivered to Holders or purchasers of Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;


 


(i)                                     not
later than the effective date of the Registration Statement, provide a CUSIP
number for the Registrable Securities and provide each Holder with printed
certificates for the Registrable Securities, in a form eligible for deposit
with The Depository Trust Company;


 


(j)                                     use
its reasonable best efforts to comply with all rules and regulations of the SEC
to the extent and so long as they are applicable to the Registration Statement
and will make generally available to its security holders (or otherwise provide
in accordance with Section 11(a) of the Securities Act) an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company’s
first fiscal quarter commencing after the effective date of the Registration
Statement, which statement shall cover such 12-month period;


 


(k)                                  require,
at its option, each Holder of Registrable Securities to be sold pursuant to a
Registration Statement to furnish to the Company or the Registrants (as the
case may be) such information as may be required under applicable requirements
of the SEC and to obtain any acceleration of the effective date of a
Registration Statement, and the Company may exclude from such registration the
Registrable Securities of any Holder that unreasonably fails to furnish such
information within 20 days after receiving such request;


 


(l)                                     enter
into such customary agreements and take all such other action, if any, in order
to facilitate the disposition of the Registrable Securities pursuant to any
Registration Statement;


 


(m)                               (i)                                     make
reasonably available for inspection by the Holders of the Registrable
Securities and any attorney, accountant or other agent retained by the Holders
of the Registrable Securities all relevant financial and other records,
pertinent corporate documents and properties of the Company or the Registrants
(as the case may be) and (ii) cause the officers, directors, employees,
accountants and auditors of the Company or the Registrants (as the case may be)
to supply all relevant information reasonably requested by the Holders of the
Registrable Securities or any such attorney, accountant or agent in connection
with the Registration Statement, in each case, as shall be reasonably necessary


 


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to enable such Persons, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated by the Investor and on behalf of the
other parties, by one counsel selected by of such other parties; provided
further, however, that any such records, documents, properties
and such information that is designated in writing by the Company or the
Registrants (as the case may be), in good faith, as confidential at the time of
delivery of such records, documents, properties or information shall be kept
confidential by any such Persons and shall be used only in connection with such
Registration Statement, unless disclosure thereto is made in connection with a
court proceeding or required by law (it being understood that such Persons (and
any employee, representative or other agent of such Person) may disclose to any
and all Persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated in the Registration Statement and
all materials of any kind (including such records, documents, properties or
information and opinions or other tax analyses) that are provided to it
relating to such tax treatment and tax structure), or such information has
become available (not in violation of this Agreement) to the public generally
or through a third party without an accompanying obligation of confidentiality;
and


 


(n)                                 if
requested by any Holder of Registrable Securities, cause (i) its counsel to
deliver an opinion and updates thereof relating to the Registrable Securities
in customary form addressed to such Holders thereof and dated, in the case of
the initial opinion, the effective date of such Registration Statement (it
being agreed that the matters to be covered by such opinion shall include,
without limitation, the due incorporation and good standing of the Company or
the Registrants (as the case may be) and its or their subsidiaries; the
qualification of the Company or the Registrants (as the case may be) and its or
their subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant document of the type
referred to in Section 3(a) hereof; the due authorization,
execution, authentication and issuance, and the validity and enforceability, of
the applicable Securities; the absence of material legal or governmental
proceedings involving the Company or the Registrants (as the case may be) and
its or their subsidiaries; the absence of governmental approvals required to be
obtained in connection with the Registration Statement, the offering and sale
of the applicable Registrable Securities, or any document of the type referred
to in Section 3(a) hereof; the compliance as to form of such
Registration Statement and any documents incorporated by reference therein;
and, as of the date of the opinion and as of the effective date of the
Registration Statement or most recent post-effective amendment thereto, as the
case may be, the absence from such Registration Statement and the prospectus
included therein, as then amended or supplemented, and from any documents
incorporated by reference therein of an untrue statement of a material fact or
the omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the prospectus, in
light of the circumstances under which they were made) not misleading (in the
case of any such documents, in the light of the circumstances existing at the
time that such documents were filed with the SEC under the Exchange Act); (ii)
its independent public accountants to provide to the Holders a comfort letter
in customary form and covering matters of the type customarily covered in
comfort letters in connection with primary underwritten offerings, subject to
receipt of appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing


 


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Standards No. 72; and (iii) use its best
efforts to cause the disposition of the Registrable Securities covered by the
Registration Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or sellers
thereof to consummate the disposition of such Registrable Securities.


 


If any such Registration Statement refers to
any Holder by name or otherwise as the holder or any securities of the Company,
then such Holder shall have the right to require (i) the insertion therein of
language, in form and substance reasonably satisfactory to such Holder, to the
effect that the holding by such Holder of such securities is not to be construed
as a recommendation by such Holder of the investment quality of the Company’s
securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the Company,
or (ii) in the event that such reference to such Holder by name or otherwise is
not required by the Securities Act or any similar Federal statute then in
force, the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.


 


Section 4.                                            Shelf
Registration.


 


(a)                                  The
Company shall use its reasonable best efforts to (i) on or before the Filing
Date, prepare and cause to be filed with the SEC pursuant to Rule 415 under the
Securities Act a shelf registration statement on the appropriate form relating
to resales of all Registrable Securities or an amendment to a previously filed
shelf registration statement on the appropriate form, amending such registration
statement to cover resales of all Registrable Securities (the “Shelf
Registration Statement”), (ii) cause the Shelf Registration Statement to be
declared effective under the Securities Act on or prior to the Effectiveness
Date and (iii) keep any Shelf Registration Statement required by this Section 4(a)
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Section 4(a) hereof and in conformity
with the requirements of this Agreement, the Securities Act and the rules and
regulations of the SEC promulgated thereunder from time to time (including (A)
preparing and filing with the SEC such amendments and post-effective amendments
to the Shelf Registration Statement as may be necessary to keep such Shelf Registration
Statement effective; (B) cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and complying fully with Rules 424, 430A and
462, as applicable, under the Securities Act in a timely manner; and (C) comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such Shelf Registration Statement), until the second
anniversary of the effective date of such Shelf Registration Statement;
provided that such obligation shall expire before such date if all the
Registrable Securities covered by the Shelf Registration Statement (i) have
been sold pursuant thereto or (ii) are no longer Restricted Securities.


 


(b)                                 No
Holder may include any of its Registrable Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the


 


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Securities Act for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus included
therein.  Each selling Holder agrees to
promptly furnish additional information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.


 


(c)                                  The
Company shall be deemed not to have used its best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Registrable Securities covered
thereby not being able to offer and sell such Registrable Securities during
that period, unless such action is required by applicable law or this
Agreement.


 


Section 5.                                            Limitations,
Conditions and Qualifications to Obligations under Registration Covenants.


 


(a)                                  The
obligations of the Company described in Section 4 and Section 6
of this Agreement are subject to the obligations of the Holders (i) to furnish
all information and materials described in Section 3(k) hereof and
(ii) to take any and all actions as may be required under Federal and state
securities laws and regulations to permit the Company to comply with all
applicable requirements of the SEC and to obtain any acceleration of the
effective date of such Registration Statement.


 


(b)                                 Subject
to the next sentence of this paragraph, the Company or the Registrants (as the
case may be) shall be entitled to postpone, for a reasonable period of time,
the effectiveness of, or suspend the rights of any selling Holders Registrable
Securities to make sales pursuant to any Registration Statement otherwise
required to be prepared, filed and kept effective by it under Section 4
or 6 in the event that, and for a period (a “Suspension Period”) not to
exceed an aggregate of 90 days in any 365-day period (1) an event or
circumstance occurs and is continuing as a result of which the Registration
Statement, any related Prospectus or any document incorporated therein by
reference as then amended or supplemented or proposed to be filed would, in the
good faith judgment of the Company’s board of directors, contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and (2) (a) the board of directors of the
Company determines in its good faith judgment that the disclosure of the event
or circumstance at that time would have a material adverse effect on the
Company’s business, operations or prospects or (b) the disclosure otherwise
relates to a material business transaction or development that has not yet been
publicly disclosed.  If the Company or
the Registrants (as the case may be) shall so postpone the effectiveness of, or
suspend the rights of any selling Holders of Registrable Securities to make sales
pursuant to, a Registration Statement, it shall, as promptly as possible,
notify any selling Holders of Registrable Securities of such determination, and
the selling Holders of Registrable Securities shall (y) have the right, in the
case of a postponement of the effectiveness of a Registration Statement, upon
the affirmative vote of selling Holders of Registrable Securities of not less
than a majority of the Registrable Securities to be included in such
Registration Statement, to withdraw the request for registration by giving
written notice to the Company or the Registrants (as the case may be) within 10
days after receipt of such notice or (z) in the case of a suspension of the


 


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right to make sales, receive an extension of
the registration period referred to in Section 4(a) or Section 6(a)
hereof, as applicable, equal to the number of days of the suspension.


 


(c)                                  Each
Holder agrees, if and to the extent requested by the managing underwriter or
underwriters in a Public Equity Offering, not to effect any public sale or
distribution of Registrable Securities, including a sale pursuant to Rule 144A
(except as part of such Public Equity Offering), during the 90 day period
beginning on the closing date of any such Public Equity Offering (which period
may be extended to 180 days in the case of the Company’s initial Public Equity
Offering), to the extent timely notified in writing by the Company or such
managing underwriter or underwriters.  In
the event that the Company is not otherwise in compliance with the provisions
of this Agreement at the time the Company or such managing underwriter or
underwriters send notice pursuant to this Section 5(c), the Holders
shall not be required to comply with this Section 5(c).  In addition, the provisions of this Section 5(c)
shall not apply to any Holder of Registrable Securities if such Holder is
prevented by applicable statute or regulation from entering into any such
agreement; provided, that any such Holder shall undertake not to effect any
public sale or distribution of any Registrable Securities commencing on the
closing date of any such Public Equity Offering unless it has provided 45 days’
prior written notice of such sale or distribution to the managing underwriter
or underwriters.


 


Section 6.                                            Piggy-Back
Registration of Registrable Securities.


 


(a)                                  If
at any time after the Closing Date the Company or the Parent proposes to file a
registration statement under the Securities Act with respect to a Public Equity
Offering, then the Company or the Registrants (as the case may be) shall give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable (but in no event fewer than 20 days before the
anticipated filing date), and such notice shall offer such Holders the opportunity
to register such number of Registrable Securities as each Holder may request in
writing within 20 days after receipt of such written notice from the Company or
the Registrants (as the case may be) (which request shall specify the
Registrable Securities intended to be disposed of by such selling Holder of
Registrable Securities and the intended method of distribution thereof) (a “Piggy-Back
Registration”); provided that any holder of Warrants so requesting shall
agree, upon or prior to effectiveness of any such Registration Statement other
than a registration statement filed with the SEC pursuant to Rule 415 under the
Securities Act, to exercise their Warrants at least to the extent necessary for
such holder to acquire the number of Registrable Securities for which such
holder has requested registration; provided, further, that no Holder of
Registrable Securities shall have “piggy-back” registration rights with respect
to their Registrable Securities for any registration statement filed by the
Company to register exchange notes pursuant to the Registration Rights
Agreement, dated as of April 22, 2004, by and between the Company and
Jefferies & Company, Inc. The Company or the Registrants (as the case may
be) shall use their reasonable best efforts to keep such Piggy-Back
Registration continuously effective under the Securities Act until at least the
earlier of (a) the second anniversary of the effective date thereof or (b) the
consummation of the distribution by the Holders of all of the Registrable
Securities covered thereby.  The Company
or the Registrants (as the case may be) shall use their reasonable best efforts
to cause the managing underwriter or


 


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underwriters, if any, of such proposed
offering to permit the Registrable Securities requested to be included in a
Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Company or the Registrants (as the case may be) or
any other security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof.  Any
selling Holder of Registrable Securities shall have the right to withdraw its
request for inclusion of its Registrable Securities in any Shelf Registration
Statement pursuant to this Section 6 by giving written notice to
the Company or the Registrants (as the case may be) of its request to withdraw
at any time prior to the filing of such Shelf Registration Statement with the
SEC. The Company or the Registrants (as the case may be) will pay all
registration expenses described in Section 7 hereof in connection
with each registration of Registrable Securities requested pursuant to this Section 6,
and each Holder of Registrable Securities shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of such Holder’s Registrable Warrant Shares pursuant to a Piggy-Back
Registration effected pursuant to this Section 6.


 


No
registration effected under this Section 6, and no failure to
effect a registration under this Section 6, shall relieve the
Company or the Registrants (as the case may be) of its or their obligations to
effect a registration of any Registrable Securities not included in such
Piggy-Back Registration pursuant to Section 4 hereof, and no
failure to effect a registration under this Section 6 and to
complete the sale of securities registered thereunder in connection therewith
shall relieve the Company or the Parent of any other obligation under this
Agreement.


 


(b)                                 Priority
in Piggy-Back Registration.  In a
registration pursuant to this Section 6 involving an underwritten
offering, if the managing underwriter or underwriters of such underwritten
offering have informed, in writing, the Company or the Registrants (as the case
may be) and the selling Holders of Registrable Securities requesting inclusion
in such offering that in such underwriter’s or underwriters’ opinion the total
number of securities which the Company or the Registrants (as the case may be),
the selling Holders of Registrable Securities and any other Persons desiring to
participate in such registration intend to include in such offering is such as
to adversely affect the success of such offering, including the price at which
such securities can be sold, then the Company or the Registrants (as the case
may be) will be required to include in such registration only the amount of
securities which it is so advised should be included in such registration.  In such event:  (x) in cases initially involving the
registration for sale of securities for the Company or the Registrants’ own
account (as the case may be), securities shall be registered in such offering
in the following order of priority:  (i)
first, the securities which the Company or the Registrants proposes to
register, (ii) second, provided that no securities proposed to be registered by
the Company or the Registrants (as the case may be) have been excluded from
such registration, the securities that have been requested to be included in
such registration pursuant to the Existing Equity Registration Rights
Agreement, (iii) third, provided that no securities sought to be included in
such registration pursuant to the Existing Equity Registration Rights Agreement
have been excluded from such registration, the securities that have been
requested to be included in such registration by the selling Holders of
Registrable


 


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Securities (pro rata based on the amount of
securities sought to be registered by such Persons), and (iv) fourth, provided
that no securities sought to be included by the selling Holders of Registrable
Securities have been excluded from such registration, the securities of other Persons
entitled to exercise “piggy-back” registration rights pursuant to contractual
commitments of the Company (pro rata based on the amount of securities sought
to be registered by such Persons); and (y) in cases not initially involving the
registration for sale of securities for the Company or the Registrants own
account (as the case may be), securities shall be registered in such offering
in the following order of priority:  (i)
first, the securities of any Person whose exercise of a “demand” registration
right pursuant to a contractual commitment of the Company is the basis for the
registration, (ii) second, provided that no securities of any Person whose
exercise of a “demand” registration right pursuant to a contractual commitment
of the Company is the basis for such registration have been excluded from such
registration, the securities that have been requested to be included in such
registration pursuant to the Existing Equity Registration Rights Agreement,
(iii) third, provided that no securities sought to be included pursuant to the
Existing Equity Registration Rights Agreement have been excluded from such
registration, the securities requested to be included in such registration by
the selling Holders of Registrable Securities pursuant to this Agreement (pro
rata based on the amount of securities sought to be registered by such
Persons), (iv) fourth, provided that no securities sought to be included by the
selling Holders of Registrable Securities have been excluded from such
registration, securities of other Persons entitled to exercise “piggy-back”
registration rights pursuant to contractual commitments of the Company (pro
rata based on the amount of securities sought to be registered by such Persons)
and (v) fifth, provided that no securities sought to be included by other
Persons entitled to exercise “piggy-back” registration rights pursuant to such
contractual commitments have been excluded from such registration, any
securities which the Company or the Registrants (as the case may be) propose to
register.


 


(c)                                  Exclusion
of Registrable Warrant Shares.  The
Company or the Registrants (as the case may be) shall not be required by this Section 6
to include Registrable Securities in a Piggy-Back Registration if (i) in the
written opinion of outside counsel to the Company or the Registrants, addressed
to the Holders of Registrable Securities and delivered to them, the Holders of
such Registrable Securities seeking registration would be free to sell all such
Registrable Securities within the current calendar quarter without registration
under Rule 144, which opinion may be based in part upon the representation by
the Holders of such Registrable Securities seeking registration, which
representation shall not be unreasonably withheld, that each such Holder is not
an affiliate of the Company within the meaning of the Securities Act, and (ii)
all requirements under the Securities Act for effecting such sales are
satisfied at such time.


 


Section 7.                                            Registration
Expenses.


 


(a)                                  All
expenses incident to the Company’s and/or the Parent’s respective performance
of and compliance with this Agreement will be borne by the Company and/or the
Parent, respectively, regardless of whether a Registration Statement is ever
filed or becomes effective, including without limitation:


 


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(i)                                     all
registration and filing fees and expenses (including all SEC and stock exchange
and NASD fees and expenses);


 


(ii)                                  all
fees and expenses of compliance with federal securities and state “blue sky” or
securities laws (including, without limitation, reasonable fees and
disbursements of counsel for any underwriters in connection with blue sky
qualifications of the Registrable Securities);


 


(iii)                               all
expenses of printing, preparing, filing, duplicating and distributing a
Registration Statement and the related prospectus (including certificates for
the Securities to be issued in the registration and printing of Prospectuses),
messenger and delivery services and telephone usage and costs and charges of any
transfer agent;


 


(iv)                              all
fees and disbursements of counsel for the Company or the Registrants (as the
case may be);


 


(v)                                 all
fees and disbursements of independent certified public accountants of the
Company or the Registrants (as the case may be) (including the expenses of any
special audit required by or incident to such performance);


 


(vi)                              the
fees and disbursements of underwriters customarily paid by issuers or sellers
of securities (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of Registrable Securities by
selling Holders); and


 


(vii)                           reasonable
fees and expenses of one counsel for the selling Holders and other reasonable
out-of-pocket expenses of the selling Holders.


 


(b)                                 The
Company and the Parent will bear each of their internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and
the fees and expenses of any Person, including special experts, retained by the
Company and/or the Parent.


 


(c)                                  The
Holders shall pay the underwriting discounts, commissions, and transfer taxes,
if any, in connection with the Registration Statement requested under Section 4
or 6 which costs shall be allocated pro rata among all Holders on whose
behalf Registrable Securities of the Company are included in such registration
on the basis of the respective amounts of the Registrable Securities then being
registered on their behalf.


 


Section 8.                                            Indemnification.


 


(a)                                  The
Company or the Registrants (as the case may be) agrees to indemnify and hold
harmless each Holder and each Person, if any, who controls such Holder within
the meaning of the Securities Act or the Exchange Act from and against any
losses, claims, damages or liabilities, joint or several, or any actions in
respect thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to


 


13





















 


purchases and sales of the Registrable
Securities) to which each Indemnified Party (as defined in Section 8(c)
below) may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or Prospectus or in
any amendment or supplement thereto or in any preliminary Prospectus relating
to a Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, and
shall reimburse, as incurred, the Indemnified Parties for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action in respect thereof;
provided, however, that (i) the Company or the Registrants (as the case may be)
shall not be liable in any such case to the extent that such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary Prospectus relating to a Registration Statement in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company or the Registrants (as the case may be) by
or on behalf of such Holder specifically for inclusion therein and (ii) with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any preliminary Prospectus relating to the Registration
Statement, the indemnity agreement contained in this subsection (a) shall
not inure to the benefit of any Holder from whom the Person asserting any such
losses, claims, damages or liabilities purchased the Registrable Securities
concerned, to the extent that the Prospectus was required to be delivered by
such Holder under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder results from the fact that
there was not sent or given to such Person, at or prior to the written
confirmation of the sale of such Registrable Securities to such Person, a copy
of the final Prospectus if the Company or the Registrants (as the case may be)
had previously furnished copies thereof to such Holder; provided further,
however, that this indemnity agreement will be in addition to any liability
which the Company or the Registrants (as the case may be) may otherwise have to
such Indemnified Party.


 


(b)                                 Each
Holder of the Registrable Securities, severally and not jointly, will indemnify
and hold harmless the Company or the Registrants (as the case may be) and each
Person, if any, who controls the Company or the Registrants (as the case may
be) within the meaning of the Securities Act or the Exchange Act from and
against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or the Registrants (as the case may be) or any
such controlling Person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in a Registration Statement or
Prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus relating to a Registration Statement, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under


 


14





















 


which they were made) not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company or
the Registrants (as the case may be) by or on behalf of such Holder
specifically for inclusion therein; and, subject to the limitation set forth
immediately preceding this clause, shall reimburse, as incurred, the Company or
the Registrants (as the case may be) for any legal or other expenses reasonably
incurred by the Company or the Registrants or any such controlling Person in
connection with investigating or defending any loss, claim, damage, liability
or action in respect thereof.  This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or the Registrants (as the case may be) or any of
its or their controlling Persons.


 


(c)                                  Promptly
after receipt by any Person in respect of which indemnity may be sought
pursuant to Section 8(a) or (b) (any such Person, an “Indemnified
Party”) under this Section 8 of notice of the commencement of any
action or proceeding (including a governmental investigation), such Indemnified
Party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying
party of the commencement thereof; but the omission so to notify the
indemnifying party will not, in any event, relieve the indemnifying party from
any obligations to any Indemnified Party other than the indemnification
obligation provided in paragraph (a) or (b) above.  In case any such action is brought against
any Indemnified Party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying party),
and after notice from the indemnifying party to such Indemnified Party of its
election so to assume the defense thereof the indemnifying party will not be
liable to such Indemnified Party under this Section 8 for any legal
or other expenses, other than reasonable costs of investigation, subsequently
incurred by such Indemnified Party in connection with the defense thereof.  No indemnifying party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened action in respect of which any Indemnified Party is or
could have been a party and indemnity could have been sought hereunder by such
Indemnified Party unless such settlement includes an unconditional release of
such Indemnified Party from all liability on any claims that are the subject
matter of such action, and does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any Indemnified
Party.  The indemnifying party shall not
be liable for the costs and expenses of any settlement of such action effected
by such Indemnified Party without the consent of the indemnifying party, which
consent shall not be unreasonably withheld.


 


(d)                                 If
the indemnification provided for in this Section 8 is unavailable
or insufficient to hold harmless an Indemnified Party under subsections (a)
or (b) above, then each indemnifying party shall contribute to the
amount paid or payable by such Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a)
or (b) above (i) in such proportion as is


 


15





















 


appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
Indemnified Party on the other from the sale of the Registrable Securities by
the Holders, or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the indemnifying party or parties on the one hand and the
Indemnified Party on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations.  The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Registrants (as the case may be) on the one hand or such Holder or such other
Indemnified Party, as the case may be, on the other, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.  The amount
paid by an Indemnified Party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any action
or claim which is the subject of this subsection (d).  Notwithstanding any other provision of this Section 8(d),
the Holders of the Registrable Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Registrable Securities pursuant to the Registration
Statement exceeds the amount of damages which such Holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.  For purposes of this paragraph (d), each
Person, if any, who controls such Indemnified Party within the meaning of the
Securities Act or the Exchange Act shall have the same rights to contribution
as such Indemnified Party, and each Person, if any, who controls the Company or
the Registrants within the meaning of the Securities Act or the Exchange Act shall
have the same rights to contribution as the Company or the Registrants (as the
case may be).


 


(e)                                  The
agreements contained in this Section 8 shall survive the sale of
the Registrable Securities pursuant to the Registration Statement and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any Indemnified
Party.


 


Section 9.                                            Rule
144A and Rule 144.


 


The Company shall use its best efforts to
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder, make publicly
available other information so long as necessary to permit sales of their
securities pursuant to Rules 144 and 144A. 
The Company covenants that it will take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the


 


16





















 


exemptions provided by Rules 144 and 144A (including the requirements
of Rule 144A(d)(4)).  The Company will
provide a copy of this Agreement to prospective purchasers of Registrable
Securities identified to the Company by any Holder upon request.  Upon the request of any Holder, the Company
shall deliver to such Holder a written statement as to whether it has complied
with such requirements.  Notwithstanding
the foregoing, nothing in this Section 9 shall be deemed to require
the Company to register any of its securities pursuant to the Exchange Act.


 


Section 10.                                      Miscellaneous.


 


(a)                                  Remedies.  Each of the Company and the Parent
acknowledges and agrees that any failure by the Company to comply with its
obligations under Section 4 and Section 6 hereof may
result in material irreparable injury to the Holders for which there is no
adequate remedy at law, that it will not be possible to measure damages for
such injuries precisely and that, in the event of any such failure, any Holder
may obtain such relief as may be required to specifically enforce the Company’s
and the Parent’s obligations under Section 4 and Section 6
hereof.  Each of the Company and the
Parent further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.


 


(b)                                 No
Inconsistent Agreements.  Neither the
Company nor the Parent will on or after the date of this Agreement enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof.  The rights granted to
the Holders hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company’s or the Parent’s
securities under any agreement in effect on the date hereof.


 


(c)                                  Amendments
and Waivers.  The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, except by the
Company, the Parent and the written consent of the Holders of a majority of the
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent.


 


(d)                                 Notices.  All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
first-class mail, facsimile transmission, or air courier which guarantees overnight
delivery:


 


(i)                                     if
to a Holder of the Securities, at the most current address given by such Holder
to the Company or the Parent.


 


(ii)                                  if
to the Company or the Parent, at the address as follows:


 


17





















 


7 North Street

Staten Island, New York 10302-1205

Attention:  Nathan Schlenker

Fax No.:  (718) 442-9103


 


with a copy to:


 


Latham & Watkins LLP

885 Third Avenue, Suite 100

New York, New York 10022-4834

Attention:  Robert Zuccaro, Esq.

Fax No.:  (212) 751-4864


 


All such notices and communications shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; three business days after being deposited in the mail, postage
prepaid, if mailed; when receipt is acknowledged by recipient’s facsimile
machine operator, if sent by facsimile transmission; and on the day delivered,
if sent by overnight air courier guaranteeing next day delivery.


 


(e)                                  Third
Party Beneficiaries.  It is expressly
understood and agreed that each Holder is intended to be a beneficiary of the
Company’s and the Parent’s covenants contained in this Agreement to the same
extent as if those covenants were made directly to such Holder by the Company
and the Parent, and each such Holder shall have the right to take action
against the Company and the Parent to enforce, and obtain damages for any
breach of, those covenants.


 


(f)                                    Successors
and Assigns.  This Agreement shall be
binding upon the Company and the Parent and each of their successors and
assigns.


 


(g)                                 Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.


 


(h)                                 Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.


 


(i)                                     Governing
Law.  THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.


 


(j)                                     Severability.  If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.


 


(k)                                  Securities
Held by the Company.  Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder,


 


18





















 


Registrable Securities held by the Company or
the Parent or either of their Affiliates (other than subsequent Holders of
Registrable Securities if such subsequent Holders are deemed to be Affiliates
solely by reason of their holdings of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.


 


[Signature Page Follows]


 


19





















 


IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first written above.


 


	
   

  	
  ATLANTIC EXPRESS TRANSPORTATION

  CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Neil J. Abitabilo

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Neil J. Abitabilo

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ATLANTIC EXPRESS TRANSPORTATION

  GROUP, 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

  
					



 


20