Exhibit
4.4


 


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 SECURITIES ISSUED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT AND APPLICABLE LAWS.


 


No. W-1


 


WARRANT TO PURCHASE
COMMON STOCK OF 

ATLANTIC EXPRESS TRANSPORTATION CORP.


 


Atlantic Express
Transportation Corp., a New York corporation (the “Company”), hereby certifies
that, for value received, AIRLIE OPPORTUNITY CAPITAL MANAGEMENT, L.P., a
Delaware limited partnership (the “Purchaser”), or
its registered transferees, successors or assigns (each, a “holder”),
is the registered holder of warrants (the ”Warrants”, the
term “Warrant” shall include any warrant
issued upon transfer or partial exercise of this Warrant, unless the context
clearly requires otherwise) to subscribe for and purchase 40,725 shares of the fully
paid and nonassessable Common Stock (as adjusted pursuant to Section 6
hereof, the ”Warrant Shares”) of the Company
(representing five percent (5%) of the total number of issued and outstanding
shares of Common Stock, on a fully diluted basis, as of the date hereof), at a
purchase price per share equal to one cent ($0.01) (such price, as adjusted
pursuant to Section 6 hereof, the “Exercise
Price”), subject to the provisions and upon the terms and conditions
hereinafter set forth.


 


1.                                       Certain Definitions. 
As used in this Warrant, the following terms shall have the following
respective meanings:


 


“Affiliate”
of any specified Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with such
specified Person.  For purposes of this
definition, “control,” as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting stock of a Person will be
deemed to be control. For purposes of this definition, the terms “controlling,”
“controlled by” and “under common control with” have correlative meanings.


 


“Board of
Directors” means:


 


(1)                                  with
respect to a corporation, the board of directors of the corporation;


 


(2)                                  with
respect to a partnership, the Board of Directors of the general partner of the
partnership; and


 


(3)                                  with
respect to any other Person, the board or committee of such Person serving a
similar function.


 


1





















 


“Business Day”
means any day other than a Legal Holiday.


 


“Commission”
means the Securities and Exchange Commission.


 


“Common Stock”
shall mean the Company’s presently authorized common stock, par value $0.01 per
share, and any stock into or for which such Common Stock may hereafter be
converted or exchanged


 


“Equity
Registration Rights Agreement” means the registration rights
agreement, dated as of March 3, 2005, by and among the Company, the Parent
and the Purchaser relating to the Warrant Shares.


 


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


 


“Exercise Price”
means the amount set forth in the first paragraph hereof.


 


“Legal
Holiday” means a Saturday, a Sunday or a day on which banking
institutions in the City of New York are authorized by law, regulation or
executive order to remain closed.  If a
payment date is a Legal Holiday, payment may be made on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue on such payment for
the intervening period.


 


“Officer”
means, with respect to any Person, the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.


 


“Parent”
means Atlantic Express Transportation Group, Inc., a Delaware corporation.


 


“Person”
means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, limited liability
company or government or other entity.


 


“Rule 144”
means Rule 144 promulgated under the Securities Act.


 


“Rule 144A”
means Rule 144A promulgated under the Securities Act.


 


“Securities
Act” means the Securities Act of 1933, as amended.


 


2.                                       Term. 
The purchase right represented by this Warrant is exercisable, in whole
or in part, at any time and from time to time from the date hereof through and
including the close of business on the fourth anniversary of the date hereof
(the “Expiration Date”).  Each Warrant not exercised prior to 5:00
p.m., New York City time, on the Expiration Date shall become void and all
rights thereunder and all rights in respect thereof shall cease as of such
time.


 


3.                                       Exercise.


 


(a)                                  Method of Exercise; Payment;
Issuance of New Warrant.  Subject to Section 2
hereof, the purchase right represented by this Warrant may be exercised by the
holder


 


2





















 


hereof,
in whole or in part and from time to time, from and after the date hereof by
the surrender of this Warrant (with the notice of exercise form attached hereto
as Exhibit A duly executed) at the principal office of the Company, and,
except as otherwise provided for herein, by the payment to the Company by wire
transfer or by certified or official bank check payable to the order of the
Company of an amount in cash equal to the then applicable Exercise Price
multiplied by the number of Warrant Shares then being purchased.  The person or persons in whose name(s) any
certificate(s) representing shares of Common Stock shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the
shares represented thereby (and such shares shall be deemed to have been
issued) immediately prior to the close of business on the date or dates upon
which this Warrant is exercised if exercised prior to the close of business on
such date;  otherwise, the date of record
shall be the next business day.  In the
event of any exercise of the rights represented by this Warrant, certificates
for the shares of Common Stock so purchased shall be delivered to the holder
hereof as soon as possible and in any event within fifteen (15) days after such
exercise and, unless this Warrant has been fully exercised, a new Warrant
representing the portion of the Warrant Shares, if any, with respect to which
this Warrant shall not then have been exercised shall also be issued to the
holder hereof as soon as possible and in any event within such fifteen (15)-day
period.


 


(b)                                 Net Issue Exercise. 
In addition to and without limiting the rights of the holder under the
terms of this Warrant, the holder may elect to receive shares equal to the
value (as determined below) of this Warrant (or the portion thereof being
cancelled) on a net basis, without the exchange of any funds, by surrender of
this Warrant at the principal office of the Company (with the notice of
exercise form and notice of such election attached hereto as Exhibit A
duly executed) in which event the Company shall issue to the holder a number of
Warrant Shares computed using the following formula:


 


	
   

  	
   

  	
  X = Y (A – B)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Where:

  	
   

  	
  X =

  	
   

  	
  the number of
  shares of Common Stock to be issued to the holder

  
	
   

  	
   

  	
  Y =

  	
   

  	
  the number of
  shares of Common Stock purchasable under the Warrant or, if only a portion of
  the Warrant is being exercised, the portion of the Warrant being cancelled
  (at the date of such calculation)

  
	
   

  	
   

  	
  A =

  	
   

  	
  the Market Value
  of one (1) share of Common Stock

  
	
   

  	
   

  	
  B =

  	
   

  	
  the Exercise
  Price

  
								



 


The “Market Value”
per share of Common Stock as of any date shall equal (i) if Common Stock is
primarily traded on a securities exchange, the last sale price on such
securities exchange on the trading day immediately prior to the date of
determination, or if no sale occurred on such day, the mean between the closing
“bid” and “asked” prices on such day, (ii) if the principal market for Common
Stock is in the over-the-counter market, the closing sale price on the trading
day immediately prior to the date of the determination, as published by the


 


3





















 


National
Association of Securities Dealers Automated Quotation System or similar
organization, or if such price is not so published on such day, the mean
between the closing “bid” and “asked” prices, if available, on such day, which
prices may be obtained from any reputable pricing service, broker or dealer,
and (iii) if neither clause (i) nor clause (ii) is applicable, the fair market
value on the date of determination of Common Stock as determined in good faith
by the Board of Directors of the Company.


 


4.                                       Stock Fully Paid; Reservation and
Registration of Shares.


 


(a)                                  All Warrant Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens, charges, and pre-emptive rights
with respect to the issue thereof.  The
Company shall pay all transfer taxes, if any, attributable to the initial
issuance of the Warrant Shares upon the exercise of this Warrant; provided that
the Company shall not be required to pay any tax or taxes which may be payable
in respect of any transfer involved in the issue of any Warrants or any
certificates for Warrant Shares in a name other than that of the registered
holder of a Warrant surrendered upon the exercise of a Warrant, and the Company
shall not be required to issue or deliver such Warrant unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.


 


(b)                                 The Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock or the authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum
number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.


 


(c)                                  The Company or, if appointed, the
transfer agent for the Common Stock (the “Transfer Agent”) and every subsequent
transfer agent for any shares of the Company’s capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will be irrevocably
authorized and directed at all times to reserve such number of authorized
shares as shall be required for such purpose. 
The Company shall keep a copy of this Warrant on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company’s
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants.  The holder hereof is
hereby irrevocably authorized to requisition from time to time from such
Transfer Agent the stock certificates required to honor outstanding Warrants
upon exercise thereof in accordance with the terms of this Agreement.  The Company shall supply such Transfer Agent
with duly executed certificates for such purposes and shall provide or
otherwise make available any cash which may be payable as provided in Section 7
hereof.  The Company shall furnish such
Transfer Agent a copy of all notices of adjustments, and certificates related
thereto, transmitted to each holder pursuant hereto.


 


(d)                                 Before taking any action which would
cause an adjustment pursuant to Section 6 hereof to reduce the Exercise
Price below the then par value (if any) of the Warrant Shares, the Company
shall take any corporate action which may, in the opinion of its counsel (which
may be counsel employed by the Company), be necessary in order that the Company
may


 


4





















 


validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.


 


(e)                                  The Company covenants that all
Warrant Shares which may be issued upon exercise of Warrants shall, upon issue,
be fully paid, nonassessable, free of preemptive rights and free from all
taxes, liens, charges and security interests with respect to the issuance
thereof.


 


(f)                                    The Company has agreed pursuant to
the Equity Registration Rights Agreement to, within 90 days of the Closing
Date, use reasonable best efforts to file or amend an existing shelf
registration statement on an appropriate form under the Securities Act to cover
the resale of the Warrant Shares.  The
Company will use reasonable best efforts to cause such registration statement
or amendment to become effective within 180 days of the Closing Date. The
Company will use its reasonable best efforts to keep such registration
statement continuously effective under the Securities Act in order to permit
the resale of the Warrant Shares by the holders thereof for the earlier of (i)
two years or (ii) until such time as all registrable securities have been sold
pursuant to such registration statement. In addition, pursuant to the Equity
Registration Rights Agreement, subject to certain limitations, the Company and
the Parent have agreed that 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 an offering by the Company or the Parent, respectively, for
its own account or for the account of any holders of its common stock, then the
Company or the Parent, respectively, shall give written notice of such proposed
filing to the holders of Warrants and Warrant Shares 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
Warrant Shares as each holder may request in writing within 20 days after
receipt of such written notice from the Company or the Parent, respectively
(which request shall specify the Warrant Shares intended to be disposed of by
such selling holder and the intended method of distribution thereof); provided
that any holder of Warrants so requesting shall agree, upon or prior to
effectiveness of such registration statement, to exercise their Warrants at
least to the extent necessary for such holder to acquire the number of Warrant
Shares for which such holder has requested registration. The Company or the
Parent, respectively, shall use its reasonable best efforts to keep such
registration statement continuously effective under the Securities Act until at
least the earlier of (i) an aggregate of 180 days after the effective date
thereof or (ii) the consummation of the distribution by the holders of all of
the Warrant Shares covered thereby.


 


5.                                       Obtaining Stock Exchange Listings.


 


The Company shall from
time to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed
on a principal securities exchange, automated quotation system or other market
within the United States of America, if any, on which other shares of Common
Stock are then listed.


 


6.                                       Adjustment of Exercise Price and
Number of Warrant Shares Issuable.


 


The Exercise Price and
the number of Warrant Shares issuable upon the exercise of each Warrant shall
be subject to adjustment from time to time upon the occurrence of the events


 


5





















 


enumerated in this
Section 6.  For purposes of this Section 6,
“Common Stock” means shares now or
hereafter authorized of any class of common shares of the Company and any other
stock of the Company, however designated, that has the right (subject to any
prior rights of any class or series of preferred stock) to participate in any
distribution of the assets or earnings of the Company without limit as to per
share amount.


 


In addition to the
adjustments required under this Section 6, the Company may, at any time
reduce the Exercise Price for any period of time (but not less than 20 Business
Days) deemed appropriate by the Board of Directors of the Company.


 


(a)                                  Adjustment for Change in Capital
Stock.  If the Company (i) pays a dividend or makes a
distribution on its Common Stock payable in shares of its Common Stock, (ii)
subdivides its outstanding shares of Common Stock into a greater number of
shares, (iii) combines its outstanding shares of Common Stock into a smaller
number of shares, (iv) makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock or (v) issues by reclassification of
its Common Stock any shares of its capital stock, then the Exercise Price in
effect immediately prior to such action shall be proportionately adjusted so
that the holder of any Warrant thereafter exercised may receive the aggregate number
and kind of shares of capital stock of the Company which such holder would have
owned immediately following such action assuming the exercise of such Warrant
immediately prior to such action.


 


The adjustment shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification.


 


If, after an adjustment,
a holder of a Warrant upon exercise of it may receive shares of two or more
classes of capital stock of the Company, the Company shall determine, in good
faith, the allocation of the adjusted Exercise Price between the classes of
capital stock.  After such allocation,
the exercise privilege and the Exercise Price of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 6.  Such adjustment shall be made successively
whenever any event listed above shall occur.


 


(b)                                 Adjustment for Rights Issue. 
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them for a period expiring within 45 days
after the record date set forth below to subscribe for shares of Common Stock
or securities convertible into, or exchangeable or exercisable for, shares of
Common Stock, in either case, at a price per share less than the Fair Market
Value (as defined in subsection (g) of this Section 6) per share on
that record date, the Exercise Price shall be adjusted in accordance with the
formula:


 


6





















 


	
   

  	
   

  	
   

  	
   

  	
  O

  	
  +

  	
  N x P

  	
   

  
	
  E’

  	
  =

  	
  E

  	
  x

  	
   

  	
   

  	
  M

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  O+N

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  where:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E’

  	
  =

  	
  the adjusted
  Exercise Price.

  
	
   

  	
   

  	
  E

  	
  =

  	
  the current
  Exercise Price.

  
	
   

  	
   

  	
  O

  	
  =

  	
  the number of
  shares of Common Stock outstanding on the record date.

  
	
   

  	
   

  	
  N

  	
  =

  	
  the number of
  additional shares of Common Stock issued pursuant to such rights, options or
  warrants.

  
	
   

  	
   

  	
  P

  	
  =

  	
  the aggregate
  price per share of the additional shares.

  
	
   

  	
   

  	
  M

  	
  =

  	
  the Fair Market
  Value per share of Common Stock on the record date.

  
									



 


The adjustment shall be
made successively whenever any such rights, options or warrants are issued and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive the rights, options or warrants.  If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or
warrants shall have been exercised, the Exercise Price shall be immediately readjusted
to what it would have been if “N” in the above formula had been the number of
shares actually issued.


 


(c)                                  Adjustment for Other Distributions. 
If the Company distributes to all holders of its Common Stock any of its
assets (including cash), debt securities, preferred stock or any rights or
warrants to purchase assets (including cash), debt securities, preferred stock
or other securities of the Company, the Exercise Price shall be adjusted in
accordance with the formula:


 


	
  E’

  	
  =

  	
  E

  	
  x

  	
  M

  	
  -

  	
  F

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  M

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  where:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E’

  	
  =

  	
  the adjusted
  Exercise Price.

  
	
   

  	
   

  	
  E

  	
  =

  	
  the current
  Exercise Price.

  
	
   

  	
   

  	
  M

  	
  =

  	
  the Fair Market
  Value per share of Common Stock on the record date mentioned below.

  
	
   

  	
   

  	
  F

  	
  =

  	
  the fair market
  value on the record date of the debt securities, preferred stock, assets,
  securities, rights or warrants to be distributed in respect of one share of
  Common Stock as determined in good faith by the Board of Directors of the
  Company.

  
									



 


7





















 


The adjustment shall be
made successively whenever any such distribution is made and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive the distribution.


 


This Section 6(c)
shall not apply to cash dividends or other cash distributions paid out of consolidated
current or retained earnings as shown on the books of the Company prepared in
accordance with generally accepted accounting principles.  In addition, this Section 6(c) shall not
apply to rights, options or warrants referred to in Section 6(b) hereof.


 


(d)                                 Adjustment for Common Stock Issue. 
If the Company issues shares of Common Stock for a consideration per
share less than the Fair Market Value per share on the date the Company fixes
the offering price of such additional shares, the Exercise Price shall be
adjusted in accordance with the formula:


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  P 

  	
   

  
	
  E’

  	
  =

  	
  E

  	
  x

  	
  O

  	
  +

  	
  M

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  A

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  where:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E’

  	
  =

  	
  the adjusted
  Exercise Price.

  
	
   

  	
   

  	
  E

  	
  =

  	
  the current
  Exercise Price.

  
	
   

  	
   

  	
  O

  	
  =

  	
  the number of
  shares outstanding immediately prior to the issuance of such additional
  shares.

  
	
   

  	
   

  	
  P

  	
  =

  	
  the aggregate
  consideration received for the issuance of such additional shares.

  
	
   

  	
   

  	
  M

  	
  =

  	
  the Fair Market
  Value per share on the date of issuance of such additional shares.

  
	
   

  	
   

  	
  A

  	
  =

  	
  the number of
  shares outstanding immediately after the issuance of such additional shares.

  



 


The adjustment shall be
made successively whenever any such issuance is made, and shall become
effective immediately after such issuance.


 


This subsection (d)
shall not apply to:


 


(1)                                  any
of the transactions described in subsections (a), (b) and (c) of this Section 6,


 


(2)                                  the
exercise of Warrants, or the conversion, exchange or exercise of other
securities convertible into or exchangeable or exercisable for Common Stock the
issuance of which requires an adjustment to be made under Section 6(e),


 


(3)                                  the
issuance of Common Stock (and options exercisable therefore) to employees,
officers or directors of the Company or its subsidiaries under bona fide
employee benefit plans adopted by the Board of Directors and approved by the
holders of Common Stock when required by law, if such Common Stock would
otherwise be


 


8





















 


covered by this subsection (d)
(but only to the extent that the aggregate number of shares excluded hereby and
issued after the date of this Warrant shall not exceed 5% of the Common Stock
outstanding at the time of the adoption of each such plan, exclusive of
anti-dilution adjustments thereunder),


 


(4)                                  the
issuance of Common Stock to shareholders of any Person which merges into the
Company, or with a subsidiary of the Company, in proportion to their stock
holdings of such person immediately prior to such merger, upon such merger,
provided that if such Person is an Affiliate of the Company, the Board of Directors
shall have obtained a fairness opinion from a nationally recognized investment
banking, appraisal or valuation firm, which is not an Affiliate of the Company,
stating that the consideration received in such merger is fair to the Company
from a financial point of view,


 


(5)                                  the
issuance of securities upon the conversion, exchange or exercise of other
securities, warrants, options or similar rights if the conversion, exchange or
exercise price is not less than the Fair Market Value per share of Common Stock
at the time the security, warrant, option or right so converted, exchanged or
exercised was issued or granted, or


 


(6)                                  the
issuance of shares of Common Stock pursuant to rights, options or warrants
which were originally issued in a Non-Affiliate Sale (as defined below)
together with one or more other securities as part of a unit at a price per
unit.


 


(e)                                  Adjustment for Convertible
Securities Issue.  If the Company issues any securities
convertible into or exchangeable or exercisable for Common Stock (other than
securities issued in transactions described in subsections (a), (b) and (c) of
this Section 6) for a consideration per share of Common Stock initially
deliverable upon conversion, exchange or exercise of such securities less than
the Fair Market Value per share on the date of issuance of such securities, the
Exercise Price shall be adjusted in accordance with the formula:


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  P

  	
   

  
	
  E’

  	
  =

  	
  E

  	
  x

  	
  O

  	
  +

  	
   

  	
  M

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  O

  	
  +

  	
   

  	
  D

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  where:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E’

  	
  =

  	
  the adjusted
  Exercise Price.

  
	
   

  	
   

  	
  E

  	
  =

  	
  the then current
  Exercise Price.

  
	
   

  	
   

  	
  O

  	
  =

  	
  the number of
  shares outstanding immediately prior to the issuance of such securities.

  
	
   

  	
   

  	
  P

  	
  =

  	
  the aggregate
  consideration received for the issuance of such securities.

  
	
   

  	
   

  	
  M

  	
  =

  	
  the Fair Market
  Value per share on the date of issuance of such securities.

  



 


9





















 


	
   

  	
   

  	
  D

  	
  =

  	
  the maximum
  number of shares deliverable upon conversion or in exchange for such
  securities at the initial conversion, exchange or exercise rate.

  



 


 


The adjustment shall be
made successively whenever any such issuance is made, and shall become
effective immediately after such issuance.


 


If all of the Common
Stock deliverable upon conversion, exchange or exercise of such securities have
not been issued when such securities are no longer outstanding, then the
Exercise Price shall promptly be readjusted to the Exercise Price which would
then be in effect had the adjustment upon the issuance of such securities been
made on the basis of the actual number of shares of Common Stock issued upon
conversion, exchange or exercise of such securities.


 


This subsection (e)
shall not apply to convertible securities issued to shareholders of any Person
which merges into the Company, or with a subsidiary of the Company, in
proportion to their stock holdings of such person immediately prior to such
merger, upon such merger, provided that if such Person is an Affiliate of the
Company, the Board of Directors shall have obtained a fairness opinion from a
nationally recognized investment banking, appraisal or valuation firm, which is
not an Affiliate of the Company, stating that the consideration received in
such merger is fair to the Company from a financial point of view.


 


(f)                                    Consideration Received. 
For purposes of any computation respecting consideration received
pursuant to subsections (d) and (e) of this Section 6, the following shall
apply:


 


(1)                                  in
the case of the issuance of shares of Common Stock for cash, the consideration
shall be the amount of such cash, provided that in no case shall any deduction
be made for any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in connection therewith;


 


(2)                                  in
the case of the issuance of shares of Common Stock for a consideration in whole
or in part other than cash, the consideration other than cash shall be deemed
to be the fair market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof), whose
determination shall be conclusive, and described in a Board resolution which
shall be delivered to the holder hereof;


 


(3)                                  in
the case of the issuance of securities convertible into or exchangeable or
exercisable for shares, the aggregate consideration received therefor shall be
deemed to be the consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be received by
the Company upon the conversion, exchange or exercise thereof (the
consideration in each case to be determined in the same manner as provided in
clauses (1) and (2) of this subsection (f)); and


 


(4)                                  in
the case of the issuance of shares of Common Stock pursuant to rights, options
or warrants which rights, options or warrants were originally issued together
with one or more other securities as part of a unit at a price per unit, the
consideration shall be


 


10





















 


deemed to be the fair
value of such rights, options or warrants at the time of issuance thereof as
determined in good faith by the Board of Directors whose determination shall be
conclusive and described in a Board resolution which shall be delivered to the
holder hereof plus the additional minimum consideration, if any, to be received
by the Company upon the exercise, conversion or exchange thereof (as determined
in the same manner as provided in clauses (1) and (2) of this subsection (f)).


 


(g)                                 Fair Market Value. 
For purposes of Sections 6(b), (c), (d) and (e) hereof, the “Fair Market Value” per share of Common Stock at any date of
determination shall be (1) in connection with a sale by the Company to a party
that is not an Affiliate of the Company in an arm’s-length transaction (a “Non-Affiliate Sale”), the price per security at which such
security is sold and (2) in connection with any sale by the Company to an
Affiliate of the Company, (a) the last price per security at which such
security was sold in a Non-Affiliate Sale within the three-month period
preceding such date of determination and (b), if clause (a) is not applicable,
the fair market value of such security determined in good faith by (i) a
majority of the Board of Directors of the Company, including a majority of the
Disinterested Directors, and approved in a Board resolution delivered to the
holder hereof or (ii) a nationally recognized investment banking, appraisal or
valuation firm, which is not an Affiliate of the Company, in each case, taking
into account, among all other factors deemed relevant by the Board of Directors
or such investment banking, appraisal or valuation firm, the trading price and
volume of such security on any national securities exchange or automated
quotation system on which such security is traded.


 


For purposes of this Section 6(g),
“Disinterested Director” means, in
connection with any issuance of securities that gives rise to a determination
of the Fair Market Value thereof, each member of the Board of Directors who is
not an officer, employee, director or other Affiliate of the party to whom the
Company is proposing to issue the securities giving rise to such determination.


 


For purposes of this Section 6(g),
“Affiliate” of any specified Person
means (A) any other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified Person and (B)
any director, officer or employee of such specified Person.  For purposes of this definition “Control” (including, with correlative meanings, the terms “Controlling,” “Controlled By”
and “Under Common Control With”) as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise.


 


(h)                                 When De Minimis Adjustment May Be
Deferred.  No adjustment in the Exercise Price need be
made unless the adjustment would require an increase or decrease of at least 1%
in the Exercise Price.  Any adjustments
that are not made shall be carried forward and taken into account in any
subsequent adjustment.  All calculations
under this Section 6 shall be made to the nearest cent or to the nearest
1/100th of a share, as the case may be, it being understood that no such
rounding shall be made under subsection (o).


 


(i)                                     When No Adjustment Required. 
With respect to Warrants of any holder, no adjustment need be made for a
transaction referred to Section 6(a), (b), (c), (d), (e) or (f) hereof, if
such holder is to participate (without being required to exercise its Warrants)
in the


 


11





















 


transaction
on a basis and with notice that the Board of Directors determines to be fair
and appropriate in light of the basis and notice on which holders of Common
Stock participate in the transaction.  No
adjustment need be made for (i) rights to purchase Common Stock pursuant to a
Company plan for reinvestment of dividends or interest or (ii) a change in the
par value or no par value of the Common Stock. 
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. 
Interest will not accrue on the cash.


 


(j)                                     Notice of Adjustment. 
Whenever the Exercise Price is adjusted, the Company shall provide the
notices required by Section 8 hereof.


 


(k)                                  Reorganization of Company. 
At any time after the date hereof, if the Company consolidates or merges
with or into, or transfers or leases all or substantially all its assets to,
any Person, upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the holder of a Warrant would have owned immediately after
the consolidation, merger, transfer or lease if the holder had exercised the
Warrant immediately before the effective date of the transaction. Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than the Company, or the
Person to which such sale or conveyance shall have been made, shall execute (i)
a supplemental Warrant so providing and further providing for adjustments which
shall be as nearly equivalent as may be practical to the adjustments provided
for in this Section 6(k) and (ii) a supplement to the Equity Registration
Rights Agreement providing for the assumption of the Company’s obligations
thereunder.  The successor Company shall
mail to Warrant holders a notice describing the supplemental Warrant and Equity
Registration Rights Agreement.  If the
issuer of securities deliverable upon exercise of Warrants under the
supplemental Warrant is an Affiliate of the formed, surviving, transferee or
lessee corporation, such issuer shall join in the supplemental Warrant and
Equity Registration Rights Agreement.  If
this Section 6(k) shall be applicable, Sections 6(a), (b), (c), (d), (e)
and (f) hereof shall not be applicable.


 


(l)                                     Company Determination Final. 
Any determination that the Company or the Board of Directors must make
pursuant to Section 6(a), (c), (d), (e), (f), (g), (h) or (i) hereof is
conclusive.


 


(m)                               When Issuance or Payment May Be
Deferred.  In any case in which this Section 6
shall require that an adjustment in the Exercise Price be made effective as of
a record date for a specified event, the Company may elect to defer until the
occurrence of such event (i) issuing to the holder of any Warrant exercised
after such record date the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise over and above the Warrant Shares
and other capital stock of the Company, if any, issuable upon such exercise on
the basis of the Exercise Price and (ii) paying to such holder any amount in
cash in lieu of a fractional share pursuant to Section 7 hereof; provided
that the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder’s right to receive such additional Warrant
Shares, other capital stock and cash upon the occurrence of the event requiring
such adjustment.


 


(n)                                 Adjustment in Number of Shares. 
Upon each adjustment of the Exercise Price pursuant to this Section 6,
each Warrant outstanding prior to the making of the adjustment


 


12





















 


in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated
to the nearest hundredth) obtained from the following formula:


 


	
  N’

  	
  =

  	
  N

  	
  x

  	
  E

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  E’

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  where:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  N’

  	
  =

  	
  the adjusted
  number of Warrant Shares issuable upon exercise of a Warrant by payment of
  the adjusted Exercise Price.

  
	
   

  	
   

  	
  N

  	
  =

  	
  the number of
  Warrant Shares previously issuable upon exercise of a Warrant by payment of
  the Exercise Price prior to adjustment.

  
	
   

  	
   

  	
  E’

  	
  =

  	
  the adjusted
  Exercise Price

  
	
   

  	
   

  	
  E

  	
  =

  	
  the Exercise
  Price prior to adjustment.

  



 


(o)                                 Form of Warrants. 
Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.


 


7.                                       Fractional Interests.


 


The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants.  If more than one Warrant shall be presented
for exercise in full at the same time by the same holder, the number of full
Warrant Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of the Warrants so presented. 
If any fraction of a Warrant Share would, except for the provisions of
this Section 7, be issuable on the exercise of any Warrants (or specified
portion thereof), the Company shall pay an amount in cash equal to the Fair
Market Value per Warrant Share, as determined on the day immediately preceding
the date the Warrant is presented for exercise, multiplied by such fraction,
computed to the nearest whole U.S. cent.


 


8.                                       Notices to Warrant Holders.


 


(a)                                  Upon any adjustment of the Exercise
Price pursuant to Section 6 hereof, the Company shall promptly thereafter
(i) cause to be delivered to the holder hereof a certificate of a firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company (who may be the regular auditors of the Company)
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to the holder hereof written notice
of such adjustments by first-class mail, postage prepaid.


 


13





















 


Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 8.


 


(b)                                 In the event:


 


(i)                                     that the Company shall authorize the
issuance to all holders of shares of Common Stock of rights, options or
warrants to subscribe for or purchase shares of Common Stock or of any other
subscription rights or warrants;


 


(ii)                                  that the Company shall authorize the
distribution to all holders of shares of Common Stock of evidences of its
indebtedness or assets (other than dividends or cash distributions paid out of
consolidated current or retained earnings as shown on the books of the Company
prepared in accordance with generally accepted accounting principles or
dividends payable in shares of Common Stock or distributions referred to in Section 8(a)
hereof);


 


(iii)                               of any consolidation or merger to
which the Company is a party and for which approval of any stockholders of the
Company is required, or of the conveyance or transfer of the properties and
assets of the Company substantially as an entirety, or of any reclassification
or change of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or a tender offer
or exchange offer for shares of Common Stock;


 


(iv)                              of the voluntary or involuntary
dissolution, liquidation or winding up of the Company; or


 


(v)                                 that the Company proposes to take
any action (other than actions of the character described in Section 6(a)
hereof) which would require an adjustment of the Exercise Price pursuant to Section 6
hereof;


 


then the Company
shall cause to be given to the holder hereof at least 20 days (or 10 days in
any case specified in clauses (i) or (ii) above) prior to the applicable record
date hereinafter specified, or promptly in the case of events for which there
is no record date, by first-class mail, postage prepaid, a written notice
stating (x) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such rights, options, warrants or
distribution are to be determined, (y) the initial expiration date set forth in
any tender offer or exchange offer for shares of Common Stock, or (z) the date
on which any such consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, and
the date as of which it is expected that holders of record of shares of Common
Stock shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up. The
failure to give the notice required by this Section 8 or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.


 


(c)                                  Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof the right to vote or to
consent or to receive notice as a stockholder in respect of


 


14





















 


the
meetings of stockholders or the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.


 


9.                                       Reports. 
The Company agrees with each holder, for so long as any Warrants or
Warrant Shares remain outstanding and during any period in which the Company
(i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any holder, to such holder or beneficial owner of
Warrants or Warrant Shares in connection with any sale thereof and any
prospective purchaser of such Warrants or Warrant Shares designated by such
holder or beneficial owner, the information required by Rule 144(A)(d)(4) under
the Act in order to permit resales of such Warrants or Warrant Shares pursuant
to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange
Act, to make all filings required thereby in a timely manner in order to permit
resales of such Warrants or Warrant Shares pursuant to Rule 144A.


 


10.                                 Transfer of Warrant.


 


(a)                                  Warrant Register. 
The Company will maintain a register (the “Warrant
Register”) containing the names and addresses of the holder or
holders of the Warrants.  Any holder of
this Warrant, or any portion thereof may change his or her address as shown on
the Warrant Register by written notice to the Company requesting such
change.  Any notice or written
communication required or permitted to be given to the holder may be delivered
or given by mail to such holder as shown on the Warrant Register and at the
address shown on the Warrant Register. 
Until this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the holder as shown on the Warrant Register as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.


 


(b)                                 Warrant Agent. 
The Company may, by written notice to the holder, appoint an agent for
the purpose of maintaining the Warrant Register referred to in Section 10(a)
above, issuing the Common Stock or other securities then issuable upon the
exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or
any or all of the foregoing.  Thereafter,
any such registration, issuance, exchange, or replacement, as the case may be,
shall be made at the office of such agent.


 


(c)                                  Transferability and
Non-negotiability of Warrant.  This Warrant
may not be transferred or assigned in whole or in part without compliance with
all applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if such are requested by
the Company).  Subject to the provisions
of this Warrant with respect to compliance with federal and state securities
laws, title to this Warrant may be transferred by endorsement (by the holder
executing the Assignment Form attached hereto as Exhibit B) and
delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery.


 


(d)                                 Exchange of Warrant Upon a Transfer. 
On surrender of this Warrant for exchange, properly endorsed on the
Assignment Form and subject to the provisions of this Warrant with respect to
compliance with federal and state securities laws and with the limitations on
assignments and transfers contained in this Section 10, the Company
at its expense shall issue


 


15





















 


to or on
the order of the holder a new warrant or warrants of like tenor, in the name of
the holder or as the holder may direct, for the number of shares issuable upon
exercise hereof.


 


(e)                                  Compliance with Securities Laws.


 


(i)                                     The holder of this Warrant, by
acceptance hereof, acknowledges that this Warrant and the shares of Common
Stock to be issued upon exercise hereof or conversion thereof are being
acquired solely for the holder’s own account and not as a nominee for any other
party, and for investment, and that the holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Common Stock to be issued
upon exercise hereof or conversion thereof except under circumstances that will
not result in a violation of the Securities Act or any state securities
laws.  Upon exercise of this Warrant, the
holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the holder’s own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale
that would violate the Securities Act.


 


(ii)                                  The holder of this Warrant, by
acceptance hereof, hereby represents and warrants as follows:


 


(A)                              Such
holder is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect its own interests. Such holder must
bear the economic risk of this investment indefinitely unless the Warrant
Shares, if issued, are registered pursuant to the Securities Act, or an
exemption from registration is available.


 


(B)                                Such
holder is an “accredited investor” within the meaning of Rule 501(a) of
Regulation D under the Securities Act.


 


(C)                                Such
holder 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. Such
holder 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.


 


(iii)                               This Warrant, the Warrant Shares and
any other securities issued upon exercise hereof or conversion thereof 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 SECURITIES ISSUED
HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND APPLICABLE LAWS.


 


11.                                 Replacement of Warrants or Stock
Certificates.  The Company covenants to the holder hereof
that, upon receipt of evidence reasonably satisfactory to the Company of the
loss,


 


16





















 


theft,
destruction or mutilation of this Warrant or any stock certificate and, in the
case of any loss, theft or destruction, upon receipt of an executed lost
securities bond or indemnity reasonably satisfactory to the Company, or in the
case of any such mutilation upon surrender and cancellation of such mutilated
Warrant or stock certificate, the Company will make and deliver a new Warrant
or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.


 


12.                                 Amendment. 
Any amendment or supplement to this Warrant shall require the written
consent of the holders of a majority of the then outstanding Warrants
(excluding Warrants held by the Company or any of its Affiliates). The consent
of each holder of Warrants affected shall be required for any amendment
pursuant to which the Exercise Price would be increased or the number of
Warrant Shares purchasable upon exercise of Warrants would be decreased (other
than pursuant to adjustments provided in the Warrant).


 


13.                                 Notices. 
Unless otherwise specifically provided herein, all communications under
this Warrant shall be in writing and shall be deemed to have been duly given
(a) on the date of service if served personally on the party to whom notice is
to be given, (b) on the day of transmission if sent by facsimile transmission
to a number provided to a party specifically for such purposes, and telephonic
confirmation of receipt is obtained promptly after completion of transmission,
(c) on the day after delivery to Federal Express or similar overnight courier,
or (d) on the fifth day after mailing, if mailed to the party to whom notice is
to be given, by first class mail, registered or certified, postage prepaid, and
properly addressed, return receipt requested, to each such holder at its
address as shown on the books of the Company or to the Company or the Purchaser
at the address indicated below.


 


To the Company at:


Atlantic Express
Transportation Corp.


7 North Street


Staten Island, New York
10302-1205


Telecopier No.:  (718) 442-9103


Attention:  Chief Financial Officer


 


With a copy to:


 


Latham & Watkins LLP


885 Third Avenue, Suite
100


New York, New York
10022-4834


Telecopier No.:  (212) 751-4864


Attention:  Robert A. Zuccaro, Esq.


 


To the Purchaser at:


 


Airlie Opportunity Capital Management, L.P.


115 East Putnam Avenue


Greenwich, Connecticut 06830


Telecopier No.: 203-661-0479


Attention: Adam Goodfriend


 


17





















 


With a copy to:


 


Satterlee Stephens Burke & Burke LLP


230 Park Avenue, Suite 1130


New York, New York 10169


Telecopier No.: 212-818-9606


Attention: William M. Jackson, Esq.


 


Any party hereto may change its address for purposes of this Section 14
by giving the other party written notice of the new address in the manner set
forth herein.


 


14.                                 Binding Effect on Successors. 
This Warrant shall be binding upon any person or entity succeeding the
Company by merger, consolidation or acquisition of all or substantially all of
the Company’s assets, and all of the obligations of the Company relating to the
Common Stock issuable upon the exercise or conversion of this Warrant shall
survive the exercise, conversion and termination of this Warrant and all of the
covenants and agreements of the Company shall inure to the benefit of the successors
and assigns of the holder hereof.


 


15.                                 Descriptive Headings. 
The descriptive headings of the several sections of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.


 


16.                                 Governing Law.


 


(i)
THIS WARRANT 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 COMPANY AND THE HOLDER HEREOF, BY ACCEPTANCE OF THIS WARRANT,  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 WARRANT.


 


EACH OF THE COMPANY AND THE HOLDER HEREOF 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.


 


17.                                 Waiver of Jury Trial. 
EACH OF THE COMPANY AND THE HOLDER HEREOF 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 WARRANT OR THE
TRANSACTIONS CONTEMPLATED BY THIS WARRANT.


 


18.                                 Benefits of this Warrant. 
Nothing in this Warrant shall be construed to give to any person or
corporation other than the Company and the registered holders of Warrants any
legal or equitable right, remedy or claim under this Warrant; but this Warrant
shall be for the sole and exclusive benefit of the Company and the registered
holders of Warrants.


 


18





















 


19.                                 Remedies. 
In case any covenant or agreement contained in this Warrant shall have
been breached, the holders hereof (in the case of a breach by the Company), or
the Company (in the case of a breach by a holder), may proceed to protect and
enforce their or its rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific performance of any such covenant or
agreement contained in this Warrant.


 


[Signature page follows]


 


19





















 


IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed on its behalf by one of its
officers thereunto duly authorized as of the date first set forth above.


 


 


	
   

  	
  ATLANTIC EXPRESS
  TRANSPORTATION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Domenic
  Gatto

  	
   

  
	
   

  	
  Name:

  	
  Domenic Gatto

  	
   

  
	
   

  	
  Title:

  	
  President and
  CEO

  	
   

  



 


20





















 


EXHIBIT A


NOTICE OF EXERCISE


 


To:                              ATLANTIC
EXPRESS TRANSPORTATION CORP.


 


1.                                       The
undersigned hereby:


 


 ̈                                    Elects
to purchase        shares of Common Stock of                                 ,
pursuant to the terms of Section 3(a) of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.


 


 ̈                                    Elects
to exercise this Warrant for the purchase of      
shares of Common Stock, pursuant to the terms of Section 3(b) of
the attached Warrant.


 


2.                                       Please
issue a certificate or certificates representing said shares in the name of the
undersigned or in such other name or names as are specified below:


 


	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Address)

  



 


3.                                       The
undersigned represents that the aforesaid shares are being acquired for the
account of the person(s) specified in paragraph 2 of this Notice of Exercise
for investment and not with a view to, or for resale in connection with, the
distribution thereof and that the person(s) specified in paragraph 2 of this
Notice of Exercise have no present intention of distributing or reselling such
shares. The undersigned expressly reaffirms that the representations and
warranties of the undersigned set forth in Section 10(e)(ii) of the
attached Warrant are true and current with respect to each person specified in
paragraphs 2 and 4 of this Notice of Exercise as of the date hereof. The
undersigned acknowledges and agrees that the aforesaid shares shall be issued
subject to and in compliance with the terms and conditions of the attached
Warrant, including the inclusion of the legend prescribed in Section 10(e)(iii)
of the attached Warrant.


 


	
   

  	
  (Signature)

  	
   

  	
  (Date)

  



 


4.                                       Please
issue a new Warrant for the unexercised portion of the attached Warrant in the
name of the undersigned or in such other name as is specified below:


 


	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:
  (Warrantholder)

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: (Print)

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
								



 


21





















 


EXHIBIT B

FORM OF ASSIGNMENT


 


FOR VALUE RECEIVED, the
undersigned registered owner of this Warrant hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
under the within Warrant, with respect to the number of shares of Common Stock
set forth below:


 


	
  Name of Assignee

  	
   

  	
  Address

  	
   

  	
  No. of Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 


The undersigned also
represents that, by assignment hereof, the Assignee acknowledges that this
Warrant and the shares of stock to be issued upon exercise hereof or conversion
thereof are being acquired for investment and that the Assignee will not offer,
sell or otherwise dispose of this Warrant or any shares of stock to be issued
upon exercise hereof or conversion thereof except under circumstances which
will not result in a violation of the Securities Act of 1933, as amended, or
any state securities laws.  Further, the
Assignee has acknowledged that upon exercise of this Warrant, the Assignee
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the shares of stock so purchased are being acquired for
investment and not with a view toward distribution or resale.


 


	
  Dated:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature of
  holder

  	
   

  	
   

  
							



 


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