Document:

Exhibit
4.6

 

AMENDED AND RESTATED INTERCREDITOR AGREEMENT

 

THIS AMENDED AND RESTATED INTERCREDITOR
AGREEMENT (“Intercreditor Agreement”) dated as of March 3, 2005 is by and
among WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as
successor to Congress Financial Corporation, a Delaware corporation, as
Revolving Loan Agent (as defined below) for the Revolving Loan Lenders (as
defined below), THE BANK OF NEW YORK, a New York banking corporation, as
collateral agent for the Trustee (as defined below) and the Noteholders (as
defined below) (in such capacity, together with its successors and assigns, if
any, in such capacity, the “Noteholder Collateral Agent”) and, Airlie
Opportunity Capital Management, L.P. as collateral agent for the Third Priority
Noteholders (as defined below) (in such capacity, together with its successors
and assigns, if any, in such capacity, the “Third Priority Collateral Agent”).  Revolving Loan Agent, Noteholder Collateral
Agent and Third Priority Agent are sometimes individually referred to herein as
a “Creditor” and collectively as “Creditors.”

 

W  I  T  N  E  S
S  E  T  H:

 

WHEREAS, Revolving Loan Agent and Revolving
Loan Lenders have entered into a Second Amended and Restated Loan and Security
Agreement dated as of April  22, 2004 (as amended, supplemented, and
restated or otherwise modified from time to time, the “Loan Agreement”) among
the Debtors (as such term is defined below) and the Revolving Loan Lenders
parties thereto, pursuant to which Debtors may borrow and, subject to the terms
and conditions specified therein, the Revolving Loan Agent, on behalf of the
Revolving Loan Lenders will from time to time make loans in an aggregate
principal amount of up to $23,000,000 and arrange for letter of credit
accommodations in an amount of up to $10,000,000 at any one time outstanding to
provide funds for the ongoing working capital needs of Debtors, which financing
arrangements with Debtors are secured by certain assets and properties of
Debtors; and

 

WHEREAS, the Debtors and the Noteholder
Collateral Agent and Noteholders entered into an Indenture, dated as of April 
22, 2004 (as amended, supplemented, restated or otherwise modified from time to
time, the “Note Indenture”) with The Bank of New York, as trustee (“Trustee”)
governing the rights and duties of Debtors thereunder and under the 12% Senior
Secured Notes due 2008 and the Senior Secured Floating Rate Notes due 2008 in
the original aggregate principal amount of $115,000,000 (together with any
notes issued in exchange for such notes and any additional notes issued under
such Indenture, the “Notes”) which Notes are secured by certain assets and
properties of Debtor;

 

WHEREAS, each of the Revolving Loan Agent and
the Noteholder Collateral Agent entered into an intercreditor agreement dated
as of April, 22 2004 (the “Existing Intercreditor Agreement”) to, among other
things, (i) confirm the relative priority of the security interests of
such Creditors in the assets and properties of Debtor and (ii) provide for the
orderly sharing

 

 

among them, in accordance with such
priorities, of proceeds of such assets and properties upon any foreclosure
thereon or other disposition thereof;

 

WHEREAS, the Note Indenture has been or is
about to be amended and supplemented by the First Supplemental Indenture dated
as of the date hereof the (the “Supplemental Indenture”) to, inter alia, permit
the Debtors to borrow under a separate credit facility up to an additional
$15.0 million (plus the principal amount of new notes issued in connection with
the accrual of interest thereunder in respect of the principal amount of such
Notes) of secured debt, in the form of $15.0 million aggregate principal amount
(plus new PIK notes) of Third Priority Senior Secured Notes due 2008 and to
provide for permitted liens to secure such debt;

 

WHEREAS, each of Creditors desires to amend
and restate the Existing Intercreditor Agreement to (i) confirm the
relative priority of the security interests of Creditors in the assets and
properties of Debtor and (ii) provide for the orderly sharing among them, in
accordance with such priorities, of proceeds of such assets and properties upon
any foreclosure thereon or other disposition thereof.

 

NOW THEREFORE, in consideration of the mutual
benefits accruing to Creditors hereunder and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto do hereby agree as follows:

 

1.                                       DEFINITIONS

 

As used above and in this Intercreditor
Agreement, the following terms shall have the meanings ascribed to them below:

 

1.1                                 “Agreements” shall mean,
collectively, the Revolving Loan Agreements, the Noteholder Agreements and the
Third Priority Agreements.

 

1.2                                 “Capital Stock Assets” shall
mean all Capital Stock of Atlantic Express Transportation Corp. owned by
Atlantic Express Transportation Group, Inc., and all Capital Stock of each
direct or indirect subsidiary of Atlantic Express Transportation Corp. owned by
the Atlantic Express Transportation Corp. or any such subsidiary, and in each case
all proceeds thereof.

 

1.3                                 “Capital Stock” shall mean,
with respect to any Person, any and all shares, interests (including membership
interests in limited liability companies), participations, rights (including
options, warrants and the like convertible or exercisable into shares of
Capital Stock) or other equivalents (however designated, whether voting or
non-voting) of such Person’s capital, whether outstanding on, or issued after,
the Effective Date.

 

1.4                                 “Collateral” shall mean all
of the property and interests in property, real or personal, tangible or
intangible, now owned or hereafter acquired by Debtors or any of Obligors in or
upon which any or all of Creditors at any time has a Lien, and including,
without limitation, all proceeds of such property and interests in property.

 

1.5                                 “Creditors” shall mean,
collectively, Note Collateral Agent, on behalf or itself, the Trustee and the
Noteholders, Revolving Loan Agent, on behalf of itself and the Revolving Loan

 

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Lenders and their respective successors and
assigns, and Third Priority Collateral Agent, on behalf or itself, and the
Third Priority Noteholders.  Each of Note
Collateral Agent, Revolving Loan Agent and Third Priority Collateral Agent being
sometimes referred to herein individually as a “Creditor”.

 

1.6                                 “Debtors” shall mean Atlantic
Express Transportation Corp., a New York corporation, and substantially all of
the subsidiaries of Atlantic Express Transportation Group, Inc., and Atlantic
Express Transportation Corp., as more particularly set forth on Schedule 1
hereto and their respective successors and assigns, including, without
limitation, a receiver, trustee or debtor-in-possession on behalf of such
person or on behalf of any such successor or assign.

 

1.7                                 “Enforcement Action” shall
mean the exercise by any Creditor of any of its material enforcement rights and
remedies as a secured creditor under its Agreements, applicable law or
otherwise at any time following the occurrence and during the continuance of an
event of default under its Agreements (including, without limitation, the
demand for the immediate payment of all of the debt owed to it, the
solicitation of bids from third parties to conduct the liquidation of the
Collateral, the engagement or retention of sales brokers, marketing agents,
investment bankers, accountants, appraisers, auctioneers or other third parties
for the purposes of valuing, marketing, promoting and selling the Collateral,
the commencement of any action to foreclose on the security interests or liens
of such Creditor in all or any material portion of the Collateral, notification
of account debtors to make payments to such Creditor (in the case of Revolving
Loan Agent), any action to take possession of all or any material portion of
the Collateral or commencement of any legal proceedings or actions against or
with respect to all or any portion of the Collateral)

 

1.8                                 “Fixtures” shall mean all
fixtures of Debtors, whether now owned and hereafter acquired and wherever located
and proceeds of the foregoing.  The term “fixtures”
as used in this definition shall mean heating, ventilating, air conditioning
equipment, boilers, generators, plumbing and electrical equipment, wall and
floor coverings, walls and ceilings and other similar equipment installed in
and affixed to the Real Property and any other similar equipment which is so
related to any particular Real Property that an interest therein arises under
applicable real estate law

 

1.9                                 “Insolvency Proceeding” shall
mean, as to any Debtor, any of the following, occurring after the date
hereof:  (a) any case or proceeding with
respect to such Debtor under the U.S. Bankruptcy Code, any other federal, state
or provincial bankruptcy, insolvency, reorganization or other law affecting
creditors’ rights generally or any other or similar proceedings of any other
jurisdiction or otherwise seeking any stay, reorganization, arrangement,
liquidation, dissolution, composition or readjustment of the obligations and
indebtedness of such Debtor or (b) any proceeding seeking the appointment of
any receiver, administrative receiver, receiver and manager, examiner, judicial
custodian, trustee, liquidator, official manager, administrator or similar
official for any Debtor or any material part of its properties or (c) any
proceedings for liquidation, dissolution or other winding up of the business of
such Debtor or (d) the sale of all or substantially all of the assets or
capital stock of such Debtor or (e) any assignment for the benefit of creditors
or any marshaling of assets of such Debtor.

 

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1.10                           “Lien” shall mean any
mortgage, deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance (including, but not limited to,
easements, rights of way and the like), lien (statutory or other), security
agreement or transfer intended as security, including without limitation, any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease or any financing lease having substantially the same
economic effect as any of the foregoing.

 

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

 

1.12                           “Note Indenture” shall have
the meaning set forth in the second recital of the Intercreditor Agreement.

 

1.13                           “Noteholder Agreements” shall
mean the Note Indenture, the Supplemental Indenture and the agreements set forth
on Schedule 3 hereto and all other agreements, documents and instruments
at any time executed and/or delivered by Debtors, Obligors or any other person
with, to or in favor of Noteholder or in connection therewith or related
thereto, as all of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated, refinanced, replaced or
restructured.

 

1.14                           “Noteholder Collateral” shall
mean the Noteholder First Priority Real Property Collateral and the Noteholder
Motor Vehicle Collateral.

 

1.15                           “Noteholder Debt” shall mean
any and all obligations, liabilities and indebtedness of every kind, nature and
description owing by Debtors or any of Obligors to the Noteholders, Trustee and
Noteholder Collateral Agent under the Noteholder Agreements, including,
principal, interest, charges, fees, premiums, indemnities and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether now existing or hereafter arising, whether arising before, during or
after the initial or any renewal term of the Noteholder Agreements or after the
commencement of any case with respect to Debtor or any of Obligors under the
U.S. Bankruptcy Code or any similar statute (including the payment of interest
and other amounts which would accrue and become due but for the commencement of
such case, whether or not such amounts are allowed or allowable in whole or in
part in such case), whether direct or indirect; absolute or contingent, joint
or several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and whether arising directly or howsoever acquired by the
Noteholders.

 

1.16                           “Noteholder First Priority Real
Property Collateral” shall mean all of the Real Property of Debtors and
Obligors (including without limitation the Real Property described in Schedule 1.16
hereto) and the proceeds of any disposition thereof; provided, that,
Noteholder First Priority Real Property Collateral shall not include the Real
Property of Debtors located in Bordentown, New Jersey or the Revolving Loan
Real Property Collateral.

 

1.17                           “Noteholder Motor Vehicle
Collateral” shall mean all of the Motor Vehicles owned by Debtors in which
Noteholder Collateral Agent has a Lien and the proceeds of any disposition
thereof.

 

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1.18                           “Noteholders” shall mean
collectively, the holders of Noteholder Debt and their respective successors
and assigns; sometimes being referred to herein individually as a “Noteholder”.

 

1.19                           “Obligors” shall mean,
individually and collectively, any person liable on or in respect of the
Revolving Loan Debt, the Noteholder Debt or the Third Priority Debt, and its
successors and assigns, including, without limitation, a receiver, trustee or
debtor-in-possession on behalf of such person or on behalf of any such
successor or assign, other than Debtors.

 

1.20                           “Person” or “person”
shall mean any individual, sole proprietorship, partnership, corporation
(including, without imitation, any corporation which elects subchapter S status
under the Internal Revenue Code of 1986, as amended), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock company, trust, joint venture, or other entity or any
government or any agency or instrumentality or political subdivision thereof.

 

1.21                           “Real Property” shall mean
all real property of Debtors and Obligors, whether now owned or hereafter
acquired and wherever located, including leasehold interests, together with all
Fixtures located thereon and all licenses, easements and appurtenances relating
thereto, wherever located and the proceeds of all of the foregoing.

 

1.22                           “Revolving Loan Agent” shall
mean Congress Financial Corporation, a Delaware corporation in its capacity as
agent pursuant to the Loan Agreement, acting for the benefit and on behalf of
Revolving Loan Lenders, and its successors and assigns (and including, without
limitation, any successor, assignee or additional person at any time acting as
agent for the benefit of or on behalf of it and/or Revolving Loan Lenders).

 

1.23                           “Revolving Loan Agreements”
shall mean, collectively, the Second Amended Loan and Security Agreement, dated
April 22, 2004, by and among Revolving Loan Agent, the Revolving Loan
Lenders and Debtors and all agreements, documents and instruments at any time
executed and/or delivered by any Debtor, Obligors or any other person with, to
or in favor of Revolving Loan Agent or Revolving Loan Lenders in connection
therewith or related thereto, as all of the foregoing now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated,
refinanced, replaced or restructured (in whole or in part and including any
agreements with, to or in favor of any other lender or group of lenders that at
any time refinances, replaces or succeeds to all or any portion of the
Revolving Loan Debt).

 

1.24                           “Revolving Loan Collateral”
shall mean all Collateral except for the Noteholder Motor Vehicle Collateral.

 

1.25                           “Revolving Loan Debt” shall
mean, all obligations, liabilities and indebtedness of every kind, nature and
description owing by Debtor or any of Obligors to Revolving Loan Agent and
Revolving Loan Lenders, including principal, interest, charges, fees, premiums,
indemnities and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether arising under the Revolving Loan
Agreements or otherwise, (including, without limitation the “Obligations” as
such term is defined in the Revolving Loan Agreements), whether now existing or
hereafter arising, whether arising before, during or after the initial or any

 

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renewal term of the Revolving Loan Agreements
or after the commencement of any case with respect to any Debtor or any of
Obligors under the U.S. Bankruptcy Code or any similar statute (including the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case, whether or not such amounts are allowed or allowable
in whole or in part in such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and whether arising directly or
howsoever acquired by Congress.

 

1.26                           “Revolving Loan Lenders”
shall mean, collectively, Congress Financial Corporation and its successors and
assigns (including any other lender or group of lenders that at any time
succeeds to or refinances, replaces or substitutes for all or any portion of
the Revolving Loan Debt at any time and from time to time in accordance with Section 4.2(c)
hereof); sometimes being referred to herein individually as a “Revolving Loan
Lender”.

 

1.27                           “Revolving Loan Priority Amount”
shall mean the sum of (a) (i) the outstanding principal amount of Revolving
Loan Debt not to exceed $23,000,000 in the aggregate, plus (ii) the
aggregate amount of Letter of Credit Accommodations and LC Advances (as such
terms are defined in the Revolving Loan Agreements) in an amount not to exceed
$10,000,000, plus (iii) the outstanding principal amount of any other
Revolving Loan Debt (in excess of the Revolving Loan Debt referenced in clause
(i) above) to the extent that such Revolving Loan Debt is permitted under Section 4.12
of the Indenture and clause (14) of the definition of “Permitted Indebtedness”
contained therein, plus (b) accrued but unpaid interest on and fees and
charges payable in connection with the Revolving Loan Debt set forth in clause
(a) above (including, without limitation, interest and fees accruing during any
Insolvency Proceeding whether or not allowable in whole or in part therein), plus
(c) Revolving Loan Agent’s costs and expenses paid or incurred and other
payments made in connection with collecting the Revolving Loan Debt and
enforcing Revolving Loan Lenders’ rights and remedies under the Revolving Loan
Agreements and applicable law, to the extent that such costs, expenses and
payments are chargeable to or are required to be paid or reimbursed by Debtors
under the Revolving Loan Agreements (including, without limitation, such
amounts arising during any Insolvency Proceeding whether or not allowable in
whole or in part therein).

 

1.28                           “Revolving Loan Real Property
Collateral” shall mean the Real Property of Metro Affiliates, Inc. located
at 46-81 Metropolitan Avenue, Ridgewood, New York and the proceeds thereof.

 

1.29                           “Secured Debt” shall mean
either the Noteholder Debt, the Revolving Loan Debt, or the Third Priority
Debt, or any or all of these, as the case may be.

 

1.30                           “Supplemental Indenture”
shall have the meaning set forth in the fourth recital of this Intercreditor
Agreement.

 

1.31                           “Third Priority Agreements”
shall mean, collectively, (i) the Third Priority Note Purchase Agreement, (ii)
the agreements set forth on Schedule 4 hereto and (iii) all other
agreements, documents and instruments at any time executed and/or delivered by
Debtors, Obligors or any other person with, to or in favor of the Third
Priority Noteholders or in connection therewith or related thereto, as all of
the foregoing now exist or may hereafter be

 

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amended, modified, supplemented, extended,
renewed, restated, refinanced, replaced or restructured.

 

1.32                           “Third Priority Debt” shall
mean any and all obligations, liabilities and indebtedness of every kind,
nature and description owing by Debtors or any of Obligors to the Third
Priority Noteholders and Third Priority Collateral Agent under the Third
Priority Agreements, including, principal, interest, charges, fees, premiums,
indemnities and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal term of the
Third Priority Agreements or after the commencement of any case with respect to
Debtor or any of Obligors under the U.S. Bankruptcy Code or any similar statute
(including the payment of interest and other amounts which would accrue and
become due but for the commencement of such case, whether or not such amounts
are allowed or allowable in whole or in part in such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and whether
arising directly or howsoever acquired by the Third Priority Noteholders.

 

1.33                           “Third Priority Noteholders”
shall mean collectively, the holders of Third Priority Debt and their
respective successors and assigns; sometimes being referred to herein
individually as a “Third Priority Noteholder.”

 

1.34                           “Third Priority Note Purchase
Agreement” shall mean that certain Note and Warrant Purchase Agreement
dated as of the date hereof among Atlantic Express Transportation Corp. and
Airlie Opportunity Capital Management, L.P.

 

All terms
defined in the Uniform Commercial Code, unless otherwise defined herein shall
have the meanings set forth therein.  All
references to any term in the plural shall include the singular and all
references to any term in the singular shall include the plural.

 

2.                                       SECURITY
INTERESTS; PRIORITIES; REMEDIES

 

2.1                                 Acknowledgement of Liens. 
Each Creditor hereby acknowledges that:

 

(a)                                  Noteholder Collateral Agent, for the
benefit of the Noteholders, has been granted a Lien upon the Collateral
pursuant to the Noteholder Agreements to secure the Noteholder Debt;

 

(b)                                 Revolving Loan Agent, for the
benefit of Revolving Loan Lenders has been granted a Lien upon all of the
Collateral (other than the Noteholder Motor Vehicle Collateral) pursuant to the
Revolving Loan Agreements to secure the Revolving Loan Debt;

 

(c)                                  Third Priority Collateral Agent, for
the benefit of the Third Priority Noteholders, has been granted a Lien upon the
Collateral (other than Noteholder Motor Vehicle Collateral)  pursuant to the Third Priority Agreements to
secure the Third Priority Debt; and

 

(d)                                 None of the Revolving Loan Agent,
the Noteholder Collateral Agent or the Third Priority Collateral Agent has a
Lien on the Capital Stock Assets.

 

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2.2                                 Priority of Liens. 
Notwithstanding the time of incurrence of any Secured Debt, the order or
method of attachment or perfection of any Liens securing any Secured Debt, the
time or order of filing or recording of financing statements or other documents
filed or recorded to perfect any Lien upon any Collateral, the rules for
determining priority under any law governing relative priorities of Liens on
the Collateral or any conflicting terms or conditions which may be contained in
any of the Agreements:

 

(a)                                  The following Lien priorities shall
strictly apply in defining the respective Lien priorities of each Creditor in
the Revolving Loan Collateral (other than the Noteholder First Priority Real
Property Collateral):

 

(i)                                     first: 
the Liens upon such Collateral of Revolving Agent and Revolving Loan
Lenders to the full extent of the Revolving Loan Debt;

 

(ii)                                  second: 
the Liens upon such Collateral of Noteholder Collateral Agent, Trustee
and Noteholders to the full extent of the Noteholder Debt; and

 

(iii)                               third: the Liens upon such Collateral of
Third Priority Collateral Agent and Third Priority Noteholders to the full
extent of the Third Priority Debt.

 

(b)                                 The following Lien priorities shall
strictly apply in defining the respective Lien priorities of each Creditor in
the Noteholder First Priority Real Property Collateral:

 

(i)                                     first: 
the Liens upon such Collateral of Noteholder Collateral Agent, Trustee
and Noteholders to the full extent of the Noteholder Debt;

 

(ii)                                  second: 
the Liens upon such Collateral of Revolving Loan Agent and Revolving
Loan Lenders to the full extent of the Revolving Loan Debt; and

 

(iii)                               third: the Liens upon such Collateral of
Third Priority Collateral Agent and Third Priority Noteholders to the full
extent of the Third Priority Debt.

 

(c)                                  Only Noteholder Collateral Agent has
a Lien on the Motor Vehicles.

 

(d)                                 Notwithstanding anything to the
contrary contained herein, the principal amount of the Revolving Loan Debt in
excess of Revolving Loan Priority Amount shall not be entitled to the benefit
of the priority of the Liens of Revolving Loan Agent provided for in this Section 2.2.

 

2.3                                 Proceeds of Revolving Loan
Collateral.  Subject to Section 2.7 below, the
proceeds of any sale, disposition or other realization upon all or any part of
the Revolving Loan Collateral (other than Noteholder First Priority Real
Property Collateral) in connection with an Enforcement Action shall be applied
in the following order of priorities:

 

(a)                                  first, to Revolving Loan Agent for the
payment in full in cash or other immediately available funds of the outstanding
Revolving Loan Debt up to the Revolving Loan Priority Amount, in such order as
may be provided in the Revolving Loan Agreements;

 

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(b)                                 second, to the Noteholder Collateral Agent
for the payment in full in cash or other immediately available funds of all of
the Noteholder Debt in such order as may be provided in the Noteholder
Agreements;

 

(c)                                  third, to the Third Priority Collateral
Agent for the payment in full in cash or other immediately available funds of
all of the Third Priority Debt in such order as may be provided in the Third
Priority Agreements;

 

(d)                                 fourth, to the Revolving Loan Agent for
the payment of the Revolving Debt in excess of the Revolving Loan Priority
Amount until the Revolving Debt has been paid in full in cash or other
immediately available funds; and

 

(e)                                  fifth, to the Debtors, or their
respective successors or assigns or as required by applicable law.

 

2.4                                 Proceeds of Noteholder First
Priority Real Property Collateral.  Subject to Section 2.7
below, the proceeds of any sale, disposition or other realization upon all or
any part of the Noteholder First Priority Real Property Collateral shall be
applied in the following order of priorities:

 

(a)                                  first, to the Noteholder Collateral Agent
for the payment of the Noteholder Debt until such Noteholder Debt has been paid
in full in cash or other immediately available funds, in such order as may be
provided in the Noteholder Agreements; and

 

(b)                                 second, to the Revolving Loan Agent for
the payment in full in cash or other immediately available funds of the
outstanding Revolving Loan Debt up to the Revolving Priority Amount, in such order
as may be provided for in the Revolving Loan Agreements;

 

(c)                                  third, to the Third Priority Collateral
Agent for the payment of the Third Priority Debt until such Third Priority Debt
has been paid in full in cash or other immediately available funds, in such
order as may be provided in the Third Priority Agreements;

 

(d)                                 fourth, to the Revolving Loan Agent for
the payment of the Revolving Debt in excess of the Revolving Loan Priority
Amount until the Revolving Debt has been paid in full in cash or other
immediately available funds; and

 

(e)                                  fifth, to the Debtors, or their
respective successors or assigns or as required by applicable law.

 

2.5                                 Proceeds of Noteholder Motor Vehicle
Collateral.  Subject to Section 2.7 below, the
proceeds of any sale, disposition or other realization upon all or any part of
the Noteholder Motor Vehicle Collateral shall be applied to the payment in full
in cash or other immediately available funds of the Noteholder Debt in whatever
manner and order Noteholder Collateral Agent chooses in accordance with the
Noteholder Agreements and applicable law.

 

2.6                                 Priorities Unaffected by Action on
Inaction.  The lien priorities provided in Section 2.2
shall not be altered or otherwise affected by any amendment, modification,
supplement, extension, renewal, restatement, replacement or refinancing of the
Revolving Loan

 

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Debt, the Noteholder Debt or the Third
Priority Debt nor by any action or inaction which any Creditor may take or fail
to take in respect of the Collateral.

 

2.7                                 Perfection; No Contest of Liens. 
Subject to Section 4.5, each Creditor shall be solely responsible
for perfecting and maintaining the perfection of its Lien in and to each item
constituting the Collateral in which such Creditor has been granted a
Lien.  The foregoing provisions of this
Intercreditor Agreement are intended solely to govern the respective Lien
priorities as between the Creditors and shall not impose on any Creditor any
obligations in respect of the disposition of proceeds of foreclosure on any
Collateral which would conflict with prior perfected claims therein in favor of
any other person or any order or decree of any court or other governmental
authority or any applicable law.  Each
Creditor agrees that it will not contest the validity, perfection, priority or
enforceability of the Liens upon the Collateral of the other Creditors and that
as between Creditors, the terms of this Intercreditor Agreement shall govern
even if part or all of the Revolving Loan Debt, the Noteholder Debt or the
Third Priority Debt or the Liens securing payment and performance thereof are
avoided, disallowed, set aside or otherwise invalidated in any judicial
proceeding or otherwise.

 

2.8                                 Right to Enforce Security Interests.

 

(a)                                  With respect to (i) the Noteholder
Collateral Agent, so long as any Noteholder Debt remains outstanding, (ii) the
Revolving Loan Agent, so long as any Revolving Loan Debt remains outstanding,
and (iii) the Third Priority Collateral Agent, so long as any of the Third
Priority Debt remains outstanding, the Agent with the senior Lien on any of the
Collateral will have the sole and exclusive right to control, administer,
account for and otherwise deal with such Collateral, and to determine the
manner of every sale or other disposition of such Collateral upon enforcement
of such Agent’s interest therein or the enforcement of any other right or
remedy with respect thereto.  The Agent
with the senior Lien on any of the Collateral may foreclose on such Collateral
in any order in which it in its sole discretion, deems appropriate.

 

(b)                                 The Noteholder Collateral Agent will
have the sole and exclusive right to control, administer, account for and
otherwise deal with the Motor Vehicles, and to determine the manner of every
sale or other disposition of the Motor Vehicles in connection with an
Enforcement Action.  The Collateral Agent
may foreclose on the Motor Vehicles in any order in which it in its sole
discretion deems appropriate.

 

2.9                                 Rights of Creditor with the Most
Senior Lien.

 

(a)                                  Notwithstanding anything to the
contrary contained in any of the Agreements, only the Creditor with the most
senior Lien in the Collateral shall have the right to restrict or permit, or
approve or disapprove, the sale, transfer or other disposition of such
Collateral in connection with an Enforcement Action.  To the extent any Collateral is sold or
otherwise disposed of by or on behalf of or at the request of the Creditor with
the senior Lien (including by the Debtor with the consent of the Creditor with
the most senior Lien in the Collateral) in connection with an Enforcement
Action, each Creditor with a junior Lien on such Collateral shall:  (i) be deemed to have automatically and
without further action released and terminated any Liens it may have on such
Collateral, (ii) be deemed to have authorized the

 

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Creditor with the most senior Lien to file
UCC amendments and terminations covering the Collateral so sold or otherwise
disposed of on behalf of each Creditor with a junior Lien, (iii) promptly
upon the request of the Creditor with the most senior Lien in the Collateral
execute and deliver such other release documents and confirmations of the
authorization to file UCC amendments and terminations (and other release
documents) provided for herein, in each case as the Creditor with the most
senior Lien in the Collateral may require in connection with such sale or other
disposition by or on behalf of such Creditor (including by the Debtor with the
consent of the Creditor with the most senior Lien in the Collateral) to
evidence and effectuate such termination and release, provided, that,
any such release or UCC amendment or termination by or on behalf of Creditor or
Creditors, as the case may be, with a junior Lien in such Collateral shall not
extend to or otherwise affect any of the rights, if any, of such Creditor’s
rights to the proceeds from any such sale or other disposition of such
Collateral upon the payment and satisfaction in full of the indebtedness owing
to the Creditor with the most senior Lien, and (iv) be deemed to have consented
under the Agreements of the each Creditor with a junior Lien thereon and the
Lenders, Noteholders or Third Priority Noteholders, as the case may be, for whom
such Creditor is acting to such sale or other disposition.  Any sale or other disposition of any of the
Collateral by the Creditor with the most senior lien thereon (other than sales
supervised by a court) under the Uniform Commercial Code or other applicable
law shall be conducted in a commercially reasonable manner under the
circumstances based on such information available to the Creditor with the most
senior Lien thereon relevant to such determination.

 

(b)                                 To the extent that the Revolving
Loan Priority Amount has been paid in full but Revolving Debt remains
outstanding, Revolving Loan Agent shall, at its option, or at the written
request of Noteholder Collateral Agent, turn over the enforcement proceedings
with respect to Revolving Loan Collateral to Noteholder Collateral Agent, and
at all times thereafter, subject to Section 2.9(c), Noteholder Collateral
Agent shall be deemed to be the Creditor with the most senior Lien for purposes
of this Section 2.9; provided, that, the priorities of
payment in respect of the Secured Debt set forth herein shall remain unchanged.

 

(c)                                  To the extent that Noteholder Debt
has been paid in full and the Revolving Loan Priority Amount has been paid in
full but Third Priority Debt remains outstanding, Revolving Loan Agent or
Noteholder Collateral Agent, as applicable, shall, at its option, or at the
written request of Third Priority Collateral Agent, turn over the enforcement
proceedings with respect to Revolving Loan Collateral to Third Priority
Collateral Agent, and at all times thereafter, Third Priority Collateral Agent
shall be deemed to be the Creditor with the most senior Lien for purposes of
this Section 2.9; provided, that, the priorities of payment
in respect of the Secured Debt set forth herein shall remain unchanged.

 

2.10                           Rights of Junior Creditor. 
Each Creditor with a junior Lien on any Collateral will not, directly or
indirectly, (a) exercise any of its rights or remedies upon a default or event
of default by Debtor or any of Obligors under its Agreements against such
Collateral, or (b) seek to foreclose or realize upon (judicially or non
judicially) its junior Lien on such Collateral or assert any claims or interest
therein (including, without limitation, by setoff or notification of account
debtors) or (c) take any other action that would interfere in any manner with
the rights of the Creditor with the most senior Lien in such Collateral.  Notwithstanding the foregoing, if Insolvency
Proceeding shall be commenced against any Debtor, each Creditor shall be entitled
to

 

11

 

file proofs of claim and commence other
proceedings in order to evidence and protect its interest in the Collateral so
long as such filings are not in any manner inconsistent with the provisions of
this Intercreditor Agreement.

 

2.11                           Access to Noteholder First Priority
Real Property Collateral.

 

(a)                                  In the event that Noteholder
Collateral Agent or, subject to the provisions of this Intercreditor Agreement,
Revolving Loan Agent shall acquire control or possession of any of the
Noteholder First Priority Real Property Collateral, or shall, through the
exercise of remedies under its Agreements, sell or otherwise transfer any of
the Real Property of Debtor(s) to any third party (a “Third Party Purchaser”),
Noteholder Collateral Agent or Revolving Loan Agent, as applicable, shall
permit Revolving Loan Agent (if applicable) and Third Priority Collateral Agent
(or require as a condition of such sale to a Third Party Purchaser that the
Third Party Purchaser agree to permit Revolving Loan Agent (if applicable) and
Third Priority Collateral Agent), at its option, to enter and use any or all of
the Noteholder Real Property Collateral during normal business hours in order
to inspect, remove or take any action with respect to the other Collateral or
to enforce, in the case of the Revolving Loan Agent, Revolving Loan Agent’s and
Revolving Loan Lenders’ rights with respect thereto, and, in the case of Third
Priority Collateral Agent, Third Priority Collateral Agent’s and Third Priority
Noteholders’ right with respect thereto, in each case including, but not
limited to, the examination and removal of such other Collateral in which
Revolving Loan Agent or Third Priority Collateral Agent, as the case may be,
has the most senior Lien and the examination and duplication of the books and
records of Debtor related to such other Collateral or to otherwise handle, deal
with or dispose of any of the Collateral, such right to include, without
limiting the generality of the foregoing, the right to conduct one or more
public or private sales or auctions thereon. 
The access and use rights of Revolving Loan Agent set forth in this Section as
to the Noteholder First Priority Real Property Collateral, to the extent
applicable,  shall continue until the
date one hundred twenty (120) days after the earlier of (i) the date Revolving
Loan Agent receives written notice from Noteholder Collateral Agent that
Noteholder Collateral Agent has commenced a foreclosure proceeding or other
legal proceeding to take possession of such Noteholder Real Property or to
appoint a receiver of rents or (ii) the date that Revolving Loan Agent
commences an Enforcement Action with respect to the Collateral subject to its
senior Lien.  The rights of Third Priority
Collateral Agent set forth in this Section as to the Noteholder Real
Property shall continue until the date one hundred twenty (120) days after the
earlier of (i) the date Third Priority Collateral Agent receives written notice
from Noteholder Collateral Agent that Noteholder Collateral Agent has commenced
a foreclosure proceeding or other legal proceeding to take possession of such
Noteholder Real Property or to appoint a receiver of rents or (ii) the date
that Third Priority Collateral Agent commences an Enforcement Action with
respect to the Collateral subject to its senior Lien.  In no event shall the use by Revolving Loan
Agent or Third Priority Collateral Agent of the Real Property constitute an
assumption by Revolving Loan Agent, any Revolving Loan Lender, Third Priority
Collateral Agent, or any Third Priority Noteholder of the Revolving Loan
Agreements, the Noteholder Agreement or the Third Priority Agreements, as
applicable.

 

(b)                                 Revolving Loan Lenders shall
indemnify and hold harmless Noteholder Collateral Agent, Noteholders and any
Third Party Purchaser from and against (i) any loss, liability, claim, damage
or expense arising out of any claim asserted by any third party as a result

 

12

 

of any acts or omissions by Revolving Loan
Agent in connection with the exercise by Revolving Loan Agent, of the rights of
access and use set forth in this Section 2.11 and (ii) any damage to any
of the Noteholder Real Property Collateral caused by any act of Revolving Loan
Agent.  In no event shall Revolving Loan
Agent have any liability to Noteholder Collateral Agent, Noteholders,  or any Third Party Purchaser pursuant to this
Section 2.11 or otherwise solely as a result of any condition on or with
respect to the Noteholder Real Property Collateral existing prior to the date
of the exercise by Revolving Loan Agent of its rights under this Section 2.11.

 

(c)                                  Third Priority Noteholders shall
indemnify and hold harmless Noteholder Collateral Agent, Noteholders and any Third
Party Purchaser from and against (i) any loss, liability, claim, damage or
expense arising out of any claim asserted by any third party as a result of any
acts or omissions by Third Priority Collateral Agent in connection with the
exercise by Third Priority Collateral Agent, of the rights of access and use
set forth in this Section 2.11 and (ii) any damage to any of the
Noteholder Real Property Collateral caused by any act of Third Priority
Collateral Agent.  In no event shall
Third Priority Collateral Agent have any liability to Noteholder Collateral
Agent, Noteholders, or any Third Party Purchaser pursuant to this Section 2.11
or otherwise solely as a result of any condition on or with respect to the
Noteholder Real Property Collateral existing prior to the date of the exercise
by Third Priority Collateral Agent of its rights under this Section 2.11.

 

2.12                           Access to Revolving Loan Real
Property Collateral.

 

(a)                                  In the event that Revolving Loan
Agent or, subject to the provisions of this Intercreditor Agreement, Noteholder
Collateral Agent, shall acquire control or possession of any of the Revolving
Loan Real Property Collateral, or shall, through the exercise of remedies under
its Agreements, sell or otherwise transfer any of the Real Property of Debtor(s)
to any third party (a “Third Party Purchaser”), Revolving Loan Agent shall
permit Noteholder Collateral Agent (if applicable) and Third Priority
Collateral Agent (or require as a condition of such sale to a Third Party
Purchaser that the Third Party Purchaser agree to permit Noteholder Collateral
Agent (if applicable) and the Third Priority Collateral Agent), at its option,
to enter and use any or all of the Revolving Loan Real Property Collateral
during normal business hours in order to inspect, remove or take any action
with respect to the Noteholder Collateral or to enforce Noteholder Collateral
Agent’s rights with respect thereto, including, but not limited to, the
examination and removal of such other Collateral in which Noteholder Collateral
Agent or the Third Priority Collateral Agent, as the case may be, has the most
senior Lien and the examination and duplication of the books and records of
Debtor related to such other Collateral or to otherwise handle, deal with or
dispose of any of the Collateral, such right to include, without limiting the
generality of the foregoing, the right to conduct one or more public or private
sales or auctions thereon.  The rights of
access and use of Noteholder Collateral Agent set forth in this Section as
to the Revolving Loan Real Property Collateral, to the extent applicable, shall
continue until the date one hundred twenty (120) days after the earlier of (i)
the date Noteholder Collateral Agent receives written notice from Revolving
Loan Agent that Revolving Loan Agent has commenced a foreclosure proceeding or
other legal proceeding to take possession of such Revolving Loan Real Property
Collateral or to appoint a receiver of rents or (ii) the date that Revolving
Loan Agent commences an Enforcement Action with respect to the Collateral
subject to its senior Lien.  The rights
of Third Priority Collateral Agent set forth in this Section as to the
Revolving Loan Real Property Collateral shall continue until the date one
hundred twenty (120) days after 

 

13

 

the earlier of (i) the date Third Priority
Collateral Agent receives written notice from Revolving Loan Agent that
Revolving Loan Agent has commenced a foreclosure proceeding or other legal
proceeding to take possession of such Revolving Loan Real Property Collateral
or to appoint a receiver of rents or (ii) the date that Third Priority
Collateral Agent commences an Enforcement Action with respect to the Collateral
subject to its senior Lien.  In no event
shall the use by Noteholder Collateral Agent or Third Priority Collateral
Agent, as the case may be, of the Revolving Loan Real Property Collateral
constitute an assumption by Noteholders or Third Priority Collateral Agent, as
the case may be, of the Revolving Loan Agreements.

 

(b)                                 Noteholders shall indemnify and hold
harmless Revolving Loan Agent and Revolving Loan Lenders and any Third Party
Purchaser from and against (i) any loss, liability, claim, damage or expense
arising out of any claim asserted by any third party as a result of any acts or
omissions by Noteholder Collateral Agent in connection with the exercise by
Noteholder Collateral Agent, of the rights of access and use set forth in this Section 2.12
and (ii) any damage to any of the Revolving Loan Real Property Collateral
caused by any act of Noteholder Collateral Agent.  In no event shall Noteholder Collateral Agent
and Noteholders have any liability to Revolving Loan Agent or any Third Party
Purchaser pursuant to this Section 2.12 or otherwise solely as a result of
any condition on or with respect to the Revolving Loan Real Property Collateral
existing prior to the date of the exercise by Noteholder Collateral Agent of
its rights under this Section 2.12.

 

(c)                                  Third Priority Noteholders shall
indemnify and hold harmless Revolving Loan Agent and Revolving Loan Lenders and
any Third Party Purchaser from and against (i) any loss, liability, claim,
damage or expense arising out of any claim asserted by any third party as a
result of any acts or omissions by Third Priority Collateral Agent in
connection with the exercise by Third Priority Collateral Agent, of the rights
of access and use set forth in this Section 2.12 and (ii) any damage
to any of the Revolving Loan Real Property Collateral caused by any act of
Third Priority Collateral Agent.  In no
event shall Third Priority Collateral Agent and Third Priority Noteholders have
any liability to Revolving Loan Agent or any Third Party Purchaser pursuant to
this Section 2.12 or otherwise solely as a result of any condition on or
with respect to the Revolving Loan Real Property Collateral existing prior to
the date of the exercise by Third Priority Collateral Agent of its rights under
this Section 2.12.

 

2.13                           Right to Cure. 
Revolving Loan Agent shall have the right one (1) time in any twelve
(12) month period, but not any obligation, to cure any events of default under
the Noteholder Agreements or the Third Priority Agreements for the account of
Debtor or any of Obligors within fifteen (15) days after the receipt by Congress
of written notice of such event of default from the Creditor or thereafter with
the consent of Creditor.  In no event
shall Revolving Loan Agent, by virtue of the payment of amounts or performance
of any obligation required to be paid or performed by Debtor or any of
Obligors, be deemed to have assumed any obligation of Debtor or any of Obligors
to Noteholders, the Third Priority Noteholders or any other person.

 

2.14                           Notices of Default. 
Each Creditor shall give to the others concurrently with the giving
thereof to Debtor, (a) a copy of any written notice by such Creditor of either
a default or an event of default under its Agreements with Debtors, or written
notice of demand of payment from Debtors, and (b) any written notice sent by
such Creditor to Debtors at any time an event of default under such Creditor’s
Agreements exists stating such Creditor’s intention to exercise any

 

14

 

of its enforcement rights or remedies,
including written notice pertaining to any foreclosure on any of the Collateral
or other judicial or non judicial remedy in respect thereof, and any legal
process served or filed in connection therewith; provided, that
the failure of any party to give notice as required hereby shall not affect the
relative priorities of Creditor’s respective Liens as provided herein or the
validity or effectiveness of any such notice as against any Debtor and shall
not give rise to any claim or cause of action by any Creditor against the other
Creditors.  Each Creditor shall, upon the
request of the other, provide to such other Creditor a statement of the amount
of the indebtedness of Debtors then owing to it.  Debtors hereby authorize and consent to each
Creditor sending any such notices and other information to the other.

 

2.15                           Access to Books and Records. 
In the event that any of Creditors shall, in the exercise of its
respective rights under its Agreements or otherwise, receive possession or
control of any books and records of Debtors or any of Obligors which contain
information identifying or pertaining to any of the property of Debtors or any
of Obligors in which the other Creditors have been granted a Lien, it shall
notify the other Creditors that it has received such books and records and
shall, as promptly as practicable thereafter, make available to the other
Creditors such books and records for inspection and duplication.

 

3.                                       REPRESENTATIONS
AND WARRANTIES

 

3.1                                 Additional Revolving Loan Agent
Representations.  Revolving Loan Agent hereby represents and
warrants to the Noteholder Collateral Agent, each Noteholder, the Third
Priority Collateral Agent and each Third Priority Noteholder that:

 

(a)                                  the execution, delivery and
performance of this Intercreditor Agreement by the Revolving Loan Agent, on
behalf of each Revolving Loan Lender is within the powers of such Revolving
Loan Agent under the Revolving Loan Agreements, and has been duly authorized by
such Revolving Loan Agent on behalf of the Revolving Loan Lender;

 

(b)                                 the Revolving Loan Agent has been duly
directed to execute, deliver and perform this Intercreditor Agreement, on
behalf of the Revolving Loan Lender pursuant to the terms of the Revolving Loan
Agreements, and this Intercreditor Agreement constitutes the legal, valid and
binding obligations of Revolving Loan Agent, enforceable against the Revolving
Loan Agent, in its capacity as agent under the Revolving Loan Agreements, and
Revolving Loan Lenders in accordance with its terms and shall be binding on
each of them;

 

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

 

(d)                                 the Revolving Loan Debt is not
subject to any lien, security interest, financing statements, subordination,
assignment or other claim.

 

3.2                                 Additional Noteholder
Representations.  Noteholder Collateral Agent hereby represents
and warrants to the Revolving Loan Agent, each Revolving Loan Lender, the Third
Priority Collateral Agent and each Third Priority Noteholder that:

 

15

 

(a)                                  the execution, delivery and
performance of this Agreement by the Noteholder Collateral Agent, on behalf of
each Noteholder is within the powers of the Noteholder Collateral Agent under
the Indenture, and has been duly authorized by such Noteholder Collateral Agent
on behalf of the Noteholders.

 

(b)                                 the requisite majority of
Noteholders have consented to the Noteholder Collateral Agent’s execution,
deliverance and performance of this Intercreditor Agreement, on behalf of the
Noteholders pursuant to the terms of the Indenture and the other Noteholder
Agreements and this Agreement constitutes the legal, valid and binding
obligations of each Noteholder, enforceable against the Noteholder Collateral
Agent, in its capacity as collateral agent under the Noteholder Agreements, and
each Noteholder in accordance with its terms and shall be binding on each of
them;

 

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

 

(d)                                 the Noteholder Debt is not subject
to any lien, security interest, financing statements, subordination, assignment
or other claim.

 

3.3                                 Additional Third Priority Noteholder
Representations.  Third Priority Collateral Agent hereby
represents and warrants to the Revolving Loan Agent and each Revolving Loan
Lender and to the Noteholder Collateral Agent and each Noteholder that:

 

(a)                                  the execution, delivery and
performance of this Agreement by the Third Priority Collateral Agent, on behalf
of each Third Priority Noteholder is within the powers of the Third Priority
Collateral Agent under the Third Priority Note Purchase Agreement, and has been
duly authorized by such Third Priority Collateral Agent on behalf of the Third
Priority Noteholders.

 

(b)                                 the Third Priority Collateral Agent
has been duly directed to execute, deliver and perform this Intercreditor
Agreement, on behalf of the Third Priority Noteholders pursuant to the terms of
the Third Priority Agreements and this Agreement constitutes the legal, valid
and binding obligations of each Third Priority Noteholder, enforceable against
the Third Priority Collateral Agent, in its capacity as collateral agent under
the Third Priority Agreements, and each Third Priority Noteholder in accordance
with its terms and shall be binding on each of them;

 

(c)                                  as of the date hereof, no default or
event of default, or event which with notice or passage of time or both would
constitute an event of default exists or has occurred under the Third Priority
Agreements; and

 

(d)                                 the Third Priority Debt is not
subject to any lien, security interest, financing statements, subordination,
assignment or other claim.

 

16

 

4.                                       MISCELLANEOUS

 

4.1                                 Amendments. 
Any waiver, permit, consent or approval by any of Creditors of or under
any provision, condition or covenant to this Intercreditor Agreement must be in
writing and shall be effective only to the extent it is set forth in writing
and as to the specific facts or circumstances covered thereby.  Any amendment of this Intercreditor Agreement
must be in writing and signed by each of the parties to be bound thereby.

 

4.2                                 Successors and Assigns.

 

(a)                                  This Intercreditor Agreement shall
be binding upon each Creditor and its successors and assigns and shall inure to
the benefit of each Creditor and its successors, participants and assigns.

 

(b)                                 Each Creditor reserves the right to
grant participations in, or otherwise sell, assign, transfer or negotiate all
or any part of, or any interest in, the Revolving Loan Debt,  the Noteholder Debt and the Third Priority
Debt; provided, that, no Creditor shall be obligated to give any
notices to or otherwise in any manner deal directly with any participant in the
Revolving Loan Debt, the Noteholder Debt or the Third Priority Debt, as the
case may be, and no participant shall be entitled to any rights or benefits
under this Intercreditor Agreement except through the Creditor with which it is
a participant.  In connection with any
participation or other transfer or assignment, a Creditor (i) may, subject to
its Agreements, disclose to such assignee, participant or other transferee or
assignee all documents and information which such Creditor now or hereafter may
have relating to Debtor, any of Obligors or the Collateral and (ii) shall
disclose to such participant or other transferee or assignee the existence and
terms and conditions of this Intercreditor Agreement.  In the case of an assignment or transfer, the
assignee or transferee acquiring any interest in the Revolving Loan Debt, the
Noteholder Debt or the Third Priority Debt, as the case may be, shall execute
and deliver to each of Creditors a written acknowledgement of receipt of a copy
of this Intercreditor Agreement and the written agreement by such person to be
bound by the terms of this Intercreditor Agreement.

 

(c)                                  In connection with any assignment or
transfer of any or all of the Revolving Loan Debt, the Noteholder Debt or the
Third Priority Debt, or any or all rights of any Creditor in the property of
Debtors or any of Obligors (other than pursuant to a participation), each
Creditor agrees to execute and deliver an agreement containing terms
substantially identical to those contained herein in favor of any such assignee
or transferee and, in addition, will execute and deliver an agreement
containing terms substantially identical to those contained herein in favor of
any third person who succeeds to or refinances, replaces or substitutes for any
or all of financing of Debtor and of any of Obligors, whether such successor or
replacement financing occurs by transfer, assignment, “takeout” or any other
means or vehicle.

 

4.3                                 Insolvency. 
This Intercreditor Agreement shall be applicable both before and after
the filing of any petition by or against any Debtor or any of Obligors under
the U.S. Bankruptcy Code and all converted or succeeding cases in respect thereof,
and all references herein to Debtor or any of Obligors shall be deemed to apply
to a trustee for Debtor or any of Obligors and Debtor or any of Obligors as
debtor-in-possession.  The relative
rights of Creditors to repayment of the Revolving Loan Debt, the Noteholder
Debt or the Third Priority Debt,

 

17

 

respectively, and in or to any distributions
from or in respect of Debtor or any of Obligors or any Collateral or proceeds
of Collateral, shall continue after the filing thereof on the same basis as
prior to the date of the petition, subject to any court order approving the
financing of, or use of cash collateral by, Debtor or any of Obligors as
debtor-in-possession.

 

4.4                                 Bankruptcy Financing. 
If any Debtor shall become subject to a proceeding under the U.S.
Bankruptcy Code and if Revolving Loan Agent desires to permit the use of cash
collateral or to provide financing to Debtors under either Section 363 or Section 364
of the U.S. Bankruptcy Code, Noteholder Collateral Agent, Noteholders and Third
Priority Collateral Agent and Third Priority Noteholders agree as follows:  (a) adequate notice shall have been provided
for such financing or use of cash collateral if Noteholder Collateral Agent and
the Third Priority Collateral Agent receive notice three (3) business days
prior to the entry of the order approving such financing or use of cash
collateral and (b) no objection will be raised by Noteholder Collateral Agent
or the Third Priority Collateral Agent to any such financing on the ground of a
failure to provide “adequate protection” for the Liens of Noteholder Collateral
Agent and the Liens of the Third Priority Collateral Agent or any other
grounds, provided, that, (i) each of Noteholder Collateral
Agent and Third Priority retain a Lien on the Collateral (including proceeds
thereof arising after the commencement of such proceeding) and obtain a
replacement Lien on post-petition Collateral to the same extent and with the
same priority as existed prior to the commencement of the proceeding under the
U.S. Bankruptcy Code, and (ii) the maximum amount outstanding under such
post-petition financing, together with the aggregate principal amount of the
pre-petition Revolving Loan Debt, shall not exceed the Revolving Loan Priority
Amount.  For purposes of this Section,
notice of a proposed financing or use of cash collateral shall be deemed given
when given, in the manner prescribed by Section 4.6 hereof, to Noteholder
Collateral Agent and Third Priority Collateral Agent.

 

4.5                                 Bailee for Perfection. 
Each Creditor hereby appoints each other Creditor, and each hereby
agrees to serve, as agent and bailee for the other Creditors for the limited
purpose of perfecting their respective Liens on the Collateral which may at any
time be in its possession or under its control during the term of this
Intercreditor Agreement.  The Creditor
having the most senior Lien thereon shall not have any duty to protect or
preserve any rights pertaining to any of the Collateral in its possession and
each of the other Creditors hereby waives and releases the Creditor holding the
most senior Lien from all claims and liabilities at any time arising pursuant
to the role of such senior Creditor as agent and bailee with respect to the
Collateral in its actual possession (or control) other than gross negligence or
willful misconduct.  The Creditor with
the most senior Lien on any Collateral shall, after all obligations of Debtor
to it have been fully and finally paid and performed, deliver the remainder of
Collateral, if any, and the books and records relating to such Collateral in
its possession (or under its control) to the Creditor with the next most senior
Lien as set forth herein, except in the event and to the extent that (a) such
senior Creditor has retained or otherwise acquired such Collateral in full or
partial satisfaction of the Obligations owing to such senior Creditor, (b) such
Collateral is sold or otherwise disposed of by such Creditor or by Debtor as
provided herein or (c) except as may otherwise be required by applicable law or
any court order.

 

4.6                                 Notices. 
All notices, requests and demands to or upon the respective parties
hereto shall be in writing and shall be deemed duly given, made or
received:  if delivered in person, immediately
upon delivery; if by telex, telegram or facsimile transmission, immediately

 

18

 

upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with
instructions to deliver the next business day, one (1) business day after
sending; and if mailed by certified mail, return receipt requested, five (5)
days after mailing to the parties at their addresses set forth below (or to
such other addresses as the parties may designate in accordance with the
provisions of this Section):

 

	
  To Revolving
  Loan Agents:

  	
   

  	
  Congress Financial Corporation

  
	
   

  	
   

  	
  1133 Avenue of the Americas

  
	
   

  	
   

  	
  New York, New York 10036

  
	
   

  	
   

  	
  Attention: Mr. Robert Strack

  
	
   

  	
   

  	
  Fax: (212) 840-6259

  
	
   

  	
   

  	
   

  
	
  To
  Noteholder Collateral Agent:

  	
   

  	
  The Bank of New York

  
	
   

  	
   

  	
  Corporate Trust Department

  
	
   

  	
   

  	
  101 Barclay Street, Floor 8W

  
	
   

  	
   

  	
  New York, New York 10286

  
	
   

  	
   

  	
  Attention: Fax: 212-815-5707

  
	
   

  	
   

  	
   

  
	
  To Third
  Priority Collateral Agent:

  	
   

  	
  Airlie Opportunity Capital Management, L.P.

  
	
   

  	
   

  	
  115 East Putnam Avenue

  
	
   

  	
   

  	
  Greenwich, CT 06830

  

 

Any of the
above Creditors may change the address(es) to which all notices, requests and
other communications are to be sent by giving written notice of such address
change to the other Creditor in conformity with this Section 4.6, but such
change shall not be effective until notice of such change has been received by
the other Creditors.

 

4.7                                 Counterparts; Effective Date. 
This Intercreditor Agreement may be executed in any number of
counterparts, each of which shall be an original with the same force and effect
as if the signatures thereto and hereto were upon the same instrument.  Delivery of an executed counterpart of a
signature page to this Intercreditor Agreement by facsimile shall be effective
as delivery of a manually executed counterpart of this Intercreditor
Agreement.  This Agreement shall become
effective (the “Effective Date”) when (i) the Loan Agreement has been duly
executed and delivered by each party thereto and is effective by its terms,
(ii) the Indenture has been duly executed and delivered by each party thereto
and is effective by its terms, and (iii) counterparts of this Intercreditor
Agreement has been duly executed and delivered on behalf of each party hereto

 

4.8                                 Governing Law. 
The validity, interpretation and enforcement of this Intercreditor
Agreement and any dispute arising out of the relationship between the parties
hereto whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of New York but excluding any principles of
conflicts of law or other rule of law that would cause the application of the
law of any jurisdiction other than the laws of the State of New York.

 

19

 

4.9                                 Consent to Jurisdiction; Waiver of
Jury Trial.  Each of the parties hereto hereby irrevocably
consents to the non-exclusive jurisdiction of Supreme Court of New York, New
York County and the United States District Court for the Southern District of
New York, New York County and waives trial by jury in any action or proceeding
with respect to this Intercreditor Agreement. 
The Bank of New York executes this Agreement solely in its capacity as
Noteholder Collateral Agent, and as such there is no recourse against The Bank
of New York, individually

 

4.10                           Complete Agreement. 
This written Intercreditor Agreement is intended by the parties as a
final expression of their agreement and is intended as a complete statement of
the terms and conditions of their agreement.

 

4.11                           No Third Parties Benefitted. 
Except as expressly provided in Section 4.2, this Intercreditor
Agreement is solely for the benefit of the Creditors and their respective
successors, participants and assigns, and no other person shall have any right,
benefit, priority or interest under, or because of the existence of, this
Intercreditor Agreement.

 

4.12                           Disclosures; Non-Reliance. 
Each Creditor has the means to, and shall in the future remain, fully
informed as to the financial condition and other affairs of Debtors and no
Creditor shall have any obligation or duty to disclose any such information to
any other Creditor.  Except as expressly
set forth in this Intercreditor Agreement, the parties hereto have not
otherwise made to each other nor do they hereby make to each other any warranties,
express or implied, nor do they assume any liability to each other with respect
to:  (a) the enforceability, validity,
value or collectability of any of the Revolving Loan Debt, the Noteholder Debt
the Third Priority Debt or any guarantee or security which may have been
granted to any of them in connection therewith, (b) any Debtor’s or
Obligors’ title to or right to transfer any of the Collateral, or (c) any other
matter except as expressly set forth in this Intercreditor Agreement.

 

4.13                           Term. 
This Intercreditor Agreement is a continuing agreement and shall remain
in full force and effect until the indefeasible satisfaction in full of all of
the Revolving Loan Debt and the Noteholder Debt.

 

4.14                           Amendment and Restated of April 2004
Intercreditor Agreement.  The parties
hereto agree that this is an amendment and restatement of, and supersedes, the
Existing Intercreditor Agreement; provided, however, that if in contravention
of the intention of parties hereto, this agreement is rendered invalid or unenforceable
as a matter of law, the parties agree that the Existing Intercreditor Agreement
shall automatically be re-instated and shall be binding and enforceable on the
parties thereto.

 

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

20

 

IN WITNESS WHEREOF, the parties have caused
this Intercreditor Agreement to be duly executed as of the day and year first
above-written.

 

	
   

  	
  WACHOVIA
  BANK, NATIONAL

  ASSOCIATION (as successor by merger to

  CONGRESS
  FINANCIAL CORPORATION),

  as Revolving Loan Agent

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Herbert
  Korn

  	
   

  
	
   

  	
  Name: Herbert
  C. Korn

  
	
   

  	
  Title:   Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE BANK OF
  NEW YORK,

  solely in its capacity as Noteholder Collateral

  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Julie
  Salovitch-Miller

  	
   

  
	
   

  	
  Name: Julie
  Salovitch-Miller

  
	
   

  	
  Title:   Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AIRLIE
  OPPORTUNITY CAPITAL

  MANAGEMENT, L.P.

  solely in its capacity as Third Priority Collateral

  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Adam
  Goodfriend

  	
   

  
	
   

  	
  Name: Adam
  Goodfriend

  
	
   

  	
  Title:   Managing
  Director

  
	
   

  	
   

  	
   

  	
   

  
					

 

 

The undersigned hereby acknowledges and
agrees to the foregoing terms and provisions. 
By its signature below, the undersigned agrees that it will, together
with its successors and assigns, be bound by the provisions hereof.

 

The undersigned agrees that any of Creditors
holding Collateral does so as bailee (under the UCC) for each other of
Creditors which has a Lien on such Collateral and is hereby authorized to and
may turn over to such other Creditor upon request therefor any such Collateral,
after all obligations and indebtedness of the undersigned to the bailee
Creditor have been fully paid and performed.

 

The undersigned acknowledges and agrees
that:  (i) although it may sign this
Intercreditor Agreement it’s not a party hereto and does not and will not
receive any right, benefit, priority or interest under or because of the
existence of the foregoing Intercreditor Agreement, and (ii) it will execute
and deliver such additional documents and take such additional action as may be
necessary or desirable in the reasonable opinion of any of Creditors to
effectuate the provisions and purposes of the foregoing Intercreditor
Agreement.

 

	
   

  	
  BORROWERS

  
	
   

  	
   

  
	
   

  	
  Atlantic
  Express Transportation Corp.

  
	
   

  	
  Amboy Bus
  Co., Inc.

  
	
   

  	
  Atlantic
  Express Coachways, Inc.

  
	
   

  	
  Atlantic
  Express of L.A. Inc.

  
	
   

  	
  Atlantic
  Express of Missouri Inc.

  
	
   

  	
  Atlantic
  Express of New Jersey, Inc.

  
	
   

  	
  Atlantic
  Express of Pennsylvania, Inc.

  
	
   

  	
  Atlantic-Hudson,
  Inc.

  
	
   

  	
  Atlantic
  Paratrans, Inc.

  
	
   

  	
  Atlantic
  Paratrans of NYC, Inc.

  
	
   

  	
  Atlantic
  Queens Bus Corp.

  
	
   

  	
  Block 7932,
  Inc.

  
	
   

  	
  Brookfield
  Transit Inc.

  
	
   

  	
  Courtesy Bus
  Co., Inc.

  
	
   

  	
  Jersey
  Business Land Co., Inc.

  
	
   

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

  
	
   

  	
  180 Jamaica
  Corp.

  
	
   

  	
  Merit
  Transportation Corp.

  
	
   

  	
  Metro
  Affiliates, Inc.

  
	
   

  	
  Metropolitan
  Escort Service, Inc.

  
	
   

  	
  Midway
  Leasing Inc.

  
	
   

  	
  Staten
  Island Bus, Inc.

  
	
   

  	
  Temporary
  Transit Service, Inc.

  
	
   

  	
  201 West
  Sotello Realty, Inc.

  
	
   

  	
  Wrightholm
  Bus Line, Inc.

  

 

[SIGNATURES CONTINUED ON
FOLLOWING PAGE]

 

 

[SIGNATURES -CONTINUED FROM
PREVIOUS PAGE]

 

	
   

  	
  Atlantic
  Transit Corp.

  	 

	
   

  	
  Airport
  Services, Inc.

  	 

	
   

  	
  Atlantic
  Express New England, Inc.

  	 

	
   

  	
  Atlantic
  Express of California, Inc.

  	 

	
   

  	
  Atlantic
  Express of Illinois, Inc.

  	 

	
   

  	
  Atlantic
  Paratrans of Arizona, Inc.

  	 

	
   

  	
  Fiore Bus
  Service, Inc.

  	 

	
   

  	
  Groom
  Transportation, Inc.

  	 

	
   

  	
  James
  McCarty Limo Service, Inc.

  	 

	
   

  	
  K. Corr,
  Inc.

  	 

	
   

  	
  McIntire
  Transportation, Inc.

  	 

	
   

  	
  Mountain
  Transit, Inc.

  	 

	
   

  	
  R. Fiore Bus
  Service, Inc.

  	 

	
   

  	
  Raybern Bus
  Service, Inc.

  	 

	
   

  	
  Raybem
  Capital Corp.

  	 

	
   

  	
  Raybern
  Equity Corp.

  	 

	
   

  	
  Robert L.
  McCarthy & Son, Inc.

  	 

	
   

  	
  T-NT Bus
  Service, Inc.

  	 

	
   

  	
  Transcomm,
  Inc.

  	 

	
   

  	
  Winsale,
  Inc.

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By 

  	
  /s/ Neil J. Abitabilo

  	
   

  
	
   

  	
  Name: Neil J. Abitabilo

  	 

	
   

  	
  Title:   Chief Financial
  OfficerExhibit
4.7

 

SECURITY
AGREEMENT

 

This SECURITY AGREEMENT, dated as of March 3,
2005 (as amended, supplemented, amended and restated or otherwise modified from
time to time, this “Agreement”), is made by ATLANTIC EXPRESS
TRANSPORTATION CORP., a New York corporation (the “Issuer”), and each
Subsidiary (such capitalized term and other terms used in this Agreement to
have the meanings set forth in Section 1) of the Issuer from time
to time party to this Agreement (the “Subsidiary Guarantors” and,
together with the Issuer, the “Debtors”), in favor of AIRLIE OPPORTUNITY
CAPITAL MANAGEMENT, L.P., a Delaware limited partnership, in its capacity as
collateral agent (together with any successors thereto in such capacity, the “Collateral
Agent”) for the benefit of the Noteholders (the Collateral Agent, and the
Noteholders are hereinafter referred to as the “Secured Parties”).

 

R E C I T A L S

 

WHEREAS, the Issuer has entered into a Note
and Warrant Purchase Agreement, dated as of the date hereof (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
“Purchase Agreement”) with the Airlie Opportunity Capital Management,
L.P., a Delaware limited partnership (the “Initial Purchaser”), pursuant to
which the Issuer is issuing, as of the date hereof, 10% Senior Secured Notes
due 2008 in the original aggregate principal amount of $15,000,000
(collectively with any additional notes issued from time to time thereunder and
under the Purchase Agreement, the “Notes”) and 40,725 Common Stock
Purchase Warrants, to the Initial Purchaser;

 

WHEREAS, pursuant to the Purchase Agreement,
each Debtor is required to execute and deliver this Agreement;

 

WHEREAS, each Debtor (other than the Issuer)
is a Subsidiary of the Issuer, and each Debtor will derive substantial direct
and indirect benefit from the proceeds of the issuance of the Notes;

 

WHEREAS, the Debtors have entered into a
Second Amended and Restated Loan and Security Agreement, dated as of April 22,
2004 (as amended, supplemented, amended and restated or otherwise modified from
time to time, the “Loan Agreement”), with certain lenders and the
Revolving Loan Agent, pursuant to which the Debtors have incurred indebtedness,
which indebtedness is secured by certain of the Collateral;

 

WHEREAS, the Issuer has entered into an
Indenture, dated as of April 22, 2004 (as amended, supplemented, amended
and restated or otherwise modified from time to time, the “Indenture”)
with The Bank of New York, a New York banking corporation, as Trustee (in such
capacity, the “Trustee”), pursuant to which the Issuer has issued
105,000 Units consisting of 12% Senior Secured Notes due 2008 in the original
aggregate principal amount of $105,000,000 and 105,000 Common Stock Purchase
Warrants and 10,000 Units, consisting of Senior Secured Floating Rate Notes due
2008 in the original aggregate principal amount of $10,000,000 and 10,000
Common Stock Purchase Warrants (collectively with any exchange notes issued in
exchange thereof as contemplated by the Registration Rights Agreement, dated as
of April 22, 2004,

 

1

 

among the Issuer and the initial purchasers thereof and any additional
notes issued from time to time under such Indenture, the “Senior Notes”);

 

WHEREAS, the Debtors have entered into a
Security Agreement dated April 22, 2004 (the “Senior Debt Security
Agreement”) with The Bank of New York, a New York banking corporation, in
its capacity as collateral agent (the “Senior Debt Collateral Agent”)
for the benefit of the Trustee and the holders of the Senior Notes (the “Senior
Noteholders”), pursuant to which the payment of the Senior Notes is also
secured by certain of the Collateral;

 

WHEREAS, in connection with the execution of
the Indenture and the Loan Agreement, the Revolving Loan Agent and the Senior
Debt Collateral Agent entered into an Intercreditor Agreement dated April 22,
2004 (the “Original Intercreditor Agreement”);

 

WHEREAS, in connection with the issuance of
the Notes, the Revolving Loan Agent, the Senior Debt Collateral Agent and the
Collateral Agent will enter into an amendment or restatement of the Original
Intercreditor Agreement, dated the date hereof (as so amended, supplemented,
amended and restated or otherwise modified from time to time, the “Intercreditor
Agreement”); and

 

WHEREAS, pursuant to the terms of the
Purchase Agreement and subject to the terms of the Intercreditor Agreement, the
Secured Parties have agreed to accept the pledge and assignment and the grant
of a third priority security interest under this Agreement as security for the
Noteholder Debt.

 

NOW, THEREFORE, in consideration of the
mutual conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Initial Purchaser to enter into the
Purchase Agreement and to purchase the Notes, each Debtor agrees with the
Collateral Agent for the benefit of the Secured Parties as follows:

 

SECTION 1.           DEFINITIONS

 

Unless otherwise defined herein, terms used
in this Agreement, including its preamble and recitals, have the meanings
provided in the Intercreditor Agreement or, if not defined in the Intercreditor
Agreement as in effect on the date hereof, then the Purchase Agreement.

 

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

 

1.2           “Agreement”
is defined in the preamble.

 

1.3           “Collateral”
is defined in Section 2.1.

 

1.4           “Collateral
Agent” is defined in the preamble.

 

2

 

1.5           “Collateral
Access Agreement” shall mean a Collateral Access Agreement in form and
substance satisfactory to the Collateral Agent, as amended, supplemented,
amended and restated or otherwise modified from time to time.

 

1.6           “Debtors”
is defined in the preamble.

 

1.7           “Deposit
Account Control Agreement” shall mean a Deposit Account Control Agreement
substantially in form of Exhibit A (with such changes as are acceptable
to the Collateral Agent), as amended, supplemented, amended and restated or
otherwise modified from time to time.

 

1.8           “Discharge
of Noteholder Debt” shall mean the payment in full in cash of (i) the
principal of and interest and premium, if any, on all outstanding Notes and
(ii) any other Noteholder Debt.

 

1.9           “Equipment”
shall mean all of any Debtor’s now owned and hereafter acquired equipment,
wherever located, including machinery, data processing and computer equipment
and computer hardware and software, whether owned or licensed and including
embedded software, tools, furniture, fixtures, all attachments, accessions and
property now or hereafter affixed thereto or used in connection therewith, and
substitutions and replacements thereof wherever located, but excluding Motor
Vehicles.

 

1.10         “Event
of Default” is defined in Section 6.1.

 

1.11         “Excluded
Assets” means each of the following:

 

(a)           any
lease, license, contract, property right or agreement to which any Debtor is a
party or any of its rights or interests thereunder if and only for so long as
the grant of a security interest under this Agreement shall constitute or
result in a breach, termination or default under any such lease, license,
contract, property right or agreement (other than to the extent that any such
term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408
or 9-409 of the UCC of any relevant jurisdiction or any other applicable law or
principles of equity) or shall violate applicable law; provided that such
lease, license, contract, property right or agreement shall be an Excluded
Asset only to the extent and for so long as the consequences specified above
shall result and shall cease to be an Excluded Asset and shall become subject
to the security interest granted under this Agreement, immediately and
automatically, at such time as such consequences shall no longer result;

 

(b)           Motor
Vehicles owned or leased by any Debtor;

 

(c)           the
Capital Stock of any Domestic Subsidiary, foreign Subsidiary or other Affiliate
of any Debtor;

 

(d)           so
long as no event of Default has occurred under the Loan Agreement, Real
Property with a purchase price or (s) as of the date such Real Property is
acquired, a Fair Market Value, of equal to or less than $200,000;

 

3

 

(e)           any
Equipment which is, or at the time of the Issuer’s is or a Subsidiary Guarantor’s
acquisition thereof shall be, subject to a purchase money mortgage or other
purchase money lien or security interest (including Capital Leases) permitted
under the Purchase Agreement, if the valid grant of a security interest or lien
to Collateral Agent in such item of Equipment is prohibited by the terms of the
agreement between the Issuer or such Subsidiary Guarantor and the holder of
such purchase money mortgage or other purchase money lien or security interest
has not been or is not otherwise obtained, or under applicable law such
prohibition has not been or is not waived, or the consent of the holder of the
purchase money mortgage or other purchase money lien or security interest has
not been or is not otherwise obtained or under applicable law such prohibition
cannot be waived;

 

(f)            any
other property or assets not described in clauses (a) through (e) above (other
than any deposit account that is not solely used for payroll, payroll taxes and
other employee wage and benefits purposes) in which a security interest cannot
be perfected by the filing of a financing statement under the UCC of the
relevant jurisdiction, so long as the aggregate Fair Market Value of all
property excluded under this clause (f) does not at any one time exceed $1.0
million plus, in the case of any such property comprised of deposit accounts
that is used solely for payroll, payroll taxes and other employee wage and
benefits purposes, the dollar amount of any payments expected to be disbursed
by the Issuer or the applicable Debtor from such deposit account for payroll,
payroll taxes and other employee wage and benefits purposes within three
business days following deposit therein.

 

1.12         “Information
Certificate” shall mean the Information Certificate of any Debtor
constituting Exhibit B hereto containing material information with
respect to such Debtor, its business and assets provided by or on behalf of
such Debtor to the Collateral Agent in connection with the preparation of this
Agreement and the other Noteholder Agreements and the financing arrangements
provided for herein and therein.

 

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

 

1.14         “Intercreditor
Agreement” is defined in the ninth recital.

 

1.15         “Inventory”
shall mean all of any Debtor’s now owned and hereafter existing or acquired
goods, wherever located, which (a) are leased by any Debtor as lessor; (b) are
held by

 

4

 

any Debtor for sale or lease or to be furnished under a contract of
service; (c) are furnished by any Debtor under a contract of service; or (d)
consist of raw materials, work in process, finished goods or materials used or
consumed in its business.

 

1.16         “Investment
Property Control Agreement” shall mean an Investment Property Control
Agreement in form and substance satisfactory to the Collateral Agent, as amended,
supplemented, amended and restated or otherwise modified from time to time.

 

1.17         “Issuer”
is defined in the preamble.

 

1.18         “Majority
Noteholders” shall mean the Noteholders holding a majority of the principal
amount of the Notes issued and outstanding at any time.

 

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

 

1.20         “Noteholder
Agreements” shall mean, collectively, the Purchase Agreement, this
Agreement, the Notes and all guarantees, security agreements and other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by the Issuer, any Debtor or any other Obligor in connection
with the Purchase Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated, refinanced, replaced or
restructured.

 

1.21         “Noteholder
Debt” shall mean any and all obligations, liabilities and indebtedness of every
kind, nature and description owing by Debtors or any other Obligor to the
Secured Parties under the Noteholder Agreements, including, principal,
interest, charges, fees, premiums, indemnities and expenses, however evidenced,
whether as principal, surety, endorser, a Debtor or otherwise, whether arising
under this Agreement or otherwise, whether now existing or hereafter arising
(including the payment of interest which would accrue and become due but for
the commencement of such case, whether or not a claim for such amounts is
allowed or allowable in whole or in part in such case) whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary liquidated or unliquidated, secured or unsecured, and whether arising
directly or howsoever acquired by a Secured Party.

 

1.22         “Notes”
is defined in the first recital.

 

1.23         “Noteholders”
shall mean the holders of the Notes from time to time.

 

1.24         “Obligors”
shall mean, individually and collectively any person liable on or in respect of
the Noteholder Debt, and its successors and, assigns, including, without
limitation a receiver, trustee or debtor-in-possession on behalf of such person
or on behalf of any such successor or assign.

 

1.25         “Perfection
Agent” shall mean (i) during the effectiveness of the Intercreditor
Agreement and prior to the payment in full of the Priority Debt, (x) solely
with respect to the Revolving Loan Collateral, the Revolving Loan Agent
(including with respect to any Collateral delivered to or held by the
Perfection Agent hereunder or under the Senior Debt Security Agreement, in its
capacity as bailee for the Trustee, the Senior Noteholders and the Secured

 

5

 

Parties under the Intercreditor Agreement) and (y) otherwise, the
Senior Debt Collateral Agent (including with respect to any Collateral
delivered to or held by the Perfection Agent hereunder, in its capacity as
bailee for the Secured Parties under the Intercreditor Agreement) and (ii)
otherwise, the Collateral Agent; provided that if at any time either the
Revolving Loan Agent or the Senior Debt Collateral Agent fails, following a
written request from the Collateral Agent or any Obligor, to take any action
permitted to be taken by it as Perfection Agent, then the Collateral Agent has
the power to be the Perfection Agent.

 

1.26         “Permitted
Prior Liens” shall mean the security interests on the Collateral created by
the Loan Agreement and the Senior Debt Security Agreement.

 

1.27         “Priority
Debt” shall mean all amounts due and owing by Debtors under the Loan
Agreement, the Indenture and the Senior Notes.

 

1.28         “Purchase
Agreement” is defined in the first recital.

 

1.29         “Real
Property” shall mean all now owned and hereafter acquired real property of
a Debtor, including leasehold interests, together with all buildings,
structures, and other improvements located thereon and all licenses, easements
and appurtenances relating thereto, wherever located.

 

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

 

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

 

6

 

1.32         “Revolving
Loan Agent” shall mean, at any time, the Person serving at such time as the
“Administrative Agent” under the Loan Agreement or any other representative of
the lenders then most recently designated by a majority of the lenders under
the Loan Agreement in a written notice delivered to the Senior Debt Collateral
Agent, the Trustee and the Collateral Agent.

 

1.33         “Secured
Parties” is defined in the preamble.

 

1.34         “Subsidiary
Guarantors” is defined in the preamble.

 

1.35         “UCC”
shall means the Uniform Commercial Code as in effect from time to time in the
State of New York; provided that if, with respect to any financing
statement or by reason of any provisions of law, the perfection or the effect
of perfection or non-perfection of the security interests granted to the
Collateral Agent pursuant to the applicable Noteholder Agreement is governed by
the Uniform Commercial Code as in effect in a jurisdiction of the United States
other than New York, UCC means the Uniform Commercial Code as in effect from time
to time in such other jurisdiction for purposes of the provisions of each
Noteholder Agreement and any financing statement relating to such perfection or
effect of perfection or non-perfection.

 

SECTION 2.           GRANT
OF SECURITY INTEREST

 

2.1           Grant
of Security Interest. To secure payment and performance of all Noteholder
Debt, each Debtor hereby grants to the Collateral Agent on behalf of the
Secured Parties a continuing security interest in and, a lien upon, and hereby
assigns to the Collateral Agent on behalf of the Secured Parties as security,
all personal and real property and fixtures and interests in property and
fixtures of such Debtor (other than Excluded Assets and accounts receivable
owed to Atlantic Conn Transit, Inc. by Ridgefield Board of Education), whether
now owned or hereafter acquired or existing, and wherever located (together
with all other collateral security for the Noteholder Debt at any time granted
to or held or acquired by the Collateral Agent on behalf of the Secured
Parties, collectively, the “Collateral”), including:

 

(a)           all
Accounts;

 

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

 

(c)           all
goods, including, without limitation, Inventory and Equipment (other than Motor
Vehicles);

 

(d)           all
Real Property and fixtures;

 

(e)           all
chattel paper (including all tangible and electronic chattel paper);

 

(f)            all
instruments (including all promissory notes);

 

(g)           all
documents;

 

7

 

(h)           all
deposit accounts;

 

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

 

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

 

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

 

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

 

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

 

(n)           all
Records; and

 

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

 

Notwithstanding anything in this Section 2.1
to the contrary, in no event shall the security interest granted under this Section 2.1
attach to any Excluded Asset for so long as such asset remains an Excluded
Asset.

 

2.2           Perfection
of Security Interests.

 

(a)           Each
Debtor irrevocably and unconditionally authorizes Collateral Agent (or its
agent) to file at any time and from time to time such financing statements with
respect to the Collateral naming Collateral Agent or its designee as the
secured party and such Debtor as debtor, as Collateral Agent may require, and
including any other information with respect to such Debtor or otherwise
required by part 5 of Article 9 of the Uniform Commercial Code of such
jurisdiction as Collateral Agent may determine, together with any amendment and
continuations, with respect thereto, which

 

8

 

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

 

(b)           No
Debtor has any chattel paper (whether tangible or electronic) or instruments as
of the date hereof, except as set forth in the Information Certificate or as
constitutes an Excluded Asset. In the event that any Debtor shall be entitled
to or shall receive any chattel paper or instrument which does not constitute
an Excluded Asset after the date hereof, such Debtor shall promptly notify
Collateral Agent thereof in writing. Promptly upon the receipt of such chattel
paper or instrument (and so long as such chattel paper or instrument is not an
Excluded Asset) by or on behalf of any Debtor (including by any agent or
representative), such Debtor shall deliver, or cause to be delivered to
Perfection Agent, all such tangible chattel paper and instruments, accompanied
by such instruments of transfer or assignment duly executes in blank as
Perfection Agent may from time to time specify. At Perfection Agent’s option,
Debtor shall, or Perfection Agent may at any time on behalf of Debtor, cause
the original of any such instrument or chattel paper to be conspicuously marked
in a form and manner acceptable to Perfection Agent.

 

(c)           In
the event that any Debtor shall at any time hold, or acquire an interest in any
electronic chattel paper or any “transferable record” (as such term is defined
in Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or in Section 16 of the Uniform Electronic Transactions Act
as in effect in any relevant jurisdiction) which does not constitute an
Excluded Asset, such Debtor shall promptly notify Collateral Agent thereof in
writing. Promptly upon receipt thereof, Debtor shall take, or cause to be
taken, such necessary actions to give Perfection Agent control of such
electronic chattel paper (so long as such electronic chattel paper is not an
Excluded Asset) under Section 9-105 of the UCC and control of such
transferable record under Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act

 

9

 

or, as the case may be, Section 16 of
the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

 

(d)           No
Debtor has any deposit accounts as of the date hereof, except as set forth in
the Information Certificate. Promptly after the Date hereof each Debtor shall deliver
to the Perfection Agent fully executed Deposit Account Control Agreements for
all deposit accounts that constitute Collateral, together with opinions of
counsel in form and substance reasonably satisfactory to the Collateral Agent.
No Debtor shall, directly or indirectly, after the date hereof open, establish
or maintain any deposit account which does not constitute an Excluded Asset
unless each of the following conditions is satisfied: (i) Collateral Agent
shall have received not less than five (5) Business Days’ prior written notice
of the intention of such Debtor to open or establish such account which notice
shall specify in reasonable detail and specificity reasonably acceptable to
Collateral Agent the name of the account, the owner of the account, the name
and address of the bank at which such account is to be opened or established,
the individual at such bank with whom such Debtor is dealing and the purpose of
the account, (ii) the bank where such account is opened or maintained shall be
reasonably acceptable to Perfection Agent, and (iii) Debtor shall promptly
deliver to the Perfection Agent a Deposit Account Control Agreement with
respect to such deposit account duly authorized, executed and delivered by such
Debtor and the bank at which such deposit account is opened and maintained.

 

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

 

(i)            In
the event that any Debtor shall be entitled to or shall at any time after the
date hereof hold or acquire any certificated securities (other than
certificated securities that are Excluded Assets), such Debtor shall promptly
endorse, assign and deliver the same to Perfection Agent, accompanied by such
instruments of transfer or assignment duly executed in blank as Perfection
Agent may from time to time specify. If any securities (other than certificated
securities that are Excluded Assets), now or hereafter acquired by any Debtor
are uncertificated and are issued to such Debtor or its nominee directly by the
issuer thereof, such Debtor shall immediately notify Collateral Agent thereof
and shall promptly cause the issuer to agree to comply with instructions from
Perfection Agent as to such securities, without further consent of Debtor or
such nominee.

 

(ii)           No
Debtor shall, directly or indirectly, after the date hereof open, establish or
maintain any investment account, securities account, commodity account or any
other similar account (other than a deposit account or an investment account,
securities account, commodity account or similar account which is an Excluded
Asset) with any securities intermediary or commodity intermediary unless each
of the following conditions is satisfied: (A) Collateral Agent shall have
received not less than five (5) Business Days’ prior written notice of the
intention of such Debtor to open or establish such account, which

 

10

 

notice shall specify in reasonable detail and
specificity reasonably acceptable to Collateral Agent the name of the account,
the owner of the account, the name and address of the securities intermediary
or commodity intermediary at which such account is to be opened or established,
the individual at such intermediary with whom such Debtor is dealing and the
purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be reasonably acceptable to Perfection Agent and (C) on or before the
opening of such investment account, securities account or other similar account
with a securities intermediary or commodity intermediary, such Debtor shall
execute and deliver, and cause to be executed and delivered to the Perfection
Agent, an Investment Property Control Agreement with respect thereto duly
authorized, executed and delivered by such Debtor and such securities
intermediary or commodity intermediary.

 

(f)            No
Debtor is the beneficiary or otherwise entitled to any right to payment under
any letter of credit, banker’s acceptance or similar instrument as of the date
hereof, except as set forth in the Information Certificate. In the event that
any Debtor shall be entitled to or shall receive any right to payment under any
letter of credit, banker’s acceptance or any similar instrument which does not
constitute an Excluded Asset, whether as beneficiary thereof or otherwise after
the date hereof, such Debtor shall promptly use reasonable efforts to notify
Collateral Agent thereof in writing. Such Debtor shall promptly deliver, or
cause to be delivered to Perfection Agent, with respect to any such letter of
credit, banker’s acceptance or similar instrument (unless any such instrument
is an Excluded Asset), the written agreement of the issuer and any other
nominated person obligated to make any payment in respect thereof (including
any confirming or negotiating bank), in form and substance reasonably
satisfactory to Perfection Agent, consenting to the assignment of the proceeds
of the letter of credit to Perfection Agent by such Debtor and agreeing to make
all payments thereon directly to Perfection Agent or as Perfection Agent may
otherwise direct.

 

(g)           No
Debtor has any commercial tort claims as of the date hereof, except as set forth
in the Information Certificate. In the event that any Debtor shall at any time
after the date hereof have any commercial tort claims, such Debtor shall
promptly notify Collateral Agent thereof in writing, which notice shall (i) set
forth in reasonable detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by such Debtor to Collateral Agent of
a security interest in such commercial tort claim (and the proceeds thereof).
In the event that such notice does not include such grant of a security
interest, the sending thereof by such Debtor to Collateral Agent shall be
deemed to constitute such grant to Collateral Agent. Upon the sending of such
notice, any commercial tort claim described therein shall constitute part of
the Collateral and shall be deemed included therein. Without limiting the
authorization of Collateral Agent provided in Section 2.2(a) hereof
or otherwise arising by the execution by each Debtor of this Agreement or any
of the other Noteholder Agreements, Collateral Agent is hereby irrevocably
authorized from time to time and at any time to file such financing statements
naming Collateral Agent or its designee as secured party and the applicable
Debtor as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, such Debtor shall
promptly upon Collateral Agent’s

 

11

 

request, execute and deliver, or cause to be
executed and delivered, to Collateral Agent such other agreements, documents
and instruments as Collateral Agent may require in connection with such
commercial tort claim.

 

(h)           No
Debtor has any goods, documents of title or other Collateral which do not
constitute Excluded Assets in the custody, control or possession of a
third-party as of the date hereof, except (i) as set forth in the Information
Certificate, (ii) for any Collateral in the possession or under the control of
the Perfection Agent or the Collateral Agent and (iii) except for goods located
in the United States in transit to a location of such Debtor permitted herein
in the ordinary course of business of such Debtor in the possession of the
carrier transporting such goods. In the event that any goods, documents of
title or other Collateral are at any time after the date hereof in the custody,
control or possession of any other, person not referred to in the Information
Certificate or such carriers, such Debtor shall promptly notify Collateral
Agent thereof in writing. Promptly upon Perfection Agent’s request, such Debtor
shall exercise commercially reasonable efforts to deliver to Perfection Agent a
Collateral Access Agreement duly authorized, executed and delivered by such
person and such Debtor.

 

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

 

2.3           Debtors
Remains Liable. Anything herein to the contrary notwithstanding

 

(a)           each
Debtor will remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein, to the same extent as if this
Agreement had not been executed;

 

(b)           the
exercise by the Collateral Agent of any of its rights hereunder will not
release any Debtor from any of its duties or obligations, under any such
contracts or agreements included in the Collateral; and

 

12

 

(c)           no
Secured Party will have any obligation or liability under any contracts or
agreements included in the Collateral by reason of this Agreement, nor will any
Secured Party be obligated to perform any of the obligations or duties of any
Debtor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.

 

2.4           Postponement
of Subrogation. etc. Each Debtor hereby agrees that it will not exercise
any rights against any other Debtor which it may acquire by reason of any
payment made hereunder, whether by way of subrogation, reimbursement or
otherwise, until the Discharge of Noteholder Debt. Any amount paid to any
Debtor on account of any payment made hereunder prior to the Discharge of
Noteholder Debt shall be held in trust for the benefit of the Perfection Agent
and shall immediately be paid to the Perfection Agent applied in accordance
with the terms of the Intercreditor Agreement; provided, however,
that if such Debtor has made payment to the Collateral Agent of all or any part
of the Noteholder Debt and the Discharge of Noteholder Debt has occurred, then
at such Debtor’s request, the Collateral Agent will, at the expense of such
Debtor, execute and deliver to such Debtor appropriate documents (without
recourse and without representation or warranty) necessary to evidence the
transfer by subrogation to such Debtor of an interest in such Noteholder Debt
resulting from such payment. In furtherance of the foregoing, at all times
prior to the Discharge of Noteholder Debt, each Debtor shall refrain from taking
any action or commencing any proceeding against the Issuer or any other Debtors
(or its successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amounts in respect of payments made
under this Agreement to any Secured Party.

 

SECTION 3.           COLLATERAL
COVENANTS

 

3.1           Accounts
Covenants. Collateral Agent shall have the right at any time or times, in
Collateral Agent’s name or in the name of a nominee of Collateral Agent, to
verify the validity, amount or any other matter relating to any Account or
other Collateral, by mail, telephone, facsimile transmission or otherwise;
provided when no Event of Default has occurred and is continuing, Collateral
Agent shall give the Issuer at least one Business Day’s telephonic notice of
any such verification.

 

3.2           Inventory
Covenants. With respect to the Inventory (other than Inventory that is an
Excluded Asset): (a) each Debtor shall at all times maintain inventory records
reasonably satisfactory to Collateral Agent, keeping correct and accurate
records itemizing and describing the kind, type, quality and quantity of such
Inventory, such Debtor’s cost therefor and daily withdrawals therefrom and
additions thereto; (b) each Debtor shall conduct a physical count of such
Inventory at any time or times as Collateral Agent may reasonably request (but
not more than once per year) on or after an Event of Default, and promptly
following such physical inventory shall supply Collateral Agent with a report
in the form and with such specificity as may be reasonably satisfactory to
Collateral Agent concerning such physical count; (c) no Debtor shall remove any
such Inventory from the locations set forth or permitted herein, without the
prior written consent of Perfection Agent, except for sales and movement or
transport of such Inventory in the ordinary course of such Debtor’s business
and except to move such Inventory directly from one location set forth of
permitted herein to another such location; (d) each Debtor shall produce, use,
store and maintain such Inventory, with all reasonable care and caution and in

 

13

 

accordance with applicable standards of any insurance and in conformity
with applicable laws (including the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto); (e) each Debtor assumes all responsibility and liability arising from
or relating to the production, use, sale or other disposition of such
Inventory; (f) no Debtor shall sell such Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate such,
Debtor to repurchase such Inventory (other than in the ordinary course of
business consistent with past practices); (g) each Debtor shall keep such
Inventory in good and marketable condition; and (h) no Debtor shall, without
prior written notice to Collateral Agent, acquire or accept any such Inventory
on consignment or approval (other than in the ordinary course of business
consistent with past practices).

 

3.3           Equipment
and Real Property Covenants. With respect to the Equipment and Real
Property: (a) upon Collateral Agent’s reasonable request (but not more than
once per year) or at any time or times on or after an Event of Default, each
Debtor shall, at its expense, deliver or cause to be delivered to Collateral
Agent written appraisals as to Equipment and/or Real Property in form, scope
and methodology reasonably acceptable to Collateral Agent and by an appraiser acceptable
to Collateral Agent, addressed to Collateral Agent and upon which Collateral
Agent is expressly permitted to rely; (b) each Debtor shall keep Equipment in
good order, repair, running and marketable condition (ordinary wear and tear
excepted); (c) each Debtor shall use Equipment and Real Property with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with all applicable laws; (d) Equipment is and
shall be used in each Debtor’s business and not for personal, family, household
or farming use; (e) no Debtor shall remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of such Debtor or
to move Equipment directly from one location set forth or permitted herein to
another such location; (f) the Equipment is now and shall remain personal
property and such Debtor shall not permit any of the Equipment to be or become
a part of or affixed to real property except to the extent that upon such event
the Collateral Agent has a perfected security interest in such fixture; and (g)
as between the Collateral Agent and such Debtor, the Debtor assumes all
responsibility and liability arising from the use of Equipment and Real
Property.

 

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

 

14

 

to take control in any manner of any item of payment in respect of
Receivables or constituting Collateral or otherwise received in or for deposit
in any deposit accounts maintained by such Debtor or otherwise received by
Collateral Agent, (x) have access to any lockbox or postal box into which remittances
from account debtors or other obligors in respect of Receivables or other
proceeds of Collateral are sent or received, (xi) endorse such Debtor’s name
upon any items of payment in respect of Receivables or constituting Collateral
or otherwise received by Collateral Agent and deposit the same in Collateral
Agent’s account for application to the Noteholder Debt, (xii) endorse such
Debtor’s name upon any chattel paper, document, instrument, invoice, or similar
document or agreement relating to any Receivable or any goods pertaining
thereto or any other Collateral, including any warehouse or other receipts, or
bills of lading and other negotiable or non-negotiable documents, and (xiii)
sign such Debtor’s name on any verification of Receivables and notices thereof
to account debtors or any secondary obligors or other obligors in respect
thereof and (b) do all acts and things which are necessary in Collateral Agent’s
determination to fulfill such Debtor’s obligations under this Agreement and the
other Noteholder Agreements. Each Debtor hereby releases Collateral Agent and
its officers, employees and designees from any liabilities arising from any act
or acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Collateral Agent’s own gross
negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.

 

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

 

3.6           Access
to Premises. From time to time as requested by Collateral Agent, at the
cost and expense of the Debtors, (a) Collateral Agent or its designee shall
have complete access to all of each Debtor’s premises during normal business
hours and after reasonable advance notice to such Debtor, or at any time and
without notice to such Debtor if an Event of Default exists or has occurred and
is continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of such Debtor’s books and records, including the Records,
(b) each Debtor shall promptly furnish to Collateral Agent such copies of such
books and records or extracts therefrom as Collateral Agent may request, and
(c) use during normal business hours such of each Debtor’s personnel,
equipment, supplies and premises as may be reasonably necessary for

 

15

 

the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Accounts and realization of other Collateral.

 

SECTION 4.           REPRESENTATIONS
AND WARRANTIES

 

Each Debtor hereby represents and warrants to
Secured Parties the following (which shall survive the execution and delivery
of this Agreement):

 

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

 

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

 

(a)           The
exact legal name of such Debtor is as set forth on the signature page of this
Agreement and in the Information Certificate. Such Debtor has not, during the
past five years, been known by or used any other corporate or fictitious name
or been a party to any merger or consolidation, or acquired all or substantially
all of the assets of any Person, or acquired any of its property or assets out
of the ordinary course of business, except as set forth in the Information
Certificate.

 

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

 

(c)           The
chief executive office and mailing address of such Debtor and such Debtor’s
Records concerning Accounts are located only at the address identified as such
in Schedule 4.2 hereto and its only other places of business and
the only other locations of Collateral, if any, are the addresses set forth in Schedule 4.2
hereto, subject to the right of such Debtor to establish new locations in
accordance with Section 5.1 below. Schedule 4.2

 

16

 

correctly identifies any of such locations
which are not owned by such Debtor and sets forth the owners and/or operators
thereof.

 

4.3           Priority
of Liens; Title to Properties. The security interests and liens granted to
Collateral Agent under this Agreement and the other Noteholder Agreements
constitute valid and perfected third priority liens and security interests in
and upon the Collateral subject only to Permitted Prior Liens except as
otherwise permitted by the Purchase Agreement. Such Debtor has good and
marketable fee simple title to or valid leasehold interests in all of its Real
Property and good, valid and merchantable title to all of its other properties
and assets subject to no liens, mortgages, pledges, security interests,
encumbrances or charges of any kind, other than Permitted Liens and except as
otherwise permitted by the Purchase Agreement.

 

4.4           Survival
of Warranties: Cumulative. All representations and warranties contained in
this Agreement or any of the other Noteholder Agreements shall survive the
execution and delivery of this Agreement. The representations and warranties
set forth herein shall be cumulative and in addition to any other
representations or warranties which such Debtor shall now or hereafter give, or
cause to be given, to Secured Parties.

 

4.5           Information
Certificate. Such Debtor has delivered to the Collateral Agent an
Information Certificate, fully and accurately completed in all material
respects and executed by an authorized officer of such Debtor.

 

4.6           Best
Interests. It is in the best interests of such Debtor (other than the
Issuer) to execute this Agreement inasmuch as such Debtor will, as a result of
being a Subsidiary of the Issuer, derive substantial direct and indirect
benefits from the issuance of Notes by the Issuer, and each Debtor agrees that
the Initial Purchaser is relying on this representation in agreeing to purchase
the Notes.

 

SECTION 5.           AFFIRMATIVE
AND NEGATIVE COVENANTS

 

5.1           New
Collateral Locations. A Debtor may only open any new location within the continental
United States provided Debtor (i) gives Collateral Agent thirty (30) days prior
written notice of the intended opening of any such new location and (ii)
executes and delivers, or causes to be executed and delivered, to Collateral
Agent such agreements, documents, and instruments as Collateral Agent may deem
necessary or desirable to protect its interests in the Collateral at such
location; provided that no lien need be granted in real property other than as
owned in fee by the applicable Debtor.

 

5.2           Costs
and Expenses. Each Debtor shall pay to Collateral Agent within ten business
days following demand with reasonable substantiation therefor all costs,
expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Noteholder Debt,
Collateral Agent’s rights in the Collateral, this Agreement, the other
Noteholder Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording
(including UCC financing statement filing taxes and fees, documentary taxes,

 

17

 

intangibles taxes and mortgage recording taxes and fees if applicable);
(b) reasonable insurance premiums, appraisal fees and search fees; (c) reasonable
costs and expenses of preserving and protecting the Collateral; (d) reasonable
costs and expenses paid or incurred in connection with obtaining payment of the
Noteholder Debt, enforcing the security interests and liens of Collateral
Agent, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Noteholder Agreements
or defending any claims made or threatened against Collateral Agent arising out
of the transactions contemplated hereby and thereby (including preparations for
and consultations concerning any such matters); and (e) reasonable fees and
disbursements of counsel to Collateral Agent in connection with any of the
foregoing.

 

5.3           Further
Assurances. At the request of Collateral Agent at any time and from time to
time, each Debtor shall, at its expense, duly execute and deliver, or cause to
be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary
or proper to evidence, perfect, maintain and enforce the security interests and
the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Noteholder
Agreements.

 

SECTION 6.           EVENTS
OF DEFAULT AND REMEDIES

 

6.1           Events
of Default. The occurrence or existence of any Event of Default under the
Purchase Agreement is referred to herein individually as an “Event of Default”
and collectively as “Events of Default”.

 

6.2           Remedies.

 

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

 

(b)           Subject
to the Intercreditor Agreement, without limiting the foregoing, at any time an
Event of Default exists or has occurred and is continuing, Collateral Agent
may, in its discretion and, without limitation, (i) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (ii) require any such

 

18

 

Debtor, at such Debtor’s expense, to assemble
and make available to Collateral Agent any part or all of the Collateral at any
place and time designated by Collateral Agent, (iii) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (iv)
remove any or all of the Collateral from any premises on or in which the same
may be located for the purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, and/or (v) sell, lease, transfer,
assign, deliver or otherwise dispose of any and all Collateral (including
entering into contracts with respect thereto, public or private sales at any
exchange, broker’s board, at any office of Collateral Agent or elsewhere) at
such prices or terms as Collateral Agent may deem reasonable, for cash, upon
credit or for future delivery with the Collateral Agent having the right to
purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of any
Debtor, which right or equity of redemption is hereby expressly waived and
released by each Debtor. If any of the Collateral is sold or leased by
Collateral Agent upon credit terms or for future delivery, the Noteholder Debt
shall not be reduced as a result thereof until payment therefor is finally
collected by Collateral Agent. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Collateral Agent to a Debtor
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall
be deemed to be reasonable notice thereof and each Debtor waives any other
notice. In the event Collateral Agent institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy,
each Debtor waives the posting of any bond which might otherwise be required.

 

(c)           To
the extent that applicable law imposes duties on Collateral Agent to exercise
remedies in a commercially reasonable manner (which duties cannot be waived
under such law), each Debtor acknowledges and agrees that it is not
commercially unreasonable for Collateral Agent (i) to fail to incur expenses
reasonably deemed significant by Collateral Agent to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain consents of any
governmental authority or other third party for the collection or disposition
of Collateral to be collected or disposed of, (iii) to fail to exercise
collection remedies against account debtors, secondary obligors or other
persons obligated on Collateral or to remove liens or encumbrances on or any
adverse claims against Collateral, (iv) to exercise collection remedies against
account debtors and other persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other persons, whether or not in the same business as any Debtor for
expressions of interest in acquiring all or any portion of the Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the collateral is of a specialized nature, (viii)
to dispose of Collateral by utilizing Internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capability of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, (xi) to purchase insurance or credit

 

19

 

enhancements to insure Collateral Agent
against risks of loss, collection or disposition of Collateral or to provide to
Collateral Agent a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Collateral Agent, to
obtain the services of other brokers, investment bankers, consultants and other
professionals to assist Collateral Agent in the collection or disposition of
any of the Collateral. Each Debtor acknowledges that the purpose of this Section is
to provide non-exhaustive indications of what actions or omissions by Collateral
Agent would not be commercially unreasonable in Collateral Agent’s exercise of
remedies against the Collateral and that other actions or omissions by
Collateral Agent shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section. Without limitation of the
foregoing, nothing contained in this Section shall be construed to grant
any rights to any Debtor or to impose any duties on Collateral Agent that would
not have been granted or imposed by this Agreement or by applicable law in the
absence of this Section.

 

(d)           Subject
to the terms of the Intercreditor Agreement, for the purpose of enabling
Collateral Agent to exercise the rights and remedies hereunder each Debtor
hereby grants to Collateral Agent, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to such Debtor) to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by such Debtor,
wherever the same may be located, including in such license reasonable access
to all media in which any of the licensed items may be recorded or stored and
to all computer programs used for the compilation or printout thereof.

 

(e)           Subject
to the terms of the Intercreditor Agreement, Collateral Agent may apply the
cash proceeds of Collateral actually received by Collateral Agent from any
sale, lease, foreclosure or other disposition of the Collateral to payment of
the Noteholder Debt in whole or in part and in such order as Collateral Agent
may elect, whether or not then due. Each Debtor shall remain liable to
Collateral Agent for the payment of any deficiency with interest at the highest
rate provided for in the Purchase Agreement and all costs and expenses of
collection or enforcement, including attorneys’ fees and legal expenses.

 

SECTION 7.           COLLATERAL
AGENT

 

7.1           Collateral
Agent Has No Duty. The powers conferred on the Collateral Agent hereunder
are solely to protect its interest (on behalf of the Secured Parties) in the
Collateral and shall not impose any duty on it to exercise any such powers.

 

7.2           Reasonable
Care. The Collateral Agent is required to exercise reasonable care in the
custody and preservation of any of the Collateral in its possession; provided,
however, that the Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of any of the Collateral if it takes such
action for that purpose as any Owner thereof reasonably requests in writing at
times other than upon the occurrence and during the

 

20

 

continuance of any Event of Default, but failure of the Collateral
Agent, to comply with any such request at any time shall not in itself be
deemed a failure to exercise reasonable care.

 

7.3           Other
Provisions Relating to the Collateral Agent.

 

(a)           The
Collateral Agent has such powers, rights and obligations as are expressly
delegated to the Collateral Agent by the terms of this Agreement and the other
Noteholder Agreements. The Collateral Agent may, from time to time, appoint a
financial institution to act as Collateral Agent so long as such institution
meets the requirements of Section 7.3(d). The Collateral Agent,
acting in its capacity as such, shall have only such duties with respect to the
Collateral as are set forth herein.

 

(b)           Except
during the continuance of an Event of Default, the Collateral Agent need
perform only those duties that are specifically set forth in this Agreement and
no others, and no implied covenants or obligations will be read into this
Agreement against the Collateral Agent. In case an Event of Default has
occurred and is continuing, the Collateral Agent shall exercise those rights
and powers vested in it by this Agreement, and use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.

 

(c)           As
to any matters not expressly provided for by this Agreement, the Noteholder
Agreements or the Intercreditor Agreement, the Collateral Agent shall not be
required to take any action or exercise any discretion, but shall be required
to act or to refrain from acting upon the instructions of the Majority
Noteholders and shall in all such cases be fully protected in acting, or in
refraining from acting, in accordance with such instructions of the Majority
Noteholders, and any action taken or failure to act pursuant thereto shall be
binding on all of the Noteholders. The Collateral Agent may rely on the written
certification of the Majority Noteholders with respect to any such vote.
Notwithstanding any other provisions herein, the Collateral Agent shall not be
required to advance or expend any funds or otherwise incur any financial
liability in the performance of its duties or the exercise of its powers or
rights hereunder at the request of the Noteholders unless the Debtors or the
Noteholders have provided to the Collateral Agent security or indemnity, which
the Collateral Agent, in its reasonable discretion, deems sufficient against
any and all liability or expense which may be incurred by it by reason of
taking or continuing to take such action.

 

(d)           Subject
to the appointment and acceptance of a successor Collateral Agent, the
Collateral Agent may resign at any time by giving not less than thirty (30)
days’ notice thereof to each Noteholder and the Issuer.  Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, (i) such successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent, and the
retiring Collateral Agent shall be discharged from its duties and obligations
hereunder, and (ii) the retiring Collateral Agent shall promptly transfer all
Collateral within its possession or control to the possession or control of the
successor Collateral Agent and shall execute and deliver such notices,
instructions and assignments as may be necessary or desirable to transfer the
rights of the Collateral Agent in respect of the Collateral to the successor

 

21

 

Collateral Agent. After any retiring
Collateral Agent’s resignation or replacement hereunder as Collateral Agent,
the provisions of this Section and Section 6.2 shall continue
in effect for its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as Collateral Agent. Upon any such resignation
or removal, the former Collateral Agent shall take all steps necessary to
assign the Collateral to the successor Collateral Agent.

 

SECTION 8.           JURY
TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

 

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

 

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

 

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

 

(c)           EACH
DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER NOTEHOLDER
AGREEMENTS OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF SUCH DEBTOR AND COLLATERAL AGENT IN RESPECT OF THIS AGREEMENT OR
ANY OF THE OTHER NOTEHOLDER AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE. EACH DEBTOR HEREBY AGREES AND CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY AND THAT EACH DEBTOR OR COLLATERAL AGENT MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF SUCH DEBTOR AND COLLATERAL AGENT TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.

 

22

 

(d)           Collateral
Agent shall not have any liability to any Debtor (whether in tort, contract,
equity or otherwise) for losses suffered by any Debtor in connection with,
arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in connection
herewith, unless it is determined by a final and non-appealable judgment or
court order binding on Collateral Agent that the losses were the result of acts
or omissions constituting gross negligence or willful misconduct. In any such
litigation, Collateral Agent shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement and the other
Noteholder Agreements.

 

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

 

8.3           Amendments
and Waivers. Neither this Agreement nor any provision hereof shall be
amended, modified, waived or discharged orally or by course of conduct, but
only by a written agreement signed by an authorized officer of Collateral Agent
and as to amendments, as also signed by an authorized officer of each Debtor.
Collateral Agent shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Collateral Agent. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Collateral Agent of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Collateral Agent would
otherwise have on any future occasion, whether similar in kind or otherwise.

 

8.4           Waiver
of Counterclaims. Each Debtor waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any nature (other then compulsory
counterclaims) in any action or proceeding with respect to this Agreement, the
Noteholder Debt, the Collateral or any matter arising therefrom or relating
hereto or thereto.

 

SECTION 9.           MISCELLANEOUS

 

9.1           Interpretative
Provisions.

 

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

 

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

 

23

 

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

 

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

 

(e)           The
word “including” when used in this Agreement shall mean “including, without
limitation”.

 

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

 

(g)           An
Event of Default shall exist or continue or be continuing until such Event of
Default is waived in accordance with Section 8.3 or is cured in a
manner satisfactory to such Collateral Agent, if such Event of Default is
capable of being cured as determined by Collateral Agent.

 

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

 

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

 

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

 

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

 

9.2           Notices.
All notices, requests and demands hereunder shall be given in accordance with Section 9.1
of the Purchase Agreement.

 

24

 

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

 

9.4           Successors.
This Agreement, the other Noteholder Agreements and any other document referred
to herein or therein shall be binding upon each Debtor and its successors and
assigns and inure to the benefit of and be enforceable by Collateral Agent and
its successors and assigns, except that no Debtor may assign its rights under
this Agreement, the other Noteholder Agreements and any other document referred
to herein or therein without the prior written consent of Collateral Agent.

 

9.5           Entire
Agreement. Subject to Section 9.6, this Agreement, the other
Noteholder Agreements, the Intercreditor Agreement, any supplements hereto or
thereto and any instruments or documents delivered or to be delivered in
connection herewith or therewith represents the entire agreement and
understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement
shall govern.

 

9.6           RELATIONSHIP
WITH INTERCREDITOR AGREEMENT. NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, THE ENFORCEMENT OF THE LIEN AND SECURITY INTEREST GRANTED TO THE
COLLATERAL AGENT PURSUANT TO THIS AGREEMENT AND THE EXERCISE OF ANY RIGHT OR
REMEDY BY THE COLLATERAL AGENT HEREUNDER ARE SUBJECT TO THE PROVISIONS OF THE
INTERCREDITOR AGREEMENT. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE
INTERCREDITOR AGREEMENT AND THIS SECURITY AGREEMENT, THE TERMS OF THE
INTERCREDITOR AGREEMENT SHALL GOVERN; PROVIDED THAT NOTHING IN THE INTERCREDITOR
AGREEMENT SHALL AFFECT THE ATTACHMENT OF OR, SUBJECT TO THE PRIORITIES
ESTABLISHED IN THE INTERCREDITOR AGREEMENT, PERFECTION OF THE LIEN AND SECURITY
INTEREST GRANTED TO THE COLLATERAL AGENT PURSUANT TO THIS AGREEMENT.

 

9.7           Release
of Liens. The security interests granted hereunder in any Collateral shall
automatically be released in the manner, at the times and to the extent
specified in the Intercreditor Agreement, if any, and as may be permitted by
the Purchase Agreement and any other Noteholder Agreement. Upon any such
release or termination, the Collateral Agent will, at the Debtors’ sole
expense, deliver to the applicable Debtor, without any representations,
warranties or recourse of any kind whatsoever, all Collateral held by the
Collateral Agent hereunder in which the security interest granted hereunder is
released or terminated, and execute and deliver to the applicable Debtor such
documents as such Debtor shall reasonably request to evidence such release or
termination.

 

25

 

9.8           Additional
Debtors. Upon the execution and delivery by any other Person of a
supplement in the form of Annex I hereto, such Person shall become a “Debtor”
hereunder with the same force and effect as if it were originally a party to
this Agreement and named as a “Debtor” hereunder. The execution and delivery of
such supplement shall not require the consent of any other Debtor hereto, and
the rights and obligations of each Debtor hereunder shall remain in full force
and effect notwithstanding the addition of any new Debtor as a party to this
Agreement.

 

[REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK]

 

26

 

IN WITNESS WHEREOF, each party hereto has
caused this Agreement to be duly executed as of the day and year first above
written.

 

	
   

  	
  ATLANTIC EXPRESS TRANSPORTATION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Neil J. Abitabilo

  
	
   

  	
   

  	
  Name: Neil J. Abitabilo

  
	
   

  	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  101 JAMAICA CORP.

  
	
   

  	
  201 WEST SOTELLO REALTY, INC.

  
	
   

  	
  AIRPORT SERVICES, INC.

  
	
   

  	
  AMBOY BUS CO., INC.

  
	
   

  	
  ATLANTIC EXPRESS COACHWAYS, INC.

  
	
   

  	
  ATLANTIC EXPRESS NEW ENGLAND, INC.

  
	
   

  	
  ATLANTIC EXPRESS OF CALIFORNIA, INC.

  
	
   

  	
  ATLANTIC EXPRESS OF ILLINOIS, INC.

  
	
   

  	
  ATLANTIC EXPRESS OF L.A. INC.

  
	
   

  	
  ATLANTIC EXPRESS OF MISSOURI INC.

  
	
   

  	
  ATLANTIC EXPRESS OF NEW JERSEY, INC.

  
	
   

  	
  ATLANTIC EXPRESS OF PENNSYLVANIA, INC.

  
	
   

  	
  ATLANTIC EXPRESS OF SOUTH CAROLINA, INC.

  
	
   

  	
  ATLANTIC PARATRANS OF ARIZONA, INC.

  
	
   

  	
  ATLANTIC PARATRANS OF NYC, INC.

  
	
   

  	
  ATLANTIC PARATRANS OF PENNSYLVANIA, INC.

  
	
   

  	
  ATLANTIC PARATRANS, INC.

  
	
   

  	
  ATLANTIC QUEENS BUS CORP.

  
	
   

  	
  ATLANTIC TRANSIT, CORP.

  
	
   

  	
  ATLANTIC-CHITTENANGO REAL PROPERTY CORP.

  
	
   

  	
  ATLANTIC-CONN. TRANSIT, INC.

  
	
   

  	
  ATLANTIC-HUDSON, INC.

  
	
   

  	
  BLOCK 7932, INC.

  
	
   

  	
  BROOKFIELD TRANSIT INC.

  
	
   

  	
  CENTRAL NEW YORK REORGANIZATION CORP.

  
	
   

  	
  COURTESY BUS CO., INC.

  
	
   

  	
  FIORE BUS SERVICE, INC.

  
	
   

  	
  GROOM TRANSPORTATION, INC.

  
	
   

  	
  GVD LEASING CO., INC.

  
	
   

  	
  JAMES MCCARTY LIMO SERVICE, INC.

  
	
   

  	
  JERSEY BUS SALES, INC.

  
	
   

  	
  JERSEY BUSINESS LAND CO., INC.

  
	
   

  	
  K. CORR INC.

  
	
   

  	
  MCINTIRE TRANSPORTATION, INC.

  
	
   

  	
  MERIT TRANSPORTATION CORP.

  
	
   

  	
  METRO AFFILIATES, INC.

  
	
   

  	
  METROPOLITAN ESCORT SERVICE, INC.

  

 

27

 

	
   

  	
  MIDWAY LEASING INC.

  
	
   

  	
  MOUNTAIN TRANSIT, INC.

  
	
   

  	
  R. FIORE BUS SERVICE, INC.

  
	
   

  	
  RAYBERN BUS SERVICE, INC.

  
	
   

  	
  RAYBERN CAPITAL CORP.

  
	
   

  	
  RAYBERN EQUITY CORP.

  
	
   

  	
  ROBERT L. MCCARTHY & SON, INC.

  
	
   

  	
  STATEN ISLAND BUS, INC.

  
	
   

  	
  TEMPORARY TRANSIT SERVICE, INC.

  
	
   

  	
  T-NT BUS SERVICE, INC.

  
	
   

  	
  TRANSCOMM, INC.

  
	
   

  	
  WINSALE, INC.

  
	
   

  	
  WRIGHTHOLM BUS LINE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Neil J. Abitabilo

  
	
   

  	
   

  	
  Name:

  	
  Neil J. Abitabilo

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AIRLIE OPPORTUNITY CAPITAL

  MANAGEMENT, L.P., as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Adam Goodfriend

  
	
   

  	
   

  	
  Name:

  	
  Adam Goodfriend

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
					

 

28

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