Document:

Exhibit 4.3

 

 

 

ATLANTIC
EXPRESS TRANSPORTATION CORP.

 

 

Warrants
to Purchase

Common Shares

 

 

WARRANT
AGREEMENT

 

 

Dated
as of April 22, 2004

 

 

THE
BANK OF NEW YORK

 

Warrant
Agent

 

 

 

 

WARRANT AGREEMENT, dated as
of April 22, 2004, between Atlantic Express Transportation Corp., a New York
corporation (the “Company”), and The Bank of New York, as warrant agent
(the “Warrant Agent”).

 

WHEREAS, the Company
proposes to issue warrants (the “Warrants”) to initially purchase up to
an aggregate of 115,000 common shares, par value $0.01 per share (the “Common
Stock”), of the Company (the Common Stock issuable on exercise of the
Warrants being referred to herein as the “Warrant Shares”), each Warrant
initially representing the right to purchase one Warrant Share, in connection
with the offering (the “Offering”) by the Company of (i) 105,000 units
(the “Fixed Rate Units”), each Fixed Rate Unit consisting of (A) $1,000
principal amount at maturity of the 12% Senior Secured Notes due 2008 of the
Company  (the “Fixed Rate Notes”)
and (B) one Warrant, and (ii) 10,000 units (the “Floating Rate Units”),
each Floating Rate Unit consisting of (A) $1,000 in aggregate principal amount
of Senior Secured Floating Rate Notes due 2008 of the Company (the “Floating
Rate Notes” and together with the Fixed Rate Notes, the “Notes”) and
(B) one Warrant.

 

WHEREAS, the Company desires
the Warrant Agent to act on behalf of the Company, and the Warrant Agent is
willing so to act in connection with the issuance of Warrant Certificates (as
defined) and other matters as provided herein.

 

NOW, THEREFORE, in
consideration of the premises and the mutual agreements herein set forth, the
parties hereto agree as follows:

 

Section 1.                                            Certain Definitions.

 

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

 

“144A Global Warrant”
means a global Warrant substantially in the form of Exhibit A hereto
bearing the Global Warrant Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary
or its nominee.

 

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

 

“Applicable Procedures”
means, with respect to any transfer or exchange of or for beneficial interests
in any Global Note, the rules and procedures of the Depositary, Euroclear and
Clearstream that apply to such transfer or exchange.

 

 

“Board of Directors”
means:

 

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

 

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

 

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

 

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

 

“Clearstream” means
Clearstream Banking, S.A.

 

“Closing Date” means
the date hereof.

 

“Commission” means
the Securities and Exchange Commission.

 

“Depositary” means,
with respect to the Warrants issuable or issued in whole or in part in global
form, the Person specified in Section 3.3 hereof as the Depositary with
respect to the Warrants, and any and all successors thereto appointed as
Depositary hereunder and having become such pursuant to the applicable
provision of the Indenture.

 

“Equity Registration
Rights Agreement” means the registration rights agreement, dated as of
April 22, 2004, by and among the Company, the Parent and the Initial Purchaser
relating to the Warrant Shares.

 

“Euroclear” means
Euroclear Bank S.A./N.V., as operator of the Euroclear system.

 

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

 

“Exercise Price”
means the amount set forth in the form of Warrant Certificate attached hereto
as Exhibit A, as adjusted as herein provided.

 

“Global Warrants”
means, individually and collectively, each of the Restricted Global Warrants
and the Unrestricted Global Warrants, substantially, in the form of Exhibit
A hereto issued in accordance with Section 3.1(b) and 3.5
hereof.

 

“Global Warrant Legend”
means the legend set forth in Section 3.5(g)(ii), which is required to
be placed on all Global Warrants issued under this Warrant Agreement.

 

“IAI Global Warrant”
means the Global Warrant substantially in the form of Exhibit A hereto
bearing the Global Warrant Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee.

 

“Indenture” means the
indenture, dated as of April 22, 2004, among the Company, the Guarantors set
forth therein and The Bank of New York, as trustee, relating to the Notes.

 

2

 

“Indirect Participant”
means a Person who holds a beneficial interest in a Global Warrant through a
Participant.

 

“Initial Purchaser”
means Jefferies & Company, Inc.

 

“Institutional Accredited
Investor” means an institution that is an “accredited investor” as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, which is not also
a QIB.

 

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

 

“Non-U.S. Person”
means any Person other than a U.S. Person.

 

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

 

“Opinion of Counsel”
means an opinion from legal counsel who is reasonably acceptable to the Warrant
Agent in form and substance reasonably acceptable to the Warrant Agent.  The counsel may be an employee of or counsel
to the Company, any subsidiary of the Company or the Warrant Agent.

 

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

 

“Participant” means,
with respect to the Depositary, Euroclear or Clearstream, a Person who has an
account with the Depositary, Euroclear or Clearstream, respectively (and, with
respect to DTC, shall include Euroclear and Clearstream).

 

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

 

“Private Placement Legend”
means the legend set forth in Section 3.5(g)(i) to be placed on all Warrants
issued under this Warrant Agreement except where otherwise permitted by the
provisions of this Warrant Agreement.

 

“QIB” means a
“qualified institutional buyer” as defined in Rule 144A.

 

“Regulation S” means
Regulation S promulgated under the Securities Act.

 

“Regulation S Global
Warrant” means a global Warrant in the form of Exhibit A hereto
bearing the Global Warrant Legend, the Private Placement Legend and the
Regulation S Legend and deposited with or on behalf of and registered in the
name of the Depositary or its nominee.

 

3

 

“Regulation S Legend”
means the legend set forth in Section 3.5(g)(iv) to be placed on all
Regulation S Global Warrants issued pursuant to Regulation S.

 

“Restricted Definitive
Warrant” means a Definitive Warrant bearing the Private Placement Legend.

 

“Restricted Global
Warrant” means a Global Warrant bearing the Private Placement Legend.

 

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

 

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

 

“Rule 903” means Rule
903 promulgated under the Securities Act.

 

“Rule 904” means Rule
904 promulgated under the Securities Act.

 

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

 

“Separation Date” means
the earliest of (i) 180 days after the date hereof, (ii) the date on which a
registration statement with respect to a registered exchange offer or a shelf
registration statement with respect to the Notes is declared effective under
the Securities Act, (iii) the date on which any registration statement
including the Warrant Shares is declared effective under the Securities Act,
and (iv) such date as Jefferies & Company, Inc., in its sole discretion,
shall determine.

 

“Transfer Restricted
Securities” shall mean (a) each Warrant and Warrant Share held by an
Affiliate of the Company and (b) each other Warrant and Warrant Share until the
earlier to occur of (i) with respect to each Warrant Share only, the date on
which such Warrant Share has been effectively registered under the Securities
Act and disposed of in accordance with a Registration Statement covering it
(and the purchasers thereof have been issued a registered freely tradable
security) and (ii) the date on which such Warrant or Warrant Share is distributed
to the public pursuant to Rule 144 under the Securities Act.

 

“Trustee” means the
trustee under the Indenture.

 

“Unrestricted Global
Warrant” means a global Warrant substantially in the form of Exhibit A
attached hereto that bears the Global Warrant Legend and that has the “Schedule
of Exchanges of Interests in the Global Warrant” attached thereto, and that is
deposited with or on behalf of and registered in the name of the Depositary,
representing a series of Warrants that do not bear the Private Placement
Legend.

 

“Unrestricted Definitive
Warrant” means one or more Definitive Warrants that do not bear and are not
required to bear the Private Placement Legend.

 

“U.S. Person” means a
U.S. person as defined in Rule 902(k) under the Securities Act.

 

4

 

“Warrant Paying Agent”
means an office or agency where Warrants may be presented for surrender.  The Company initially appoints the Warrant
Agent to act as Warrant Paying Agent.

 

Section 2.                                            Appointment of Warrant Agent.

 

The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement and the Warrant Agent
hereby accepts such appointment.

 

Section 3.                                            Issuance of Warrants; Warrant Certificates.

 

3.1.                              Form and Dating.

 

(a)                                  General.  The Warrants shall be
substantially in the form of Exhibit A hereto (each a “Warrant
Certificate”).  The Warrants may
have notations, legends or endorsements required by law, stock exchange rule or
usage.  Each Warrant shall be dated the
date of the countersignature.

 

The terms and provisions
contained in the Warrants shall constitute, and are hereby expressly made, a
part of this Warrant Agreement.  The
Company and the Warrant Agent, by their execution and delivery of this Warrant
Agreement, expressly agree to such terms and provisions and to be bound
thereby.  However, to the extent any
provision of any Warrant conflicts with the express provisions of this Warrant
Agreement, the provisions of this Warrant Agreement shall govern and be
controlling.

 

(b)                                 Global Warrants. 
Warrants issued in global form shall be substantially in the form of Exhibit
A attached hereto (including the Global Warrant Legend thereon and the
“Schedule of Exchanges of Interests in the Global Warrant” attached
thereto).  Warrants issued in definitive
form shall be substantially in the form of Exhibit A attached hereto
(but without the Global Warrant Legend thereon and without the “Schedule of
Exchanges of Interests in the Global Warrant” attached thereto).  Each Global Warrant shall represent such of
the outstanding Warrants as shall be specified therein and each shall provide
that it shall represent the number of outstanding Warrants from time to time
endorsed thereon and that the number of outstanding Warrants represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions.  Any
endorsement of a Global Warrant to reflect the amount of any increase or
decrease in the number of outstanding Warrants represented thereby shall be
made by the Warrant Agent in accordance with instructions given by the holder
thereof as required by Section 3.5 hereof.

 

(c)                                  Euroclear and Clearstream Procedures
Applicable.  The provisions of the “Operating Procedures
of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear”
and the “General Terms and Conditions of Clearstream Banking” and “Customer
Handbook” of Clearstream shall be applicable to transfers of beneficial interests
in the Regulation S Global Warrant that are held by Participants through
Euroclear or Clearstream.

 

5

 

3.2.                              Execution.

 

An Officer shall sign the
Warrants on behalf of the Company by manual or facsimile signature.

 

If the Officer whose
signature is on a Warrant no longer holds that office at the time a Warrant is
countersigned, the Warrant shall nevertheless be valid.

 

A Warrant shall not be valid
until countersigned by the manual signature of the Warrant Agent.  The signature shall be conclusive evidence
that the Warrant has been properly issued under this Warrant Agreement.

 

The Warrant Agent shall,
upon a written order of the Company signed by an Officer (a “Warrant
Countersignature Order”), countersign Warrants for original issue up to the
number stated in the preamble hereto.

 

The Warrant Agent may
appoint an agent acceptable to the Company to countersign Warrants.  Such an agent may countersign Warrants
whenever the Warrant Agent may do so. 
Each reference in this Warrant Agreement to a countersignature by the
Warrant Agent includes a countersignature by such agent.  Such an agent has the same rights as the
Warrant Agent to deal with the Company or an Affiliate of the Company.

 

3.3.                              Warrant Registrar and Depositary.

 

The Company shall maintain
an office or agency where Warrants may be presented for registration of
transfer or for exchange (“Warrant Registrar”).  The Warrant Registrar shall keep a register
of the Warrants and of their transfer and exchange.  The Company may appoint one or more co-Warrant Registrars.  The term “Warrant Registrar” includes any
co-Warrant Registrar.  The Company may
change any Warrant Registrar without notice to any holder.  The Company shall notify the Warrant Agent
in writing of the name and address of any agent not a party to this Warrant
Agreement.  If the Company fails to
appoint or maintain another entity as Warrant Registrar, the Warrant Agent
shall act as such.  The Company or any
of its subsidiaries may act as Warrant Registrar.

 

The Company initially
appoints the Warrant Agent to act as the Warrant Registrar with respect to the
Global Warrants.

 

The Company initially
appoints The Depository Trust Company (“DTC”) to act as Depositary with
respect to the Global Warrants.

 

3.4.                              Holder Lists.

 

The Warrant Agent shall
preserve in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of all holders of Warrants.  If the Warrant Agent is not the Warrant
Registrar, the Company shall promptly furnish to the Warrant Agent at such
times as the Warrant Agent may request in writing, a list in such form and as
of such date as the Warrant Agent may reasonably require of the names and
addresses of the holders.

 

6

 

3.5.                              Transfer and Exchange.

 

(a)                                  Transfer and Exchange of Global Warrants.  A
Global Warrant may not be transferred as a whole except by the Depositary to a
nominee of the Depositary, by a nominee of the Depositary to the Depositary or
to another nominee of the Depositary, or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary.  All Global Warrants will be exchanged by the
Company for Definitive Warrants if (i) the Company delivers to the Warrant
Agent notice from the Depositary that it is unwilling or unable to continue to
act as Depositary or that it is no longer a clearing agency registered under
the Exchange Act and, in either case, a successor Depositary is not appointed
by the Company within 120 days after the date of such notice from the
Depositary or (ii) the Company in its sole discretion determines that the
Global Warrants (in whole but not in part) should be exchanged for Definitive
Warrants and delivers a written notice to such effect to the Warrant
Agent.  Upon the occurrence of either of
the preceding events in (i), (ii) above, Definitive Warrants shall be issued in
such names as the Depositary shall instruct the Warrant Agent.  Global Warrants also may be exchanged or
replaced, in whole or in part, as provided in Sections 3.6 and 3.7
hereof.  A Global Warrant may not be
exchanged for another Warrant other than as provided in this Section 3.5(a),
however, beneficial interests in a Global Warrant may be transferred and
exchanged as provided in Section 3.5(b) or (c) hereof.

 

(b)                                 Transfer and Exchange of Beneficial Interests
in the Global Warrants.  The transfer and exchange of beneficial
interests in the Global Warrants shall be effected through the Depositary, in accordance
with the provisions of this Warrant Agreement and the Applicable
Procedures.  Beneficial interests in the
Restricted Global Warrants shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act.  Transfers of beneficial interests
in the Global Warrants also shall require compliance with either subparagraph
(i) or (ii) below, as applicable, as well as one or more of the
other following subparagraphs, as applicable:

 

(i)                                     Transfer of Beneficial Interests in the Same
Global Warrant.  Beneficial interests in any Restricted
Global Warrant may be transferred to Persons who take delivery thereof in the
form of a beneficial interest in the same Restricted Global Warrant in
accordance with the transfer restrictions set forth in the Private Placement
Legend.  Beneficial interests in any
Unrestricted Global Warrant may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Warrant.  No written orders or
instructions shall be required to be delivered to the Warrant Registrar to
effect the transfers described in this Section 3.5(b)(i).

 

(ii)                                  All Other Transfers and Exchanges of
Beneficial Interests in Global Warrants.  In connection with all
transfers and exchanges of beneficial interests that are not subject to Section
3.5(b)(i) above, the transferor of such beneficial interest must deliver to
the Warrant Registrar both (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Warrant in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions given
in accordance with the Applicable Procedures containing information regarding
the Participant account to be credited with such

 

7

 

increase or both (B) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Warrant in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions given
by the Depositary to the Warrant Registrar containing information regarding the
Person in whose name such Definitive Warrant shall be registered.  Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Warrants contained
in this Agreement and the Warrants or otherwise applicable under the Securities
Act, the Warrant Agent shall adjust the principal amount of the relevant Global
Warrant(s) pursuant to Section 3.5(g) hereof.

 

(iii)                               Transfer of Beneficial Interests to Another
Restricted Global Warrant.  A beneficial interest in any Restricted
Global Warrant may be transferred to a Person who takes delivery thereof in the
form of a beneficial interest in another Restricted Global Warrant if the transfer
complies with the requirements of Section 3.5(b)(ii) above and the
Warrant Registrar receives the following:

 

(A)                              if the transferee will take delivery in the
form of a beneficial interest in the 144A Global Warrant, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including
the certifications in item (1) thereof; and

 

(B)                                if the transferee will take delivery in the
form of a beneficial interest in the Regulation S Global Warrant, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof, if

 

(C)                                if the transferee will take delivery in the
form of a beneficial interest in the IAI Global Warrant, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including
the certifications and certificates and Opinion of Counsel required by item (3)
thereof, if applicable.

 

(iv)                              Transfer and Exchange of Beneficial Interests
in a Restricted Global Warrant for Beneficial Interests in the Unrestricted
Global Warrant.  A beneficial interest in any Restricted
Global Warrant may be exchanged by any holder thereof for a beneficial interest
in an Unrestricted Global Warrant or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Warrant
if the exchange or transfer complies with the requirements of Section
3.5(b)(ii) above and the Warrant Registrar receives the following:

 

(A)                              if the holder of such beneficial interest in
a Restricted Global Warrant proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Warrant, a certificate from such
holder in the form of Exhibit C hereto, including the certifications in item
(1)(a) thereof; or

 

(B)                                if the holder of such beneficial interest in
a Restricted Global Warrant proposes to transfer such beneficial interest to a
Person who shall take delivery thereof in the form of a beneficial interest in
an Unrestricted Global

 

8

 

Warrant, a certificate from
such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;

 

and, in each such case set
forth in this subparagraph (iv), if the Warrant Registrar so requests or
if the Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Warrant Registrar to the effect that such exchange
or transfer is in compliance with the Securities Act and that the restrictions
on transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.

 

If any such transfer is
effected pursuant to subparagraph (iv) above at a time when an
Unrestricted Global Warrant has not yet been issued, the Company shall issue
and, upon receipt of an Warrant Countersignature Order in accordance with Section
3.2 hereof, the Warrant Agent shall countersign one or more Unrestricted
Global Warrants in the number equal to the number of beneficial interests
transferred pursuant to subparagraph (iv) above.

 

(c)                                  Transfer and Exchange of Beneficial Interests
for Definitive Warrants.

 

(i)                                     Beneficial Interests in Restricted Global
Warrants to Restricted Definitive Warrants.  If any holder of a beneficial
interest in a Restricted Global Warrant proposes to exchange such beneficial
interest for a Restricted Definitive Warrant or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a Restricted
Definitive Warrant, then, upon receipt by the Warrant Registrar of the
following documentation:

 

(A)                              if the holder of such beneficial interest in
a Restricted Global Warrant proposes to exchange such beneficial interest for a
Restricted Definitive Warrant, a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (2)(a) thereof;

 

(B)                                if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;

 

(C)                                if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;

 

(D)                               if such beneficial interest is being
transferred pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;

 

(E)                                 if such beneficial interest is being
transferred to an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than those
listed in subparagraphs (B)

 

9

 

through (D) above, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable; or

 

(F)                                 if such beneficial interest is being
transferred to the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof;

 

the Warrant Agent shall
cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Warrant Agent, the number of Warrants
represented by the Global Warrant to be reduced by the number of Warrants to be
represented by the Definitive Warrant pursuant to Section 3.5(g) hereof,
and the Company shall execute and the Warrant Agent shall countersign and
deliver to the Person designated in the instructions a Definitive Warrant in
the appropriate amount.  Any Definitive
Warrant issued in exchange for a beneficial interest in a Restricted Global
Warrant pursuant to this Section 3.5(c) shall be registered in such name
or names as the holder of such beneficial interest shall instruct the Warrant
Registrar through instructions from the Depositary and the Participant or
Indirect Participant.  The Warrant Agent
shall deliver such Definitive Warrants to the Persons in whose names such
Warrants are so registered.  Any
Definitive Warrant issued in exchange for a beneficial interest in a Restricted
Global Warrant pursuant to this Section 3.5(c)(i) shall bear the Private
Placement Legend and shall be subject to all restrictions on transfer contained
therein.

 

(ii)                                  Beneficial Interests in Restricted Global
Warrants to Unrestricted Definitive Warrants.  A holder of a beneficial
interest in a Restricted Global Warrant may exchange such beneficial interest
for an Unrestricted Definitive Warrant or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Warrant only if the Warrant Registrar receives the following:

 

(A)                              if the holder of such beneficial interest in
a Restricted Global Warrant proposes to exchange such beneficial interest for
an Unrestricted Definitive Warrant, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (1)(b)
thereof; or

 

(B)                                if the holder of such beneficial interest in
a Restricted Global Warrant proposes to transfer such beneficial interest to a
Person who shall take delivery thereof in the form of an Unrestricted
Definitive Warrant, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof; and, in each
such case set forth in this subparagraph (ii), if the Warrant Registrar
so requests or if the Applicable Procedures so require, an Opinion of Counsel
in form reasonably acceptable to the Warrant Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement Legend
are no longer required in order to maintain compliance with the Securities Act.

 

(iii)                               Beneficial Interests in Unrestricted Global
Warrants to Unrestricted Definitive Warrants.  If any holder of a beneficial
interest in an Unrestricted Global

 

10

 

Warrant proposes to exchange
such beneficial interest for a Definitive Warrant or to transfer such
beneficial interest to a Person who takes delivery thereof in the form of a
Definitive Warrant, then, upon satisfaction of the conditions set forth in Section
3.5(b)(ii) hereof, the Warrant Agent shall cause the amount of the
applicable Global Warrant to be reduced accordingly pursuant to Section
3.5(g) hereof, and the Company shall execute and the Warrant Agent shall
countersign and deliver to the Person designated in the instructions a
Definitive Warrant in the appropriate principal amount.  Any Definitive Warrant issued in exchange for
a beneficial interest pursuant to this Section 3.5(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Warrant Registrar through instructions from the Depositary and the Participant
or Indirect Participant.  The Warrant
Agent shall deliver such Definitive Warrants to the Persons in whose names such
Warrants are so registered.  Any
Definitive Warrant issued in exchange for a beneficial interest pursuant to
this Section 3.5(c)(iii) shall not bear the Private Placement Legend.

 

(d)                                 Transfer and Exchange of Definitive Warrants
for Beneficial Interests.

 

(i)                                     Restricted Definitive Warrants to Beneficial
Interests in Restricted Global Warrants.  If any holder of a Restricted
Definitive Warrant proposes to exchange such Warrant for a beneficial interest
in a Restricted Global Warrant or to transfer such Restricted Definitive
Warrants to a Person who takes delivery thereof in the form of a beneficial interest
in a Restricted Global Warrant, then, upon receipt by the Warrant Registrar of
the following documentation:

 

(A)                              if the holder of such Restricted Definitive
Warrant proposes to exchange such Warrant for a beneficial interest in a
Restricted Global Warrant, a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (2)(b) thereof;

 

(B)                                if such Restricted Definitive Warrant is
being transferred to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (1) thereof;

 

(C)                                if such Restricted Definitive Warrant is
being transferred to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(2) thereof;

 

(D)                               if such Restricted Definitive Warrant is
being transferred pursuant to an exemption from the registration requirements
of the Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;

 

(E)                                 if such Restricted Definitive Warrant is
being transferred to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities Act other than
those listed in subparagraphs (B)

 

11

 

through (D) above, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable; or

 

(F)                                 if such Restricted Definitive Warrant is
being transferred to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(b) thereof;

 

the Warrant Agent shall
cancel the Restricted Definitive Warrant, increase or cause to be increased the
amount of, in the case of clause (A) above, the appropriate Restricted
Global Warrant, in the case of clause (B) above, the 144A Global
Warrant, in the case of clause (C) above, the Regulation S Global
Warrant, and in all other cases, the IAI Global Warrant.

 

(ii)                                  Restricted Definitive Warrants to Beneficial
Interests in Unrestricted Global Warrants.  A holder of a Restricted
Definitive Warrant may exchange such Warrant for a beneficial interest in an
Unrestricted Global Warrant or transfer such Restricted Definitive Warrant to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Warrant only if the Warrant Registrar receives the
following:

 

(A)                              if the holder of such Definitive Warrants
proposes to exchange such Warrants for a beneficial interest in the
Unrestricted Global Warrant, a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (1)(c) thereof; or

 

(B)                                if the holder of such Definitive Warrants
proposes to transfer such Warrants to a Person who shall take delivery thereof
in the form of a beneficial interest in the Unrestricted Global Warrant, a
certificate from such holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;

 

and, in each such case set
forth in this subparagraph (ii), if the Warrant Registrar so requests or
if the Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Warrant Registrar to the effect that such exchange
or transfer is in compliance with the Securities Act and that the restrictions
on transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.

 

Upon
satisfaction of the conditions of any of the subparagraphs in this Section
3.5(d)(ii), the Warrant Agent shall cancel the Definitive Warrants and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Warrant.

 

(iii)                               Unrestricted Definitive Warrants to
Beneficial Interests in Unrestricted Global Warrants.  A
holder of an Unrestricted Definitive Warrant may exchange such Warrant for a
beneficial interest in an Unrestricted Global Warrant or transfer such
Definitive Warrants to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Warrant at any time.  Upon receipt of a request for such

 

12

 

an exchange or transfer, the
Warrant Agent shall cancel the applicable Unrestricted Definitive Warrant and increase
or cause to be increased the amount of one of the Unrestricted Global Warrants.

 

If any such exchange or
transfer from a Definitive Warrant to a beneficial interest is effected
pursuant to subparagraphs (ii)(B) or (iii) above at a time when
an Unrestricted Global Warrant has not yet been issued, the Company shall issue
and, upon receipt of an Warrant Countersignature Order in accordance with Section
3.2 hereof, the Warrant Agent shall countersign one or more Unrestricted
Global Warrants in the number equal to the number of beneficial interests of
Definitive Warrants so transferred.

 

(e)                                  Transfer and Exchange of Definitive Warrants
for Definitive Warrants.  Upon request by a holder of Definitive
Warrants and such holder’s compliance with the provisions of this Section
3.5(e), the Warrant Registrar shall register the transfer or exchange of
Definitive Warrants.  Prior to such
registration of transfer or exchange, the requesting holder shall present or
surrender to the Warrant Registrar the Definitive Warrants duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Warrant Registrar duly executed by such holder or by its attorney, duly
authorized in writing.  In addition, the
requesting holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 3.5(e).

 

(i)                                     Restricted Definitive Warrants to Restricted
Definitive Warrants.  Any Restricted Definitive Warrant may be
transferred to and registered in the name of Persons who take delivery thereof
in the form of a Restricted Definitive Warrant if the Warrant Registrar
receives the following:

 

(A)                              if the transfer will be made pursuant to Rule
144A, then the transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item (1) thereof;

 

(B)                                if the transfer will be made pursuant to Rule
903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item (2) thereof; or

 

(C)                                if the transfer will be made pursuant to any
other exemption from the registration requirements of the Securities Act, then
the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.

 

(ii)                                  Restricted Definitive Warrants to
Unrestricted Definitive Warrants.  Any Restricted Definitive
Warrant may be exchanged by the holder thereof for an Unrestricted Definitive
Warrant or transferred to a Person or Persons who take delivery thereof in the
form of an Unrestricted Definitive Warrant if the Warrant Registrar receives
the following:

 

(A)                              if the holder of such Restricted Definitive
Warrants proposes to exchange such Warrants for an Unrestricted Definitive
Warrant, a certificate from

 

13

 

such holder in the form of Exhibit
C hereto, including the certifications in item (1)(d) thereof; or

 

(B)                                if the holder of such Restricted Definitive
Warrants proposes to transfer such Warrants to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Warrant, a certificate from
such holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;

 

and, in each such case set
forth in this subparagraph (ii), if the Warrant Registrar so requests,
an Opinion of Counsel in form reasonably acceptable to the Warrant Registrar to
the effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance with
the Securities Act.

 

(iii)                               Unrestricted Definitive Warrants to Unrestricted
Definitive Warrants.  A holder of Unrestricted Definitive Warrants
may transfer such Warrants to a Person who takes delivery thereof in the form
of an Unrestricted Definitive Warrant. 
Upon receipt of a request to register such a transfer, the Warrant
Registrar shall register the Unrestricted Definitive Warrants pursuant to the
instructions from the holder thereof.

 

(f)                                    Legends.  The following legends shall
appear on the face of all Global Warrants and Definitive Warrants issued under
this Warrant Agreement unless specifically stated otherwise in the applicable
provisions of this Warrant Agreement.

 

(i)                                     Private Placement Legend.

 

(A)                              Except as permitted by subparagraph (B)
below, each Global Warrant and each Definitive Warrant (and all Warrants issued
in exchange therefor or substitution thereof) shall bear the legend in
substantially the following form:

 

“THIS SECURITY AND THE
WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY, THE WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

 

THE HOLDER OF THIS SECURITY
AND THE WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE BY ITS ACCEPTANCE HEREOF
(1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), (B) IT IS A NON-U.S. PURCHASER AND IS
ACQUIRING THIS SECURITY AND THE WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE
IN AN OFFSHORE TRANSACTION WITHIN THE

 

14

 

MEANING OF REGULATION S
UNDER THE SECURITIES ACT, OR (C) IT IS AN INSTITUTIONAL “ACCREDITED INVESTOR”
WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT, AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY AND THE WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE, PRIOR TO THE
DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
“ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY AND THE
WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S, OR TRANSFER AGENT’S, AS APPLICABLE,
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E),
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING
CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE OR
TRANSFER AGENT.

 

THE HOLDER OF THIS SECURITY
AND THE WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE, BY ITS ACCEPTANCE
HEREOF, AGREES NOT TO ENGAGE IN ANY HEDGING TRANSACTION UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT. THE HOLDER OF THIS SECURITY AND THE WARRANT SHARES TO
BE ISSUED UPON ITS EXERCISE, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR ANY INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THESE LEGENDS.”

 

15

 

(B)                                Notwithstanding the foregoing, any Global
Warrant or Definitive Warrant issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii)
or (f) to this Section 3.5 (and all Warrants issued in exchange
therefor or substitution thereof) shall not bear the Private Placement Legend.

 

(ii)                                  Global Warrant Legend. 
Each Global Warrant shall bear a legend in substantially the following
form:

 

“THIS GLOBAL WARRANT IS HELD
BY THE DEPOSITARY (AS DEFINED IN THE WARRANT AGREEMENT GOVERNING THIS WARRANT)
OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND
IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE
WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 3.5 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5(a) OF THE WARRANT AGREEMENT,
(III) THIS GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR
CANCELLATION PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS
GLOBAL WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY.”

 

(iii)                               Unit Legend.  Each Warrant issued prior to
the Separation Date shall bear a legend in substantially the following form:

 

“THIS SECURITY WAS INITIALLY
ISSUED AS PART OF AN ISSUANCE OF UNITS (THE “UNITS”), EACH OF WHICH CONSISTS OF
$1,000 PRINCIPAL AMOUNT OF EITHER THE COMPANY’S 12% SENIOR SECURED NOTES DUE
2008 OR SENIOR SECURED FLOATING RATE NOTES DUES 2008 (THE “NOTES”) AND ONE
WARRANT TO PURCHASE ONE SHARE OF THE COMPANY’S COMMON STOCK (THE “WARRANTS”).

 

PRIOR TO THE EARLIEST TO
OCCUR OF (I) 180 DAYS AFTER THE CLOSING OF THE OFFERING OF THE UNITS, (II) THE
DATE ON WHICH A REGISTRATION STATEMENT FOR A REGISTERED EXCHANGE OFFER WITH
RESPECT TO THE NOTES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (III) THE
DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE WARRANT SHARES IS
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, AND (IV) SUCH DATE AS JEFFERIES &
COMPANY, INC. IN ITS SOLE DISCRETION SHALL DETERMINE, THE SECURITY EVIDENCED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY
BE TRANSFERRED OR EXCHANGED ONLY AS A UNIT.”

 

(iv)                              Regulation S Legend. 
Each Warrant that is a Registrable Security and issued pursuant to
Regulation S shall bear the following legend on the face thereof:

 

16

 

“THIS WARRANT AND THE
SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT AND THE WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S.
PERSON UNLESS REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”) OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.  IN ORDER TO EXERCISE THIS
WARRANT, THE HOLDER MUST FURNISH TO THE COMPANY AND THE WARRANT AGENT EITHER
(A) A WRITTEN CERTIFICATION THAT IT IS NOT A U.S. PERSON AND THE WARRANT IS NOT
BEING EXERCISED ON BEHALF OF A U.S. PERSON OR (B) A WRITTEN OPINION OF COUNSEL
TO THE EFFECT THAT THE SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH
SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.  TERMS IN THIS LEGEND HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.”

 

(g)                                 Cancellation and/or Adjustment of Global
Warrants.  At such time as all beneficial interests in
a particular Global Warrant have been exercised or exchanged for Definitive
Warrants or a particular Global Warrant has been exercised, redeemed,
repurchased or canceled in whole and not in part, each such Global Warrant
shall be returned to or retained and canceled by the Warrant Agent in
accordance with Section 3.8 hereof. 
At any time prior to such cancellation, if any beneficial interest in a
Global Warrant is exercised or exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Warrant or for Definitive Warrants, the amount of Warrants represented
by such Global Warrant shall be reduced accordingly and an endorsement shall be
made on such Global Warrant by the Warrant Agent or by the Depositary at the
direction of the Warrant Agent to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global
Warrant, such other Global Warrant shall be increased accordingly and an
endorsement shall be made on such Global Warrant by the Warrant Agent or by the
Depositary at the direction of the Warrant Agent to reflect such increase.

 

(h)                                 General Provisions Relating to Transfers and
Exchanges.

 

(i)                                     To permit registrations of transfers and
exchanges, the Company shall execute and the Warrant Agent shall countersign
Global Warrants and Definitive Warrants upon the Company’s order or at the
Warrant Registrar’s request.

 

(ii)                                  No service charge shall be made to a holder
of a beneficial interest in a Global Warrant or to a holder of a Definitive
Warrant for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith.

 

(iii)                               All Global Warrants and Definitive Warrants
issued upon any registration of transfer or exchange of Global Warrants or
Definitive Warrants shall be the duly authorized, executed and issued warrants
for Common Stock of the Company, not subject

 

17

 

to any preemptive rights,
and entitled to the same benefits under this Warrant Agreement, as the Global
Warrants or Definitive Warrants surrendered upon such registration of transfer
or exchange.

 

(iv)                              Prior to due presentment for the registration
of a transfer of any Warrant, the Warrant Agent, and the Company may deem and
treat the Person in whose name any Warrant is registered as the absolute owner
of such Warrant for all purposes and none of the Warrant Agent, or the Company
shall be affected by notice to the contrary.

 

(v)                                 The Warrant Agent shall countersign Global
Warrants and Definitive Warrants in accordance with the provisions of Section
3.2 hereof.

 

(i)                                     Facsimile Submissions to Warrant Agent.  All
certifications, certificates and Opinions of Counsel required to be submitted
to the Warrant Registrar pursuant to this Section 3.5 to effect a
registration of transfer or exchange may be submitted by facsimile.

 

Notwithstanding anything
herein to the contrary, as to any certificates and/or certifications delivered
to the Warrant Registrar pursuant to this Section 3.5, the Warrant
Registrar’s duties shall be limited to confirming that any such certifications
and certificates delivered to it are in the form of Exhibits B and C
attached hereto.  The Warrant Registrar
shall not be responsible for confirming the truth or accuracy of
representations made in any such certifications or certificates.  As to any Opinions of Counsel delivered
pursuant to this Section 3.5, the Warrant Registrar may rely upon, and
be fully protected in relying upon, such opinions.

 

3.6.                              Replacement Warrants.

 

If any mutilated Warrant is
surrendered to the Warrant Agent or the Company and the Warrant Agent receives
evidence to its satisfaction of the destruction, loss or theft of any Warrant,
the Company shall issue and the Warrant Agent, upon receipt of a Warrant
Countersignature Order, shall countersign a replacement Warrant if the Warrant
Agent’s requirements are met.  If
required by the Warrant Agent or the Company, an indemnity bond must be
supplied by the holder that is sufficient in the judgment of the Warrant Agent
and the Company to protect the Company, the Warrant Agent, any Agent and any
agent for purposes of the countersignature from any loss that any of them may
suffer if a Warrant is replaced.  The
Company may charge for its expenses in replacing a Warrant.

 

Every replacement Warrant is
an additional warrant of the Company and shall be entitled to all of the
benefits of this Warrant Agreement equally and proportionately with all other
Warrants duly issued hereunder.

 

3.7.                              Temporary Warrants.

 

Until certificates
representing Warrants are ready for delivery, the Company may prepare and the
Warrant Agent, upon receipt of a Warrant Countersignature Order, shall issue
temporary Warrants.  Temporary Warrants
shall be substantially in the form of certificated Warrants but may have
variations that the Company considers appropriate for temporary Warrants and as
shall be reasonably acceptable to the Warrant Agent.  Without unreasonable delay, the Company shall

 

18

 

prepare and the Warrant Agent shall countersign definitive Warrants in
exchange for temporary Warrants.

 

Holders of temporary
Warrants shall be entitled to all of the benefits of this Warrant Agreement.

 

3.8.                              Cancellation.

 

Subject to Section 3.5(g)
hereof, the Company at any time may deliver Warrants to the Warrant Agent for
cancellation.  The Warrant Registrar and
Warrant Paying Agent shall forward to the Warrant Agent any Warrants
surrendered to them for registration of transfer, exchange or exercise.  The Warrant Agent and no one else shall
cancel all Warrants surrendered for registration of transfer, exchange,
exercise, replacement or cancellation and shall destroy canceled Warrants
(subject to the record retention requirement of the Exchange Act).  Certification of the destruction of all
canceled Warrants shall be delivered to the Company.  The Company may not issue new Warrants to replace Warrants that
have been exercised or that have been delivered to the Warrant Agent for
cancellation.

 

Section 4.                                            Separation of Warrants; Exercise of Warrants;
Terms of Warrants.

 

(a)                                  The Notes and Warrants will not be separately
transferable until the Separation Date. 
Subject to the terms of this Agreement, each Warrant holder shall have
the right, which may be exercised during the period commencing at the opening
of business on the Separation Date and until 5:00 p.m., New York City time on
April 15, 2008 (the “Exercise Period”), to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the holder may at
the time be entitled to receive on exercise of such Warrants and payment of the
Exercise Price (i) in cash, by wire transfer or by certified or official bank
check payable to the order of the Company, (ii) by tendering Notes having an
Accreted Value (as defined in the Indenture) at the time of tender equal to the
Exercise Price then in effect, (iii) by tendering Warrants as set forth below
or (iv) any combination of cash, Notes or Warrants. Each holder may elect, upon
exercise of its Warrants during the Exercise Period, to receive Warrant Shares
on a net basis, such that, without the exchange of any funds, the holder will
receive such number of Warrant Shares as shall equal the product of (A) the
number of Warrant Shares for which such Warrant is exercisable as of the date
of exercise (if the Exercise Price were being paid in cash) and (B) the
Cashless Exercise Ratio.  The “Cashless
Exercise Ratio” shall equal a fraction the numerator of which is the Market
Value (as defined below) per share of Common Stock minus the Exercise Price per
share as of the date of exercise and the denominator of which is the Market
Value per share on the date of exercise. 
Each Warrant not exercised prior to 5:00 p.m., New York City time, on
April 15, 2008 (the “Expiration Date”) shall become void and all rights
thereunder and all rights in respect thereof under this agreement shall cease
as of such time.  The Warrant Agent
shall have no obligation to calculate the Cashless Exercise Ratio.  No adjustments as to dividends will be made
upon exercise of the Warrants.

 

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

 

19

 

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

 

(b)                                 In order to exercise all or any of the
Warrants represented by a Warrant Certificate, (i) in the case of a Definitive
Warrant, the holder thereof must surrender upon exercise the Warrant
Certificate to the Company at the corporate trust office of the Warrant Agent
set forth in Section 15 hereof, (ii) in the case of a book-entry
interest in a Global Warrant, the exercising Participant whose name appears on
a securities position listing of the Depositary as the holder of such
book-entry interest must comply with the Depositary’s procedures relating to
the exercise of such book-entry interest in such Global Warrant and (iii) in
the case of interests in both Global Warrants and Definitive Warrants, the
holder thereof or the Participant, as applicable, shall deliver to the Company
at the corporate trust office of the Warrant Agent the form of election to
purchase on the reverse thereof duly completed and signed, which signature
shall be medallion guaranteed by an institution which is a member of a
Securities Transfer Association recognized signature guarantee program, and
upon payment to the Warrant Agent for the account of the Company of the
Exercise Price, for the number of Warrant Shares in respect of which such
Warrants are then exercised. Payment of the aggregate Exercise Price shall be
made in accordance with Section 4(a) hereof.

 

(c)                                  Subject to the provisions of Section 5
hereof, upon compliance with clause (b) above, the Company shall deliver
or cause to be delivered with all reasonable dispatch, to or to the written
order of the holder and in such name or names as the holder may designate, a
certificate or certificates for the number of whole Warrant Shares issuable
upon the exercise of such Warrants or other securities or property to which
such holder is entitled hereunder, together with cash as provided in Section
9 hereof; provided that if any consolidation, merger or lease or
sale of assets is proposed to be effected by the Company or its subsidiaries as
described in Section 8(m) hereof, or a tender offer or an exchange offer
for shares of Common Stock shall be made, upon such surrender of Warrants and
payment of the Exercise Price in accordance with clause (b) above, the
Company shall, as soon as possible, but in any event not later than two
business days thereafter, deliver or cause to be delivered the full number of
Warrant Shares issuable upon the exercise of such Warrants in the manner
described in this sentence or other securities or property to which such holder
is entitled hereunder, together with cash as provided in Section 9
hereof. Such certificate or certificates shall be deemed to have been issued
and any Person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of
such Warrants and payment of the Exercise Price.

 

(d)                                 The Warrants shall be exercisable, at the
election of the holders thereof, either in full.  If less than all the Warrants represented by a Warrant
Certificate are exercised, such Warrant Certificate shall be surrendered and a
new Warrant Certificate of the same tenor and for

 

20

 

the number of Warrants which were not exercised shall be executed by
the Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as
may be directed in writing by the holder, and shall deliver or cause to be
delivered the new Warrant Certificate to the Person or Persons entitled to
receive the same.

 

(e)                                  All Warrant Certificates surrendered upon
exercise of Warrants shall be cancelled by the Warrant Agent.  Such cancelled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner satisfactory to the Company.  The Warrant Agent shall report promptly to
the Company with respect to Warrants exercised and concurrently pay to the
Company all monies received by the Warrant Agent for the purchase of the
Warrant Shares through the exercise of such Warrants.

 

(f)                                    The Warrant Agent shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the holders during normal business hours at its office.  The Company shall supply the Warrant Agent
from time to time with such numbers of copies of this Agreement as the Warrant
Agent may request.

 

Section 5.                                            Payment of Taxes.

 

The Company shall pay all
documentary stamp taxes attributable to the initial issuance of Warrant Shares
upon the exercise of Warrants; provided that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue of any Warrant Certificates or any certificates
for Warrant Shares in a name other than that of the registered holder of a
Warrant Certificate surrendered upon the exercise of a Warrant, and the Company
shall not be required to issue or deliver such Warrant Certificates unless or
until the Person or Persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.

 

Section 6.                                            Reservation of Warrant Shares; Registration
of Warrant Shares.

 

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

 

(b)                                 The Company or, if appointed, the transfer
agent for the Common Stock (the “Transfer Agent”) and every subsequent
transfer agent for any shares of the Company’s capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will be irrevocably
authorized and directed at all times to reserve such number of authorized
shares as shall be required for such purpose. 
The Company shall keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company’s capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants.  The
Warrant Agent is hereby irrevocably authorized to requisition from time to time
from such Transfer Agent the stock certificates required to honor outstanding
Warrants upon exercise thereof in accordance with the terms of this
Agreement.  The Company shall supply such

 

21

 

Transfer Agent with duly executed certificates for such purposes and
shall provide or otherwise make available any cash which may be payable as
provided in Section 9 hereof. 
The Company shall furnish such Transfer Agent a copy of all notices of
adjustments, and certificates related thereto, transmitted to each holder
pursuant to Section 11 hereof.

 

(c)                                  Before taking any action which would cause an
adjustment pursuant to Section 8 hereof to reduce the Exercise Price
below the then par value (if any) of the Warrant Shares, the Company shall take
any corporate action which may, in the opinion of its counsel (which may be
counsel employed by the Company), be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares at the
Exercise Price as so adjusted.

 

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

 

(e)                                  The Company has agreed pursuant to the Equity
Registration Rights Agreement to, within 90 days of the Closing Date, use
reasonable best efforts to file a shelf registration statement on an
appropriate form under the Securities Act covering the resale of the Warrant
Shares.  The Company will use reasonable
best efforts to cause such registration statement to become effective within
180 days of the Closing Date. The Company will use its reasonable best efforts
to keep such registration statement continuously effective under the Securities
Act in order to permit the resale of the Warrant Shares by the holders thereof
for the earlier of (i) two years or (ii) until such time as all registrable
securities have been sold pursuant to such registration statement. In addition,
pursuant to the Equity Registration Rights Agreement, subject to certain
limitations, the Company and the Parent have agreed that if at any time after
the Closing Date the Company or the Parent proposes to file a registration
statement under the Securities Act with respect to an offering by the Company
or the Parent, respectively, for its own account or for the account of any
holders of its common stock, then the Company or the Parent, respectively,
shall give written notice of such proposed filing to the holders of Warrants
and Warrant Shares as soon as practicable (but in no event fewer than 20 days
before the anticipated filing date) and such notice shall offer such holders
the opportunity to register such number of Warrant Shares as each holder may
request in writing within 20 days after receipt of such written notice from the
Company or the Parent, respectively (which request shall specify the Warrant
Shares intended to be disposed of by such selling holder and the intended
method of distribution thereof); provided that any holder of Warrants so
requesting shall agree, upon or prior to effectiveness of such registration
statement (but in no event earlier than the Separation Date), to exercise their
Warrants at least to the extent necessary for such holder to acquire the number
of Warrant Shares for which such holder has requested registration. The Company
or the Parent, respectively, shall use its reasonable best efforts to keep such
registration statement continuously effective under the Securities Act until at
least the earlier of (i) an aggregate of 180 days after the effective date
thereof or (ii) the consummation of the distribution by the holders of all of
the Warrant Shares covered thereby.

 

Section 7.                                            Obtaining Stock Exchange Listings.

 

The Company shall from time
to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed
on

 

22

 

a principal securities exchange, automated quotation system or other
market within the United States of America, if any, on which other shares of
Common Stock are then listed, if any.

 

Section 8.                                            Adjustment of Exercise Price and Number of
Warrant Shares Issuable.

 

The Exercise Price and the
number of Warrant Shares issuable upon the exercise of each Warrant shall be
subject to adjustment from time to time upon the occurrence of the events
enumerated in this Section 8; provided, that in no event shall
the Exercise Price be less than $0.01 per share of Common Stock.  For purposes of this Section 8, “Common
Stock” means shares now or hereafter authorized of any class of common
shares of the Company and any other stock of the Company, however designated,
that has the right (subject to any prior rights of any class or series of
preferred stock) to participate in any distribution of the assets or earnings
of the Company without limit as to per share amount.

 

In addition to the
adjustments required under this Section 8, the Company may, at any time
reduce the Exercise Price to any amount greater than or equal to $0.01 per
share for any period of time (but not less than 20 Business Days) deemed
appropriate by the Board of Directors of the Company.

 

(a)                                  Adjustment for Change in Capital Stock.  If
the Company (i) pays a dividend or makes a distribution on its Common Stock
payable in shares of its Common Stock, (ii) subdivides its outstanding shares
of Common Stock into a greater number of shares, (iii) combines its outstanding
shares of Common Stock into a smaller number of shares, (iv) makes a
distribution on its Common Stock in shares of its capital stock other than
Common Stock or (v) issues by reclassification of its Common Stock any shares
of its capital stock, then the Exercise Price in effect immediately prior to
such action shall, subject to the proviso to the first sentence of the first
paragraph of this Section 8, be proportionately adjusted so that the
holder of any Warrant thereafter exercised may receive the aggregate number and
kind of shares of capital stock of the Company which such holder would have
owned immediately following such action assuming the exercise of such Warrant
immediately prior to such action.

 

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

 

If, after an adjustment, a
holder of a Warrant upon exercise of it may receive shares of two or more
classes of capital stock of the Company, the Company shall determine, in good
faith, the allocation of the adjusted Exercise Price between the classes of
capital stock.  After such allocation,
the exercise privilege and the Exercise Price of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 8.  Such adjustment shall be made successively whenever any event
listed above shall occur.

 

(b)                                 Adjustment for Rights Issue.  If
the Company distributes any rights, options or warrants to all holders of its
Common Stock entitling them for a period expiring within 45 days after the
record date set forth below to subscribe for shares of Common Stock or
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock, in either case, at a

 

23

 

price per share less than the Fair Market Value (as defined in subsection
(g) of this Section 8) per share on that record date, the Exercise
Price shall be adjusted in accordance with the formula:

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  O

  	
  +

  	
   

  	
  N x P

  	
   

  
	
  E’

  	
   

  	
  =

  	
   

  	
  E

  	
  x

  	
   

  	
   

  	
   

  	
  M

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  O+N

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

where:

 

	
  E’

  	
  =

  	
   

  	
  the adjusted Exercise Price.

  
	
  E

  	
  =

  	
   

  	
  the current Exercise Price.

  
	
  O

  	
  =

  	
   

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

  
	
  N

  	
  =

  	
   

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

  
	
  P

  	
  =

  	
   

  	
  the aggregate price per share of the additional shares.

  
	
  M

  	
  =

  	
   

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

  

 

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

 

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

 

	
  E’

  	
   

  	
  =

  	
   

  	
  E

  	
  x

  	
  M

  	
  -

  	
  F

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  M

  	
   

  

where:

 

	
  E’

  	
   

  	
  =

  	
   

  	
  the adjusted Exercise Price.

  
	
  E

  	
   

  	
  =

  	
   

  	
  the current Exercise Price.

  
	
  M

  	
   

  	
  =

  	
   

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

  
	
  F

  	
   

  	
  =

  	
   

  	
  the fair market value on the record date of the debt securities,
  preferred stock, assets, securities,

  
	
   

  	
   

  	
   

  	
   

  	
  rights or warrants to be distributed in respect of

  
	
   

  	
   

  	
   

  	
   

  	
  one share of Common Stock as determined in

  
	
   

  	
   

  	
   

  	
   

  	
  good faith by the Board of Directors of the Company.

  

 

24

 

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

 

This Section 8(c)
shall not apply to cash dividends or other cash distributions paid out of
consolidated current or retained earnings as shown on the books of the Company
prepared in accordance with generally accepted accounting principles.  In addition, this Section 8(c) shall
not apply to rights, options or warrants referred to in Section 8(b)
hereof.

 

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

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  P

  	
   

  
	
  E’

  	
   

  	
  =

  	
   

  	
  E

  	
  x

  	
  O

  	
  +

  	
   

  	
  M

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  A

  	
   

  

where:

 

	
  E’

  	
   

  	
  =

  	
   

  	
  the adjusted Exercise Price.

  
	
  E

  	
   

  	
  =

  	
   

  	
  the then current Exercise Price.

  
	
  O

  	
   

  	
  =

  	
   

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

  
	
  P

  	
   

  	
  =

  	
   

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

  
	
  M

  	
   

  	
  =

  	
   

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

  
	
  A

  	
   

  	
  =

  	
   

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

  

 

 

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

 

This subsection (d)
shall not apply to:

 

(1)                                  any of the transactions described in subsections
(a), (b) and (c) of this Section 8,

 

(2)                                  the exercise of Warrants, or the conversion,
exchange or exercise of other securities convertible into or exchangeable or
exercisable for Common Stock the issuance of which requires an adjustment to be
made under Section 8(e),

 

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

 

25

 

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

 

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

 

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

 

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

 

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

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  P

  	
   

  
	
  E’

  	
   

  	
  =

  	
   

  	
  E

  	
  x

  	
  O

  	
  +

  	
   

  	
  M

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  O

  	
  +

  	
   

  	
  D

  	
   

  

 

where:

 

	
  E’

  	
   

  	
  =

  	
   

  	
  the adjusted Exercise Price.

  
	
  E

  	
   

  	
  =

  	
   

  	
  the then current Exercise Price.

  
	
  O

  	
   

  	
  =

  	
   

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

  
	
  P

  	
   

  	
  =

  	
   

  	
  the aggregate consideration received for the issuance of such
  securities.

  
	
  M

  	
   

  	
  =

  	
   

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

  

 

26

 

	
  D

  	
   

  	
  =

  	
   

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

  

 

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

 

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

 

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

 

(f)                                    Consideration Received.  For
purposes of any computation respecting consideration received pursuant to subsections
(d) and (e) of this Section 8, the following shall apply:

 

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

 

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

 

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

 

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

 

27

 

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

 

(g)                                 Fair Market Value.  For
purposes of Sections 8 (b), (c), (d) and (e)
hereof, the “Fair Market Value” per share of Common Stock at any date of
determination shall be (1) in connection with a sale by the Company to a party
that is not an Affiliate of the Company in an arm’s-length transaction (a “Non-Affiliate
Sale”), the price per security at which such security is sold and (2) in
connection with any sale by the Company to an Affiliate of the Company, (a) the
last price per security at which such security was sold in a Non-Affiliate Sale
within the three-month period preceding such date of determination and (b), if clause
(a) is not applicable, the fair market value of such security determined in
good faith by (i) a majority of the Board of Directors of the Company,
including a majority of the Disinterested Directors, and approved in a Board
resolution delivered to the Warrant Agent or (ii) a nationally recognized
investment banking, appraisal or valuation firm, which is not an Affiliate of
the Company, in each case, taking into account, among all other factors deemed
relevant by the Board of Directors or such investment banking, appraisal or
valuation firm, the trading price and volume of such security on any national
securities exchange or automated quotation system on which such security is
traded.

 

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

 

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

 

(h)                                 When De Minimis Adjustment May Be Deferred.  No
adjustment in the Exercise Price need be made unless the adjustment would
require an increase or decrease of at least 1% in the Exercise Price.  Any adjustments that are not made shall be
carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 8
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be, it being understood that no such rounding shall be made under subsection
(p).

 

(i)                                     When No Adjustment Required. 
With respect to Warrants of any holder, no adjustment need be made for a
transaction referred to Section 8(a), (b), (c), (d),
(e) or (f) hereof, if such holder is to participate (without
being required to exercise its Warrants) in the transaction

 

28

 

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

 

(j)                                     Notice of Adjustment. 
Whenever the Exercise Price is adjusted, the Company shall provide the
notices required by Section 10 hereof.

 

(k)                                  Reorganization of Company. 
Immediately after the date hereof, if the Company consolidates or merges
with or into, or transfers or leases all or substantially all its assets to, any
Person, upon consummation of such transaction the Warrants shall automatically
become exercisable for the kind and amount of securities, cash or other assets
which the holder of a Warrant would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised the
Warrant immediately before the effective date of the transaction. Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than the Company, or the
Person to which such sale or conveyance shall have been made, shall enter into
(i) a supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the adjustments
provided for in this Section 8(l) and (ii) a supplement to the Equity
Registration Rights Agreement providing for the assumption of the Company’s
obligations thereunder.  The successor
Company shall mail to Warrant holders a notice describing the supplemental
Warrant Agreement and Equity Registration Rights Agreement.  If the issuer of securities deliverable upon
exercise of Warrants under the supplemental Warrant Agreement is an Affiliate
of the formed, surviving, transferee or lessee corporation, such issuer shall
join in the supplemental Warrant Agreement and Equity Registration Rights
Agreement.  If this Section 8(l)
shall be applicable, Sections 8(a), (b), (c), (d), (e)
and (f) hereof shall not be applicable.

 

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

 

(m)                               Warrant Agent’s Disclaimer.  The
Warrant Agent shall have no duty to determine when an adjustment under this Section
8 should be made, how it should be made or what it should be.  The Warrant Agent shall have no duty to
determine whether a supplement warrant agreement under Section 8(k) need
be entered into or whether any provisions of a supplemental Warrant Agreement
under Section 8(l) hereof are correct. 
The Warrant Agent makes no representation as to the validity or value of
any securities or assets issued upon exercise of Warrants.  The Warrant Agent shall not be responsible
for the Company’s failure to comply with this Section 8.

 

(n)                                 When Issuance or Payment May Be Deferred.  In
any case in which this Section 8 shall require that an adjustment in the
Exercise Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event (i) issuing to
the holder of any Warrant exercised after such record date the Warrant Shares
and other capital stock of the Company, if any, issuable upon such exercise
over and above the Warrant Shares

 

29

 

and other capital stock of the Company, if any, issuable upon such
exercise on the basis of the Exercise Price and (ii) paying to such holder any
amount in cash in lieu of a fractional share pursuant to Section 10
hereof; provided that the Company shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder’s right to receive
such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.

 

(o)                                 Adjustment in Number of Shares. 
Upon each adjustment of the Exercise Price pursuant to this Section 8,
each Warrant outstanding prior to the making of the adjustment in the Exercise
Price shall thereafter evidence the right to receive upon payment of the
adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest hundredth) obtained from the following formula:

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  N’

  	
   

  	
  =

  	
   

  	
  N

  	
  x

  	
  E

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  E’

  	
   

  	
   

  

 

where:

 

	
  N’

  	
   

  	
  =

  	
   

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

  
	
  N

  	
   

  	
  =

  	
   

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

  
	
  E’

  	
   

  	
  =

  	
   

  	
  the adjusted Exercise Price.

  
	
  E

  	
   

  	
  =

  	
   

  	
  the Exercise Price prior to adjustment.

  

 

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

 

Section 9.                                            Fractional Interests.

 

The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants.  If more than one Warrant shall be presented
for exercise in full at the same time by the same holder, the number of full
Warrant Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of the Warrants so presented. 
If any fraction of a Warrant Share would, except for the provisions of
this Section 9, be issuable on the exercise of any Warrants (or
specified portion thereof), the Company shall pay an amount in cash equal to
the Fair Market Value per Warrant Share, as determined on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction, computed to the nearest whole U.S. cent.

 

Section 10.                                      Notices to Warrant Holders.

 

(a)                                  Upon any adjustment of the Exercise Price
pursuant to Section 8 hereof, the Company shall promptly thereafter (i)
cause to be filed with the Warrant Agent a certificate of a firm of independent
public accountants of recognized standing selected by the Board of Directors

 

30

 

of the Company (who may be the regular auditors of the Company) setting
forth the Exercise Price after such adjustment and setting forth in reasonable
detail the method of calculation and the facts upon which such calculations are
based and setting forth the number of Warrant Shares (or portion thereof)
issuable after such adjustment in the Exercise Price, upon exercise of a
Warrant and payment of the adjusted Exercise Price, which certificate shall be
conclusive evidence of the correctness of the matters set forth therein, and
(ii) cause to be given to each of the registered holders of Warrants at the
address appearing on the Warrant register for each such registered holder
written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 10.

 

(b)                                 In the event:

 

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

 

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

 

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

 

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

 

(v)                                 that the Company proposes to take any action
(other than actions of the character described in Section 8(a) hereof)
which would require an adjustment of the Exercise Price pursuant to Section
8 hereof;

 

then the Company shall cause
to be filed with the Warrant Agent and shall cause to be given to each of the
registered holders of Warrants at his address appearing on the Warrant
register, at least 20 days (or 10 days in any case specified in clauses (i)
or (ii) above) prior to the applicable record date hereinafter
specified, or promptly in the case of events for which there is no record date,
by first-class mail, postage prepaid, a written notice stating (x) the date as
of which the holders of record of shares of Common Stock to be entitled to
receive any such rights, options, warrants or distribution are to be
determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (z) the date on which any such

 

31

 

consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective or consummated, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange such
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this Section
10 or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.

 

(c)                                  Nothing contained in this Agreement or in any
of the Warrant Certificates shall be construed as conferring upon the holders
of Warrants the right to vote or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company.

 

Section 11.                                      Merger, Consolidation or Change of Name of
Warrant Agent.

 

(a)                                  Any corporation into which the Warrant Agent
may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant Agent shall be
a party, or any corporation succeeding to the business of the Warrant Agent,
shall be the successor to the Warrant Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for appointment
as a successor warrant agent under the provisions of Section 13 hereof.
In case at the time such successor to the Warrant Agent shall succeed to the
agency created by this Agreement, and in case at that time any of the Warrant
Certificates shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent; and in case at that time any of the Warrant Certificates shall
not have been countersigned, any successor to the Warrant Agent may countersign
such Warrant Certificates either in the name of the predecessor Warrant Agent
or in the name of the successor to the Warrant Agent; and in all such cases
such Warrant Certificates shall have the full force and effect provided in the
Warrant Certificates and in this Agreement.

 

(b)                                 In case at any time the name of the Warrant
Agent shall be changed and at such time any of the Warrant Certificates shall
have been countersigned but not delivered, the Warrant Agent whose name has
been changed may adopt the countersignature under its prior name, and in case
at that time any of the Warrant Certificates shall not have been countersigned,
the Warrant Agent may countersign such Warrant Certificates either in its prior
name or in its changed name, and in all such cases such Warrant Certificates
shall have the full force and effect provided in the Warrant Certificates and
in this Agreement.

 

Section 12.                                      Warrant Agent.

 

The Warrant Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Warrants, by
their acceptance thereof, shall be bound:

 

(a)                                  The statements contained herein and in the
Warrant Certificates shall be taken as statements of the Company and the
Warrant Agent assumes no responsibility for

 

32

 

the correctness of any of
the same except such as describe the Warrant Agent or action taken or to be
taken by it.  The Warrant Agent assumes
no responsibility with respect to the distribution of the Warrant Certificates
except as herein otherwise provided.

 

(b)                                 The Warrant Agent shall not be responsible
for any failure of the Company to comply with any of the covenants contained in
this Agreement or in the Warrant Certificates to be complied with by the
Company.

 

(c)                                  The Warrant Agent may consult at any time
with counsel satisfactory to it (who may be counsel for the Company) and the
Warrant Agent shall incur no liability or responsibility to the Company or to
any holder of any Warrant Certificate in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the opinion or
the advice of such counsel.

 

(d)                                 The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant Certificate for
any action taken in reliance on any Warrant Certificate, certificate of shares,
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.

 

(e)                                  The Company agrees to pay to the Warrant
Agent reasonable compensation for all services rendered by the Warrant Agent in
the execution of this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent in the execution of this Agreement.  The Company shall indemnify the Warrant
Agent against any and all losses, liabilities or expenses incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Warrant Agreement, including the costs and expenses of
enforcing this Agreement against the Company and defending itself against any
claim (whether asserted by the Company or any holder or any other person) or
liability in connection with the exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, liability or expense
may be attributable to its gross negligence or bad faith.  The Warrant Agent shall notify the Company
promptly of any claim for which it may seek indemnity.  Failure by the Warrant Agent to so notify
the Company shall not relieve the Company of its obligations hereunder.  The Company shall defend the claim and the
Warrant Agent shall cooperate in the defense. 
The Warrant Agent may have separate counsel and the Company shall pay
the reasonable fees and expenses of such counsel.  The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld, conditioned or
delayed.

 

(f)                                    The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or one or more
registered holders of Warrants shall furnish the Warrant Agent with reasonable
security and indemnity for any costs and expenses which may be incurred, but
this provision shall not affect the power of the Warrant Agent to take such
action as it may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced

 

33

 

by the Warrant Agent without
the possession of any of the Warrant Certificates or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrants, as their respective rights or interests
may appear.

 

(g)                                 The Warrant Agent, and any stockholder,
director, officer or employee of it, may buy, sell or deal in any of the
Warrants or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Warrant Agent under this Agreement. 
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.

 

(h)                                 The Warrant Agent shall act hereunder solely
as agent for the Company, and its duties shall be determined solely by the
provisions hereof.  The Warrant Agent
shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own gross negligence or bad
faith.

 

(i)                                     The Warrant Agent shall not at any time be
under any duty or responsibility to any holder of any Warrant Certificate to
make or cause to be made any adjustment of the Exercise Price or number of the
Warrant Shares or other securities or property deliverable as provided in this
Agreement, or to determine whether any facts exist which may require any of
such adjustments, or with respect to the nature or extent of any such
adjustments, when made, or with respect to the method employed in making the
same. The Warrant Agent shall not be accountable with respect to the validity
or value or the kind or amount of any Warrant Shares or of any securities or
property which may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other securities
will when issued be validly issued and fully paid and nonassessable, and makes
no representation with respect thereto.

 

(j)                                     The Warrant Agent shall not be required to
risk or expend its own funds on the performance of it obligations and duties
hereunder.

 

(k)                                  The obligations of the Company under this
Section 12 shall survive the exercise and the expiration of the Warrant
Certificates and the resignation and removal of the Warrant Agent.

 

(l)                                     The Warrant Agent shall not be under any
liability for interest on, and shall not be required to invest, any monies at
any time received by it pursuant to any of the provisions of this Agreement or
of the Warrant Certificates.

 

(m)                               Any corporation or bank into which the
Warrant Agent hereunder may be merged or converted, or any corporation or bank
with which the Warrant Agent may be consolidated, or any corporation or bank
resulting from any merger, conversion or consolidation to which the Warrant
Agent shall be a party, or any corporation or bank to which the Warrant Agent
shall sell or otherwise transfer all or substantially all of its

 

34

 

corporate trust business,
shall be the successor to the Warrant Agent under this Agreement (provided that
such corporation or bank shall be qualified as aforesaid) without the execution
or filing of any document or any further act on the part of any of the parties
hereto.

 

(n)                                 No Warrant Agent under this Agreement shall
be personally liable for any action or omission of any successor Warrant Agent.

 

Section 13.                                      Change of Warrant Agent.

 

If the Warrant Agent shall
resign or become incapable of acting as Warrant Agent, the Company shall
appoint a successor to such Warrant Agent. 
If the Company shall fail to make such appointment within a period of 30
days after it has been notified in writing of such incapacity by the Warrant
Agent or by the registered holder of a Warrant Certificate, then the registered
holder of any Warrant may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent.  Pending appointment of a successor to such Warrant Agent, either
by the Company or by such a court, the duties of the Warrant Agent shall be
carried out by the Company.  The holders
of a majority of the unexercised Warrants shall be entitled at any time to
remove the Warrant Agent and appoint a successor to such Warrant Agent.  Such successor to the Warrant Agent need not
be approved by the Company or the former Warrant Agent.  After appointment the successor to the
Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; provided that the former Warrant Agent shall
deliver and transfer to the successor to the Warrant Agent any property at the
time held by it hereunder and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose.  Failure to give any notice provided for in this Section 13,
however, or any defect therein, shall not affect the legality or validity of
the appointment of a successor to the Warrant Agent.

 

Section 14.                                      Reports.

 

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

 

(b)                                 The Company shall provide the Warrant Agent
with a sufficient number of copies of all such reports that the Warrant Agent
may be required to deliver to the holders of the Warrants and the Warrant
Shares under this Section 14.

 

35

 

Section 15.                                      Notices to Company and Warrant Agent.

 

Any notice or demand
authorized by this Agreement to be given or made by the Warrant Agent or by the
registered holder of any Warrant to or on the Company shall be sufficiently
given or made when received if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent) as follows:

 

Atlantic Express
Transportation Corp.

7 North Street

Staten Island, New York 10302-1205

Telecopier No: (718) 4442-9103

Attention:  Chief Financial Officer

 

With a copy to:

 

Latham & Watkins LLP

885 Third Avenue, Suite 100

New York, New York 10022-4834 

Telecopier No.:  (212) 751-4864

Attention:  Robert A. Zuccaro, Esq.

 

In case the Company shall
fail to maintain such office or agency or shall fail to give such notice of the
location or of any change in the location thereof, presentations may be made
and notices and demands may be served at the corporate trust office of the
Warrant Agent.

 

Any notice pursuant to this
Agreement to be given by the Company or by the registered holder(s) of any
Warrant to the Warrant Agent shall be sufficiently given when and if deposited
in the mail, first-class or registered, postage prepaid, addressed (until
another address is filed in writing by the Warrant Agent with the Company) to
and received by the Warrant Agent at its corporate trust office as follows:

 

The Bank of New York 

101 Barclay St. – 8W

New York, NY  10286

Telecopier No.: 646-835-8469

Attention:  Corporate Trust
Administration

 

With a copy to:

 

Carter Ledyard & Milburn
LLP

2 Wall Street

New York, NY 10005

Telecopier No.:  212-732-3232

Attention:  James Gadsden

 

36

 

Section 16.                                      Supplements and Amendments.

 

The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrants in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
materially adversely affect the interests of the holders of Warrants.  Any amendment or supplement to this
Agreement that has a materially adverse effect on the interests of the holders
of Warrants shall require the written consent of the holders of a majority of
the then outstanding Warrants (excluding Warrants held by the Company or any of
its Affiliates).  The consent of each
holder of Warrants affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (other than pursuant
to adjustments provided in this Agreement).

 

Section 17.                                      Successors.

 

All the covenants and
provisions of this Agreement by or for the benefit of the Company or the
Warrant Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.

 

Section 18.                                      Termination.

 

This Agreement shall
terminate at 5:00 p.m., New York City time on April 15, 2008.  Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been
exercised.  The provisions of Section
12 shall survive such termination.

 

Section 19.                                      Governing Law.

 

(a)                                  This Agreement and each Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with
the internal laws of said State.

 

(b)                                 Each of the parties hereto irrevocably
consents to the non-exclusive jurisdiction of Supreme Court of New York, New
York county and the United States District Court for the Southern District of
New York, New York county and waives trial by jury in any action or proceeding
with respect to this Agreement.

 

Section 20.                                      Benefits of this Agreement.

 

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

 

37

 

Section 21.                                      Counterparts.

 

This Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.

 

[Signature
Page Follows]

 

38

 

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

 

	
   

  	
  ATLANTIC EXPRESS TRANSPORTATION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOMENIC GATTO

  
	
   

  	
   

  	
  Name: Domenic Gatto

  
	
   

  	
   

  	
  Title:   President, CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK,

  
	
   

  	
  as Warrant Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JULIE SALOVITCH-MILLER

  
	
   

  	
   

  	
  Name: Julie Salovitch-Miller

  
	
   

  	
   

  	
  Title:   Vice President

  

 

 

EXHIBIT
A

 

[Form
of Warrant Certificate]

 

[Face]

 

[Insert the Unit Legend, if
applicable pursuant to the terms of the Warrant Agreement]

 

[Insert the Private
Placement Legend, if applicable pursuant to the terms of the Warrant Agreement]

 

[Insert the Global Warrant
Legend, if applicable pursuant to the terms of the Warrant Agreement]

 

[Insert the Regulation S
Legend, if applicable pursuant to the terms of the Warrant Agreement]

 

No.                                            Warrants

CUSIP
No.                             

 

Warrant
Certificate

 

ATLANTIC
EXPRESS TRANSPORTATION CORP.

 

This Warrant Certificate
certifies that Cede & Co., or its registered assigns, is the registered
holder of the number set forth above of Warrants expiring April 15, 2008 (the “Warrants”)
to purchase common shares, par value $0.01 (the “Common Stock”), of
Atlantic Express Transportation Corp., a New York corporation (the “Company”).  Each Warrant entitles the registered holder
upon exercise at any time from 9:00 a.m. on the Separation Date referred to
below until 5:00 p.m. New York City Time on April 15, 2008 to receive from the
Company 1.000 fully paid and nonassessable shares of Common Stock (the “Warrant
Shares”) at the initial exercise price (the “Exercise Price”) of
$0.01 per share payable upon surrender of this Warrant Certificate and payment
of the Exercise Price at the office or agency of the Warrant Agent, but only
subject to the conditions set forth herein and in the Warrant Agreement referred
to on the reverse hereof.  The Exercise
Price and number of Warrant Shares issuable upon exercise of the Warrants are
subject to adjustment upon the occurrence of certain events set forth in the
Warrant Agreement.

 

No Warrant may be exercised
after 5:00 p.m., New York City Time on April 15, 2008.  To the extent not exercised by such time any
such Warrant shall become void.

 

Reference is hereby made to
the further provisions of this Warrant Certificate set forth on the reverse
hereof and such further provisions shall for all purposes have the same effect
as though fully set forth at this place.

 

This Warrant Certificate
shall not be valid unless countersigned by the Warrant Agent, as such term is
used in the Warrant Agreement.

 

A-1

 

This Warrant Certificate
shall be governed by and construed in accordance with the internal laws of the
State of New York.

 

IN WITNESS WHEREOF, Atlantic
Express Transportation Corp. has caused this Warrant Certificate to be signed
below.

 

	
  DATED:  April 22, 2004

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ATLANTIC EXPRESS TRANSPORTATION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
  THE BANK OF NEW YORK,

  	
   

  
	
  as Warrant Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Signature

  	
   

  
						

 

A-2

 

[Reverse
of Warrant Certificate]

 

The Warrants evidenced by
this Warrant Certificate are part of a duly authorized issue of Warrants
expiring at 5:00 p.m. New York City time on April 15, 2008 entitling the holder
on exercise to receive shares of Common Stock, and are issued or to be issued
pursuant to a Warrant Agreement dated as of April 22, 2004 (the “Warrant
Agreement”), duly executed and delivered by the Company to The Bank of New
York, as warrant agent (the “Warrant Agent”), which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the Company
and the holders (the words “holders” or “holder” meaning the registered holders
or registered holder) of the Warrants. Capitalized terms used but not defined
herein have the meaning ascribed to such terms in the Warrant Agreement.  A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.

 

Warrants may be exercised at
any time on or after the Separation Date and on or before 5:00 p.m. New York
City time on April 15, 2008.  In order
to exercise all or any of the Warrants represented by this Warrant Certificate,
the holder must deliver to the Warrant Agent at its corporate trust office set
forth in Section 15 of the Warrant Agreement this Warrant Certificate and the
form of election to purchase on the reverse hereof duly completed and signed,
which signature shall be medallion guaranteed by an institution which is a
member of a Securities Transfer Association recognized signature guarantee
program, and upon payment to the Warrant Agent for the account of the Company
of the Exercise Price, for the number of Warrant Shares in respect of which
such Warrants are then exercised. No adjustment shall be made for any dividends
on any Common Stock issuable upon exercise of this Warrant.

 

The Warrant Agreement
provides that upon the occurrence of certain events the Exercise Price set
forth on the face hereof may, subject to certain conditions, be adjusted.  If the Exercise Price is adjusted, the
Warrant Agreement provides that the number of shares of Common Stock issuable
upon the exercise of each Warrant shall be adjusted.  No fractions of a share of Common Stock will be issued upon the
exercise of any Warrant, but the Company will pay the cash value thereof
determined as provided in the Warrant Agreement.

 

The Company has agreed
pursuant to an Equity Registration Rights Agreement dated as of April 22, 2004
by and among the Company, the Parent and the Initial Purchaser (the “Equity
Registration Rights Agreement”) to, within 90 days of the Closing Date,
file a shelf registration statement on an appropriate form under the Securities
Act covering the resale of the Warrant Shares. 
The Company will cause such registration statement to become effective
within 180 days of the Closing Date. The Company will use its reasonable best
efforts to keep such registration statement continuously effective under the
Securities Act in order to permit the resale of the Warrant Shares by the
holders thereof for two years. In addition, pursuant to the Equity Registration
Rights Agreement, subject to certain limitations, the Company and the Parent
have agreed that if at any time after the Closing Date the Company or the
Parent proposes to file a registration statement under the Securities Act with
respect to an offering by the Company or the Parent, respectively, for its own
account or for the account of any holders of its common stock, then the Company
or the Parent, respectively, shall give written notice of such

 

A-3

 

proposed filing to the holders of Warrants and Warrant Shares as soon
as practicable (but in no event fewer than 20 days before the anticipated
filing date) and such notice shall offer such holders the opportunity to
register such number of Warrant Shares as each holder may request in writing
within 20 days after receipt of such written notice from the Company or the
Parent, respectively (which request shall specify the Warrant Shares intended
to be disposed of by such selling holder and the intended method of
distribution thereof); provided that any holder of Warrants so
requesting shall agree, upon or prior to effectiveness of such registration
statement (but in no event earlier than the Separation Date), to exercise their
Warrants at least to the extent necessary for such holder to acquire the number
of Warrant Shares for which such holder has requested registration. The Company
or the Parent, respectively, shall use its reasonable best efforts to keep such
registration statement continuously effective under the Securities Act until at
least the earlier of (i) an aggregate of 180 days after the effective date
thereof or (ii) the consummation of the distribution by the holders of all of
the Warrant Shares covered thereby.

 

Warrant Certificates, when
surrendered at the corporate trust office of the Warrant Agent by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any service
charge, for another Warrant Certificate or Warrant Certificates of like tenor
evidencing in the aggregate a like number of Warrants.

 

Upon due presentation for
registration of transfer of this Warrant Certificate at the corporate trust
office of the Warrant Agent a new Warrant Certificate or Warrant Certificates
of like tenor and evidencing in the aggregate a like number of Warrants shall
be issued to the transferee(s) in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection
therewith.

 

The Company and the Warrant
Agent may deem and treat the registered holder(s) thereof as the absolute
owner(s) of this Warrant Certificate (notwithstanding any notation of ownership
or other writing hereon made by anyone), for the purpose of any exercise
hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice to the contrary.  Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.

 

A-4

 

[Form
of Election to Purchase]

 

(To
Be Executed Upon Exercise Of Warrant)

 

The undersigned hereby
irrevocably elects to exercise the right, represented by this Warrant
Certificate, to
receive               shares
of Common Stock and herewith tenders payment for such shares to the order of
ATLANTIC EXPRESS TRANSPORTATION CORP., in the amount of [Warrants] [Notes]
equal in [principal amount] [fair market value] to
$                  in
accordance with the terms hereof.  The
undersigned requests that a certificate for such shares be registered in the
name
of                          ,
whose address
is                            and
that such shares be delivered
to                      ,
whose address
is                          .  If said number of shares is less than all of
the shares of Common Stock purchasable hereunder, the undersigned requests that
a new Warrant Certificate representing the remaining balance of such shares be
registered in the name
of                                         ,
whose address
is                                    ,
and that such Warrant Certificate be delivered to whose address
is                                         .

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature Guaranteed

  

 

Signatures must be
guaranteed by an “eligible guarantor institution” meeting the requirements of
the Warrant Agent, which requirements include membership or participation in
the Security Transfer Agent Medallion Program (“Stamp”) or such other
“signature guarantee program” as may be determined by the Warrant Agent in
addition to, or in substitution for, Stamp, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

A-5

 

SCHEDULE
OF EXCHANGES OF INTERESTS OF GLOBAL WARRANTS

 

The following exchanges of a
part of this Global Warrant have been made:

 

	
  Date of
  Exchange

  	
   

  	
  Amount of
  decrease in

  Number of warrants in

  this Global Warrant

  	
   

  	
  Amount of
  increase in

  Number of warrants in

  this Global Warrant

  	
   

  	
  Number of
  warrants in

  this Global Warrant

  following such decreases

  of increase

  	
   

  	
  Signature
  of authorized

  officer of Warrant Agent

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

A-6

 

EXHIBIT
B

 

FORM
OF CERTIFICATE OF TRANSFER

 

Atlantic Express
Transportation Corp.

7 North Street

Staten Island, New York 10302-1205

 

The Bank of New York 

101 Barclay St. – 8W

New York, NY  10286

Attention:  Corporate Trust
Administration

 

Re:                               Warrants

 

Reference is hereby made to
the Warrant Agreement, dated as of April 22, 2004 (the “Warrant Agreement”),
between Atlantic Express Transportation Corp., as issuer (the “Company”),
and The Bank of New York, as warrant agent. 
Capitalized terms used but not defined herein shall have the meanings
given to them in the Warrant Agreement.

 

                                     ,
(the “Transferor”) owns and proposes to transfer the Warrant[s] or
interest in such Warrant[s] specified in Annex A hereto, in the principal
amount at maturity of
$                          in
such Warrant[s] or interests (the “Transfer”),
to                                            (the
“Transferee”), as further specified in Annex A hereto.  In connection with the Transfer, the
Transferor hereby certifies that:

 

[CHECK
ALL THAT APPLY]

 

1.                                       o  Check
if Transferee Will Take Delivery of a Beneficial Interest in the 144A Global
Warrant or a Definitive Warrant Pursuant to Rule 144A.  The Transfer is being effected pursuant to
and in accordance with Rule 144A under the United States Securities Act of
1933, as amended (the “Securities Act”), and, accordingly, the
Transferor hereby further certifies that the beneficial interest or Definitive
Warrant is being transferred to a Person that the Transferor reasonably
believed and believes is purchasing the beneficial interest or Definitive
Warrant for its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and each such
account is a “qualified institutional buyer” within the meaning of Rule 144A in
a transaction meeting the requirements of Rule 144A and such Transfer is in
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the 144A Global Warrant and/or the
Definitive Warrant and in the Warrant Agreement and the Securities Act.

 

2.                                       o  Check
if Transferee Will Take Delivery of a Beneficial Interest in the Regulation S
Global Warrant or a Definitive Warrant Pursuant to Regulation S.  The Transfer is being effected pursuant to
and in accordance with Rule 903 or Rule 904 under the Securities Act

 

B-1

 

and, accordingly, the Transferor hereby further certifies that (i) the
Transfer is not being made to a person in the United States and (x) at the time
the buy order was originated, the Transferee was outside the United States or
such Transferor and any Person acting on its behalf reasonably believed and
believes that the Transferee was outside the United States or (y) the
transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the
United States, (ii) no directed selling efforts have been made in contravention
of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the
Securities Act, (iii) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the
proposed transfer in accordance with the terms of the Warrant Agreement, the
transferred beneficial interest or Definitive Warrant will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Warrant and/or the Definitive Warrant and in the
Warrant Agreement and the Securities Act.

 

3.                                        ̈  Check
and Complete if Transferee Will Take Delivery of a Beneficial Interest in the
IAI Global Warrant or a Definitive Warrant Pursuant to any Provision of the
Securities Act other than Rule 144A or Regulation S.  The Transfer is being effected in compliance
with the transfer restrictions applicable to beneficial interests in Restricted
Global Warrants and Restricted Definitive Warrants and pursuant to and in
accordance with the Securities Act and any applicable blue sky securities laws
of any state of the United States, and accordingly the Transferor hereby
further certifies that (check one):

 

(a)                                  o  such
Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act; or

 

(b)                                  ̈  such
Transfer is being effected to the Company or a subsidiary thereof or

 

(c)                                   ̈  such
Transfer is being effected to an Institutional Accredited Investor and pursuant
to an exemption from the registration requirements of the Securities Act other
than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further
certifies that it has not engaged in any general solicitation within the
meaning of Regulation D under the Securities Act and the Transfer complies with
the transfer restrictions applicable to beneficial interests in a Restricted
Global Warrant or Restricted Definitive Warrants and the requirements of the
exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Warrant Agreement
and (2) if the Company requests, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the IAI Global Warrant and/or the
Definitive Warrants and in the Warrant Agreement and the Securities Act.

 

B-2

 

4.                                        ̈  Check
if Transferee Will Take Delivery of a Beneficial Interest in an Unrestricted
Global Warrant or of an Unrestricted Definitive Warrant.

 

(a)                                   ̈  Check
if Transfer is Pursuant to Rule 144. 
(i) The Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act and in compliance with the transfer
restrictions contained in the Warrant Agreement and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions on
transfer contained in the Warrant Agreement and the Private Placement Legend
are not required in order to maintain compliance with the Securities Act.  Upon consummation of the proposed Transfer
in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants, on Restricted Definitive Warrants and in the
Warrant Agreement.

 

(b)                                  ̈  Check
if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities
Act and in compliance with the transfer restrictions contained in the Warrant
Agreement and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Warrant
Agreement and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Warrants, on Restricted Definitive Warrants and in the
Warrant Agreement.

 

(c)                                   ̈  Check
if Transfer is Pursuant to Other Exemption.  (i) The Transfer is being effected pursuant to and in compliance
with an exemption from the registration requirements of the Securities Act
other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Warrant Agreement and any applicable blue sky
securities laws of any State of the United States and (ii) the restrictions on
transfer contained in the Warrant Agreement and the Private Placement Legend
are not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will not be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Warrants or Restricted
Definitive Warrants and in the Warrant Agreement.

 

This certificate and the
statements contained herein are made for your benefit and the benefit of the
Company.

 

	
   

  	
  [Insert Name of Transferor]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
					

 

B-3

 

ANNEX
A TO CERTIFICATE OF TRANSFER

 

1.                                       The Transferor owns and proposes to transfer
the following:

 

[CHECK
ONE OF (a) OR (b)]

 

(a)                                   ̈  a
beneficial interest in the:

 

(i)                                      ̈  144A
Global Warrant, or

(ii)                                   ̈ 
Regulation S Global Warrant, or

(iii)                                ̈  IAI
Global Warrant, or

 

(b)                                  ̈  a
Restricted Definitive Warrant.

 

2.                                       After the Transfer the Transferee will hold:

 

[CHECK
ONE]

 

(a)                                   ̈  a
beneficial interest in the:

 

(i)                                      ̈  144A
Global Warrant, or

(ii)                                   ̈ 
Regulation S Global Warrant, or

(iii)                                ̈ 
Unrestricted Global Warrant; or

(iv)                               ̈ 
Regulation S Global Warrant; or

 

(b)                                  ̈  a
Restricted Definitive Warrant; or

 

(c)                                   ̈  an
Unrestricted Definitive Warrant,

 

in
accordance with the terms of the Warrant Agreement.

 

B-4

 

EXHIBIT
C

 

FORM
OF CERTIFICATE OF EXCHANGE

 

Atlantic Express
Transportation Corp.

7 North Street

Staten Island, New York 10302-1205

 

The Bank of New York 

101 Barclay St. - 8W

New York, NY  10286

Attention:  Corporate Trust
Administration

 

Re:                               Warrants

 

(CUSIP               )

 

Reference is hereby made to
the Warrant Agreement, dated as of April 22, 2004 (the “Warrant Agreement”),
between Atlantic Express Transportation Corp., as issuer (the “Company”),
and The Bank of New York, as warrant agent. 
Capitalized terms used but not defined herein shall have the meanings
given to them in the Warrant Agreement.

 

                           ,
(the “Owner”) owns and proposes to exchange the Warrant[s] or interest
in such Warrant[s] specified herein, in the amount of
$                   in
such Warrant[s] or interests (the “Exchange”).  In connection with the Exchange, the Owner hereby certifies that:

 

1.                                       Exchange of Restricted Definitive Warrants or
Beneficial Interests in a Restricted Global Warrant for Unrestricted Definitive
Warrants or Beneficial Interests in an Unrestricted Global Warrant.

 

(a)                                   ̈  Check
if Exchange is from Beneficial Interest in a Restricted Global Warrant to
Beneficial Interest in an Unrestricted Global Warrant.  In connection with the Exchange of the
Owner’s beneficial interest in a Restricted Global Warrant for a beneficial interest
in an Unrestricted Global Warrant in an equal principal amount, the Owner
hereby certifies (i) the beneficial interest is being acquired for the Owner’s
own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Global Warrants and
pursuant to and in accordance with the United States Securities Act of 1933, as
amended (the “Securities Act”), (iii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Warrant is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.

 

(b)                                  ̈  Check
if Exchange is from Beneficial Interest in a Restricted Global Warrant to
Unrestricted Definitive Warrant.  In
connection with the Exchange of the Owner’s beneficial interest in a Restricted
Global Warrant for an Unrestricted Definitive

 

C-1

 

Warrant, the Owner hereby
certifies (i) the Definitive Warrant is being acquired for the Owner’s own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Warrants and
pursuant to and in accordance with the Securities Act, (iii) the restrictions
on transfer contained in the Warrant Agreement and the Private Placement Legend
are not required in order to maintain compliance with the Securities Act and
(iv) the Definitive Warrant is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.

 

(c)                                   ̈  Check
If Exchange Is from Restricted Definitive Warrant to Beneficial Interest in an
Unrestricted Global Warrant.  In
connection with the Owner’s Exchange of a Restricted Definitive Warrant for a
beneficial interest in an Unrestricted Global Warrant, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner’s own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Warrants and
pursuant to and in accordance with the Securities Act, (iii) the restrictions
on transfer contained in the Warrant Agreement and the Private Placement Legend
are not required in order to maintain compliance with the Securities Act and
(iv) the beneficial interest is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.

 

(d)                                  ̈  Check
if Exchange is from Restricted Definitive Warrant to Unrestricted Definitive
Warrant.  In connection with the
Owner’s Exchange of a Restricted Definitive Warrant for an Unrestricted
Definitive Warrant, the Owner hereby certifies (i) the Unrestricted Definitive
Warrant is being acquired for the Owner’s own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Warrants and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Warrant is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.

 

2.                                       Exchange of Restricted Definitive Warrants or
Beneficial Interests in Restricted Global Warrants for Restricted Definitive
Warrants or Beneficial Interests in Restricted Global Warrants.

 

(a)                                   ̈  Check
if Exchange is from Beneficial Interest in a Restricted Global Warrant to
Restricted Definitive Warrant.  In
connection with the Exchange of the Owner’s beneficial interest in a Restricted
Global Warrant for a Restricted Definitive Warrant in a number equal to the
number of beneficial interests exchanged, the Owner hereby certifies that the
Restricted Definitive Warrant is being acquired for the Owner’s own account
without transfer.  Upon consummation of
the proposed Exchange in accordance with the terms of the Warrant Agreement,
the Restricted Definitive Warrant issued will continue to be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Definitive Warrant and in the Warrant Agreement and the
Securities Act.

 

C-2

 

(b)                                 o  Check
if Exchange is from Restricted Definitive Warrant to Beneficial Interest in a
Restricted Global Warrant.  In
connection with the Exchange of the Owner’s Restricted Definitive Warrant for a
beneficial interest in the [CHECK ONE] o  144A
Global Warrant,  ̈  Regulation S Global Warrant,  ̈  IAI
Global Warrant in a number equal to the number of beneficial interests
exchanged, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner’s own account without transfer and (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to
the Restricted Global Warrants and pursuant to and in accordance with the
Securities Act, and in compliance with any applicable blue sky securities laws
of any state of the United States. Upon consummation of the proposed Exchange
in accordance with the terms of the Warrant Agreement, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the relevant Restricted Global Warrant and
in the Warrant Agreement and the Securities Act.

 

This certificate and the
statements contained herein are made for your benefit and the benefit of the
Company.

 

	
   

  	
  [Insert Name
  of Transferor]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
					

 

C-3

 

EXHIBIT
D

 

FORM
OF CERTIFICATE FROM

ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

 

Atlantic Express Transportation
Corp.

7 North Street

Staten Island, New York 10302-1205

 

The Bank of New York 

101 Barclay St. – 8W

New York, NY  10286

Attention:  Corporate Trust
Administration

 

Re:                               Warrants

 

Reference is hereby made to
the Warrant Agreement, dated as of April 22, 2004 (the “Warrant Agreement”),
between Atlantic Express Transportation Corp., as issuer (the “Company”),
and The Bank of New York, as warrant agent. 
Capitalized terms used but not defined herein shall have the meanings
given to them in the Warrant Agreement.

 

In connection with our
proposed purchase of
$               amount
of:

 

(a)                                   ̈  a
beneficial interest in a Global Warrant, or

 

(b)                                  ̈  a
Definitive Warrant,

 

we confirm that:

 

1.                                       We understand that any subsequent transfer of
the Warrants or any interest therein is subject to certain restrictions and
conditions set forth in the Warrant Agreement and the undersigned agrees to be
bound by, and not to resell, pledge or otherwise transfer the Warrants or any
interest therein except in compliance with, such restrictions and conditions
and the United States Securities Act of 1933, as amended (the “Securities
Act”).

 

2.                                       We understand that the offer and sale of the
Warrants have not been registered under the Securities Act, and that the
Warrants and any interest therein may not be offered or sold except as
permitted in the following sentence.  We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Warrants or any interest
therein, we will do so only (A) to the Company or any subsidiary thereof, (B)
in accordance with Rule 144A under the Securities Act to a “qualified
institutional buyer” (as defined therein), (C) to an institutional “accredited
investor” (as defined below) that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to you and to the Company a
signed letter substantially in the form of this letter and, if requested by the
Company, an Opinion of Counsel in form reasonably acceptable to the Company to
the effect that such transfer is in compliance with the Securities Act, (D)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the provisions of Rule

 

D-1

 

144(k) under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing the Definitive Warrant or beneficial interest
in a Global Warrant from us in a transaction meeting the requirements of clauses
(A) through (E) of this paragraph a notice advising such purchaser
that resales thereof are restricted as stated herein.

 

3.                                       We understand that, on any proposed resale of
the Warrants or beneficial interest therein, we will be required to furnish to
you and the Company such certifications, legal opinions and other information
as you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. 
We further understand that the Warrants purchased by us will bear a
legend to the foregoing effect.

 

4.                                       We are an institutional “accredited investor”
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Warrants, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment.

 

5.                                       We are acquiring the Warrants or beneficial
interest therein purchased by us for our own account or for one or more
accounts (each of which is an institutional “accredited investor”) as to each
of which we exercise sole investment discretion.

 

We agree not to engage in
any hedging transactions with regard to the Warrants unless such hedging
transactions are in compliance with the Securities Act.

 

You and the Company are
entitled to rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters covered
hereby.

 

	
   

  	
  [Insert Name
  of Transferor]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
					

 

D-2Exhibit 4.4

 

 

 

EQUITY REGISTRATION RIGHTS
AGREEMENT

 

DATED AS OF APRIL 22, 2004

 

BY AND AMONG

 

ATLANTIC EXPRESS
TRANSPORTATION CORP.

 

ATLANTIC EXPRESS
TRANSPORTATION GROUP, INC.

 

AND

 

JEFFERIES & COMPANY,
INC.

 

 

 

 

This Equity Registration
Rights Agreement (the “Agreement”) is made and entered into as of April
22, 2004, by and among Atlantic Express Transportation Corp., a New York
corporation (the “Company”), Atlantic Express Transportation Group,
Inc., a Delaware corporation (“Parent”) and Jefferies & Company,
Inc. (the “Initial Purchaser”), who has agreed to purchase from the
Company, pursuant to the Purchase Agreement (as defined below) (i) 105,000
fixed rate units (the “Fixed Rate Units”), each Fixed Rate Unit
consisting of (A) $1,000 in aggregate principal amount at maturity of a 12%
Senior Secured Note due 2008 (the “Fixed Rate Notes”) of the Company and
(B) one warrant representing the right to initially purchase one common share,
par value $0.01 per share (the “Common Stock”) of the Company (collectively,
the “Warrants”) (the Common Stock issuable on exercise of the Warrants
being referred to collectively herein as the “Warrant Shares”) and (ii)
10,000 floating rate units (the “Floating Rate Units”), each Floating
Rate Unit consisting of (A) $1,000 in aggregate principal amount of Senior
Secured Floating Rate Notes due 2008 (the “Floating Rate Notes” and,
together with the Fixed Rate Notes, the “Notes”) of the Company and (B)
one Warrant.

 

This Agreement is made
pursuant to the Purchase Agreement (the “Purchase Agreement”), dated as
of April 16, 2004, by and among the Company, the Guarantors named therein and
the Initial Purchaser.  To induce the
Initial Purchaser to purchase the Units, the Company has agreed to provide the
registration rights set forth in this Agreement.  The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchaser set forth in Section 3 of the Purchase
Agreement.  Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in
the Purchase Agreement.

 

The parties hereby agree as
follows:

 

Section 1.  Definitions.

 

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

 

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

 

“Closing Date”:  The date hereof.

 

“Common Stock”:  The common stock, par value $0.01 per share,
of the Company.

 

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

 

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

 

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

 

“Holder”:  As defined in Section 2 hereof.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 “SEC”:  The
Securities and Exchange Commission.

 

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

 

2

 

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

 

“Warrant Agreement”:  The Warrant Agreement dated the Closing Date
by and between the Company and The Bank of New York, as Warrant Agent.

 

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

 

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

 

Section 2.  Holders of Registrable Securities.

 

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

 

Section 3.  Registration Procedures.

 

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

 

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

 

(b)                                 give written notice to the Initial Purchaser
and the Holders:

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

to
general service of process or to taxation in any jurisdiction where it is not
then so subject;

 

(g)                                 cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing the Registrable
Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders may request a reasonable period of time prior to sales of the
Registrable Securities pursuant to such Registration Statement;

 

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

 

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

 

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

 

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

 

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

 

(m)                               (i) make reasonably available for inspection
by the Holders of the Registrable Securities and any attorney, accountant or
other agent retained by the Holders

 

5

 

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

 

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

 

6

 

misleading (in the case of
any such documents, in the light of the circumstances existing at the time that
such documents were filed with the SEC under the Exchange Act); (ii) its
independent public accountants to provide to the Holders a comfort letter in
customary form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings, subject to receipt
of appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72; and (iii) use its best efforts to cause
the disposition of the Registrable Securities covered by the Registration
Statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities.

 

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

 

Section 4.  Shelf Registration.

 

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

 

7

 

(b)                                 No Holder may include any of its Registrable
Securities in any Shelf Registration Statement pursuant to this Agreement
unless and until such Holder furnishes to the Company in writing, within 20
days after receipt of a request therefor, the information specified in Item 507
or 508 of Regulation S-K, as applicable, of the Securities Act for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein.  Each
selling Holder agrees to promptly furnish additional information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.

 

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

 

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

 

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

 

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

 

8

 

of
selling Holders of Registrable Securities of not less than a majority of the
Registrable Securities to be included in such Registration Statement, to
withdraw the request for registration by giving written notice to the Company
or the Registrants (as the case may be) within 10 days after receipt of such
notice or (z) in the case of a suspension of the right to make sales, receive
an extension of the registration period referred to in Section 4(a) or Section
6(a) hereof, as applicable, equal to the number of days of the suspension.

 

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

 

Section
6.  Piggy-Back Registration of
Registrable Securities.

 

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

 

9

 

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

 

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

 

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

 

10

 

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

 

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

 

Section
7.  Registration Expenses.

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section
8.  Indemnification.

 

(a)                                  The
Company or the Registrants (as the case may be) agrees to indemnify and hold
harmless each Holder and each Person, if any, who controls such Holder within
the meaning of the Securities Act or the Exchange Act from and against any
losses, claims, damages or liabilities, joint or several, or any actions in
respect thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Registrable
Securities) to which each Indemnified Party (as defined in Section 8(c)
below) may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims,

 

12

 

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

 

(b)                                 Each
Holder of the Registrable Securities, severally and not jointly, will indemnify
and hold harmless the Company or the Registrants (as the case may be) and each
Person, if any, who controls the Company or the Registrants (as the case may
be) within the meaning of the Securities Act or the Exchange Act from and
against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or the Registrants (as the case may be) or any
such controlling Person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in a Registration Statement or
Prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus relating to a Registration Statement, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company or the
Registrants (as the case may be) by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company or the
Registrants (as the case may be) for any legal or other expenses

 

13

 

reasonably
incurred by the Company or the Registrants or any such controlling Person in
connection with investigating or defending any loss, claim, damage, liability
or action in respect thereof.  This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or the Registrants (as the case may be) or any of
its or their controlling Persons.

 

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

 

(d)                                 If the
indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an Indemnified Party under subsections (a)
or (b) above, then each indemnifying party shall contribute to the
amount paid or payable by such Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in subsection
(a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the Indemnified Party on the other from the sale of the Registrable
Securities by the Holders, or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties
on the one hand and the Indemnified Party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations.  The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or

 

14

 

alleged
omission to state a material fact relates to information supplied by the
Company or the Registrants (as the case may be) on the one hand or such Holder
or such other Indemnified Party, as the case may be, on the other, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. 
The amount paid by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any
action or claim which is the subject of this subsection (d).  Notwithstanding any other provision of this Section
8(d), the Holders of the Registrable Securities shall not be required to
contribute any amount in excess of the amount by which the net proceeds
received by such Holders from the sale of the Registrable Securities pursuant
to the Registration Statement exceeds the amount of damages which such Holders
have otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.  For purposes of this paragraph (d),
each Person, if any, who controls such Indemnified Party within the meaning of
the Securities Act or the Exchange Act shall have the same rights to contribution
as such Indemnified Party, and each Person, if any, who controls the Company or
the Registrants  within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company or the Registrants (as the case may be).

 

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

 

Section
9.  Rule 144A and Rule 144.

 

The
Company shall use its best efforts to file the reports required to be filed by
it under the Securities Act and the Exchange Act in a timely manner and, if at
any time the Company is not required to file such reports, it will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of their securities pursuant to Rules 144 and 144A.  The Company covenants that it will take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)).  The Company will provide a
copy of this Agreement to prospective purchasers of Registrable Securities
identified to the Company by the Initial Purchaser upon request.  Upon the request of any Holder, the Company
shall deliver to such Holder a written statement as to whether it has complied
with such requirements.  Notwithstanding
the foregoing, nothing in this Section 9 shall be deemed to require the
Company to register any of its securities pursuant to the Exchange Act.

 

Section
10.  Miscellaneous.

 

(a)                                  Remedies.  Each of the Company and the Parent
acknowledges and agrees that any failure by the Company to comply with its
obligations under Section 4 and Section 6 hereof may result in
material irreparable injury to the Holders for which there is no adequate
remedy at

 

15

 

law,
that it will not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, any Holder may obtain such relief as
may be required to specifically enforce the Company’s and the Parent’s
obligations under Section 4 and Section 6 hereof.  Each of the Company and the Parent further
agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.

 

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

 

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

 

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

 

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

 

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

 

7
North Street

Staten Island, New York 10302-1205

Attention:  Nathen Schlenker

Fax No.:  (718) 442-9103

 

with
a copy to:

 

Latham
& Watkins LLP

885 Third Avenue, Suite 100

New York, New York 10022-4834 

Attention:  Robert Zuccaro, Esq.

Fax No.:  (212) 751-4864

 

(3)                                  if to the
Warrant Agent, at its address as follows:

 

The
Bank of New York

101
Barclay Street, 8th Floor West

New
York, NY  10286

Telecopier No.:  646-835-8469

Attention:  Corporate Trust
Administration

 

16

 

with
a copy to:

 

Carter
Ledyard & Milburn LLP

2 Wall Street

New York, NY 10005

Telecopier No.:  212-732-3232

Attention:  James Gadsden

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

[Signature
Page Follows]

 

17

 

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

 

	
   

  	
  ATLANTIC EXPRESS TRANSPORTATION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DOMENIC GATTO

  
	
   

  	
   

  	
  Name: Domenic Gatto

  
	
   

  	
   

  	
  Title:  
  President, CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ATLANTIC EXPRESS TRANSPORTATION GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ NATHAN SCHLENKER

  
	
   

  	
   

  	
  Name: Nathan Schlenker

  
	
   

  	
   

  	
  Title:  
  Chief Financial Officer

  

 

 

	
  JEFFERIES & COMPANY, INC.

  
	
   

  
	
  By:

  	
  /s/ RICHARD A. GOLDBERG

  	
   

  
	
  Name: Richard A. Goldberg

  
	
  Title:   Managing
  Director

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