Exhibit
10.4


 


December 24,
2003


 


Peter Frank


120 Lloyd Road


Montclair, New Jersey
07042


 


Retention
Agreement


 


Dear Mr. Frank:


 


This letter shall confirm
our agreement (this “Agreement”) as follows:


 


1.                                       Atlantic
Express Transportation Group, Inc. Corp. (the “Company”) hereby retains
you as the Chairman of the Board of Directors of the Company. In such capacity,
you shall (i) be responsible for strategic and financial planning for the
Company and its subsidiaries, (ii) work with the Chief Executive Officer, the
Chief Financial Officer and the other key executive officers of the Company,
and (iii) perform your duties and responsibilities primarily at the offices of
the Company in Staten Island, New York, subject to reasonable travel as
required from time to time in the performance of your duties and
responsibilities as the Chairman of the Board of Directors.


 


2.                                       (a)                                  So
long as you shall be retained as the Chairman of the Board of Directors: (i)
the Company shall pay to you a salary at the rate of $150,000 per annum, and a
year-end bonus of $150,000, subject to applicable tax and other withholding
required by law; (ii) you shall be entitled to participate in any benefit and
other plans (other than bonus and deferred compensation plans) as shall be made
available generally from time to time to senior executive officers of the
Company, subject to insurability requirements under any medical or other
insurance programs; and (iii) you shall be reimbursed, subject to Company
policies in effect from time to time, for any out-of-pocket expenses reasonably
incurred by you in the performance of your duties and responsibilities.


 


(b)                                 In
addition to the compensation described in clause (i) of Paragraph 2(a)
hereof, you shall be entitled to participate in a stock option or restricted
stock purchase or similar plan which shall be established by the Company and
which will entitle you to acquire shares of the Common Stock of the Company
(the “Equity”) as set fort on Schedule A attached hereto,
subject to:


 


(i)                                     vesting at the rate of (x) one-third upon
consummation of the First Amended Joint Plan of Reorganization of Atlantic
Express and its debtor subsidiaries, dated July 21, 2003, filed in those
certain Chapter 11 cases identified as Case No. 02-42560 (PCB) and confirmed on
September 4, 2003  by order of the
United States Bankruptcy Court for the Southern District of New York (the “Plan”)
and (y) one-third per year thereafter so long as you are retained hereunder;
however, in the event of a Sale of the


 

















 


Company
(as hereinafter defined) or an initial public offering by the Company,
the Equity shall be 100% vested; and


 


(ii)                                  repurchase
rights of the Company upon any termination of your retention at a price equal
to:


 


(A)                              your
original purchase price, if any has been paid by you, for any unvested portion
of the Equity if (x) you voluntarily terminate your retention prior to the end
of the Initial Term or (y) you are subject to a Termination for Cause or a
Termination for Medical Reasons (as such terms are hereinafter defined); and


 


(B)                                your
original purchase price for the vested portion of the Equity if you are subject
to a Termination for Cause; and


 


(iii)                               the
occurrence of a Sale of the Company, in which case you shall participate and
cooperate in any Sale of the Company on an equal per share basis with the
holders of a majority of the Common Stock of the Company.


 


(c)                                  In
the event that your retention terminates at the end of the Initial Term or any
Extended Term or you are subject to a Termination for Medical Reasons, you (or
your estate) shall have the right to require the Company to repurchase the
vested portion of your Equity for fair market value (as determined in good
faith by the Board of Directors of the Company). However, any such repurchase
obligation of the Company shall be suspended so long as the Company is
prohibited from repurchasing the Equity under the terms of any indebtedness or
Preferred Stock of the Company.


 


3.                                       The
initial term of your retention shall be for a period of three years (the “Initial
Term”), subject to automatic annual extensions (an “Extended Term”)
thereafter unless the Company or you shall give notice to the other, at least
60 days prior to the end of the Initial Term or any Extended term, that your
retention will terminate at the end of the Initial Term or any then Extended
Term. Notwithstanding the foregoing, your retention shall be subject to
termination by the Company at any time in the event that: (i) you shall have
engaged in any conduct which violates your fiduciary duties to the Company or
any conduct which constitutes a felony or similar serious crime under the laws
of the State of New York or any Federal law (a “Termination for Cause”);
(ii) you are unable, because of death or heath reasons, to substantially
perform your duties as President and Chief Executive Officer (a “Termination
Medical Reasons”); or (iii) 100% of the Common Stock of the Company or
substantially all of its assets shall be sold (by purchase, merger, combination
or otherwise) (a “Sale of the Company”). Upon the effectiveness of any
early termination as aforesaid, any obligation of the Company or you to each
other under Paragraphs 1, 2(a) and 3 hereof shall terminate
automatically, and you shall not have any claim thereafter for any salary,
compensation, damages or otherwise based on such termination or otherwise,
except you shall be entitled to the payment of salary and the reimbursement of
travel expenses that have accrued as of or prior to the effectiveness of any
such termination.


 


2

















 


4.                                       You
shall not disclose, and shall not use for any purpose, other than for the
benefit of the Company and its subsidiaries, any information regarding the
Company and its subsidiaries and the businesses, operations, assets, financial
condition and affairs, results of operations, prospects and customers and
suppliers of the Company and its subsidiaries. Subsequent to the termination of
your retention, you shall cooperate with the Company and its subsidiaries in
any legal proceedings to which the Company or any of its subsidiaries is a
party, subject to reimbursement of your reasonable out-of-pocket expenses
incurred in connection therewith at the request of the Company and its
subsidiaries.


 


5.                                       You
shall be entitled to indemnification by the Company in accordance with the
indemnification provisions contained in the certificate of incorporation and
by-laws of the Company as of the date hereof. The Company shall use its
reasonable commercial efforts to maintain director and officer insurance in commercially
reasonable amounts and on commercially reasonable terms.


 


6.                                       (a)                                  This
Agreement contains the entire agreement between the Company and you with
respect to your retention by the Company or any of its subsidiaries and
supersedes all prior arrangements or understandings with respect thereto,
including without limitation the Agreement dated as of July 9, 2002
between Atlantic Express Transportation Corp and you.


 


(b)                                 This
Agreement shall be governed by and construed in accordance with the Laws of the
State of New York (other than the choice of law principles thereof).


 


(c)                                  Neither
this Agreement nor any claims or rights under this Agreement shall be
assignable otherwise than by operation of law by any party without the prior
written consent of the other parties, and any purported assignment by any party
without the prior written consent of the other parties shall be void. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors (whether by merger or otherwise) and permitted
assigns.


 


(d)                                 Any
waiver of any term or condition of this Agreement, or any amendment or
supplementation of this Agreement, shall be effective only if in writing. A
waiver of any breach or failure to enforce any of the terms or conditions of
this Agreement shall not in any way affect, limit or waive a party’s rights
under this Agreement at any time to enforce strict compliance thereafter with
every term or condition of this Agreement.


 


(e)                                  Notwithstanding
any other provision of this Agreement, this Agreement shall not create benefits
on behalf of any third party or any other person; and this Agreement shall be
effective only as among the parties hereto, their successors and permitted
assigns.


 


[Signature page
follows.]


 


3

















 


If the foregoing
correctly sets forth our agreement, please execute this Agreement where
indicated below.


 


	
   

  	
   

  	
  Atlantic Express Transportation Group, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
         /s/ SANJAY H. PATEL

  
	
   

  	
   

  	
   

  	
  Sanjay H. Patel

  
	
   

  	
   

  	
   

  	
  Chairman of the Board
  of Directors

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accepted and agreed as
  of the date first above written:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
      /s/ PETER FRANK

  	
   

  	
   

  	
   

  
	
  Peter Frank

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


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