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Exhibit 10.1  

 
 

AMENDMENT NO. 3 TO SECOND AMENDED
  AND RESTATED LOAN AND SECURITY AGREEMENT    
    

        Amendment
No. 3, dated as of October 14, 2004, by and among Congress Financial Corporation, in its capacity as agent (in such capacity, "Agent") acting for and on behalf of
Lenders (as hereinafter defined), Atlantic Express Transportation Corp. a New York corporation ("AETC"), Amboy Bus Co., Inc., a New York corporation ("Amboy"), Atlantic Express
Coachways, Inc., a New Jersey corporation ("Coachways"), Atlantic Express of L.A., Inc. a California corporation ("AELA"), Atlantic Express of Missouri Inc,. a Missouri corporation ("AE
Missouri"), Atlantic Express of New Jersey, Inc., a New Jersey corporation ("AENJ"), Atlantic Express of Pennsylvania, Inc., a Delaware corporation ("AEP"), Atlantic-Hudson, Inc.
a New York corporation ("AH"), Atlantic Paratrans, Inc. a New York corporation ("AP"), Atlantic Paratrans of NYC, Inc. a New York corporation ("APNY"), Atlantic Queens Bus Corp. a New
York corporation ("AQ"), Block 7932, Inc. a New York corporation ("Block"), Brookfield Transit Inc., a New York corporation ("Brookfield"), Courtesy Bus Co., Inc., a New York
corporation ("Courtesy"), G.V.D. Leasing Co., Inc. a New York corporation ("GVD"), 180 Jamaica Corp. a New York corporation ("Jamaica"), Merit Transportation Corp. a New York corporation
("Merit"), Metro Affiliates, Inc., a New York corporation ("Metro"), Metropolitan Escort Service, Inc. a New York corporation ("Escort"), Midway Leasing Inc. a New York
corporation ("Midway"), Staten Island Bus, Inc. a New York corporation ("SI-Bus"), Temporary Transit Service, Inc. a New York corporation ("TTS"), 201 West Sotello
Realty, Inc. a California corporation ("Sotello"), Wrightholm Bus Line, Inc. a Vermont corporation ("Wrightholm"), Jersey Business Land Co., Inc., a New Jersey corporation
("JBL"), Atlantic Transit Corp. a New York corporation ("ATC"), Airport Services, Inc. a Massachusetts corporation ("Airport"), Atlantic Express New England, Inc. a
Massachusetts corporation ("AE-NE"), Atlantic Express of California, Inc. a California corporation ("AE-CA"), Atlantic Express of Illinois, Inc. an Illinois
corporation ("AE-I"), Atlantic Paratrans of Arizona, Inc. an Arizona corporation ("AP-AZ"), Fiore Bus Service, Inc. a Massachusetts corporation ("Fiore"), Groom
Transportation, Inc. a Massachusetts corporation ("Groom"), James McCarthy Limo Service, Inc. a Massachusetts corporation ("Limo"), K. Corr, Inc. a New York corporation ("Corr"),
McIntire Transportation, Inc. a Massachusetts corporation ("McIntire"), Mountain Transit, Inc. a Vermont corporation ("Mountain"), Jersey Business Land Co., Inc. a New Jersey
corporation (JBL"), R. Fiore Bus Service, Inc. a Massachusetts corporation ("FBS"), Raybern Bus Service, Inc. a New York corporation ("RBS"), Raybern Capital Corp. a New
York corporation ("RBC"), Raybern Equity Corp. a New York corporation ("REC"), Robert L. McCarthy & Son, Inc. a Massachusetts corporation ("McCarthy"), T-NT Bus
Service, Inc., a New York corporation ("TNT"),
Transcomm, Inc., a Massachusetts corporation ("Transcomm") and Winsale, Inc., a New Jersey corporation ("Winsale", and together with AETC, Coachways, Amboy, AELA, AE Missouri, AENJ, AEP,
AP, APNY, AQ, Block, Brookfield, Courtesy, GVD, Jamaica, Merit, Metro, Escort, Midway, SI-Bus, TTS, Sotello, Wrightholm, ATC, Airport, AE-NE, AE-CA,
AE-I, AP-AZ, Fiore, Groom, Limo, Corr, McIntire, Mountain, JBL, FBS, RBS, RBC, REC, McCarthy, TNT, and Transcomm, each individually a "Borrower" and collectively, "Borrowers"),
and Central New York Reorganization Corp. (f/k/a Central New York Coach Sales & Service, Inc.), a New York corporation ("Central"), Jersey Bus Sales, Inc., a New Jersey
corporation ("Jersey" and together with Central, each individually a "Guarantor" and collectively, "Guarantors"). 

 
W I T N E S S E T H: 

        WHEREAS,
Agent, Lenders, Borrowers and Guarantors have entered into financing arrangements pursuant to which Agent and Lenders may make loans and advances and provide other financial
accommodations to Borrowers as set forth in the Second Amended and Restated Loan and Security Agreement, dated as of April 22, 2004, by and among Agent, Borrowers, Guarantors and the financial
institutions from time to time parties thereto as lenders ("Lenders"), whether by execution thereof or of an Assignment and Acceptance, as amended by Amendment No. 1 to Second Amended and
Restated Loan and Security Agreement, dated as of June 14, 2004, by and among Borrowers, Guarantors, Agent and Lenders, as amended by Amendment No. 2 to Second Amended and Restated Loan
and Security Agreement, dated as of September 15, 2004, by and among Borrowers, Guarantors, Agent and Lenders,(as amended hereby and as the same may hereafter be further amended, modified,
supplemented, extended, renewed, restated or replaced the "Loan Agreement", and together with all agreements, documents and instruments at any time executed and/or delivered in connection therewith or
related thereto, as from time to time amended, modified, supplemented, extended, renewed, restated or replaced, collectively, the "Financing Agreements"). All capitalized terms used herein shall have
the meanings assigned thereto in the Loan Agreement and the other Financing Agreements, unless otherwise defined herein; 

        WHEREAS,
Borrowers have requested that Agent and Lenders make certain amendments to the Loan Agreement and Agent and Lenders are willing to agree to such requests, subject to the terms
and conditions contained herein; and 

        WHEREAS,
by this Amendment No. 3, Agent, Lenders, Borrowers and Guarantors wish and intend to evidence such amendments. 

        NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, the parties hereto agree as follows: 

        1.    Additional Definitions.    As used herein, the following terms shall have the respective meanings given to them
below: 

        (a)   "Amendment
No. 3" shall mean this Amendment No. 3 to Second Amended and Restated Loan and Security Agreement, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. 

        (b)   "Junior
Participant" shall have the meaning set forth in the Junior Participation Agreement. 

        (c)   "Junior
Participation" shall mean the amount of the Junior Participation purchased by Junior Participants from Lender pursuant to the Junior Participation Agreement. 

        (d)   "Junior
Participation Agreement" shall mean the Junior Participation Agreement between Congress, GSCP II Holdings (AE), L.L.C. and GSC Recovery II, L.P., Junior
Participants, dated as of date hereof. 

        (e)   "Supplemental
Loan Interest Rate" shall mean, a rate equal to twelve (12%) percent per annum. 

        (f)    "Supplemental
Loan Limit" shall mean an amount not to exceed $3,500,000, as such amount may be permanently reduced by payments pursuant to Section 4(a) of
Amendment No. 3 through and including the Supplemental Loan Termination Date and zero at all times thereafter. 

        (g)   "Supplemental
Loans" shall mean the loans made by Congress to or for the benefit of Borrowers as set forth in Section 4 of Amendment No. 3. 

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        (h)   "Supplemental
Loan Termination Date" shall mean the earlier of (a) the date of repayment of the Supplemental Loan pursuant to the terms of Section 4 hereof
or the Termination Date as set forth in Section 13.1.of the Loan Agreement. 

        2.    Amendment to Definitions.    All references to the term "Loans" in the Loan Agreement and the other Financing
Agreements shall be deemed and each such reference is hereby amended to include, in addition and not in limitation, the Supplemental Loans. 

        3.    Interpretation.    For purposes of this Amendment No. 3, unless otherwise defined herein, all terms used
herein, including, but not limited to, those terms used and/or defined in the recitals above, shall have the respective meanings assigned to such terms in the Loan Agreement. 

        4.    Supplemental Loans.    

        (a)   In
addition to the Revolving Loans which may be made by Lenders to Borrowers pursuant to Section 2.1 of the Loan Agreement, Congress, as Lender shall make a
supplemental loan to Borrowers in an amount equal to $3,500,000. Interest shall be payable monthly on the Supplemental Loan at the Supplemental Loan Interest Rate. Agent may, at its option, apply
payments in respect of the Loans received by Agent, to the Supplemental Loan or the Loans other than the Supplemental Loan or any of the other Obligations in such order and manner as Agent shall from
time to time determine. Notwithstanding the foregoing, Congress shall, upon one (1) days notice to Agent, be entitled to receive payment of any amount equal to the outstanding principal balance
of the Supplemental Loan and accrued and unpaid interest thereon at the Supplemental Loan Interest Rate, conditioned upon the following being satisfied: 

        (i)    the
Borrowers average Excess Availability for the Business Days included in the thirty (30) day period immediately prior to the date of repayment of the
Supplemental Loan, and the Excess Availability for each of the three (3) Business Days immediately prior to the date of repayment of the Junior Participation or portion thereof, is not less
than $5,000,000; and 

        (ii)   No
Event of Default exists under the Loan Agreement. 

Borrowers
authorize Agent, upon satisfaction of the foregoing conditions to make a Revolving Loan in the amount necessary to repay the Supplemental Loan without further notice to Borrowers and
authorize Agent to charge the loan account of Borrowers therefor. 

        (b)   Except
in Agent's discretion, Borrowers shall not have any right to request, and Lenders shall not make, any Supplemental Loans in excess of the Supplemental Loan Limit
as then in effect or at any time on or after the Supplemental Loan Termination Date. 

        (c)   The
Supplemental Loan shall be secured by all Collateral and shall bear interest at the Supplemental Loan Interest Rate. Interest shall accrue and be due and payable in
respect of the Supplemental Loan in accordance with Section 3.1 (d) of the Loan Agreement. 

        (d)   Unless
sooner demanded by the Agent or Lenders in accordance with terms of the Loan Agreement or the other Financing Agreements, all outstanding and unpaid Obligations
arising pursuant to the Supplemental Loan (including, but not limited to, principal, interest, fees, costs, expenses and other charges in respect thereof payable by Borrowers to Lenders) shall
automatically, without notice or demand, be absolutely and unconditionally due and payable and Borrowers shall pay to Agent for the benefit of Congress Financial Corporation and Lenders in cash or
other immediately available funds all such Obligations, on the Supplemental Loan Termination Date. 

        (e)   Borrowers
acknowledge and agree that, notwithstanding anything to the contrary contained in the Loan Agreement or the other Financing Agreements, the failure of
Borrowers to pay all of the Obligations arising pursuant to the Supplemental Loans on the Supplemental Loan Termination Date, shall constitute an Event of Default. 

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        5.    Conditions Precedent.    The effectiveness of Amendment No. 3 is further conditioned upon the
satisfaction of each of the following conditions precedent in a manner satisfactory to Agent and Lenders: 

        (a)   No
Event of Default, or act, condition or event which with notice or passage of time or both would constitute an Event of Default shall exist or have occurred; 

        (b)   Congress
shall have received an original of the Junior Participation Agreement, duly authorized, executed and delivered by the Junior Participants in form and substance
satisfactory to Congress; 

        (c)   Congress
shall have received the amount of the Junior Participation purchased by the Junior Participants pursuant to the Junior Participation Agreement; and 

        (d)   Agent
shall have received an original of this Amendment No. 3 duly authorized, executed and delivered by the parties hereto. 

        6.    Additional Representations, Warranties and Covenants.    Borrowers represent, warrants and covenant with and to
Agent and Lenders as follows, which representations, warranties and covenants are continuing and shall survive the execution and delivery hereof, and the truth and accuracy of, or compliance with
each, together with the representations, warranties and covenants in the other Financing Agreements, being a continuing condition of the making of Loans by Agent to Borrowers: 

        (i)    No
Event of Default or act, condition or event which with notice or passage of time or both would constitute an Event of Default exists or has occurred as of the date of
this Amendment No. 3 (after giving effect to the amendments to the Financing Agreements made by this Amendment No. 3); and 

        (ii)   This
Amendment No. 3 has been duly executed and delivered by Borrowers and is in full force and effect as of the date hereof and the agreements and obligations
of Borrowers contained herein constitute legal, valid and binding obligations of such Borrower enforceable against such Borrower in accordance with their respective terms. 

        7.    Miscellaneous.    

        (a)    Entire Agreement; Ratification and Confirmation of the Financing Agreements.    This Amendment No. 3
contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous term sheets, proposals, discussions, negotiations, correspondence,
commitments and communications between or among the parties concerning the subject matter hereof. This Amendment No. 3 may not be modified or any provision waived, except in writing signed by
the party against whom such modification or waiver is sought to be enforced. Except for those provisions specifically modified or waived pursuant hereto,, the Financing Agreements are hereby ratified,
restated and confirmed by the parties hereto as of the effective date hereof. To the extent of conflict between the terms of this Amendment No. 3 and the Financing Agreements, the terms of this
Amendment No. 3 shall control. 

        8.    Governing Law.    This Amendment No. 3 and the rights and obligations hereunder of each of the parties
hereto shall be governed by and interpreted and determined in accordance with the internal laws of the State of New York, without regard to principles of conflicts of law. 

        9.    Binding Effect.    This Amendment No. 3 shall be binding upon and inure to the benefit of each of the
parties hereto and their respective successors and assigns. 

        10.    Counterparts.    This Amendment No. 3 may be executed in any number of counterparts, but all of such
counterparts shall together constitute but one and the same agreement. In making proof of this Amendment No. 3 it shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto. 

        11.    Headings.    The headings listed herein are for convenience only and do not constitute matters to be construed
in interpreting this Amendment No. 3. 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK] 

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        IN
WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused these presents to be duly executed as of the day and year first above written. 

	 	 	BORROWERS
	

 	
 	

Atlantic Express Transportation Corp.

Amboy Bus Co., Inc.

Atlantic Express Coachways, Inc.

Atlantic Express of L.A. Inc.

Atlantic Express of Missouri Inc.

Atlantic Express of New Jersey, Inc.

Atlantic Express of Pennsylvania, Inc.

Atlantic-Hudson, Inc.

Atlantic Paratrans, Inc.

Atlantic Paratrans of NYC, Inc.

Atlantic Queens Bus Corp.

Block 7932, Inc.

Brookfield Transit Inc.

Courtesy Bus Co., Inc.

Jersey Business Land Co., Inc.

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

180 Jamaica Corp.

Merit Transportation Corp.

Metro Affiliates, Inc.

Metropolitan Escort Service, Inc.

Midway Leasing Inc.

Staten Island Bus, Inc.

Temporary Transit Service, Inc.

201 West Sotello Realty, Inc.

Wrightholm Bus Line, Inc.

Atlantic Transit Corp.

Airport Services, Inc.

Atlantic Express New England, Inc.

Atlantic Express of California, Inc.

Atlantic Express of Illinois, Inc.

Atlantic Paratrans of Arizona, Inc.

Fiore Bus Service, Inc.

Groom Transportation, Inc.

James McCarty Limo Service, Inc.

K. Corr, Inc.

McIntire Transportation, Inc.

Mountain Transit, Inc.

R. Fiore Bus Service, Inc.

Raybern Bus Service, Inc.

[SIGNATURES CONTINUED ON FOLLOWING PAGE] 

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[SIGNATURES
CONTINUED FROM PREVIOUS PAGE] 

	 	 	Raybern Capital Corp.

Raybern Equity Corp.

Robert L. McCarthy & Son, Inc.

T-NT Bus Service, Inc.

Transcomm, Inc.

Winsale, Inc.
	

 	
 	

By:	

/s/ Domenic Gatto

	

 	
 	

Title:	

President

	GUARANTORS
	

JERSEY BUS SALES, INC.
	

By:	

/s/ Domenic Gatto
	
 	

 
	

Title:	

President
	
 	

 
	

CENTRAL NEW YORK REORGANIZATION CORP.
	

By:	

/s/ Domenic Gatto
	
 	

 
	

Title:	

President
	
 	

 
	
AGENT
	

CONGRESS FINANCIAL CORPORATION
	

By:	

/s/ Herb Korn
	
 	

 
	

Title:	

Vice President
	
 	

 
	
LENDER
	

CONGRESS FINANCIAL CORPORATION
	

By:	

/s/ Herb Korn
	
 	

 
	

Title:	

Vice President
	
 	

 

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AMENDMENT NO. 3 TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENTQuickLinks
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Exhibit 10.16    
    

	$4,900,000	 	August 5, 2004

 
 

SENIOR UNSECURED TERM NOTE    
    

ALL
AMOUNTS AT ANY TIME OWING BY THE BORROWER UNDER THIS SENIOR UNSECURED TERM NOTE (THIS "NOTE") TO THE GSC LENDERS HEREUNDER ARE SUBORDINATED IN RIGHT OF PAYMENT SOLELY TO THE INDEFEASIBLE PAYMENT
AND SATISFACTION IN FULL OF ALL PRESENT AND FUTURE OBLIGATIONS, LIABILITIES AND INDEBTEDNESS OF THE BORROWER UNDER THIS NOTE TO CONGRESS FINANCIAL CORPORATION (AND ITS SUCCESSORS AND ASSIGNS) IN ITS
CAPACITY AS AGENT PURSUANT TO THE SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, DATED APRIL 22, 2004, BY AND AMONG THE BORROWER UNDER THIS NOTE, CERTAIN AFFILIATES OF THE BORROWER UNDER
THIS NOTE, CONGRESS FINANCIAL CORPORATION AND THE LENDERS PARTY THERETO, AS PROVIDED BY AND AS OTHERWISE SUBJECT TO THE SUBORDINATION AGREEMENT, DATED AS OF THE DATE HEREOF, BETWEEN THE LENDERS AND
CONGRESS FINANCIAL CORPORATION, AS AGENT. THIS NOTE IS NOT SUBORDINATED TO ANY OTHER OBLIGATIONS, LIABILITIES OR INDEBTEDNESS OF THE BORROWER. 

        FOR
VALUE RECEIVED, the undersigned, Atlantic Express Transportation Corp., a New York corporation (the "Borrower"), hereby promises to pay to the order GSCP II Holdings (AE), L.L.C., a
Delaware limited liability company, and GSC Recovery II, L.P., a Delaware limited partnership (collectively, the "GSC Lenders"), at 500 Campus Drive, Florham Park, NJ 07932 (or such other place
as the GSC Lenders may direct from time to time), in lawful money of the United States of America and in immediately available funds, the principal amount of four million, nine hundred thousand
Dollars ($4,900,000) on the Maturity Date (as such term is defined below) and to pay interest on said principal amount as set forth below. 

        If
any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and
before as well as after judgment) at the per annum rate of seventeen percent (17%). 

        All
interest payable hereunder shall be computed on the basis of actual days elapsed and a year of 360 days. 

        Capitalized
terms used herein but not otherwise defined shall have the meanings set forth in the Second Amended and Restated Loan and Security Agreement (the "Second Amended Loan and
Security Agreement") dated April 22, 2004 by and among the Borrower and other parties on the signature page thereto as Borrowers, Jersey Bus Sales, Inc. and Central New York
Reorganization Corp. as Guarantors, Congress Financial Corporation as Agent and the Lenders from time to time party thereto, as in effect on the date hereof. 

        1.    Maturity Date.    The Maturity Date shall mean the earlier of (i) April 23, 2007 or
(ii) such date as Excess Availability exists under the Second Amended Loan and Security Agreement in an amount in excess of $7,000,000 after giving effect to the repayment of the principal of
this Note.

        2.    Interest Payments.    Interest shall be computed at the per annum rate of fifteen percent (15%) and shall be
paid on said principal amount (i) monthly in arrears, payable on the last Business Day of each month, commencing on August 31, 2004 until September 30, 2004, and thereafter
(ii) quarterly in arrears, payable on the last Business Day of each quarter, commencing on December 31, 2004 until the Maturity Date; provided, however, that no interest payment shall be
made unless (a), after giving effect to such interest payment, at least $1,000,000 of Excess Availability exists under the Second Amended Loan and Security Agreement and (b) no Event of Default
exists under the Second Amended Loan and Security Agreement. 

 

        3.    Representations and Warranties.    The Borrower hereby agrees that each of the representations and warranties
made in Section 8 of the Second Amended Loan and Security Agreement (i) are true and correct as of the date hereof, (ii) shall be
deemed made as of the date hereof and (iii) are deemed incorporated into this Note with the same force and effect as if such representations and warranties were set forth in their entirety in
this Note. 

        4.    Covenants.    The Borrower hereby agrees to comply with each of the covenants, agreements, undertakings and
other promises made by it in Section 9 of the Second Amended and Restated Loan and Security Agreement as in effect on the date hereof regardless
of whether or the not the Second Amended Loan and Security Agreement remains in full force and effect or the Obligations under the Second Amended Loan and Security Agreement remain outstanding. The
covenants, agreements, undertakings and other promises made by the Borrower in Section 9 of the Second Amended and Restated Loan and Security
Agreement shall be deemed incorporated by reference into this Note with the same force and effect as if such covenants, agreements, undertakings and other promises were set forth in their entirety in
this Note. 

        5.    Events of Default.    The occurrence or existence of any one or more of the following events are referred to
herein individually as an "Event of Default", and collectively as "Events of Default": 

	a.
	Borrower
fails to pay principal plus interest in full on the Maturity Date or when otherwise due;

	b.
	any
representation, warranty or statement of fact made by the Borrower in this Note shall when made or deemed made be false or misleading in any material respect;

	c.
	any
judgment for the payment of money is rendered against the Borrower in excess of $500,000 in any one case or in excess of $1,000,000 in the aggregate (to the extent not covered by
insurance where the insurer has assumed responsibility in writing for such judgment) and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at
any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against the Borrower;

	d.
	Borrower
dissolves or suspends or discontinues doing business;

	e.
	Borrower
makes an assignment for the benefit of creditors, makes or sends notice of a bulk transfer or calls a meeting of its creditors or principal creditors in connection with a
moratorium or adjustment of the Indebtedness due to them;

	f.
	a
case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against the Borrower or all or any part of its properties and such
petition or application is not dismissed within thirty (30) days after the date of its filing or the Borrower shall file any answer admitting or not contesting such petition or application or
indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner;

	g.
	a
case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by the Borrower or for all or any part of its property;

	h.
	any
default in respect of any Indebtedness of the Borrower (other than Indebtedness owing to the GSC Lenders under this Note), which default continues for more than the applicable cure
period, if any, with respect thereto and/or is not waived in writing by the other parties thereto; 

2

 

	i.
	any
material provision hereof shall for any reason cease to be valid, binding and enforceable with respect to any party hereto in accordance with its terms, or any such party shall
challenge the enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take any action based on the assertion that any provision hereof has ceased to be or is
otherwise not valid, binding or enforceable in accordance with its terms;

	j.
	an
ERISA Event shall occur which results in or could reasonably be expected to result in liability of the Borrower in an aggregate amount in excess of $500,000;

	k.
	any
Change of Control;

	l.
	the
indictment by any Governmental Authority, or the threatened indictment by any Governmental Authority of the Borrower, as to which there is a reasonable possibility of an adverse
determination under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against such Borrower pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any property of the Borrower which is necessary or material to the conduct of its business;

	m.
	there
shall be a Material Adverse Effect;

	n.
	the
occurrence of an "Event of Default" under the Second Amended Loan and Security Agreement (as such term is defined therein); or

	o.
	the
occurrence of an "Event of Default" under the Indenture (as such term is defined therein), dated as of April 22, 2004, by and among the Borrower as Issuer, the Bank of New
York as Trustee and Collateral Agent and the Guarantors named therein.

	6.
	Remedies.

	a.
	At
any time an Event of Default exists or has occurred and is continuing, the GSC Lenders shall have all rights and remedies provided in this Note, all of which rights and remedies may
be exercised without notice to or consent by the Borrower, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted
to the GSC Lenders hereunder or other applicable law, are cumulative, not exclusive and enforceable, in the GSC Lenders' discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by the Borrower of this Note.

	b.
	Without
limiting the generality of the foregoing, at any time an Event of Default exists or has occurred and is continuing, the GSC Lenders may accelerate the obligations hereunder and
demand immediate payment thereof (provided, that, upon the occurrence of any Event of Default described in Paragraphs 4(f) and 5(g) above, all obligations hereunder shall automatically become
immediately due and payable).

	7.
	Miscellaneous.

	a.
	Amendments, Etc.    No amendment, modification, termination or waiver of any provision of this Note, and no consent to any
departure by the Borrower herefrom, shall in any event be effective unless the same shall be in writing and signed by the GSC Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

	b.
	Other Rights.    No failure to exercise, and no delay in exercising on the part of the GSC Lenders of, any right, power or
privilege under this Note shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies 

3

 

of
the GSC Lenders herein provided are cumulative and not exclusive of any rights or remedies provided by law. 

	c.
	Binding Effect; Successors and Assigns.    This Note and the terms, covenants and conditions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower shall not have the right to assign or transfer this Note or its rights or obligations
hereunder or any interest herein without the prior written consent of the GSC Lenders.

	d.
	Governing Law.    This Note shall be a contract made under and governed by, and construed in accordance with, the laws of the
State of New York, without regard to conflict of laws principles. All obligations of the Borrower and rights of the GSC Lenders expressed herein shall be in addition to and not in limitation of those
provided by applicable law.

	e.
	Indemnification.    The Borrower agrees to indemnify and hold harmless the GSC Lenders and each of their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or proceeding arising out of, any use made or proposed to be made by the Borrower of all or any portion of the borrowings hereunder, except
to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified
Party's gross negligence or willful misconduct.

	f.
	Maximum Interest Rate.    This Note is subject to the express condition that at no time shall the Borrower be obligated or
required to pay interest on the principal balance at a rate which would subject the GSC Lenders to either civil or criminal liability as a result of being in excess of the maximum rate which the
Borrower is permitted by law to contract or agree to pay. If by the terms of this Note the Borrower is at any time required or obligated to pay interest on the principal balance at a rate in excess of
such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and interest payable hereunder shall be computed at such maximum rate and the
portion of all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance.

	g.
	All
notices and other communications provided to any party hereto under this Note shall be in writing (including telex or facsimile) and addressed or delivered to such party at its
address set forth herein: 

	If to the GSC Lenders:	 	GSCP II Holdings (AE), L.L.C.

12 East 49th Street, Suite 3200

New York, NY 10017

Attention: Matthew Kaufman Telephone No.: 212-884-6200

Telecopy No.: 212-884-6197
	If to the Borrower:	 	Atlantic Express Transportation Corp.

7 North Street

Staten Island, New York 10302

Attention: President

Telephone No.:718-442-7000

Telecopy No.: 718-442-5105

4

 

or
at such other address as may be designated by such party from time to time in a notice complying with the terms of this section. Any notice shall be deemed given upon receipt. 

	h.
	Severability.    Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and
valid under applicable law. Any provision of this Note that is prohibited by, unenforceable or invalid in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition, unenforceability or invalidity, without invalidating the remainder of such provisions of this Note or affecting the validity or enforceability of such provision in any other jurisdiction.

	i.
	Captions.    Section captions used in this Note are for convenience of reference only and shall not affect the construction of
this Note.

	j.
	Counterparts.    This Note may be executed in any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute but one and the same Note. The Borrower hereby acknowledges receipt of a true, correct and complete counterpart of this Note.

	k.
	SUBMISSION TO JURISDICTION; WAIVER OF VENUE.    THE BORROWER: (A) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
NEW YORK STATE OR FEDERAL COURT SITTING IN MANHATTAN, NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT; AND (B) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST THE GSC LENDERS
OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF THE GSC LENDERS, ARISING OUT OF OR RELATING TO THIS NOTE, IN ANY COURT OTHER THAN AS HEREINABOVE SPECIFIED IN THIS PARAGRAPH. THE BORROWER
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY THE BORROWER, THE
GSC LENDERS, OR OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS PARAGRAPH AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER
COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

	l.
	WAIVER OF JURY TRIAL.    THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS NOTE, AND AGREE THAT ANY SUCH ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT 

5

 

BEFORE
A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE GSC LENDERS ENTERING INTO THIS NOTE. 

	 	 	ATLANTIC EXPRESS TRANSPORTATION CORP.
	

 	
 	

By:	

/s/  NEIL J. ABITABILO      
 Name: Neil J. Abitabilo

Title: Chief Financial Officer

6

QuickLinks

Exhibit 10.16

SENIOR UNSECURED TERM NOTE

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