Document:

Exhibit 10.7

 

Stockholders
Agreement dated as of December 24, 2003 (this “Agreement”),
among (i) Atlantic Express Transportation Group Inc., a New York corporation
(the “Company”) and (ii) all Persons receiving shares of the Common
Stock (as hereinafter defined) of the Company pursuant to the Plan (as
hereinafter defined), including without limitation the parties identified on
the signature pages hereof and any parties identified on the signature pages of
any joinder agreements executed and delivered pursuant to Section 8.2
of this Agreement (each an “Investor”, and together, the “Investors”).

 

Witnesseth:

 

Whereas, the First Amended Joint Plan of Reorganization of the Company
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 5, 2003  by order of the
United States Bankruptcy Court for the Southern District of New York (the “Plan”)
provides that the Company will enter into a stockholders agreement with the Investors
relating, among other things, to the rights of Investors in respect of the
Common Stock (as defined below).

 

Whereas, as of the date hereof, the Investors are the holders of 100%
of the Common Stock pursuant to the Plan.

 

In consideration of the foregoing and of their mutual covenants set
forth in this Agreement, the parties hereby agree as follows:

 

Article I

Definitions

 

1.1.                              Definitions.
The following terms, as used herein, have the following meanings:

 

“Advice” shall have the meaning as specified in Section 6.3.

 

“Agreement” shall have the meaning as specified in the Preamble.

 

“Affiliate” means, as to any Person, any other Person directly
or indirectly Controlling, Controlled by or under direct or indirect common
Control with such Person; provided that the Company and its subsidiaries shall
not, solely as a result of such Person owning Common Stock of the Company or
designating a director on the Board of Directors, be deemed Affiliates of such
Person for the purposes of this Agreement.

 

“Approved Sale” shall have the meaning specified in Section 5.3(a).

 

“Board of Directors” means the Board of Directors of the
Company.

 

“Certificate of Incorporation” means the Certificate of
Incorporation of the Company, as amended and in effect from time to time.

 

 

“Common Stock” means the common stock, par value $0.001 per
share, of the Company.

 

“Common Stock Equivalents” shall have the meaning specified in Section 5.1(a).

 

“Control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of securities, partnership interests or
by contract, assignment or otherwise. The terms “Controls”, “Controlling” and
“Controlled” shall have meanings correlative to the foregoing.

 

“Corporate Transaction” shall have the meaning specified in Section 5.3(a).

 

“Demand Registration” shall have the meaning as set forth in Section 6.2(a).

 

“Electing Holder” shall have the meaning as specified in Section 5.2(a).

 

“GSC” means GSCP II Holdings (AE), LLC, GSC Recovery II, L.P.
and GSC Partners CDO Fund, Limited and their respective Affiliates.

 

“GSC Designated Directors” shall have the meaning as specified
in Section 4.1(a)(i).

 

“GSC Minimum Common Stock Ownership” shall have the meaning as
specified in Section 4.1(a)(i).

 

“HSR Act” shall have the meaning specified in Section 5.1(c).

 

“Initial Public Offering” means the first to occur of: (i) a
sale of Common Stock for the account of the Company in a firmly underwritten
public offering registered under the Securities Act of 1933, as amended
(excluding registration statements filed on Form S-8, or any similar successor
form or another form used for a purpose similar to the intended use for such
forms), and underwritten by a nationally recognized investment bank approved by
vote of a majority of the Board of Directors and (ii) the listing of the Common
Stock on a national securities exchange or authorization for quotation on the
Nasdaq National Market System or any successor thereto.

 

“Investors” shall have the meaning as specified in the Preamble.

 

“Losses” shall have the meaning as specified in Section 6.8.

 

“NASD” shall have the meaning as specified in Section 6.3(g).

 

“1933 Act” means the Securities Act of 1933, as amended and in
effect from time to time.

 

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“1934 Act” means the Securities Exchange Act of 1934, as amended
and in effect from time to time.

 

“Notice of Offer” means any bona fide written offer from a
Proposed Section 5.2(a) Purchaser to purchase or otherwise acquire for
value issued and outstanding shares of Common Stock from an Investor, which
offer shall identify the proposed transferee or transferees, the Common Stock
covered thereby, all terms and conditions of the offer and, in the case of an
offer pursuant to which the consideration consists in whole or in part of
consideration other than cash, a description of the non-cash component of such
consideration.

 

“Original 10% Holder” shall have the meaning as specified in Section 5.2(a).

 

“Person” means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.

 

“Personal Obligations” shall have the meaning as specified in Section 5.3(b).

 

“Piggyback Registration” shall have the meaning as specified in Section 6.1(a).

 

“Regulatory Compliance” shall have the meaning as specified in Section 5.1(c).

 

“Proposed Section 5.1(a) Purchaser” shall have the meaning
as specified in Section 5.1(a).

 

“Proposed Section 5.2(a) Purchaser” shall have the meaning
as specified in Section 5.2(a).

 

“Pro Rata Portion” means, with respect to one or more Investors,
the ratio of (a) the number of shares of Common Stock then owned by each
such Investor to (b) the total number of shares of Common Stock
outstanding.

 

“Qualified IPO” means a bona fide public offering of Common
Stock pursuant to an effective registration statement filed under the 1933 Act
which results in proceeds to the Company of at least $50,000,000 and which
results in the listing or quotation of the Common Stock on a national
securities exchange or automated quotation system.

 

“Registrable Securities” means any shares of Common Stock held
by an Investor and any other securities issued or issuable with respect to the
Common Stock by way of a stock split, stock dividend, reclassification,
subdivision or reorganization, recapitalization or similar event.

 

“Registration and Registrations” shall have the meanings as
specified in Section 6.3.

 

“Sale of Stock” shall have the meaning specified in Section 5.3(a).

 

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“SEC” means the United States Securities and Exchange Commission.

 

“Selling 10% Holder” shall have the meaning as specified in Section 5.2(a).

 

“Senior Credit Facility” shall mean the Credit Agreement, dated
December    , entered into among the Company, Atlantic
Express Transportation Corp., Congress Financial Corporation and the other
parties thereto, as amended and in effect from time to time, including without
limitation any refinancing or replacement thereof.

 

“Standby Commitment” shall have the meaning as specified in Section 4.3(c).

 

“Tag Along Right” shall have the meaning as specified in Section 5.2(a).

 

“Transfer” means any assignment, transfer, sale, conveyance,
pledge, hypothecation or other disposition.

 

Article II

Representations and Warranties

 

Each of the parties hereby severally represents and warrants to each of
the other parties as follows:

 

2.1.                              Authority;
Enforceability. Such party has the legal capacity or corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. Such party (in the case of the parties that are not natural persons)
is duly organized and validly existing under the laws of its jurisdiction of
organization, and the execution of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
action. No other act or proceeding, corporate or otherwise, on its part is
necessary to authorize the execution of this Agreement or the consummation of
any of the transactions contemplated hereby. This Agreement has been duly
executed by such party and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with the terms of this Agreement, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity (whether applied by
a court of law or of equity).

 

2.2.                              No
Breach. Neither the execution of this agreement nor the performance by such
party of its obligations hereunder nor the consummation of the transactions
contemplated hereby does or will:

 

(a)                                  in
the case of parties that are not natural persons, conflict with or violate its
certificate of incorporation, bylaws or other organizational documents;

 

(b)                                 violate,
conflict with or result in the breach or termination of, or otherwise give any
other person the right to accelerate, renegotiate or terminate or receive any
payment or constitute a default or an event of default (or an event which with
notice, lapse of time, or both,

 

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would constitute a default or event of default) under the terms of, any
material contract or agreement to which it is a party or by which it or any of
its assets or operations are bound or affected; or

 

(c)                                  constitute
a violation by such party of any laws, rules or regulations of any
governmental, administrative or regulatory authority or any judgments, orders,
rulings or awards of any court, arbitrator or other judicial authority or any
governmental, administrative or regulatory authority.

 

2.3.                              Consents.
No consent, waiver, approval, authorization, exemption, registration, license
or declaration is required to be made or obtained by such party, other than
those which have been made or obtained, in connection with (i) the execution or
enforceability of this Agreement or (ii) the consummation of any of the
transactions contemplated hereby.

 

Article III

Share Transfers

 

3.1.          Transfers by
Investors. No Investor shall Transfer to any Person who is not a party to
this Agreement any Common Stock now or hereafter owned by such Investor unless
the transferee of any such Investor shall join in this Agreement by executing a
joinder agreement substantially in the form attached hereto as Exhibit A.
The foregoing restriction on Transfer shall not apply to (i) a Transfer of
Common Stock in acccordance with Section 5.3; (ii) a Transfer of Common
Stock by an Investor pursuant to an effective registration statement under the
1933 Act; or (iii) a Transfer of all or any of such Common Stock in a bona fide
pledge of such Common Stock to a financial institution to secure borrowings as
permitted by applicable law; provided that such Transfer shall not
result in a violation of the provisions of Article II, that the Investor shall
be able to fulfill its obligations under the provisions of this Agreement and
the Certificate of Incorporation, and that contemporaneously with such pledge
such financial institution agrees that upon any foreclosure on such pledge it
and any transferee shall be bound by the obligations of the Investor under this
Agreement and the Certificate of Incorporation.

 

3.2.                              Transfers
to Comply with Laws. Notwithstanding any contrary provision herein, no
Investor may Transfer or offer to Transfer any shares of Common Stock (or
solicit any offers to Transfer any shares of Common Stock), except in
compliance with the 1933 Act and rules and regulations promulgated thereunder
and in compliance with any applicable state securities laws and rules and
regulations promulgated thereunder.

 

3.3.                              Improper
Transfer. Any attempt to Transfer any shares of Common Stock not in
accordance with this Agreement shall be null and void and the Company will not
give nor permit the Company’s transfer agent to give any effect to such attempted
Transfer in its stock records

 

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3.4.                              Restrictive
Legend. Each certificate evidencing shares of Common Stock shall contain in
substance the following restrictive legend in addition to any other legend:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (A) THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS, OR (B) IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO ATLANTIC EXPRESS TRANSPORTATION GROUP INC. (THE “COMPANY”),
REGISTRATION UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.

 

THIS SECURITY IS ALSO SUBJECT TO THE TERMS
AND CONDITIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF
DECEMBER    , 2003, AS AMENDED FROM TIME TO TIME TO WHICH
THE COMPANY IS A PARTY AND WHICH IS BINDING ON ALL SHAREHOLDERS, WHICH CONTAINS RESTRICTIONS ON TRANSFER HEREOF AND A PROVISION THAT MAY REQUIRE THE
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE TO SELL SUCH
SECURITIES UNDER CERTAIN CIRCUMSTANCES, COPIES OF WHICH
ARE ON FILE AT THE OFFICES OF THE COMPANY AND MAY BE OBTAINED UPON REQUEST.

 

Article IV

Voting and Election of Directors

 

4.1.                              Board
of Directors. Each of the Investors severally agrees that in exercising its
voting rights on the election of directors, whether or not at an annual or
special meeting of the Company and whether or not at an adjourned meeting, such
Investor shall vote its shares of the voting Common Stock for, and each of the
Investor and the Company agrees that it will take all other necessary actions
within its control to cause the nomination and the election of, the individuals
to the Board of Directors as follows:

 

(a)                                  The
Board of Directors shall consist of at least three (3) directors so long as GSC
and its Affiliates are the record holders of at least 35% of the Common Stock
issued under the Plan (subject to adjustment from time to time for stock
splits, stock dividends, stock combinations, reclassifications and similar
transactions and adjustments in the event of further stock issuances), with:

 

(i)                                     a majority of the
Board of Directors designated by GSC so long as GSC and its Affiliates are the
record holders of at least 35% of the Common Stock issued under the Plan
(subject to adjustment from time to time for stock splits, stock dividends,
stock combinations, reclassifications and similar transactions and adjustments
in the event of further stock issuances) (the “GSC Minimum Common Stock
Ownership”), and at least one director so long as GSC and its Affiliates
are the record holders of at least 10% of the Common Stock issued under the
Plan (subject to adjustment from time to time for stock splits, stock
dividends, stock combinations, reclassifications and similar transactions and
adjustments in the event of further stock issuances); such directors being
herein referred to as the “GSC Designated Directors”); and GSC shall
have the right to

 

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remove and replace any GSC Designated Director at any time and a
vacancy in a seat belonging to a GSC Designated Director, whether by
resignation or otherwise, shall be filled by GSC so long as GSC and its
Affiliates are the record holders of the number of shares necessary to
designate such director as set forth in this Section 4.1(a)(i); and

 

(ii)                                  the Chief Executive
Officer of the Company.

 

It is understood that the foregoing shall not
limit the rights of GSC and its Affiliates to vote their shares of the Common
Stock as they shall elect for any members of the Board of Directors other than
the GSC Designated Directors and the Chief Executive Officer of the Company.

 

4.2.                              Directors’
and Officers’ Insurance. The Company shall use its reasonable best efforts
to obtain and maintain directors’ and officers’ insurance on such terms and in
such amounts as are customary for companies of its type.

 

4.3.                              Minority
Stockholder Protections. The Company will not, without approval of the
holders of a majority of Common Stock that is not owned by GSC or its
Affiliates:

 

(a)                                  redeem
or repurchase any shares of Common Stock unless each holder of Common Stock may
participate on a pro rata basis;

 

(b)                                 pay
a dividend or distribution on the Common Stock unless such dividend or
distribution is paid to all holders of Common Stock on a pro rata basis;

 

(c)                                  engage (or permit any
subsidiary to engage) in any transactions with a director, an officer or an
Affiliate including financing transactions unless (a) such transaction is
approved by a majority of the members of the Board of Directors who have no
financial interest in such transaction and are not Affiliates of any person who
has a financial interest in such transaction, and (b) such transaction is fair
to the Company or its subsidiaries, as the case may be, from a financial point
of view or on terms no less favorable to the Company or its subsidiaries than
those that could be obtained at the time of such transaction in arm’s-length
dealings with a party who is not an Affiliate (which fairness or favorable
terms may be conclusively established by the Company with an opinion of a
nationally recognized investment banking firm); provided, however,
the above restrictions shall not apply to (a) transactions between the Company
and its subsidiaries, (b) employment arrangements approved by the Board of
Directors with individuals who are operating officers or employees of the
Company or its subsidiaries, (c) transactions in which all holders of Common
Stock participate on a pro rata basis, (d) payment of reasonable
fees and expense reimbursement to the members of the Board of Directors on an
equal basis, (e) transactions and arrangements approved pursuant to the Plan,
(f) transactions contemplated by the express terms of this Agreement, including
without limitation the payment of fees pursuant to Section 5.5
hereof, and (g) the issuance by the Company or its subsidiaries of securities
in which GSC and its Affiliates do not purchase more than (I) where the
preemptive rights set forth in Section 5.1 do not apply, any amount
of securities as GSC or its Affiliates may agree to purchase under any
“standby” commitment entered into by the Company or its subsidiary with GSC or
its

 

7

 

Affiliates where such standby commitment has been offered pro rata
to all holders of more than 10% of the Common Stock (a “Standby Commitment”),
or (II) where the preemptive rights set forth in Section 5.1 do
apply, the amount of such securities which GSC and its Affiliates are entitled
to purchase by reason of such preemptive rights plus any amount of such
additional securities as GSC or its Affiliates may agree to purchase under any
Standby Commitment; or

 

(d)                                 any
amendments or modifications to the Certificate of Incorporation or bylaws of
the Company which modify or expressly limit in any material respect, or
conflicts in any material respect with, the terms of this Agreement.

 

Article V

Rights of Certain Investors

 

5.1.                              Preemptive
Rights.

 

(a)                                  Except
as provided in Section 5.1(b), if the Company at any time or from
time to time proposes to issue any shares of Common Stock or any other
securities convertible into, exercisable for, or otherwise entitling the holder
thereof to acquire, Common Stock by exchange or the exercise of options,
warrants or rights (“Common Stock Equivalents”) at a price that is less
than fair market value (as determined in good faith by the Board of Directors),
the Company shall give written notice thereof to each Investor. Such notice
shall contain the amount of Common Stock Equivalents to be issued, the identity
of the Person to whom the Common Stock Equivalents are proposed to be issued
(the “Proposed Section 5.1(a) Purchaser”) if then known by the
Company and any other pertinent terms of the proposed issuance (including the
terms of such Common Stock Equivalents) and shall also contain an irrevocable
offer to each Investor to purchase, at the purchase price at which the Company
initially proposes to issue such Common Stock Equivalents, its Pro Rata Portion
of such Common Stock Equivalents. At any time within thirty (30) days after
receipt of the notice provided for in the previous sentence, an Investor may
accept the offer made to it in such notice on substantially the same terms (and
consisting of the same combination of Common Stock Equivalents, if the offer of
Common Stock Equivalents consists of more than one type of security and the
terms of the offer of Common Stock Equivalents require that Investors purchase
such Common Stock Equivalents in a prorated strip), by furnishing notice
thereof to the Company. If an Investor shall fail to respond to the Company
within thirty (30) days of receipt of the Company’s notice to Investors of the
proposed issuance described above, such failure shall be regarded as a
rejection of such Investor’s right to exercise such Investor’s preemptive
rights provided in this Article V.

 

(b)                                 Section 5.1(a)
shall not apply to (i) the grant of employee stock options or other convertible
securities to purchase Common Stock pursuant to an employee stock option plan,
stock purchase plan, or similar benefit program or agreement, where the primary
purpose is not to raise additional equity capital for the Company; (ii) the
issuance of any Common Stock Equivalents in order to effect any joint venture
arrangement, merger, consolidation or other acquisition of any Person,
business, division or assets, which joint venture, merger, consolidation or
other acquisition has been approved by the Board of Directors, and (iii) the
issuance of any Common Stock or convertible securities to a landlord of, or any
insurance surety or insurance

 

8

 

provider for, or equipment lessor or lender to, the Company, which
issuance has been approved by the Board of Directors and provided that such
landlord, surety, insurer, lessor or lender is not GSC or an Affiliate of GSC.

 

(c)                                  The
closing of the purchase of Common Stock Equivalents accepted for purchase
pursuant to Section 5.1(a) shall take place simultaneously with the
closing of the sale of the Common Stock Equivalents to the Proposed
Section 5.1(a) Purchaser, or, if there is no Proposed Section 5.1(a)
Purchaser, at such time and place upon which the Investors (based on a majority
of the Common Stock Equivalents that such Investors have agreed to purchase)
who have accepted for purchase Common Stock Equivalents as provided in this
Article V may agree; provided, however, that such closing
shall be subject to a reasonable extension as to an Investor if the purchase by
the Investor is subject to compliance with any applicable law related to the
issuance of the Common Stock Equivalents to such Investor (“Regulatory
Compliance”), including any necessary filings or notices and the expiration
or termination of any waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”), or any similar
applicable state antitrust or applicable state securities laws, provided that
(i) such Regulatory Compliance does not unreasonably delay the issuance the
Common Stock Equivalents and the attainment by the Company of the benefits of
such financing and (ii) such Investor uses reasonably commercial efforts to
effect such Regulatory Compliance as soon as possible.

 

(d)                                 In
the event an Investor fails to exercise the preemptive right provided in this Section 5.1
within the thirty (30) day period described above, the Company shall have
ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of Common Stock Equivalents covered thereby shall be closed, if
at all, within (60) days from the date of said agreement) to sell the Common
Stock Equivalents not elected to be purchased by such Investor or the other
Investors pursuant to Section 5.1(a), at or above the price and
upon the terms no more favorable to the Proposed Section 5.1(a) Purchaser
than specified in the Company’s notice. In the event the Company has not sold
the Common Stock Equivalents or entered into an agreement to sell the Common
Stock Equivalents within such ninety (90) day period (or has not sold and
issued the Common Stock Equivalents in accordance with the foregoing within
sixty (60) days from the date of said agreement), the Company shall not
thereafter issue or sell any Common Stock Equivalents without first offering
such Common Stock Equivalents to the Investors in the manner provided above.

 

(e)                                  If
the Investor’s acquisition of Common Stock Equivalents upon exercise of its
rights under this Article V would be subject to Regulatory
Compliance, the Company and such Investor each will take such actions as may be
reasonable required promptly to comply with such Regulatory Compliance. The
Company and such Investor each will pay their respective costs that each incurs
in complying with the obligations set forth in this Sextion 5.1(e);
provided, however, that the HSR filing fee and any other Regulatory Compliance
governmental fees (other than governmental fees which are not applicable to all
Investors generally) shall be paid by the Company. It shall be a condition
precedent to the acquisition of Common Stock Equalivents by any Investor that
either (i) no filing under the HSR Act by such Investor is required in
connection with such acquisition or (ii) any applicable waiting period under
the HSR Act has expired or been terminated. If the applicable waiting period
under the HSR Act has not expired

 

9

 

or been terminated by the time of the closing of the sale of Common
Stock Equivalents to a Proposed Section 5.1(a) Purchaser, or if there is
no Proposed Section 5.2(a) Purchaser, within ninety (90) days after the
filing of the HSR Report, or if such Investor and the Company agree to withdraw
the HSR Report, or if such Investor chooses not to file an HSR Report, then the
Company will use its reasonable best efforts to afford to such Investor the
benefits intended to be provided by this Article V by granting to such Investor
the right to acquire, on the same terms as the Common Stock Equivalents
originally to be acquired, other securities of the Company having substantially
the same rights, privileges and preferences as the Common Stock Equivalents
originally to be acquired, except that such other securities will not possess
voting rights and will be convertible into the Common Stock Equivalents that
such Investor was to acquire originally pursuant to this Article IV.

 

5.2. Tag-Along Right.

 

(a)                                  Subject
to Sections 5.2(b) and 5.2(c), if an Investor holding more than 10% of
the outstanding Common Stock which Common Stock was received by such Investor
pursuant to the Plan (each an “Original 10% Holder”) (including without
limitation GSC and its Affiliates at such time as GSC and its Affiliates have
ceased to have the GSC Minimum Common Stock Ownership but own in excess of 10%
of the outstanding Common Stock) shall receive and determine to accept a Notice
of Offer from a Person (a “Proposed Section 5.2(a) Purchaser”) to
purchase or otherwise acquire in a transaction or series of related
transactions any of its Common Stock (in such case the Original 10% Holder
shall be referred to as the “Selling 10% Holder”), each other Original
10% Holder shall have the right to participate in such transaction in the
manner set forth in this Section 5.2. The Selling 10% Holder shall,
promptly after its receipt of a Notice of Offer, send a copy thereof to the
Company and the other Original 10% Holders. Each such other Original 10% Holder
shall have the right (the “Tag-Along Right”) to cause the Selling 10%
Holder to condition its sale to the Proposed Section 5.2(a) Purchaser of
any Common Stock owned by the Selling 10% Holder on the simultaneous purchase
by the Proposed Section 5.2(a) Purchaser of such amount of Common Stock
owned by such Original 10% Holder that such Original 10% Holder (the “Electing
Holder”) may designate by written notice delivered to the Selling 10%
Holder within twenty (20) days following the date on which the Notice of Offer
is sent to such Electing Holder; provided, however, that no
Electing Holder may so designate for purchase an amount of Common Stock greater
than that number of shares of Common Stock that is the subject of the Notice of
Offer owned by such Electing Holder multipied by its Pro Rata Portion. In the
event that the Proposed Section 5.2(a) Purchaser does not wish to purchase
more than the number of shares listed in the Notice of Offer, the number of
shares of Common Stock to be sold by the Selling 10% Holder shall be reduced to
accommodate the participation of the Electing Holders. The purchase price for
each share of the Common Stock sold by each Electing Holder pursuant to this Section 5.2
and the terms of such purchase shall be the same as are set forth in the Notice
of Offer or, in the case of the terms of such purchase other than price, as
otherwise agreed by the Selling 10% Holder with the Section 5.2(a)
Purchaser in any definitive purchase and sale agreement; however, an Electing
Holder shall have the right to withdraw from participation in the sale if the
material terms of the definitive purchase and sale agreement differ in any
material respect with the material terms set forth in the Notice of Offer. No
seller shall receive, in connection with sales pursuant to this Section, any
material consideration (including without limitation, any investment banking or
financial advisory fees)

 

10

 

which is not shared with each other seller in proporation to the number
of shares sold by each. As soon as practicable after such sale, all sale
proceeds relating to the Common Stock of each Electing Holder shall be remitted
to such Electing Holder. In the event any potential Electing Holder fails to
exercise its Tag-Along Right within the aforementioned twenty (20) day period,
the Selling 10% Holder shall have the period commencing upon the expiration of
such twenty (20) day period up to and including the 120th day after
such expiration in which to sell the Common Stock to be sold pursuant to such
Notice of Offer, without any obligation to condition the sale thereof on the
purchase by the Proposed Section 5.2(a) Purchaser of any Common Stock
owned by such potential Electing Holder, at a price not higher than that contained
in the Notice of Offer and on terms no more favorable to the Selling 10% Holder
than that contained in the Notice of Offer. If, at the end of such period the
sale has not been completed, this Section 5.2 shall again apply to
sales of Common Stock by any Original 10% Holder, including the Selling 10%
Holder.

 

(b)                                 The
provisions of Section 5.2(a) shall apply in the case of Transfers
by GSC and its Affiliates only (i) to the extent that the transfer of shares of
Common Stock result in GSC and its Affiliates owning or controlling less than
50% of the Common Stock (subject to adjustment from time to time for stock
splits, stock dividends, stock combinations, reclassifications and similar
transactions and adjustments in the event of further stock issuances) or (ii)
if, immediately prior to such transfer by GSC and its Affiliates, GSC and its
Affiliates own or control less than 50% of the Common Stock (subject to
adjustment from time to time for stock splits, stock dividends, stock
combinations, reclassifications and similar transactions and adjustments in the
event of further stock issuances). So long as GSC and its Affiliates have the
GSC Minimum Common Stock Ownership, GSC and its Affiliates shall have the right
to participate in any transaction or series or transactions in which any
Original 10% Holder transfers Common Stock, such participation to be in amount
equal to one-third of the amount of shares proposed to be transferred by such
Original 10% Holder (and the number of shares proposed to be sold by the such Original
10% Holder other than GSC and its Affiliates shall be reduced if necessary to
accommodate the participation of GSC and its Affiliates).

 

(c)                                  The
following Transfers shall not be subject to the Tag-Along Right: (i) Transfers
by an Original 10% Holder (including without limitation GSC) to its Affiliates,
provided that such Affiliate shall agree to be bound by this Agreement, and
(ii) Transfers pursuant to an effective registration statement under the 1933
Act which are effected pursuant to a public distribution.

 

5.3.                              Drag-Along
Right.

 

(a)                                  Approved
Sale. If GSC shall propose a sale of the Company to a party that is not GSC
or an Affiliate of GSC, pursuant to a sale of all or substantially all of the
Company’s assets, an amalgamation, a scheme of arrangement, a merger or
consolidation, a recapitalization or reorganization (each of the foregoing a “Corporate
Transaction”), or a sale of a majority or more of the issued and
outstanding shares of Common Stock (a “Sale of Stock”), on terms
approved by GSC (each of a Corporate Transaction or a Sale of Stock, an “Approved
Sale”), the Approved Sale shall be effected and each Investor shall be provided not less that fifteen
(15) days’ written notice of such Approved Sale, which notice shall set forth
the name and address of

 

11

 

the proposed purchaser and the material terms
(including without limitation the proposed structure of the Approved Sale and
the consideration and the method of payment thereof) and conditions of the
Approved Sale, and each Investor shall, with
respect to his or its Common Stock (and any other voting securities of the
Company) over which such Investor has voting control or otherwise “beneficial
ownership” (as defined under the 1934 Act):

 

(i)                                     in the case of a
Corporate Transaction, vote (at a stockholders’ meeting which has been duly
called or, if so requested by GSC, by written consent) all of his, her or its
Common Stock and other voting securities of the Company for, consent to, take
all necessary and desirable actions to consummate and not dissent from, object
to or otherwise impede the consummation of the Approved Sale and waive all
dissenter’s rights, appraisal rights and similar rights in connection with such
Corporate Transaction; and

 

(ii)                                  in the case of a Sale
of Stock, agree to sell and sell all of its Common Stock and rights to acquire
Common Stock on the terms and conditions of the Approved Sale.

 

(b)                                 Required
Actions. Without limiting the obligation of the Investors under Section 5.3(a)
hereof, each Investor shall take all necessary or desirable actions reasonably
requested by GSC in connection with the consummation of the Approved Sale, and
each Investor shall make the same representations and warranties, and enter
into the same purchase agreement, indemnities and other documents and
agreements as are entered into or made by GSC in its capacity as a holder of
shares the Common Stock (subject to clauses (i) through (iv) below). In
any Approved Sale, (i) each Investor shall be obligated to make representations
and warranties as to such Investor’s title to and ownership of Common Stock,
authorization, execution and delivery of relevant documents by such Investor,
enforceability of relevant agreements against such Investor and other matters
relating to such Investor and the Company and enter into covenants in respect
of the transfer of such Investor’s Common Stock or otherwise in connection with
such applicable sale (such representations and warranties and covenants,
collectively, “Personal Obligations”), and enter into indemnification
obligations with respect to breach of any of the foregoing, in each case to the
extent that each other Investor is similarly obligated; provided, that
no Investor shall be obligated to enter into indemnification obligations with
respect to any of the foregoing to the extent relating to any other Investor or
another Investor’s Common Stock, (ii) no Investor will be obligated to make any
representations and warranties relating to the business or capitalization of,
or any other matter relating to, the Company and its subsidiaries, other than
Personal Obligations, unless such representations and warranties are made only
to the extent of such Investor’s actual knowledge, provided that each Investor
may be required to enter into indemnification obligations (which need not be
limited to the knowledge of such Investor) in respect of covenants of the
Company or representations and warranties made by the Company or the Investors
as a group, if any, relating to the business, assets, financial condition,
results of operations, prospects or capitalization of, or any other matter
relating to, any of the Company and its subsidiaries, to the same extent that
GSC in its capacity as an Investor enters into such indemnification obligations
on a pro
rata basis, (iii) unless required by the proposed purchaser, no
Investor will be liable in respect of any indemnity obligations pursuant to any
Approved Sale in an aggregate amount in excess of an amount equal to the
product of the aggregate

 

12

 

indemnification liability of all Investors as a group and such
Investor’s percentage ownership of the Common Stock as of immediately prior to
the effectiveness of such Approved Sale; however, if the proposed purchaser
requires that the Investors be jointly and severally liable in respect of
indemnification obligations to the proposed purchaser, the Investors shall
enter into an indemnification and contribution agreement among themselves in
order to give effect to such limitation on a several and proportionate basis,
(iv) Investors shall not be
obligated to participate in an Approved Sale unless they are provided an
opinion of counsel to the effect that the sale in connection with such Approved
Sale is not in violation of the registration or qualification requirements of
federal or applicable state securities laws, and (v) no Investor shall be required to agree to, or be
subject to, a non-competition covenant or similar restriction, except that Investors may be subject to confidentiality
restrictions with respect to information of the Company and its direct and
indirect subsidiaries and to no-shop or similar provisions with respect to
their investment in the Company.

 

(c)                                  Conditions
to Investor’s Obligations. The obligations of the Investors pursuant to
this Section 5.3 with respect to an Approved Sale are subject to
the satisfaction of the following conditions: (i) upon the consummation of the
Approved Sale, each Investor will receive the same consideration, if any, on an
equal per share of Common Stock basis as every other Investor; and (ii) if
Investors are given an option as to the form and amount of consideration to be
received, each Investor will be given the same option per share of Common
Stock.

 

(d)                                 Expenses
of Approved Sale. Investors shall not be obligated to pay any expenses
incurred in connection with an approved sale, except that to the extent any
expenses are incurred by the Company or by GSC for the benefit of all Investors
and are not otherwise paid by the Company or the acquiring party, the aggregate
proceeds available for distribution upon consummation of the Approved Sale
shall be reduced by the amount of such expenses and the consideration received
by each Investor shall be reduced proportionately on an equal per share basis.
The Company shall promptly reimburse GSC, upon demand, for any reasonable
out-of-pocket expenses (including without limitation professional and
investment banking fees) incurred by GSC for the benefit of all Investors
relating to the Approved Sale, whether or not the closing of an Approved Sale
shall have occurred. For purposes of this Section 5.3(d), expenses
incurred in exercising reasonable efforts to take all necessary actions in
connection with the consummation of an Approved Sale in accordance with Section 5.3
shall be deemed to be for the benefit of all Investors. Expenses incurred by
any Investor other than as set forth in this Section 5.3(d) will be
on its own behalf, will not be considered expenses of the transaction hereunder
and will be the responsibility of such Investor.

 

(e)                                  Termination.
This Section 5.3 will terminate and cease to be of any force and
effect upon the first to occur of (i) the consummation of an Approved Sale in
compliance with the terms of this Agreement, or (ii) GSC and its Affiliates
ceasing to be the record holders of at least 35% of the Common Stock issued
under the Plan (subject to adjustment from time to time for stock splits, stock
dividends, stock combinations, reclassifications and similar transactions and
adjustments in the event of further stock issuances).

 

13

 

5.5.                              Management
Fee. So long as GSC shall own any shares of the Common Stock, the Company
shall pay in cash to GSC an aggregate annual management fee of $500,000. Such
payment shall accrue, with interest at the annual rate of interest paid from
time to time by the Company or its subsidiaries, as applicable, under the
Senior Credit Facility (or if there be no Senior Credit Facility, the highest
rate that would have been payable from time to time under the most recent
Senior Credit Facility), to the extent that the current cash payment of the
annual management fee, or the distribution to the Company by subsidiaries of
the Company of funds necessary to enable the Company pay the annual management
fee, is not allowed under the Senior Credit Facility.

 

Article VI

Registration Rights

 

6.1.                              Piggyback
Registration.

 

(a)                                  If,
at any time, the Company proposes to register any of its Common Stock under the
1933 Act in connection with the offering of such Common Stock (except pursuant
to a registration statement filed on Form S-4 or on Form S-8 or such other
forms as shall be prescribed under the 1933 Act for the same purposes or for
any exchange offer) (a “Piggyback Registration”), the Company shall
provide written notice to each Investor of its intention so to do at least
forty-five (45) days prior to the anticipated filing date. Upon the written
request of any Investor given within twenty (20) days after the providing of
any such notice by the Company, the Company shall use reasonable best efforts
to cause to be registered under the 1933 Act all of the Registrable Securities
held by such Investor that have been so requested to be registered, subject to
the provisions of Section 6.1(c).

 

(b)                                 If
the Company in its sole discretion decides a Piggyback Registration shall be
underwritten, the Company shall have sole discretion in the selection of any
underwriter or underwriters to manage such Piggyback Registration.

 

(c)                                  If
the managing underwriter or underwriters of a Piggyback Registration advise the
Company in writing that in its or their opinion the number of Registrable
Securities proposed to be sold in such Piggyback Registration exceeds the
number which can be sold, or adversely affects the price at which the
securities are to be sold in such offering, the Company will include in such
registration only the number of Registrable Securities which, in the opinion of
such underwriter or underwriters, can be sold in such offering and which will
not adversely affect the price thereof. In the event that the contemplated
distribution does not involve an underwritten offering, the determination that
the inclusion of such Registrable Securities shall adversely affect the price
or the number of securities which may be sold by the Company in such offering
may be made by the Company in its reasonable judgment. The Registrable
Securities so included in such Piggyback Registration shall be apportioned (i)
first, to any shares of Common Stock that the Company proposes to sell and (ii)
second, pro
rata
among any shares of Registrable Securities that any Investors propose to sell,
according to the total amount of Registrable Securities requested for inclusion
by said Investors, or in such other proportions as shall mutually be agreed to
among such Investors.

 

14

 

6.2.                              Demand
Registration.

 

(a)                                  Subsequent
to the earlier of the first anniversary of the date of this Agreement or the
180th day following a Qualified IPO, GSC may at any time and from
time to time make a written request to the Company for registration (a “Demand
Registration”), under and in accordance with the 1933 Act, of all or part
of its Registrable Securities, upon receipt of which the Company shall promptly
cause (and in any event within sixty (60) days after receipt of such request)
to be prepared and filed a registration statement under the 1933 Act covering
the Registrable Securities requested to be registered pursuant to this Section.
Within twenty (20) days after receipt of such request, the Company will provide
written notice of such registration request to all Investors who are holders of
Registrable Securities and the Company will include in such registration all
Registrable Securities of such Investors with respect to which the Company has
received written requests for inclusion therein within twenty (20) days after
the providing of such written notice. All requests made pursuant to this subsection will
specify the number of Registrable Securities to be registered and the intended
methods of disposition thereof; provided, however, that the
Company may, if the Board of Directors so determines in the exercise of its
reasonable judgment, that due to a pending or contemplated material
acquisition, disposition, financing or other transaction it would be
inadvisable to effect such Demand Registration at such time, defer such Demand
Registration for a single period not to exceed 90 days; provided that the
Company may not exercise this right more than once in any twelve-month period.

 

(b)                                 GSC
shall be entitled to three Demand Registrations with respect to the Common
Stock held by them, and the expenses of such registrations shall be borne by
the Company. A Demand Registration shall not be counted as a Demand
Registration hereunder until the registration statement to such Demand
Registration has been declared effective and maintained for a period of at
least six months, or such shorter period if all Registrable Securities included
therein have been sold. The Company shall not be obligated to effect more than
one Demand Registration in any 12-month period.

 

(c)                                  If
requested by GSC, any Demand Registration shall be underwritten and GSC shall
select the underwriter or underwriters to manage such Demand Registration.

 

(d)                                 The
Company shall be entitled to include in any registration statement referred to
in this Section 6.2, for sale in accordance with the method of
disposition specified by GSC, shares of Common Stock to be sold by the Company
for its own account. If the managing underwriter or underwriters of a Demand
Registration advise the Company in writing that in its or their opinion the
number of Registrable Securities proposed to be sold in such Demand Registration
exceeds the number which can be sold, or adversely affects the price at which
the securities are to be sold, in such offering, the Company will include in
such registration only the number of Registrable Securities which, in the
opinion of such underwriter or underwriters, can be sold in such offering and
which will not adversely affect the price thereof. In the event that the
contemplated distribution does not involve an underwritten offering, the
determination that the inclusion of such Registrable Securities shall adversely
affect the price or the number of securities which may be sold by the Company
in such offering may be made by GSC in its reasonable judgment. The Registrable
Securities so included in such Demand Registration shall

 

15

 

be apportioned (i)  first, to
any shares of Registrable Securities that GSC and its Affiliates propose to
sell, (ii) second, pro rata among any shares of Registrable
Securities that any other Investors propose to sell, according to the total
amount of Registrable Securities requested for inclusion by said other
Investors, or in such other proportions as shall mutually be agreed to among
such other Investors, and (iii) third, to any shares of Common Stock that the Company
proposes to sell. Except for registration statements on Form S-4 or on Form S-8
or such other forms as shall be prescribed under the 1933 Act for the same
purposes or for any exchange offer, the Company will not file with the SEC any
other registration statement under the 1933 Act with respect to its securities,
whether for its own account or that of other Investors, from the date of
receipt of a notice from GSC pursuant to Section 6.2(a) until the
completion of the period of distribution of the registration statement
contemplated thereby (unless the request for Demand Registration under Section 6.2(a)
has been withdrawn by GSC, in which case the Company may file such other
registration statements after any such withdrawal).

 

(e)                                  The
provisions of this Section 6.2 shall apply so long as GSC and its
Affiliates are the record holders of at least 20% of the Common Stock issued
under the Plan (subject to adjustment from time to time for stock splits, stock
dividends, stock combinations, reclassifications and similar transactions and
adjustments in the event of further stock issuances).

 

6.3.                              Registration
Procedures. It shall be a condition precedent to the obligations of the
Company and any underwriter or underwriters to take any action pursuant to this
Article VI that the Investors requesting inclusion in any Piggyback
Registration or Demand Registration (each, a “Registration,” and
collectively, the “Registrations”) shall furnish to the Company such
information regarding them, the Registrable Securities held by them, the
intended method of disposition of such Registrable Securities, and such
agreements regarding indemnification, disposition of such securities and the
other matters referred to in this Article VI as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company. With respect to any Registration which includes
Registrable Securities held by an Investor, the Company shall, subject to the
provisions of this Article VI, as expeditiously as practicable:

 

(a)                                  prepare
and file with the SEC a registration statement on the appropriate form
prescribed by the SEC and use its reasonable best efforts to cause such
registration statement to become effective;

 

(b)                                 immediately
notify each Investor participating in the Registration and, if applicable, any
underwriter or underwriters of the Registrable Securities covered by the
Registration of any stop order threatened or issued by the SEC and take all
actions reasonably required to prevent the entry of a stop order or if entered
to have it rescinded or otherwise removed;

 

(c)                                  prepare
and file with the SEC such amendments, post-effective amendments and
supplements to such registration statement, and any documents required to be
incorporated by reference therein, as may be necessary to keep the registration
statement effective until the distribution of Registrable Securities shall have
been completed or until the expiration of 180 days (or such longer period as
the Company may agree on) after the effective

 

16

 

date, whichever is earlier; cause the prospectus to be supplemented by
any required prospectus supplement and, as so supplemented, to be filed pursuant
to Rule 424 under the 1933 Act (or any successor rule); and comply with the
provisions of the 1933 Act applicable to it with respect to the disposition of
all Registrable Securities covered by such registration statement during the
applicable period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement or supplement to the
prospectus;

 

(d)                                 furnish
to the Investors participating in the Registration and, if applicable, to the
underwriter or underwriters of the Registrable Securities covered by the
Registration such number of copies of the registration statement and any
post-effective amendment thereto, the prospectus (including each preliminary
prospectus and any amendments or supplements thereto), any exhibits or
documents incorporated by reference in the foregoing items and such other
documents as such Investors or underwriter or underwriters, if any, may
reasonably request in order to facilitate the disposition of the securities
being sold by the Investors;

 

(e)                                  on
or prior to the date on which the registration statement is declared effective,
use its reasonable best efforts to register or qualify, and cooperate with such
Investor, the underwriter or underwriters, if any, and their counsel in
connection with the registration or qualification of the Registrable Securities
covered by the registration statement for offer and sale under the securities
or blue sky laws of each state and other jurisdiction of the United States as
such Investor or managing underwriter or underwriters, if any, may reasonably
request (considering the nature or size of the offering and the expense and
time involved in such qualification or registration), and to do any and all
other reasonable acts or things which may be necessary or advisable to enable
the disposition in all such jurisdictions of the Registrable Securities covered
by the applicable registration statement; provided, however, that
the Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process in any such jurisdiction where
it is not then so subject;

 

(f)                                    notify
each Investor participating in the Registration and, if applicable, the
underwriter or underwriters of the Registrable Securities covered by the
Registration, at any time when a prospectus is required to be delivered under
the 1933 Act, of any event as a result of which the prospectus or any document
incorporated therein by reference contains an untrue statement of a material
fact or omits to state any material fact necessary to make the statements
therein not misleading in light of the circumstances under which such
statements were made, and prepare a supplement or amendment to the prospectus
or any such document incorporated therein so that thereafter the prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in light
of the circumstances under which such statements were made;

 

(g)                                 use
its reasonable best efforts to cause the Registrable Securities covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including,
without limitation, the National Association of Securities Dealers, Inc. (the “NASD”),
as may be necessary to enable the seller or sellers thereof or the underwriter
or underwriters, if any, to consummate the disposition of such Registrable
Securities;

 

17

 

(h)                                 use
its reasonable best efforts to cause the Registrable Securities covered by the
registration statement to be listed or quoted (as the case may be) on any
national securities exchange or automated quotation system on which any Common
Stock is listed or quoted, and to provide a transfer agent and registrar for
such securities covered by such registration statement no later than the
effective date of such registration statement;

 

(i)                                     enter
into such customary agreements (including an underwriting agreement in
customary form) reasonably satisfactory to the Company and take all other
actions in connection with those agreements as the Investors participating in
the Registration and, if applicable, the underwriter or underwriters of the
Registrable Securities covered by the Registration, if any, reasonably request
to expedite or facilitate the disposition of the Registrable Securities;

 

(j)                                     give
the Investors who hold Registrable Securities registered under such
registration statement, the underwriter or underwriters, if any, and their
respective counsel and accountants, the timely opportunity to participate in
the preparation of such registration statement, each prospectus included
therein or filed with the SEC and each amendment or supplement to the foregoing
items, and give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be reasonably necessary or advisable, in the opinion of each of such
Investors and such underwriters’ respective counsel, to conduct appropriate due
diligence as contemplated by the 1933 Act;

 

(k)                                  use
its reasonable best efforts to provide to the Investors and underwriter or
underwriters, if any, with legal opinions and “cold comfort” letters in
customary form and substance as the Investors participating in the Registration
and, if applicable, the underwriter or underwriters of the Registrable
Securities covered by the Registration reasonably request; and

 

(l)                                     use
its reasonable best efforts to comply with all applicable rules and regulations
of the SEC, and make available to its security holders, as soon as reasonably
practicable, an earnings statement complying with the provisions of Section 11(a)
of the 1933 Act and covering the period of at least twelve months, beginning
with the first fiscal quarter beginning after the effective date of the
registration statement.

 

The Investors, upon receipt of any notice from the Company that the
prospectus prepared pursuant to Section 6(c) above contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein not misleading, will forthwith discontinue
disposition of the Registrable Securities until the Investors receive copies of
a supplemented or amended prospectus or until they are advised in writing (the
“Advice”) by the Company that the use of the prospectus may be resumed,
and have received copies of any supplemented or amended prospectus, and, if so
directed by the Company, each Investor shall, or shall request the managing
underwriter or underwriters, if any, to, deliver to the Company all copies,
other than permanent file copies then in such Investor’s possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the time periods
mentioned in Section 6(c) shall be

 

18

 

extended by the number of days during the period from and including any
date of the giving of such notice to and including the date when each seller of
Registrable Securities covered by such registration statement shall have received
the copies of the supplemented or amended prospectus contemplated by the immediately
preceding sentence or the Advice.

 

6.4.                              Registration
Expenses. Except where this Agreement specifies otherwise, in the case of
any Registration, the Company shall bear all expenses in connection with its
obligations in connection therewith, including, without limitation, the
expenses of preparing any registration statement, commission and state “blue
sky” filing, registration and qualification fees and expenses (including,
without limitation, fees and expenses of counsel in connection with blue sky
surveys), fees and expenses associated with filings required to be made with
the NASD, fees and expenses of counsel for the Company (one firm of counsel
selected by GSC or, if GSC is not a selling stockholder, the holders of a
majority of the Registrable Securities included in the registration statement)
for all selling stockholders and independent public accountants (including,
without limitation, the cost of providing any legal opinions or “cold comfort”
letters)), and all printing costs and expenses; provided, however,
that the Company shall not be responsible for the underwriting discounts and
commissions or placement fees of underwriters directly attributable to the Registrable
Securities included in such Registration.

 

6.5.                              Participation
in Registration. No Investor may participate in any Registration hereunder
unless such Investor (a) agrees to sell its securities on the basis provided in
any underwriting arrangements approved by the Company or GSC, as the case may
be, and (b) completes and executes all questionnaires, powers of attorney,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements. Nothing in this Section 6.5
shall be construed to create any additional rights regarding the registration
of Registrable Securities in any Person otherwise than as set forth in this
Article VI.

 

6.6.                              Delay
of Registration. No Investor shall have any right to take any action to
restrain, enjoin, or otherwise delay any Registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.

 

6.7.                              Specific
Performance. The parties agree that the recovery of damages would not be an
adequate remedy for the breach of the covenants of the Company contained in
this Article VI and, accordingly, agree that the Investors shall be
entitled to specific performance of the obligations contained herein.

 

6.8.                              Indemnification
by the Company. In connection with any registration statement filed to
effect a Registration pursuant to this Agreement, the Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law, each
Investor which is a holder of Registrable Securities participating in such a
Registration hereunder, its officers, directors, partners and Affiliates, each
underwriter of such Registrable Securities and each Person who Controls such
Investor or underwriter against all losses, claims, damages, liabilities and
expenses (as incurred or suffered and including, but not limited to, any and
all expenses incurred in investigating, preparing or defending any litigation
or proceeding, whether commenced or threatened, or any claim whatsoever) (“Losses”)
which arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement or

 

19

 

any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
or by any untrue or alleged untrue statement of a material fact included in any
prospectus forming a part of such registration statement or preliminary
prospectus or final prospectus, or any amendment or supplement thereof or any
omission or alleged omission to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such
Investor or underwriter or its representative with respect to such Person
expressly for use therein.

 

6.9.                              Indemnification
by Holders of Registrable Securities. In connection with any registration
statement filed pursuant to this Agreement to effect a Registration, each
Investor which is a holder of Registrable Securities participating in such
Registration agrees, severally and not jointly, to (and, as a condition
precedent to the filing of such registration statement, the Company may require
an undertaking reasonably satisfactory to it from each such participating
Investor and from any prospective underwriter therefor agreeing to) indemnify,
to the fullest extent permitted by law, the Company, each officer of the
Company who signs the registration statement, each director of the Company, and
each Person who Controls the Company against any Losses which arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in such registration statement or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or by any untrue or alleged untrue
statement of a material fact included in any prospectus forming a part of such
registration statement or preliminary prospectus or final prospectus, or any
amendment or supplement thereof or any omission or alleged omission to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, to the extent,
but only to the extent, that such untrue statement or omission is contained in
any information with respect to such Investor so furnished in writing to the
Company by such Investor or its representative expressly for use therein; provided,
however, that no such Investor shall be responsible for Losses in excess
of the net proceeds to be received by such Investor from the sale of
Registrable Securities covered by the applicable registration statement. The
Company shall be entitled to receive indemnities from underwriters, selling
brokers, dealer-managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information with respect to such Persons so furnished in writing by
such Persons specifically for inclusion in any prospectus or registration
statement.

 

6.10.                        Conduct
of Indemnification Proceedings. Each Person entitled to indemnification
hereunder will (a) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification or contribution pursuant
to this Agreement and (b) permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party; provided, however, that any Person entitled to
indemnification hereunder shall have the right to employ separate counsel and
to participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such Person unless (x) the indemnifying
party has agreed in writing to pay such fees and expenses, (y) the indemnifying
party shall have failed to assume the defense of such claim and employ counsel
reasonably satisfactory to such Person or (z) in the reasonable judgment of
such Person, based upon advice

 

20

 

of its counsel, a conflict of interest may exist between such Person
and the indemnifying party with respect to such claims (in which case, if the
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such Person); provided, further, that an
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim on behalf of all indemnified parties shall not be obligated to pay
the fees and expenses of more than one counsel (in addition to local counsel)
for all indemnified parties. If the indemnifying party assumes the defense, or
is not, pursuant to clause (z) above, entitled to assume the defense, it shall not
be subject to any liability for any settlement or compromise made by the
indemnified party without its consent (but such consent shall not be
unreasonably withheld). No indemnifying party will be permitted to consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
indemnified party of a release from all liability in respect to such claim or
litigation. In addition, without the consent of the indemnified party (which
consent will not be unreasonably withheld), no indemnifying party will be
permitted to consent to entry of any judgment or enter into any settlement
which provides for any action on the part of the indemnified party other than
the payment of money damages which are to be paid in full by the indemnifying
party. Likewise, no indemnified party may enter into any settlement without the
consent of the indemnifying party (which consent may not be unreasonably
withheld). If requested by the indemnifying party, the indemnified party agrees
to cooperate with the indemnifying party and its counsel in contesting any
claim which the indemnifying party elects to contest.

 

6.11.                        Contribution.
If the indemnification provided for in this Article VI from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any Losses, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party, on the one hand, and such indemnified party, on the other hand, or, if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect the relative benefits received by and fault of the
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the actions which resulted in such Losses, as well as
any other relevant equitable considerations. The relative benefit shall be
determined by reference to, among other things, the amount of net proceeds
received by each party from the offering to which such contribution relates.
The relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
Losses referred to above shall be deemed to include, without limitation, any
legal or other fees, costs or expenses reasonably incurred by such party in
connection with any investigation or proceeding. Notwithstanding anything to
the contrary in the foregoing, no Investor shall be responsible for Losses in
excess of the net proceeds to be received by such Investor from the sale of
Registrable Securities covered by such registration statement.

 

21

 

The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.11 were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. The
obligations of the Investors to contribute in this Section 6.11 are
several in proportion to the net proceeds received from the sale of Registrable
Securities by each such Investor and not joint.

 

6.12.                        Current
Public Information. With a view to making available the benefits of certain
rules and regulations of the SEC which may permit the sale of Registrable
Securities to the public without registration, the Company agrees to use its
reasonable best efforts, after the Company has become subject to the requirements
of the 1934 Act due to registration of its securities under Section 12 of
the 1934 Act, to: (a) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1934 Act; and (b) furnish to
any holder of Registrable Securities, during the term of this Agreement and
after the Company has been subject to the requirements of the 1934 Act for at
least ninety (90) days, forthwith upon request, (i) a written statement by the
Company that it has complied with the current public information and reporting
requirements of Rule 144 under the 1933 Act and the 1934 Act to which it is
subject and (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company.

 

Article VII

Termination

 

7.1.                              Termination.
Except as otherwise provided herein with respect to certain specific
provisions, this Agreement shall terminate upon the earliest to occur of: (a)
the consummation of (i) a sale of all or substantially all of the Company’s
assets, (ii) an amalgamation, a scheme of arrangement, a merger or
consolidation, a recapitalization or reorganization having the effect of a sale
of all or substantially all of the Company’s assets, or (iii) a transaction in
which Investors have sold 100% of the Common Stock, (b) the mutual agreement of
the parties hereto; and (c) with respect to any party hereto other than the
Company, such party ceasing to own any Common Stock.

 

Article VIII

Miscellaneous

 

8.1.                              Notices.
All notices, requests and other communications to any party hereunder shall be
in writing (including facsimile or similar writing) and shall be given to such
party at its address or facsimile number set forth on the signature pages
hereof, or the signature page of any joinder agreement executed and delivered
pursuant to Section 8.2 of this Agreement or such other address or
facsimile number as such party may hereafter specify for the purpose by notice
to the party sending the communication. Each such notice, request or other
communication shall be effective (a) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this
Section and receipt is confirmed, (b) if given by mail, three (3)
business days after such communication is deposited in the mail registered or
certified, return receipt requested,

 

22

 

with postage prepaid, addressed as aforesaid, (c) if given by an
overnight delivery service, one (1) business day after such communication is
deposited with a reputable, overnight delivery service, postage or delivery
charges prepaid, addressed as aforesaid, or (d) if given by any other
means, when delivered at the address specified in this Section.

 

8.2.                              Additional
Parties. Only Persons (other than the initial signatories hereto) that
execute a joinder agreement in the form of Exhibit A shall be deemed to
be Investors. Except to the extent limited in any joinder agreement, each
Person that so becomes an Investor after the date hereof shall be entitled to
all rights and privileges of an Investor as if such Investor had been an
original signatory to this Agreement.

 

8.3.                              Amendments
and Waivers. Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Company, by the Investors holding, in the aggregate, at least 90% of the
outstanding shares of Common Stock held by the Investors and by GSC (so long as
GSC and its Affiliates have the GSC Minimum Common Stock Ownership). Any
amendment or waiver effected in accordance with this Section 8.3
shall be binding upon each Investor, each future Investor and the Company. Upon
the effectuation of each such amendment or waiver, the Company shall promptly
give written notice thereof to the Investors who have not previously consented
thereto in writing.

 

8.4.                              Successors
and Assigns. The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that no assignment of
rights under this Agreement will be valid unless made in connection with a
contemporaneous Transfer of Common Stock; and provided, further,
that upon any such assignment, the assignee shall comply with Section 8.2
hereof. The Company may not assign or otherwise transfer any of its rights
under this Agreement.

 

8.5.                              Captions.
The captions of this Agreement are included for convenience of reference only,
do not constitute a part hereof and shall be disregarded in the construction
hereof.

 

8.6.                              Counterparts.
This Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument.

 

8.7.                              Governing
Law; Venue; Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY,
COUNTY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY
TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ANY AND

 

23

 

ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

8.8.                              Severability.
Any term or provision of this Agreement which is invalid or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement, or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.

 

8.9.                              Additional
Covenants. The parties hereto undertake, generally, to execute all such
agreements and other instruments and to do all such other acts as are necessary
or appropriate to give full effect to the terms, conditions and provisions of
this Agreement and to make them binding upon the parties hereto.

 

8.10.                        Entire
Agreement. This Agreement is intended by the parties as a final expression
of their agreement, and is intended to be a complete and exclusive agreement
and understanding of the parties hereto in respect of the subject matter
contained herein.

 

[Signature Pages Follow]

 

24

 

In witness whereof, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

 

 

	
   

  	
   

  	
   

  	
  Atlantic Express
  Transportation Group Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ DOMENIC GATTO

  
	
   

  	
   

  	
   

  	
  Print name:

  	
  Domenic Gatto

  
	
   

  	
   

  	
   

  	
  Print title:

  	
  President, CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address:

  	
  7 North Street

  Staten Island, New York 10302

  Attention: President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Investors

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GSCP II Holdings
  (AE), LLC

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ SANJAY H. PATEL

  	
   

  	
   

  	
   

  
	
  Print name:

  	
  Sanjay H. Patel

  	
   

  	
   

  	
   

  
	
  Print title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  12 East 49th Street, Suite 3200

  New York, New York 10017

  Attention: Sanjay H. Patel
Facsimile:     212.884-6184

  E-mail:

  spatel@gscpartners.com

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GSC Recovery II,
  L.P.

  	
   

  	
  GSC Partners CDO
  Fund, Limited

  
	
  By:

  	
  GSC Recovery II GP, L.P., its General

  Partner

  	
   

  	
  By:

  	
  GSC Partners CDO Investors, L.P., its

  General Partner

  
	
  By:

  	
  GSC RII, LLC, its General Partner

  	
   

  	
  By:

  	
  GSC Partners CDO GP, L.P., its
  General

  Partner

  
	
  By:

  	
  GSCP (NJ) Holdings, L.P., its sole

  Member

  	
   

  	
  By:

  	
  GSC CDO, LLC, its General Partner

  
	
  By:

  	
  GSCP (NJ), Inc., its General Partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ SANJAY H. PATEL

  	
   

  	
  By:

  	
  /s/ SANJAY H. PATEL

  
	
  Print name:

  	
  Sanjay H. Patel

  	
   

  	
  Print name:

  	
  Sanjay H. Patel

  
	
  Print title:

  	
   

  	
   

  	
  Print title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  12 East 49th Street, Suite 3200

  New York, New York 10017

  Attention: Sanjay H. Patel
Facsimile:     212.884-6184

  E-mail:

  spatel@gscpartners.com

  	
   

  	
  Address:

  	
  12 East 49th Street, Suite 3200

  New York, New York 10017

  Attention: Sanjay H. Patel
Facsimile:     212.884-6184

  E-mail:

  spatel@gscpartners.com

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stockholders
  Agreement

  
														

 

25

 

	
  ML CBO VIII
  (Cayman) Ltd.

  	
   

  	
   

  
	
  ML CBO XXIV
  (Cayman) Ltd.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ ZACHARAY A. HAMEL

  	
   

  	
   

  	
   

  
	
   

  	
  Zachary A. Hamel

  	
   

  	
   

  	
   

  
	
   

  	
  Manager

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  10801 Martin Blvd., Suite 220

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Overland Park, Kansas 66212

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Kevin Birzer

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  913-345-2763

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  E-mail:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  hkbirzer@fountaincapital.com

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  gmurphy@fountaincapital.com

  	
   

  	
   

  	
   

  	
   

  	
   

  
														

 

26

 

Exhibit
A to Stockholders Agreement

 

Form of Joinder Agreement

 

This Joinder Agreement is made and entered into by the undersigned
with reference to the following facts:

 

A.                                   I
am acquiring simultaneously with the execution of this Joinder Agreement
[     ] shares of the Common Stock (the “Shares”)
of Atlantic Express Transportation Group Inc. (the “Company”); and

 

B.                                     As a condition to
the acquisition of the Shares, I have agreed to join in a Atockholders
Agreement dated as of          
  , 2003, as amended from time to time (the “Stockholders
Agreement”), a copy of which has been furnished to me, among the Company
and the Investors party thereto.

 

I therefore agree as follows:

 

1.                                       I
hereby join in the Stockholders Agreement and agree to be bound by all of the
terms and provisions thereof as though I were an original party thereto and
were included in the definition of Investor, as used therein.

 

2.                                       I
hereby consent that the certificate or certificates to be issued to me
representing the Shares shall bear the restrictive legend set forth in
Section 3.4 of the Stockholders Agreement.

 

3.                                       I
hereby make the representations and warranties set forth in Article II of
the Stockholders Agreement as if such representations and warranties were set
forth in this Joinder Agreement in full.

 

[Signature Page Follows]

 

 

In witness whereof, the undersigned has executed this agreement this
     day of
        ,
      .

 

 

	
   

  	
  [Name]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print name:

  	
   

  
	
   

  	
  Print title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  [Address]

  
	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile:

  	
   

  	
   

  
	
   

  	
   

  	
  E-mail:

  	
   

  	
   

  
							

 

Joinder Agreement

 

2Exhibit 10.10

 

BOARD OF EDUCATION
OF THE CITY OF NEW YORK

 

EXTENSION AND ELEVENTH AMENDMENT OF
CONTRACT

FOR SPECIAL EDUCATION PUPIL
TRANSPORTATION SERVICES

 

Extension and Eleventh Amendment
Agreement made and entered into on the date expressed at the
end hereof by and between the BOARD OF EDUCATION OF THE CITY SCHOOL DISTRICT OF THE
CITY OF NEW YORK (hereinafter expressed as “Board of Education,”
“Board” or “BOE”), with principal headquarters located at 110 Livingston
Street, Brooklyn, NY 11201, and the Contractor whose name, address and
authorized signature appear at the end hereof (hereinafter expressed as “Contractor”).

 

WITNESSETH

 

WHEREAS,
in 1979 the BOE publicly solicited competitive bids for transportation of
special education pupils under Contract Serial Nos. 0070 and 8108;(1) and,

 

WHEREAS,
at divers times thereafter from 1982 through 1984, the BOE publicly solicited
competitive bids for similar services under Contract Serial Nos. G8805, G8891,
G8893, G9301 and G9325,(2) which contracts have incorporated, as of their
dates, provisions which are counterparts of the provisions of contracts under
Serial Nos. 0070 and 8108 as they then read; and,

 

WHEREAS,
the Contractor tendered a bid(s) under one or more aforementioned contract
serial numbers and was duly awarded a contract(s) including certain Employee
Protection Provisions (1st amendment) for the transportation of
special education pupils; and,

 

WHEREAS,
from September 10, 1979 through December 21, 1979, the Contractor did not
provide escort services for special education pupils; but, under an emergency
contract entered into with the BOE (2nd amendment), the Contractor
has supplied such escort services since that time; and,

 

WHEREAS,
the New York State Legislature enacted Chapter 737 of the Laws of 1979 and the
parties have desired to amend the Contract to implement Chapter 737 and be
subject to its terms; and,

 

WHEREAS,
the original terms of all contracts under Serial Nos. 0070, 8108, G8805, G8891
and G8893 would have expired on June 30, 1982 unless extended, and all
contracts under Serial Nos. G9301 and G9325 would have expired on June 30, 1984
unless extended; and, Education Law §305(14)(a) authorizes extensions
and provides a method for appropriate payment increases linked to a defined region

 

(1) By their
original specifications, all contracts under Serial Nos. 0070 and 8108 provide
for ten-month pupil transportation service from September through June of each
school or extension year.

 

(2) By their
original specifications, all contracts under Serial Nos. G8805, G8891, G8893,
G9301 and G9325 provide or provided for ten-month pupil transportation service
from September through June of each school or extension year.

 

1

 

al Consumer Price Index (hereinafter expressed as “CPI”); and, the BOE
elected fairly and reasonably on the basis of the best interests of the New
York City School District to refrain from the extension of the terms of all
contracts under Serial Nos. G8893 and G9301; and,

 

WHEREAS,
in 1982 the BOE and various contractors agreed to amend (3rd
amendment) and extend all contracts under Serial Nos. 0070, 8108, G8805 and
G8891 until June 30, 1984; and,

 

WHEREAS,
in 1984 the BOE and various contractors agreed to amend (4th
amendment) and extend further all contracts under Serial Nos. 0070, 8108,
G8805, G8891 and G9325 until June 30, 1987; and,

 

WHEREAS,
in 1987 the BOE and various contractors agreed to amend (5th
amendment) and extend further all contracts under Serial Nos. 0070, 8108,
G8805, G8891 and G9325 until June 30, 1990; and,

 

WHEREAS,
in 1990 the BOE and various contractors agreed to amend (6th
amendment) and extend further all contracts under Serial Nos. 0070, 8108,
G8805, G8891 and G9325 until June 30, 1993; and,

 

WHEREAS, in 1991, the BOE Office of Auditor General (hereinafter expressed as
“OAG”) started a review and audit of annual rate increases paid to contractors
during school years 1986-87 to 1999-2000 pursuant to provisions in previous and
existing extension and amendment agreements as allowed by Education Law
§305 (14)(a); and, this OAG review and audit has resulted in the issuance by
the BOE of preliminary and other findings, which shall have caused, or shall
cause, various adjustments to the daily vehicle rates of many contractors as
well as the recovery of overpayments from some contractors; and,

 

WHEREAS,
in 1993 the BOE and various contractors agreed to amend (7th
amendment) and extend further all contracts under Serial Nos. 0070, 8108,
G8805, G8891 and G9325 until June 30, 1996; and,

 

WHEREAS,
in 1994 the BOE publicly solicited competitive bids for transportation of
special education pupils under Contract Serial No. 7165,(3) whose original term
would have expired on June 30, 1997, unless extended; and,

 

WHEREAS,
in 1995 the City of New York, the BOE, various contractors, and delegates of
the Amalgamated Transit Union, Local Division 1181-1061, the Transit Workers
Union, Local 100, and various other labor organizations representing school bus
workers entered into negotiations to deal with the increasing costs of school
bus service in the face of markedly diminished City and school district
financial resources; and, the City of New York, the BOE, various contractors,
and the labor organizations reached an accord that averted the possibility of
school bus service interruptions and that produced significant prospective cost
savings for the City and the BOE; and,

 

WHEREAS,
the said accord among the City, the BOE, various contractors, and the labor
organizations called for modifications to the terms, conditions and
specifications of the then existing extension

 

(3) By
their original specifications, all contracts under Serial No. 7165 provide for
twelve-month pupil transportation service from July through June of each school
or extension year as compared to other serial numbers covered by this Extension
and Eleventh Amendment Agreement that provide for ten-month pupil
transportation service from September through June of each school or extension
year.

 

2

 

and amendment agreements under Serial Nos.  0070, 8108, G8805, G8891 and G9325 and all contracts under Serial
No. 7165 that took effect during the original or extension terms of such
contracts starting as of July 1 or September 1, 1995 depending upon the particular
contract serial number, and,

 

WHEREAS,
as a result of said accord among the City, the BOE, various contractors, and
the labor organizations in 1995, the BOE and various contractors agreed
thereupon to amend and extend, either initially or further, all contracts under
Serial Nos. 0070, 7165, 8108, G8805, G8891 and G9325 (8th
amendment), by which all such contracts have been extended until June 30, 2000;
and,

 

WHEREAS, in 1996 the BOE and various contractors, including the Contractor,
mutually determined that changes had occurred in banking, financial services
and insurance markets affecting the availability and affordability of
performance bonds, letters of credit and other forms of performance security;
and, the BOE and various contractors, including the Contractor, entered into a
Supplemental Ninth Amendment of Contract for Special Education Pupil
Transportation Services thereby modifying and revising the performance security
provisions of Contract Serial Nos. 0070, 7165, 8108, G8805, G8891 and G9325 for
the remainder of the period of the extension period through June 30, 2000; and,

 

WHEREAS, in 1998 the Chancellor inaugurated “Project Read,” an after-school
extended day program to improve pupil literacy; and, BOE and various contractors,
including the Contractor, mutually determined that contractual revisions would
be needed to allow overtime wage rates to be paid to school bus escorts if the
transportation aspect of Project Read were to be feasible; whereupon, the BOE
and various contractors, including the Contractor, entered into a Supplemental
Tenth Amendment of Contract for Special Education Pupil Transportation Services
thereby modifying and revising applicable provisions of Contract Serial Nos.
0070, 8108, G8805, G8891 and G9325 (but not Contract Serial No. 7165) for the
remainder of the extension period through June 30, 2000; and,

 

WHEREAS,
the BOE has determined that all contracts under Serial Nos. 0070, 7165, 8108,
G8805, G8891 and G9325 should be still further amended and extended, and the
Contractor agrees; and,

 

WHEREAS,
at a regular public meeting on March 15, 2000, the BOE adopted a Resolution
(Calendar No. 20) authorizing the Chancellor to enter into further amendment
and extension of contracts under Serial Nos. 0070, 7165, 8108, G8805, G8891 and
G9325 (hereinafter expressed collectively as “Contract”) until a termination
date not later than June 30, 2005, unless further extended; and,

 

WHEREAS,
the parties mutually desire to make this extension agreement and amendment to
the Contract as heretofore amended and extended;

 

NOW,
THEREFORE, in consideration of the heretofore-recited
stipulations and the hereinafter-expressed terms, conditions and specifications,
the BOE and the Contractor, as the parties to this Extension and Eleventh
Amendment Agreement, do hereby stipulate and agree both as above and as
follows:

 

(A)                               TERM
OF EXTENSION AGREEMENT.  All
references to the termination of the Contract, by whatever terminology, shall
be deemed hereafter to read “June 30, 2005, unless further extended.”

 

3

 

(B)                               ARTICLE 28(C) of contracts under Serial No. 7165
entitled, “PAYMENT DURING PERIOD OF EXTENSION,” is hereby added, and ARTICLE
V-A of
contracts under Serial Nos. 0070, 8108, G8805, G8891 and G9325 entitled,
“PAYMENT DURING PERIOD OF EXTENSION,” is hereby further amended, both of which
to read as follows for the term of this Extension and Eleventh Amendment
Agreement:

 

“(1)                                       Any provisions of
ARTICLE V or 28 (as applicable) to the contrary notwithstanding, the daily
rate(s) per vehicle during this Extension Period shall be deemed to be adjusted
each year according to the following formulae subject to the Office of Pupil
Transportation (hereinafter expressed as ‘OPT’) Director’s approval of all or
any portion(s) of the Contractor’s claims in the below-described annual Cost
Justification Financial Statements:

 

“(a)                      During
the Extension Year of July 1, 2000 through June 30, 2001, the Contractor’s
daily rate(s) per vehicle shall be augmented by an amount not to exceed whichever
of the following represents the least amount of actual increase: (i)
the same percentage by which the Consumer Price Index (hereinafter expressed as
‘CPI’) as of May 2000 shall have increased over the CPI as of May 1999; (ii)
eight percent (8%) over the base daily rates per vehicle paid during the Extension
Year of July 1, 1999 through June 30, 2000; or, (iii) the amount in dollars expressed
as a percentage by which each Contractor’s actual costs during the Extension
Year from July 1, 1999 through June 30, 2000 shall have increased over each
Contractor’s actual costs during the Extension Year of July 1, 1998 through
June 30, 1999, plus
any previously unabsorbed percentages of the Contractor’s actual cost increases
from Extension Year 1997-98 over Extension Year 1996-97 and from Extension Year
1998-99 over Extension Year 1997-98 to the extent that such percentages shall
have exceeded the CPI increments from May 1997 to May 1998 and from May 1998 to
May 1999, respectively, and shall have been disallowed as a result from the
rate increase(s) for Extension Years 1998-99 and 1999-2000, respectively.

 

“(b)                      During
the Extension Year of July 1, 2001 through June 30, 2002, the Contractor’s
daily rate(s) per vehicle shall be augmented by an amount not to exceed whichever
of the following represents the least amount of actual increase: (i)
the same percentage by which the CPI as of May 2001 shall have increased over
the CPI as of May 2000; (ii) eight percent (8%) over the base daily
rates per vehicle paid during the Extension Year of July 1, 2000 through June
30, 2001; or, (iii) the amount in dollars expressed as a percentage by which
the Contractor’s actual costs during the Extension Year of July 1, 2000 through
June 30, 2001 shall have increased over the Contractor’s actual costs during
the Extension Year of July 1, 1999 through June 30, 2000, plus any previously unabsorbed percentages of
the Contractor’s actual cost increases from Extension Year 1998-99 over
Extension Year 1997-98 and from Extension Year 1999-2000 over Extension Year
1998-99 to the extent that such percentage shall have exceeded the CPI
increments from May 1998 to May 1999 and from May 1999 to May 2000

 

4

 

and shall have been
disallowed as a result from the rate increases for Extension Years 1999-2000
and 2000-01, respectively.

 

“(c)                      During
the Extension Year of July 1, 2002 through June 30, 2003, the Contractor’s
daily rate(s) per vehicle shall be augmented by an amount not to exceed whichever
of the following represents the least amount of actual increase: (i)
the same percentage by which the CPI as of May 2002 shall have increased over
the CPI as of May 2001; (ii) eight percent (8%) over the base daily
rates per vehicle paid during the Extension Year of July 1, 2001 through June
30, 2002; or, (iii) the amount in dollars expressed as a percentage by which
the Contractor’s actual costs during the Extension Year of July 1, 2001 through
June 30, 2002 shall have increased over each Contractor’s actual costs during
the Extension Year of July 1, 2000 through June 30, 2001, plus any previously unabsorbed percentages of
the Contractor’s actual cost increases from Extension Year 1999-2000 over Extension
Year 1998-99 and from Extension Year 2000-01 over Extension Year 1999-2000 to
the extent that such percentages shall have exceeded the CPI increments from
May 1999 to May 2000 and May 2000 to May 2001, respectively, and shall have
been disallowed as a result from the rate increases for Extension Years 2000-01
and 2001-02, respectively.

 

“(d)                      During
the Extension Year of July 1, 2003 through June 30, 2004, the Contractor’s
daily rate(s) per vehicle shall be augmented by an amount not to exceed whichever
of the following represents the least amount of actual increase: (i)
the same percentage by which the CPI as of May 2003 shall have increased over
the CPI as of May 2002; (ii) eight percent (8%) over the base daily
rates per vehicle paid during the Extension Year of July 1, 2002 through June
30, 2003; or, (iii) the amount in dollars expressed as a percentage by which
the Contractor’s actual costs during the Extension Year of July 1, 2002 through
June 30, 2003 shall have increased over the Contractor’s actual costs during
the Extension Year of July 1, 2001 through June 30, 2002, plus any previously unabsorbed percentages of
the Contractor’s actual cost increases from Extension Year 2000-01 over
Extension Year 1999-2000 and from Extension Year 2001-02 over Extension Year
2000-01 to the extent that such percentages shall have exceeded the CPI
increments from May 2000 to May 2001 and May 2001 to May 2002, respectively,
and shall have been disallowed as a result from the rate increases for Extension
Year 2001-02 and 2002-03, respectively.

 

“(e)                      During
the Extension Year of July 1, 2004 through June 30, 2005, the Contractor’s
daily rate(s) per vehicle shall be augmented by an amount not to exceed whichever
of the following represents the least amount of actual increase: (i)
the same percentage by which the CPI as of May 2004 shall have increased over
the CPI as of May 2003; (ii) eight percent (8%) over the base daily
rates per vehicle paid during the Extension Year of July 1, 2003 through June
30, 2004; or, (iii) the amount in dollars expressed as a percentage by which
the Contractor’s actual costs during the Extension Year of

 

5

 

July 1, 2003 through June
30, 2004 shall have increased over the Contractor’s actual costs during the
Extension Year of July 1, 2002 through June 30, 2003, plus any previously unabsorbed percentages of
the Contractor’s actual cost increases from Extension Year 2001-02 over
Extension Year 2000-01 and from Extension Year 2002-03 over Extension Year
2001-02 to the extent that such percentages shall have exceeded the CPI
increments from May 2001 to May 2002 and May 2002 to May 2003, respectively,
and shall have been disallowed as a result from the rate increases for
Extension Years 2002-03 and 2003-04, respectively.

 

“(2)                                       Anything
in the foregoing payment increase provisions to the contrary notwithstanding,
where there is a decrease in the regional consumer price index for the New
York, New York–Northeastern, New Jersey area as based upon the index for all
urban consumers (hereinafter expressed as ‘CPI-U’) during the preceding twelve
month period, the amount to be paid to the Contractor in the succeeding
extension year will reflect that decrease in a manner satisfactory to the New
York State Education Department (hereinafter expressed as ‘SED’).

 

“(3)                                       Special
Costs for Drivers Covered by Statute. 
Anything in the foregoing payment increase provisions to the contrary
notwithstanding, the BOE shall pay the Contractor each extension year for
actual costs allowable pursuant to Education Law §305(14)(c) under the
following conditions, even if such reimbursement shall cause annual payments to
exceed the relevant CPI increment.  To
be eligible for such payment, the Contractor shall provide full, separate,
written details in each annual Cost Justification Financial Statement submitted
under ARTICLE V–A or 28(C) (as applicable) of this Contract of all claims for
reimbursement of expenses covered by Education Law §305(14)(c), which
shall be described for purposes of this Contract as ‘special vehicle operator administrative
costs,’ and which may not exceed (a) the actual costs of qualifying criminal
history and driver licensing testing fees attributable to special requirements
of Vehicle and Traffic Law Articles 19 and 19–A, and (b)
the actual costs of all diagnostic tests and physical performance tests that
shall be deemed necessary by an examining physician or the Director to
determine whether each applicant to drive a school bus under this Contract
possesses the physical and mental ability to operate a school bus and to
perform satisfactorily all other responsibilities of a school bus driver as
required by this Contract and all applicable Federal, State of New York, City
of New York and BOE laws, rules, regulations and policies.(4)  To the extent that any special vehicle
operator administrative costs as contained in the Contractor’s Cost
Justification Financial Statement for a given extension year together with the
Contractor’s other claimed cost increases for the prescribed comparison period
shall exceed the applicable CPI increment, the BOE shall pay the exact amount
of all unabsorbed special vehicle operator administrative costs, provided, that the
Contractor shall submit to OPT a separate, fully detailed written cost
reimbursement request for any amount of

 

(4) Allowable diagnostic tests and physical performance tests shall
include pre-employ­ment medical and physical performance tests and examinations
and pre-employment alcohol and substance abuse tests.  Allowable diagnostic and physi­cal performance tests shall not include tests and examination performed during the
course of a driver’s employment with the Contractor such as, but not limited
to, random substance and/or alcohol abuse tests, post-accident substance and/or
alcohol abuse tests, reasonable suspicion substance and/or alcohol abuse tests,
and/or annual medical examinations.

 

6

 

such costs not absorbed
by the applicable annual rate increase.(5) 
(To the extent that such special vehicle operator administrative costs
for a given extension year shall cause the Contractor’s claimed cost growth for
the prescribed comparison period to surpass the fixed cap of 8%, however, the
Contractor shall not be entitled to any portion of such expenditures that shall
exceed the said fixed cap.)  In each
such written cost reimbursement request, the Contractor shall include details
of (aa)
the totals of all special vehicle operator administrative costs, (bb)
the portion of such special vehicle operator administrative costs absorbed by
the applicable CPI increment, if any, and (cc) the portion of such special vehicle
operator administrative costs not
absorbed by the applicable CPI increment. 
All Contractor cost claims under Education Law §305(14)(c) shall
be subject to review and/or audit by the BOE, its employees and agents.  Upon BOE approval of Contractor cost claims
under Education Law §305(14)(c) that shall exceed the CPI increment for
a given extension year, the BOE shall pay the Contractor for such excess actual
costs without interest either in a lump sum (if less than $10,000.00 per
extension year) or in equal monthly installments (if greater than $10,000.00
per extension year).

 

“(4)                                       Definitions.  The definitions below control the meanings
of the described terms wherever they appear in this Contract.  These definitions add to and supplement any
definitions or instructions expressed in the original Contract and, as such, do
not supersede, revoke, replace, revise or limit any similar or analogous provisions
in the original Contract.

 

“(a)                                              For
Contracts under Serial Nos. 0070, 8108, G8805, G8891 and G9325, the following
shall apply:

 

“(i)                              ‘Nineteenth
(19th) Extension Year’ means July 1, 2000 until June 30, 2001;

 

“(ii)                          ‘Twentieth
(20th) Extension Year’ means July 1, 2001 until June 30, 2002;

 

“(iii)                      ‘Twenty-first
(21st) Extension Year’ means July 1, 2002 until June 30, 2003;

 

“(iv)                         ‘Twenty-second
(22nd) Extension Year’ means July 1, 2003 until June 30, 2004;

 

“(v)                             ‘Twenty-third
(23rd) Extension Year’ means July 1, 2004 until June 30, 2005.

 

“(b)                                              For
Contracts under Serial No. 7165, the following shall apply:

 

“(i)                              ‘Fourth
(4th) Extension Year’ means July 1, 2000 until June 30, 2001;

 

“(ii)                          ‘Fifth (5th) Extension Year’ means July
1, 2001 until June 30, 2002;

 

“(iii)                      ‘Sixth (6th)
Extension Year’ means July 1, 2002 until June 30, 2003;

 

“(iv)                         ‘Seventh
(7th) Extension Year’ means July 1, 2003 until June 30, 2004;

 

“(v)                             ‘Eighth
(8th) Extension Year’ means July 1, 2004 until June 30, 2005.

 

7

 

“(c)                                              The
term ‘Consumer Price Index’ (herein expressed as ‘CPI’), as of a given date, is
defined as that statistic of the United States Department of Labor or its
successor agency, which the New York State Education Department (herein expressed
as ‘SED’) deems as the ‘regional consumer price index for the New York, New
York-Northeastern, New Jersey area, based upon the index for all urban
consumers (CPI-U),’ according to Education Law §305(14)(a) as the same
may be updated, revised or otherwise changed during the life of this Extension
and Eleventh Amendment Agreement.  If Education
Law §305(14)(a) shall be amended to a permit stated or fixed percentage(s)
of annual rate increase(s) for pupil transportation contract extensions, which
increase(s) may exceed the applicable CPI increment(s), this Contract shall be
deemed to be amended automatically and without the need for any action by the
parties by substituting such stated or fixed percentage(s) of increase in place
of the actual percentage(s) of increase in the CPI in any extension year in
which the CPI shall be lower that the stated or fixed percentage(s).

 

“(d)                                              The
term ‘contractor’s average cost per vehicle per day’ for a given extension year
is defined as the Contractor’s ‘total net allowable costs’ for that extension
year divided by the total number of ‘vehicle days.’  The term ‘total net allowable costs’ is limited to those expenses
determined by the BOE to be related directly to transportation services
provided to the BOE under this Contract. 
The term ‘vehicle days’ is defined as the total number of ‘authorized
vehicles’ the Contractor actually operates multiplied by the number of school
days, which number is hereby fixed at 182 school days per extension year (220
school days per extension year for 12-month contracts)(6) for the term of this
Extension and Amendment Agreement, except for certain additional vehicles which shall be
treated in the manner hereinafter provided. 
The term ‘authorized vehicles’ is defined as the total number of
contract and additional vehicles, but excluding spare vehicles, that the
Contractor shall have been granted expressly by the Director.  If the Director shall grant the Contractor
additional vehicles during any given extension year of this Extension and
Amendment Agreement, such additional vehicles shall be counted among the
‘authorized vehicles’ during the first extension year in which the shall be
awarded but only to the extent of the actual number of school days actually
operated not to exceed a maximum of 91 school days (110 school days for
12-month contracts).(7)  Only during the
succeeding extension year(s) shall such additional vehi

 

(5) In the event of a given Extension Year in which the Contractor’s
relevant general cost increases, i.e.,
without the inclusion of costs covered by Education Law §305(14)(c),
exceed the applicable regional CPI increment, the Contractor shall be entitled
to a payment(s) in excess of the said CPI growth but only for such statutorily covered
costs.

 

(6) The numbers 182 days (10-month contracts) and 220 days (12-month
contracts) represent average numbers of school days per extension year for the
five extension years preceding the instant Extension and Amendment Agreement, i.e.,
extension years 1995-96 through 1999-2000. 
The BOE shall review these averages every three years during the
preceding, current and any future extension periods.  Whereupon a triennial review shall find that one or both average
numbers of school days shall have changed as based upon the actual number of
school days per
annum, the BOE shall revise the fixed number(s) of days up or down
accordingly with written notice to the Contractor by not later than December 31st
preceding the extension year in which the revised fixed number(s) shall take
effect.  In each triennial review, the
effects of changes in the numbers of school days from the preceding triennial
review(s) shall be viewed cumulatively.

 

(7) This partial exclusion of additional vehicles during the first
extension year of award shall not apply to any vehicles that the Contractor may
obtain by assignment or other transfer of contract or by acquiring the
corporate shares of another school bus contractor.  For cost justification purposes under this Contract, the
Contractor shall add and combine not more than fifty percent (50%) of the value
of the costs of the affected additional vehicles into the Contractor’s other
costs for the first extension year.

 

8

 

cles be counted as
‘authorized vehicles’ for 182 school days (220 school days for 12-month
contracts).  If the Contractor has a
10-month Contract(s) and the Director shall grant the Contractor summer work
beyond the normal 10 months from September to June, the summer vehicles only shall be exempt
from inclusion in the cost justification process.

 

“(e)                                              The
term ‘Cost Justification Financial Statement’ is defined as a written ‘review
report’ prepared by a Certified Public Accountant (hereinafter expressed as
‘CPA’) or Public Accountant (hereinafter expressed as ‘PA’) licensed by the
State of New York, except as otherwise noted herein.  Each Cost Justification Financial Statement shall include all of
the facts and figures deemed necessary by the Director and/or the SED to
provide a complete view of the Contractor’s cost increase claims for the
applicable comparative periods specified in this Extension and Eleventh
Amendment Agreement.  Each such review
report shall state that a review shall have been performed in accordance with
Generally Accepted Accounting Principles (hereinafter expressed as ‘GAAP’) as
of the date of a given review report and that the information in each Cost
Justification Financial Statement shall have been based upon the
representations of the Contractor’s management.  Each such review shall describe the nature of a review as
distinct from an audit and shall describe the standard procedures that the
CPA/PA shall have performed, e.g., an inquiry and an analytical review.  Each review report shall give the limited
assurance that, based upon the review, the CPA/PA shall not have been aware of
any material modifications that should be made to the Cost Justification
Financial Statement for it to be in conformity with GAAP.  A compilation report is insufficient to
qualify as a Cost Justification Statement. 
In addition, the CPA/PA preparing each review report must state that
he/she shall have studied the cost justification manual that shall be supplied
by the Board and shall have applied the standards contained in the Board’s
manual to the development of each Cost Justification Financial Statement.  If the Contractor shall not have had a
CPA-audited financial report performed for any purpose within two (2) years
prior to July 1, 2000, then the Contractor must submit a certified audited statement
by a CPA for its first Cost Justification Financial Statement under this
Extension and Eleventh Amendment Agreement. 
The CPA/PA who shall prepare each Cost Justification Financial Statement
must have no interest in this Contract, the Contractor and/or any entity
affiliated in any manner with the Contractor and must so certify in
writing.  Each Cost Justification
Financial Statement shall be in a form prescribed by the Director as approved
by SED.

 

“(5)                                       Cost
Justification Financial Statements.  Education Law §305(14) requires the Contractor to
substantiate any cost increases that he/she claims to justify annual payment increases
during the term of this Extension and Eleventh Amendment Agreement.  The Director shall determine whether to
approve all or any portion(s) of the claims in each of the Contractor’s annual
Cost Justification Financial Statements in accordance with the following:

 

“(a)                                              To
substantiate any payment increases received under ARTICLE V–A or 28(C) during
the Extension Year of July 1, 2000 to June 30, 2001, the Contractor must submit
by September 30, 2000, (i) a cost
justification financial statement that details total costs incurred by

 

9

 

the Contractor for all of
its operations and, separately, for its operations under this Contract for the
Extension Years 1999-2000 and for 1998-1999, and (ii) an additional Cost Justification Financial Statement that
details total costs incurred by the Contractor for all its operations and,
separately, for its operations under the Contract for Extension Years 1996-97,
1997-98 and 1998-99 to account for unabsorbed cost carry-forwards, if any.

 

“(b)                                              To
substantiate any payment increases received under ARTICLE V–A or 28(C) during
the Extension Year of July 1, 2001 to June 30, 2002, the Contractor must submit
by September 30, 2001, (i) a Cost
Justification Financial Statement that details the total costs incurred by the
Contractor for all of its operations and, separately, for its operations under
this Contract for the Extension Years 2000-2001 and 1999-2000, and (ii) an additional Cost Justification Financial
Statement that details the total costs incurred by the Contractor for all its
operations and, separately, for its operations under this Contract for
Extension Years 1997-98, 1998-99 and 1999-2000 to account for unabsorbed cost
carry-forwards, if any.

 

“(c)                                              To
substantiate any payment increases received under ARTICLE V–A or 28(C) during
the Extension Year of July 1, 2002 to June 30, 2003, the Contractor must submit
by September 30, 2002, (i) a Cost
Justification Financial Statement that details the total costs incurred by the
Contractor for all of its operations and, separately, for its operations under
this Contract, for the Extension Years 2001-2002 and 2000-2001, and (ii) an additional Cost Justification Financial
Statement that details the total costs incurred by the Contractor for all its
operations and, separately, for its operations under this Contract for
Extension Years 1998-99, 1999-2000 and 2000-01 to account for unabsorbed cost
carry-forwards, if any.

 

“(d)                                              To substantiate any payment increases received under
ARTICLE V–A or 28(C) during the Extension Year of July 1, 2003 to June 30,
2004, the Contractor must submit by September 30, 2003, (i) a
Cost Justification Financial Statement that details the total costs incurred by
the Contractor for all of its operations and, separately, for its operations
under this Contract for the Extension Years 2002-2003 and 2001-2002, and (ii)
an additional Cost Justification Financial Statement that details the total
costs incurred by the Contractor for all its operations and, separately, for
its operations under this Contract for Extension Years 1999-2000, 2000-01 and
2001-02 to account for unabsorbed cost carry-forwards, if any.

 

“(e)                                              To substantiate any payment increases received under
ARTICLE V–A or 28(C) during the Extension Year of July 1, 2004 to June 30,
2005, the Contractor must submit by September 30, 2004, (i) a
Cost Justification Financial Statement that details the total costs incurred by
the Contractor for all of its operations and, separately, for its operations
under this Contract for the Extension Years 2003-2004 and 2002-2003, and (ii)
an additional Cost Justification Financial Statement that details the total
costs incurred by the Contractor for all its operations and, separately, for
its operations under this Contract for Extension Years 2000-01, 2001-02 and
2002-03 to account for unabsorbed cost carry-forwards, if any.

 

10

 

“(f)                                                In each annual Cost Justification Financial
Statement, the Contractor must treat costs for escorts separately from all
other costs.  The Contractor shall
supply in each annual Cost Justification Financial Statement all data required
by SED related to this Contract, and the submittal shall include, but shall not
limited to, SED-approved cost justification forms.  The Contractor must supply promptly all additional cost data as required
by the BOE or SED.

 

“(g)                                             Until six
(6) years after completion of its services hereunder or six (6) years after the
termination date of this Extension and Amendment Agreement, whichever shall
occur later, the Contractor shall maintain complete and correct books and
records related to all aspects of the Contractor’s obligations hereunder.  Records must be maintained separately, so as
to identify clearly the expenses applicable to this Contract, all previous
extension and amendment agreements, and this Extension and Amendment Agreement
and must be distinguishable from all other costs not incurred under this
Contract, all previous extension and amendment agreements, and this Extension
and Amendment Agreement.  Except as
provided in this subparagraph, all other provisions of this Contract, as
amended, that relate to the maintenance of records shall remain in full force
and effect.

 

“(6)                     Required
Analysis of Costs.  To determine the
allowable increase in costs for a given extension year, as specified in ARTICLE
V–A(1) or 28(C)(1) of this Contract, the following analysis of the Cost
Justification Financial Statement must be undertaken:

 

“Step 1:                            Divide the total applicable
annual operating costs by the number of vehicle days for both the base year and
the year previous to the base year to determine the average daily cost per
vehicle for each of those years.  The
base year is the year immediately before the extension year to which a rate
increase is to be applied.

 

“Step 2:                            Subtract the average daily
cost per vehicle for the year previous to the base year from the average daily
cost per vehicle for the base year to determine the increase in the average
daily cost per vehicle.

 

“Step 3:                            Divide the increase in the
average daily cost per vehicle by the average daily cost per vehicle for the
year previous to the base year to determine the percent increase in the average
daily cost per vehicle.

 

“Step 4:                            Compare the percent of
increase in the average daily cost per vehicle to the percentage by which the
CPI as of May of the base year shall have increased over the CPI as of May of
the year previous to the base year and to the appropriate fixed annual increase
percentage caps as expressed in ARTICLE V–A(1) or 28(C) of this Contract.  Whichever is the least of the three
percentages will be the allowable increase applied to the daily rate for the
affected extension year.

 

“Step 5:                            For Extension Years 2000-01
through 2004-05, repeat Steps 1-4.  For
each such Extension Year, determine the percent of increase in the average
daily cost per 

 

11

 

vehicle.  If the percent of increase in the average
daily cost per vehicle resulting in Step 3 shall be insufficient to justify
fully the CPI increment in Step 4 or the fixed cap, whichever shall be lower,
add any previously unabsorbed percent of increase from the applicable Extension
Year(s) expressed heretofore at Paragraphs
(1)(a)-(e) of ARTICLE V–A(1) or 28(C) of this Contract.

 

“(7)                                       Allowable
Cost Increases.  Only increases in
‘net allowable costs’ will justify augmentation of the daily vehicle rate from
one extension year to the next. 
‘Allowable costs’ are limited by the following: costs not attributable
to the Contractor’s operations under this Contract, costs that are not ordinary
and/or reasonable, costs that are not documented, and costs disallowed by the
SED and/or BOE auditors are not permitted to justify increases of the daily
rate(s) per vehicle.  The Director shall
have the right to prescribe miscellaneous standardized cost categories for all
contractors including the Contractor.

 

“(8)                                       Access to
Subcontractors.  If with the
Director’s approval the Contractor subcontracts any portion of the services
under this Contract, the Contractor must include in any such subcontract a
provision that allows full and unimpeded access by the BOE, the SED and/or the
New York City Office of the Comptroller to the books and records of a
subcontractor for inspection, audit and copying purposes.  The Contractor does hereby agree and warrant
to render all necessary assistance to obtain any requested documents from
subcontractors.  The Contractor’s
inability to obtain requested documentation from any subcontractors shall not
excuse a failure to provide the documentation as a means to justify payment
increases.

 

“(9)                                       Absence of
Cost Justification Financial Statement. 
The Contractor’s failure to submit an annual Cost Justification Financial
Statement by the deadline date as above expressed will result in the forfeiture
of any increase later justified for the period from the service start date to
the day the statement is received at OPT, unless the Director determines that
reasonable circumstances exist to excuse the Contractor’s late submittal.

 

“(10)                                Adjustments to
Later Payments.  Based on the BOE’s
audit of the Contractor’s annual statements and financial records, the BOE may
make any necessary adjustments in any later payments that become due and owing
to the Contractor to compensate for any excesses of payments over cost
increases.

 

“(11)                                Refund of
Overpayment.  The Contractor does
hereby agree and warrant further to refund all additional monies due to the BOE
within thirty (30) days of the BOE’s final findings regarding any given Cost
Justification Financial Statement, if the amount of a given extension year’s
payment excess over allowable cost increase is greater than any payments due
and owing for the balance of a given extension year.

 

“(12)                                Unabsorbed Cost
Carry-Forward Provision.  For any
extension year in which the Contractor shall not be able to justify
the maximum allowable rate(s) increase(s) for any one or more of Extension
Years 2000-01 to 2004-05, the Contractor shall be entitled to use an
“unabsorbed cost

 

12

 

carry-forward(s)” as a supplemental device to
achieve a greater allowable rate(s) increase(s).  To be eligible for an ‘unabsorbed cost carry-forward(s),’ the
Contractor must detail in writing all total net allowable costs from each set
of two comparison years from which any unabsorbed costs shall be derived as
well as the total percentage of actual cost increase and the unabsorbed
percentage of cost increase.  The
Director may prescribe additional conditions of eligibility as reasonably
appropriate.  When eligible and entitled
hereunder, the Contractor may carry forward ‘below-the-line’ any previously
unabsorbed actual costs from any sets of comparison periods as heretofore
expressed at Paragraph 1(a)-(e) of ARTICLE V-A or 28(C) of the Contract to
supplement those cost increases that are used to justify augmentations of the
daily rate(s) per vehicle for Extension Years 2000-01 through 2004-05.  The term ‘below-the-line’ is hereby defined
to mean that previously unabsorbed cost increases, which are carried forward,
are deemed as allocated to the extension year(s) of accrual and not to the subsequent
extension year(s) to which they are carried forward and applied both supplementally
and ‘below-the-line’ as prior cost increases that have not as yet been absorbed
by the lesser of an annual CPI increment or a fixed annual rate increase
cap.  Once an item of previously
unabsorbed cost increase shall have been carried forward and applied ‘below-the-line’
to a give extension year, that item may not be used again in any later extension
year.

 

“(13)                                In the event of
any inconsistencies between any other provisions of the Contract and ARTICLES
V-A and/or 28(C) hereof, the provisions of ARTICLES V-A and/or 28(C) shall
prevail and govern in every case and for all intents and purposes.”

 

(C)                               For Contracts
under Serial No. 7165, there are no separate daily rates for escort
service.  Throughout this Extension
Period of July 1, 2000 until June 30, 2005, therefore, contracts under Serial
Nos. 7165 shall not be permitted any special or separate increases in any
payment or allowance for escorts other than the general rate increase expressed
heretofore at Paragraph B. 
Regarding contracts under Serial Nos. 0070, 8108, G8805, G8891 and G9325
only, Article XIX entitled, “ESCORTS,” as amended
previously, is hereby amended further so that subparagraph A(2), as numbered by
the First Amendment Agreement, shall read as follows for the balance of the
Contract term:

 

“(2)                                       However, the
parties agree that, for only so long as and only to the extent that the New
York City Administrative Code and Charter requires the BOE to utilize
escorts on special education school bus runs, the Contractor shall continue to
provide such escorts and substitute escorts in addition to the vehicle operators,
as hereinafter allowed, through June 30, 2005, and that:

 

“(a)                                              Escort
Compensation. 
Except for overtime, the BOE shall compensate the Contractor for each
full day for each escort who shall provide actual service under this Contract
in an amount to be calculated in the following manner subject to the Director’s
approval of all or any portion(s) of the Contractor’s claims in each of the
below-described annual Escort Cost Justification Financial Statements:

 

“(i)      During the 19th Extension Year, the
BOE shall increase the ‘Base Escort Daily Compensation Rate’ in an amount to be
derived by applying Paragraph (A)(2)(b)
hereinafter, or such lesser amount that represents the audited and approved
increase

 

13

 

over the Base Escort
Daily Compensation Rate paid to the contractor during the 18th
Extension Year.  Also, the BOE shall pay
‘Wage Accrual Compensation’ in the exact amount the Contractor actually paid
either to or for escorts during the 19th Extension Year, if any, and
only when known after a BOE audit and which was required to be paid.  With respect to the preceding sentence, the
Contractor may receive as Wage Accrual Compensation for the 19th
Extension Year an amount per escort that is more than ten percent (10%) per
escort above the total reimbursed costs for wage accruals as of June 30, 2000 but only to the
extent that such excess amounts shall have been required by an express
provision of a written collective bargaining agreement that shall have been
concluded and executed before the start of this Extension and Eleventh
Amendment Agreement.(8)

 

“(ii)  During the 20th Extension Year, the BOE
shall increase the ‘Base Escort Daily Compensation Rate’ in an amount to be
derived by applying Paragraph (A)(2)(b)
hereinafter, or such lesser amount that represents the audited and approved
increase over the Base Escort Daily Compensation Rate paid to the contractor
during the 19th Extension Year. 
Also, the BOE shall pay ‘Wage Accrual Compensation’ in the exact amount
the Contractor actually paid either to or for escorts during the 20th
Extension Year, if any, and only when known after a BOE audit and which was
required to be paid.  With respect to
the preceding sentence, the Contractor may receive as Wage Accrual Compensation
for the 20th Extension Year an amount per escort that is more than
ten percent (10%) per escort above the total reimbursed costs for wage accruals
as of June 30, 2001 but only
to the extent that such excess amounts shall have been required by an express
provision of a written collective bargaining agreement that shall have been
concluded and executed before the start of this Extension and Eleventh
Amendment Agreement.(9)

 

“(iii)                                              During
the 21st Extension Year, the BOE shall increase the ‘Base Escort
Daily Compensation Rate’ in an amount to be derived by applying Paragraph (A)(2)(b) hereinafter or such
lesser amount that represents the audited and approved increase over the Base
Escort Daily Compensation Rate paid to the contractor during the 20th
Extension Year.  Also, the BOE shall pay
‘Wage Accrual Compensation’ in the exact amount the Contractor actually paid
either to or for escorts during the 21st Extension Year, if any, and
only when known after a BOE audit and which was required to be paid.  No contractor may receive as Wage Accrual
Compensation an amount in the aggregate that is more than ten percent (10%)
above the total reimbursed costs for wage accruals as of June 30, 2002.

 

(8) The provision in this sentence permitting an increase in the Base
Escort Daily Compensation beyond ten percent (10%) during the 19th Extension
Year shall be subject to approval by a resolution of the Board of Education. 

 

(9) The provision in this sentence permitting an increase in the Base
Escort Daily Compensation beyond ten percent (10%) during the 20th Extension
Year shall be subject to approval by a resolution of the Board of Education.

 

14

 

“(iv)                                                 During
the 22nd Extension Year, the BOE shall increase the ‘Base Escort
Daily Compensation Rate’ in an amount to be derived by applying Paragraph (A)(2)(b) hereinafter or such
lesser amount that represents the audited and approved increase over the Base
Escort Daily Compensation Rate paid to the contractor during the 21st
Extension Year.  Also, the BOE shall pay
‘Wage Accrual Compensation’ in the exact amount the Contractor actually paid
either to or for escorts during the 22nd Extension Year, if any, and
only when known after a BOE audit and which was required to be paid.  No contractor may receive as Wage Accrual
Compensation an amount in the aggregate that is more than ten percent (10%)
above the total reimbursed costs for wage accruals as of June 30, 2003.

 

“(v)     During the 23rd Extension Year, the BOE
shall increase the ‘Base Escort Daily Compensation Rate’ in an amount to be
derived by applying Paragraph (A)(2)(b)
hereinafter or such lesser amount that represents the audited and approved
increase over the Base Escort Daily Compensation Rate paid to the contractor
during the 22nd Extension Year. 
Also, the BOE shall pay ‘Wage Accrual Compensation’ in the exact amount
the Contractor actually paid either to or for escorts during the 23rd
Extension Year, if any, and only when known after a BOE audit and which was
required to be paid.  No contractor may
receive as Wage Accrual Compensation an amount in the aggregate that is more
than ten percent (10%) above the total reimbursed costs for wage accruals as of
June 30, 2004.

 

“(b)                      Annual Increase of the Base
Escort Daily Compensation Rate. 
Each extension year the BOE will augment the amount of the Base Escort
Daily Compensation Rate according to the payment increase limits expressed
herein at ARTICLE V–A(1), i.e.,  Paragraph
(B)(1) above, provided, the Contractor shall justify each such
increase, if any, by submitting a separate, annual ‘Escort Cost Justification
Financial Statement’ according to the same terms, conditions and deadlines
expressed in ARTICLE V–A(2)–(13), i.e.,  Paragraphs
(B)(2) to (B)(13)
above.  This provision does not affect
payment for overtime escort services, which is governed separately at Article
XIX, Paragraph (A)(2)(c), i.e.,  Paragraph
(C)(2)(c) below.

 

“(c)                      Payment for Overtime.  Where the Contractor actually supplies
scheduled overtime escort services pursuant to BOE authorization, the BOE shall
reimburse the Contractor for such services in the exact amount of the costs for
overtime wages and statutory fringe benefits. 
No reimbursement will be permitted for occasional or episodic
overtime.  ‘Overtime’ is defined as
service that exceeds eight (8) hours within any ten (10) hour daily
period.  The hourly rate for overtime
escort services will not exceed one-and-one-half times the regular hourly wage
rate.  (As heretofore and hereinafter
expressed, this paragraph is subject to the Supplemental Tenth Amendment of Contract for
Special Education Pupil Transportation Services for purposes of ‘Project Read’
only.)

 

“(d)                      Monthly Advance Payment for
Escort Services.  On or about the
first school day of each calendar month, the BOE will pay an eligible
contractor in advance an amount equal to

 

15

 

the anticipated usage of
escort service for that month, excluding overtime.  For each month’s overtime claims, the BOE will pay the Contractor
only after receipt and approval of a voucher on a BOE form, which will contain such
detail as the BOE may require to confirm the Vendor’s claims and which will be
subject to BOE audit.

 

“(i)                         Fidelity Bond.  Before he/she may receive advance monthly
payments, the Contractor must file with OPT a fidelity bond in the amount of
the anticipated use of escort service for one (1) month. The coverage period
for each fidelity bond must be from September 1st to August 31st
of each prospective year.  To calculate
the bond amount for one year, use the following formula: twenty (20) school
days multiplied by the total number vehicles (excluding spares) multiplied
again by the Base Escort Daily Compensation Rate for a given extension
year.  Each fidelity bond must list the
BOE and the City of New York as the named insureds.  Each fidelity bond must insure against any and all acts of
commission or omission by the Contractor, any subcontractors, subsidiaries,
parent or affiliate entities or any officers, owners, directors, employees,
servants, agents, independent contractors or any other parties which cause the
failure of proper disbursement to the intended escort beneficiaries, whether
any such party acts within or outside the scope of employment or contractual
performance.  A company licensed by the
Superintendent of Insurance to do business in New York State must issue every
fidelity bond.

 

“(ii)                     Where the BOE makes payments to
the Contractor in excess of what is properly due and owing under Paragraph (A)(2)(b), the BOE may recoup
such amounts from future payments to the Contractor, request the Contractor to
refund such amounts, or take whatever other actions are necessary to retrieve
excessive payments.  Where the BOE
requests the Contractor to make a refund, the Contractor will remit payment
within thirty (30) days of the Contractor’s receipt of BOE audit findings.

 

“(iii)                 Where the Contractor elects to
delegate escort services to a subcontractor, the Contractor may direct the BOE
to make payments in the full amounts or any portions thereof directly to the
subcontractor.  The Contractor must make
such payment directions in writing on a form approved by the BOE.

 

“(e)                      The Contractor must provide all
the escorts necessary to perform all of the work covered by the Contract including
additional and spare vehicles.  The
Contractor must have sufficient, qualified and approved personnel to enable the
Contractor to dispatch substitute escorts promptly if, when and where necessary
to ensure continuous, uninterrupted and punctual service in each and every
instance.  The Contractor must operate
every vehicle for the transportation of handicapped children in strict
adherence to the provisions of New York City Administrative Code
§19-603(a)-(b).  If the law shall be
amended during the term of this Extension and Eleventh Amendment Agreement to
eliminate the requirement of escorts, the Contractor must cease to provide
escorts upon five (5) days notice from the BOE to that

 

16

 

effect.  After the effective date of the notice, the
BOE and the City of New York shall not be obligated to the Contractor or any
other party for the provision of escort services.

 

“(f)                        Basic, Refresher and
Additional Training for Special Education Escorts.  The Contractor shall arrange for BOE approved
basic escort training courses.  Each
escort must complete the American Red Cross Multi-Media Starter Course in First
Aid.  This course shall provide the
knowledge and skills called for in situations where emergency first aid care is
required and medical assistance is not excessively delayed.  The Multi-Media Starter in First Aid also instructs
on personal safety an accident prevention so that a person can learn the causes
of accidents and act to eliminate or minimize such causes.

 

“(i)                         The escorts (attendants/matrons) must meet the
requirements for course completion, which includes taking a written
examination, receiving a satisfactory grade and being issued a
certificate.  Each escort must submit to
OPT a certificate as proof of course completion.  Every escort (attendant/matron) shall take the refresher course
once every three (3) years and furnish to OPT evidence of completion of the
course.

 

“(ii)                     The Contractor understands and agrees that the costs
for such course required by the Board will not be borne by the Board Of
Education.

 

“(g)                     Escort Subcontractor.  The Contractor may delegate performance of
escort services to an acceptable subcontractor; however, the Contractor will
remain responsible for all pertinent contractual obligations.  The Director will have sole and final
discretion to approve or disapprove at any time the Contractor’s particular
choice of an initial or replacement escort subcontractor.  Whereupon the BOE requests new, updated or
revised information regarding any subcontractor, the Contractor must supply the
data immediately and/or secure the cooperation of the affected subcontractor to
make full and prompt disclosure of any information.

 

“(h)                     Annual List of Escorts.  At any time as required by the Director, the
Contractor must provide a list of all escorts and substitute escorts to be
utilized for special education school bus service during the prospective school
year.  The list must be on a form to be
supplied by OPT and will include, but not be limited to, the following
information: the name, social security number and date of original hire of each
escort.  Whenever a change occurs in the
escort list, the Contractor will provide updated information on the OPT form(s)
not later than the end of the month in which any change occurs.”

 

(D)                               NO
DUPLICATION OR MISALLOCATION OF COSTS. 
To prevent unjust enrichment through misrepresentation or falsification
of cost increase claims, the Contractor hereby agrees, consents and covenants
to abide in all respects by the following rules for the treatment of fixed,
variable or other costs utilized to establish increased expenses from one given
Extension year to the next:

 

(1)                           Duplication
of Costs.  Regarding contracts
under Serial Nos. 0070, 8108, G8805, G8891 and G9325 only in the establishment of allowable cost
increases under ARTICLE V–A (see  Para-

 

17

 

graph B,
supra)
and ARTICLE XIX (see  Paragraph C,
supra),
the Contractor must not commingle, combine, merge or duplicate costs in any
manner or to any extent between the two Articles, i.e., costs used to justify
increased payments for vehicles and drivers under ARTICLE V–A may not be used
again to justify increases in the Base Escort Daily Compensation Rate, and vice
versa.  In addition, the Contractor
shall not cause and/or allow any other forms of duplication and/or
multiplication of costs and/or items of cost increase in any manner or to any
extent.

 

(2)                           Allocation
of Costs.  If the Contractor
misallocates any cost item(s), the allocation will be disallowed.  Improper allocation or “misallocation” is
defined as a transgression of one or more of the following precepts:

 

(a)          Only those of the
Contractor’s fixed, variable or other costs that are directly attributable to
the performance and/or administration of BOE pupil transportation contract work
will be considered allowable expense items. 
Costs attributable to a contractor’s other operations, whether in the
public or private sector, will not be allowed to justify payment increases.

 

(b)          Costs must be
attributable solely to the specific group of contracts covered by this
Extension Agreement, i.e., Contract Serial Nos. 0070, 7165, 8108, G8805, G8891
and G9325.  Expenses allocable to BOE
pupil transportation contracts other than these eight serial numbers must not
appear in any materials presented to justify payment increases under this
Extension Agreement.

 

(c)          Costs must be
attributable solely to the corporate, partnership, sole proprietorship or other
entity that constitutes the Contractor. 
Expenses allocable to a parent or other affiliated entity must not
appear on the Contractor’s cost justification financial statement.  Where employees, offices, storage and
maintenance facilities or other cost items are shared by several affiliated or
unaffiliated entities, all or some of which hold separate BOE transportation
contracts, assertions of expense increases must reflect only those percentages
of utilization directly allocable to the claimant Contractor.

 

(d)          Allocation of costs must
be based on the number of vehicle days and not merely the number of vehicles
under contract.

 

(e)          Such other forms of
misallocation of costs as may be determined by the BOE, the New York City
Office of the Comptroller or the New York State Education Department, in
accordance with the terms and conditions of this Contract.

 

(E)                                 AMENDMENTS TO INSURANCE PROVISIONS.

 

(1)                           The Extension and Eighth Amendment of Contract for
Special Education Pupil Transportation Services and the original Contract are
hereby amended to provide as follows:

 

(a)          The Contractor must
obtain and maintain throughout the life of this extension and Eleventh
Amendment the following types of coverage in strict compliance with the terms,

 

18

 

conditions and minimum
amounts stated in this Contract: Motor Vehicle liability Insurance, Property
Damage Liability Insurance, Worker’s Compensation Insurance, Comprehensive
General Liability Insurance and Subcontractor’s Insurance.

 

(b)          The Contractor shall
arrange with its carrier(s) to have the Board and the City appear as additional
insured parties on every policy and certificate of insurance for all coverage
under this Contract.  To the extent
commercially available, the Contractor shall not obtain or use any insurance
policy(ies) or contract(s) for purposes of this Contract that contains any
endorsement exclusions relating to an additional insured’s negligence, relating
to the maintenance, use and operation of an additional insured’s realty or
personalty, or relating to any other activities by the additional insured that
arise from, or in the context of, this Contract.

 

(c)          The Contractor must
obtain the foregoing certifications and policies from an insurance company(ies)
acceptable to the Board of Education.

 

(d)          The Contractor must
maintain all required coverage in full force and effect throughout the life of
this Extension and Eleventh Amendment Agreement.  The Contractor must file renewals with the Director at least
thirty (30) days before the expiration of any policy.

 

(e)          The Contractor shall
obtain, maintain, and tender insurance policies for the following types of
coverage in the following minimum coverage limits, and the Contractor shall
comply with the following terms and conditions with respect to all such
insurance coverage:

 

(i)                                    The
Contractor shall obtain both comprehensive general liability insurance coverage
and automobile liability insurance coverage for personal injury (including, but
not limited to death, sickness, disease and disability) and property damage,
caused directly or indirectly by any act(s) of commission or omission of the
Contractor and/or the Contractor’s agents, servants, employees, partners
(including, without limitation, general, limited, silent and apparent
partners), directors, officers, subcontractors, subcontractor employees,
volunteers, invitees, licensees, designees, assignees or any other
representatives.  For each type of
coverage, the liability limits for personal injury (including, but not limited
to death, sickness, disease and disability) shall be not less than (a) combined single limit coverage of Five
Million Dollars ($5,000,000.00) per occurrence, or (b) split limit coverage of Five Hundred Thousand Dollars
($500,000.00) per person and Five Million Dollars ($5,000,000.00) per
occurrence.  For each type of coverage,
the liability limits for property damage shall be not less than (aa) combined single limit coverage One
Hundred Thousand Dollars ($100,000.00) per occurrence, or (bb) split limit coverage of Fifty Thousand
Dollars ($50,000.00) per person and One Hundred Thousand Dollars ($100,000.00)
per occurrence.

 

(ii)                                Not
later than thirty (30) days after the date of execution and before the start of
any of the work under this Contract, the Contractor shall submit to the BOE
evidence of the insurance specified herein together with all supporting
documentation reasonably

 

19

 

deemed necessary by the
Director.  The Contractor shall transmit
one (1) copy of each of all insurance policies and certificates of insurance to
the Board of Education of the City of New York, Office of Pupil Transportation,
33-00 Northern Boulevard, Room 223, Long Island City, New York 11101,
Attention: Contractual & Regulatory Affairs Unit.  The Board’s receipt of such policies and certificate shall be a
condition precedent to any payment by the Board to the Contractor under the
Contract.  Furthermore, the Contractor
shall transmit an informational copy of this Agreement to its insurance
carrier(s) together with a cover letter(s)—the cover letter(s) shall identify
the Contractor’s insurance policy(ies) and/or account number(s)—that alerts and
informs the carrier(s) of the existence of this Agreement and particular
insurance provisions contained herein.

 

(2)                     Worker’s
Compensation Insurance.  The
Contractor shall maintain Worker’s Compensation insurance in the manner and
amount(s) as prescribed by law.  The
Contractor must maintain such insurance throughout the life of this Contract
and up to the completion of required services or work to be performed.

 

(3)                     Subcontractors.  Before the Director may approve the
Contractor’s utilization of any subcontractor(s)—where such use is permitted
under this Contract—the Contractor must submit an acceptable written
certification(s) that such subcontractor(s) complies fully with (a) all of insurance requirements of this
Contract including, but not limited to, the specification of the BOE and the
City as additional insured parties in all of each subcontractor’s insurance
policies, and (b) the Worker’s
Compensation Law including appropriate insurance coverage.

 

(4)                     Required
Rider Provisions.  The
Contractor shall ensure that every policy for all of the insurance coverage
required under this Contract shall contain the following provision via a rider
attached to every such policy:

 

(a)          Any and all notices that the insurer(s) shall provide to the Board
shall be addressed to the Director at “Board of Education of the City of New
York, Office of Pupil Transportation, 33-00 Northern Boulevard, Room 223, Long
Island City, New York 11101, Attention: Contractual & Regulatory Affairs
Unit.”

 

(b)          The Contractor shall transmit prompt notice of each coverable accident
or occurrence to the Contractor’s insurer(s) with such notice transmittal to
occur not later than required under the Contractor’s insurance policy(ies) or
contract(s).

 

(c)          The Contractor’s insurance policy(ies) or contract(s) shall not be
terminated, revised, modified or otherwise changed unless the affected
insurer(s) shall have provided at least thirty (30) days advance written notice
to the Director regarding such termination, revision, modification or other
change.  If an insurer(s) notifies the
BOE of the termination of any required coverage, the Contractor shall provide
written evidence, e.g., a new certificate of insurance, before the effective
date contained in such notice(s) that the affected insurance coverage has been
fully replaced.  If an insurer(s)
notifies the BOE of any non-termination revi-

 

20

 

sion, modification or other change
that causes the Contractor’s insurance to be out of compliance with the
requirements of this Contract, the Contractor shall cure such non-compliance
before the effective date contained in such notice(s).

 

(5)                     The minimum coverage limit amounts and types of
insurance coverage expressed in this Agreement shall not be construed in any
manner whatsoever to limit the nature and/or extent of the Contractor’s
responsibility and liability under this Agreement to defend, indemnify and hold
harmless the Board and the City as hereinafter provided.

 

(6)
The Contractor must obtain, maintain, and renew throughout the life of this
Contract such additional insurance policies necessary to comply with all
applicable laws, rules, and/or regulations governing the performance of this
Contract.  Moreover, the Contractor must
obtain, maintain, and renew throughout the life of this Contract all required
types of insurance coverage in amounts not less than those specified above for
each additional vehicle, transportation service, or other service which may be
required during the term of the Contract. 
Whereupon the Director assigns to the Contractor additional vehicles,
transportation service, or other service, the latter must submit a certification
that additional insurance has been obtained prior to the start of the
additional work.

 

(7)                     The BOE
reserves the right to alter, either by increase or decrease, the minimum limits
of coverage required under this Contract by a duly approved Resolution of the
Board.  Should the minimum limits of any
or all types of insurance coverage be increased, the Board of Education will
not provide, nor will the Contractor be entitled to, any additional
compensation.  Should the minimum limits
of insurance coverage be reduced, the Board will be entitled to a credit from
the Contractor for any savings in premiums.

 

(8)                     If any or all
vehicles to be used to perform this Contract are not owned directly by the
Contractor, the insurance certificates and policies must be endorsed to include
the Contractor as well as the Board and the City as additional insured
parties.  Any insurance certificates
and/or policies that reflect coverage only for an owner, who is not the
Contractor, are not acceptable.

 

(9)                     The
Contractor hereby agrees to defend, hold harmless and indemnify the Board and
the City from and for all claims, actions, damages, judgment, expenses,
attorney’s fees and compensation, whether in contract or tort, arising out of
personal injury (including, but not limited to, death, sickness, disease and
disability) and/or property damage sustained or alleged to have been sustained
in whole or in part as a result of, or arising out of, any act or omission of
the Contractor, its agents, employees and/or subcontractors, or caused or
resulting from any deleterious substance in any products supplied, or while
equipment, supplies, etc. are being delivered, or the
service-work performed under this Contract, whichever instance is applicable.

 

(F)                                 Paragraph
E of the Extension & Eighth Amendment Agreement of Contract Serial Nos.
0070, 8107, 8108, G8805, G8891 and G9325 is hereby amended to read as follows:

 

“1.  Priority
in Hiring and Master Seniority Lists.

 

21

 

“There shall be
established two industry-wide Master Seniority Lists.  One list shall be composed of all operators (drivers), mechanics,
and dispatchers and the other list shall be composed of escorts
(matrons-attendants) who were employed as of June 30, 2000, under a contract
between their employers and the Board for the transportation of school children
in the City of New York, who are furloughed or become unemployed as a result of
loss of contract or any part thereof by their employers, or as the result of a
reduction in service directed by the Board during the term of the contract, in
accordance with their date of entry into the industry.  All operators (drivers), mechanics,
dispatchers and escorts (matrons-attendants) on the Master Seniority Lists who
participated in the Division 1181 A.T.U.–New York Employees Pension Fund and
Plan as of June 30, 2000, and who do not exercise their option to withdraw from
the Fund and Plan shall continue to participate in such Pension Plan.

 

“Any existing contractor
or individual who conducted business as a sole proprietor, or as a member of a
partnership or who held a controlling interest in a corporation that performed
service pursuant to contract expiring in June, 2000 (contractor) shall give
priority in employment on September, 2000 or thereafter on the basis of
position on the Master Seniority List of any additional or replacement
operators, mechanics and dispatchers beyond those performing service as of June
30, 2000 consistent with the number of employees required by the specifications
of the contract expiring June, 2000 for the number of vehicles providing
service to the Board as of June 30, 2000 to individuals from the Master
Seniority List until such list is exhausted.

 

“Any new contractors, i.e.,
those who did not provide service pursuant to contract expiring June, 2000 (new
contractor), shall give priority in employment in September, 2000 or thereafter
on the basis of seniority to every operator (driver), mechanic and dispatcher
performing service pursuant to such contract starting from the first employee
from the Master Seniority List until such list is exhausted.

 

“Should the Board
determine to require the contractor to provide escort service in addition to
the operator, and in the event that all escorts (matrons-attendants) on the
Master Seniority List, who were employed as of June 30, 2000, are not employed
as escorts by contractors for the beginning of service in September of 2000,
then said escorts shall be employed in order of their position on the Master
Seniority List.

 

“2.  Compensation.

 

“All operators (drivers),
mechanics, dispatchers and escorts (matrons-attendants) on the industry-wide
Master Seniority Lists shall be employed and paid on a full-time basis based
upon the wage scale received from prior employer under pupil transportation contracts.

 

“The contractor shall
compensate operators (drivers), mechanics and dispatchers and escorts
(matrons-attendants) who appear on the Master Seniority Lists and who are
employed pursuant to contracts to be awarded as follows for the term of the
contract:

 

22

 

“(a)                                              operators
(drivers) and dispatchers at a daily rate of pay, including any COLA, for each
day of service, not less than that paid pursuant to any applicable labor
collective bargaining agreement.

 

“(b)                                              mechanics
at a daily rate of pay, including any COLA, for each day of service, not less
than that paid pursuant to any applicable labor collective bargaining
agreement.

 

“(c)                                              escorts
(matrons-attendants) at a daily rate of pay, including any COLA, for each day
of service, not less than that paid pursuant to any applicable labor collective
bargaining agreement.

 

“Such operators (drivers)
and escorts (matrons-attendants) shall be available for extended service,
without additional compensation, which shall be defined as performance within
the particular job category (i.e. drivers as drivers, and escorts
(matrons-attendants) as escorts (matrons-attendants) ) within the eight (8)
hour work day within the spread (8 within 10 hours) provided for in the
collective bargaining agreement covering said employees, if any.

 

“3.  Welfare.

 

“Contributions by the
contractor for providing welfare benefits to operators (drivers), mechanics,
dispatchers and escorts (matrons-attendants), in the event the contractor
employs escorts, who appear on the Master Seniority List shall be no less than
$410 per employee per month on a twelve month basis during each year of the
contract.

 

“4.  Pensions.

 

“The contractor shall
sign an agreement with Division 1181 A.T.U.–New York Employees Pension Fund and
Plan to participate in such plan on behalf of all operators (drivers),
mechanics, dispatchers and escorts (matrons-attendants), in the event the
contractor employs escorts who appear on the Master Seniority Lists and who
participated in the Fund and Plan as of June 30, 2000.  This requirement shall not be interpreted to
require a contractor to enter into a collective bargaining agreement with the
union nor shall it prohibit the contractor from entering into a collective bargaining
agreement with the union.  The
contractor shall file a copy of the executed agreement with the Trustees of the
Fund and Plan to participate in said Fund and Plan and with the Secretary of
the Board with the acknowledgment of the Notice of Award.

 

“The contractor shall
contribute $48.15 per week per operator (driver), mechanic and dispatcher on
the Master Seniority List, and participating in the Plan and Fund as of June
30, 2000, for forty weeks each year for the term of the contract, or such
greater amount as may be required, based on contributions by contractors on
behalf of the majority of employees participating in the Fund and Plan pursuant
to a collective bargaining agreement with Local 1181–1061.  The contractor shall withhold $23.00 a week
from each operator, mechanic and dispatcher participating in said Fund and Plan
for forty weeks each year for the term of the contract, or such greater amount
as may be

 

23

 

required based on
contributions of a majority of the operators (drivers), mechanics or
dispatchers contributing to the Fund and Plan.

 

“Such contractors who
provide escort service, shall contribute $44.15 per week per escort (matron-attendant)
for forty weeks each year for the term of the contract, or such greater amount
as may be required based on contributions by contractors on behalf of the
majority of employees participating in the Fund and Plan pursuant to a
collective bargaining agreement with Local 1181–1061.  The contractor shall withhold $18.00 per week from each escort,
(matron-attendant) participating in said Fund and Plan and Fund for forty weeks
each year for the term of the contract, or such greater amount as may be
required based on contributions of the majority of the escorts contributing to
the Fund and Plan.

 

“In connection with
employees who are on the Master Seniority List and who do not participate in
the Local 1181–1061 Fund and Plan, they shall not be required to participate in
the Plan but shall participate in the collective bargaining agreement, if any,
of their employer.

 

“The contractor shall pay
all such amounts to the Fund and Plan within seven days after the end of each
payroll period.

 

“5.  Enforcement.

 

“In addition to any other
remedies provided in the contract between the Board and the contractor, such as
default and/or termination, if the contractor is found to be in violation of
the foregoing employee protection provisions regarding the payment of wages,
welfare benefit contributions, pension contributions, or other aspects of
compensation or benefits, then the Director of the Office of Pupil
Transportation, within thirty (30) days of written notice, shall withhold the
appropriate amounts from any payments due to the contractor and pay them
directly to the applicable union for the benefit of the employees affected, to
the Division 1181 A.T.U.–New York Employees Pension Fund or other applicable
union pension fund for the benefit of the employees affected or to the
appropriate Welfare Fund for the benefit of the employees affected.  If the affected employees are not affiliated
with any union, then the Board shall investigate on their behalf allegations of
employee protection provision violations regarding the payment of wages,
welfare benefit or health insurance contributions, pension or similar savings
plan contributions, or other aspects of compensation or benefits.  Upon a finding of any such violation(s), the
OPT Director shall withhold the appropriate amounts from any payments due to
the Contractor and pay them directly to the employees or to such health insurance
companies or other institutions as appropriate.

 

“In the event any
contractor willfully fails to comply, the Board of Education shall act to
cancel such contractor’s contract; provided, however, that the Board shall not
be required to act so as to cause a disruption of service.

 

24

 

“6. 
Contractors providing a total of five vehicles or less pursuant to all
contracts with the Board for the transportation of pupils shall not be subject
to the foregoing provisions with respect to operators (drivers), mechanics and
dispatchers.

 

“Escorts
(matron-attendants) shall not be included in the exclusion in this paragraph six (6).

 

“7. 
For the purposes of this section, corporate bidders who are subject to
common control as determined by the Board based upon analysis of (a) ownership of the corporation’s assets, (b) coincidence of corporate officers and
directors, and (c) such other
factors as the Board determines to be relevant, are deemed to be one bidder.

 

“8. 
The Board may in its sole and unfettered discretion change any date
which determines employee protected status, employer status or any other
status, which is contained in any employee protection provisions of the
Contract.  The Master Seniority Lists
will be updated to June 30, 2000 as permitted in accordance with pre-existing
collective bargaining agreements executed prior to the date of execution of
this Contract.  Furthermore, the rates
quoted herein may not be reflective of current labor rates in effect.  The contractor should pay special attention
to the fact that many employees on the Master Seniority Lists have been in the
industry for many years and therefore may be entitled to substantial wages,
pension and welfare benefits and wage accruals.

 

“The date for inclusion
on the Master Seniority List is hereby updated to the last school day in June,
2000 as permitted in accordance with pre-existing collective bargaining
agreement executed prior to the date of this Extension Agreement and Amendment
Agreement.”

 

(G)                   MISCELLANEOUS
VEHICLE SPECIFICATIONS AND OPERATIONAL AMENDMENTS.  Any terms, conditions and specifications to
the contrary notwithstanding, the Contract is hereby amended as follows:

 

(1)                                             Federal
Safety Standards.  All vehicles
used to perform this Contract must meet all of the 1977 Federal Safety
Standards, as reflected in Title 49 of the Code of Federal Regulations, Part
571, and particularly, Standard Nos. 105, 111, 220, 221, 222, and 301 (the
“1977 Standards”).  Violation of this
provision to any extent will be grounds for a determination of contractual default.

 

(2)                                             Age
and Condition of Vehicles.   The
vehicles affected by this provision include all originally contracted vehicles,
(i.e., “contract vehicles”) and all additional and spare vehicles.  Except for the age of vehicles, nothing
contained in this Paragraph (2)
and/or any of its subparagraphs shall be deemed or construed in any manner or
to any extent whatsoever to act and/or operate in abrogation or derogation of
any other individual or cumulative provisions of the Contract, as heretofore
amended and extended.

 

(a)          The Contractor shall
furnish service, maintenance and repairs of all vehicles used in the
performance of this contract in compliance with (i) all manufacturer’s guidelines for maintenance, service and
repairs, (ii) all Federal and
State of New York statutes, regulations, rules, guidelines and policies
applicable to service, maintenance and repair of school bus vehicles,

 

25

 

(iii)
all New York State Department of Transportation and New York State Department
of Motor Vehicles policies, rules and regulations, (iv) Federal and State regulations applicable to maintenance
and repair of school bus vehicles, and (v)
all New York State Education Department, policies, rules and regulations
applicable to service, maintenance and repair of school bus vehicles.  The Contractor shall maintain and, upon
demand, shall present to the Director contemporaneously kept, accurate, complete,
orderly and written records of the school bus vehicle maintenance and repair
activities performed in accordance with the foregoing.

 

(b)          The Director shall have
the right to disapprove any vehicles under this Contract and to require the
Contractor to furnish an acceptable replacement vehicles in the event that the
Director determines in his/her reasonable judgement any such vehicle(s) to be
unfit for service.

 

(c)          During the life of this
Extension Agreement all vehicles must comply with the following:

 

(i)                        By July 1, 2000 no more than 30% of  the number of vehicles operated by a
Contractor as of June 30, 2000 pursuant to this contract may be manufactured
prior to 1987;

 

(ii)                    By July 1, 2001 no more than 25% of  the number of vehicles operated by a
Contractor as of June 30, 2000 pursuant to this contract may be manufactured
prior to 1987;

 

(iii)                By July 1, 2002 no more than 20% of  the number of vehicles operated by a
Contractor as of June 30, 2000 pursuant to this contract may be manufactured
prior to 1987;

 

(iv)                   By July 1, 2003 no more than 15% of  the number of vehicles operated by a
Contractor as of June 30, 2000 pursuant to this contract may be manufactured
prior to 1987;

 

(v)                       By July 1, 2004 no more than 10% of  the number of vehicles operated by a Contractor
as of June 30, 2000 pursuant to this contract may be manufactured prior to
1987;

 

(d)          The Contractor may
continue to use the vehicles that are in service as of the date of the
execution of this Extension and Amendment Agreement throughout the term of said
Extension and Amendment Agreement, provided each such vehicle is in compliance
with subparagraphs a, b and c
hereof.  However, any new vehicles that
shall be placed into service during the term of this Extension and Amendment
Agreement shall be not more than five years old at the time such vehicle is
placed into service.  Vehicles
transferred among contractors that are subject to common control shall not be
considered as new vehicles under the preceding sentence.  In his/her reasonable discretion, the Director
may allow the continued use of any given contractor’s vehicles that are in
service as of the date of the execution of this Extension and Amendment
Agreement upon an assignment of the Contract, if and to the extent any such
assignment shall be approved in accordance with the terms and conditions of the
Contract, as heretofore amended and extended.

 

26

 

(3)                     List of
Vehicles.  At any time stated by
the Director, the Contractor must provide a list of all vehicles, including
spare and maintenance vehicles, to be operated during each Extension year.  Each list must show for every vehicle the
year, make, type, seating capacity, registration number, bus number, license plate
number, owner, lessee (if applicable), and the expiration date of the New York
State Department of Transportation approval sticker.  The information must be provided on forms approved and supplied
by the BOE, and the Contractor must supply a copy of the title or certificate
of registration for each listed vehicle. 
Whenever any changes occur in the list of vehicles, the Contractor must
update the list within ten (10) business days. 
In addition, the Contractor must provide at the same time written
assurance that all vehicles are equipped with two-way radios.

 

(4)                     Air
Conditioning/Climate Control Systems. Each vehicle that is required to
have an Air Conditioning/Climate Control System must be equipped with an air
conditioning system with sufficient power-train, electrical, and engine cooling
support systems to maintain comfortable conditions throughout the entire
interior of the vehicle during any warm weather periods at ambient temperatures
not higher nor lower than necessary to meet the medical and comfort needs of
each passenger.

 

(a)          By July 1, 2000,
five percent (5%) of all mini wagons, ramp wagons and hydraulic lifts operated
by the contractor pursuant to this contract will be required to be equipped
with air conditioning/climate control systems.

 

(b)          By July 1, 2001,
ten percent (10%) of all mini wagons, ramp wagons and hydraulic lifts operated
by the contractor pursuant to this contract will be required to be equipped
with air conditioning/climate control systems.

 

(c)          By July 1, 2002,
fifteen percent (15%) of all mini wagons, ramp wagons and hydraulic lifts
operated by the contractor pursuant to this contract will be required to be
equipped with air conditioning/climate control systems.

 

(d)          By July 1, 2003,
twenty percent (20%) of all mini wagons, ramp wagons and hydraulic lifts
operated by the contractor pursuant to this contract will be required to be
equipped with air conditioning/climate control systems.

 

(e)          By July 1, 2004,
twenty-five percent (25%) of all mini wagons, ramp wagons and hydraulic lifts
operated by the contractor pursuant to this contract will be required to be
equipped with air conditioning/climate control systems.

 

(5)                     Fax
Machines.  All contractors must
provide to the Director an available number where documents pertaining to pupil
transportation may be faxed.

 

(6)                     Computer
Systems.  The Contractor will be
required to maintain a computer system sufficient to run applications developed
by the Office of Pupil Transportation. 
Currently the minimum computer system required is as follows: Pentium II
Computer, 4 megabytes RAM, 6 gigabyte hard

 

27

 

disk, Windows 95 or
Windows 98, and 56k Modem.  During the
life of this Extension Agreement, the contractor will be required to update the
computer system as required by the Director.

 

(7)                     New Laws,
Rules, Regulations, Bylaws or School Bus Safety Features.  Whereupon any Federal, State, local or BOE
laws, rules, regulations or bylaws are enacted, updated, revised, amended or
otherwise changed in any manner which require the Contractor to undertake any
new or revised procedures affecting school bus personnel or operations (i.e.,
school bus personnel drug or alcohol testing, driver licensing or training
procedures, etc.) or the introduction onto vehicles of new safety features or
any other equipment (e.g., increased seat-back padding, back-up beepers, stop
arms, safety sensors, seat belts, etc.), the Contractor must comply
promptly.  The Contractor must assume
the full cost of compliance with any new or revised driver and/or operational procedures
and/or for the purchase and installation of new safety features and/or other
equipment in compliance with any such legal and/or regulatory changes and shall
not be entitled to any additional remuneration from the BOE except as expressly
permitted by law, i.e., if the BOE is able to obtain State aid or other
Federal, State of New York and/or City of New York funding to pay for all or
any portion of the Contractor’s compliance with such legal and/or regulatory
changes, the BOE shall pay the Contractor for such compliance but only
to the extent of the Board’s receipt of such funding.

 

(8)                     Railroad
Crossings.  Each driver must
make a full stop at all railroad crossings, except that no stop is necessary at
any railroad crossing where a police officer, New York City Department of
Transportation traffic control officer, or a traffic control signal directs traffic
to proceed.

 

(9)                     EZ Pass.  Every vehicle used under this Contract
(including spare vehicles but not maintenance vehicles) that crosses one or more
toll bridges as part of the performance of its regularly scheduled run(s) must
be equipped with an EZ Pass that meets all applicable laws, rules and
regulations.  In addition, the
Contractor shall purchase and maintain a sufficient number of EZ Passes to
ensure that all buses used for field trips shall be able to have EZ Passes to
speed their passage across any affected toll bridges.

 

(10)              Back-Up Warning
Alarms.  Every vehicle used
under this Contract (including spare and maintenance vehicles) must be equipped
with an automatic audible alarm system installed behind the rear axle.  The said alarm system on each vehicle must
comply in every respect with the official published standards of the Society of
Automotive Engineers (hereinafter expressed as “SAE”) entitled, “Back-up Alarm
Standards,” (SAE No. 994b) specifying 97±4dBA for rubber tired vehicles as well
as all applicable Federal, State of New York, City of New York and/or BOE laws,
bylaws, rules, regulations and policies as the same currently exist or may be
created, added, deleted, updated, recodified, revised, amended or otherwise
changed during the term of this Extension and Amendment Agreement.

 

(11)              Use of Vehicles.  ARTICLE XII entitled, “Use of Vehicles,” in
Contract Serial Nos. 0070, 8108, G8805, G8891 and G9325 and Article 35
entitled, “Use of Vehicles,” in Contract Serial No.

 

28

 

7165, are hereby amended
by the addition of sixth and seventh unnumbered paragraphs, respectively, at
the end of each such Article to read as follows:

 

“In addition to all other uses of vehicles prescribed
in pupil transportation contracts, the Director shall have the right, power and
authority to require the Contractor to provide vehicles during the hours
between the transportation of pupils to school for the morning sessions and the
pick-up of pupils for homeward bound trips for service to other mayoral and/or
non-mayoral City of New York agencies and to any other public agencies and/or
private organizations, as determined by the Director.  While not previously invoked to any great extent during the
period of the Contract, the provisions of the third unnumbered paragraph
contained in this Article XII are still in full force and effect as stated
herein.  The Contractor shall be entitled
to payment for such services as stipulated in this contract.  At no time shall such service interfere with
the timely transportation of pupils to and from school.”

 

(H)                               MISCELLANEOUS
FINANCIAL AMENDMENTS.  Any
express terms, conditions and specifications to the contrary notwithstanding,
the Contract is hereby amended as follows:

 

(1)                     SED State
Aid and Other Forms.  The
Contractor does hereby warrant and agree to complete and duly execute any and
all New York State Education Department (herein expressed as “SED”) forms for
State aid and other purposes that shall be needed to maintain the continuity of
funding for this Extension and Amendment Agreement.

 

(2)                     Cancellation.

 

(a)          General Terms and
Conditions Section 7 entitled, “Cancellation,” is amended so that the Director
may seek to have the Contractor declared by the Chancellor’s Board of Review to
be in default of the Contract either as a whole or merely in one or more
“items” of the Contract, i.e., the Contract is divisible into its several
“items.”  Upon a finding of default, the
Chancellor’s Board of Review may terminate the whole Contract or merely one or
more contractual “items.”

 

(b)          General Terms and
Conditions Section 7 entitled, “Cancellation,” is amended by the addition of a
new paragraph “D” to read as follows:

 

“In the event of significant or repeated safety
violations due to acts of commission and/or omission by the Contractor or its
employees that result from the Contractor’s failure and/or refusal to conduct
its operations according to good pupil transportation industry practices, the
BOE may terminate the Contract upon thirty (30) days written notice to the
Contractor, unless the Contractor can establish to the Director’s reasonable
satisfaction that the Contractor’s record of safety will thereafter be
satisfactory according to good industry practices.  For purposes of this provision, the term “safety violations”
shall mean significant and/or repeated violation of safety laws and/or
regulations of the U.S. Department of Transportation,

 

29

 

the New York State Department of Transportation, the
New York City Department of Transportation and/or the BOE, provided, that
before terminating this agreement for significant and/or repeated safety
violations, OPT shall provide the Contractor with notice and an opportunity to
cure.”

 

(c)          General Terms and
Conditions Section 7 entitled, “Cancellation,” is amended by the addition of a
new paragraph “E” to read as follows:

 

“In
the event of an indictment of the Contractor, its principals, officers, or
management employees on the basis of acts of commission or omission involving
or affecting the provision of pupil transportation services under any BOE pupil
transportation contract(s) including, but not limited to, acts of commission or
omission that excessively increase BOE costs of doing business, the BOE may, at
the Director’s discretion, either terminate the Contract upon thirty (30) days
written notice to the Contractor or require the Contractor to obtain the
employment termination and/or ownership divestiture of the indicted
party(ies).  Before a final decision on
either disposition, the Director shall afford the Contractor a personal meeting
to allow for a full, open discussion of relevant issues.”

 

(d)          General Terms and
Conditions Section 7 entitled, “Cancellation,” is amended by adding a new
paragraph “F” to read as follows: “Nothing herein shall otherwise limit the
rights and remedies of the Director and/or the Board of Education as set forth
in this Contract.”

 

(3)                     BOE
Procedural Due Process Arising from Controlled Substance and/or Alcohol
Consumption and Abuse.  The
Contractor does hereby stipulate and agree that Federal and State of New York
courts and the SED have issued judicial decisions requiring the BOE to administer
forms of procedural due process under certain circumstances in cases where any
of the Contractor’s employees or subcontractor employees have their BOE
certifications of approval suspended and/or permanently revoked as a consequence
of positive test results for the presence of a controlled substance(s) and/or
alcohol.  The Contractor does hereby
further stipulate and agree to comply fully with all Federal, State of New
York, City of New York and BOE laws, bylaws, rules, regulations, procedures and
policies applicable to the prohibition of consumption of, and testing for,
controlled substances and alcohol with respect to its employees and
subcontractor employees that affect the safe operation of school bus vehicles
as the same currently exist or shall be added, deleted, updated, amended, revised
or otherwise changed during the Term of this Contract.  The Contractor does hereby further stipulate
and agree that compliance with the preceding sentence shall require the
Contractor to administer effectively a program of controlled substance and
alcohol abuse prevention, training, testing and other services, for portions of
which the Contractor may elect to use professional subcontractors.  The Contractor shall submit to the BOE for
advance and continuing(10)

 

(10) In the event that the OPT Director shall inquire into any
allegation(s) that any previously approved subcontractor shall have provided
unsatisfactory performance of its controlled substance and alcohol abuse
prevention, training and/or testing responsibilities, the Contractor shall
furnish full and detailed written information about the affected subcontractor
and shall otherwise provide all reasonable assistance in the conduct of any
such BOE inquiry.  Whereupon the OPT
Director shall determine after such an inquiry that any previously approved
subcontractor shall have provided unsatisfactory performance of its controlled
substance and alcohol abuse prevention, training and/or testing
responsibilities, the Contractor shall cease and desist from any use of such
subcontractor immediately upon receipt of written notice from the OPT Director
to that effect.

 

30

 

approval by the OPT
Director full and detailed written information(11) about every subcontractor
that the Contractor shall elect to use to provide controlled substance and
alcohol abuse prevention, training, testing and other services under this
Contract.  The Contractor does hereby
further stipulate and agree that, if the OPT Director shall reasonably
determine that the reversal, disqualification or other nullification by the
BOE, a Federal or State court, the SED and/or any other tribunal of competent jurisdiction
of a positive test result for a controlled substance(s) and/or alcohol shall
have been caused and/or permitted by the Contractor’s failure and/or refusal to
administer effectively a program of controlled substance and alcohol abuse
prevention, training, testing and other services, the Contractor shall pay all
BOE and/or City of New York costs for disciplinary conferences, other forms of
procedural due process and the defense of judicial, administrative and/or other
claims, actions, proceedings, special proceedings and/or appeals.  Such BOE and/or City costs may include, but
shall not be limited to, BOE administrative personnel hourly rates, BOE facilities
use fees, expert witness fees, subcontractor and other document production
fees, back pay for Contractor employees, and reasonable attorney fees.  Reasons for an OPT Director’s determination
that a reversal, disqualification or other nullification by the BOE, a Federal
or State court, the SED and/or any other tribunal of competent jurisdiction of
a positive test result for a controlled substance(s) and/or alcohol shall have
been caused and/or permitted by the Contractor’s failure and/or refusal to
administer effectively a program of controlled substance and alcohol abuse
prevention, training, testing and other services may include, but shall not be
limited to, failure to maintain adequate records, failure to produce evidence
and/or expert testimony from a subcontractor(s), failure to safeguard the chain
of custody of a test sample(s), and failure to use adequate and/or approved
scientific testing methods.

 

(4)                     Sales,
Excise and Use Taxes.  The
Contractor does hereby agree and warrant to cooperate fully with the BOE to
eliminate of the Contractor’s payment of Federal, State and local sales, excise
and use taxes on purchases, leases and other transfers that the Contractor makes,
effects, causes or allows in the performance of the Contract.  The Contractor does hereby further consent
and agree to cooperate fully with BOE efforts to eliminate Federal, State and
local sales, excise and use taxes through a program(s) of BOE purchases of
gasoline, diesel fuel, automotive parts, safety equipment and other goods,
materials, commodities and/or services, which the BOE may supply to the
Contractor and which the Contractor shall use to perform the Contract with the
cost of that same being deducted from any and all BOE payments to the
Contractor.  The BOE may elect to
promulgate particular rules and procedures regarding the elimination of such
taxes, a draft copy of which the Board shall circulate to the Contractor for
comment before final promulgation.  Such
rules and procedures may include, but are not necessarily limited to, the
following: (a) the Contractor’s
use of the Board’s tax exempt status when making, effecting, causing or
allowing purchases, leases and other transfers in the performance of the
Contract (the Board shall furnish

 

(11) The OPT Director may prescribe the types of information of
subcontractor information to be supplied, in which case the BOE shall supply
without cost to the Contractor a form(s) for the provision of such information.

 

31

 

the Contractor with appropriate forms and procedures), provided,
that the Contractor shall remain the purchaser or lessee of its vehicles,
goods, commodities, supplies, equipment and so forth; (b) the Contractor’s use of BOE-supplied
gasoline, diesel fuel, automotive parts, safety equipment and other goods,
materials, commodities and/or services, the cost of which the BOE shall deduct
from any and all payments to the Contractor; and, (c) the Contractor’s cooperation through the production of
documentary and other evidence and testimony, as specified by the Board, with
any and all attempts by the BOE to seek and obtain refunds of any and all Federal,
State and local excise, sales and use taxes that the Contractor has paid during
any applicable statutory period of limitation for goods, fuel, commodities,
services, leases, etc. in the performance of the Contract.  The Board does hereby stipulate and agree
that it will not seek any refunds or other remedies affecting sales, excise
and/or use taxes, regarding which the Contractor shall be entitled to, or shall
have obtained, an exemption(s), credit(s) and/or refund(s), except where the
Contractor shall have failed and/or refused to have sought any affected
exemption(s), credit(s) and/or refund(s). 
Whereupon the BOE shall require the Contractor to produce documentary
and other evidence and testimony in the course of any attempt by the Board to
seek and obtain refunds of any such taxes, the Board shall pay the Contractor,
as consideration for such cooperation, twenty percent (20%) of any refund
amount attributable to the Contractor’s purchases, leases and other transfers,
but only when and after such refund amounts are actually received by the Board.  If the Contractor shall have obtained an
exemption(s) or refund(s) or shall have taken a credit(s) and/or deduction(s)
from income or other taxes with respect to all or any portion of Federal, State
and/or local sales, excise and/or compensating use taxes applicable to
vehicles, goods, commodities, supplies, equipment and so forth under this
Contract, then the Contractor shall not be required to furnish documentation in
support of a tax refund in connection with the affected sales, excise and/or compensating
use taxes but,
upon request, shall instead furnish the BOE with a full written statement
describing the exemption(s), credit(s) and/or deduction(s) regarding all or any
portion of Federal, State and/or local sales, excise and/or compensating use
taxes applicable to vehicles, goods, commodities, supplies, equipment and so
forth under this Contract to confirm that the Contractor’s Cost Justification Financial
Statements and any other financial reports do not include any tax expenses that
shall have been exempted, credited and/or refunded.

 

(5)                     Limitation
on Payments for Days When Vehicles Are Not Operated.  All provisions of contracts under Serial No.
7165 prescribing no payments for when days when vehicles are not operated shall
remain unchanged for Extension Year 2000-01 but are hereby amended for
Extension Years 2001-02 through 2004-05 to reflect the changes hereinafter
expressed for contracts under Serial Numbers 0070, 8108, G8801, G8891 and
G9325.  The first unnumbered paragraph
of ARTICLE V of contracts under Serial Nos. 0070, 8108, G8801, G8891 and G9325
entitled, “PAYMENT,” is hereby amended by the addition of the following
language between the existing fourth and fifth sentences:

 

“The preceding sentence to the contrary
notwithstanding, the Contractor shall be entitled to receive eighty-five
percent (85%) of its daily rate(s) per vehicle for ‘regularly scheduled school
days’ on which the Chancellor or his designee(s) shall order schools

 

32

 

to be closed and/or
pupils not to be in attendance for any reason, which percentage shall be deemed
to represent costs that the Contractor is unable to avoid even when service is
not furnished.  The preceding sentence
to the contrary notwithstanding, the Contractor shall not seek, nor be entitled
to receive, payment for one (1) regularly scheduled school day during the
2000-01 Extension Year when the Chancellor or his designee(s) shall order
students not to be in attendance and vehicles not to run; and, for a second
regularly scheduled school day during the 2000-01 Extension Year when the
Chancellor or his designee(s) shall order students not to be in attendance and
vehicles not to run, the Board shall be entitled to pay eighty-five percent
(85%) of the Contractor’s daily rate(s) per vehicle in equal monthly installments
over a period of thirty-six (36) months after the month in which the day of
non-operation shall actually occur.  The
term ‘regularly scheduled school day’ is defined as any day on which schools
are scheduled to be open in accordance with the official BOE Calendar as
originally adopted and published annually and prior to amendment thereof.  Moreover, the Contractor does hereby
stipulate and agree on behalf of itself and its successors and assigns to discontinue
with prejudice any and all pending claims, actions, proceedings and/or special
proceedings against the BOE and to refrain from bringing any claims, actions,
proceedings and/or special proceedings against the BOE that shall have accrued
on or before the execution date of this Extension and Eleventh Amendment
Agreement about any days on which schools were scheduled to have been opened
but were closed for any reason by order of the Chancellor or his designee(s).”

 

(6)                                 Advertising
on Vehicles.

 

(a)          The Contractor shall cooperate fully and
completely with the Board of Education regarding the placement of advertisements
on the two (2) exterior sides of all standard size vehicles, including spare
vehicles.  The Contractor shall not be
responsible for any costs, labor or other work associated with the
installation, repair, maintenance, replacement and/or removal of advertisements
or the repair and/or maintenance of school bus vehicles in relation
thereto.  In addition, the Contractor
must not cause, incur or allow any costs, expenses or other liabilities on its
own part concerning anything whatsoever directly or indirectly related to the
placement, repair, maintenance and/or removal of advertisements on school bus
vehicles or the repair or maintenance of school bus vehicles in connection with
such advertisements, and the Contractor shall not demand, nor be entitled to,
any compensation from the Board of Education for any such costs, expenses or
other liabilities.

 

(b)          The Contractor shall
allow the BOE and/or BOE agents, employees, contractors, subcontractors or
other representatives to affix any and all such advertisements to the
Contractor’s vehicles by any means the Board selects including, but not limited
to, metal and/or plastic frames and/or direct-application adhesive decals, provided, that the
BOE and/or its agent, employee, contractor, subcontractor and/or other
representative shall be responsible for the cost to restore the vehicle bodies
with respect to any damage upon removal. 
The Contractor

 

33

 

shall cooperate fully to provide access to all of its
vehicles under the Contract, including spare vehicles, at such times when they
are not in use for BOE transportation service including the early morning, midday
and evening hours, as the BOE and/or the BOE agents, employees, contractors,
subcontractors or other representatives shall schedule with at least three (3)
business days advance notice.  Whereupon
any advertisement or any component part thereof becomes damaged to any extent
or destroyed, for any reason whatsoever, and/or whereupon any vehicle sustains
damage or requires repairs or maintenance due to any advertisements or any
component part thereof, the Contractor shall notify the Board’s designated agents,
employees, contractors, subcontractors or other representatives within
twenty-four (24) hours by calling a “212,” “718” or other local New York City
telephone number which the Board shall supply to the Contractor.  If the Contractor shall be dissatisfied for
any reason with any vehicle repairs or maintenance supplied by the BOE or the
Board’s designated agents, employees, contractors, subcontractors or other
representatives, the Contractor shall submit any such claim or dispute in
writing to the OPT Director for resolution, whose decision shall be final and
binding upon the Contractor, except for
administrative appeal to the Chancellor’s Board of Review pursuant to §8.3 of
the Board of Education’s Bylaws.

 

(c)          The Contractor does
hereby stipulate and agree that all revenues or other consideration derived
from the placement of advertisements on the Contractor’s vehicles shall be and
remain forever the sole and exclusive property of the Board of Education and not
the Contractor.  The Contractor further
agrees to follow in every respect any and all rules, regulations, requirements,
specifications or procedures concerning school bus advertisements that the
Board may, in its sole discretion, promulgate in the Board’s “SCHOOL BUS
CONTRACTOR’S MANUAL OF PROCEDURES AND REQUIREMENTS,” as currently or hereafter
updated, revised or otherwise changed.

 

(I)                                    INSURANCE
AND FUEL COST INFLATION RELIEF PROVISIONS.  Whereupon the New York State Legislature shall amend the Education
Law to allow the BOE to obtain State funding to reimburse the Contractor
for any amount of demonstrated and approved increases in the costs of
automotive liability insurance, comprehensive general liability insurance,
employee health care insurance, unemployment insurance, Worker’s Compensation Insurance,
and/or vehicle fuel costs, this Contract shall be deemed amended automatically
and without any need for action by the parties to allow such reimbursement
according to the exact language of such statutory provisions.  Furthermore, all else to the contrary
notwithstanding, the Contract is hereby amended to provide as follows:

 

(1)                                 Interim Excessive Insurance and Fuel Cost Inflation
Relief Provisions.  For
only so long as the Education Law does not provide reimbursement by the
State of New York for automotive liability insurance, comprehensive general
liability insurance, employee health care insurance, unemployment insurance,
Worker’s Compensation Insurance and/or vehicle fuel cost increases, the Board
does hereby agree to suspend partially or totally the application of the two
percent (2%) prompt payment discount to which the BOE is otherwise entitled
under the Contract but only for
contracts under Serial Nos. 0070, 7165, 8108, G8805, G8891 and G9325 and

 

34

 

only to the extent of
the Contractor’s monthly and/or annual written proof of eligibility as
hereinafter specified.  The preceding sentence
to the contrary notwithstanding, the extent of the Contractor’s eligibility to
use its vehicle fuel cost increases to justify a suspension of the discount
shall be reduced in the manner hereinafter specified at Paragraph (I)(7), et seq., by an amount equal
to thirty percent (30%) of the Contractor’s liability to the BOE, if any, for
overpayments by the BOE to the Contractor from Extension Years 1986-87 through
1999-2000 (hereinafter expressed as “Deductible Amount”) that was the subject
of consolidated litigation entitled, A.C. Transportation, Inc., et al., v. Board of
Education of City of New York, et al., 253 A.D.2d 330, 687
N.Y.S.2d 1 (App.Div. 1 Dept. 1999), leave to appeal denied 93 N.Y.2d 808, 691
N.Y.S.2d 382, 713 N.E.2d 417 (1999).

 

(2)         Eligibility for
Insurance Rate Increase Relief. 
The BOE shall determine annually whether the Contractor shall be eligible
prospectively for partial or total suspension of the two percent (2%) prompt
payment discount on the basis of the Contractor’s submittal of written proof of
sufficient insurance cost increases per vehicle and per employee, as
applicable.  The Contractor must submit
an “Insurance Rate Increase Claim Statement,” as hereinafter defined, by not
later than October 15th of each Extension Year.  The extent of the discount suspension, if
any, shall be governed by the provisions hereinafter expressed at Paragraph (I)(4), et seq.

 

(3)         The term “Insurance Rate
Increase Claim Statement” is defined as a written “review report” prepared by a
CPA or PA licensed by the State of New York, except as otherwise noted
herein.  Each Insurance Rate Increase
Claim Statement shall include all of the facts and figures deemed necessary by
the Director to provide a full view of the Contractor’s insurance cost increase
claims for the applicable comparative periods hereinafter stated at Paragraph (I)(4), et seq.  Each such review report shall state that a
review shall have been performed in accordance with GAAP as of the date of a
given review report and that the information in each Insurance Rate Increase
Claim Statement shall have been based upon the representations of the
Contractor’s management.  Each such
review shall describe the nature of a review as distinct from an audit and
shall describe the standard procedures that the CPA/PA shall have performed,
e.g., an inquiry and an analytical review. 
Each review report shall give the limited assurance that, based upon the
review, the CPA/PA shall not have been aware of any material modifications that
should be made to the Insurance Rate Increase Claim Statement for it to be in
conformity with GAAP.  A compilation
report shall not qualify as an Insurance Rate Increase Claim Statement.  In addition, the CPA/PA preparing each
review report must state that he/she shall have studied the cost justification
manual that shall be supplied by the Board and shall have applied the standards
contained in the Board’s manual to the development of each Insurance Rate
Increase Claim Statement.  If the
Contractor shall not have had a CPA-audited financial report performed for any
purpose before July 1, 2000, then the Contractor shall be required to submit a
certified audited statement by a CPA for its first Insurance Rate Increase
Claim Statement hereunder.  In addition,
the CPA/PA who shall prepare each Insurance Rate Increase Claim Statement must
have no interest in this Contract, the Contractor and/or any entity affiliated
in any manner with the Contractor 

 

35

 

and must so certify in writing.  Each Insurance Rate Increase Claim Statement
shall utilize a form prescribed by the Director.

 

(4)                                 Documentation
of Insurance Premium Rate Increases. 
To show increases in the premiums rates for automobile liability
insurance, comprehensive general liability insurance, employee health care
insurance, unemployment insurance and/or Worker’s Compensation Insurance the
Contractor must submit with its annual Insurance Premium Rate Increase Claim
Statement copies of the full insurance policies and copies of all invoices from
the insurance carriers, governmental agencies and/or health/welfare funds
noting the full amounts of premiums and other costs on per vehicle and per
employee bases, as applicable, that are the subject of the Contractor’s
claims.  To be eligible for partial or
total suspension of the two percent (2%) prompt payment discount, the Contractor
must be able to demonstrate the following:

 

(a)                      For a suspension of the discount during the 2000-01
Extension Year, the Contractor must show on per vehicle and per employee bases,
as applicable, the differences between all premiums paid for automobile
liability insurance, comprehensive general liability insurance and employee
health care insurance only(12)
for the period from July 1, 1999 to June 30, 2000 and the amounts paid for such
coverage for the period from July 1, 1998 to June 30, 1999.  The percentage of difference for all such
costs shall be calculated as a weighted average of the percentages of
difference for each type of cost in relation to the total amount that the
Contractor shall have paid for each category of insurance.  For a total discount suspension during Extension
Year 2000-01, the weighted average difference between the two (2) years must at
least equal the value of the discount itself for the 1999-2000 Extension Year
as adjusted by the annual percentage of increase for the 2000-01 Extension Year
provided at ARTICLE V–A, 28(C) or 29(D) (as applicable) of the Contract.  To the extent that the weighted average difference
is between zero percent (0%) and two percent (2%), there will be a
proportionate reduction in the discount suspension, i.e., a “partial” suspension.

 

(b)                      For a suspension of the discount during the 2001-02
Extension Year, the Contractor must show on per vehicle and per employee bases,
as applicable, the differences between all premiums paid for automobile
liability insurance, comprehensive general liability insurance and employee
health care insurance only for
the period from July 1, 2000 to June 30, 2001 and the amounts paid for such
coverage for the period from July 1, 1998 to June 30, 1999.  In addition, the Contractor must show on per
vehicle and per employee bases, as applicable, the differences between all
premiums paid for unemployment insurance and Worker’s Compensation Insurance
for the period from July 1, 2000 to June 30, 2001 and the amounts paid for such
coverage for the period from July 1, 1999 to June 30, 2000.  The percentage of difference for all such
costs shall be calculated as a weighted average of the percentages of
difference for each type of cost in relation to the total amount that the
Contractor shall have paid for each category of insurance.  For a total suspension of the discount 

 

(12) Cost increases for unemployment insurance and Worker’s
Compensation Insurance shall not be included for purposes of suspension of the
discount during the 2000-01 Extension Year.

 

 

36

 

during the 2001-02 Extension Year,
the weighted average difference between the two (2) years must at lease equal
the value of the discount itself for the 2000-01 Extension Year as adjusted by
the annual percentage of increase for the 2001-02 Extension Year provided at
ARTICLE V–A, 28(C) or 29(D) (as applicable) of the Contract.  To the extent that the weighted average
difference is between zero percent (0%) and two percent (2%), there will be a
proportionate reduction in the discount suspension, i.e., a “partial”
suspension.

 

(c)                      For a suspension of the discount during the 2002-03
Extension Year, the Contractor must show on per vehicle and per employee bases,
as applicable, the differences between all premiums paid for automobile
liability insurance, comprehensive general liability insurance and employee
health care insurance only for
the period from July 1, 2001 to June 30, 2002 and the amounts paid for such
coverage for the period from July 1, 1998 to June 30, 1999.  In addition, the Contractor must show on per
vehicle and per employee bases, as applicable, the differences between all
premiums paid for unemployment insurance and Worker’s Compensation Insurance
for the period from July 1, 2001 to June 30, 2002 and the amounts paid for such
coverage for the period from July 1, 1999 to June 30, 2000.  The percentage of difference for all such
costs shall be calculated as a weighted average of the percentages of
difference for each type of cost in relation to the total amount that the
Contractor shall have paid for each category of insurance.  For a total suspension of the discount
during the 2002-03 Extension Year, the weighted average difference between the
two (2) years must at least equal the value of the discount itself for the
2001-02 Extension Year as adjusted by the annual percentage of increase for the
2002-03 Extension Year provided at ARTICLE V–A, 28(C) or 29(D) (as applicable)
of the Contract.  To the extent that the
weighted average difference is between zero percent (0%) and two percent (2%),
there will be a proportionate reduction in the discount suspension, i.e., a
“partial” suspension.

 

(d)                      For a suspension of the discount during the 2003-04
Extension Year, the Contractor must show on per vehicle and per employee bases,
as applicable, the differences between all premiums paid for automobile
liability insurance, comprehensive general liability insurance and employee
health care insurance only for
the period from July 1, 2002 to June 30, 2003 and the amounts paid for such
coverage for the period from July 1, 1998 to June 30, 1999.  In addition, the Contractor must show on per
vehicle and per employee bases, as applicable, the differences between all
premiums paid for unemployment insurance and Worker’s Compensation Insurance
for the period from July 1, 2002 to June 30, 2003 and the amounts paid for such
coverage for the period from July 1, 1999 to June 30, 2000.  The percentage of difference for all such
costs shall be calculated as a weighted average of the percentages of
difference for each type of cost in relation to the total amount that the
Contractor shall have paid for each category of insurance.  For a total suspension of the discount
during the 2003-04 Extension Year, the weighted average difference between the
two (2) years must at least equal the value of the discount itself for the
2002-03 Extension Year as adjusted by the annual percentage of increase for the
2003-04 Extension Year provided at ARTICLE V–A, 28(C) or 29(D) (as applicable)
of the Contract.  To the extent that the

 

37

 

weighted average difference is
between zero percent (0%) and two percent (2%), there will be a proportionate
reduction in the discount suspension, i.e., a “partial” suspension.

 

(e)                      For a suspension of the discount during the 2004-05
Extension Year, the Contractor must show on per vehicle and per employee bases,
as applicable, the differences between all premiums paid for automobile
liability insurance, comprehensive general liability insurance and employee
health care insurance only for
the period from July 1, 2003 to June 30, 2004 and the amounts paid for such
coverage for the period from July 1, 1998 to June 30, 1999.  In addition, the Contractor must show on per
vehicle and per employee bases, as applicable, the differences between all
premiums paid for unemployment insurance and Worker’s Compensation Insurance
for the period from July 1, 2003 to June 30, 2004 and the amounts paid for such
coverage for the period from July 1, 1999 to June 30, 2000.  The percentage of difference for all such
costs shall be calculated as a weighted average of the percentages of
difference for each type of cost in relation to the total amount that the
Contractor shall have paid for each category of insurance.  For a total suspension of the discount
during the 2004-05 Extension Year, the weighted average difference between the
two (2) years must at least equal the value of the discount itself for the
2003-04 Extension Year as adjusted by the annual percentage of increase for the
2002-03 Extension Year provided at ARTICLE V–A, 28(C) or 29(D) (as applicable)
of the Contract.  To the extent that the
weighted average difference is between zero percent (0%) and two percent (2%),
there will be a proportionate reduction in the discount suspension, i.e., a
“partial” suspension.

 

(5)               Eligibility for
Fuel Cost Increase Relief.  The
BOE shall determine monthly and annually whether the Contractor shall be eligible
prospectively for partial or total suspension of the two percent (2%) prompt
payment discount on the basis of the Contractor’s submittal of written proof of
sufficient vehicle gasoline and vehicle diesel fuel cost increases per
gallon.  The Contractor must submit to
the BOE with each regular monthly invoice a “Monthly Vehicle Fuel Cost Increase
Claim Statement,” as hereinafter defined. 
In addition, the Contractor must submit to the BOE an “Annual Vehicle
Cost Increase Summary Statement,” as hereinafter defined, by August 15th
following each Extension Year.  The
extent of the discount suspension, if any, shall be governed by the provisions
hereinafter expressed at Paragraph (I)(7),
et seq.

 

(6)               The term “Monthly
Vehicle Fuel Cost Increase Claim Statement” is defined as a written and
attested certification by the Contractor that shall state (a) the Contractor’s total monthly usage in
gallons of vehicle gasoline and total monthly usage in gallons of vehicle
diesel fuel under this Contract, (b)
the average RACK Rates(13) for vehicle gasoline and vehicle diesel fuel for the
base period of January 1, 1999 to June 30, 2000, (c) the sums of the foregoing average RACK Rates for vehicle
gasoline and vehicle diesel fuel plus the respective products of the said
average

 

(13) The term “RACK Rates” is hereby defined as the “average petroleum
product manufacturer gross dock rates for vehicle gasoline and vehicle diesel
fuel without sales, excise or compensating use taxes, discounts or any other
adjustments,” as published regularly by the Oil Price Information Service, a
division of United Communications Group, Inc., or its successor.

 

 

38

 

RACK Rates multiplied by the CPI increase
percentage(14) for the month preceding the month of the Contractor’s affected
service invoice (hereinafter expressed as “Base RACK Rates”), (d) the RACK Rates for vehicle gasoline and
vehicle diesel fuel for the month preceding the month of the affected
Contractor’s service invoice, (e)
the unit cost differences of the monthly RACK Rates expressed heretofore at Paragraph (I)(6)(d)  minus the Base RACK Rates
expressed heretofore at Paragraph (I)(6)(c),
(f) the remainders resulting from
each application of the calculations expressed heretofore at Paragraph (I)(6)(e)  multiplied by the respective
monthly total gallons of gasoline and diesel fuel that the Contractor consumes
under this Contract (hereinafter expressed as “Excess Vehicle Fuel Cost”), and (g) all other information required for
eligibility as expressed hereinafter at Paragraph
(I)(7), et seq. 
The term “Annual Vehicle Fuel Cost Increase Summary Statement” is
defined as a written “review report” prepared by a CPA or PA licensed by the
State of New York, except as otherwise noted herein.  Each Annual Vehicle Fuel Cost Increase Summary Statement shall
include all of the facts and figures deemed necessary by the Director to
provide a full annually adjusted summary of the Contractor’s vehicle fuel cost
increase claims for the applicable comparison periods heretofore expressed in
the requirements for Monthly Vehicle Fuel Cost Increase Claim Statements and
hereinafter expressed at Paragraph (I)(7),
et seq.  Each such review report shall state that a review shall have been
performed in accordance with GAAP as of the date of a given review report and
that the information in each Annual Vehicle Fuel Cost Increase Summary
Statement shall have been based upon the representations of the Contractor’s
management.  Each such review shall
describe the nature of a review as distinct from an audit and shall describe
the standard procedures that the CPA/PA shall have performed, e.g., an inquiry
and an analytical review.  Each review
report shall give the limited assurance that, based upon the review, the CPA/PA
shall not have been aware of any material modifications that should be made to
the Annual Vehicle Fuel Cost Increase Summary Statement for it to be in
conformity with GAAP.  A compilation
report shall not qualify as an Annual Vehicle Fuel Cost Increase Summary
Statement.  In addition, the CPA/PA
preparing each review report must state that he/she shall have studied the cost
justification manual that shall be supplied by the Board and shall have applied
the standards contained in the Board’s manual to the development of each Annual
Vehicle Fuel Cost Increase Summary Statement. 
If the Contractor shall not have had a CPA-audited financial report
performed for any purpose before July 1, 2000, then the Contractor shall be
required to submit a certified audited statement by a CPA for its first Annual
Vehicle Fuel Cost Increase Summary Statement hereunder.  In addition, the CPA/PA who shall prepare
each Annual Vehicle Fuel Cost Increase Summary Statement must have no interest
in this Contract, the Contractor and/or any entity affiliated in any manner
with the Contractor and must so certify in writing.  Each Annual Vehicle Fuel Cost Increase Summary Statement shall
utilize a form prescribed by the Director.

 

(14) For this purpose, the “CPI increase” is hereby defined as the
aggregate percentage increase in the consumer price index for the New York, New
York-North­eastern, New Jersey area, based upon the index for all urban
consumers (CPI-U), as stated in Education Law §305(14(a).

 

39

 

(7)                                 Documentation
of Vehicle Fuel Cost Increases. 
To be eligible for partial or total suspension of the two percent (2%)
prompt payment discount, the Contractor must show the following:

 

(a)                      For a total or partial suspension of the discount,
the Contractor must show each month on a total dollar basis the differences
between the Excess Vehicle Fuel Costs for vehicle gasoline and vehicle diesel minus
one thirty-sixth (1/36) of the Contractor’s Deductible Amount.  If the remainder from the formula in the
preceding sentence shall at least equal the value of the discount itself for
the affected month, the Contractor shall be entitled to a total suspension of
the discount for that month.  To the
extent that the remainder shall fall below the value of the discount on a
monthly basis, there will be a proportionate reduction in the discount
suspension, i.e., a “partial”
suspension.  To the extent that any
seasonal adjustments in the CPI shall occur, the Contractor shall use the
preceding formula on an adjusted annualized basis and demonstrate it and the
results in each Annual Vehicle Fuel Cost Increase Summary Statement.

 

(8)                     BOE
Payment Deadline for Application of Prompt Payment Discount.  The Contractor does hereby stipulate and
agree that the two percent (2%) prompt payment discount shall be deemed to
apply to payments for all services rendered under the Contract that the BOE
makes within six (6) business days after thirty (30) Calendar days shall have
elapsed from the date of the BOE’s receipt of the Contractor’s monthly invoice.

 

(9)                     Audit and
Recovery of Overpayment.  Each
Insurance Rate Increase Claim Statement, Monthly Vehicle Fuel Cost Increase
Claim Statement and Annual Vehicle Fuel Cost Increase Summary Statement shall
be subject to review, audit and approval by the BOE.  The BOE shall have the right to recover any amounts paid to the
Contractor including, but not limited to, seasonal adjustments that the BOE
shall determine to have been unjustified either be a deduction(s) from any
later payment(s) that shall become due and payable to the Contractor or by a
refund payment by the Contractor upon written request from the BOE.

 

(10)              Limitation on
Actions.  If the Contractor
shall dispute any finding, determination or other action by the OPT Director or
any other BOE unit or official arising from anything contained in Paragraph (I) of this Extension and
Eleventh Amendment Agreement pertaining to the suspension of the prompt payment
discount, the Contractor’s sole remedy and legal action shall be an appeal to
the Chancellor’s Board of Review pursuant to Section 8.3 of the Bylaws of the
Board of Education, the decision of which board shall be final, binding upon
the Contractor, and not subject to any claim, action, proceeding, special
proceeding and/or other form of further appeal.  If the Contractor shall institute any claim, action, proceeding,
special proceeding and/or other form of appeal after a final decision by the
Chancellor’s Board of Review, the Contractor shall consent, upon request by the
BOE and/or the City of New York, to a dismissal with prejudice of such claim,
action, proceeding, special proceeding and/or other form of appeal.

 

(J)                                 GENERAL
MISCELLANEOUS AMENDMENTS.  All
else to the contrary notwithstanding, the Contract is hereby amended as follows:

 

40

 

(1)           Standardization
of Contracts.  The
Contractor does hereby stipulate and agree that contracts awarded under Serial
Nos. 0070, 8108, G8801, G8891 and G9325 all form an interwoven system for the
provision of pupil transportation services as fully and completely as if they
were awarded simultaneously, and, therefore, constitute one contract.  This includes contracts that successor
vendors obtain through assignments, mergers, acquisitions, management agency
agreements or any other means.  Therefore,
any individual contractor with more than one contract will be deemed for all
intents and purposes to possess one contract. 
Furthermore, any group of vendor entities subject to common ownership or
control that holds more than one contract will be deemed for all intents and
purposes to be one contractor with one contract, namely, the Contract.

 

(2)           Changes
Affecting the Contractor. 
The Contractor shall provide written notice to the BOE on forms
prescribed by the Director of each change affecting the following: partners,
sole proprietors, management control, Chief Executive Officer, Chief Financial
Officer, Chief Operating Officer, or the organization of ownership of the
contractor, i.e., the corporation, partnership or sole proprietorship.  Changes in the contractor include, but are
not limited to, the following: corporate or partner voting power; sale,
transfer or other alienation of corporate, partnership or sole proprietorship
assets; sale or transfer of corporate stock or partnership interest over five
percent (5%); or, any other action that may affect BOE interests.

 

(3)           Office
of Pupil Transportation. 
All references in the Contract and any previous extension and amendment
agreements to the “Bureau of Pupil Transportation” are hereby amended to read,
“Office of Pupil Transportation.”

 

(4)           NYSDOT
Bus Inspection System. 
The Contractor shall not allow its New York State Department of
Transportation “Out of Service Rate” to exceed an average of twenty percent
(20%) over any three consecutive six-month inspection periods during the Term
of this Extension and Amendment Agreement.

 

(5)           School
Bus Contractor’s Manual of Procedures and Requirements.  The Office of Pupil Transportation’s School
Bus Contractor’s Manual of Procedures and Requirements (hereinafter expressed
as “Contractor’s Manual”), issued on June 1, 1982, is hereby incorporated by
this reference into, and made a part of, this Contract as if the “Contractor’s
Manual” were set forth herein in its entirety. 
Contractors and its employees, agents, successors, assigns,
subcontractors and subcontractor employees must observe and comply fully with
all rules, requirements and procedures as expressed in the “Contractor’s
Manual.”  The Director shall have the
right, authority and sole discretion to add, delete, revise, update, reissue or
otherwise change any and all rules, procedures and/or requirements in the
“Contractor’s Manual” at any time without prior notice to any party.  Any and all provisions of the Contract,
including but not limited to the Article regarding Liquidated Damages, which
refer to Pupil Transportation Handbook Nos. 1, 2 and/or 3, are hereby amended
to refer solely to the “Contractor’s Manual.”

 

41

 

(6)           Standards
of Professional Conduct and Performance.  If the Director promulgates new standards of
professional conduct and/or minimum levels of competency or performance for
drivers and escorts, the Contractor must ensure that all affected employees are
made fully aware of, and act in full compliance with, such new standards.  In addition, the Contractor must certify in
the manner prescribed by the Director that each and every driver, escort and
other affected employee has received written notification of such new
standards.

 

(7)           Computer
Systems.  The Contractor
shall maintain a computer system sufficient to run applications developed by
OPT.  As of the 2000-01 Extension Year,
the minimum computer system for the Contractor to maintain must include the following
elements: (a) Pentium II Computer; (b) 4 megabytes RAM; (c) 6 gigabyte hard
disk; (d) Windows 95 or Windows 98; (e) Word for Windows 95 or 98; and, (f) 56k
Modem.  During the life of this
Extension Agreement, the Contractor shall update its computer system as required
by the Director.

 

(8)           Uniform
Attire of Transportation Crews. 
Unnumbered Paragraph 9 of Article XVII entitled, “Vehicle Operator
Standards,” is hereby amended to add the following provisions: (a) on August
15th prior to the start of the 2000-01 Extension Year, the Contractor shall
submit one (1) complete sample each of the current or new uniforms to be worn
by drivers; (b) within five (5) business days of the submittal, the Director
shall have the sole discretion whether to approve or disapprove the
Contractor’s choice of uniform attire for any class of employees, i.e., this
provision affects current choices of uniforms as well as prospective choices;
(c) whereupon the Director disapproves any choice of uniform attire, the
Contractor must replace, at no expense to the BOE, the affected uniform items
with those acceptable to the Director; and, (d) the Contractor must submit for
approval to the Director any proposed change(s) in any item(s) of uniform
attire before such change(s) becomes effective.

 

(9)           Access
to Premises.  The
Contractor and its employees, agents, successors, assigns, subcontractors and
subcontractor employees must grant to OPT inspectors, BOE administrative
personnel, City of New York administrative personnel, and State of New York
administrative personnel full cooperation and access to all premises, vehicles,
books and records for the purpose of vehicle and garage inspections and related
functions as well as the review and audit of the Contractor’s records to
ascertain compliance with the Contract and/or any Federal, State, local and/or
Board of Education laws, rules, regulations and/or bylaws.

 

(10)         Unlawful
or Unenforceable Provisions Void.  Whereupon this Extension and Amendment Agreement shall be found
to contain any unlawful or unenforceable provision(s), such provision(s) shall
be deemed of no effect and will, upon application of either party, be stricken
from this document without thereafter affecting the binding force of the
remainder of this Extension and Amendment Agreement.

 

(11)         Approval
and Execution.  This
Extension and Amendment Agreement will not become binding or effective upon the
Board of Education until the following series of events will have transpired:
(a) approval as to legal sufficiency by the BOE Office of Legal Services; (b)
authorization 

 

42

 

by a resolution duly adopted by a vote of the Board of
Education; (c) execution on behalf of the Board of Education by the Chancellor
or his/her designee; (d) approval by the New York State Commissioner of Education;
(e) initial registration with Comptroller and re-registration with the
Comptroller each year thereafter; and, (f) initial approval and subsequent
annual re-approval by the New York State Financial Control Board pursuant to
the New York State Emergency Act for the City of New York, the rules and regulations
of said Board so require.

 

(12)         Implementation
of the State Education Law. 
This Extension and Amendment Agreement is intended to implement the provisions
of New York State Education Law §305(14) and the attendant regulations of the
New York State Commissioner of Education. 
Whereupon there shall exist any inconsistency between the BOE and the
SED concerning this statutory provision, the attendant regulations of the
Commissioner of Education and/or any formula(e) for reimbursement of funds,
this Extension and Amendment Agreement shall be deemed amended automatically to
conform to the interpretation of the SED but only for the protection of BOE
interests and only at the Board of Education’s option.

 

(13)         The Comptroller shall endorse hereon
during the term of this Contract his/her certificates that there are appropriations
or funds applicable thereto sufficient to pay the estimated expense to execute
and operate this Contract during the respective fiscal periods.

 

(14)         As used herein, the singular shall
include the plural and vice versa.  As
used herein, all masculine, feminine and neuter pronouns and other gender
descriptions shall be deemed synonymous and interchangeable.

 

(15)         Fingerprint
Processing and Identification Badges.  The Contractor hereby agrees, consents and covenants that at the
discretion of the Director, all employees of the Contractor including but not
limited to principals, shareholders, stockholders, managers, dispatchers,
office personnel, and mechanics, will be subject to a fingerprint check.  The Contractor also, hereby agrees, consents
and covenants that the costs to process fingerprints, criminal background
research, other documents and identification badges for any of the above
mentioned will not be borne by the Board of Education.  Whereupon OPT assumes the responsibility to
process fingerprints, criminal background research, other documents and
identification badges, the Contractor agrees and covenants to be bound by rules
and procedures prescribed by the Director whereby the BOE will defray the associated
administrative costs.

 

(16)         Vacillation
in the Number of Contract and/or Additional Vehicles during Extension Periods.  Article XIII entitled, “INCREASE OR DECREASE
IN THE NUMBER OF VEHICLES,” is henceforth amended as follows:

 

(a)           The current Paragraph C is henceforth redesignated as Paragraph D.  A new Paragraph C is
added immediately below the current Paragraph
B.  The new paragraph shall
reads as follows:

 

43

 

“C.  Increases
and/or Decreases in the Number of Vehicles during Extension Periods.  The Board and the Contractor do hereby stipulate
and agree that the number of vehicles required to serve pupil transportation
needs may change often during each school year due to changes in pupil
population, default or voluntary surrender of a Contract or changes in policy
or directives adopted by the BOE, the City of New York, the State Education Department
and/or Financial Control Board, over the term of an Extension Agreement. This
provision does not apply to the summer months when vehicles may be decreased as
much as necessary.  For Summer School
Transportation services vehicles will be offered by item beginning with the contractor
that quoted the lowest daily rate per vehicle under Contract Serial Nos. 4515,
4516, 4894, 4952 and 7164.  If
additional vehicles are then needed vehicles will be offered by item beginning
with the contractor who quoted the lowest daily rate per vehicle under Contract
Serial Nos. 0070, 8108, 8805, 8891, 9325 and 7165.

 

“If the Director eliminates any vehicle(s) from the
number originally awarded to the Contractor and later offers again a vehicle(s)
of the same type(s) and geographical service area(s) due to any resumed need,
the Contractor shall be entitled to restoration up to and including the number
of vehicles of the same type(s) and geographical service area(s) originally
awarded pursuant to the procedures specified above in Paragraph B.

 

“The Director shall offer any ‘additional’ vehicle(s) first to the
contractor with the lowest ‘current’ weighted average daily rate per vehicle
and the daily rate per escort in the relevant contractual item, pursuant to the
procedures specified above in Paragraph B.  Additional vehicles will be offered first to
the Contractor will the lowest current daily weighted average plus the daily
rate per escort.  The ranking will include
both those contractors who are under an extension agreement and those
contractors who are under the terms of Contracts for similar work.

 

“The term ‘lowest weighted average daily rate per
vehicle,’ plus the daily rate per escort, which is used to determine the order
in which contractors are affected by both the decrease provisions of Paragraph A and the increase provisions of Paragraph B concerning both original
vehicles and all additional vehicles, shall reflect the current rates paid by
the Board of Education at the time of an offer.

 

“If the Director shall eliminate any ‘additional’
vehicles at the outset of service in any given September and thereafter restore
such vehicles by not later than October 15th of the same school
year, the Director shall award such restored additional vehicles to the
contractor(s) from whom they were previously taken.

 

“Anything in the previous ARTICLE XIII and/or
elsewhere in the Contract to the contrary notwithstanding, the Board of
Education shall not reduce the number of

 

44

 

‘additional’ vehicles held by the Contractor as of
June 30th each extension year during the period of this Extension
and Eleventh Amendment Agreement, except in instances of decreases of student population
affecting the Contractor’s geographical service area(s) and/or type(s) of vehicle(s).  With respect to this ARTICLE XIII and all
other applicable aspects of the Contract, the BOE shall have the sole and
absolute discretion to fix and determine which schools students shall attend
throughout the New York City School District, to determine what types of
vehicles shall be appropriate to transport individual pupils, and to make
findings and decisions with respect to increases and decreases of student
populations in the various geographical areas of the New York City School
District.”

 

(17)                          All
other provisions of the Contract as amended by the 1984 Extension and Fourth
Amendment Agreement, by the 1987 Extension and Fifth Amendment Agreement, by
the 1990 Extension and Sixth Amendment Agreement, by the 1993 Extension and
Seventh Amendment Agreement, by the 1995 Extension and Eighth Amendment, by the
1996 Supplemental Ninth Amendment Agreement, and by the 1998 Supplemental Tenth
Amendment Agreement, except those provisions herein noted and revised, shall
remain in full force and effect.

 

* * *NO
FURTHER TEXT APPEARS ON THIS PAGE * * *

 

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