Document:

Exhibit 10.1
	 

	 
		EXECUTION 
	 

	 
		FIFTH AMENDED AND RESTATED
	 

	 
		EMPLOYMENT AGREEMENT
	 

	 
		FIFTH AMENDED AND RESTATED EMPLOYMENT
		AGREEMENT dated as of April 18, 2007 (the “Agreement”)
		among Atlantic Express Transportation Group Inc., a New York corporation
		(“Group”), Atlantic Express Transportation Corp., a New
		York corporation (the “Company”),
		and Domenic Gatto (the “Executive”).
	 

	 
		WHEREAS, the Executive is presently employed
		by the Company, a wholly owned subsidiary of Group, under a Fourth Amended and
		Restated Employment Agreement dated as of November 25, 2003, as amended (the
		“Prior Agreement”);
	 

	 
		WHEREAS, the Company desires to secure the
		continued services of the Executive, and the Executive desires to continue in
		the employment of the Company and, in connection therewith, the Company, Group
		and the Executive desire to amend and restate the terms and provisions of the
		Prior Agreement to, among other things, set forth the terms of such continued
		employment.
	 

	 
		NOW, THEREFORE, in consideration of the
		foregoing and the respective covenants and agreements hereinafter set forth and
		for other good and valuable consideration, the Company, Group and the Executive
		hereby agree to amend and restate the Prior Agreement in its entirety, as
		follows:
	 

	 
		1. EMPLOYMENT AND DUTIES
	 

	 
		1.1. General. The
		Company hereby employs the Executive, and the Executive agrees to serve, as
		President and Chief Executive Officer of the Company and upon the Board of
		Directors of the Company (the “Board”) as
		Vice Chairman of the Board, upon the terms and 
	 

	 
		 
	 

	 
		 
	 

	 

	 
	 

	 
	 
		conditions herein contained during the
		Employment Term. In such capacities the Executive agrees to serve the Company
		faithfully and to the best of his ability under the direction of the Board. The
		Executive also shall serve as a member of the Board of Directors of Group
		during the Employment Term. During the Employment Term, the Executive also
		agrees to serve, if elected, at no compensation in addition to that provided
		for in this Agreement, in the position of officer of Group and of any
		subsidiary of Group or the Company. As long as the Executive remains either
		President or Chief Executive Officer, the Executive shall continue to occupy
		the same corner office which he has occupied during the Term of the Prior
		Agreement.
	 

	 
		1.2. Exclusive Services. During the Employment Term, the Executive shall devote
		his full-time working hours to his duties hereunder and shall not, directly or
		indirectly, render services to any other person or organization for which he
		receives compensation without the unanimous consent of the Board or otherwise
		engage in activities which would interfere significantly with his faithful
		performance of his duties hereunder. Notwithstanding the foregoing, the
		Executive may serve as a managing member of Birdie Holding Company LLC and
		affiliates which own and operate the Eagle Oaks Golf Club, provided that
		such services shall not interfere with the performance of Executive’s
		duties hereunder. 
	 

	 
		1.3. Term of Employment. The Executive’s employment under this Agreement
		shall commence as of the date hereof (the “Commencement Date”) and shall terminate on the earliest of (i)
		December 31, 2009, subject to renewal in accordance with Section 1.4, (ii) the
		death of the Executive or (iii) the termination of the Executive’s
		employment pursuant to this Agreement (the “Employment Term”).
	 

	 
		1.4. Renewal of Employment Term. Unless the Company has provided the Executive with a
		written notice at least seventy-five days prior to December 31, 2009 of its
		intent 
	 

	 
		 
	 

	 
		 
	 

	 
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		not to extend the Employment Term (the
		“Termination Notice”), the Employment Term shall be renewed and
		extended automatically for a further period of one year on January 1, 2010, and
		such extended term shall thereafter be further extended for successive one year
		periods unless a Termination Notice is given to the Executive at least
		sevety-five days prior to the next successive December 31.
	 

	 
		2. SALARY
	 

	 
		2.1. Base Salary.
		From the Commencement Date, the Executive shall be entitled to receive a base
		salary (“Base
		Salary”) at a rate of $592,162 per
		annum, payable in arrears in equal installments in accordance with the
		Company’s payroll practices, with such increases as may be provided in
		accordance with the terms hereof. Once increased, such higher amount shall
		constitute the Executive’s annual Base Salary. 
	 

	 
		2.2. Increase in Base Salary. On November 1 of each year during the Employment Term,
		the Executive’s Base Salary shall be increased by a percentage which shall
		equal the greater of 3% or the percentage increase in the consumer price index
		for the New York-Northern New Jersey-Long Island, NY-NJ-CT metropolitan area,
		as reported by the United States Department of Labor, for the 12-month period
		ended the immediately preceding October 31.
	 

	 
		2.3. Annual Bonus.
		(a) The Executive shall be paid a bonus (an “Annual Bonus”) equal to 15% of his Base Salary for each fiscal
		year during the Employment Term, commencing with the fiscal year ending June
		30, 2008, in which the Company’s actual consolidated Adjusted EBITDA
		exceeds by 10% or more the Adjusted EBITDA projected by management (which
		projection has been accepted by the Board) for such fiscal year;
		provided, in the event the actual Adjusted EBITDA exceeds the
		projected Adjusted EBITDA by 15% or
	 

	 
		 
	 

	 
		 
	 

	 
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		more, the Annual Bonus amount shall equal
		25% of the Base Salary. In the event, the Executive’s employment is
		terminated for any reason after June 30, 2007, other than by the Executive
		without Good Reason or by the Company for Cause, the Executive shall be
		entitled to a pro rata portion of the Annual Bonus, if any, for the fiscal year
		in which such termination occurs, in an amount equal to the Annual Bonus which
		would have been applicable as determined following the end of such fiscal year,
		multiplied by a fraction, the numerator of which shall be the number of days
		elapsed during such fiscal year through the date of such termination and
		denominator of which shall be 365 days. The Annual Bonus shall be paid on or
		before 105 days following the end of the applicable fiscal year.
	 

	 
		(b) “Adjusted EBITDA” shall mean operating income, (i) plus
		depreciation and amortization, (ii) less the amount by which the actual Capital
		Expenditure relating to the projected EBITDA exceeds Capital Expenditures
		projected by management (which has been accepted by the Board) for the
		applicable fiscal year, and (iii) excluding any extraordinary or nonrecurring
		expenses or gains.
	 

	 
		(c) “Capital Expenditure” shall mean expenditures for fixed or capital
		assets or improvements or replacements thereof, which have a useful life of
		more than one year, whether financed by cash, capital leases, purchase money
		mortgages or other incurrence of debt.
	 

	 
		2.4. Exit Bonus. (a)
		Upon the occurrence of a Change of Control at any time during or after the
		termination of the Executive’s employment, the Company shall pay to the
		Executive a bonus (“Exit
		Bonus”) which shall be equal to
		the Fair Market Value (as of the date of such Change of Control) of 1.5% of all
		of the Company’s outstanding common stock (on a fully diluted basis)
		immediately preceding such Change of Control (such percentage being referred to
		herein as the “Base
		Amount”), provided the Base Amount
		shall be increased to 2.5% 
	 

	 
		 
	 

	 
		 
	 

	 
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		in the event that the transaction resulting
		in the Change of Control is based upon an aggregate Fair Market Value of all of
		the Company’s outstanding common stock (on a fully diluted basis) equal to
		or in excess of $50,000,000 and 3.0% in the event such Fair Market Value is
		equal to or exceeds $70,000,000; further,
		provided, the Exit Bonus to be paid to the Executive upon a
		Change of Control shall be reduced by an amount equal to (i) the Fair Market
		Value of all of the Company’s outstanding common stock as of the date of
		such Change of Control, multiplied by (ii) a fraction, the numerator of which
		shall be the aggregate number of Group Common Shares (as defined below) sold,
		transferred or otherwise disposed of by GSC Group (as defined below) prior to
		such Change of Control and the denominator of which shall be 107,593,
		multiplied by (iii) the applicable Base Amount as determined in accordance with
		this Section 2.4(a) as of the date of such Change of Control. Except as
		provided in Section 2.4(b), the Exit Bonus shall be payable in the same form of
		consideration and at the same time as received by the shareholders of either
		Group or the Company upon such Change of Control. 
	 

	 
		(b) In the event the Company or Group during
		the Employment Term and prior to a Change of Control, shall adopt a stock
		option or restricted stock purchase or similar plan, the Executive within
		thirty (30) days following written notice of the adoption of such a plan, shall
		have the right, by delivery of written notice to the Company, to participate in
		such plan and to receive such number of shares or options, in substitution and
		in place of the Exit Bonus, as would be equivalent to the Base Amount as of the
		date of such participation in such plan by the Executive.
	 

	 
		(c) In the event prior to the occurrence of
		a Change of Control, GSCP II Holdings (AE), LLC or any of its affiliates
		(collectively, the “GSC
		Group”) sells, transfers or
		otherwise disposes of any of the shares (the “Group Common Shares”) of common stock of Group it 
	 

	 
		 
	 

	 
		 
	 

	 
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		beneficially owns as of the date hereof and
		excluding any shares of common stock of Group the GSC Group may acquire after
		the date hereof (a “Disposition
		Event”), the Executive shall be
		entitled to a portion of his Exit Bonus equal to (i) the Fair Market Value of
		all of the Company’s outstanding common (on a fully diluted basis) as of
		the date of such Disposition Event, multiplied by (ii) a fraction, the
		numerator of which shall be the number of Group Common Shares sold, transferred
		or otherwise disposed of in such transaction and the denominator of which shall
		be 107,593, multiplied by (iii) the applicable Base Amount as determined in
		accordance with Section 2.4(a) as of the date of such Disposition Event. Except
		as provided in Section 2.4(b), the portion of the Exit Bonus payable upon a
		Disposition Event shall be payable in the same form of consideration and at the
		same time as received by the GSC Group upon such Disposition Event.
	 

	 
		2.5 Definitions. (a)
		Change of Control shall mean (i) the transfer (in one transaction or a
		series of transactions) of all or substantially all of the assets of Group or
		the Company to any person or group (as such term is used in Section 13(d)(3) of
		the Securities Exchange Act of 1934, as amended (the “Exchange Act”)); (ii) the liquidation or dissolution of Group
		or the Company or the adoption of a plan by the stockholders of Group or the
		Company relating to the dissolution or liquidation of either Group or the
		Company; or (iii) the acquisition by any person or group (as such term is used
		in Section 13(d)(3) of the Exchange Act), except for by the GSC Group of
		beneficial ownership, directly or indirectly, of more than 50% of the aggregate
		ordinary voting power of Group or the Company; and
	 

	 
		(b) “Fair Market Value” of the Company’s common stock shall mean the
		value of the Company’s common stock as specified in accordance with any
		transaction resulting in a Change of Control or Disposition Event, as the case
		may be, or if no specific value is specified in 
	 

	 
		 
	 

	 
		 
	 

	 
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		such transaction, the value of the
		Company’s common stock as reasonably determined by the Board
		(provided, in the event the Executive disagrees with the value
		determined by the Board, as determined by a nationally recognized independent
		investment banking or accounting firm reasonably acceptable to the Company and
		the Executive), in either case without control premiums or minority
		discounts.
	 

	 
		3. EMPLOYEE BENEFITS
	 

	 
		3.1. General Benefits. The Executive shall receive the following benefits
		during the Employment Term: 
	 

	 
		(a) the Executive will be eligible to
		participate in benefit programs of the Company consistent with those benefit
		programs provided from time to time to other senior executives of the
		Company;
	 

	 
		(b) a disability insurance policy providing
		$15,000 in monthly benefits commencing six months after a disability which
		prevents the Executive from performing the ordinary and necessary functions and
		duties of his employment; provided that the premium therefor shall not exceed
		the usual and customary rates charged by underwriters for such a policy for a
		person of the Executive’s age in good health. At the option of the
		Executive and in the place of the disability policy, the Company shall pay the
		cash equivalent of the premium for such policy to the Executive to be used by
		the Executive to pay such premium; 
	 

	 
		(c) an automobile allowance of $2,150 per
		month; 
	 

	 
		(d) an annual life insurance premium
		allowance of $35,000, payable in two installments in June and February of each
		year of the Employment Term hereof;
	 

	 
		(e) continued use of the same Company car
		and driver which the Executive is using as of the date of this Agreement; and
		
	 

	 
		 
	 

	 
		 
	 

	 
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		(f) participation in any executive incentive
		plan which might be implemented by the Board during the Employment Term.

	 

	 
		3.2. Vacation. The
		Executive shall be entitled to 25 days paid vacation each calendar year in
		accordance with the applicable policies of the Company. 
	 

	 
		4. TERMINATION OF EMPLOYMENT
	 

	 
		4.1. Termination for Cause; Termination Without Cause;
		Termination for Permanent Disability; Resignation.
	 

	 
		4.1.1. General. (a) If,
		prior to the expiration of the Employment Term, the Executive’s employment
		is terminated by the Company for Cause, the Executive shall be entitled only to
		(i) his accrued but unpaid Base Salary through and including the date of
		termination (“Accrued Base
		Salary”); (ii) his accrued but
		unpaid Annual Bonus (the “Accrued
		Annual Bonus”), payable in
		accordance with Section 2.3; (iii) the Exit Bonus payable in accordance with
		Section 2.4; (iv) twelve months of medical coverage under the same terms as
		medical coverage offered to other senior executives of the Company; and (v) as
		severance, an amount equal to six months of his Base Salary payable in a lump
		sum upon termination, provided
		that, if such termination is for a
		Disloyalty Termination Event, the Executive shall have no right to receive, and
		the Company shall have no obligation to pay the Severance Payment.
	 

	 
		(b) If the Executive is terminated by the
		Company Without Cause, the Executive terminates employment for Good Reason or
		upon the expiration of the Employment Term without renewal in accordance with
		Section 1.4, the Executive shall be entitled only to (i) his Accrued Base
		Salary; (ii) his Base Salary from the day after the termination date through
		the normal expiration date of the Employment Term, payable in a lump sum upon
		termination; (iii) the benefits set forth under Section 3.1 of this Agreement
		during such term; provided, in the
		case 
	 

	 
		 
	 

	 
		 
	 

	 
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		of medical coverage, during such period or
		for a period of one year, which ever is longer; (iv) the Accrued Annual Bonus
		and the pro rata portion of the Annual Bonus for the then current fiscal year,
		each payable in accordance with Section 2.3; (v) the Exit Bonus payable in
		accordance with Section 2.4; and (vi) as severance, an amount equal to his
		annual Base Salary (the “Severance
		Payment”) payable in a lump sum
		upon termination. 
	 

	 
		(c) If, prior to the expiration of the
		Employment Term, the Executive’s employment is terminated by the Company
		for Permanent Disability (as defined in Section 5), the Executive shall be
		entitled only to (i) the payments and benefits as provided for in Section
		4.1.1(a)(i), (ii) and (iii); (ii) the benefits set forth under Section 3.1 of
		this Agreement for a period of 12 months following the date of termination;
		(iii) the pro rata portion of the Annual Bonus for the then current fiscal
		year, payable in accordance with Section 2.3; and (iv) the Severance Payment
		payable in a lump sum upon termination. 
	 

	 
		(d) If the Executive resigns from his
		employment hereunder without Good Reason, the Executive shall be entitled only
		to (i) payment of his Accrued Base Salary, if any, payable in a lump sum not
		later than 30 days following the date of termination; (ii) the Accrued Annual
		Bonus, payable in accordance with Section 2.3; and (iii) the Exit Bonus payable
		in accordance with Section 2.4.
	 

	 
		(e) In the event of termination hereunder as
		a result of death of the Executive, the Executive’s estate shall be
		entitled to (i) the compensation provided for in Section 4.1.1(a)(i), (ii) and
		(iii); (ii) the pro rata portion of the Annual Bonus for the then current
		fiscal year, payable in accordance with Section 2.3; and (iii) the Severance
		Payment payable in a lump sum upon termination.
	 

	 
		 
	 

	 
		 
	 

	 
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		(f) Except as otherwise provided herein, the
		Executive shall have no further right to receive any other compensation, or to
		participate in any other plan, arrangement, or benefit, after any termination
		or resignation of employment, subject to the terms of such plans or
		arrangements.
	 

	 
		(g) In the event of the termination of the
		Executive’s employment by the Company for any reason, the Company or Group
		shall, within 30 days of such termination of employment, (x) obtain releases
		that release the Executive from any guarantees made by the Executive in respect
		of obligations of Group, the Company or any of their respective subsidiaries
		(the “Guarantees”), if any such Guarantees are then in effect, or
		(y) provide letters of credit to the Executive in respect thereof, if any such
		Guarantees are then in effect.
	 

	 
		4.1.2. Date of Termination/Resignation. The date of termination for a termination by the
		Company for Cause shall be the date of the written notice of termination
		provided for in Section 4.1.3. The date of termination for a Termination
		Without Cause shall be as provided in Section 4.1.4. The date of termination
		for a termination for Permanent Disability shall be as provided in Section 5.
		The date of resignation shall be the date specified in the written notice of
		resignation from the Executive to the Company, or if no date is specified
		therein, 10 business days after receipt by the Company of written notice of
		resignation from the Executive.
	 

	 
		4.1.3. Notice of Termination for Cause. Termination of the Executive’s employment by the
		Company for Cause shall be effected by delivery of a written notice of
		termination from the Company to the Executive, which notice shall specify the
		event or events set forth in Section 4.2 giving rise to such
		termination.
	 

	 
		4.1.4. Notice of Termination Without Cause. Termination of the Executive’s employment for a
		Termination Without Cause shall be effected by written notice of termination
		
	 

	 
		 
	 

	 
		 
	 

	 
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		from the Company to the Executive,
		specifying a termination date no earlier than 10 business days after the date
		on which such notice is given.
	 

	 
		4.2. Termination for Cause. Termination for “Cause”
		shall mean termination by the Company of the Executive’s employment
		because the Executive (a) has been convicted of a crime punishable by
		imprisonment for more that one year, (b) has failed to perform in all material
		respects the normal and customary duties required of his position of
		employment, following a written warning specifying such deficiency and
		affording the Executive a reasonable period to cure such failure, or (c) has
		been disloyal to Group, the Company or any of their respective affiliates by
		assisting transportation competitors of Group, the Company or any of their
		respective affiliates to the disadvantage of Group, the Company or any of their
		respective affiliates by a breach of Section 6 or by otherwise actively
		assisting such competitors to the disadvantage of Group, the Company or any of
		their respective affiliates (a “Disloyalty Termination Event”).
	 

	 
		4.3. Termination Without Cause. “Termination Without Cause” shall mean any termination by the Company of the
		Executive’s employment at any time during the Employment Term for any
		reason other than Cause, death or Permanent Disability. 
	 

	 
		4.4. Termination by Executive for “Good
		Reason”. In the event of: (i) a
		material reduction in the nature or scope of Executive’s position as
		President and Chief Executive Officer or his authorities, powers, duties, or
		responsibilities in such capacity; or (ii) a material breach by the Company of
		its affirmative or negative covenants or undertakings hereunder and such breach
		shall not be remedied within fifteen (15) days after notice to Company thereof
		(which notice shall be signed by Executive and refer to a specific breach of
		this Agreement); then the 
	 

	 
		 
	 

	 
		 
	 

	 
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		Executive may at any time by notice
		terminate Executive’ employment hereunder for “Good Reason”.
	 

	 
		4.5. Release by Executive. As a condition to receipt of the Severance Payment,
		the Executive shall deliver a release (the “Release”)
		to the Company and the Group, in a form reasonably requested by the Company,
		releasing and discharging on behalf of the Executive, his heirs,
		administrators, executors, agents, or employees, the Company, Group and all
		other affiliates, divisions, subsidiaries and each of their predecessors,
		successors, assigns, agents, directors, officers, employees, representatives,
		attorneys, and all persons acting by, through, under or in concert with any of
		them (collectively, the “Releasee”)
		from any and all charges, claims, demands, judgments, actions, causes of
		action, damages, expenses, costs, attorneys’ fees, and liabilities of any
		kind whatsoever, whether known or unknown, vested or contingent, in law, equity
		or otherwise, which the Executive ever had, then has, or may hereafter have
		against a Releasee for or on account of any matter, cause or thing whatsoever
		which has occurred at any time up to the date of the Release, but excluding any
		liabilities or obligations of a the Company or Group set forth in this
		Agreement to the extent such liabilities or obligations survive the termination
		of the Executive’s employment, and excluding any liabilities or
		obligations of a Releasee arising out of any indemnity agreement in the
		Executive’s favor whether contained in such Releasee’s articles of
		incorporation, bylaws, corporate resolutions or in any employment agreement or
		arising by operation of law.
	 

	 
		5. PERMANENT DISABILITY
	 

	 
		If, prior to the expiration of the
		Employment Term, the Executive shall fail because of illness, physical or
		mental disability or other incapacity, for a period of six consecutive months,
		or for shorter periods aggregating six months during any twelve-month 
	 

	 
		 
	 

	 
		 
	 

	 
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		period, to render the services provided for
		by this Agreement, then the Company may, by written notice to the Executive
		after the last day of the six consecutive months of disability or the day on
		which the shorter periods of disability equal an aggregate of six months,
		terminate the Executive’s employment for “Permanent Disability”, specifying a termination date no earlier than 10
		business days after the date on which such notice is given. The determination
		of the Executive’s Permanent Disability shall be made by an independent
		physician who is reasonably acceptable to the Executive and the Company and
		shall be final and binding and shall be based on such competent medical
		evidence as shall be presented to it by the Executive or by any physician or
		group of physicians or other competent medical experts employed by the
		Executive and/or the Company to advise such independent physician.
	 

	 
		6. NONCOMPETITION/NONSOLICITATION AND
		CONFIDENTIALITY
	 

	 
		6.1. Noncompetition/Nonsolicitation. The Executive shall not, directly or indirectly, as a
		sole proprietor, member of a partnership, stockholder or investor, officer or
		director of a corporation, or as an employee, associate, consultant or agent of
		any person, partnership, corporation or other business organization or entity
		other than the Company, Group and any of their subsidiaries: (a) engage in, or
		acquire an interest in any entity or enterprise which engages in, any business
		that is in competition with any business actively conducted by Group, the
		Company or any of their respective subsidiaries within (i) the counties then
		served by Group, the Company or their respective subsidiaries as well as
		adjacent counties, and (ii) any other counties in which Group, the Company or
		their respective subsidiaries has made a bid within 36 months prior to the
		Executive’s termination and any adjacent counties in which Group, the
		Company or their respective subsidiaries conducts business; (b) solicit or
		endeavor to entice away from Group, the Company or any of their respective
		subsidiaries any person who is, or was 
	 

	 
		 
	 

	 
		 
	 

	 
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		during the then most recent 36-month period,
		employed by or associated with Group, the Company or any of their respective
		subsidiaries, or (c) solicit or endeavor to entice away from Group, the Company
		or any of their respective subsidiaries, or otherwise interfere with the
		business relationship of Group, the Company or any of their respective
		subsidiaries with, any person or entity who is, or was within the then most
		recent 36-month period, a customer, client or prospect of Group, the Company or
		any of their respective subsidiaries. The obligations of this Section 6.1 shall
		apply for 18 months, or a period of 24 months if, as of termination of the
		employment of the Executive, more than a majority of the Common Stock of Group
		is then owned by the current shareholders of Group, after termination of
		employment of the Executive as well as during employment and shall be extended
		by a period of time equal to any period during which the Executive shall be in
		breach of such obligations.
	 

	 
		6.2. Confidentiality.
		The Executive covenants and agrees with the Company that he will not at any
		time, except in performance of his obligations to the Company hereunder or with
		the prior written consent of the Company, directly or indirectly, disclose any
		secret or confidential information that he may learn or has learned by reason
		of his association with Group, the Company or any of their respective
		subsidiaries and affiliates. The term “confidential information”
		includes information not previously disclosed to the public or to the trade by
		the Company’s or Group’s management, or otherwise in the public
		domain, with respect to the Company’s or Group’s or any of their
		respective affiliates’ or subsidiaries’ products, services,
		facilities, applications and methods, trade secrets and other intellectual
		property, systems, procedures, manuals, confidential reports, product or
		service price lists, customer lists, technical information, financial
		information (including the revenues, costs or profits associated with any of
		the Company’s or Group’s products), business plans, prospects or
		opportunities.
	 

	 
		 
	 

	 
		 
	 

	 
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		6.3. Exclusive Property. The Executive confirms that all confidential
		information is and shall remain the exclusive property of Group and the
		Company. All business records, papers and documents kept or made by the
		Executive relating to the business of Group, the Company or their respective
		subsidiaries shall be and remain the property of Group and the Company.
	 

	 
		6.4. Injunctive Relief. Without intending to limit the remedies available to
		Group and the Company, the Executive acknowledges that a breach of any of the
		covenants contained in this Section 6 may result in material and irreparable
		injury to Group, the Company or their respective affiliates or subsidiaries for
		which there is no adequate remedy at law, that it will not be possible to
		measure damages for such injuries precisely and that, in the event of such a
		breach or threat thereof, Group and the Company shall be entitled to obtain a
		temporary restraining order and/or a preliminary or permanent injunction
		restraining the Executive from engaging in activities prohibited by this
		Section 6 or such other relief as may be required specifically to enforce any
		of the covenants in this Section 6. If for any reason a final decision of any
		court determines that the restrictions under this Section 6 are not reasonable
		or that consideration therefor is inadequate, such restrictions shall be
		interpreted, modified or rewritten by such court to include as much of the
		duration and scope identified in this Section 6 as will render such
		restrictions valid and enforceable.
	 

	 
		7. GUARANTEES
	 

	 
		7.1. Indemnification.
		In addition to any right to indemnification as provided in the By Laws or
		Certificate of Incorporation of the Group and/or Company, Group, the Company
		and each of their subsidiaries, jointly and severally, shall indemnify the
		Executive and his spouse, heirs, estate, executors and administrators
		(collectively, the “Indemnitees”) and hold such 
	 

	 
		 
	 

	 
		 
	 

	 
		15
	 

	 
		 
	 

	 

	 
	 

	 
	 
		Indemnitees harmless from and against, and
		pay and reimburse the Indemnitees for, any and all demands, payments, claims,
		actions, losses, damages, liabilities, obligations, fines, taxes, deficiencies,
		costs and expenses (including reasonable attorneys’ fees), whether or not
		resulting from third-party claims, including interest and penalties with
		respect thereto, asserted against or incurred or sustained by an Indemnitee in
		connection with or arising out of any personal guaranty or undertaking by the
		Executive of any obligation of Group, the Company or any of their subsidiaries
		(collectively a “Guaranty”).
	 

	 
		7.2. Future Subsidiaries. In the event, Group, the Company or any of their
		subsidiaries acquires or forms a subsidiary after the date hereof, Group and
		the Company shall cause such newly acquired or formed subsidiary to execute and
		deliver a supplement to this Amendment, which supplement shall provide that
		such newly acquired or formed subsidiary will indemnify the Indemnitees in
		accordance with Section 7.1 hereof.
	 

	 
		8. [intentionally deleted]
	 

	 
		9. MISCELLANEOUS
	 

	 
		9.1. Notices. All
		notices or communications hereunder shall be in writing, addressed as
		follows:
	 

	 
		To the Company or Group, to it at:
	 

	 
		Atlantic Express Transportation Corp.

	 

	 
		7 North Street
	 

	 
		Staten Island, NY 10302
	 

	 
		Attention: Corporate Secretary
	 

	 
		with a copy to each of:
	 

	 
		 
	 

	 
		 
	 

	 
		16
	 

	 
		 
	 

	 

	 
	 

	 
	 
		GSCP III Holdings (AE), LLC
	 

	 
		c/o Greenwich Street Capital Partners,
		Inc.
	 

	 
		500 Campus Drive, Suite 220
	 

	 
		Florham Park, NJ 07932
	 

	 
		Fax: (973) 593-5454
	 

	 
		Attention: Matthew Kaufman
	 

	 
		To the Executive:
	 

	 
		Domenic Gatto
	 

	 
		136 Monmouth Road
	 

	 
		Monmouth Township, NJ 08831
	 

	 
		Fax: (732) 251-5519
	 

	 
		with a copy to:
	 

	 
		Silverman Sclar Shin & Byrne PLLC

	 

	 
		381 Park Avenue South, Suite 1601
	 

	 
		New York, NY 10016
	 

	 
		Fax: (212) 779-8858
	 

	 
		Attention: Peter R. Silverman
	 

	 
		Any such notice or communication shall be
		sent certified or registered mail, return receipt requested, or by facsimile,
		addressed as above (or to such other address as such party may designate in
		writing from time to time), and the actual date of receipt shall determine the
		time at which notice was given.
	 

	 
		9.2. Severability. If
		a court of competent jurisdiction determines that any term or provision hereof
		is invalid or unenforceable, (a) the remaining terms and provisions hereof
		shall be unimpaired and (b) such court shall have the authority to replace such
		invalid or unenforceable term or provision with a term or provision that is
		valid and enforceable and that comes closest to expressing the intention of the
		invalid or unenforceable term or provision.
	 

	 
		9.3. Assignment. This
		Agreement shall inure to the benefit of the heirs and representatives of the
		Executive and the assigns and successors of the Company, but neither this
		Agreement nor any rights hereunder shall be assignable or otherwise subject to
		hypothecation by 
	 

	 
		 
	 

	 
		 
	 

	 
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		the Executive. Each of Group and the Company
		may assign this Agreement without prior written approval of the Executive upon
		the transfer of all or substantially all of its business and/or assets (whether
		by purchase, merger, consolidation or otherwise), provided that the successor
		to such business and/or assets shall expressly assume and agree to perform this
		Agreement.
	 

	 
		9.4. Entire Agreement; Amendment. This Agreement represents the entire agreement of the
		parties with respect to the subject matter hereof and shall supersede any and
		all previous contracts, arrangements or understandings between or among Group,
		the Company and the Executive, including the Prior Agreement. The Agreement may
		be amended at any time by mutual written agreement of the parties
		hereto.
	 

	 
		9.5. Withholding. The
		Company shall be entitled to withhold, or cause to be withheld, from payment
		any amount of withholding taxes required by law with respect to payments made
		to the Executive in connection with his employment hereunder.
	 

	 
		9.6. Governing Law.
		This Agreement shall be construed, interpreted, and governed in accordance with
		the laws of the State of New York without reference to principles of conflict
		of laws.
	 

	 
		9.7. Survival.
		Articles 4 (relating to early termination), 5 (relating to Permanent
		Disability) and 6 (relating to noncompetition, nonsolicitation and
		confidentiality) and Section 8.6 (relating to governing law) shall survive the
		termination hereof, whether such termination shall be by expiration of the
		Employment Term or an early termination pursuant to Sections 4 or 5
		hereof.
	 

	 
		9.8. Headings.
		Headings to sections in this Agreement are for the convenience of the parties
		only and are not intended to be a part of or to affect the meaning or
		interpretation hereof.
	 

	 
		 
	 

	 
		 
	 

	 
		18
	 

	 
		 
	 

	 

	 
	 

	 
	 
		9.9. Counterparts.
		This Agreement may be executed in counterparts, each of which shall be deemed
		an original but all of which together shall constitute one and the same
		instrument. 
	 

	 
		[signature page follows]
	 

	 
		 
	 

	 
		 
	 

	 
		19
	 

	 
		 
	 

	 

	 
	 

	 
	 
		IN WITNESS WHEREOF, the Company and Group
		have caused this Agreement to be duly executed by their authorized
		representatives and the Executive has hereunto set his hand, in each case
		effective as of the day and year first above written.
	 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  ATLANTIC EXPRESS
				

				
				  TRANSPORTATION GROUP INC.
				

			 
	
				
				   
				

			 	
				
				

			 	
				
				   
				

			 	
				
				  By:
				

			 	
				
				  
 /s/ Peter Frank
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name: Peter Frank
				

				
				  Title: Chairman of the Board of
				  Directors
				

			 

 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  ATLANTIC EXPRESS
				

				
				  TRANSPORTATION CORP.
				

			 
	
				
				   
				

			 	
				
				

			 	
				
				   
				

			 	
				
				  By:
				

			 	
				
				  
 /s/ Peter Frank
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name: Peter Frank
				

				
				  Title: Chairman of the Board of
				  Directors
				

			 

 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  EXECUTIVE:
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				

			 	
				
				   
				

			 	
				
				  /s/ Domenic Gatto
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Domenic Gatto
				

			 

 

	 
		 
	 

	 
		 
	 

	 
		20Exhibit 10.2
	 

	 
		EXECUTION
	 

	 
		FIFTH AMENDED AND RESTATED
	 

	 
		EMPLOYMENT AGREEMENT
	 

	 
		FIFTH AMENDED AND RESTATED EMPLOYMENT
		AGREEMENT dated as of April 18, 2007 (the “Agreement”)
		among Atlantic Express Transportation Group Inc., a New York corporation
		(“Group”), Atlantic Express Transportation Corp., a New
		York corporation (the “Company”),
		and Nathan Schlenker (the “Executive”).
	 

	 
		WHEREAS, the Executive is presently employed
		by the Company, a wholly owned subsidiary of Group, under the Fourth Amended
		and Restated Employment Agreement dated as of October 25, 2004, as amended (the
		“Prior Agreement”);
	 

	 
		WHEREAS, the Company desires to secure the
		continued services of the Executive, and the Executive desires to continue in
		the employment of the Company and, in connection therewith, the Company, Group
		and the Executive desire to amend and restate the terms and provisions of the
		Prior Agreement to, among other things, set forth the terms of such continued
		employment.
	 

	 
		NOW, THEREFORE, in consideration of the
		foregoing and the respective covenants and agreements hereinafter set forth and
		for other good and valuable consideration, the Company, Group and the Executive
		hereby agree to amend and restate the Prior Agreement in its entirety, as
		follows:
	 

	 
		1. EMPLOYMENT AND DUTIES
	 

	 
		1.1. General. The
		Company hereby employs the Executive, and the Executive agrees to serve, as
		Chief Financial Officer of the Company, upon the terms and conditions herein
		contained during the Employment Term (as defined below), and in such capacity
		the Executive agrees to serve the Company faithfully and to the best of his
		ability under the direction of the Board of Directors (the
		“Board”). 
	 

	 
		1.2. Exclusive Services. During the Employment Term, the Executive shall devote
		his full-time working hours to his duties hereunder and shall not, directly or
		indirectly, render services to any other person or organization or otherwise
		engage in activities which would interfere significantly with his faithful
		performance of his duties hereunder without the consent of the Board, provided,
		however, the Executive may work one day a week from his home office in Palaline
		Bridge, New York. 
	 

	 
		1.3. Term of Employment. The “Employment Term” of Executive’s employment under this
		Agreement shall commence as of the date hereof (the “Commencement
		Date”) and shall terminate on
		December 31, 2008, subject to renewal in accordance with Section 1.4.
	 

	 
		 
	 

	 
		 
	 

	 

	 
	 

	 
	 
		1.4. Renewal of Employment Term. Unless the Company has provided the Executive with a
		written notice at least sixty days prior to December 31, 2008 of its intent not
		to extend the Employment Term (the “Termination Notice”), the
		Employment Term shall be renewed and extended automatically for a further
		period of one year on January 1, 2009, and such extended term shall thereafter
		be further extended for successive one year periods unless a Termination Notice
		is given to the Executive at least sixty days prior to the next successive
		December 31.
	 

	 
		1.5 Consulting Services. Upon expiration and non-renewal of the Employment
		Term, the Company shall retain the Executive for a period of six months (the
		“Consulting Term”) as a consultant. During the Consulting Term, the
		Executive shall provide such consulting services, at such times as may be
		reasonably be requested by the Company; provided, that the Executive may do so
		primarily through telephone contact with the Company and shall not be required
		to travel from his residence to perform such services or to provide services in
		excess of 10 hours per month. During the Consulting Term, the Executive shall
		be entitled to six months of his Base Salary (the “Consulting Compensation”), payable on the same terms as in effect at the
		end of the Employment Term. The Company shall not have any obligation to retain
		the Executive as a consultant if the Executive’s employment is terminated
		(i) by the Company for Cause, or (ii) by the Executive without Good Reason. In
		the event of termination of the Executive’s employment or of the
		Consulting Term due to death of the Executive, the Executive’s estate
		shall be entitled to receive any unpaid portion of the Consulting Compensation
		payable in a lump sum upon such termination.
	 

	 
		2. SALARY
	 

	 
		2.1. Base Salary.
		From the Commencement Date, the Executive shall be entitled to receive a base
		salary (“Base
		Salary”) at a rate of $345,909 per
		annum, payable monthly on or about the 15th day of each month in equal
		installments in accordance with the Company’s payroll practices, with such
		increases as may be provided in accordance with the terms hereof. Once
		increased, such higher amount shall constitute the Executive’s annual Base
		Salary.
	 

	 
		2.2 Increase in Base Salary. On November 1 of each year during the Employment Term,
		the Executive’s Base Salary shall be increased by a percentage which shall
		equal the greater of 3% or the percentage increase in the consumer price index
		for the New York-Northern New Jersey-Long Island, NY-NJ-CT metropolitan area,
		as reported by the United States Department of Labor, for the 12-month period
		ended the immediately preceding October 31.
	 

	 
		2.3 Annual Bonus.
		(a) The Executive shall be paid a bonus (an “Annual Bonus”) equal to 15% of his Base Salary for each fiscal
		year during the Employment Term, commencing with the fiscal year ending June
		30, 2008, in which the Company’s consolidated actual Adjusted EBITDA
		exceeds by 10% or more the Company’s consolidated Adjusted EBITDA
		projected by management (which projection has been accepted by the Board) for
		such fiscal year; provided, in the
		event the actual Adjusted EBITDA exceeds the projected Adjusted EBITDA by 15%
		or more, the Annual Bonus amount shall equal 25% of the Base Salary. In the
		event, the Executive’s employment is terminated for any reason after June
		30, 2007, other than by the
	 

	 
		 
	 

	 
		 
	 

	 
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		Executive without Good Reason or by the
		Company for Cause, in addition to any accrued but unpaid Annual Bonus, the
		Executive shall be entitled to a pro rata portion of the Annual Bonus, if any,
		for the fiscal year in which such termination occurs, in an amount equal to the
		Annual Bonus which would have been applicable as determined following the end
		of such fiscal year, multiplied by a fraction, the numerator of which shall be
		the number of days elapsed during such fiscal year through the date of such
		termination and denominator of which shall be 365 days. The Annual Bonus shall
		be paid on or before 105 days following the end of the applicable fiscal
		year.
	 

	 
		(b) “Adjusted EBITDA” shall mean operating income, (i) plus
		depreciation and amortization, (ii) less the amount by which the actual Capital
		Expenditure relating to the projected EBITDA exceeds Capital Expenditures
		projected by management (which has been accepted by the Board) for the
		applicable fiscal year, and (iii) excluding any extraordinary or nonrecurring
		expenses or gains.
	 

	 
		(c) “Capital Expenditure” shall mean expenditures for fixed or capital
		assets or improvements or replacements thereof, which have a useful life of
		more than one year, whether financed by cash, capital leases, purchase money
		mortgages or other incurrence of debt.
	 

	 
		2.4 Exit Bonus. (a)
		Upon the occurrence of a Change of Control at any time during or after the
		termination of the Executive’s employment, the Company shall pay to the
		Executive a bonus (“Exit
		Bonus”) which shall be equal to
		the Fair Market Value (as of the date of such Change of Control) of 0.5% of all
		of the Company’s outstanding common stock (on a fully diluted basis)
		immediately preceding such Change of Control (such percentage being referred to
		herein as the “Base
		Amount”); provided, the Base
		Amount shall be increased to 1.0% in the event that the transaction resulting
		in the Change of Control is based upon an aggregate Fair Market Value of all of
		the Company’s outstanding common stock (on a fully diluted basis) equal to
		or in excess of $50,000,000 and 1.5% in the event such Fair Market Value is
		equal to or exceeds $70,000,000; further, provided, the Exit Bonus to be paid
		to the Executive upon a Change of Control shall be reduced by an amount equal
		to (i) the Fair Market Value of all of the Company’s outstanding common
		stock as of the date of such Change of Control, multiplied by (ii) a fraction,
		the numerator of which shall be the aggregate number of Group Common Shares (as
		defined below) sold, transferred or otherwise disposed of by GSC Group (as
		defined below) prior to such Change of Control and the denominator of which
		shall be 107,593, multiplied by (iii) the applicable Base Amount as determined
		in accordance with this Section 2.4(a) as of the date of such Change of
		Control. Except as provided in Section 2.4(b), the Exit Bonus shall be payable
		in the same form of consideration and at the same time as received by the
		shareholders of either Group or the Company upon such Change of Control.
		
	 

	 
		(b) In the event the Company or Group during
		the Employment Term and prior to a Change of Control, shall adopt a stock
		option or restricted stock purchase or similar plan, the Executive within
		thirty (30) days following written notice of the adoption of such a plan, shall
		have the right, by delivery of written notice to the Company, to participate in
		such plan and to receive such number of shares or options, in substitution and
		in place of the Exit Bonus, as would be equivalent to the Base Amount as of the
		date of such participation in such plan by the Executive.
	 

	 
		 
	 

	 
		 
	 

	 
		3
	 

	 
		 
	 

	 

	 
	 

	 
	 
		(c) In the event prior to the occurrence of
		a Change of Control, GSCP II Holdings (AE), LLC or any of its affiliates
		(collectively, the “GSC
		Group”) sells, transfers or
		otherwise disposes of any of the shares (the “Group Common Shares”) of common stock of Group it beneficially owns as
		of the date hereof and excluding any shares of common stock of Group the GSC
		Group may acquire after the date hereof (a “Disposition Event”), the Executive shall be entitled to a portion of
		his Exit Bonus equal to (i) the Fair Market Value of all of the Company’s
		outstanding common (on a fully diluted basis) as of the date of such
		Disposition Event, multiplied by (ii) a fraction, the numerator of which shall
		be the number of Group Common Shares sold, transferred or otherwise disposed of
		in such transaction and the denominator of which shall be 107,593, multiplied
		by (iii) the applicable Base Amount as determined in accordance with Section
		2.4(a) as of the date of such Disposition Event. Except as provided in Section
		2.4(b), the portion of the Exit Bonus payable upon a Disposition Event shall be
		payable in the same form of consideration and at the same time as received by
		the GSC Group upon such Disposition Event.
	 

	 
		2.5 Definitions. (a)
		Change of Control shall mean (i) the transfer (in one transaction or a
		series of transactions) of all or substantially all of the assets of Group or
		the Company to any person or group (as such term is used in Section 13(d)(3) of
		the Securities Exchange Act of 1934, as amended (the “Exchange Act”)); (ii) the liquidation or dissolution of Group
		or the Company or the adoption of a plan by the stockholders of Group or the
		Company relating to the dissolution or liquidation of either Group or the
		Company; or (iii) the acquisition by any person or group (as such term is used
		in Section 13(d)(3) of the Exchange Act), except for by the GSCP Group of
		beneficial ownership, directly or indirectly, of more than 50% of the aggregate
		ordinary voting power of Group or the Company; 
	 

	 
		(b) Fair Market Value of the Company’s common stock shall mean the value
		of the Company’s common stock as specified in accordance with any
		transaction resulting in a Change of Control or Disposition Event, as the case
		may be, or if no specific value is specified in such transaction, the value of
		the Company’s common stock as reasonably determined by the Board
		(provided, in the event the Executive disagrees with the value
		determined by the Board, as determined by a nationally recognized independent
		investment banking or accounting firm reasonably acceptable to the Company and
		the Executive), in either case without control premiums or minority discounts.
		
	 

	 
		3. EMPLOYEE BENEFITS
	 

	 
		3.1. General Benefits. The Executive shall receive the following benefits
		during the Employment Term: 
	 

	 
		(a) the Executive will be eligible to
		participate in benefit programs of the Company consistent with those benefit
		programs provided from time to time to other senior executives of the
		Company;
	 

	 
		(b) an annual life insurance premium
		allowance of $2,500 payable annually in February of each year;
	 

	 
		 
	 

	 
		 
	 

	 
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		(c) an
		automobile allowance of $250 per month and the exclusive use of a company
		car;
	 

	 
		(d) a travel allowance not to exceed $15,000 annually;
		and
	 

	 
		(e)  participation in any executive
		incentive plan which might be implemented by the Board during the Employment
		Term.
	 

	 
		3.2. Vacation. During
		the Employment Term, the Executive shall be entitled to 20 days paid vacation
		each year in accordance with the applicable policies of the Company. 
	 

	 
		3.3. Reimbursement of Expenses. The Company will reimburse the Executive for
		reasonable, ordinary and necessary business expenses incurred by him in the
		fulfillment of his duties hereunder upon presentation by the Executive of an
		itemized account of such expenditures in accordance with the Company practices
		consistently applied. 
	 

	 
		3.4. Consulting Term Benefits. During the Consulting Term, the Company shall provide,
		without charge, the Executive with medical coverage under the same terms as
		medical coverage offered to other senior executives of the Company.
	 

	 
		3.5. Benefits upon Termination. Upon the termination of the Executive’s
		employment and the Consulting Term, the Company shall provide, without charge,
		the Executive with eighteen (18) months of medical coverage under the same
		terms as medical coverage offered to other senior executives of the
		Company.
	 

	 
		3.6. Severance Pay.
		(a) Upon termination of the Executive’s employment for any reason
		(including, without limitation, upon non-renewal of the Employment Term), other
		than (i) by the Company for Cause, (ii) due to death or Permanent Disability of
		the Executive or (iii) by the Executive without Good Reason, the Executive
		shall be entitled to receive an amount equal to his six months of his Base
		Salary (the “Severance
		Pay”), payable commencing upon the
		expiration of the Consulting Term on the same terms as in effect at the end of
		the Consulting Term; provided, the Severance Pay shall be paid to the
		Executive’s estate in a lump sum payment in the event of the
		Executive’s death during the Consulting Term.
	 

	 
		(b) Release by Executive. As a condition to receipt of the Severance Pay, the
		Executive shall deliver a release (the “Release”)
		to the Company and the Group, in a form reasonably requested by the Company,
		releasing and discharging on behalf of the Executive, his heirs,
		administrators, executors, agents, or employees, the Company, Group and all
		other affiliates, divisions, subsidiaries and each of their predecessors,
		successors, assigns, agents, directors, officers, employees, representatives,
		attorneys, and all persons acting by, through, under or in concert with any of
		them (collectively, the “Releasee”)
		from any and all charges, claims, demands, judgments, actions, causes of
		action, damages, expenses, costs, attorneys’ fees, and liabilities of any
		kind whatsoever, whether known or unknown, vested or contingent, in law, equity
		or otherwise, which the Executive ever had, then has, or may hereafter have
		against a Releasee for or on account of any matter, cause or thing whatsoever
		which has occurred at any 
	 

	 
		 
	 

	 
		 
	 

	 
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		time up to the date of the Release, but
		excluding any liabilities or obligations of a the Company or Group set forth in
		this Agreement to the extent such liabilities or obligations survive the
		termination of the Executive’s employment, and excluding any liabilities
		or obligations of a Releasee arising out of any indemnity agreement in the
		Executive’s favor whether contained in such Releasee’s articles of
		incorporation, bylaws, corporate resolutions or in any employment agreement or
		arising by operation of law.
	 

	 
		(c) Definitions. (i)
		Termination for “Cause”
		shall mean termination by the Company of the Executive’s employment
		because the Executive (A) admits to, has been convicted of or has entered into
		a plea of nolo
		contendere to a crime punishable by
		imprisonment for more that one year, (B) has failed to perform in all material
		respects the normal and customary duties required of his position of
		employment, following a written warning specifying such deficiency and
		affording the Executive a reasonable period to cure such failure; or (C) has
		been disloyal to Group, the Company or any of their respective affiliates by
		assisting transportation competitors of Group, the Company or any of their
		respective affiliates to the disadvantage of Group, the Company or any of their
		respective affiliates by a breach of Section 6 or by otherwise actively
		assisting such competitors to the disadvantage of Group, the Company or any of
		their respective affiliates.
	 

	 
		(ii) Termination “Without Cause” shall mean any termination by the Company of the
		Executive’s employment at any time during the Employment Term for any
		reason other than Cause, death or Permanent Disability.
	 

	 
		(iii) Termination by Executive for
		“Good Reason” shall mean termination by the Executive because
		of (A) a material reduction in the nature or scope of Executive’s position
		as Chief Financial Officer or his authorities, powers, duties, or
		responsibilities in such capacity; or (B) a material breach by the Company of
		its affirmative or negative covenants or undertakings hereunder and such breach
		shall not be remedied within fifteen (15) days after notice to Company thereof
		(which notice shall be signed by Executive and refer to a specific breach of
		this Agreement).
	 

	 
		(iv) Termination due to Permanent Disability shall mean termination by the Company due to the
		failure of the Executive because of illness, physical or mental disability or
		other incapacity, for a period of six consecutive months, or for shorter
		periods aggregating six months during any twelve-month period, to render the
		services provided for by this Agreement. The determination of the
		Executive’s Permanent Disability shall be made by an independent physician
		who is reasonably acceptable to the Executive and the Company and shall be
		final and binding and shall be based on such competent medical evidence as
		shall be presented to it by the Executive or by any physician or group of
		physicians or other competent medical experts employed by the Executive and/or
		the Company to advise such independent physician.
	 

	 
		4. [intentionally deleted]
	 

	 
		5. [intentionally deleted]
	 

	 
		 
	 

	 
		 
	 

	 
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		6. NON COMPETITION/NON SOLICITATION AND
		CONFIDENTIALITY
	 

	 
		6.1. Noncompetition/Nonsolicitation. The Executive shall not, directly or indirectly, as a
		sole proprietor, member of a partnership, stockholder or investor, officer or
		director of a corporation, or as an employee, associate, consultant or agent of
		any person, partnership, corporation or other business organization or entity
		other than the Company: (a) engage in, or acquire an interest in any entity or
		enterprise which engages in, any business that is in competition with any
		business actively conducted by Group, the Company or any of their respective
		subsidiaries within (i) the counties then served by Group, the Company or their
		respective subsidiaries as well as adjacent counties, and (ii) any other
		counties in which Group, the Company or their respective subsidiaries has made
		a bid within 36 months prior to the Executive’s termination and any
		adjacent counties in which Group, the Company or their respective subsidiaries
		conducts business; (b) solicit or endeavor to entice away from Group, the
		Company or any of their respective subsidiaries any person who is, or was
		during the then most recent 36-month period, employed by or associated with
		Group, the Company or any of their respective subsidiaries, or (c) solicit or
		endeavor to entice away from Group, the Company or any of their respective
		subsidiaries, or otherwise interfere with the business relationship of Group,
		the Company or any of their respective subsidiaries with, any person or entity
		who is, or was within the then most recent 36-month period, a customer, client
		or prospect of Group, the Company or any of their respective subsidiaries. The
		obligations of this Section 6.1 shall apply for 18 months, or a period of 24
		months if, as of termination of the employment of the Executive, more than a
		majority of the Common Stock of Group is then owned by the current shareholders
		of Group, after termination of employment of the Executive as well as during
		employment and shall be extended by a period of time equal to any period during
		which the Executive shall be in breach of such obligations.
	 

	 
		6.2. Confidentiality.
		The Executive covenants and agrees with the Company that he will not at any
		time, except in performance of his obligations to the Company hereunder or with
		the prior written consent of the Company, directly or indirectly, disclose any
		secret or confidential information that he may learn or has learned by reason
		of his association with Group, the Company or any of their respective
		subsidiaries and affiliates. The term “confidential information”
		includes information not previously disclosed to the public or to the trade by
		the Company’s or Group’s management, or otherwise in the public
		domain, with respect to the Company’s or Group’s or any of their
		respective affiliates’ or subsidiaries’ products, services,
		facilities, applications and methods, trade secrets and other intellectual
		property, systems, procedures, manuals, confidential reports, product or
		service price lists, customer lists, technical information, financial
		information (including the revenues, costs or profits associated with any of
		the Company’s or Group’s products), business plans, prospects or
		opportunities.
	 

	 
		6.3. Exclusive Property. The Executive confirms that all confidential
		information is and shall remain the exclusive property of Group and the
		Company. All business records, papers and documents kept or made by the
		Executive relating to the business of Group, the Company or their respective
		subsidiaries shall be and remain the property of Group and the Company.
	 

	 
		6.4. Injunctive Relief. Without intending to limit the remedies available to
		Group and the Company, the Executive acknowledges that a breach of any of the
		covenants contained 
	 

	 
		 
	 

	 
		 
	 

	 
		7
	 

	 
		 
	 

	 

	 
	 

	 
	 
		in this Section 6 may result in material and
		irreparable injury to Group, the Company or their respective affiliates or
		subsidiaries for which there is no adequate remedy at law, that it will not be
		possible to measure damages for such injuries precisely and that, in the event
		of such a breach or threat thereof, Group and the Company shall be entitled to
		obtain a temporary restraining order and/or a preliminary or permanent
		injunction restraining the Executive from engaging in activities prohibited by
		this Section 6 or such other relief as may be required specifically to enforce
		any of the covenants in this Section 6. If for any reason a final decision of
		any court determines that the restrictions under this Section 6 are not
		reasonable or that consideration therefor is inadequate, such restrictions
		shall be interpreted, modified or rewritten by such court to include as much of
		the duration and scope identified in this Section 6 as will render such
		restrictions valid and enforceable.
	 

	 
		7. GUARANTEES
	 

	 
		7.1. Indemnification.
		Group, the Company and each of their subsidiaries, jointly and severally, shall
		indemnify the Executive and his spouse, heirs, estate, executors and
		administrators (collectively, the “Indemnitees”) and hold such Indemnitees harmless from and
		against, and pay and reimburse the Indemnitees for, any and all demands,
		payments, claims, actions, losses, damages, liabilities, obligations, fines,
		taxes, deficiencies, costs and expenses (including reasonable attorneys’
		fees), whether or not resulting from third-party claims, including interest and
		penalties with respect thereto, asserted against or incurred or sustained by an
		Indemnitee in connection with or arising out of any personal guaranty or
		undertaking by the Executive of any obligation of Group, the Company or any of
		their subsidiaries (collectively a “Guaranty”).
	 

	 
		7.2. Future Subsidiaries. In the event, Group, the Company or any of their
		subsidiaries acquires or forms a subsidiary after the date hereof, Group and
		the Company shall cause such newly acquired or formed subsidiary to execute and
		deliver a supplement to this Amendment, which supplement shall provide that
		such newly acquired or formed subsidiary will indemnify the Indemnitees in
		accordance with Section 7.1 hereof.
	 

	 
		8. MISCELLANEOUS
	 

	 
		8.1. Notices. All
		notices or communications hereunder shall be in writing, addressed as
		follows:
	 

	 
		To the Company or Group, to it at:
	 

	 
		Atlantic Express Transportation Corp.

	 

	 
		7 North Street
	 

	 
		Staten Island, NY 10302
	 

	 
		Attention: Corporate Secretary
	 

	 
		with a copy to:
	 

	 
		 
	 

	 
		 
	 

	 
		8
	 

	 
		 
	 

	 

	 
	 

	 
	 
		GSCP III Holdings (AE), LLC
	 

	 
		c/o Greenwich Street Capital Partners,
		Inc.
	 

	 
		500 Campus Drive, Suite 220
	 

	 
		Florham Park, NJ 07932
	 

	 
		Fax: (973) 593-5454
	 

	 
		Attention: Matthew Kaufman
	 

	 
		and:
	 

	 
		To the Executive:
	 

	 
		Nathan Schlenker
	 

	 
		347 Horning Road
	 

	 
		Palatine Bridge, NY 13428
	 

	 
		Fax: (518) 673-5071
	 

	 
		Any such notice or communication shall be
		sent certified or registered mail, return receipt requested, or by facsimile,
		addressed as above (or to such other address as such party may designate in
		writing from time to time), and the actual date of receipt shall determine the
		time at which notice was given.
	 

	 
		8.2. Severability. If
		a court of competent jurisdiction determines that any term or provision hereof
		is invalid or unenforceable, (a) the remaining terms and provisions hereof
		shall be unimpaired and (b) such court shall have the authority to replace such
		invalid or unenforceable term or provision with a term or provision that is
		valid and enforceable and that comes closest to expressing the intention of the
		invalid or unenforceable term or provision.
	 

	 
		8.3. Assignment. This
		Agreement shall inure to the benefit of the heirs and representatives of the
		Executive and the assigns and successors of the Company, but neither this
		Agreement nor any rights hereunder shall be assignable or otherwise subject to
		hypothecation by the Executive. Each of Group and the Company may assign this
		Agreement without prior written approval of the Executive upon the transfer of
		all or substantially all of its business and/or assets (whether by purchase,
		merger, consolidation or otherwise), provided that the successor to such
		business and/or assets shall expressly assume and agree to perform this
		Agreement.
	 

	 
		8.4. Entire Agreement; Amendment. This Agreement represents the entire agreement of the
		parties with respect to the subject matter hereof and shall supersede any and
		all previous contracts, arrangements or understandings between or among Group,
		the Company and the Executive, including the Prior Agreement. The Agreement may
		be amended at any time by mutual written agreement of the parties
		hereto.
	 

	 
		8.5. Withholding. The
		Company shall be entitled to withhold, or cause to be withheld, from payment
		any amount of withholding taxes required by law with respect to payments made
		to the Executive in connection with his employment hereunder.
	 

	 
		 
	 

	 
		 
	 

	 
		9
	 

	 
		 
	 

	 

	 
	 

	 
	 
		8.6. Governing Law.
		This Agreement shall be construed, interpreted, and governed in accordance with
		the laws of the State of New York without reference to principles of conflict
		of laws.
	 

	 
		8.7. Survival.
		Section 2.3 (relating to Annual Bonus), Section 2.4 (relating to Exit Bonus),
		Article 6 (relating to noncompetition, nonsolicitation and confidentiality) and
		Section 8.6 (relating to governing law) shall survive the termination
		hereof.
	 

	 
		8.8. Headings.
		Headings to sections in this Agreement are for the convenience of the parties
		only and are not intended to be a part of or to affect the meaning or
		interpretation hereof.
	 

	 
		8.9. Counterparts.
		This Agreement may be executed in counterparts, each of which shall be deemed
		an original but all of which together shall constitute one and the same
		instrument. 
	 

	 
		[signature page follows]
	 

	 
		 
	 

	 
		 
	 

	 
		10
	 

	 
		 
	 

	 

	 
	 

	 

	 
		IN WITNESS WHEREOF, the Company and Group
		have caused this Agreement to be duly executed by their authorized
		representatives and the Executive has hereunto set his hand, in each case
		effective as of the day and year first above written.
	 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  ATLANTIC EXPRESS

				  TRANSPORTATION GROUP INC.
				

			 
	
				
				

			 	
				
				   
				

			 	
				
				  By: 
				

			 	
				
				  
 /s/ Peter Frank
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name: Peter Frank
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Title: Chairman of the Board of
				  Directors
				

			 

 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  ATLANTIC EXPRESS

				  TRANSPORTATION CORP.
				

			 
	
				
				

			 	
				
				   
				

			 	
				
				  By: 
				

			 	
				
				  
 /s/ Peter Frank
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name: Peter Frank
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Title: Chairman of the Board of
				  Directors
				

			 

 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  EXECUTIVE:
				

			 
	
				
				

			 	
				
				   
				

			 	
				
				  
 /s/ Nathan Schlenker
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Nathan Schlenker
				

			 

 

	 
		 
	 

	 
		 
	 

	 
		11

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