1035423--9/26/2008--ATLANTIC_EXPRESS_TRANSPORTATION

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{debt, indebtedness, cash}

{cost, regulation, environmental}

{investment, property, distribution}

{regulation, government, change}

{loan, real, estate}

{loss, insurance, financial}

{cost, operation, labor}

{stock, price, share}

{stock, price, operating}

{cost, contract, operation}

{capital, credit, financial}

{personnel, key, retain}

{control, financial, internal}

Risk Factors Relating to Our Business Our business is dependent upon school bus transportation contracts with school districts, which contracts may not be renewed or rebid. Our bankruptcy reorganizations could harm our business, financial condition and results of operations. We may be adversely affected by rising insurance costs. Fluctuations in the cost of fuel could adversely affect our business. We may not be able to maintain letters of credit or performance bonds required by our transportation contracts. Some of our transportation contracts may be terminated or services to be provided reduced due to factors beyond our control. Our fixed contract rates may not be sufficient to absorb future cost increases. We may incur additional labor costs due to labor unions and collective bargaining agreements. We may be adversely affected by a shortage of qualified drivers and possible resulting increase in labor costs. We may be adversely affected by environmental requirements. We may be adversely affected by current and new governmental laws and regulations. We have significant capital expenditure requirements. We depend on management and key personnel. The interests of our significant shareholders may be different than your interests. We may be adversely affected by substantial competition in the school bus transportation industry and increased consolidation within the industry. Our business is subject to seasonality and fluctuations in quarterly operating results. Risk Factors Relating to the Notes Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes. Restrictive covenants in our Amended and Restated Credit Facility, the indenture governing the notes and our other current and future indebtedness could adversely restrict our operating flexibility. Despite current indebtedness levels and restrictive covenants, we may still be able to incur substantial additional debt, which could exacerbate the risks described above. To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. We have a history of net losses and may incur additional losses in the future. We may not have access to the cash flow and other assets of our subsidiaries that may be needed to make payments on the notes. The value of the collateral securing the notes may not be sufficient to satisfy our and our subsidiaries obligations under the notes. Holders of the notes will not control decisions regarding the second lien collateral. The sale of assets constituting collateral securing the notes may be used to repay our obligations on our Amended and Restated Credit Facility. The collateral securing the notes may be reduced or diluted under certain circumstances, including the issuance of additional notes. Rights of holders of the notes in the collateral may be adversely affected by the failure to perfect security interests in certain collateral acquired in the future. Holders of the notes may not have a perfected security interest in the motor vehicle or the real property portion of the collateral. Because the collateral includes real property, holders of the notes may be liable under limited circumstances for environmental claims related to the real property. Third party claims may significantly diminish the value of our real property collateral. The notes and the note guarantees and the granting of the collateral securing the note guarantees may be voidable, subordinated or limited in scope under laws governing fraudulent transfers and insolvency. Our ability to purchase the notes upon a change of control may be limited. The collateral is subject to casualty risks. The ability of the collateral agent to foreclose on the collateral may be limited pursuant to bankruptcy laws. There is no or only a limited public trading market for the notes, and holder s ability to sell the notes is limited. The trading price of the notes may be volatile.

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1035423--9/26/2008--ATLANTIC_EXPRESS_TRANSPORTATION_CORP