COACH USA INC, S-1/A, 1996-05-09

COACH USA INC
S-1/A, 1996-05-09
LOCAL & SUBURBAN TRANSIT & INTERURBAN HWY PASSENGER TRANS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1996
REGISTRATION NO. 333-2704

==============================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

AMENDMENT NO. 3

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

------------------------

COACH USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 4141
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)

76-0496471
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)

4801 WOODWAY - SUITE 300E
HOUSTON, TEXAS 77056
(888) COACH-US
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

------------------------

RICHARD H. KRISTINIK
CHIEF EXECUTIVE OFFICER
COACH USA, INC.
4801 WOODWAY - SUITE 300E
HOUSTON, TEXAS 77056
(888) COACH-US
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)

------------------------

COPIES TO:

Christopher T. Jensen, Esq. Richard C. Tilghman, Jr., Esq.
Morgan, Lewis & Bockius LLP Piper & Marbury L.L.P.
101 Park Avenue 36 S. Charles Street
New York, New York 10178 Baltimore, Maryland 21201
(212) 309-6000 (410) 576-1678

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

As soon as practicable after the Registration Statement becomes effective.

------------------------

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

==============================================================================
<PAGE>
COACH USA, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K.
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND
HEADING PROSPECTUS CAPTION
------------------------------------- -------------------------------------
<S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus.................. Inside Front Cover Page of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges... Prospectus Summary; The Company; Risk Factors
4. Use of Proceeds...................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price...... Outside Front Cover Page of Prospectus; Risk
Factors; Underwriting
6. Dilution............................. Dilution
7. Selling Security Holders............. Not Applicable.
8. Plan of Distribution................. Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered........................... Dividend Policy; Description of Capital Stock
10. Interests of Named Experts and
Counsel.............................. Legal Matters; Experts
11. Information with Respect to
Registrant........................... Outside Front Cover Page of Prospectus;
Prospectus Summary; The Company; Risk Factors;
Use of Proceeds; Dividend Policy;
Capitalization; Selected Combined Founding
Companies' Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Business; Management;
Principal Stockholders; Description of Capital
Stock; Shares Eligible for Future Sale;
Underwriting; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.......................... Not Applicable
</TABLE>

<PAGE>

SUBJECT TO COMPLETION
MAY 9, 1996

3,600,000 SHARES

COACH USA, INC.

COMMON STOCK
------------------------

All of the 3,600,000 shares of Common Stock offered hereby are being
offered by Coach USA, Inc. Prior to this offering, there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price for the Common Stock will be between $12.00 and
$14.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Common Stock
has been approved for quotation on the Nasdaq National Market under the symbol
"TOUR," subject to notice of issuance.

------------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 11 HEREOF.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
Per Share..... $ $ $
Total(2)...... $ $ $

(1) Before deducting expenses of the offering estimated at $3,600,000.

(2) The Company has granted the Underwriters a 30-day option to purchase up to
540,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public as shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

The shares of Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by them, and
subject to the right of the Underwriters to reject any order in whole or in
part. It is expected that delivery of the shares of Common Stock will be made
at the offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or
about May , 1996.

ALEX. BROWN & SONS SMITH BARNEY INC.
INCORPORATED

THE DATE OF THIS PROSPECTUS IS MAY , 1996.
******************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************
<PAGE>
[Coach USA Logo]

[A photograph of a Coach USA motorcoach with mountain scenery in the
background.]

THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS AND WITH QUARTERLY REPORTS CONTAINING UNAUDITED SUMMARY FINANCIAL
INFORMATION FOR EACH OF THE FIRST THREE QUARTERS OF EACH FISCAL YEAR.

------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL
MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
[Coach USA logo]

CHARTER, TOUR AND SIGHTSEEING SERVICES

The Company provides motorcoach charter, tour and sightseeing services
throughout the United States.

SPECIALIZED DESTINATION SERVICE

Daily scheduled service is provided to Atlantic City from various points
in the Northeast.

CORPORATE OUTSOURCING

Employee shuttle and other services are provided to hotels and casinos
through outsourcing contracts.

COMMUTER SERVICES

The Company provides daily commuter service into New York City and San
Francisco.

PRIVATIZATION CONTRACTS

Privatization transit and contract services are provided to several
municipalities and universities such as Rutgers University.

[A photograph of an Arrow Stage Lines, Inc. motorcoach traveling
through Yosemite National Park.]

[A photograph of a Gray Line of San Francisco motorcoach with the
Golden Gate bridge in the background.]

[A photograph of a Leisure Line motorcoach with Caesar's
Palace -- Atlantic City casino in the background.]

[A photograph of an Adventure Trails motorcoach parked in front of
the Trump Taj Mahal casino.]

[A photograph of a Community Coach motorcoach with the New York City
skyline in the background.]

[A photograph of an articulated transit motorcoach utilized for the
Rutgers University privatization contract.]

PROSPECTUS SUMMARY

SIMULTANEOUSLY WITH THE CLOSING OF THE OFFERING MADE BY THIS PROSPECTUS
(THIS "OFFERING"), COACH USA, INC. WILL ACQUIRE, IN SEPARATE TRANSACTIONS (THE
"MERGERS") IN EXCHANGE FOR CASH AND SHARES OF ITS COMMON STOCK, SIX MOTORCOACH
BUSINESSES (EACH, A "FOUNDING COMPANY" AND, COLLECTIVELY, THE "FOUNDING
COMPANIES"). UNLESS OTHERWISE INDICATED, ALL REFERENCES TO THE "COMPANY"
HEREIN INCLUDE THE FOUNDING COMPANIES, AND REFERENCES HEREIN TO "COACH USA"
MEAN COACH USA, INC. PRIOR TO THE CONSUMMATION OF THE MERGERS.

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE COMBINED, PRO FORMA
COMBINED AND INDIVIDUAL HISTORICAL FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED,
ALL SHARE, PER SHARE AND FINANCIAL INFORMATION SET FORTH HEREIN (I) HAVE BEEN
ADJUSTED TO GIVE EFFECT TO ALL OF THE MERGERS; (II) ASSUME AN INITIAL PUBLIC
OFFERING PRICE OF $13.00 PER SHARE; AND (III) ASSUME NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION.

THE COMPANY

The Company will be the largest provider of motorcoach charter, tour and
sightseeing services and one of the five largest non-municipal providers of
commuter and transit motorcoach services in the United States upon
consummation of the Mergers. The Company does not provide regularly scheduled,
long-haul intercity bus service like Greyhound Lines, Inc. and does not intend
to do so. During 1995, Company vehicles traveled over 40 million miles, and
the Company provided service to more than 40 million passengers through a
fleet of over 760 motorcoaches and other high occupancy vehicles, including
246 motorcoaches provided by various transit authorities pursuant to service
contracts. The Company's charter and tour fleet features luxury, European
style motorcoaches with plush seats, televisions, VCRs and other amenities.

Coach USA was founded in September 1995 to create a nationwide motorcoach
service provider. Although it has conducted no operations to date, Coach USA
has entered into agreements to acquire, simultaneously with the closing of
this Offering, the six Founding Companies. The Founding Companies have been in
business an average of 41 years and provide regional and local services in the
Northeastern, Southwestern and Western United States.

The motorcoach industry in the United States can be broadly divided into
three types of services: (i) recreation and excursion (charter, tour and
sightseeing); (ii) commuter and transit; and (iii) regularly scheduled
intercity service. The Company only provides the first and second types of
services. The motorcoach industry is highly fragmented, with approximately
5,000 motorcoach operators providing the first or second type of services,
primarily in a single regional or local market. These companies collectively
generated approximately $20 billion in revenues in 1995.

The Company intends to utilize a decentralized operating and service
philosophy, rather than a standardized national model, in order to assure high
quality customer service while capitalizing on the centralized finance,
administrative support, purchasing power and national sales and marketing
capabilities of a large organization. This strategy also emphasizes the
retention of local management, all of which the Company believes will allow it
to successfully implement its acquisition strategy in the highly fragmented
motorcoach industry.
3

The Company's objective is to be the largest provider of regional and
local motorcoach services in the United States. Management plans to achieve
this goal by:

EXPANDING THROUGH ACQUISITIONS. The Company intends to pursue an
aggressive acquisition strategy to enhance its position in its current markets
and to expand into new markets by:

ENTERING NEW GEOGRAPHIC MARKETS. The Company intends to expand into
geographic markets it does not currently serve by acquiring
well-established motorcoach service providers that, like the Founding
Companies, are leaders in their regional markets.

EXPANDING EXISTING MARKETS. The Company also plans to acquire
additional motorcoach operations in each of the markets in which it
operates, including acquisitions that either broaden the range of
services provided by the Company in that market or expand the geographic
scope of the Company's operations in that market, as well as "tuck-in"
acquisitions of smaller motorcoach operations. The Company believes that
tuck-in acquisitions will increase operating efficiencies without a
proportionate increase in administrative costs and, in some instances,
will broaden the Company's range of services.

To facilitate its acquisition strategy, the Company intends to register
3,500,000 additional shares of Common Stock under the Securities Act within 90
days after the completion of this Offering. These shares will be available for
use by the Company as consideration for future acquisitions.

ACCELERATING INTERNAL GROWTH. A key component of the Company's strategy
is to accelerate internal growth at each Founding Company and each
subsequently acquired motorcoach business. The Company believes internal
growth can be accelerated by:

ESTABLISHING A NATIONAL SALES AND MARKETING PROGRAM. The travel and
tourism industry has experienced significant growth in recent years, and
the Company expects this trend to continue. The Company intends to
establish a national sales and marketing program as a means to expand its
recreation and excursion business. This program will target travel and
tour companies, national and international travel agencies and convention
organizers, as well as organizations such as AAA, AARP and professional
and amateur athletic teams.

DEVELOPING PRIVATIZATION AND OUTSOURCING OPPORTUNITIES. Of the
Company's total revenues in 1995, approximately 16% were derived from
operations that had been privatized by a state or municipal transit
authority or outsourced by a business within the last 10 years. The
Company believes that the trend toward privatization and outsourcing will
accelerate, as more transit authorities and businesses such as hotels,
casinos, rental car agencies, colleges and other institutions that
operate their own motorcoach fleets decide to privatize or outsource
non-core operations.

CAPITALIZING ON NEW CORPORATE STRUCTURE. The Company intends to take
advantage of its new corporate structure by:

CENTRALIZING ADMINISTRATIVE FUNCTIONS. The Company expects that
significant cost savings can be achieved through the consolidation of
administrative functions such as employee benefits, safety and
maintenance programs and risk management. The Company also believes that
it will have greater purchasing power in such areas as equipment and
parts, fuel, insurance and financing than the Founding Companies had
independently.

INCREASING OPERATING EFFICIENCIES. The Company believes that there
are opportunities to eliminate redundant facilities and equipment through
coordination among the Founding Companies and other subsequently acquired
operations. Additionally, the Company expects to benefit from
cross-marketing and increased equipment utilization among the Founding
Companies.
4

THE OFFERING

Common Stock offered by the 3,600,000 shares
Company..........................

Common Stock to be outstanding
after this Offering.............. 10,865,411 shares(1)

Use of proceeds.................. To pay the cash portion of the purchase
price for the Founding Companies, to repay
indebtedness and for general corporate
purposes, including future acquisitions.
See "Use of Proceeds."

Nasdaq National Market symbol.... TOUR

(1) Includes 5,099,687 shares of Common Stock to be issued in connection with
the Mergers, but excludes 1,174,717 shares of Common Stock subject to
options to be granted in connection with this Offering at an exercise
price equal to the initial public offering price. See "Management -- 1996
Long-Term Incentive Plan" and "-- 1996 Non-Employee Directors' Stock
Plan."

RISK FACTORS

The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."

RECENT RESULTS

During the three months ended March 31, 1996, Coach USA sold an aggregate
of 692,000 shares of Common Stock to management. As a result, Coach USA and the
Founding Companies on a combined basis incurred a non-recurring, non-cash charge
of $2,076,000, representing the difference between the amounts paid for the
shares and the estimated fair value of the shares on the date of sale as if the
companies were combined. After giving effect to this non-cash charge, the net
loss for the three months was $2,722,000. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Recent Results."

5
SUMMARY COMBINED FOUNDING COMPANIES' FINANCIAL DATA

Coach USA will acquire, simultaneously with the closing of this Offering,
the Founding Companies. The historical financial statements of each of the
Founding Companies have been combined for all periods presented at historical
cost, as if these companies had always been members of the same operating
group. However, during the periods presented, the Founding Companies were not
under common control or management and, as such, their results of operations
reflect a variety of tax structures (S Corporations and C Corporations).
Therefore, the data presented may not be comparable to or indicative of
post-combination results to be achieved by the Company. See "Selected Combined
Founding Companies' Financial Data."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total revenues.................. $ 92,653 $ 96,928 $ 103,072 $ 106,754 $ 113,489
Operating expenses.............. 76,358 79,578 85,367 88,297 89,669
Gross profit.................... 16,295 17,350 17,705 18,457 23,820
General and administrative
expenses...................... 11,582 11,894 12,490 12,471 14,213
Interest and other expense,
net........................... 2,014 2,281 2,101 2,068 2,534
Net income...................... 2,024 3,379 2,348 3,300 6,144
PRO FORMA:(1)
Pro forma operating income(2)... 6,071 7,133 7,051 8,044 12,814
Pro forma net income(2)(3)...... 2,380 2,847 2,873 3,568 6,049
Pro forma net income per
share......................... 0.67
Pro forma weighted average
shares(4)..................... 9,093
</TABLE>
DECEMBER 31, 1995
------------------------------------------
PRO AS
ACTUAL FORMA(5) ADJUSTED(5)(6)
------- ----------- --------------
BALANCE SHEET DATA:
Working capital (deficit).......$(5,211) $ (31,463) $ 1,098
Total assets.................... 79,363 71,901 73,630
Total debt, including current
portion......................... 33,114 33,454 18,051
Stockholders' equity
(deficit)....................... 24,713 (7,208) 32,716
- ------------
(1) See the Pro Forma Combined Financial Statements of the Company for pro
forma financial information relating to 1995.

(2) Gives effect to certain reductions in salaries and benefits to the owners
of the Founding Companies which have been agreed to in connection with the
Mergers (the "Compensation Differential"). See Note 11 of Notes to
Combined Founding Companies' Financial Statements.

(3) Gives effect to certain tax adjustments related to the taxation of certain
Founding Companies as S Corporations prior to the consummation of the
Mergers and the tax impact of the Compensation Differential in each
period. See Note 11 of Notes to Combined Founding Companies' Financial
Statements.

(4) Includes: (i) 2,165,724 shares issued by Coach USA prior to this Offering;
(ii) 5,099,687 shares to be issued to the stockholders of the Founding
Companies in connection with the Mergers; (iii) 1,700,714 of the 3,600,000
shares offered hereby to pay the cash portion of the consideration for the
Founding Companies; and (iv) 127,230 of the 3,600,000 shares offered
hereby to pay excess Subchapter S distributions; but excludes 1,174,717
shares of Common Stock subject to options to be granted in connection with
this Offering at an exercise price equal to the initial public offering
price. See "Management -- 1996 Long-Term Incentive Plan" and "-- 1996
Non-Employee Directors' Stock Plan."

(5) Gives effect to: (i) the combination of the Founding Companies with Coach
USA as if such combination had occurred on December 31, 1995; (ii) a
liability for the cash consideration of approximately $22.1 million to be
paid to the stockholders of the Founding Companies in connection with the
Mergers; (iii) the transfer by the Founding Companies of certain assets
and related liabilities to their stockholders in connection with the
Mergers; (iv) the sale of 692,000 shares of Common Stock to management
subsequent to December 31, 1995; (v) the issuance of 5,099,687 shares of
Common Stock to the Founding Companies' stockholders in connection with
the Mergers; and (vi) the additional cash to be borrowed from a bank.

(6) Adjusted for the sale of the 3,600,000 shares of Common Stock offered
hereby, the application of the estimated net proceeds therefrom and the
elimination of the deferred offering costs. See "Use of Proceeds."

SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA

The following table presents summary data for each of the individual
Founding Companies for the three most recent years as well as the most recent
interim period and comparative period of the prior year, as applicable.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31(1) FIRST QUARTER(2)
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUBURBAN:
Revenues......................... $ 32,274 $ 30,427 $ 29,752
Operating expenses............... 28,903 27,526 25,322
Gross profit..................... 3,371 2,901 4,430
General and administrative
expenses...................... 2,417 2,283 2,563
Interest and other expense,
net........................... 175 147 213
Net income....................... 520 343 1,231
Pro forma net income(3).......... 795 658 1,512
GRAY LINE SF:
Revenues......................... 22,122 24,487 29,235 $ 5,153 $ 5,728
Operating expenses............... 16,590 18,990 22,627 4,760 5,021
Gross profit..................... 5,532 5,497 6,608 393 707
General and administrative
expenses...................... 4,129 3,794 4,722 1,208 1,459
Interest and other expense,
net........................... 228 323 430 127 95
Net income (loss)................ 672 924 1,074 (678) (627)
Pro forma net income (loss)(3)... 735 867 1,085 (507) (404)
LEISURE:
Revenues......................... 17,534 17,694 18,992
Operating expenses............... 15,497 14,139 14,577
Gross profit..................... 2,037 3,555 4,415
General and administrative
expenses...................... 2,128 1,934 1,895
Interest and other expense,
net........................... 313 184 132
Net income (loss)................ (372) 1,298 2,163
Pro forma net income (loss)(3)... (127) 963 1,577
COMMUNITY:
Revenues......................... 13,179 14,106 13,807
Operating expenses............... 11,057 12,228 11,680
Gross profit..................... 2,122 1,878 2,127
General and administrative
expenses...................... 1,760 1,999 2,193
Interest and other expense,
net........................... 258 239 173
Net income (loss)................ 103 (262) (62)
Pro forma net income(3).......... 538 415 718
ADVENTURE:
Revenues......................... 8,494 10,001 11,053
Operating expenses............... 6,665 8,457 8,241
Gross profit..................... 1,829 1,544 2,812
General and administrative
expenses...................... 840 968 1,089
Interest and other expense,
net........................... 626 641 928
Net income (loss)................ 328 (58) 719
Pro forma net income(3).......... 255 12 537
ARROW:
Revenues......................... 9,469 10,039 10,650 2,425 2,211
Operating expenses............... 6,655 6,957 7,222 1,944 1,907
Gross profit..................... 2,814 3,082 3,428 481 304
General and administrative
expenses...................... 1,216 1,493 1,751 306 337
Interest and other expense,
net........................... 501 534 658 168 199
Net income (loss)................ 1,097 1,055 1,019 7 (232)
Pro forma net income (loss)(3)... 677 653 620 8 (132)
</TABLE>
(1) Amounts for Gray Line SF are reported for fiscal years ended October 31,
and amounts for Arrow are reported for fiscal years ended September 30.

(2) Amounts for Gray Line SF are reported for the first quarter ended
January 31, 1995 and 1996, respectively, and amounts for Arrow are
reported for the first quarter ended December 31, 1994 and 1995,
respectively.

(3) Gives effect to the Compensation Differential, certain tax adjustments
related to the taxation of certain Founding Companies as S Corporations
prior to the consummation of the Mergers and the tax impact of the
Compensation Differential in each period. See Note 11 of Notes to
Combined Founding Companies' Financial Statements.

THE COMPANY

SUBURBAN TRANSIT CORP. -- The principal operations of Suburban Transit
Corp. and its six affiliated entities ("Suburban") are in central and northern
New Jersey and the New York City metropolitan area. Suburban has been in
operation since 1941 and had revenues in 1995 of over $29 million. Suburban
has a fleet of over 260 motorcoaches primarily used to provide daily commuter
service into New York City from various locations in New Jersey and to provide
regular service from central New Jersey to the casinos in Atlantic City. Since
1966, Suburban has contracted with Rutgers University to transport students
within and between its five campuses, and currently operates 42 motorcoaches
that transport approximately 45,000 students and other passengers per day.
Kenneth Kuchin, the President of Suburban, has been employed by Suburban for
21 years and will sign a five year employment agreement with Suburban and the
Company to continue in his present position with Suburban following
consummation of this Offering and to become Vice Chairman of the Board and
Senior Vice President -- Northeast Region of the Company.

GRAY LINE SF -- Grosvenor Bus Lines, Inc., which does business as Gray
Line of San Francisco ("Gray Line SF"), was incorporated in 1980 and operates
one of the oldest Gray Line franchises in the United States, principally in
the San Francisco Bay area. The franchise dates back to approximately 1910.
Gray Line SF had revenues in 1995 of more than $29 million and operates a
fleet of over 200 vehicles, which includes luxury doubledecker motorcoaches
and motorized replica cable cars, in addition to traditional motorcoaches.
Gray Line SF provides sightseeing tours to all of the major sites in the San
Francisco Bay area, the Northern California wine country and the Monterey
Peninsula. Gray Line SF operates a network of hotel lobby ticket counters and
has arrangements with hotel concierges and other hotel personnel to promote
its sightseeing tours. In addition, Gray Line SF provides transit services for
San Mateo County and Santa Clara County and commuter service for Marin County,
in each case with motorcoaches provided by the county. Robert K. Werbe,
Chairman of the Board of Gray Line SF, has been with Gray Line SF for over 15
years and will sign a five year employment agreement with Gray Line SF to
continue in his present position with Gray Line SF following consummation of
this Offering. His son, Thomas A. Werbe, is the President of Gray Line SF and
will become a director of the Company.

LEISURE TIME TOURS -- The principal operations of Leisure Time Tours
("Leisure") are in northern New Jersey, greater Philadelphia and the New York
City metropolitan area. Leisure has been in operation since 1970 and had
revenues in 1995 of approximately $19 million with a fleet of approximately
100 motorcoaches. Leisure has daily scheduled service from the five New York
City boroughs, Westchester County, northern New Jersey and the greater
Philadelphia area to Atlantic City under agreements with the major casinos,
which advertise the service and provide incentives to the passengers. In
addition, Leisure provides commuter service from five points in Bergen County,
New Jersey to New York City. Gerald Mercadante, the President and Chief
Executive Officer of Leisure, will sign a five year employment agreement with
Leisure and the Company to continue in his present position with Leisure
following consummation of this Offering and to become Senior Vice
President -- Northeast Region Operations and a director of the Company.

COMMUNITY BUS LINES, INC. -- The operations of Community Bus Lines, Inc.
and its five affiliated entities ("Community") consist largely of transit
service in northern New Jersey and

commuter service established over 65 years ago with various municipalities to
carry passengers from northern New Jersey into New York City. Community has
been operating since 1931 and had revenues in 1995 of approximately $14
million, with a fleet of 90 motorcoaches. Community also provides service to
the Meadowlands Sports Complex in New Jersey from New York City and to major
concerts and sporting events, as well as daily service from three northern New
Jersey locations to Atlantic City under agreements with the major casinos
similar to Leisure's agreements. Frank Gallagher, the President and Chief
Executive Officer of Community, has been employed by Community for 30 years
and will sign a five year employment agreement with Community and the Company
to continue in his present position with Community following consummation of
this Offering and to become Senior Vice President -- Corporate Development and
a director of the Company.

ADVENTURE TRAILS -- The principal operations of Cape Transit Corp., which
does business as Adventure Trails ("Adventure"), are in the Atlantic City and
greater Philadelphia metropolitan areas. Adventure has been in operation since
1980 and had revenues in 1995 of over $11 million with a fleet of 56
motorcoaches. Adventure has contracts with many Atlantic City casinos to
shuttle their employees to and from parking lots located five miles away.
Adventure also provides motorcoach service from Philadelphia and Bucks County,
Pennsylvania and Wilmington, Delaware to the Atlantic City casinos under
contracts with the casinos and tour operators. In addition, Adventure provides
service from the Atlantic City airport for casino and hotel guests, as well as
on a per seat basis from Adventure's ticket counter in the airport. John
Mercadante, Jr., the President and Chief Operating Officer of Adventure, will
sign a five year employment agreement with Adventure and the Company to
continue in his present position with Adventure following consummation of this
Offering and to become the President and Chief Operating Officer and a
director of the Company.

ARROW STAGE LINES, INC. -- Arrow Stage Lines, Inc. ("Arrow") operates
from Phoenix, Arizona, has been in operation since 1928 and had revenues in
1995 of over $10 million. Arrow operates a fleet of 65 luxury vehicles,
primarily serving tourists from around the United States, Europe and Asia.
Arrow provides excursion service for tours as long as 14 days to major tourist
attractions and national parks throughout the Southwestern and Western United
States and into Mexico and Canada. Most of these excursions are arranged by
major tour organizers who obtain the passengers and contract with Arrow for
the motorcoaches and driver. Charles Busskohl, the Chief Executive Officer of
Arrow, has been with Arrow for 35 years and will sign a five year employment
agreement with Arrow to continue in his present position following
consummation of this Offering and to become a director of the Company.

The aggregate consideration to be paid by Coach USA in the Mergers is
approximately $88.4 million, consisting of approximately $22.1 million in cash
and 5,099,687 shares of Common Stock. The consideration to be paid by Coach
USA for the Founding Companies was determined by negotiations among Coach USA
and representatives of the Founding Companies and was based primarily upon the
pro forma net income of each Founding Company.

The following table sets forth the consideration being paid for each
Founding Company:

CASH COMMON STOCK TOTAL
---------- -------------------- ----------
VALUE
OF
SHARES SHARES(1)
------ ----------
(IN THOUSANDS)
Suburban................ $ 7,479 1,342 $ 17,451 $ 24,930
Gray Line SF............ 4,889 878 11,409 16,298
Leisure................. 3,824 1,243 16,157 19,981
Community............... 2,420 552 7,174 9,594
Adventure............... 2,952 530 6,889 9,841
Arrow................... 545 555 7,216 7,761
---------- ------ ---------- ----------
Total.............. $ 22,109 5,100 $ 66,296 $ 88,405
========== ====== ========== ==========

(1) Represents the aggregate cash value of the shares of Common Stock issued
as consideration, based upon an assumed initial public offering price of
$13.00 per share.

In addition, immediately prior to the Mergers, certain of the Founding
Companies will make distributions to their stockholders of approximately $4.5
million, representing S Corporation earnings previously taxed to their
stockholders. Prior to the Mergers, certain Founding Companies also will
distribute to their stockholders approximately $4.2 million in net book value
of assets and approximately $700,000 of related liabilities.

Coach USA was incorporated in September 1995 in Delaware. The Company's
executive offices are located at 4801 Woodway, Suite 300E, Houston, Texas
77056, and its telephone number is (888)-COACH-US.

RISK FACTORS

AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS
INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING AN INVESTMENT IN THE COMMON STOCK.

ABSENCE OF COMBINED OPERATING HISTORY. Coach USA was founded in
September 1995 but has conducted no operations and generated no revenues to
date. Coach USA has entered into agreements to acquire the Founding Companies
simultaneously with the closing of this Offering. The Founding Companies have
been operating as separate independent entities, and there can be no assurance
that the Company will be able to successfully integrate the operations of
these businesses or institute the necessary Company-wide systems and
procedures to successfully manage the combined enterprise on a profitable
basis. The Company's management group has been assembled only recently, and
there can be no assurance that the management group will be able to
effectively manage the combined entity or effectively implement the Company's
internal growth strategy and acquisition program. The combined historical
financial results of the Founding Companies cover periods when the Founding
Companies and Coach USA were not under common control or management and,
therefore, may not be indicative of the Company's future financial or
operating results. The inability of the Company to successfully integrate the
Founding Companies would have a material adverse effect on the Company's
business, financial condition and results of operations and would make it
unlikely that the Company's acquisition program will be successful. See
"Management."

RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY. The Company intends
to grow primarily through the acquisition of additional motorcoach businesses.
Increased competition for acquisition candidates may develop, in which event
there may be fewer acquisition opportunities available to the Company as well
as higher acquisition prices. There can be no assurance that the Company will
be able to identify, acquire or profitably manage additional businesses or
successfully integrate acquired businesses, if any, into the Company without
substantial costs, delays or other operational or financial problems. Further,
acquisitions involve a number of special risks, including possible adverse
effects on the Company's operating results, diversion of management's
attention, failure to retain key acquired personnel, risks associated with
unanticipated events or liabilities and amortization of acquired intangible
assets, some or all of which could have a material adverse effect on the
Company's business, financial condition and results of operations. Customer
dissatisfaction or performance problems at a single acquired company could
have an adverse effect on the reputation of the Company and render ineffective
the Company's national sales and marketing initiative. In addition, there can
be no assurance that the Founding Companies or other motorcoach businesses
acquired in the future will achieve anticipated revenues and earnings. See
"Business -- Strategy."

RISKS RELATED TO ACQUISITION FINANCING. The Company currently intends to
finance future acquisitions by using shares of its Common Stock for all or a
substantial portion of the consideration to be paid. In the event that the
Common Stock does not maintain a sufficient market value, or potential
acquisition candidates are otherwise unwilling to accept Common Stock as part
of the consideration for the sale of their businesses, the Company may be
required to utilize more of its cash resources, if available, in order to
initiate and maintain its acquisition program. If the Company does not have
sufficient cash resources, its growth could be limited unless it is able to
obtain additional capital through debt or equity financings. Although the
Company has received certain commitments to provide it with a $30 million line
of credit, there can be no assurance that the Company will be able to obtain
all the financing it will need on terms the Company deems acceptable. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

LABOR RELATIONS. At December 31, 1995, the Company had approximately
1,800 employees, approximately 1,200 of whom were drivers. Approximately 875
of the Company's
11

employees were members of various labor unions at such date. Four of the six
Founding Companies have collective bargaining agreements, most of which expire
over the next three years. The Company's inability to negotiate acceptable
contracts with these unions could result in strikes by the affected workers
and increased operating costs as a result of higher wages or benefits paid to
union members. If the unionized employees were to engage in a strike or other
work stoppage, or other employees were to become unionized, the Company could
experience a significant disruption of its operations and higher ongoing labor
costs, which could have an adverse effect on the Company's business and
results of operations. See "Business -- Drivers and Other Personnel."

INSURANCE COSTS; CLAIMS. The Company's cost of maintaining personal
injury, property damage and workers' compensation insurance is significant.
The Company could experience higher insurance premiums as a result of adverse
claims experience or because of general increases in premiums by insurance
carriers for reasons unrelated to the Company's own claims experience. As an
operator of motorcoaches and other high occupancy vehicles, the Company is
exposed to claims for personal injury or death and property damage as a result
of accidents. The Company intends to self-insure for the first $100,000 of
losses per incident. If the Company were to experience a significant increase
in the number of claims for which it is self-insured or claims in excess of
its insurance limits, its results of operations and financial condition would
be adversely affected. See "Business -- Risk Management and Insurance."

CAPITAL REQUIREMENTS. The Company's operations require significant
capital in order to maintain a modern fleet of motorcoaches and to achieve
internal growth. The Company has historically financed the acquisition of new
motorcoaches with debt financing. A new motorcoach costs approximately
$300,000, and there can be no assurance that adequate financing will be
available in the future on terms favorable to the Company to enable the
Company to efficiently maintain operations and implement any expansion of
service through a larger fleet. In addition, as motorcoaches age, they require
increasing amounts of maintenance and, therefore, are more expensive to
operate. The Company's inability to acquire, or a material delay in acquiring,
the financing necessary to acquire replacement motorcoaches as needed would
have an adverse effect on the Company's results of operations due to the
higher operating costs associated with operating an aging fleet. See
"Business -- Equipment."

GOVERNMENT SUBSIDIES. Payments to the Company under a number of its
commuter and transit contracts are funded through Federal or state subsidy
programs, and, without these subsidies, the state or local transit authority
may be unwilling to continue or renew these contracts. In addition, many of
the motorcoaches provided at nominal rent to the Company under these contracts
are purchased with funds provided by Federal programs. If funding for these
Federal programs were eliminated or curtailed, the Company would be required
to operate existing motorcoaches longer than economically practicable or be
forced to acquire replacement equipment and/or seek to renegotiate its
contracts with the transit authorities to cover the cost of financing this
replacement equipment. Either alternative could result in an increase in the
Company's costs of operations or could cause the Company to decide not to
renew some of its contracts. See "Business -- Services Provided."

SUBSTANTIAL SEASONALITY OF THE MOTORCOACH BUSINESS. The motorcoach
business is subject to seasonal variations in operations. During the winter
months, operating costs are higher due to the cold weather and demand for
motorcoach services is lower, particularly because of a decline in tourism. As
a result, the Company expects its revenues and results of operations to be
lower in the first and fourth quarters than in the second and third quarters
of each year. The Founding Companies on a combined basis recorded a first
quarter 1996 pro forma net loss of $282,000. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Recent Results."

FUEL PRICES AND TAXES. Fuel is a significant cost to the Company. Fuel
prices are subject to sudden increases as a result of variations in supply
levels and demand. Any sustained increase in fuel prices could adversely
affect the Company's results of operations unless it were able to increase
prices. From time to time, there are efforts at the Federal or state level to
increase fuel or highway use taxes, which, if enacted, also could adversely
affect the Company's results of operations. See "Business -- Fuel Availability
and Costs."

SIGNIFICANT REGULATION. As a result of the enactment of the ICC
Termination Act of 1995, interstate motorcoach operations previously regulated
by the Interstate Commerce Commission became subject, as of January 1, 1996,
to regulatory requirements administered by the Federal Highway Administration
(the "FHWA") and the new Surface Transportation Board, both units of the
United States Department of Transportation. Motorcoach operators subject to
FHWA jurisdiction are required to be registered with the FHWA and to maintain
minimum amounts of insurance. The Surface Transportation Board must approve or
exempt any consolidation or merger of two or more regulated interstate
motorcoach operators or the acquisition of one such operator by another.
Motorcoach operators are also subject to extensive safety requirements and
requirements imposed by environmental laws, workplace safety and
anti-discrimination laws, including the Americans with Disabilities Act.
Safety, environmental and vehicle accessibility requirements for motorcoach
operators have increased in recent years, and this trend could continue. The
FHWA and state regulatory agencies have broad power to suspend, amend or
revoke the Company's operating authorizations for failure to comply with
statutory requirements, including safety and insurance requirements. Although
the acquisition of the Founding Companies by Coach USA was exempted by the
Surface Transportation Board on May 3, 1996, there can be no assurance that
future acquisitions of other motorcoach operators will be approved or exempted
from the need for regulatory approval. A number of states, such as New Jersey
and Pennsylvania, require motorcoach operators to obtain authority to operate
over certain specified intrastate routes, and, in some instances, such
authority cannot be obtained if another operator already has obtained
authority to operate on that route. As a result, there may be regulatory
constraints on the expansion of the Company's operations in these states.
Furthermore, the Company has a competitive advantage with respect to its
existing route authorities as a result of this regulatory posture. Therefore,
if New Jersey or another highly regulated state were to reduce the level of
regulation, the Company's competitive advantage could be lost. See
"Business -- Regulation."

POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES. The Company's
operations are subject to various environmental laws and regulations,
including those dealing with air emissions, water discharges and the storage,
handling and disposal of petroleum and hazardous substances. The motorcoach
industry may in the future become subject to stricter regulations. There have
been spills and releases of hazardous substances, including petroleum and
petroleum related products, at several of the Founding Companies' facilities
in the past. As a result of past and future operations at these facilities,
the Company may be required to incur remediation costs and may be subject to
penalties. In addition, although the Company intends to conduct appropriate
due diligence with respect to environmental matters in connection with future
acquisitions, there can be no assurance that the Company will be able to
identify or be indemnified for all potential environmental liabilities
relating to any acquired business. See "Business -- Environmental Matters."

GEOGRAPHIC CONCENTRATION. Four of the six Founding Companies operate in
New Jersey and the New York City metropolitan area. These four companies
generated revenues of approximately $74 million, or 65% of the combined
revenues of the Founding Companies, in 1995. Therefore, the Company's results
of operations are susceptible to downturns in the general economy or demand
for motorcoach services in this geographic area. The Company has a number of
commuter and transit contracts with the New Jersey Transit Authority, and the
loss of these contracts could adversely affect the Company.

SUBSTANTIAL COMPETITION. The motorcoach industry is highly competitive,
fragmented and subject to rapid change, particularly with regard to
recreational and excursion services and commuter and transit services. There
are numerous other companies that provide these services, some of which have
greater financial and marketing resources than the Company. Certain of these
competitors operate in several of the Company's existing or target markets,
and others may choose to enter those markets in the future. The majority of
the Company's competition at the Founding Company level is made up of smaller
regional or local motorcoach operators with a strong presence in their
respective local markets. As a result of these factors, the Company may lose
customers or have difficulty in acquiring new customers. See
"Business -- Competition."

LITIGATION. Suburban is a plaintiff in a lawsuit challenging the denial
of its access to certain terminals by the Township of East Brunswick, New
Jersey. If Suburban is unsuccessful, the result could be a loss by Suburban of
significant revenues. See "Business--Legal Proceedings."

MUNICIPAL AND OTHER CONTRACTS. The Company's contracts to provide
commuter or transit service have terms of three years or less and are subject
to competitive bidding under applicable Federal, state and local regulations
whenever the contracts are to be renewed. The Company's contracts with
casinos, airlines and other entities also have relatively short terms, and,
from time to time, there may be competitors who seek to obtain these contracts
by offering lower prices than the Company could offer without adversely
affecting the contracts' profitability. There can be no assurance that all or
most of these contracts will be renewed or that they will be renewed at prices
as profitable to the Company. See "Business -- Services Provided." The Company
also could become subject to litigation by an unsuccessful bidder for a
contract awarded by a transit authority.

RELIANCE ON KEY PERSONNEL. The Company's operations are dependent on the
continued efforts of its executive officers and the senior management of the
Founding Companies. Furthermore, the Company will likely be dependent on the
senior management of any businesses acquired in the future. If any of these
persons becomes unable to continue in his or her present role, or if the
Company is unable to attract and retain other qualified employees, the
Company's business or prospects could be adversely affected. Although the
Company or an individual Founding Company will enter into an employment
agreement with each of the Company's executive officers, there can be no
assurance that any individual will continue in his present capacity with the
Company or such Founding Company for any particular period of time. The
Company does not intend to obtain key man life insurance covering any of its
executive officers or other members of senior management. See "Management."

CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS. Following the
completion of the Mergers and this Offering, the Company's executive officers
and directors, and entities affiliated with them, will beneficially own
approximately 51.6% of the outstanding shares of Common Stock (49.2% if the
Underwriters' over-allotment option is exercised in full). These persons, if
acting in concert, will be able to continue to exercise control over the
Company's affairs, to elect the entire Board of Directors and to control the
disposition of any matter submitted to a vote of stockholders. See "Principal
Stockholders."

SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATES. Approximately
$22.1 million, or approximately 55.4%, of the net proceeds of this Offering
will be paid as the cash portion of the purchase price for the Founding
Companies, approximately $16.1 million of which will be paid either to
stockholders of the Founding Companies who will become officers, directors,
key employees or holders of more than 5% of the Common Stock or to their
spouses or trusts for which they act as trustees. Proceeds available for
working capital and other uses by the Company will be approximately $1.9
million, or 4.8% of the net proceeds of this Offering (approximately $8.5
million, or 18.2% of the net proceeds of this Offering, if the Underwriters'
over-allotment is exercised in full). See "Use of Proceeds" and "Certain
Transactions."
14

POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON
STOCK. The market price of the Common Stock may be adversely affected by the
sale, or availability for sale, of substantial amounts of the Common Stock in
the public market following this Offering. The 3,600,000 shares being sold in
this Offering will be freely tradable unless acquired by affiliates of the
Company.

Simultaneously with the closing of this Offering, the stockholders of the
Founding Companies will receive, in the aggregate, 5,099,687 shares of Common
Stock as a portion of the consideration for the sale of their businesses to
the Company. These shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), and, therefore, may not be sold
unless registered under the Securities Act or sold pursuant to an exemption
from registration, such as the exemption provided by Rule 144. Furthermore,
the stockholders who will receive these shares have agreed with Coach USA not
to sell, transfer or otherwise dispose of any of these shares for two years
following consummation of this Offering, subject to reduction in the event the
two-year "holding" period for restricted securities under Rule 144 is reduced
by the Securities and Exchange Commission (the "Commission"). However, the
stockholders who will receive these shares also have certain demand
registration rights with respect to these shares, beginning two years after
the closing of this Offering, as well as certain piggyback registration rights
with respect to these shares. In addition, existing stockholders of Coach USA
will hold, in the aggregate, 2,165,724 shares of Common Stock. See "Certain
Transactions." None of these shares have been registered under the Securities
Act and, accordingly, may not be sold unless registered under the Securities
Act or sold pursuant to an exemption, such as the exemption provided by Rule
144. The holders of substantially all of these shares also have certain
piggyback registration rights with respect to these shares and have agreed
with Coach USA to the same two-year restriction on dispositions described
above.

The Company plans to register an additional 3,500,000 shares of its
Common Stock under the Securities Act within 90 days after completion of this
Offering for use by the Company as consideration for future acquisitions. Upon
such registration, these shares will generally be freely tradable after
issuance, unless the resale thereof is contractually restricted. The piggyback
registration rights described above will not apply to the registration
statement to be filed with respect to these 3,500,000 shares. See "Shares
Eligible for Future Sale."

NO PRIOR PUBLIC MARKET AND DETERMINATION OF OFFERING PRICE. Prior to
this Offering, there has been no public market for the Common Stock.
Therefore, the initial public offering price for the Common Stock will be
determined by negotiation between the Company and the Representatives of the
Underwriters and may bear no relationship to the price at which the Common
Stock will trade after the Offering. See "Underwriting" for the factors to be
considered in determining the initial public offering price. The Common Stock
has been approved for quotation on the Nasdaq National Market, subject to
notice of issuance. However, there can be no assurance that an active trading
market will develop subsequent to this Offering or, if developed, that it will
be sustained.

After this Offering, the market price of the Common Stock may be subject
to significant fluctuations in response to numerous factors, including
variations in the annual or quarterly financial results of the Company or its
competitors, changes by financial research analysts in their estimates of the
earnings of the Company, conditions in the economy in general or in the
Company's industry in particular, unfavorable publicity or changes in
applicable laws and regulations (or judicial or administrative interpretations
thereof) affecting the Company or the motorcoach industry. From time to time,
the stock market experiences significant price and volume volatility, which
may affect the market price of the Common Stock for reasons unrelated to the
Company's performance.

IMMEDIATE AND SUBSTANTIAL DILUTION. The purchasers of the shares of
Common Stock offered hereby will experience immediate and substantial dilution
in the pro forma net tangible
15

book value of their shares of $9.99 per share. In the event the Company issues
additional Common Stock in the future, including shares issued in connection
with future acquisitions, purchasers of Common Stock in this Offering may
experience further dilution. See "Dilution."

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS. The Board of
Directors of the Company is empowered to issue preferred stock in one or more
series without stockholder action. The existence of this "blank-check"
preferred stock could render more difficult or discourage an attempt to obtain
control of the Company by means of a tender offer, merger, proxy contest or
otherwise. In addition, the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") provides for a classified
Board of Directors, which may also have the effect of inhibiting or delaying a
change in control of the Company. Certain provisions of the Delaware General
Corporation Law may also discourage takeover attempts that have not been
approved by the Board of Directors. See "Management -- Directors and Executive
Officers," "Principal Stockholders" and "Description of Capital Stock."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,600,000 shares of
Common Stock offered hereby, after deducting underwriting discounts and
estimated offering expenses, are estimated to be approximately $39.9 million
($46.5 million if the Underwriters' over-allotment option is exercised in
full). Offering expenses of approximately $3.6 million may be funded by a
stockholder prior to the closing and will be reimbursed to the stockholder
from the proceeds of this Offering.

Of the net proceeds, $22.1 million will be used to pay the cash portion
of the purchase price for the Founding Companies, of which approximately $16.1
million will be paid to former stockholders of the Founding Companies who will
become officers, directors, key employees or holders of more than 5% of the
Common Stock of the Company. In addition, approximately $15.9 million of the
net proceeds will be used to repay indebtedness assumed by the Company in the
Mergers. Of that $15.9 million, approximately $315,000, $300,000 and $171,000
are owed to stockholders and affiliates of Adventure, Gray Line SF and
Community, respectively. The indebtedness to be repaid bears effective
interest of up to 13%, with a weighted average interest rate of approximately
9.5%, and would otherwise mature at various dates through November 2004.

The approximately $1.9 million of remaining net proceeds will be used for
working capital and for general corporate purposes, which are expected to
include future acquisitions. The Company currently has no binding agreements
to effect any acquisitions. Pending such uses, the net proceeds will be
invested in short-term, interest-bearing, investment grade securities.

The Company intends to obtain a line of credit of approximately $40
million to be used for working capital and other general corporate purposes,
including future acquisitions and to refinance indebtedness not repaid out of
the net proceeds of this Offering. The Company expects to establish a separate
line of credit of approximately $40 million to finance motorcoach replacements
and additions, borrowings under which may be secured by the equipment
purchased. There can be no assurance that any line of credit will be obtained
or that, if obtained, it will be on terms that are favorable to the Company.
The Company, however, has received commitments from two lenders to provide the
Company with a line of credit of $30 million. The Company has accepted one of
these commitments and is currently negotiating a definitive loan agreement.
See "Risk Factors -- Risks Related to Acquisition Financing" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

DIVIDEND POLICY

The Company intends to retain all of its earnings, if any, to finance the
expansion of its business and for general corporate purposes, including future
acquisitions, and does not anticipate paying any cash dividends on its Common
Stock for the foreseeable future. In addition, in the event the Company is
successful in obtaining one or more lines of credit, it is likely that any
such facility will include restrictions on the ability of the Company to pay
dividends without the consent of the lender.

CAPITALIZATION

The following table sets forth the current maturities of long-term
obligations and capitalization at December 31, 1995 (i) of Coach USA and the
combined Founding Companies; (ii) of the Company on a pro forma basis to give
effect to the Mergers and the issuance of 692,000 shares of additional Common
Stock to certain executive officers after December 31, 1995; and (iii) of the
Company, pro forma as adjusted, to give effect to both the Mergers and this
Offering and the application of the estimated net proceeds therefrom. See
"Selected Combined Founding Companies' Financial Data" and "Use of Proceeds."
This table should be read in conjunction with the Pro Forma Combined Financial
Statements of the Company and the related notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------
COMBINED(1) PRO FORMA AS ADJUSTED
------------ ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term
obligations(2)..................... $ 8,001 $ 7,852 $ --
============ ========== ============
Long-term obligations, less current
maturities(2)...................... $ 25,113 $ 25,602 $ 18,051
Stockholders' equity:
Preferred Stock: $0.01 par
value, 500,000 shares
authorized; none issued or
outstanding.................. -- -- --
Common Stock: $0.01 par value,
30,000,000 shares authorized;
1,473,724 shares issued and
outstanding, combined;
7,265,411 shares issued and
outstanding, pro forma; and
10,865,411 shares issued and
outstanding, pro forma as
adjusted(3).................. 15 73 109
Additional paid-in capital...... 6,784 (1,274) 32,607
Retained earnings............... 18,339 (5,583) --
Treasury stock.................. (424) (424) --
------------ ---------- ------------
Total stockholders'
equity.................. 24,714 (7,208) 32,716
------------ ---------- ------------
Total
capitalization.... $ 49,827 $ 18,394 $ 50,767
============ ========== ============
</TABLE>
(1) Combines the respective accounts of Coach USA and the combined Founding
Companies as reflected in the first and second columns of the Pro Forma
Combined Balance Sheet at December 31, 1995 and gives effect to the
reclassification of the combined Founding Companies' common stock as
additional paid-in capital.

(2) For a description of the Company's debt, see Note 4 of Notes to Combined
Founding Companies' Financial Statements.

(3) Excludes 1,174,717 shares of Common Stock subject to options to be granted
in connection with this Offering at an exercise price equal to the initial
public offering price. See "Management -- 1996 Long-Term Incentive Plan
and "-- 1996 Non-Employee Directors' Stock Plan."

DILUTION

The deficit in pro forma net tangible book value of the Company as of
December 31, 1995 was approximately $(7,208,000), or approximately $(0.99) per
share of Common Stock. The deficit in pro forma net tangible book value per
share represents the amount by which the Company's pro forma total liabilities
exceeds the Company's pro forma net tangible assets divided by the number of
shares of Common Stock to be outstanding after giving effect to the Mergers.
After giving effect to the sale of the 3,600,000 shares of Common Stock
offered hereby at an assumed public offering price of $13.00 per share, and
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company, the Company's pro forma net tangible book
value at December 31, 1995 would have been approximately $32,716,000, or
approximately $3.01 per share. This represents an immediate increase in pro
forma net tangible book value of approximately $4.00 per share to existing
stockholders and an immediate dilution of approximately $9.99 per share to new
investors purchasing the shares in this Offering. The following table
illustrates this pro forma dilution:

Assumed initial offering price per share ................ $ 13.00

Pro forma deficit in net tangible
book value per share before Offering .................. $ (0.99)
Increase in pro forma net tangible
book value per share attributable to
new investors ........................................... 4.00
-------
Pro forma net tangible book value per
share after Offering .................................. 3.01
-------
Dilution per share to new investor(s) ................... $ 9.99
=======

The following table sets forth, on a pro forma basis to give effect to
the Mergers as of December 31, 1995, the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid by existing stockholders and the new investors purchasing
shares of Common Stock from the Company in this Offering (before deducting
underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION(1) AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 7,265,000 66.9% $(7,208,000) (18.2)% $ (0.99)
New investors........................ 3,600,000 33.1 46,800,000 118.2 $ 13.00
---------- ------- ----------- -------
Total........................... 10,865,000 100.0% $39,592,000 100.0%
========== ======= =========== =======
</TABLE>
(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity of the Founding Companies before this Offering,
adjusted to reflect: (i) the cash portion of the consideration payable to
the stockholders of the Founding Companies in connection with the Mergers;
(ii) the transfer of selected assets to and the assumption of selected
liabilities of certain stockholders of the Founding Companies in the net
amount of approximately $8,000,000 in connection with the Mergers; (iii)
the distribution of certain of the Founding Companies' S Corporation
Accumulated Adjustment Accounts; and (iv) a liability for deferred income
taxes. See "Use of Proceeds" and "Capitalization."

SELECTED COMBINED FOUNDING COMPANIES' FINANCIAL DATA

The following selected combined financial data of the Founding Companies
as of December 31, 1994 and 1995, and for each of the three years in the
period ended December 31, 1995, have been derived from the Combined Founding
Companies' Financial Statements, which have been audited by Arthur Andersen
LLP and appear elsewhere in this Prospectus. The selected combined financial
data for the Founding Companies as of December 31, 1991, 1992 and 1993, and
for the years ended December 31, 1991 and 1992, have been derived from
unaudited financial statements which have been prepared on the same basis as
the audited financial statements and, in the opinion of the Founding
Companies, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such data.

The Selected Combined Founding Companies' Financial Data should be read
in conjunction with the Combined Founding Companies' Financial Statements, the
Pro Forma Combined Financial Statements of the Company, the individual
historical financial statements of each of the Founding Companies, the related
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total revenues.................. $ 92,653 $ 96,928 $ 103,072 $ 106,754 $ 113,489
Operating expenses.............. 76,358 79,578 85,367 88,297 89,669
General and administrative
expenses..................... 11,582 11,894 12,490 12,471 14,213
Operating income................ 4,713 5,456 5,215 5,986 9,607
Interest and other expense,
net.......................... 2,014 2,281 2,101 2,068 2,534
Income before income taxes...... 2,699 3,175 3,114 3,918 7,073
Provision for income taxes...... 675 (204) 766 618 929
Net income...................... 2,024 3,379 2,348 3,300 6,144
PRO FORMA(1):
Pro forma operating income(2)... 6,071 7,133 7,051 8,044 12,814
Pro forma net income(2)(3)...... 2,380 2,847 2,873 3,568 6,049
Pro forma net income per
share........................ 0.67
Pro forma weighted average
shares(4).................... 9,093
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital (deficit)....... $ (3,616) $ (2,852) $ (1,965) $ (3,399) $ (5,211)
Total assets.................... 66,094 68,614 68,456 74,841 79,363
Total debt, including current
portion......................... 36,851 32,569 30,013 31,883 33,114
Stockholders' equity............ 16,434 17,435 18,967 21,641 24,713
</TABLE>
(1) See the Pro Forma Combined Financial Statements of the Company for pro
forma financial information relating to 1995.
(2) Gives effect to the Compensation Differential. See Note 11 of Notes to
Combined Founding Companies' Financial Statements.
(3) Gives effect to certain tax adjustments related to the taxation of
certain Founding Companies as S Corporations prior to the consummation
of the Mergers and the tax impact of the Compensation Differential in
each period. See Note 11 of Notes to Combined Founding Companies'
Financial Statements.
(4) Includes: (i) 2,165,724 shares issued by Coach USA prior to this
Offering; (ii) 5,099,687 shares to be issued to the stockholders of the
Founding Companies in connection with the Mergers; (iii) 1,700,714 of
the 3,600,000 shares being offered hereby to pay the cash portion of the
consideration for the Founding Companies; and (iv) 127,230 of the
3,600,000 shares offered hereby to pay excess Subchapter S
distributions; but excludes 1,174,717 shares of Common Stock subject to
options to be granted in connection with this Offering at an exercise
price equal to the initial public offering price. See
"Management -- 1996 Long-Term Incentive Plan" and "-- 1996 Non-Employee
Directors' Stock Plan."
19

SELECTED INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA

The following table presents selected financial data for each of the
individual Founding Companies for the three most recent years as well as the
most recent interim period and comparative period of the prior year, as
applicable.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31(1) FIRST QUARTER(2)
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUBURBAN:
Revenues........................ $ 32,274 $ 30,427 $ 29,752
Operating expenses.............. 28,903 27,526 25,322
Gross profit.................... 3,371 2,901 4,430
General and administrative
expenses...................... 2,417 2,283 2,563
Interest and other expense,
net........................... 175 147 213
Net income...................... 520 343 1,231
Pro forma net income(3)......... 795 658 1,512
GRAY LINE SF:
Revenues........................ 22,122 24,487 29,235 $ 5,153 $ 5,728
Operating expenses.............. 16,590 18,990 22,627 4,760 5,021
Gross profit.................... 5,532 5,497 6,608 393 707
General and administrative
expenses...................... 4,129 3,794 4,722 1,208 1,459
Interest and other expense,
net........................... 228 323 430 127 95
Net income (loss)............... 672 924 1,074 (678) (627)
Pro forma net income
(loss)(3)..................... 735 867 1,085 (507) (404)
LEISURE:
Revenues........................ 17,534 17,694 18,992
Operating expenses.............. 15,497 14,139 14,577
Gross profit.................... 2,037 3,555 4,415
General and administrative
expenses...................... 2,128 1,934 1,895
Interest and other expense,
net........................... 313 184 132
Net income (loss)............... (372) 1,298 2,163
Pro forma net income
(loss)(3)..................... (127) 963 1,577
COMMUNITY:
Revenues........................ 13,179 14,106 13,807
Operating expenses.............. 11,057 12,228 11,680
Gross profit.................... 2,122 1,878 2,127
General and administrative
expenses...................... 1,760 1,999 2,193
Interest and other expense,
net........................... 258 239 173
Net income (loss)............... 103 (262) (62)
Pro forma net income(3)......... 538 415 718
ADVENTURE:
Revenues........................ 8,494 10,001 11,053
Operating expenses.............. 6,665 8,457 8,241
Gross profit.................... 1,829 1,544 2,812
General and administrative
expenses...................... 840 968 1,089
Interest and other expense,
net........................... 626 641 928
Net income (loss)............... 328 (58) 719
Pro forma net income(3)......... 255 12 537
ARROW:
Revenues........................ 9,469 10,039 10,650 2,425 2,211
Operating expenses.............. 6,655 6,957 7,222 1,944 1,907
Gross profit.................... 2,814 3,082 3,428 481 304
General and administrative
expenses...................... 1,216 1,493 1,751 306 337
Interest and other expense,
net........................... 501 534 658 168 199
Net income (loss)............... 1,097 1,055 1,019 7 (232)
Pro forma net income
(loss)(3)..................... 677 653 620 8 (132)
</TABLE>
(1) Amounts for Gray Line SF are reported for fiscal years ended October 31,
and amounts for Arrow are reported for fiscal years ended September 30.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Combined
Founding Companies' Financial Statements and related notes thereto and
"Selected Combined Founding Companies' Financial Data" appearing elsewhere in
this Prospectus.

INTRODUCTION

The Company's motorcoach revenues are derived from fares charged to
individual passengers and fees charged under contracts to provide motorcoach
services. Operating expenses consist primarily of salaries and benefits for
drivers and mechanics, depreciation, maintenance, fuel, oil, insurance and
commissions to agents. General and administrative expenses consist primarily
of compensation and related benefits to the Founding Companies' owners and
certain key employees, administrative salaries and benefits, marketing,
communications and professional fees.

The Founding Companies have been managed throughout the periods presented
as independent private companies, and, as such, their results of operations
reflect a variety of tax structures (S Corporations and C Corporations) which
have influenced, among other things, their historical levels of owners'
compensation. These owners and certain key employees have agreed to certain
reductions in their compensation and benefits in connection with the
organization of the Company and the Mergers. The differential between the
previous compensation and benefits of these individuals and the compensation
they have agreed to receive subsequent to the Mergers is referred to as
"Compensation Differential." This Compensation Differential and the related
income tax effect have been reflected as pro forma adjustments in the Coach
USA pro forma financial information. See "Management -- Executive
Compensation; Employment Agreements; Covenants-Not-To-Compete."

The Company has preliminarily analyzed the savings that it expects to
realize by consolidating certain general and administrative functions,
including reductions in insurance and employee benefit plan expenses. In
addition, the Company anticipates that it will realize benefits from: (i) the
reduction in interest payments related to the prepayment of a portion of the
Founding Companies' debt; (ii) its ability to borrow at lower interest rates
than the Founding Companies; and (iii) savings in other general and
administrative areas. The Company cannot quantify these savings prior to
completion of the Mergers. It is anticipated that these savings will be
partially offset by the costs of being a public company and the incremental
increase in costs related to the Company's new corporate management. However,
these costs also cannot be accurately quantified. Accordingly, neither the
anticipated savings nor the anticipated costs have been included in the pro
forma financial information included herein. As a result, historical combined
results may not be comparable to, or indicative of, future performance.

RESULTS OF OPERATIONS--COMBINED

The combined results discussed below occurred when the combined Founding
Companies were not under common control or management and may not be
comparable to, or indicative of, future performance. See "Risk
Factors -- Absence of Combined Operating History."

COMBINED RESULTS FOR 1994 COMPARED TO 1995

REVENUES. Revenues increased $6.7 million, or 6.3%, from $106.8 million
in 1994 to $113.5 million in 1995. This increase was largely due to: (i) an
increase in Gray Line SF's revenues of $4.7 million, or 19.2%, from $24.5
million in 1994 to $29.2 million in 1995, primarily attributable to additional
transit services which began during the middle of 1994 and increased
sightseeing business in 1995; (ii) an increase in Leisure's revenues of $1.3
million, or 7.3%, from $17.7 million in 1994 to $19.0 million in 1995,
primarily attributable to increased charter and transit services and the
addition of two daily scheduled routes to Atlantic City; and (iii) an increase
in Adventure's revenues of $1.1 million, or 11.0%, from $10.0 million in 1994
to $11.1 million in 1995, primarily attributable to additional airport service
between the Atlantic City airport and the Atlantic City casinos. This increase
was partially offset by a decrease in Suburban's and Community's revenues of
$0.6 million, or 2.0%, from $30.4 million in 1994 to $29.8 million in 1995 and
$0.3 million, or 2.1%, from $14.1 million in 1994 to $13.8 million in 1995,
respectively.

OPERATING EXPENSES. Operating expenses increased by $1.4 million, or
1.6%, from $88.3 million in 1994 to $89.7 million in 1995, but declined to
79.0% of revenues in 1995 from 82.7% in 1994. The dollar increase was
primarily attributable to a $3.6 million increase, or 18.9%, from $19.0
million in 1994 to $22.6 million in 1995 in Gray Line SF's operating expenses,
consistent with its percentage increase in revenues. Gray Line SF's additional
operating expenses consisted largely of increased drivers' salaries, agents'
commissions and vehicle maintenance expenses. This increase was partially
offset by a decrease in Suburban's, Community's and Adventure's operating
expenses of $2.2 million, or 8.0%, from $27.5 million in 1994 to $25.3 million
in 1995, $0.5 million, or 4.5%, from $12.2 million in 1994 to $11.7 million in
1995, and $0.3 million, or 2.6%, from $8.5 million in 1994 to $8.2 million in
1995, respectively. The decrease in operating expenses as a percentage of
revenues was primarily attributable to the 8.0% decrease in Suburban's
operating expenses resulting from the decision not to renew a municipal
contract, lower salaries, wages and related benefits from favorable revisions
of its collective bargaining agreements and changes to Suburban's employee
group medical benefits program.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $1.7 million, or 13.6%, from $12.5 million in 1994 to $14.2 million
in 1995. This increase was largely due to an increase in owners' compensation
in 1995 of $1.1 million and an increase in Gray Line SF's general and
administrative expenses consistent with its increase in revenues. The $1.1
million increase in owners' compensation was primarily attributable to an
increase in 1995 from the prior year of $0.3 million for Suburban, $0.4
million for Community and $0.3 million for Gray Line SF.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $2.1 million in 1994 and $3.2
million in 1995, increased 60.0%, from $8.0 million, or 7.5% of revenues, in
1994 to $12.8 million, or 11.3% of revenues, in 1995. The increase was
attributable to the net increase in revenues of $6.7 million, primarily from
additional charter and transit services provided by Gray Line SF, Leisure and
Adventure and the reduction of operating expenses as a percentage of revenues,
particularly by Suburban, due to its decision not to renew a municipal
contract, favorable revisions of its collective bargaining agreements and
lower expenses related to its employee group medical benefits program.
Specifically, pro forma operating income increased (i) $1.6 million, from $1.2
million in 1994 to $2.8 million in 1995 for Suburban; (ii) $0.5 million, from
$1.8 million in 1994 to $2.3 million in

1995 for Gray Line SF; (iii) $1.0 million, from $1.8 million in 1994 to $2.8
million in 1995 for Leisure; (iv) $0.5 million, from $0.9 million in 1994 to
$1.4 million in 1995 for Community; and (v) $1.2 million, from $0.7 million in
1994 to $1.9 million in 1995 for Adventure. The Compensation Differential
increased (i) $0.3 million, from $0.6 million in 1994 to $0.9 million in 1995
for Suburban; (ii) $0.3 million, from $0.1 million in 1994 to $0.4 million in
1995 for Gray Line SF; and (iii) $0.4 million, from $1.0 million in 1994 to
$1.4 million in 1995 for Community.

INTEREST EXPENSE. Interest expense increased $0.5 million, or 17.8%,
from $2.7 million in 1994 to $3.2 million in 1995. This increase was largely
due to: (i) an increase in Suburban's interest expense of $0.2 million; (ii)
an increase in Gray Line SF's interest expense of $0.1 million; and (iii) an
increase in Adventure's interest expense of $0.1 million. In each case, the
increase resulted from higher outstanding debt during 1995 as a result of
equipment purchases.

OTHER INCOME, NET. Other income, net decreased $0.1 million, or 23.6%,
from $0.4 million in 1994 to $0.3 million in 1995, primarily due to gains and
losses realized from the sale of transportation equipment by several of the
Founding Companies.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for taxes, increased
66.7% from $3.6 million, or 3.4% of revenues, in 1994 to $6.0 million, or 5.3%
of revenues, in 1995. The pro forma provision for taxes includes the
incremental taxes provided for Federal and state income taxes relating to the
Compensation Differential of $0.8 million in 1994 and $1.3 million in 1995,
and income taxes on S Corporation income and on revenues generated from
motorcoaches owned by a stockholder of Gray Line SF which were not included in
historical net income of $1.0 million in 1994 and $2.0 million in 1995.
Specifically, pro forma net income increased (i) $0.8 million, from $0.7
million in 1994 to $1.5 million in 1995 for Suburban; (ii) $0.2 million, from
$0.9 million in 1994 to $1.1 million in 1995 for Gray Line SF; (iii) $0.6
million, from $1.0 million in 1994 to $1.6 million in 1995 for Leisure; (iv)
$0.3 million, from $0.4 million in 1994 to $0.7 million in 1995 for Community;
and (v) $0.5 million, from $12,000 in 1994 to $0.5 million in 1995 for
Adventure.

COMBINED RESULTS FOR 1993 COMPARED TO 1994

REVENUES. Revenues increased $3.7 million, or 3.6%, from $103.1 million
in 1993 to $106.8 million in 1994. This increase was largely due to: (i) an
increase in Gray Line SF's revenues of $2.4 million, or 10.9%, from $22.1
million in 1993 to $24.5 million in 1994, primarily attributable to the
start-up of additional transit and commuter operations and a higher volume of
sightseeing business; and (ii) an increase in Adventure's revenues of $1.5
million, or 17.6%, from $8.5 million in 1993 to $10.0 million in 1994,
primarily attributable to expanded Atlantic City casino employee shuttle
contracts and additional tour and charter business. These increases were
partially offset by a decrease in Suburban's revenues of $1.9 million, or
5.9%, from $32.3 million in 1993 to $30.4 million in 1994, primarily
attributable to the loss of one municipal contract and the decision to
discontinue a low margin municipal contract during 1994.

OPERATING EXPENSES. Operating expenses increased $2.9 million, or 3.4%,
from $85.4 million in 1993 to $88.3 million in 1994, but declined as a percent
of revenues from 82.8% in 1993 to 82.7% in 1994. This dollar increase was
largely due to: (i) an increase in Gray Line SF's operating expenses of $2.4
million, or 14.5%, from $16.6 million in 1993 to $19.0 million in 1994,
primarily attributable to additional fleet, employee and other costs
associated with new transit and commuter contracts; (ii) an increase in
Community's operating expenses of $1.1 million, or 9.9%, from $11.1 million in
1993 to $12.2 million in 1994, primarily attributable to higher operating
activity and increased maintenance expenses; and (iii) an increase in
Adventure's operating expenses of $1.8 million, or 26.9%, from $6.7 million in
1993 to $8.5 million in 1994, primarily attributable to an increase in its
motorcoach fleet and related maintenance, depreciation and employee expenses.
These increases were partially offset by a decrease in Suburban's operating
expenses of $1.4 million, or 4.8%, from $28.9 million in 1993 to $27.5 million
in 1994, and a decrease in Leisure's operating expenses of $1.4 million, or
9.0%, from $15.5 million in
23

1993 to $14.1 million in 1994, primarily attributable to a reduction in
maintenance costs for its transportation equipment.

GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative
expenses were $12.5 million, or 12.1% of revenues, in 1993 and $12.5 million,
or 11.7% of revenues, in 1994.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $1.8 million in 1993 and $2.1
million in 1994, increased 12.7%, from $7.1 million, or 6.9% of revenues, in
1993, to $8.0 million, or 7.5% of revenues, in 1994. The increase was
attributable to the net increase in revenues of $3.7 million primarily from
additional charter and transit services provided by Gray Line SF and
Adventure, offset by Suburban's decrease in revenues from two municipal
contracts. The net increase in revenues, along with the decrease in Leisure's
operating expenses, were offset by increases in maintenance costs for
Adventure and Community attributable to increases in their motorcoach fleet
and higher operating activity. Specifically, the pro forma operating income
(i) decreased $0.3 million, from $1.5 million in 1993 to $1.2 million in 1994
for Suburban; (ii) increased $0.3 million, from $1.5 million in 1993 to $1.8
million in 1994 for Gray Line SF; (iii) increased $1.7 million, from $0.1
million in 1993 to $1.8 million in 1994 for Leisure; (iv) decreased $0.3
million, from $1.2 million in 1993 to $0.9 million in 1994 for Community; and
(v) decreased $0.4 million, from $1.1 million in 1993 to $0.7 million in 1994
for Adventure.

INTEREST EXPENSE. Interest expense increased $0.1 million, or 3.1%, from
$2.6 million in 1993 to $2.7 million in 1994.

OTHER INCOME, NET. Other income, net increased $0.1 million, or 43.8%,
from $0.3 million in 1993 to $0.4 million in 1994, primarily due to gains and
losses realized from the sale of transportation equipment by several of the
Founding Companies.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for taxes, was $2.9
million, or 2.8% of revenues, in 1993 compared to $3.6 million, or 3.4% of
revenues, in 1994. The pro forma provision for taxes includes the incremental
taxes provided for Federal and state income taxes relating to the Compensation
Differential of $0.8 million in 1993 and $0.8 million in 1994, and income
taxes on S Corporation income and on revenues generated from motorcoaches
owned by a stockholder of Gray Line SF which were not included in historical
net income of $0.5 million in 1993 and $1.0 million in 1994. Specifically, pro
forma net income (i) decreased $0.1 million, or 17.2%, from $0.8 million in
1993 to $0.7 million in 1994 for Suburban; (ii) increased $0.2 million, or
18.0%, from $0.7 million in 1993 to $0.9 million in 1994 for Gray Line SF;
(iii) increased $1.1 million, from a loss of $0.1 million in 1993 to income of
$1.0 million in 1994 for Leisure; and (iv) decreased $0.1 million, or 22.9%,
from $0.5 million in 1993 to $0.4 million in 1994 for Community.

LIQUIDITY AND CAPITAL RESOURCES--COMBINED

Net cash provided by combined operating activities was $6.6 million, $8.9
million and $11.0 million for 1993, 1994 and 1995, respectively. The increase
in net cash provided by combined operating activities for 1995 as compared to
1994 of $2.1 million was primarily due to an increase in net income of: (i)
$0.9 million at Suburban, (ii) $0.8 million at Adventure and (iii) $0.9
million at Leisure.

Cash used in combined investing activities was $3.1 million, $4.8 million
and $10.4 million for 1993, 1994 and 1995, respectively. Cash used in combined
investing activities for 1995 was primarily for additions and replacements of
motorcoaches and for expansions of facilities, consisting principally of
additions to property and equipment, net of proceeds from sales of property
and equipment of: (i) $2.8 million at Suburban, (ii) $1.0 million at
Community, (iii) $3.4 million at Leisure, (iv) $0.4 million at Adventure and
(v) $2.2 million at Arrow.
24

Cash used in combined financing activities was $4.6 million, $2.2 million
and $1.8 million for 1993, 1994 and 1995, respectively. Cash used in combined
financing activities consisted of dividends paid to owners of the individual
Founding Companies partially offset by proceeds from issuances of long-term
obligations net of repayments. Dividends paid to owners of the individual
Founding Companies primarily consisted of payments at: (i) Suburban of $1.1
million, (ii) Leisure of $1.5 million, Community of $0.2 million and Arrow of
$0.2 million. These dividend payments were partially offset by proceeds from
issuance of long-term obligations net of repayments at: Suburban of $1.2
million, Leisure of $1.0 million and Community of $0.6 million. Grayline SF
had net principal payments on long-term obligations of $1.0 million and
Adventure had net principal payments on long-term obligations of $0.9 million.

Combined cash and cash equivalents decreased by $1.1 million in 1993,
increased by $1.9 million in 1994 and decreased by $1.2 million in 1995. The
decrease in 1995 principally resulted from a decrease of $0.4 million at
Suburban and a decrease of $0.9 million at Leisure.

Coach USA's sole stockholder as of December 31, 1995 has agreed to
advance whatever funds are necessary to effect the Mergers and this Offering.
These advances will be repaid out of the proceeds of this Offering. As of
December 31, 1995, these advances totaled $188,000.

The Company has received two commitments to provide a $30 million line of
credit. The Company has accepted one of these commitments and is currently
negotiating a definitive loan agreement. It is anticipated that the lender
selected will act as a lead financial institution to develop a syndicate and
establish an $80 million line of credit for the Company. The line of credit
under the commitment selected will be available for working capital,
acquisitions and to finance equipment replacements and additions and to
refinance indebtedness not repaid out of the net proceeds of this Offering,
subject to normal borrowing base limitations. The commitment provides for
revolving credit facilities with a term of either one or two years and will
bear interest at LIBOR plus 100 to 125 basis points, with rates increasing as
debt levels are raised by the Company. As of December 31, 1995, the combined
Founding Companies had total debt of $33.1 million. It is anticipated that
approximately $15.9 million of these obligations will be repaid from the net
proceeds of the Offering, with the remaining balance to be refinanced with the
line of credit discussed above.

Certain of the Founding Companies have entered into agreements to
purchase motorcoaches for delivery in 1996 as follows: (i) Suburban, 10
motorcoaches for $3.0 million, (ii) Leisure, 12 motorcoaches for $3.5 million,
(iii) Community, two motorcoaches for $0.6 million, (iv) Adventure, 11
motorcoaches for $3.1 million and (v) Arrow, 15 motorcoaches for $4.7 million.
Each of the applicable Founding Companies has either obtained financing or is
currently pursuing financing arrangements for these motorcoaches. The Company
expects to realize approximately $2.9 million on the trade in of approximately
30 motorcoaches in connection with its 1996 motorcoach purchases, resulting in
net capital expenditures of approximately $12.0 million.

Certain of the Founding Companies will make cash distributions to their
stockholders prior to the Merger which represent the applicable company's
estimated S Corporation Accumulated Adjustment Account as follows: (i)
Leisure, $3.1 million, (ii) Community, $0.7 million and (iii) Arrow, $0.7
million. These distributions will be funded through cash provided by operating
activities of the applicable company and additional debt as needed.

Suburban, Leisure, Community, Adventure and Arrow each had a working
capital deficit as of its most recent balance sheet date. These companies may
continue to experience working capital deficits as they pursue their business
strategy of growth and expanding services. These companies have historically
funded their operations with cash flows from operations and debt from lenders
and stockholders. While there can be no assurance, management of each of these
companies believes that it has adequate financing alternatives to fund its
operations through the first quarter of 1997.

RESULTS OF OPERATIONS - SUBURBAN

SUBURBAN RESULTS FOR 1994 COMPARED TO 1995

REVENUES. Revenues decreased $0.6 million, or 2.0%, from $30.4 million in
1994 to $29.8 million in 1995. This decline was primarily attributable to the
decision not to renew a municipal transit contract.

OPERATING EXPENSES. Operating expenses decreased $2.2 million, or 8.0%,
from $27.5 million in 1994 to $25.3 million in 1995, and declined to 85.1% of
revenues in 1995 from 90.5% in 1994. The decrease in operating expenses was
attributable to the decision not to renew a municipal transit contract, lower
salaries, wages and related benefits from favorable collective bargaining
revisions and changes to the medical benefits program.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.3 million, or 12.3%, from $2.3 million in 1994 to $2.6 million in
1995. This increase was the result of an increase in owners" compensation in
1995 of $0.3 million.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $0.6 million in 1994 and $0.9
million in 1995, increased 133.3%, from $1.2 million, or 3.9% of revenues, in
1994 to $2.8 million, or 9.4% of revenues, in 1995.

INTEREST AND OTHER EXPENSES, NET. These expenses increased $0.1 million,
or 100.0%, from $0.1 million in 1994 to $0.2 million in 1995. This increase
was primarily due to an increase in interest expense from higher outstanding
debt as a result of equipment purchases, partially offset by an increase in
interest income.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for income taxes,
increased 129.8%, from $0.7 million, or 2.2% of revenues, in 1994 to $1.5
million, or 5.1% of revenues, in 1995. The pro forma provision for taxes
includes the incremental taxes provided for Federal and state income taxes
relating to the Compensation Differential and income taxes on S Corporation
income.

SUBURBAN RESULTS FOR 1993 COMPARED TO 1994

REVENUES. Revenues decreased $1.9 million, or 5.9%, from $32.3 million
in 1993 to $30.4 million in 1994. This decrease was primarily due to the loss
of one municipal transit contract and the decision to discontinue a low margin
municipal transit contract during 1994.

OPERATING EXPENSES. Operating expenses decreased $1.4 million, or 4.8%,
from $28.9 million in 1993 to $27.5 million in 1994, but increased to 90.5% of
revenues in 1994 from 89.6% in 1993. The decrease in operating expenses was
primarily related to the reduction in municipal transit contract services.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased $0.1 million, or 5.5%, from $2.4 million in 1993 to $2.3 million in
1994.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $0.6 million in 1993 and 1994,
decreased 20.0% from $1.5 million, or 4.6% of revenues, in 1993 to $1.2
million, or 3.9% of revenues in 1994.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for income taxes,
decreased 17.2% from $0.8 million, or 2.5% of revenues, in 1993 to $0.7
million, or 2.2% of revenues, in 1994. The pro forma provision for taxes
includes the incremental taxes provided for Federal and state income taxes
relating to the Compensation Differential and income taxes on S Corporation
income.

LIQUIDITY AND CAPITAL RESOURCES - SUBURBAN

Net cash provided by operating activities was $1.4 million, $1.3 million
and $2.4 million for 1993, 1994 and 1995, respectively. The increase in net
cash provided by operating activities for 1995 was primarily due to a
significant increase in net income, together with a decrease in

accounts receivable. Cash used in investing activities was $1.1 million, $1.1
million and $2.8 million for 1993, 1994 and 1995, respectively. Cash used in
investing activities for 1995 was primarily used for additions and
replacements of motorcoaches. Cash used in (provided by) financing activities
was $0.3 million, $0.5 million and ($0.1 million) for 1993, 1994 and 1995,
respectively. Cash provided by financing activities for 1995 consisted of
proceeds from the issuance of long-term obligations, which were only partially
offset by principal payments on long-term obligations and dividends paid to
owners of Suburban.

As a result of the foregoing, cash and cash equivalents increased $0.1
million in 1993, decreased by $0.2 million in 1994 and decreased by $0.4
million in 1995.

As of December 31, 1995, Suburban had total debt of $5.1 million.
Suburban has entered into a commitment to purchase 10 additional motorcoaches
during 1996 for approximately $3.0 million. Suburban is currently evaluating
various financing alternatives associated with the purchase of these
motorcoaches.

Suburban anticipates that cash flow from operations and bank credit
agreements will be sufficient for planned capital expenditures at least
through the first quarter of 1997.

RESULTS OF OPERATIONS - GRAY LINE SF

GRAY LINE SF RESULTS FOR 1994 COMPARED TO 1995

REVENUES. Revenues increased $4.7 million, or 19.2%, from $24.5 million
in 1994 to $29.2 million in 1995. This increase was primarily attributable to
an additional municipal transit contract which began during the middle of 1994
and increased sightseeing business in 1995.

OPERATING EXPENSES. Operating expenses increased $3.6 million, or 18.9%,
from $19.0 million in 1994 to $22.6 million in 1995, and declined to 77.4% of
revenues in 1995 from 77.6% in 1994. The increase in operating expenses was
consistent with the percentage increase in revenues. The additional operating
expenses consisted largely of increased drivers' salaries, agents' commissions
and vehicle maintenance expenses.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.9 million, or 23.7%, from $3.8 million in 1994 to $4.7 million in
1995. This increase was consistent with the increase in revenues and an
increase in owners' compensation in 1995 of $0.3 million.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $0.1 million in 1994 and $0.4
million in 1995, increased 27.8%, from $1.8 million, or 7.3% of revenues, in
1994 to $2.3 million, or 7.9% of revenues, in 1995.

INTEREST AND OTHER EXPENSES, NET. Interest expenses increased $0.1
million, or 32.2%, from $0.4 million in 1994 to $0.6 million in 1995. The
increase in interest expense resulted from higher outstanding debt levels
during 1995.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for income taxes,
increased 22.2%, from $0.9 million, or 3.7% of revenues, in 1994 to $1.1
million, or 3.8% of revenues, in 1995. The pro forma provision for income
taxes includes the incremental taxes provided for Federal and state income
taxes relating to the Compensation Differential and income taxes on revenues
generated from motorcoaches owned by a stockholder for which taxes were not
required to be provided in Grayline SF's historical net income.

GRAY LINE SF RESULTS FOR 1993 COMPARED TO 1994

REVENUES. Revenues increased $2.4 million, or 10.9%, from $22.1 million
in 1993 to $24.5 million in 1994. This increase was primarily attributable to
the start up of additional municipal transit contract operations and a higher
volume of sightseeing business.
27

OPERATING EXPENSES. Operating expenses increased $2.4 million, or 14.5%,
from $16.6 million in 1993 to $19.0 million in 1994, and increased to 77.6% of
revenues in 1994 from 75.1% in 1993. The increase in operating expenses was
primarily related to additional fleet, employee and other start up costs
associated with new municipal transit contracts.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased $0.3 million, or 7.3%, from $4.1 million in 1993 to $3.8 million in
1994.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $0.1 million in 1993 and 1994,
increased 20.0%, from $1.5 million, or 6.8% of revenues, in 1993 to $1.8
million, or 7.3% of revenues, in 1994.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for income taxes,
increased 28.6%, from $0.7 million, or 3.2% of revenues, in 1993 to $0.9
million, or 3.7% of revenues, in 1994. The pro forma provision for income
taxes includes the incremental taxes provided for Federal and state income
taxes relating to the Compensation Differential and income taxes on revenues
generated from motorcoaches owned by a stockholder for which taxes were not
required to be provided in Grayline SF's historical net income.

LIQUIDITY AND CAPITAL RESOURCES - GRAY LINE SF

Net cash provided by (used in) operating activities was $1.4 million,
$1.7 million, $1.6 million and $(0.2 million) for 1993, 1994, 1995 and the
three months ended January 31, 1996, respectively. Cash used in operating
activities for the three months ended January 31, 1996 resulted from a net
loss for the period, which was only partially offset by depreciation for the
period. Cash used in investing activities was $0.4 million, $1.5 million, $0.4
million and $0.1 million for 1993, 1994, 1995 and the three months ended
January 31, 1996, respectively. Cash used in investing activities for 1995 and
for the three months ended January 31, 1996 was primarily for additions and
replacements of equipment. Cash used in financing activities was $1.2 million,
$0.3 million, $1.0 million and $0.1 million for 1993, 1994, 1995 and the three
months ended January 31, 1996, respectively. Cash used in financing activities
for 1993, 1994, 1995 and for the three months ended January 31, 1996 consisted
of net principal payments on long-term obligations.

As a result of the foregoing, cash and cash equivalents decreased $0.1
million in 1993, was unchanged in 1994, increased by $0.1 million in 1995 and
decreased by $0.4 million for the three months ended January 31, 1996.

As of January 31, 1996, Gray Line SF had total debt of $4.5 million. Gray
Line SF has no commitments to purchase additional motorcoaches in 1996. Gray
Line SF anticipates that cash flows from operations will be sufficient to meet
its liquidity requirements through the first quarter of 1997.

UNAUDITED INTERIM RESULTS - GRAY LINE SF

Revenues for the three months ended January 31, 1996 increased $0.5
million, or 11.2%, as compared to the three months ended January 31, 1995,
largely due to increased levels of municipal transit contracts. Operating
expenses increased $0.2 million, or 5.5%, for the three months ended January
31, 1996 compared to the three months ended January 31, 1995. Operating
expenses as a percentage of revenues declined from 92.4% for the three months
ended January 31, 1995 to 87.7% for the three months ended January 31, 1996
due to fixed costs, primarily depreciation, being spread over a larger revenue
base. General and administrative expenses increased $0.3 million, or 20.8%, as
a result of additional overhead expenses to support increased revenue levels.
Interest expense decreased due to lower levels of average debt outstanding.

RESULTS OF OPERATIONS - LEISURE

LEISURE RESULTS FOR 1994 COMPARED TO 1995

REVENUES. Revenues increased $1.3 million, or 7.3%, from $17.7 million
in 1994 to $19.0 million in 1995. This increase was primarily attributable to
increases in charter and the addition of two daily scheduled routes to
Atlantic City.

OPERATING EXPENSES. Operating expenses increased $0.5 million, or 3.5%,
from $14.1 million in 1994 to $14.6 million in 1995, and declined to 76.8% of
revenues in 1995 from 79.7% in 1994. The increase in operating expenses was
primarily attributable to an increase in its motorcoach fleet and related
maintenance, depreciation and employee expenses.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were unchanged at $1.9 million for 1994 and 1995.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $0.2 million in 1994 and $0.3
million in 1995, increased 55.6%, from $1.8 million, or 10.2% of revenues, in
1994 to $2.8 million, or 14.7% of revenues, in 1995.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for income taxes,
increased 60.0%, from $1.0 million, or 5.6% of revenues, in 1994 to $1.6
million, or 8.4% of revenues, in 1995. The pro forma provision for taxes
includes the incremental taxes provided for Federal and state income taxes
relating to the Compensation Differential and income taxes on S Corporation
income.

LEISURE RESULTS FOR 1993 COMPARED TO 1994

REVENUES. Revenues increased $0.2 million, or 1.1%, from $17.5 million
in 1993 to $17.7 million in 1994.

OPERATING EXPENSES. Operating expenses decreased $1.4 million, or 9.0%,
from $15.5 million in 1993 to $14.1 million in 1994, and decreased to 79.7% of
revenues in 1994 from 88.6% in 1993. The decrease in operating expenses was
primarily attributable to a reduction in maintenance cost for transportation
equipment.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased $0.2 million, or 9.1%, from $2.1 million in 1993 to $1.9 million in
1994.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $0.2 million in 1993 and 1994,
increased from $0.1 million in 1993 to $1.8 million, or 10.2% of revenues, in
1994, primarily as a result of reduced operating expenses.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for income taxes,
increased from a loss of $0.1 million in 1993 to $1.0 million, or 5.6% of
revenues, in 1994. The pro forma provision for taxes includes the incremental
taxes provided for Federal and state income taxes relating to the Compensation
Differential and income taxes on S Corporation income.

LIQUIDITY AND CAPITAL RESOURCES - LEISURE

Net cash provided by operating activities was $1.5 million, $2.7 million
and $2.9 million for 1993, 1994 and 1995, respectively. The increase in net
cash provided by operating activities for 1995 was primarily due to a
significant increase in net income which was only partially offset by changes
in operating assets and liabilities. Cash used in investing activities was
$0.7 million and $3.4 million for 1993 and 1995, respectively. Cash used in
investing activities for 1995 was primarily for additions and replacements of
motorcoaches. Cash used in financing activities was $1.6 million, $0.7 million
and $0.4 million for 1993, 1994 and 1995. Cash used in financing

activities for 1993, 1994 and 1995 consisted of net principal payments on
long-term obligations, as well as dividends paid to the owners of Leisure.

As a result of the foregoing, cash and cash equivalents decreased by $0.8
million in 1993, increased by $2.0 million in 1994 and decreased by $0.9
million in 1995.

As of December 31, 1995, Leisure had total debt of $4.3 million. Leisure
has entered into commitments to purchase 12 replacement motorcoaches during
1996 for approximately $3.5 million and is currently evaluating financing
alternatives with its present lending institution.

Leisure had a working capital deficit at December 31, 1995. Leisure may
continue to experience working capital deficits as it pursues its business
strategy of growth and expanding services. Leisure has historically funded its
operations with cash flows from operations and debt from lenders and
stockholders. While there can be no assurance, management of Leisure believes
that Leisure has adequate financing alternatives to fund its operations
through the first quarter of 1997.

RESULTS OF OPERATIONS - COMMUNITY

COMMUNITY RESULTS FOR 1994 COMPARED TO 1995

REVENUES. Revenues decreased $0.3 million, or 2.1%, from $14.1 million in
1994 to $13.8 million in 1995.

OPERATING EXPENSES. Operating expenses decreased $0.5 million, or 4.1%,
from $12.2 million in 1994 to $11.7 million in 1995, and declined to 84.8% of
revenues in 1995 from 86.5% in 1994.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.2 million, or 10.0%, from $2.0 million in 1994 to $2.2 million in
1995. This increase was primarily a result of the Compensation Differential
increasing from $1.0 million in 1994 to $1.4 million in 1995.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $1.0 million in 1994 and $1.4
million 1995, increased 55.6%, from $0.9 million, or 6.4% of revenues, in 1994
to $1.4 million, or 10.1% of revenues, in 1995.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for income taxes,
increased 75.0%, from $0.4 million, or 2.8% of revenues, in 1994 to $0.7
million, or 5.1% of revenues, in 1995. The pro forma provision for taxes
includes the incremental taxes provided for Federal and state income taxes
relating to the Compensation Differential and income taxes on S Corporation
income.

COMMUNITY RESULTS FOR 1993 COMPARED TO 1994

REVENUES. Revenues increased $0.9 million, or 6.8%, from $13.2 million in
1993 to $14.1 million in 1994.

OPERATING EXPENSES. Operating expenses increased $1.1 million, or 9.9%,
from $11.1 million in 1993 to $12.2 million in 1994, and increased to 86.5% of
revenues in 1994 from 84.1% in 1993. The increase in operating expenses was
primarily attributable to higher operating activity and increased maintenance
expenses.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.2 million, or 11.1%, from $1.8 million in 1993 to $2.0 million in
1994. This increase was the result of Compensation Differential increasing from
$0.8 million in 1993 to $1.0 million in 1994.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential of $0.8 million in 1993 and $1.0
million in 1994, decreased from
30

$1.2 million, or 9.1% of revenues, in 1993 to $0.9 million, or 6.4% of revenues,
in 1994, primarily as a result of the increased operating expenses.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for income taxes,
decreased 20.0%, from $0.5 million, or 3.8% of revenues, in 1993 to $0.4
million, or 2.8% of revenues, in 1994. The pro forma provision for taxes
includes the incremental taxes provided for Federal and state income taxes
relating to the Compensation Differential and income taxes on S Corporation
income.

LIQUIDITY AND CAPITAL RESOURCES - COMMUNITY

Net cash provided by (used in) operating activities was ($0.1 million),
$0.9 million and $0.6 million for 1993, 1994 and 1995, respectively. The
decrease in net cash provided by operating activities for 1995 was primarily
due to an increase in prepaid expenses and other current assets as compared to
1994. Cash used in investing activities was $0.4 million and $1.0 million for
1994 and 1995, respectively. Cash used in investing activities for 1995 was
primarily for additions and replacements of motorcoaches. Cash used in
(provided by) financing activities was $0.2 million, $0.4 million and ($0.4
million) for 1993, 1994 and 1995. Cash used in financing activities for 1993
and 1994 consisted of net principal payments on long-term obligations, as well
as dividends paid to the owners of Community. Cash provided by financing
activities for 1995 consisted of proceeds from issuance of long-term
obligations which were only partially offset by principal payments on
long-term obligations and dividend payments.

As a result of the foregoing, cash and cash equivalents decreased by $0.3
million in 1993, increased by $0.1 million in 1994 and decreased by $0.1
million in 1995.

As of December 31, 1995, Community had total debt of $1.7 million.
Community has entered into a commitment to purchase two replacement
motorcoaches during 1996 for approximately $600,000.

Community had a working capital deficit as of December 31, 1995.
Community may continue to experience working capital deficits as it pursues
its business strategy of growth and expanding services. Community has
historically funded its operations with cash flows from operations and debt
from lenders and stockholders. While there can be no assurances, management of
Community believes it has adequate financing alternatives to fund its
operations through the first quarter of 1997.

RESULTS OF OPERATIONS - ADVENTURE

ADVENTURE RESULTS FOR 1994 COMPARED TO 1995

REVENUES. Revenues increased $1.1 million, or 11.0%, from $10.0 million
in 1994 to $11.1 million in 1995. This increase was primarily attributable to
additional airport service between the Atlantic City airport and the Atlantic
City casinos.

OPERATING EXPENSES. Operating expenses decreased $0.3 million, or 3.5%,
from $8.5 million in 1994 to $8.2 million in 1995, and declined from 85.0% of
revenues in 1994 to 73.9% of revenues in 1995. The decrease in operating
expense as a percentage of revenues was primarily attributable to a higher
utilization of the motorcoach fleet in 1995.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.1 million, or 10.0%, from $1.0 million in 1994 to $1.1 million in
1995.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential, increased 171.4%, from $0.7
million, or 7.0% of revenues, in 1994 to $1.9 million, or 17.1% of revenues,
in 1995.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for taxes, increased
$0.5 million in 1995 to
31

$0.5 million, or 4.5% of revenues. The pro forma provision for taxes includes
the incremental taxes provided for Federal and state income taxes relating to
the Compensation Differential and income taxes on S Corporation income.

ADVENTURE RESULTS FOR 1993 COMPARED TO 1994

REVENUES. Revenues increased $1.5 million, or 17.6%, from $8.5 million
in 1993 to $10.0 million in 1994. This increase was primarily attributable to
expanded Atlantic City casino employee shuttle contracts and additional tour
and charter business.

OPERATING EXPENSES. Operating expenses increased $1.8 million, or 26.9%,
from $6.7 million in 1993 to $8.5 million in 1994, and increased from 78.8% of
revenues in 1993 to 85.0% of revenues in 1994. The increase in operating
expenses was primarily attributable to an increase in its motorcoach fleet and
related maintenance, depreciation and employee expenses.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.2 million, from $0.8 million in 1993 to $1.0 million in 1994.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential, decreased from $1.1 million, or
12.9% of revenues, in 1993 to $0.7 million, or 7.0% of revenues, in 1994.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for taxes, decreased
$0.3 million, or 3.5% of revenues, in 1994. The pro forma provision for taxes
includes the incremental taxes provided for Federal and state income taxes
relating to the Compensation Differential and income taxes on S Corporation
income.

LIQUIDITY AND CAPITAL RESOURCES - ADVENTURE

Net cash provided by operating activities was $0.9 million, $0.8 million
and $1.3 million for 1993, 1994 and 1995, respectively. The increase in net
cash provided by operating activities for 1995 was primarily due to a
significant increase in net income which was only partially offset by changes
in operating assets and liabilities. Cash used in investing activities was
$1.0 million, $1.0 million and $0.4 million for 1993, 1994 and 1995,
respectively. Cash used in investing activities for 1995 was primarily for
additions and replacements of motorcoaches. Cash used in (provided by)
financing activities was ($0.3 million) and $1.0 million for 1994 and 1995,
respectively. Cash provided by financing activities in 1994 consisted of
proceeds from the issuance of long-term obligations which were only partially
offset by principal payments on long-term obligations and dividend payments to
the owners of Adventure. Cash used in financing activities for 1995 consisted
of net principal payments on long-term obligations as well as dividends paid.

As a result of the foregoing, cash and cash equivalents increased by $0.1
million in 1994 and decreased by $0.1 million in 1995.

As of December 31, 1995, Adventure had total debt of $6.4 million.
Adventure has entered into a commitment to purchase 11 motorcoaches during
1996 for approximately $3.1 million (five replacement and six additional
motorcoaches). Adventure took delivery of the first two motorcoaches during
January 1996 and financed the transaction by issuing two installment
promissory notes totaling $515,000. Adventure has received a proposal
regarding the financing of the remaining motorcoaches.

Adventure had a working capital deficit as of December 31, 1995.
Adventure may continue to experience working capital deficits as it pursues
its business strategy of growth and expanding services. Management of
Adventure expects that expanded operations will generate sufficient cash flows
from operations to meet its working capital needs in 1996. See Note 1 of Notes
to Financial Statements of Adventure.

RESULTS OF OPERATIONS - ARROW

ARROW RESULTS FOR 1994 COMPARED TO 1995

REVENUES. Revenues increased $0.7 million, or 7.0%, from $10.0 million
in 1994 to $10.7 million in 1995.

OPERATING EXPENSES. Operating expenses increased $0.2 million, or 2.9%,
from $7.0 million in 1994 to $7.2 million in 1995, and declined from 70.0% of
revenues in 1994 to 67.3% of revenues in 1995.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.3 million, or 20.0%, from $1.5 million in 1994 to $1.8 million in
1995.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential, increased 6.3% from $1.6 million,
or 16.0% of revenues, in 1994 to $1.7 million, or 15.9% of revenues, in 1995.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for taxes, decreased
from $0.7 million in 1994 to $0.6 million, or 5.6% of revenues, in 1995. The
pro forma provision for taxes includes the incremental taxes provided for
Federal and state income taxes relating to the Compensation Differential and
income taxes on S Corporation income.

ARROW RESULTS FOR 1993 COMPARED TO 1994

REVENUES. Revenues increased $0.5 million, or 5.3%, from $9.5 million in
1993 to $10.0 million in 1994.

OPERATING EXPENSES. Operating expenses increased $0.3 million, or 4.5%,
from $6.7 million in 1993 to $7.0 million in 1994, and increased from 70.5% of
revenues in 1993 to 70.0% of revenues in 1994.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.3 million, from $1.2 million in 1993 to $1.5 million in 1994.

PRO FORMA OPERATING INCOME. Pro forma operating income, which has been
adjusted for the Compensation Differential, decreased from $1.7 million, or
17.9% of revenues, in 1993 to $1.6 million, or 16.0% of revenues, in 1994.

PRO FORMA NET INCOME. Pro forma net income, which has been adjusted for
the Compensation Differential and the pro forma provision for income taxes,
remained unchanged at $0.7 million in 1993 and 1994. The pro forma provision
for taxes includes the incremental taxes provided for Federal and state income
taxes relating to the Compensation Differential and income taxes on S
Corporation income.

LIQUIDITY AND CAPITAL RESOURCES - ARROW

Net cash provided by operating activities was $1.4 million, $1.5 million,
$2.3 million and $0.5 million for 1993, 1994, 1995 and the three months ended
December 31, 1995, respectively. The increase in net cash provided by
operating activities for 1995 was primarily due to changes in operating assets
and liabilities. Cash used in (provided by) investing activities was ($0.1
million), $0.8 million, $2.2 million and $0.7 million for 1993, 1994, 1995 and
the three months ended December 31, 1995. Cash used in investing activities
for 1995 and the three months ended December 31, 1995 was primarily used for
additions and replacements of motorcoaches. Cash used in (provided by)
financing activities was $1.4 million, $0.8 million, ($0.1 million) and ($0.1
million) for 1993, 1994, 1995 and the three months ended December 31, 1995,
respectively. Cash used in financing activities for 1993, 1994 and the three
months ended December 31, 1995 consisted of net principal payments on
long-term obligations, as well as dividends paid to the owners of Arrow. Cash
provided by financing activities in 1995 consisted of proceeds from the

issuance of long-term obligations which were only partially offset by
principal payments on long-term obligations and dividend payments.

As a result of the foregoing, cash and cash equivalents increased by $0.1
million in 1993, decreased by $0.1 million in 1994, increased by $0.1 million
in 1995 and decreased by $0.2 million for the three months ended December 31,
1995, respectively.

As of December 31, 1995, Arrow had total debt of $11.2 million. Arrow has
entered into commitments to purchase 15 motorcoaches during 1996 for
approximately $4.7 million (including 11 replacement and four additional
motorcoaches). Arrow intends to trade in a similar number of motorcoaches and
finance the balance with bank debt, which is presently being negotiated.

Arrow had a working capital deficit as of December 31, 1995. Arrow may
continue to experience working capital deficits as it pursues its business
strategy of growth and expanding services. Arrow has historically funded its
operations with cash flows from operations and debt from lenders and
stockholders. While there can be no assurance, management of Arrow believes it
has adequate financing alternatives to fund its operations through the first
quarter of 1997.

UNAUDITED INTERIM RESULTS - ARROW

Revenues for the three months ended December 31, 1995 decreased $0.2
million, or 8.8%, as compared to the three months ended December 31, 1994,
primarily due to decreased levels of charter service. Operating expenses for the
three months ended December 31, 1995 decreased $37,000, but increased 6% as a
percentage of revenues. This increase was primarily attributable to the
additional carrying cost of transportation equipment as Arrow expanded its
fleet. General and administrative expenses increased $31,000, or 2%, as Arrow
expanded its marketing efforts. Interest expense increased due to higher levels
of average debt outstanding resulting from additional motorcoaches purchased
with borrowed funds.

SEASONALITY

The timing of certain holidays, weather conditions and seasonal vacation
patterns may cause the Company's quarterly results of operations to fluctuate
significantly. The Company expects to realize higher revenues, operating
income and net income during the second and third quarters and lower revenues
and net income during the first and fourth quarters. The Founding Companies on
a combined basis recorded a pro forma net loss for the first quarter of 1996.
See "-- Recent Results."

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121."Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of " (SFAS 121)
which establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill. Adoption is required in
financial statements for fiscal years beginning after December 15, 1995. The
Company does not expect the adoption of SFAS 121 to have a material effect, if
any, on its combined financial statements. The Company will adopt SFAS 121 in
1996.
34

RECENT RESULTS

Set forth below are certain comparative unaudited interim results of
Coach USA and the Founding Companies on a combined basis for the three months
ended March 31, 1995 and 1996:

THREE MONTHS ENDED MARCH 31(1)
-----------------------------
1995 1996
--------- ---------
(IN THOUSANDS)
Revenues ............. $ 23,015 $ 24,221
Net loss ............. (694) (2,722)(2)
Pro forma net loss ... (340) (2,358)(2)
- ------------
(1) The combined interim results include Arrow and Gray Line SF for the three
months ended March 31 after conforming their respective fiscal year ends
to December 31 for both periods.

(2) During the three months ended March 31, 1996, Coach USA sold an aggregate
of 692,000 shares of Common Stock to management. The unaudited interim
results for the three months ended March 31, 1996 include a non-recurring,
non-cash charge of $2,076,000, representing the difference between the
amounts paid for the shares and the estimated fair value of the shares on
the date of sale as if the companies were combined.

Pro forma net losses give effect to the Compensation Differential and
certain tax adjustments related to the taxation of certain Founding Companies
as S Corporations prior to the consummation of the Mergers and the tax impact
of the Compensation Differential in each period.

Coach USA and the Founding Companies on a combined basis incurred a net
loss for the first quarter of 1996. See "-- Seasonality." The revenues of the
Founding Companies on a combined basis increased by 5.2% in the first quarter
of 1996, compared to the first quarter of 1995, primarily due to increased
specialized destination route service to Atlantic City and increased transit
services. Excluding the non-cash charge discussed in Note 2 above, Coach USA
and the Founding Companies on a combined basis had a decrease in net loss from
$694,000 to $646,000, or 6.9%.

BUSINESS

The Company will be the largest provider of motorcoach charter, tour and
sightseeing services and one of the five largest non-municipal providers of
commuter and transit motorcoach services in the United States upon
consummation of the Mergers. The Company does not provide regularly scheduled,
long-haul, intercity bus service like Greyhound and does not intend to do so.
During 1995, Company vehicles traveled more than 40 million miles and provided
service to more than 40 million passengers through a fleet of over 760
motorcoaches and other high occupancy vehicles, including 246 motorcoaches
provided by various transit authorities pursuant to service contracts. The
Company's charter and tour fleet features luxury, European style motorcoaches
with plush seats, televisions, VCRs and other amenities.

INDUSTRY OVERVIEW

The motorcoach industry in the United States can be broadly divided into
three types of services: (i) recreation and excursion (charter, tour and
sightseeing); (ii) commuter and transit; and (iii) regularly scheduled
intercity service. The Company only provides the first and second types of
services. The motorcoach industry is highly fragmented with approximately
5,000 motorcoach operators providing the first or second type of services,
primarily in a single regional or local market. These companies collectively
generated approximately $20 billion in revenues in 1995.

The Company believes that there will be increasing demand for both
recreation and excursion services and commuter and transit motorcoach services
for a broad range of customers based on a number of factors, including:

GROWING TRAVEL AND TOURISM INDUSTRY. Travel and tourism is one of
the fastest growing industries in the United States. Nationwide charter
users include such large organizations as AAA, AARP and convention
organizers, whose members are potential users of motorcoach services. As
the population of the United States continues to age, the Company
believes more people will find motorcoach touring an attractive, low cost
alternative to travel by automobile. Also, the number of European and
Asian tourists traveling to the United States continues to increase, and
motorcoach travel is a popular way for tourists to travel in the United
States.

PRIVATIZATION. The Company expects state and local governments to
accelerate their efforts to privatize capital intensive operations, such
as commuter and transit services, and ancillary services, such as
paratransit services required under the Americans with Disabilities Act.
The Company believes that this acceleration will result primarily from a
decrease in Federal funds available to subsidize operations and the
increasing capital cost of acquiring equipment.

OUTSOURCING. Many hotels, casinos, rental car companies, colleges
and other institutions operate large motorcoach fleets and other high
occupancy vehicles. These entities are increasingly seeking to outsource
these non-core activities as a means to better manage their capital and
operating resources and to improve their profits.

EXPANDING METROPOLITAN AREAS. Metropolitan areas are continuing to
expand geographically and in population. As a result, state and local
governments face increasing automobile traffic congestion, deteriorating
infrastructures and a continuing migration of offices and commuters to
suburban locations. These trends should increase the Company's

opportunities to provide motorcoach commuter and transit services. The
Company believes that the fuel and emissions efficiency, flexibility and
low capital cost of motorcoaches and other high occupancy vehicles will
make them increasingly viable alternatives to the high cost of widening
existing roads or establishing or expanding other transit and commuter
systems, such as subways and commuter trains.

INCREASING AIRPORT CONGESTION. The number of passengers served by
the current United States airport system is estimated to increase by 25%
over the next five years. Currently, there is no coordinated effort to
provide seamless transportation between planes and motorcoaches, and many
passengers continue to use private automobiles for local or regional
travel to and from airports. With no major airport expansions expected at
most major airports in the next five years, the Company believes that
motorcoaches and other high occupancy vehicles can alleviate much of this
congestion and address the shortage of convenient parking at many
airports.

BUSINESS STRATEGY

The Company's objective is to be the largest provider of regional and
local motorcoach services in the United States. Management plans to achieve
this goal by:

EXPANDING THROUGH ACQUISITIONS. The Company intends to pursue an
aggressive acquisition strategy to enhance its position in its current markets
and to acquire operations in new markets by:

EXPANDING EXISTING MARKETS. The Company also plans to acquire
additional motorcoach operations in each of the markets in which it
operates, including acquisitions that either broaden the range of
services provided by the Company in that market or expand the geographic
scope of the Company's operations in that market, as well as tuck-in
acquisitions of smaller motorcoach operations. The Company believes that
tuck-in acquisitions will increase operating efficiencies without a
proportionate increase in administrative costs and, in some instances,
will broaden the Company's range of services.

ACCELERATING INTERNAL GROWTH. A key component of the Company's strategy
is to accelerate internal growth at each of the Founding Companies and each
subsequently acquired motorcoach business. The Company believes internal
growth can be accelerated by:

ESTABLISHING A NATIONAL SALES AND MARKETING PROGRAM. The travel and
tourism industry has experienced significant growth in recent years, and
the Company expects this trend to continue. The Company intends to
establish a national sales and marketing program as a means to expand its
recreational and excursion business. This program will target travel and
tour companies, national and international travel agencies and convention
organizers, as well as organizations such as AAA, AARP and professional
and amateur athletic teams.

CAPITALIZING ON NEW CORPORATE STRUCTURE. The Company intends to take
advantage of its new corporate structure by:

ACQUISITION STRATEGY

The Company believes that there are many attractive acquisition
candidates in the motorcoach industry because of the highly fragmented nature
of the industry, industry participants' need for capital and their owners'
desire for liquidity. The Company intends to pursue an aggressive acquisition
program to consolidate and enhance its position in its current markets and to
acquire operations in new markets.

A "primary acquisition" will be one that creates a significant presence
for the Company in a new geographic market. The Company intends, where
possible, to make a primary acquisition in a targeted market by acquiring an
established, high quality local company. As it will do with each of the
Founding Companies, the Company, in most cases, will retain management and
operating and sales personnel of a primary acquisition in order to maintain
continuity of operations and customer service. The Company will seek to
increase the acquired company's revenues and improve its profitability by
efficiently implementing the Company's operating strategies for internal
growth.

An acquisition in an existing market generally will be smaller than a
primary entry acquisition and will enable the Company to offer additional
services or expand into secondary markets within the region already served.
When justified by the size of an existing market acquisition, the Company
expects to retain the management and operating and sales personnel of the
acquired company while seeking to improve that company's profitability by
efficiently implementing the Company's operating strategies. The Company also
intends to effect tuck-in acquisitions of small companies or individual
motorcoach operations in existing markets. In most instances, operations
acquired in a tuck-in acquisition can be integrated into the Company's
existing operations in that market, resulting in elimination of duplicative
overhead and operating costs.

The Company believes that it can successfully implement its acquisition
strategy due to: (i) its strategy for creating a national company, which
should enhance the acquired company's ability to compete in its local and
regional market though an expansion of offered services, improved equipment
utilization and lower operating costs; (ii) the additional capital available
for new equipment; (iii) the potential for increased profitability as a result
of the Company's centralization of certain administrative functions, greater
purchasing power and economies of scale; (iv) its financial strength and
visibility as a public company; and (v) its decentralized management strategy,
which should, in most cases, enable the acquired company's management to
remain involved in the operation of the company.

The Company has analyzed a substantial amount of data on the motorcoach
industry and individual businesses within the industry and believes it is well
positioned to implement its acquisition program promptly following this
Offering. Several of the principals of the Founding Companies have leadership
roles in both national and regional motorcoach trade associations, which has
allowed these principals to become personally acquainted with operators of
motorcoach businesses across the country. The Company believes that the
visibility of these individuals within these associations will increase the
industry's awareness of the Company and

its strategies, thereby attracting interest from local and regional motorcoach
operators. Within the past several months, the Company has contacted the
owners of a number of motorcoach businesses, several of whom have expressed
some interest in having their business acquired by the Company. The Company
currently has no binding agreements to effect any acquisition and is not now
engaged in any active negotiations to acquire any company. There can be no
assurance that the Company's acquisition program will be successful, and the
Company cannot predict when, if ever, it will make its first acquisition.

As consideration for future acquisitions, the Company intends to use
various combinations of Common Stock and cash or, possibly, notes. To
facilitate its acquisition strategy, the Company intends to register 3,500,000
additional shares of Common Stock under the Securities Act within 90 days
after the closing of this Offering. These shares will be available for use by
the Company as consideration for future acquisitions.

SERVICES PROVIDED

The type and level of services provided by the Company vary by market
served. The services offered in each of the Company's markets are determined
by the management team responsible for that market location and are based on
such management's estimate of the demand for a particular service in the
market, competition to provide that service and the Company's ability to
provide that service consistent with the quality standard that the Company
seeks.

The Company provides services on both a contracted and per seat basis.
For contracted services, the Company arranges a fee for the use of the
equipment. In these arrangements, the customer contracts the vehicle for use
and the Company is paid a rate, generally on a daily or per mile basis, that
is not dependent on passenger load factors. In per seat operations, the
Company is paid by each individual customer. Fares for these per seat services
are usually determined by the Company and payment is received from individual
passengers or through a commissioned agent. In some states, these fares are
subject to regulatory approval.

RECREATION AND EXCURSION

CHARTER AND TOUR SERVICES. Charter services are provided on a fixed
daily rate, based on mileage and hours of operation. The Company offers both
daily and long-term charter and tour arrangements (as long as 14 days) with
various levels of luxury and price. The Company has arrangements with tour
agencies to provide various levels of service and equipment for agent-
sponsored and organized tours. Under these arrangements, the Company contracts
with tour agencies to provide the motorcoach and driver at a fixed daily rate.
To increase equipment utilization, the Company also regularly offers shorter
charter service to various social groups or other organizers for
transportation to events or specific destinations. For example, the Company
regularly obtains charter business for sporting events at the Meadowlands
Sports Complex and day trips for social groups to Atlantic City or other
popular destinations. In some instances, the Company organizes its own tours
and markets them on a per passenger basis.

SIGHTSEEING. Per seat sightseeing services are provided on a scheduled
basis at an advertised or published price. Typically, customers will make
reservations for the tours or can simply board on an "open-door" basis at
scheduled locations. Payment is made by the customer, or through the travel
agent or the hotel. For example, hourly or day trips are provided throughout
the San Francisco Bay area, the Northern California wine country and the
Monterey Peninsula by motorcoaches and motorized cable car replicas. The
Company uses a network of hotel lobby ticket counters, hotel concierges,
travel agents and the international marketing program of Gray Line, an
international marketing cooperative, to sell the Company's sightseeing tours.

AIRPORT SERVICE. The Company picks up passengers at the Atlantic City
International Airport and transports them to and from their hotel, casino or
convention site. The Company's airport service is typically handled on a fixed
schedule and fixed fee service basis. Reservations

can be made through the airlines' computerized reservations systems and may be
prepaid, although customers are also taken on an "open-door" basis through a
service desk at the airport. Returns are arranged through various hotels and
at specified pick-up points.

SPECIALIZED DESTINATION ROUTE. The Company's specialized destination
route service includes daily scheduled service to the casinos in Atlantic City
from various points in New Jersey, New York, Pennsylvania, Delaware and
Maryland, as well as service to Foxwoods Casino in Ledyard, Connecticut from
New York and to the casinos in Laughlin, Nevada from Phoenix. Luxury
motorcoaches pick passengers up at specified locations. Tickets are sold
through agents and at specified locations. Customers are taken on an
"open-door" basis or by reservation.

COMMUTER AND TRANSIT SERVICES

COMMUTER SERVICES. In most of its commuter services, the Company has
fixed routes serviced on a daily basis. Most of these routes are owned (as a
result of having received Federal or state regular route authority) by the
individual Founding Company although one of the Founding Companies has a
contract with a municipal transit authority to provide commuter service from
Marin County, California to San Francisco on specified routes. Many of the
Company's motorcoaches that are dedicated to commuter service are owned by a
state or municipal transit authority and provided to the Company at nominal
rent or given by such authority to the Company to service a particular route.
In all cases, the drivers and operations personnel are employed by the Company
and the Company is responsible for maintenance of the equipment. The Company
is paid through individual ticket purchases or through a fare box. Contracts
with transit authorities for this service typically have one to three year
terms and are periodically reviewed for rate and fare increases. The Company
provides daily commuter service from various points in New Jersey to New York
City as well as from various points in Marin County, California to San
Francisco.

CORPORATE OUTSOURCING CONTRACTS. The Company has agreements with hotels
and casinos to provide motorcoaches, drivers and equipment for their employees
and customers. The Company contracts with the hotel or casino to provide the
schedule of service required by the customer, often 24 hours per day. For
example, the Company has contracts to shuttle Atlantic City casino employees
from employee parking lots to the casinos and also has the required authority to
transport hotel guests between the Atlantic City airport and the hotels.

PRIVATIZATION TRANSIT CONTRACTS. In privatization transit contracts, the
Company has a contract with a transit authority for fixed routes on a daily
basis, with the schedule established by the transit authority. The Company
operates dedicated equipment owned by the Company or by the transit authority.
In each instance, the drivers and operations personnel are employees of the
Company and the Company is responsible for equipment maintenance. The Company
is paid a fixed amount from the municipality based on number of miles or hours
operated. Contracts for this service are typically for three years and are
periodically reviewed for rate increases. The Company provides transit
services for San Mateo and Santa Clara Counties, California, and for Bergen
and Passaic Counties, New Jersey.

SALES AND MARKETING

The Company has a broad customer base. Although some of the Founding
Companies have customers that accounted for more than 10% of such Founding
Company's revenues in 1995, no single customer of the Founding Companies on a
combined basis accounted for more than 9.2% of their combined revenues in
1995. See Note 6 of Notes to the individual historical financial statements of
each of the Founding Companies. Management of the Founding Companies has been
responsible for establishing and maintaining relationships with tour
organizers, travel agencies and other regular users of charter and tour
services as well as pursuing outsourcing and privatization opportunities. Each
of the Founding Companies also has a small sales staff that focuses primarily
on obtaining specific charter and tour business.

Historically, most of the Founding Companies have conducted limited
marketing. The principal means of marketing charter and tour services has been
in telephone directories and through direct mail to customers included in the
Founding Companies' data bases, which include civic groups, schools and
domestic and foreign tour organizers and travel agencies. Gray Line SF
benefits from the international marketing programs of Gray Line. Arrangements
have been made with a number of leading hotels in the San Francisco Bay area
to provide lobby ticket counters or concierges to promote Gray Line SF's
sightseeing tours. Adventure maintains a ticket counter at the Atlantic City
airport for its service to hotels, casinos and convention centers.

The Company's specialized destination route services to casinos in
Atlantic City, New Jersey, Foxwoods Casino in Ledyard, Connecticut and casinos
in Laughlin, Nevada are promoted by individual casinos. These casinos
typically provide incentives to passengers, including vouchers for a small
amount of cash to gamble with and a meal at the casino, which are included
with each motorcoach ticket purchased. In some instances, the casinos actively
advertise these promotions in various media, such as newspapers, television
and billboards.

Once the Company has established operations in a sufficient number of
metropolitan areas, the Company intends to implement a targeted national sales
and marketing campaign for its recreation and excursion services. The focus of
this campaign will be on national users of motorcoach service, such as travel
agencies, convention organizers and sports teams. The Company believes that it
will have a marketing advantage over its competitors since it will be able to
offer consistent, dependable, quality service in various metropolitan areas in
the United States, thereby enabling its customers to use the Company's
services in multiple locations rather than dealing with numerous regional or
local motorcoach operators.

Contracts with counties and municipalities to provide commuter and
transit services are generally obtained through a competitive bidding process.
In some instances where the Company is the existing provider, the county or
municipality may elect to renegotiate the Company's existing contract instead
of putting the contract out for rebid. The Company believes that counties and
municipalities consider quality of service, reliability and price to be the
most important factors in awarding contracts although other factors, such as
financial stability, personnel policies and practices and total cost both to
the municipality and the public, are also considered.

OPERATIONS

All aspects of the Company's daily motorcoach operations are handled on a
local basis. Each location has an operations center staffed by customer
service personnel, fleet managers and dispatchers. All of the Company's
commuter and transit services as well as its sightseeing and specialized
destination route services are operated with dedicated fleets of motorcoaches
and drivers, and most fleets include back-up vehicles in case of equipment
breakdown or higher passenger volume. Because commuter and transit services as
well as specialized destination route services involve fixed routes which
rarely vary, the dispatch function is limited to communicating with drivers by
radio to determine that the motorcoach is in service, the number of passengers
embarked and whether the motorcoach is on schedule and to deal with any
problems in route. When necessary, dispatchers can communicate necessary
modifications in schedules to meet customer demand and increase utilization.
Operations personnel schedule individual motorcoaches for recreation and
excursion services as charter business is obtained. In many instances, the
Company receives bookings for tours and charters well in advance, which
enables the Company to predict periods during which equipment utilization is
likely to be low. When this occurs, the Company more actively solicits charter
business in an effort to maintain equipment utilization or schedules
alternative uses for its equipment, particularly during the winter months when
tourism declines.
41

Upon consummation of the Mergers, the Company will retain a decentralized
management structure. Most operating decisions will remain at the Founding
Company level. At the same time, the Company intends to centralize and
maintain certain administrative support activities. The Company believes that
by removing the burden and attention-diverting responsibility of
administrative and support functions, the principals of the Founding Companies
and any other acquired businesses will be able to focus on pursuing new
business opportunities and improving equipment utilization and yields.

The Company believes there will be opportunities to increase equipment
utilization following the Mergers by coordination among the Founding Companies
and any additional acquired businesses. For example, some motorcoaches that
transport passengers into New York City or Atlantic City in the morning are
parked until they run the reverse trip at the end of the day. The use of these
motorcoaches for day charters and sightseeing could be increased. In addition,
equipment stored during the "off-season" could be transported and utilized by
another location that has more business during that time.

EQUIPMENT

The Founding Companies operated a total of over 760 motorcoaches and
other high occupancy vehicles as of December 31, 1995. Approximately 130 of
these motorcoaches are provided by various transit authorities for nominal
rent, with the Company assuming full responsibility for maintenance and
repairs. These motorcoaches are provided under contracts to perform transit
and commuter services and must be returned to the transit authorities in the
event the contracts for them are not renewed. In addition, approximately 116
other motorcoaches have been provided by certain transit authorities to the
Founding Companies to operate for the normal useful operating lives thereof,
and these motorcoaches must only be returned to such transit authorities if
the applicable Founding Company surrenders its routes for which such
motorcoaches were provided, or at the end of the normal useful operating lives
thereof. The Company's owned fleet of motorcoaches has an average age of six
years. Motorcoaches have a useful operating life in excess of 10 years. The
Company's replacement policy will depend on the use being made of the
particular motorcoach, but the Company expects that on average it will replace
motorcoaches every 10 to 12 years. The Company's current fleet of motorcoaches
comprises approximately 380 vehicles from one manufacturer, Motorcoach
Industries Incorporated, although other manufacturers are represented in the
Company's fleet. Most engines and drive trains are manufactured by Detroit
Diesel and Allison Transmissions, respectively. This continuity of engine and
drive train should enable the Company to implement a standardized,
Company-wide maintenance program and allow it to reduce its spare parts
inventory. The Company leases most of its tires from Goodyear or Firestone,
with the lease payments based on mileage driven on the tires.

MAINTENANCE

Each of the Founding Companies has a comprehensive preventive maintenance
program for its equipment to minimize equipment downtime and prolong equipment
life. This program includes regular safety checks when a motorcoach returns to
the terminal, regular oil and filter changes, lubrication, cooling system
checks and wheel alignment on average every 6,000 to 12,000 miles, and more
extensive maintenance procedures at greater intervals. Interiors of
motorcoaches are cleaned and exteriors washed usually on a daily basis.

Repairs and maintenance are performed at 11 maintenance facilities
operated by the Founding Companies. These facilities employed a total of 266
mechanics and other maintenance personnel at December 31, 1995. Most
maintenance provided by outside facilities results from on-the-road breakdowns
or involves major engine overhauls.

To the extent economically and logistically practicable, the Company
intends to share maintenance facilities and personnel among the Founding
Companies. The Company expects this

will result in a decrease in the percentage of maintenance costs incurred at
outside shops and a decrease in total maintenance costs. For example, several
of the Founding Companies have motorcoaches parked during the day in Atlantic
City where other Founding Companies have maintenance facilities. Preventive
maintenance could be performed on these motorcoaches while idle rather than at
night when they return to their home facilities. It also may be possible to
close some maintenance facilities in areas where there will be multiple
maintenance facilities, such as Atlantic City and Philadelphia.

The Company expects that replacement of older motorcoaches with newer
equipment will reduce maintenance costs largely because late model
motorcoaches are more reliable and have better engine and power train
warranties. In addition, the Company believes that it may be able to negotiate
better warranty terms because of the combined negotiating power of the
Founding Companies following the Mergers. The Company intends to purchase most
of its motorcoaches with standard component specifications, particularly
engines and drive trains, thereby reducing the complexity of maintenance and
spare parts management. The Company also believes that it may be able to lease
or purchase replacement tires on more favorable terms than currently
available.

FACILITIES

All of the Company's facilities will be leased although most of the
Founding Companies owned their own facilities prior to the Mergers. As part of
the agreements pursuant to which the Founding Companies are being acquired,
the Founding Companies which own their facilities are transferring ownership
of these facilities to their stockholders or to entities controlled by their
stockholders, who will enter into long-term leases with the Company with
respect to such facilities. The Company intends whenever possible to require
other acquired companies that own facilities to also transfer those facilities
to their owners prior to acquisition.

The Company's facilities consist principally of offices, garages and
maintenance facilities. Some of these are single facilities, and other
facilities have limited operations, which may not include complete maintenance
services. Some of the facilities currently operated by the Company are leased
from related parties. See "Certain Transactions -- Leases of Facilities." The
Company believes that its facilities are adequate for its current needs.

Set forth below is information concerning the current facilities of the
Founding Companies :
<TABLE>
<CAPTION>
USE
----------------------
FOUNDING GARAGE AND
COMPANY LOCATION ACREAGE MAINTENANCE OFFICE
- ------------------------------------- ---------------------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Suburban............................. New Brunswick, NJ 5.8 X X
8.0 X
Hightstown, NJ
2.3 X
South Plainfield, NJ
Gray Line SF......................... San Francisco, CA 3.0 X X
Leisure.............................. Mahwah, NJ 4.4 X X
2.3 X
Pleasantville, NJ
2.5 X
Philadelphia, PA
Community............................ Passaic, NJ 4.3 X X
Adventure............................ Atlantic City, NJ 4.0 X X
2.0 X
Philadelphia, PA
Arrow................................ Phoenix, AZ 3.5 X X
</TABLE>
After consummation of the Mergers, the Company believes that the ability
of each of the Founding Companies to use garages and maintenance facilities of
the other Founding Companies for maintenance and personnel support will
increase operating efficiencies for the Company as a whole. For example, the
Company is considering eliminating one of the two facilities in the Atlantic
City area and one of the two facilities in Philadelphia.

After the completion of this Offering, the Company will lease its
principal executive and administrative offices in Houston, Texas, and is
currently in the process of obtaining office space for this purpose.

DRIVERS AND OTHER PERSONNEL

At December 31, 1995, the Founding Companies had approximately 1,800
employees, of whom approximately 1,200 were drivers and approximately 300 were
maintenance personnel. The balance included administrative personnel, sales
personnel, customer service personnel, fleet managers, dispatchers and safety
and training personnel. Of these employees, approximately 1,300 were full-time
employees.

Each of the Founding Companies has established driver retention programs
which seek to maintain a sufficient number of qualified drivers to handle
passenger service. The Founding Companies historically have had relatively
minimal driver turnover among full-time drivers other than for sightseeing and
tour services, where the need for drivers varies seasonally. Safety and
dependability of drivers are critical to the Company's operations. Drivers are
required to comply with all applicable Federal and state driver qualification
and safety regulations, including hours of service and medical qualifications,
and to hold a Commercial Driver's License issued in conformity with
regulations of the FHWA. Drivers are also subjected to drug and alcohol
testing requirements imposed by the FHWA, including random, reasonable
suspicion and post-accident testing. Driver applicants are required to have
significant driving experience and to pass medical examinations.

Several different unions represent 875 employees of the Company, of whom
793 are drivers. The Company is a party to a number of different collective
bargaining agreements which expire at various dates through 1999. In the last
10 years, the Founding Companies have not experienced any work stoppages and
believe that relationships with union representatives and union employees are
satisfactory.

SAFETY

Each of the Founding Companies is dedicated to safe operations. The
Founding Companies vigorously adhere to the FHWA and comparable state motor
carrier safety rules, including rules concerning safe motor vehicle equipment,
driver qualifications and safe operation of vehicles. The Founding Companies
maintain drug and alcohol testing programs for their drivers in conformity
with FHWA and comparable state requirements. The Founding Companies also
address accidents and other incidents and take follow-up steps intended to
reduce the risk of repeat accidents and incidents.

The Founding Companies employ safety specialists and maintain safety
programs designed to meet the specific needs of the Founding Companies,
including field spotters and riders who assess driver performance. In
addition, the Founding Companies employ specialists to perform compliance
checks and conduct safety tests throughout the Founding Companies' operations.
The Founding Companies conduct a number of safety programs designed to promote
compliance with rules and regulations and to reduce accidents and injury
claims. These programs include incentive programs for accident-free driving,
driver safety meetings, distribution of safety bulletins to drivers and
participation in national safety associations.

RISK MANAGEMENT AND INSURANCE

The primary risks in the Company's motorcoach operations are bodily
injury, property damage and workers' compensation. The Founding Companies
currently maintain insurance against these risks and are subject to liability
as self insurers to the extent of the deductible under each policy. After
completion of this Offering, the Company intends to obtain and maintain
liability insurance for bodily injury and third party property damage in
amounts which it considers sufficient, with a deductible for bodily injury and
property damage of $100,000 per
44

incident. The workers' compensation policies in the states where most of the
Founding Companies' employees are located provide for first dollar coverage.
The Company will self insure as to damage or loss to its own equipment,
subject to "stop loss" insurance coverage in excess of $250,000 per incident.

FUEL AVAILABILITY AND COST

Each of the Founding Companies purchases fuel in bulk and stores it at
its facilities. See "-- Environmental Matters." Currently, fuel is purchased
from a number of suppliers at prevailing market prices. The Company expects
that the aggregate volume of fuel purchased by the Founding Companies will
create improved negotiating leverage with fuel vendors and may result in lower
fuel prices.

Fuel prices are subject to sudden increases as a result of variations in
supply levels and demand. Any sustained increase in fuel prices could
adversely affect the Company's results of operations. From time to time, there
are efforts at the Federal or state level to increase fuel or highway use
taxes, which, if enacted, also could adversely affect the Company's results of
operations.

COMPETITION

The portions of the motorcoach industry in which the Company operates are
highly competitive, fragmented and served by numerous operators, most of which
serve only a single area or region. The Company's competitors include other
operators of motorcoaches and other high occupancy vehicles, such as Laidlaw,
Inc. and Ryder System, Inc., operators of passenger automobiles and, to a more
limited extent, airlines, Amtrak and commuter rail service providers. Some of
the Company's competitors, which vary depending on geographic region and the
nature of the service provided, have greater financial, technical and
marketing resources and generate greater revenues than the Company in specific
regions. The majority of the Company's motorcoach competitors at the Founding
Company level consist of small regional operators with a strong presence in
their respective markets. The Company believes that as it expands
geographically, it may compete with additional national, regional and local
transportation service providers.

The Company believes that the principal competitive factors in the
motorcoach industry are reliability, customer service and price, as well as
equipment comfort and appearance. In addition, competition with respect to
some services is limited in some locations by the difficulty in obtaining
required state route authorizations. The Company believes that its ownership
of route authorizations provides it with a competitive advantage in certain
markets because of the relative difficulty of obtaining these authorizations.

The Company also will compete for acquisition candidates. The Company
believes that its decentralized management philosophy and operating strategies
will make it an attractive acquiror to other motorcoach companies. However, no
assurance can be given that the Company's acquisition program will be
successful or that the Company will be able to compete effectively in its
chosen markets.

REGULATION

As a result of the ICC Termination Act of 1995 (the "Termination Act"),
the Interstate Commerce Commission (the "ICC"), which previously regulated
motorcoach operators engaged in interstate commerce, was abolished effective
January 1, 1996. However, certain of the ICC's regulatory functions were
transferred as of that date to the Surface Transportation Board (the "STB"), a
new regulatory body established within the United States Department of
Transportation (the "USDOT"), and certain other functions were transferred to
the United States Secretary of Transportation (the "Secretary"). Under the
Termination Act, motorcoach operators engaged in interstate commerce are
generally required to be registered with the Secretary, who has

delegated responsibility for registration to the Office of Motor Carriers of the
FHWA, another body of the USDOT. By virtue of the Termination Act, persons who
held operating authority issued by the ICC prior to December 31, 1995 were
automatically deemed registered with the Secretary. Each of the Founding
Companies, with the exception of certain affiliates of two of the Founding
Companies, held authority issued by the ICC prior to December 31, 1995, and,
accordingly, each was deemed registered with the FHWA and is now subject to the
regulatory requirements of the STB and the FHWA.

The Bus Regulatory Reform Act of 1982 significantly reduced federal
regulation of the motorcoach industry. The Termination Act further lessened
regulatory requirements, with the result that the Secretary, the STB and the
FHWA have only limited regulatory authority over interstate motorcoach
operations. The level of fares is not subject to federal regulation, and
motorcoach operators are not required to file tariffs. Motorcoach operators
are, however, required by the Termination Act to provide transportation
service on reasonable request and to provide safe and adequate service,
equipment and facilities. They must also maintain minimum amounts of insurance
and file evidence of such insurance with the FHWA. The Secretary and the Board
are vested with enforcement authority, including authority to impose civil
penalties, with respect to violations of applicable regulatory requirements.
The Secretary may also suspend, amend or revoke a registration for willful
failure to comply with the Termination Act, with the regulations of the
Secretary, the STB or the FHWA or with any condition of the operator's
registration.

The Termination Act preempts states, their political subdivisions and
multistate agencies from regulating the scheduling or rates of interstate or
intrastate transportation provided by motorcoach operators on interstate
routes. However, states may require motorcoach operators to provide notice,
not in excess of 30 days, of changes in their schedules. These preemption
provisions do not apply to commuter service.

The Company is subject to extensive FHWA and state regulations with
respect to the qualifications of its drivers and the safety of its vehicles
and their operation. See "-- Drivers and Other Personnel" and "-- Safety." In
addition, the vehicles operated by the Company are required by FHWA
regulations to meet Federal noise standards established by the Environmental
Protection Agency. The Company believes that the Founding Companies have
conducted their operations in substantial compliance with FHWA regulations,
and the Company does not believe that ongoing compliance with such regulations
will require substantial capital expenditures. Under the Americans with
Disabilities Act (the "ADA"), the Company could become obligated to provide
accessible vehicles to persons who are disabled under certain circumstances
defined in that statute and in USDOT regulations. If the Company were required
to make its motorcoaches compatible with ADA regulations, it could result in
significant capital expenditures by the Company. The Company is subject to
regulation by the Occupational Safety and Health Administration with respect
to worker and workplace safety.

Community, Suburban, Leisure and Adventure are subject to regulation by
the New Jersey Department of Transportation (the "NJDOT") in connection with
the operation of their vehicles and with respect to the safety of operation
and equipment. New Jersey has a comprehensive regulatory scheme, administered
by the NJDOT. Although some of New Jersey's regulatory restrictions have been
preempted by federal legislation, as described above, New Jersey maintains
strong regulatory control over wholly intrastate routes subject to NJDOT
jurisdiction. Because these Founding Companies have been granted authority to
provide commuter service and scheduled service to Atlantic City, these
companies have a competitive advantage. However, there can be no assurance
that New Jersey will maintain its current regulatory posture, and any
reduction in regulation of motorcoach operators in New Jersey could adversely
affect the Company.
46

The Termination Act requires the STB's approval of any transaction under
which a person that is not a regulated motorcoach operator, such as Coach USA,
acquires control of two or more STB-regulated motorcoach operators. However,
the STB is empowered to exempt persons from this requirement for approval of
motorcoach acquisitions. Coach USA filed a petition with the STB seeking such
exemption in order to permit the acquisition by Coach USA of those of the
Founding Companies and their affiliates that are regulated by the STB. On
March 25, 1996, the STB solicited public comments on the exemption petition
and fixed an April 11, 1996 deadline for the submission of such comments. No
comments were filed in opposition to the exemption petition. The exemption was
granted and became effective on May 3, 1996. Further, certain affiliates of
the Founding Companies which operate exclusively in New Jersey, and are
subject only to NJDOT and not STB jurisdiction, filed petitions with the NJDOT
seeking approval to transfer shares of their capital stock in connection with
the Mergers. Those petitions were approved effective on May 2, 1996.

ENVIRONMENTAL MATTERS

The Company's operations are subject to various Federal, state and local
environmental laws and regulations governing vehicle emissions, underground
and aboveground fuel tanks and the storage, use and disposal of hazardous
materials and hazardous waste in connection with the Company's in-house
maintenance operations. These laws include the Water Pollution Control Act,
the Clean Air Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act and various state and local laws. There are underground storage tanks at
most of the Company's facilities. The Company also conducts motorcoach washing
at its facilities and the resulting waste must be disposed of in accordance
with regulatory requirements. In the event of a spill, the Company would be
responsible for the cost of the clean-up, which could be significant. As a
result of historical operations, there have been spills and releases of
hazardous substances, including petroleum and petroleum products, at several
of the Founding Companies' facilities. Certain of the Founding Companies have
had to remediate these spills and releases at a significant cost to the
Founding Companies. However, additional spills and releases of hazardous
substances of which the Company is unaware, including spills and releases of
petroleum and petroleum products, may have occurred at the Founding Companies'
facilities. In addition, with respect to unknown pre-existing contamination at
a Founding Company's facilities, each of the stockholders of such Founding
Company has agreed to indemnify the Company (up to the amount of consideration
such stockholder receives in the Mergers, after satisfaction of a threshold
equal to 1% of the aggregate consideration paid to such stockholder) for
liabilities in connection with such contamination. If and to the extent that
any stockholder of a Founding Company had actual knowledge of a spill or
release and did not disclose it to the Company pursuant to the agreement to
consummate the Merger, such stockholder has agreed to indemnify the Company
for all liabilities in connection with such contamination, not subject to any
limit on such indemnification obligation. Some of the Founding Companies have
disclosed that from time to time they have spilled or released certain
hazardous substances in the course of operating their businesses. The Company
will be liable for the costs, if any, in connection with these disclosed
spills and releases. As a result of operations at the Founding Companies'
facilities, the Company also may be subject to penalties.

Certain groundwater contamination has occurred at Leisure's facility in
Mahwah, New Jersey, principally as a result of leakage from an underground
storage tank. As a result of discussions with the State of New Jersey
Department of Environmental Protection (the "Department"), in December 1989,
Leisure submitted a Ground Water Quality Assessment Program (the "GWQAP") work
plan to the Department which outlined a two-phase approach for the site
assessment. Phase I and Phase II reports were submitted to the Department in
August 1990 and
47

November 1990, respectively. In August 1991, a Phase III report was submitted
to the Department, which detailed Leisure's final stage of the assessment
program. In July 1992, Leisure entered into a Memorandum of Agreement with the
Department as an alternative to the GWQAP under which Leisure will sample and
monitor the groundwater contamination under the Department's oversight. A
sampling and monitoring schedule was submitted to the Department in September
1992 and was approved by the Department in November 1994. Leisure has
undertaken several remedial measures to improve groundwater quality at its
facility. The most recent groundwater sampling reports indicate that sampling
has been performed in accordance with the Department's Field Sampling Manual
and that the remedial measures taken by Leisure have made an improvement in
groundwater quality at the site. In addition, at Leisure's facility in Mahwah,
Leisure historically discharged certain motorcoach wash and toilet waste into
the ground. The Department has indicated that it may require Leisure to
connect to the public sanitary sewer system. Leisure has ceased discharging
motorcoach wash and toilet waste to the ground and currently hauls this waste
off site on a periodic basic for disposal. After consulting with an
environmental engineer, Leisure has accrued approximately $220,000 for the
anticipated cost of connecting to the sewer system.

Following this Offering, the Company intends to implement an
environmental compliance program at all of its facilities in an effort to
prevent or reduce future releases of hazardous substances.

LEGAL PROCEEDINGS

One or more of the Founding Companies (or other motorcoach operators
acquired in the future by the Company) may become subject to litigation in
connection with the competitive bidding process for a contract to provide
transit or commuter service on behalf of a transit authority. Unsuccessful
bidders occasionally will challenge, through a regulatory appeals process or
in court, the awarding of the contract and will often name the successful
bidder as an additional defendant. The cost of defending such an action can be
significant, and if the required competitive bidding procedures were not
followed by the transit authority, the authority could be ordered to begin the
process over or even award the contract to another bidder.

Suburban is the plaintiff in a lawsuit against a bus company, Inner
Circle Qonexions, Inc. ("Inner Circle"), and the Township of East Brunswick,
New Jersey. Suburban has challenged the award to Inner Circle of a contract
for access to certain bus terminals in that Township and the Township's right
to restrict access to those terminals. Suburban has had access to the
terminals under a contract with the Township and has retained its access to
the terminals and continues to carry passengers between the terminals and New
York City while this litigation is pending. In its complaint, Suburban has
alleged that it will lose significant revenues if denied access to the
terminals, although Suburban acknowledges that access to the terminals should
be open to all motorcoach operators with the proper authority. The suit was
filed in United States District Court for the District of New Jersey in 1994,
and the court initially denied Suburban's request for an injunction against
the granting of the award. However, on Suburban's request for reconsideration,
the court vacated its order denying the injunction in March 1996. Proceedings
in the case are continuing. Suburban is unable to predict whether it will
prevail in this litigation and whether it will be able to recoup a significant
portion of its lost revenues. Moreover, even if Suburban prevails in this
litigation, it could face competition at the terminals to which it is not
currently subject.

From time to time, each of the Founding Companies is a party to routine
litigation incidental to its business, primarily involving claims for personal
injury or property damage incurred in the transportation of its passengers.
The Company is not aware of any pending claims or threatened claims which, if
adversely determined, might materially affect the Company's operating results
or financial condition.
48

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning the Company's
directors, executive officers and certain key employees, and those persons who
will become directors and executive officers in connection with this Offering.

NAME AGE POSITION
- ------------------------------------ --- -------------------------------------
Richard H. Kristinik................ 56 Chairman of the Board and Chief
Executive Officer

John Mercadante, Jr................. 51 President and Chief Operating
Officer; Director; President and
Chief Executive Officer of
Adventure

Kenneth Kuchin...................... 42 Vice Chairman of the Board; Senior
Vice President -- Northeast Region;
President of Suburban

Douglas M. Cerny.................... 37 Senior Vice President, General
Counsel and Secretary

Frank P. Gallagher.................. 52 Senior Vice President -- Corporate
Development; Director; President and
Chief Executive Officer of Commu-
nity

Lawrence K. King.................... 39 Senior Vice President and Chief
Financial Officer; Director

Gerald Mercadante................... 49 Senior Vice President -- Northeast
Region Operations; Director;
President of Leisure

Charles D. Busskohl................. 63 Director; Chairman and Chief
Executive Officer of Arrow

Steven S. Harter.................... 33 Director

William J. Lynch.................... 54 Director

Paul M. Verrochi.................... 47 Director

Thomas A. Werbe..................... 44 Director; President of Gray Line SF

Jon M. Garfield(1).................. 32 Vice President -- Acquisitions

Raymond K. Turner(1)................ 39 Vice President and Treasurer

Steven T. Zellers(1)................ 35 Vice President and Comptroller

Robert K. Werbe(1).................. 68 Chairman of the Board of Gray Line SF

- ------------

(1) Key Employee

Richard H. Kristinik has served as Chairman of the Board of Directors and
Chief Executive Officer of the Company since March 1996. Prior to that time, Mr.
Kristinik was a Partner with Arthur Andersen LLP from 1973 to March 1996,
serving in its Houston office for all those years, except for the period from
1979 to 1984, when he served as Managing Partner of the Tulsa office, and the
period from 1985 to 1989, when he served as Managing Partner of the Denver
office.

John Mercadante, Jr. will become President and Chief Operating Officer and
a director of the Company upon consummation of this Offering. Mr. Mercadante
co-founded Leisure with his brother, Gerald Mercadante, in 1970 and acquired
Adventure in 1988. He has served as Adventure's President and Chief Operating
Officer since 1988 and will continue in that capacity after the consummation of
this Offering. Mr Mercadante is currently the President of the Atlantic City Bus
Operators Association and a director of the New Jersey Motor Bus Association,
both motorcoach trade associations.

Kenneth Kuchin will become Vice Chairman of the Board and Senior Vice
President -- Northeast Region of the Company upon consummation of this Offering.
He has been employed by Suburban since 1975, has served as Suburban's
President and Chief Executive Officer since 1990 and will continue to serve in
that capacity after the consummation of this Offering.

Douglas M. Cerny has been Senior Vice President, General Counsel and
Secretary of the Company since January 1996. From February 1994 through January
1996, he was Vice President and General Counsel of Medical Review Systems, Inc.,
a privately held health care cost-containment services company which was
acquired by Equifax, Inc. in March 1995. Between March 1995 and January 1996,
Mr. Cerny provided operational support in the transition of operations to
Equifax, Inc. From July 1988 through February 1994, Mr. Cerny was Vice President
and Corporate Counsel and then Vice President and General Counsel of Allwaste,
Inc., a publicly traded environmental services company.

Frank P. Gallagher will become Senior Vice President -- Corporate
Development and a director of the Company upon consummation of this Offering.
Mr. Gallagher has served as President and Chief Executive Officer of Community
since 1969 and will continue to serve in that capacity after the consummation of
this Offering. Mr. Gallagher currently serves as the President of the New Jersey
Motor Bus Association and President of Bus Park of Atlantic City, a bus parking
cooperative.

Lawrence K. King has served as Senior Vice President and Chief Financial
Officer and a director of the Company since December 1995. From 1992 until
December 1995, Mr. King was Executive Vice President, Secretary, Treasurer and
Chief Financial Officer of SI Diamond Technology, Inc., a publicly traded
technology development company. From 1988 to 1991, he served as Assistant
Secretary and Treasurer of The Permian Corporation, the general partner of
Permian Partners L.P., a publicly traded crude oil, trucking, transportation and
distribution master limited partnership. From 1979 to 1988, Mr. King served in a
number of positions as a certified public accountant with Arthur Andersen LLP.

Gerald Mercadante will become Regional Vice President and a director of the
Company upon consummation of this Offering. Mr. Mercadante co-founded Leisure in
1970, has been President and Chief Executive Officer of Leisure since 1980 and
will continue to serve in that capacity after the consummation of this Offering.

Charles D. Busskohl will become a director of the Company upon consummation
of this Offering. He has been employed by Arrow since 1960 and has served as
Arrow's Chairman for six years and as Chief Executive Officer for 34 years. Mr.
Busskohl was a founder of the United Motorcoach Association, a motorcoach trade
association. Mr. Busskohl will continue to serve as Chief Executive Officer of
Arrow after the consummation of this Offering.

Steven S. Harter has been a director of the Company since September 1995.
Mr. Harter is President of Notre Capital Ventures II, L.L.C., a consolidator of
highly fragmented businesses. Mr. Harter was Senior Vice President of Notre
Capital Ventures, Ltd. from June 1993 through July 1995 and was the Notre
principal primarily responsible for the initial public offerings of US Delivery
Systems, Inc. and Physicians Resource Group, Inc. From April 1989 to June 1993,
Mr. Harter was Director of Mergers and Acquisitions for Allwaste, Inc. From May
1984 to April 1989, Mr. Harter was a certified public accountant with Arthur
Andersen LLP.

William J. Lynch will become a director of the Company upon the
commencement of this Offering. Mr. Lynch is a Managing Director of Capstone
Partners, LLC, a special situations venture capital firm. From October 1989 to
March 1996, Mr. Lynch was a partner of the law firm of Morgan, Lewis & Bockius
LLP. Mr. Lynch also serves as a director of Sanifill, Inc., a publicly traded
environmental services company, and is an investor in Notre Capital Ventures II,
L.L.C.

Paul M. Verrochi will become a director of the Company upon the
commencement of this Offering. Mr. Verrochi has served as Chairman of the
Board of American Medical Response, Inc., a publicly traded provider of
ambulance services, since its inception in February 1992. Since February 1992,
he has also been a Principal of Exel Holdings, Ltd., a privately-held
investment firm he co-founded. From April 1989 to December 1990, Mr. Verrochi
was President of Allwaste Asbestos Abatement, Inc., a subsidiary of Allwaste,
Inc. Mr. Verrochi was a founder of American

Environmental Group, a regional asbestos abatement company, and served as
Chairman of its Board of Directors from July 1987 until April 1989, when it was
acquired by Allwaste, Inc.

Thomas A. Werbe will become a director of the Company upon consummation of
this Offering. Mr. Werbe is the President of Gray Line SF and has been a
director of Gray Line SF for more than five years.

Jon M. Garfield has served as Vice President -- Acquisitions of the Company
since February 1996. From 1991 until joining the Company, Mr. Garfield served as
Assistant Corporate Controller of Maxxim Medical, Inc., a publicly traded
manufacturer of medical devices. Mr. Garfield served as a certified public
accountant for Coopers & Lybrand from 1990 to 1991. Mr. Garfield served as
Accounting Manager for Premisys Realty from 1989 to 1990. From 1986 to 1989, Mr.
Garfield was a certified public accountant with Arthur Andersen LLP.

Raymond K. Turner became Vice President and Treasurer of the Company in
February 1996. From 1989 until joining the Company, Mr. Turner held various
accounting and financial positions, including Treasurer and Regional Controller,
with Allwaste, Inc. From 1983 until 1989, Mr. Turner was a certified public
accountant with Arthur Andersen LLP.

Steven T. Zellers has served as Vice President and Comptroller of the
Company since December 1995. From 1993 until joining the Company, Mr. Zellers
was Director of Finance and an officer of a privately held manufacturing
company. From 1988 to 1992, Mr. Zellers was Assistant Controller of Gundle
Environmental Corporation, a publicly traded environmental company. From 1984 to
1988, Mr. Zellers was a certified public accountant with Arthur Andersen LLP.

Robert K. Werbe has been the Chairman of the Board and Chief Executive
Officer of Gray Line SF for over 15 years. Mr. Werbe is the father of Thomas A.
Werbe, who will become a director of the Company upon consummation of this
Offering.

Effective upon consummation of this Offering, the Board of Directors will
be divided into three classes of four, four and three directors, respectively,
with directors serving staggered three-year terms, expiring at the annual
meeting of stockholders in 1997, 1998 and 1999, respectively. At each annual
meeting of stockholders, one class of directors will be elected for a full term
of three years to succeed that class of directors whose terms are expiring. All
officers serve at the discretion of the Board of Directors.

The Board of Directors has established an Audit Committee and a
Compensation Committee, effective upon the consummation of this Offering. The
members of the Audit Committee and the Compensation Committee will be Messrs.
Harter, Lynch and Verrochi.

DIRECTOR COMPENSATION

Directors who are also employees of the Company or one of its subsidiaries
will not receive additional compensation for serving as directors. Each director
who is not an employee of the Company, or one of its subsidiaries will receive a
fee of $2,000 for attendance at each Board of Directors meeting and $1,000 for
each committee meeting (unless held on the same day as a Board of Directors'
meeting). In addition, under the Company's 1996 Non-Employee Directors' Stock
Plan, each non-employee director will automatically receive an option to acquire
10,000 shares of Common Stock upon such person's initial election as a director,
and, subject to a certain exception, an annual option to acquire 5,000 shares at
each annual meeting of the Company's stockholders thereafter at which such
director is re-elected or remains a director. Each non-employee director also
may elect to receive shares of Common Stock or credits representing "deferred
shares" in lieu of cash directors' fees. See "-- 1996 Non-Employee Directors'
Stock Plan." Directors are also reimbursed for out-of-pocket expenses incurred
in attending meetings of the Board of Directors or committees thereof incurred
in their capacity as directors.

EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS; COVENANTS-NOT-TO-COMPETE

The Company was incorporated in September 1995, has conducted limited
operations and generated no revenue to date and did not pay any of its executive
officers compensation during 1995. The Company anticipates that during 1996 its
most highly compensated executive officers will be Messrs. Kristinik, John
Mercadante, Kuchin, Cerny, Gallagher, King and Gerald Mercadante.

Each of Messrs. John Mercadante, Kuchin, Gallagher and Gerald Mercadante
will enter into an employment agreement with the Company and a Founding Company
providing for an annual base salary of $150,000 and a bonus to be determined
annually pursuant to an incentive bonus plan to be established by the Company.
Each employment agreement will be for a term of five years, and unless
terminated or not renewed by the Company or not renewed by the employee, the
term will continue thereafter on a year-to-year basis on the same terms and
conditions existing at the time of renewal. Each of these agreements will
provide that, in the event of a termination of employment by the Company without
cause during the first three years of the employment term (the "Initial Term"),
the employee will be entitled to receive from the Company an amount equal to his
then current salary for the remainder of the Initial Term or for one year,
whichever is greater. In the event of a termination of employment without cause
during the final two years of the initial five year term of the employment
agreement, the employee will be entitled to receive an amount equal to his then
current salary for one year. In either case, payment is due in one lump sum on
the effective date of termination. In the event of a change in control of the
Company (as defined in the agreement) during the Initial Term, if the employee
is not given at least five days' notice of such change in control, the employee
may elect to terminate his employment and receive in one lump sum three times
the amount he would receive pursuant to a termination without cause during the
Initial Term. In addition, the non-competition provisions of the employment
agreement would not apply. In the event the employee is given at least five
days' notice of such change in control, the employee may elect to terminate his
employment agreement and receive in one lump sum two times the amount he would
receive pursuant to a termination without cause during the Initial Term. In such
an event, the non-competition provisions of the employment agreement would apply
for two years from the effective date of termination. Messrs. Busskohl and
Robert Werbe will enter into an employment agreement with Arrow and Gray Line
SF, respectively, containing substantially similar terms.

Each employment agreement contains a covenant not to compete with the
Company for a period equivalent to the longer of two years immediately following
termination of employment or, in the case of a termination by the Company
without cause in the absence of a change in control, for a period of one year
following termination of employment.

Each of Messrs. Kristinik, Cerny and King will enter into an employment
agreement with the Company providing for an annual base salary of $150,000 and a
bonus to be determined annually pursuant to an incentive bonus plan to be
established by the Company. Each employment agreement will be for a term of
three years, and unless terminated or not renewed by the Company or not renewed
by the employee, the term will continue thereafter on a year-to-year basis on
the same terms and conditions existing at the time of renewal. Each of these
agreements will provide that, in the event of a termination of employment by the
Company without cause, the employee will be entitled to receive from the Company
an amount equal to one year's salary, payable in one lump sum on the effective
date of termination. In the event of a change in control of the Company (as
defined in the agreement) during the initial three-year term, if the employee is
not given at least five days' notice of such change in control, the employee may
elect to terminate his employment and receive in one lump sum three times the
amount he would receive pursuant to a termination without cause during such
initial term. In addition, the non- competition provisions of the employment
agreement would not apply. In the event the

employee is given at least five days' notice of such change in control, the
employee may elect to terminate his employment and receive in one lump sum three
times the amount he would receive pursuant to a termination without cause during
such initial term. In such an event, the non-competition provisions of the
employment agreement would apply for two years from the effective date of
termination.

1996 LONG-TERM INCENTIVE PLAN

No stock options were granted to, or exercised by or held by any executive
officer in 1995. In March 1996, the Board of Directors and the Company's
stockholders approved the Company's 1996 Long-Term Incentive Plan (the "Plan").
The purpose of the Plan is to provide directors, officers, key employees,
consultants and other service providers with additional incentives by increasing
their ownership interests in the Company. Individual awards under the Plan may
take the form of one or more of: (i) either incentive stock options ("ISOs") or
non-qualified stock options ("NQSOs"), (ii) stock appreciation rights ("SARs"),
(iii) restricted or deferred stock, (iv) dividend equivalents and (v) other
awards not otherwise provided for, the value of which is based in whole or in
part upon the value of the Common Stock.

The Compensation Committee will administer the Plan and generally select
the individuals who will receive awards and the terms and conditions of those
awards. The maximum number of shares of Common Stock that may be subject to
outstanding awards, determined immediately after the grant of any award, may not
exceed the greater of 1,500,000 shares or 15% of the aggregate number of shares
of Common Stock outstanding. Shares of Common Stock which are attributable to
awards which have expired, terminated or been canceled or forfeited are
available for issuance or use in connection with future awards.

The Plan will remain in effect until terminated by the Board of Directors.
The Plan may be amended by the Board of Directors without the consent of the
stockholders of the Company, except that any amendment, although effective when
made, will be subject to stockholder approval if required by any Federal or
state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted.

In connection with this Offering, NQSOs to purchase a total of 495,000
shares of Common Stock of the Company have been granted as follows: 200,000
shares to Mr. Kristinik, 100,000 shares to Mr. Cerny, 100,000 shares to Mr. King
and 95,000 shares to other management. In addition, options to purchase
approximately 650,000 shares will be granted to the employees of the Founding
Companies. The grants of all of the foregoing options will be effective as of
the commencement of this Offering and each will have an exercise price equal to
the initial public offering price per share in this Offering. These options will
vest at the rate of 20% per year commencing on June 30, 1997, and will expire 10
years from the date of grant or three months following termination of
employment.

1996 NON-EMPLOYEE DIRECTORS' STOCK PLAN

The Company's 1996 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which was adopted by the Board of Directors and approved by the
Company's stockholders in March 1996, provides for (i) the automatic grant to
each non-employee director serving at the commencement of this Offering of an
option to purchase 10,000 shares, and thereafter (ii) the automatic grant to
each non-employee director of an option to purchase 10,000 shares upon such
person's initial election as a director. In addition, the Directors' Plan
provides for an

automatic annual grant to each non-employee director of an option to purchase
5,000 shares at each annual meeting of stockholders following this Offering;
provided, however, that if the first annual meeting of stockholders following a
person's initial election as a non-employee director is within three months of
the date of such election, such person will not be granted an option to purchase
5,000 shares of Common Stock at such annual meeting. These options will have an
exercise price per share equal to the fair market value of a share at the date
of grant. The options granted to Messrs. Harter, Lynch and Verrochi effective
upon the commencement of this Offering will have an exercise price equal to the
initial public offering price per share in this Offering. Options will expire at
the earlier of 10 years from the date of grant or one year after termination of
service as a director, and options will be immediately exercisable. In addition,
the Directors' Plan permits non-employee directors to elect to receive, in lieu
of cash directors' fees, shares or credits representing "deferred shares"
settleable at future dates, as elected by the director. The number of shares or
deferred shares received will be equal to the number of shares which, at the
date the fees would otherwise be payable, will have an aggregate fair market
value equal to the amount of such fees.

CERTAIN TRANSACTIONS

ORGANIZATION OF THE COMPANY

In connection with the formation of the Company, the Company issued
approximately 147 shares of Common Stock for $1,000 to Notre Capital Ventures
II, L.L.C., a Texas limited liability company ("Notre"). Mr. Harter is the
President of Notre and a director of the Company. Subsequently, the Company
declared a stock dividend of 9,999 shares of Common Stock for each share of
Common Stock outstanding. In addition, the Company sold 692,000 shares (as
adjusted for the stock dividend) of Common Stock at $.01 per share to various
members of management, including: Richard H. Kristinik -- 200,000 shares of
Common Stock, Lawrence K. King -- 114,000 shares of Common Stock and Douglas M.
Cerny -- 114,000 shares of Common Stock. The Company issued 75,000 shares of
Common Stock to a trust for the benefit of the children of Paul M. Verrochi, who
will become a director of the Company upon the commencement of this Offering,
and granted options to purchase 10,000 shares of Common Stock, effective upon
the commencement of this Offering, to Messrs. Verrochi and Harter and to William
J. Lynch, who also will become a director of the Company upon the commencement
of this Offering and who is an investor in Notre. In addition, Notre agreed to
advance whatever funds were necessary to effect the Mergers and this Offering
and had outstanding as of December 31, 1995 advances to the Company in the
aggregate amount of $188,000, all of which are on a noninterest-bearing basis.
All of Notre's advances will be repaid out of the proceeds of this Offering.

Simultaneously with the closing of this Offering, Coach USA will acquire by
merger all of the issued and outstanding stock of the six Founding Companies, at
which time each Founding Company will become a wholly owned subsidiary of the
Company. The aggregate consideration to be paid by Coach USA in the Mergers is
approximately $88.4 million, consisting of approximately $22.1 million in cash
and 5,099,687 shares of Common Stock. In addition, immediately prior to the
Mergers certain of the Founding Companies will make distributions of
approximately $4.5 million, representing S Corporation earnings previously taxed
to their respective stockholders. Also, prior to the Mergers, certain of the
Founding Companies will distribute to their respective stockholders
approximately $4.2 million in net book value of assets and approximately
$700,000 of related liabilities.

The consummation of each Merger is subject to customary conditions. These
conditions include, among others, the continuing accuracy on the closing date of
the Mergers of the representations and warranties of the Founding Companies and
the principal stockholders thereof and of Coach USA, the performance by each of
them of all covenants included in the

agreements relating to the Mergers and the nonexistence of a material adverse
change in the results of operations, financial condition or business of each
Founding Company.

There can be no assurance that the conditions of the Mergers will be
satisfied or waived or that the acquisition agreements will not be terminated
prior to consummation. If any of the Mergers is terminated for any reason, the
Company likely will not consummate this Offering on the terms described herein.

The aggregate consideration to be paid by Coach USA for each of the
Founding Companies is as follows: Suburban: $24,929,992, consisting of
$7,479,000 to be paid in cash and 1,342,384 shares of Common Stock; Gray Line
SF: $16,298,215, consisting of $4,889,467 to be paid in cash and 877,596 shares
of Common Stock; Leisure: $19,980,999, consisting of $3,824,300 to be paid in
cash and 1,242,823 shares of Common Stock; Community: $9,593,997, consisting of
$2,419,700 to be paid in cash and 551,869 shares of Common Stock; Adventure:
$9,841,000, consisting of $2,952,300 to be paid in cash and 529,900 shares of
Common Stock; and Arrow: $7,760,995, consisting of $544,500 to be paid in cash
and 555,115 shares of Common Stock.

Pursuant to the agreements to be entered into in connection with the
Mergers, the stockholders of the Founding Companies have agreed not to compete
with the Company for five years, commencing on the date of consummation of this
Offering.

Each of the Founding Companies has incurred indebtedness which has been
personally guaranteed by its stockholders or by entities controlled by its
stockholders. At December 31, 1995, the aggregate amount of indebtedness of
these Founding Companies that was subject to personal guarantees was
approximately $11.6 million. The Company intends to repay substantially all of
such indebtedness following the consummation of this Offering and to use its
best efforts to have the personal guarantees of the balance of this indebtedness
released within 120 days after the closing of this Offering and, in the event
that any guarantee cannot be released, to repay the balance of such
indebtedness. See "Use of Proceeds."

In connection with the Mergers, and as consideration for their interests in
the Founding Companies, certain officers, directors, key employees and holders
of more than 5% of the outstanding shares of the Company, together with their
spouses and trusts for which they act as trustees, will receive cash and shares
of Common Stock of the Company as follows: Mr. Kuchin -- $6,748,229 and
1,211,219 shares of Common Stock; Mr. Thomas Werbe_-- $1,955,787 and 351,038
shares of Common Stock; Mr. Robert Werbe -- $488,947 and 87,760 shares of
Common Stock; Mr. Gerald Mercadante -- $3,250,649 and 1,056,400 shares of
Common Stock; Mr. Gallagher -- $867,319 and 197,800 shares of Common Stock; Mr.
John Mercadante -- $2,214,225 and 397,425 shares of Common Stock; and Mr.
Busskohl -- $544,043 and 550,451 shares of Common Stock.

LEASES OF FACILITIES

In connection with the Mergers, the Company will assume three leases by
Suburban of properties in South Plainfield, Hightstown and New Brunswick, New
Jersey that are owned by Mr. Sidney Kuchin and used by Suburban for its
motorcoach operations. Mr. Sidney Kuchin is Mr. Kenneth Kuchin's father and a
shareholder of Suburban. Suburban is responsible for all real estate taxes,
insurance and maintenance. The terms of the leases are through October 31, 2030
and provide for aggregate annual rentals of approximately $342,000 with periodic
10% increases every five years commencing November 1, 1998. The Company believes
that the rent for such properties does not exceed the fair market rental
thereof.

In connection with the Mergers, the Company will assume leases by Community
of properties in Passaic, New Jersey used by Community in its motorcoach
operations that are owned by companies controlled by Mr. Frank P. Gallagher and
members of his family. Community is responsible for all real estate taxes,
insurance and maintenance. The terms of the leases are for five years and
provide for five one year extensions in favor of the Company. The leases

commenced January 1, 1996 and provide for aggregate annual rentals of
approximately $195,000. The Company believes that the rent for such properties
does not exceed the fair market rental thereof.

Coach USA has adopted a policy that, wherever possible, it will not own
any real property. Therefore, Coach USA has required the two Founding
Companies described below that own real property to agree to transfer such
real property to their stockholders or to entities controlled by their
stockholders prior to the Mergers. Accordingly, two properties owned by
Leisure and used for its motorcoach operations with a net book value of
$1,879,000 as of December 31, 1995 will be distributed, without payment of
consideration to Leisure or Coach USA, to an entity controlled by the
stockholders thereof, including Mr. Gerald Mercadante, prior to the Mergers
and then leased to the Company. These leases were negotiated between the
General Counsel of Coach USA and counsel for Leisure. These leases have terms
of five years and 10 years, respectively, with an option in favor of the
Company to extend the leases for five or 10 years at the end of the original
lease period, and provide for aggregate annual rentals of approximately
$77,000. Leisure will be responsible for all real estate taxes, insurance and
maintenance. See the Pro Forma Combined Financial Statements of the Company.

Certain properties owned by Arrow with a net book value of $1,412,000 as
of September 30, 1995 will be distributed, without payment of consideration to
Arrow or Coach USA, to the stockholders thereof, including Mr. Charles
Busskohl, prior to the Mergers and then leased to the Company. These leases
were negotiated between the General Counsel of Coach USA and counsel for Arrow
and are for a term of five years with five renewal options for five years and
provide for aggregate annual rentals of approximately $76,000. Arrow will be
responsible for all real estate taxes, insurance and maintenance. See the Pro
Forma Combined Financial Statements of the Company.

Because Coach USA does not want to own any real property, it did not
value the properties to be distributed to the stockholders of Leisure and
Arrow or take any such value into account when negotiating the consideration
to be paid for those Founding Companies. The rent to be paid by Coach USA on
the leases back to it of such properties was negotiated as described above
based on the historical cost to Leisure and Arrow of having those properties
in their respective businesses and is believed by Coach not to exceed the fair
market rental thereof.

OTHER TRANSACTIONS

Gray Line SF owed Grosvenor Properties, Ltd., a company owned by Mr. Robert
K. Werbe and his brother, approximately $1,552,000 as of October 31, 1994 and
approximately $300,000 as of October 31, 1995. This loan bears interest at the
prime rate plus 1% and matures in October 2000. Gray Line SF owed Mr. Robert K.
Werbe approximately $256,000 as of October 31, 1994, and Mr. Robert K. Werbe
owed Gray Line SF approximately $225,000 and $229,000 as of October 31, 1994 and
1995, respectively. These loans are unsecured, noninterest-bearing and payable
upon demand.

Community owed Ms. Alice Gallagher, a shareholder of Community,
approximately $132,000 and $171,000 as of December 31, 1994 and 1995,
respectively. These loans are unsecured, bear interest at 10.5% and are payable
in monthly installments of approximately $12,000.

Adventure owed Mr. John Mercadante and his sister approximately $315,000 as
of December 31, 1994 and 1995, respectively. These loans are unsecured,
noninterest-bearing and payable upon demand.

Suburban has outstanding accounts receivable from Mr. Kenneth Kuchin
totaling $194,000 and Sidney Kutchin totaling $458,000 as of December 31,
1995. These receivables are unsecured, noninterest-bearing and payable on
demand.
56

All of the loans to and from the Founding Companies described in this
section will be repaid in connection with the Mergers and this Offering.

The Company has entered into agreements with Exel Motorcoach Partnership
("Exel") whereby Exel will provide introductions to other motorcoach businesses
and other consulting services for a term of three years. The consideration to be
paid to Exel will be approximately $100,000 per year. In addition, Exel will be
paid a commission on any acquisition completed by the Company with motorcoach
businesses introduced to it by Exel, based on a formula ranging from 5% of the
first $1,000,000 of consideration paid for the acquired business to 1% of the
consideration in excess of $4,000,000 paid for such business. Mr. Verrochi, who
will become a director of the Company upon the commencement of this Offering, is
a principal of Exel.

COMPANY POLICY

In the future, any transactions with officers, directors and holders of
more than 5% of the Common Stock will be approved by a majority of the Board of
Directors, including a majority of the disinterested members of the Board of
Directors.
57

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company, after giving effect to the Mergers
and this Offering, by (i) each person known to beneficially own more than 5% of
the outstanding shares of Common Stock; (ii) each of the Company's directors and
persons who have consented to be named as directors ("named directors"); (iii)
each named executive officer; and (iv) all executive officers, directors and
named directors as a group. All persons listed have an address c/o the Company's
principal executive offices and have sole voting and investment power with
respect to their shares unless otherwise indicated.

SHARES BENEFICIALLY
OWNED
AFTER OFFERING
----------------------
NAME NUMBER PERCENT
- ------------------------------------- --------- -------
Richard H. Kristinik(1).............. 200,000 1.8%
Kenneth Kuchin(2).................... 1,211,219 11.1
John Mercadante, Jr.(3).............. 397,425 3.7
Douglas M. Cerny(4).................. 114,000 1.0
Frank P. Gallagher(5)................ 197,800 1.8
Lawrence K. King(4).................. 114,000 1.0
Gerald Mercadante(6)................. 1,056,400 9.7
Charles D. Busskohl(7)............... 550,451 5.1
Steven S. Harter(8).................. 1,336,352 12.3
William J. Lynch(9).................. 10,000 0.1
Paul M. Verrochi(10)................. 85,000 0.8
Thomas A. Werbe(11).................. 351,038 3.2
Notre Capital Ventures II,
L.L.C.(12)......................... 1,326,352 12.2
All executive officers, directors and
named directors as a group
(12 persons)....................... 5,623,685 51.6

(1) Does not include 200,000 shares which may be acquired upon the exercise
of options not exercisable within 60 days. These shares will be
transferred to the Kristinik Family Partnership, of which Mr. Kristinik
will be the general partner.
(2) Includes 383,299 shares held in a trust for the benefit of Mr. Kuchin's
daughter and with respect to which Mr. Kuchin is a trustee.
(3) Includes 137,774 shares to be acquired by Mr. Mercadante's spouse, as to
which shares Mr. Mercadante disclaims beneficial ownership.
(4) Does not include 100,000 shares which may be acquired upon the exercise
of options not exercisable within 60 days.
(5) Includes 90,885 shares to be acquired by Mr. Gallagher's spouse, as to
which shares Mr. Gallagher disclaims beneficial ownership, and 16,039
shares held in a trust for the benefit of Mr. Gallagher's daughter and
with respect to which Mr. Gallagher is a trustee.
(6) Includes 186,423 shares to be acquired by Mr. Mercadante's spouse, as to
which shares Mr. Mercadante disclaims beneficial ownership.
(7) These shares are held in two family trusts with respect to which Mr.
Busskohl is a trustee.
(8) Includes 10,000 shares which may be issued upon exercise of options granted
under the Directors' Plan effective as of the commencement of this Offering
and 1,326,352 shares of Common Stock issued to Notre. Mr. Harter is the
President of Notre.
(9) Includes 10,000 shares which may be issued upon exercise of options granted
under the Directors' Plan effective as of the commencement of this
Offering.
(10) Includes 10,000 shares which may be issued upon exercise of options granted
under the Directors' Plan effective as of the commencement of this Offering
and 75,000 shares held in a trust, for the benefit of Mr. Verrochi's
children, as to which shares Mr. Verrochi disclaims beneficial ownership.
(11) These shares are held in the Robert K. Werbe Grantor Retained Annuity
Trust, and Mr. Thomas Werbe is a trustee of such trust.
(12) Does not include the 10,000 shares which may be acquired by Mr. Harter, the
President of Notre, upon exercise of options granted to him under the
Directors' Plan effective as of the commencement of this Offering.

DESCRIPTION OF CAPITAL STOCK
GENERAL

The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, par value $.01 per share, and 500,000 shares of preferred stock,
par value $.01 per share (the "Preferred Stock"). After giving effect to the
Mergers, but prior to the consummation of this Offering, the Company will have
outstanding 7,265,411 shares of Common Stock and no shares of Preferred Stock.
Upon completion of this Offering, the Company will have outstanding 10,865,411
shares of Common Stock (11,405,411 if the Underwriters' over-allotment option is
exercised in full) and no shares of the Preferred Stock.

COMMON STOCK

The holders of the Common Stock are entitled to one vote for each share
held on all matters voted upon by stockholders, including the election of
directors.

Subject to the rights of any then outstanding shares of Preferred Stock,
the holders of the Common Stock are entitled to such dividends as may be
declared in the discretion of the Board of Directors out of funds legally
available therefor. Holders of Common Stock are entitled to share ratably in the
net assets of the Company upon liquidation after payment or provision for all
liabilities and any preferential liquidation rights of any Preferred Stock then
outstanding. The holders of Common Stock have no preemptive rights to purchase
shares of stock of the Company. Shares of Common Stock are not subject to any
redemption provisions and are not convertible into any other securities of the
Company. All outstanding shares of Common Stock are, and the shares of Common
Stock to be issued pursuant to this Offering will be upon payment therefor,
fully paid and non-assessable.

The Board of Directors will be classified into three classes as nearly
equal in number as possible, with the term of each class expiring on a staggered
basis. See "Management -- Board of Directors." The classification of the Board
of Directors may make it more difficult to change the composition of the Board
of Directors and thereby may discourage or make more difficult an attempt by a
person or group to obtain control of the Company. Cumulative voting for the
election of directors is not permitted, enabling holders of a majority of the
outstanding Common Stock to elect all members of the class of directors whose
terms are then expiring. Any director, or the entire Board of Directors, may be
removed by the stockholders at any time, with cause, by the affirmative vote of
the holders of a majority of the outstanding shares of the Company entitled to
vote for the election of directors.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "TOUR," subject to notice of issuance.

PREFERRED STOCK

The Preferred Stock may be issued from time to time by the Board of
Directors in one or more series. Subject to the provisions of the Company's
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to change the number of shares constituting any
series and to provide for or change the voting powers, designations, preferences
and relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any series of the Preferred
Stock, in each case without any further action or vote by the stockholders. The
Company has no current plans to issue any shares of Preferred Stock.

One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock or may otherwise adversely affect the
market price of the Common Stock.

STATUTORY BUSINESS COMBINATION PROVISION

Upon consummation of this Offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person or an affiliate or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved by
the Board of Directors of the corporation before the person becomes an
interested stockholder; (ii) the interested stockholder acquired 85% or more of
the outstanding voting stock of the corporation in the same transaction that
makes such person an interested stockholder (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's board of directors and by the holders of at least 66 2/3%
of the corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined as any person who is (i) the owner of 15% or
more of the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and who was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.

LIMITATION ON DIRECTORS' LIABILITIES

Pursuant to the Company's Certificate of Incorporation and as permitted by
Delaware law, directors of the Company are not liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty, except for
liability in connection with a breach of duty of loyalty, for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, for dividend payments or stock repurchases illegal under Delaware law or
any transaction in which a director has derived an improper personal benefit.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer and Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Mergers and completion of this Offering, the
Company will have outstanding 10,865,411 shares of Common Stock. The 3,600,000
shares sold in this Offering (plus any additional shares sold upon exercise of
the Underwriters' over-allotment option) will be freely tradeable without
restriction unless acquired by affiliates of the Company. None of the remaining
7,265,411 outstanding shares of Common Stock have been registered under the
Securities Act, which means that they may be resold publicly only upon
registration under the Securities Act or in compliance with an exemption from
the registration requirements of the Securities Act, including the exemption
provided by Rule 144 thereunder.

In general, under Rule 144 as currently in effect, if two years have
elapsed since the later of the date of the acquisition of restricted shares of
Common Stock from either the Company or any affiliate of the Company, the
acquiror or subsequent holder thereof may sell, within any three-month period
commencing 90 days after the date of this Prospectus, a number of shares that
does not exceed the greater of 1% of the then outstanding shares of the Common
Stock (108,654 shares upon completion of this Offering), or the average weekly
trading volume of the Common Stock on the Nasdaq National Market during the four
calendar weeks preceding the date on which notice of the proposed sale is sent
to the Commission. Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about the Company. If three years have elapsed since the later of
the date of the acquisition of restricted shares of Common Stock from the
Company or any affiliate of the Company, a person who is not deemed to have been
an affiliate of the Company at any time for 90 days preceding a sale would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations, manner of sale provisions or notice requirements.

The Company and its officers, directors and certain stockholders who
beneficially own 5,623,685 shares in the aggregate have agreed not to sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of Alex. Brown &
Sons Incorporated, except that the Company may issue Common Stock in connection
with acquisitions or in connection with its 1996 Long-Term Incentive Plan and
its 1996 Non-Employee Directors' Stock Plan (the "Plans"). See "Underwriting."
In addition, the stockholders of the Founding Companies and the Company's
officers, certain directors and certain stockholders have agreed with the
Company that they will not sell any of their shares for a period of two years
after the closing of this Offering. If the two-year "holding" period for
restricted securities under Rule 144 described above is reduced by the
Commission, this two-year restriction on sales of Common Stock will be
correspondingly reduced. These stockholders, however, have the right, in the
event the Company proposes to register under the Securities Act any Common Stock
for its own account or for the account of others, subject to certain exceptions,
to require the Company to include their shares in the registration, subject to
the right of any managing underwriter of any such offering to exclude some or
all of the shares for marketing reasons. In addition, certain of such
stockholders have certain limited demand registration rights to require the
Company to register shares held by them following the second anniversary of the
closing of this Offering.

Within 90 days after the closing of this Offering, the Company intends to
register 3,500,000 shares of its Common Stock under the Securities Act for use
by the Company in connection with future acquisitions. Upon such registration,
these shares will generally be freely tradeable after their issuance. In some
instances, however, the Company may contractually restrict the sale of shares
issued in connection with future acquisitions. The piggyback registration rights
described above do not apply to the registration statement relating to these
3,500,000 shares.

Prior to this Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price for
the Common Stock prevailing from time to time. Nevertheless, sales, or the
availability for sale of, substantial amounts of the Common Stock in the public
market could adversely affect prevailing market prices and the ability of the
Company to raise equity capital in the future.

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated and Smith Barney Inc., have severally agreed to
purchase from the Company the following respective number of shares of Common
Stock at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:

NUMBER
UNDERWRITER OF SHARES
- ------------------------------------- ------------
Alex. Brown & Sons Incorporated......
Smith Barney Inc.....................

------------
Total................ 3,600,000
============

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of Common Stock offered hereby if
any of such shares are purchased.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After commencement of the initial
public offering, the offering price and other selling terms may be changed by
the Representatives.

The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 540,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it in the above table bears to 3,600,000, and the Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 3,600,000 shares are being offered.

The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters and the Company regarding certain liabilities,
including liabilities under the Securities Act.

The Company has agreed that it will not sell or offer any shares of Common
Stock or options, rights or warrants to acquire any Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent of
Alex. Brown & Sons Incorporated, except

for shares issued (i) in connection with acquisitions and (ii) pursuant to the
exercise of options granted under the Plans. Further, the Company's directors,
officers and certain stockholders who beneficially own 5,623,685 shares in the
aggregate have agreed not to directly or indirectly sell or offer for sale or
otherwise dispose of any Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of Alex. Brown & Sons,
Incorporated.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.

Prior to this Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock has
been determined by negotiations between the Company and the Representatives.
Among the factors considered in such negotiations were prevailing market
conditions, the results of operations of the Founding Companies in recent
periods, the market capitalization and stages of development of other companies
which the Company and the Representatives believed to be comparable to the
Company, estimates of the business potential of the Company, the present state
of the Company's development and other factors deemed relevant by the Company
and the Representatives.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Morgan, Lewis & Bockius LLP,
New York, New York. Certain legal matters related to this Offering will be
passed upon for the Underwriters by Piper & Marbury L.L.P., Baltimore, Maryland.

EXPERTS

The audited financial statements included elsewhere in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement on Form S-1 with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information pertaining to the Company and the
shares of Common Stock offered hereby, reference is made to such Registration
Statement, including the exhibits, financial statements and schedules filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or any other document are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza Building,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained from the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates.

63
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
COACH USA, INC. PRO FORMA COMBINED
Introduction to Unaudited Pro
Forma Combined Financial
Statements .............................................. F-3
Pro Forma Combined Balance Sheet
(unaudited) ............................................. F-4
Notes to Pro Forma Combined
Balance Sheet (unaudited) ............................... F-5
Pro Forma Combined Statement of
Income (unaudited) ...................................... F-6
Notes to Pro Forma Combined
Statement of Income
(unaudited) ............................................. F-7

THE COMBINED FOUNDING COMPANIES
Report of Independent Public
Accountants ............................................. F-8
Combined Balance Sheets ................................... F-9
Combined Statements of Income ............................. F-10
Combined Statements of
Stockholders' Equity .................................... F-11
Combined Statements of Cash
Flows ................................................... F-12
Notes to Combined Financial
Statements .............................................. F-13

COACH USA, INC .................................................
Report of Independent Public
Accountants ............................................. F-27
Balance Sheet ............................................. F-28
Notes to Balance Sheet .................................... F-29

SUBURBAN TRANSIT CORP. AND RELATED
COMPANIES
Report of Independent Public
Accountants ............................................. F-30
Combined Balance Sheets ................................... F-31
Combined Statements of Income ............................. F-32
Combined Statements of
Stockholders' Equity .................................... F-33
Combined Statements of Cash
Flows ................................................... F-34
Notes to Combined Financial
Statements .............................................. F-35

GROSVENOR BUS LINES, INC. AND
SUBSIDIARIES (OPERATING AS GRAY
LINE OF SAN FRANCISCO)
Report of Independent Public
Accountants ............................................. F-43
Consolidated Balance Sheets ............................... F-44
Consolidated Statements of
Income .................................................. F-45
Consolidated Statements of
Stockholders' Equity .................................... F-46
Consolidated Statements of Cash
Flows ................................................... F-47
Notes to Consolidated Financial
Statements .............................................. F-48

LEISURE TIME TOURS
Report of Independent Public
Accountants ............................................. F-56
Balance Sheets ............................................ F-57
Statements of Income ...................................... F-58
Statements of Stockholders'
Equity .................................................. F-59
Statements of Cash Flows .................................. F-60
Notes to Financial Statements ............................. F-61

F-1

PAGE
----
COMMUNITY BUS LINES, INC. AND RELATED
COMPANIES
Report of Independent Public
Accountants ............................................. F-68
Combined Balance Sheets ................................... F-69
Combined Statements of Income ............................. F-70
Combined Statements of
Stockholders' Equity .................................... F-71
Combined Statements of Cash
Flows ................................................... F-72
Notes to Combined Financial
Statements .............................................. F-73

CAPE TRANSIT CORP. (OPERATING AS
ADVENTURE TRAILS)
Report of Independent Public
Accountants ............................................. F-81
Balance Sheets ............................................ F-82
Statements of Income ...................................... F-83
Statements of Stockholders'
Equity .................................................. F-84
Statements of Cash Flows .................................. F-85
Notes to Financial Statements ............................. F-86

ARROW STAGE LINES, INC .........................................
Report of Independent Public
Accountants ............................................. F-93
Balance Sheets ............................................ F-94
Statements of Income ...................................... F-95
Statements of Stockholders'
Equity .................................................. F-96
Statements of Cash Flows .................................. F-97
Notes to Financial Statements ............................. F-98

F-2

COACH USA, INC.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

These pro forma combined financial statements should be read in conjunction
with other information contained elsewhere in this Prospectus under the headings
"Selected Combined Founding Companies' Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
historical financial statements of the Combined Founding Companies, Coach USA,
Inc. (Coach USA or the Company) financial statements and the individual Founding
Company financial statements. See "Index to Financial Statements."

The following unaudited pro forma combined financial statements of Coach
USA present the Founding Companies with Coach USA and give effect to the
following pro forma adjustments: (i) the liability for the cash consideration to
be paid to the stockholders of the Founding Companies and the transfer of
selected assets and assumption of selected liabilities of certain stockholders
of certain of the Founding Companies; (ii) the sale of 692,000 shares of common
stock to management subsequent to December 31, 1995 and the issuance of
5,099,687 shares of Coach USA Common Stock to the Founding Companies'
stockholders in connection with the Mergers; (iii) the additional cash to be
borrowed from a bank; (iv) adjustment to record the deferred income tax
liability attributable to the temporary differences between financial reporting
and income tax basis of assets and liabilities currently held in S Corporations;
(v) the adjustment to compensation expense for the difference between the
historical compensation paid to the stockholders and the employment contract
compensation (Compensation Differential); and (vi) the incremental provision for
income taxes for S Corporations and the Compensation Differential, as if the
transactions were consummated as of December 31, 1995 for the balance sheet data
and as of January 1, 1995 for the income statement data. In addition, the as
adjusted unaudited pro forma combined financial statements of Coach USA include
post merger adjustments: (i) for the sale of 3,600,000 shares of Common Stock;
(ii) the application of the estimated proceeds; and (iii) the elimination of the
deferred offering costs. No pro forma statement of income adjustment is
necessary to give effect to the elimination of the assets dividended to the
Founding Companies' stockholders, as the related rent and interest expense were
negotiated such that the increase in cost offset the reduction in depreciation
expense, and therefore had substantially no effect on net income. In addition,
the pro forma combined statement of income does not include an adjustment for a
non-recurring, non-cash charge of $2,076,000 recorded by Coach USA in the first
quarter of 1996 as further discussed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Recent Results" on page 35.

Coach USA, through its wholly-owned subsidiaries, will merge,
simultaneously with and as a condition to the closing of the Offering with,
Suburban, Gray Line SF, Leisure, Community, Adventure and Arrow. The Mergers
have been accounted for in accordance with generally accepted accounting
principles as a combination of the Founding Companies at historical cost,
because the Founding Companies' stockholders are transferring assets to Coach
USA in exchange for Common Stock simultaneously with Coach USA's initial public
offering, the nature of future operations of the Company will be substantially
identical to the combined operations of the Founding Companies, the shareholders
of each of the Founding Companies may be considered promoters, and no former
stockholder group of any of the Founding Companies will obtain a majority of the
outstanding voting shares of the Company. Accordingly, historical financial
statements of the Founding Companies have been combined throughout all relevant
periods as if the Founding Companies had always been members of the same
operating group. However, since the Founding Companies were not under common
control or management, historical combined results may not be comparable to, or
indicative of, future performance.

The Company has preliminarily analyzed the savings that it expects to be
realized by consolidating certain general and administrative functions,
including reductions in professional fees, insurance and benefit plan expenses.
In addition, the Company anticipates that it will realize significant benefits
from: (i) the reduction in interest payments related to the prepayment of
outstanding Founding Company debt; (ii) its ability to borrow at lower interest
rates than the Founding Companies; (iii) the interest earned on the net proceeds
of the Offering remaining after payment of the expenses of the Offering and the
cash portion of the consideration for the Founding Companies; and (iv) other
general and administrative areas. The Company has not and cannot quantify these
savings until completion of the combination of the Founding Companies. It is
anticipated that these savings will be partially offset by the costs of being a
public company and the incremental increase in costs related to the Company's
new management. However, these costs, like the savings that they offset, cannot
be quantified accurately. Accordingly, neither the anticipated savings nor the
anticipated costs have been included in the pro forma financial information of
Coach USA.

The pro forma financial data do not purport to represent what the Company's
financial position or results of operations would actually have been if such
transaction in fact had occurred on those dates or to project the Company's
financial position or results of operations for any future period.
See "Risk Factors" included elsewhere herein.

F-3

COACH USA, INC.
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------------------------
COMBINED POST
COACH FOUNDING PRO FORMA MERGER AS
USA COMPANIES ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED
----- --------- ----------- --------- ----------- --------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents....... $ 1 $ 4,092 $ (3,010)(a) $ 2,083 $ 39,924(i) $ 4,000
1,000(h) (15,898)(j)
(22,109)(k)
Accounts receivable, less
allowance..................... -- 5,243 5,243 5,243
Notes receivable from
stockholders.................. -- 881 881 881
Inventories..................... -- 2,434 2,434 2,434
Investments..................... -- 3,598 (1,474)(a) 2,124 2,124
Prepaid expenses and other
current assets................ -- 4,140 (612)(b) 3,528 3,528
----- --------- ----------- --------- ----------- --------
Total current assets....... 1 20,388 (4,096) 16,293 1,917 18,210
PROPERTY AND EQUIPMENT, net.......... 9 58,089 (3,564)(c) 54,534 54,534
OTHER ASSETS......................... 188 886 1,074 (188)(j) 886
----- --------- ----------- --------- ----------- --------
Total assets............... $198 $79,363 $ (7,660) $71,901 $ 1,729 $ 73,630
===== ========= =========== ========= =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of long-term
obligations................... $-- $ 8,001 $ (149)(c) $ 7,852 $ (7,852)(j) $ --
Accounts payable and accrued
liabilities................... -- 17,112 17,112 17,112
Amounts due to stockholders..... 197 486 683 (683)(i) --
Pro forma distribution to
Founding Companies'
stockholders.................. -- -- 22,109(d) 22,109 (22,109)(k) --
----- --------- ----------- --------- ----------- --------
Total current
liabilities.............. 197 25,599 21,960 47,756 (30,644) 17,112
----- --------- ----------- --------- ----------- --------
LONG-TERM OBLIGATIONS, net of current
maturities......................... -- 25,113 (511)(c) 25,602 (7,551)(j) 18,051
1,000(h)
DEFERRED INCOME TAXES................ -- 3,938 1,813(e) 5,751 5,751
----- --------- ----------- --------- ----------- --------
Total liabilities.......... 197 54,650 24,262 79,109 (38,195) 40,914
----- --------- ----------- --------- ----------- --------
COMMITMENTS AND CONTINGENCIES........
STOCKHOLDERS' EQUITY:
Common stock.................... 15 6,696 (6,696)(f) 73 36(i) 109
58(g)
Additional paid-in capital...... (14 ) 102 (4,484)(a) (1,274) 39,888(i) 32,607
(612)(b) (424)(m)
(2,904)(c) (5,583)(l)
6,696(f)
(58)(g)
Retained earnings............... -- 18,339 (22,109)(d) (5,583) 5,583(l) --
(1,813)(e)
Treasury stock.................. -- (424) (424) 424(m) --
----- --------- ----------- --------- ----------- --------
Total stockholders'
equity................... 1 24,713 (31,922) (7,208) 39,924 32,716
----- --------- ----------- --------- ----------- --------
Total liabilities and
stockholders' equity..... $198 $79,363 $ (7,660) $71,901 $ 1,729 $ 73,630
===== ========= =========== ========= =========== ========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial statements.

F-4

COACH USA, INC.
NOTES TO PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)

(a) Records distribution of certain Founding Companies' S Corporation
Accumulated Adjustment Accounts.

(b) Records the distribution of Community's and Arrow's cash surrender
value of life insurance policies in the amounts of $479,000 and
$133,000, respectively, to certain stockholders of the Founding
Companies.

(c) Records the Founding Companies' dividend of certain automobiles,
facilities and equipment and the related obligations to certain
stockholders of the Founding Companies.

(d) Records the liability for the cash consideration to be paid to the
stockholders of the Founding Companies in connection with the
Mergers.

(e) Records the deferred income tax liability attributable to the
temporary differences between financial reporting and income tax
basis of assets and liabilities currently held in S Corporations.

(f) Records the elimination of the Founding Companies' common stock as
additional paid-in capital.

(g) Records the issuance of (i) 5,099,687 shares to the stockholders of
the Founding Companies in connection with the Mergers, and (ii)
692,000 shares to certain members of management.

(h) Records the additional cash to be borrowed from a bank.

(i) Records the proceeds from the issuance of 3,600,000 shares of Coach
USA Common Stock, net of estimated offering costs (based on an
assumed offering price of $13 per share). Offering costs primarily
consist of underwriting discounts and commissions, accounting fees,
legal fees, and printing expenses.

(j) Records the elimination of deferred offering costs and the repayment
of certain debt obligations with proceeds from the Offering.

(k) Records the cash portion due to the Founding Companies in
connection with the Mergers.

(l) Records the elimination of the retained earnings of the Founding
Companies.

(m) Records the elimination of the treasury stock of the Founding
Companies.

F-5

COACH USA, INC.
PRO FORMA COMBINED STATEMENT OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
COMBINED
FOUNDING PRO FORMA
COACH USA COMPANIES ADJUSTMENTS PRO FORMA
--------- --------- ----------- ---------
<S> <C> <C> <C>
REVENUES............................. $ -- $ 113,489 $ $ 113,489
OPERATING EXPENSES................... -- 89,669 89,669
--------- --------- ----------- ---------
Gross profit.............. -- 23,820 23,820
GENERAL AND ADMINISTRATIVE
EXPENSES........................... -- 14,213 (902) (a) 11,006
(373) (b)
(309) (c)
(1,449) (d)
(142) (e)
(32) (f)
--------- --------- ----------- ---------
Operating income.......... -- 9,607 3,207 12,814
OTHER (INCOME) EXPENSE:
Interest expense................ -- 3,210 3,210
Interest income................. -- (332) (332)
Other, net...................... -- (344) (344)
--------- --------- ----------- ---------
INCOME BEFORE INCOME TAXES........... -- 7,073 3,207 10,280
PROVISION FOR INCOME TAXES........... -- 929 3,302(g) 4,231
--------- --------- ----------- ---------
NET INCOME........................... $ -- $ 6,144 $ (95) $ 6,049
========= ========= =========== =========
PRO FORMA NET EARNINGS PER COMMON
SHARE.............................. $ 0.67
=========
WEIGHTED AVERAGE SHARES
OUTSTANDING........................ 9,093(h)
=========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial statements.

F-6

COACH USA, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME (UNAUDITED)

(a) Adjusts compensation to the level the owners of Suburban have agreed
to receive from Suburban subsequent to the Merger.

(b) Adjusts compensation to the level the owners of Gray Line SF have
agreed to receive from Gray Line SF subsequent to the Merger.

(c) Adjusts compensation to the level the owners of Leisure have agreed
to receive from Leisure subsequent to the Merger.

(d) Adjusts compensation to the level the owners of Community have agreed
to receive from Community subsequent to the Merger.

(e) Adjusts compensation to the level the owners of Adventure have agreed
to receive from Adventure subsequent to the Merger.

(f) Adjusts compensation to the level the owners of Arrow have agreed to
receive from Arrow subsequent to the Merger.

(g) Records the incremental provision for federal and state income taxes
relating to the Compensation Differential, income taxes on S
Corporation income and income taxes on the income from personal
assets of a stockholder.

(h) Includes: (i) 2,165,724 shares issued by Coach USA prior to the
Offering; (ii) 5,099,687 shares to be issued to the stockholders of
the Founding Companies in connection with the Mergers; (iii)
1,700,714 of the 3,600,000 shares issued in connection with the
Offering to pay the cash portion of the consideration for the
Founding Companies; and (iv) 127,230 of the 3,600,000 shares issued
in connection with the Offering to pay excess Subchapter S
distributions but excludes 1,174,717 shares of Common Stock subject
to options to be granted in connection with the Offering at an
exercise price equal to the initial public offering price.

F-7

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Coach USA, Inc.

We have audited the accompanying combined balance sheets of the Combined
Founding Companies (Note 1) as of December 31, 1994 and 1995, and the related
combined statements of income, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1995. These combined financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Combined Founding Companies as of December 31, 1994 and 1995, and the results of
their combined operations and their combined cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
February 29, 1996

F-8

THE COMBINED FOUNDING COMPANIES
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)

DECEMBER 31
----------------------
1994 1995
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................. $ 5,254 $ 4,092
Accounts receivable, less
allowance of $320 and $301 .............. 5,216 5,243
Notes receivable from
stockholders ............................ 880 881
Inventories ............................... 2,288 2,434
Investments, including
restricted of $1,696 and
$2,004 .................................. 2,811 3,598
Prepaid expenses and other
current assets .......................... 4,264 4,140
-------- --------
Total current assets ................ 20,713 20,388

PROPERTY AND EQUIPMENT, net .................... 52,893 58,089

OTHER ASSETS ................................... 1,235 886
-------- --------
Total assets ........................ $ 74,841 $ 79,363
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of long-term
obligations ............................. $ 6,685 $ 8,001
Accounts payable and accrued
liabilities ............................. 16,724 17,112
Notes payable to stockholders ............. 703 486
-------- --------
Total current
liabilities ....................... 24,112 25,599
-------- --------

LONG-TERM OBLIGATIONS, net of current
maturities ................................... 25,198 25,113
DEFERRED INCOME TAXES .......................... 3,890 3,938
-------- --------
Total liabilities ................... 53,200 54,650
-------- --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock .............................. 6,696 6,696
Additional paid-in capital ................ 102 102
Retained earnings ......................... 15,267 18,339
Treasury stock, at cost ................... (424) (424)
-------- --------
Total stockholders'
equity ............................ 21,641 24,713
-------- --------
Total liabilities and
stockholders' equity .............. $ 74,841 $ 79,363
======== ========

The accompanying notes are an integral part of these combined financial
statements.

F-9

THE COMBINED FOUNDING COMPANIES
COMBINED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)

YEAR ENDED DECEMBER 31
-------------------------------------
1993 1994 1995
----------- ----------- -----------
REVENUES............................. $ 103,072 $ 106,754 $ 113,489
OPERATING EXPENSES................... 85,367 88,297 89,669
----------- ----------- -----------
Gross profit.............. 17,705 18,457 23,820
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 12,490 12,471 14,213
----------- ----------- -----------
Operating income.......... 5,215 5,986 9,607
OTHER (INCOME) EXPENSE:
Interest expense................ 2,641 2,724 3,210
Interest income................. (227) (206) (332)
Other, net...................... (313) (450) (344)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES........... 3,114 3,918 7,073
PROVISION FOR INCOME TAXES........... 766 618 929
----------- ----------- -----------
NET INCOME........................... $ 2,348 $ 3,300 $ 6,144
=========== =========== ===========
PRO FORMA DATA (Unaudited):
Historical net income........... $ 2,348 $ 3,300 $ 6,144
Pro forma compensation
differential................. 1,836 2,058 3,207
Less: Pro forma provision for
income taxes................. 1,311 1,790 3,302
----------- ----------- -----------
PRO FORMA NET INCOME................. $ 2,873 $ 3,568 $ 6,049
=========== =========== ===========

The accompanying notes are an integral part of these combined financial
statements.

F-10

THE COMBINED FOUNDING COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN TREASURY RETAINED STOCKHOLDERS'
STOCK CAPITAL STOCK EARNINGS EQUITY
------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992......... $6,696 $ 102 $ (424) $ 11,061 $17,435
Dividends paid.................. -- -- -- (816) (816)
Net income...................... -- -- -- 2,348 2,348
------ ---------- -------- -------- -------------
BALANCE AT DECEMBER 31, 1993......... 6,696 102 (424) 12,593 18,967
Dividends paid.................. -- -- -- (626) (626)
Net income...................... -- -- -- 3,300 3,300
------ ---------- -------- -------- -------------
BALANCE AT DECEMBER 31, 1994......... 6,696 102 (424) 15,267 21,641
Dividends paid.................. -- -- -- (3,072) (3,072)
Net income...................... -- -- -- 6,144 6,144
------ ---------- -------- -------- -------------
BALANCE AT DECEMBER 31, 1995......... $6,696 $ 102 $ (424) $ 18,339 $24,713
====== ========== ======== ======== =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-11

THE COMBINED FOUNDING COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

YEAR ENDED DECEMBER 31
----------------------------------
1993 1994 1995
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................ $ 2,348 $ 3,300 $ 6,144
Adjustments to reconcile net
income to net cash provided by
operating activities --
Depreciation ....................... 4,640 4,772 4,992
Gain on sale of assets ............. (89) (430) (134)
Gain on sale of
investments ..................... (33) (17) (153)
Deferred tax provision ............. 502 169 512
Changes in operating assets
and liabilities --
Accounts receivable,
net ........................... (423) (1,270) (27)
Inventories ..................... (354) (23) (146)
Investments ..................... (124) (16) (326)
Prepaid expenses and other
current assets ................ (1,288) 27 (19)
Accounts payable and
accrued liabilities ........... 1,261 2,381 185
Other ........................... 191 54 13
-------- -------- --------
Net cash provided by
operating
activities .............. 6,631 8,947 11,041
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment ........................... (3,419) (6,817) (13,404)
Proceeds from sales of property
and equipment ....................... 353 2,243 3,350
Purchases of
investments -- restricted ........... -- (271) (308)
Proceeds from sales of
investments -- restricted ........... -- 69 --
-------- -------- --------
Net cash used in
investing
activities .............. (3,066) (4,776) (10,362)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations ......................... (8,302) (9,080) (12,046)
Proceeds from issuance of
long-term obligations ............... 4,487 7,456 13,277
Dividends paid ........................ (816) (626) (3,072)
-------- -------- --------
Net cash used in
financing
activities .............. (4,631) (2,250) (1,841)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH ............ (1,066) 1,921 (1,162)
CASH AND CASH EQUIVALENTS, beginning
of year .................................. 4,399 3,333 5,254
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of
year ..................................... $ 3,333 $ 5,254 $ 4,092
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest ................ $ 2,546 $ 2,815 $ 2,855
Cash paid for income taxes ............ 330 316 563

The accompanying notes are an integral part of these combined financial
statements.

F-12

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

In September 1995, Coach USA, Inc. (Coach USA) was founded to create a
national company providing motorcoach transportation services, including charter
and tour services.

Concurrent with the initial public offering of its common stock (the
Offering), wholly-owned subsidiaries of Coach USA will merge with the following
six companies (each, a Founding Company and collectively, the Founding
Companies): Suburban Transit Corp. and related companies (Suburban), Grosvenor
Bus Lines, Inc. and subsidiaries, operating as Gray Line of San Francisco (Gray
Line SF), Leisure Time Tours (Leisure), Community Bus Lines, Inc. and related
companies (Community), Cape Transit Corp., operating as Adventure Trails
(Adventure), and Arrow Stage Lines, Inc. (Arrow). The mergers will be effected
by Coach USA through issuance of its common stock and cash. Each of the Founding
Companies is a motorcoach company, which provides a wide range of commuter,
transit, recreation and excursion transportation services.

The financial statements for Arrow and Gray Line SF are as of September 30
and October 31, respectively. For purposes of presentation in these combined
financial statements, the financial statements of these two companies have been
combined with the December 31 financial statements of the other Founding
Companies.

The Founding Companies have a working capital deficit as of December 31,
1995. The Founding Companies may continue to experience working capital deficits
as they pursue their business strategy of growth and expanding services. The
Founding Companies have historically funded their operations with cash flows
from operations and debt from lenders and stockholders. While there can be no
assurances, management believes that the Founding Companies have adequate
financing alternatives to fund the operations of the Founding Companies through
the first quarter of 1997.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

Simultaneously with the closing of the Offering, Coach USA will merge with
the Founding Companies (the Mergers). The accompanying combined financial
statements and related notes represent the combined financial position, results
of operations and cash flows of the Founding Companies excluding Coach USA
without giving effect to the Mergers and the Offering. The assets and
liabilities of the Founding Companies are reflected at their historical amounts.
The Founding Companies were not under common control or management during any of
the periods presented.

CASH AND CASH EQUIVALENTS

The Founding Companies consider all highly liquid investments with a
maturity of three months or less as cash equivalents.

INVENTORIES

Inventories primarily consist of motorcoach replacement parts. Inventory
cost is accounted for on the first-in, first-out basis and reported at the lower
of cost or market.

INVESTMENTS

The Founding Companies have adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires that investments in debt securities and marketable
equity securities be designated as trading, held-to-maturity or
available-for-sale. At December 31, 1994 and 1995, marketable debt securities
and

F-13

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

marketable equity securities have been categorized as trading securities, are
stated at fair value and are classified in the balance sheets as current assets.
The realized gains and losses on the sale of investments classified as trading
securities are determined using the specific identification method. Unrealized
losses on trading securities totaling $39,000, $21,600 and $1,000 are included
in net income for the years ended December 31, 1993, 1994 and 1995,
respectively.

Included in investments at December 31, 1994 and 1995, are certificates of
deposit and cash deposits of $1,696,000 and $2,004,000, respectively, which are
restricted as to withdrawal related to accrued insurance claims payable, current
maturities on long-term obligations and collateral on letters of credit.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for maintenance
and repairs, including replacement of engines and certain other significant
costs, are expensed as costs are incurred.

Depreciation on transportation equipment and other assets for financial
reporting purposes is computed on the straight-line basis over the estimated
useful lives of the assets net of their estimated residual values.

CONCENTRATION OF CREDIT RISK

The Founding Companies provide their services primarily in the Northeast
and Southwest regions of the United States and the San Francisco, California,
area. The operations in the Northeast region contributed 69%, 68% and 65% of the
Founding Companies' revenues during 1993, 1994 and 1995, respectively.
Management performs ongoing credit evaluations of its customers and provides
allowances as deemed necessary.

REVENUE RECOGNITION

Revenues are recognized from recreation, excursion, commuter and transit
services when such services are rendered. Costs associated with the revenues are
incurred and recorded as services are rendered.

INCOME TAXES

For the Founding Companies that are C Corporations for income tax purposes,
income taxes are provided based upon the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
recognition of deferred income taxes under the liability method.

Certain of the Founding Companies are S Corporations for income tax
purposes and, accordingly, any income tax liabilities are the responsibility of
the respective stockholders. The historical combined net income of the Founding
Companies includes no provision for federal income taxes of the S Corporations.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-14

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of " (SFAS 121) which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill. Adoption is required in financial
statements for fiscal years beginning after December 15, 1995. The Founding
Companies do not expect the adoption of SFAS 121 to have a material effect, if
any, on the combined financial statements. The Founding Companies will adopt
SFAS 121 in 1996.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

ESTIMATED DECEMBER 31
USEFUL LIVES ----------------------
(YEARS) 1994 1995
------------ ---------- ----------
(IN THOUSANDS)
Transportation equipment............. 5-12 $ 72,357 $ 76,686
Other................................ 3-31 11,079 11,406
---------- ----------
83,436 88,092
Less -- Accumulated depreciation..... (30,543) (30,003)
---------- ----------
$ 52,893 $ 58,089
========== ==========

Included in transportation equipment at December 31, 1994 and 1995, are
approximately $14,358,000 and $14,231,000, respectively, of assets held under
capital leases.

4. LONG-TERM OBLIGATIONS:

Long-term obligations consist of the following:

DECEMBER 31
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
Suburban --
Notes payable to a bank, interest at
the bank's floating base rate (8.5% at
December 31, 1995), due in monthly
installments of $52,900, maturing at
various dates through June 2002; secured
by transportation equipment........................ $ 1,911 $ 3,739
Notes payable to a bank, interest
at prime (8.5% at December 31, 1995)
plus 0.5%, due in monthly installments
of $34,700, maturing at various dates
through January 1999; secured by
transportation equipment........................... 1,576 1,157
Note payable to a bank, interest at
certificate of deposit rate (3.0%
at December 31, 1995) plus 1%, due in
monthly installments of $10,400 plus
interest, maturing December 1996;
secured by a certificate of deposit................ 240 115
Other................................................. 131 56

F-15

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
Gray Line SF --
Note payable to a financial
institution, interest at prime (8.8%
at October 31, 1995) plus 2%, due in
monthly installments of $30,000, maturing
December 1999; secured by transportation
equipment and personal guarantees of the
stockholders....................................... $ -- $ 1,431
Notes payable to various third
parties, interest ranging from prime plus
1.8%, to 13%, due in monthly installments
of $45,707, maturing at various dates
through July 1999; secured by transportation
equipment and personal guarantees of the
stockholders....................................... 2,301 1,147
Obligations under capital leases of
certain transportation equipment, implicit
interest rates ranging from 6% to 10%, due
in monthly installments of $36,763, maturing
at various dates through 1998...................... 1,058 790
Note payable to a bank, interest at
prime plus 1.8%, maturing April 1996;
secured by transportation equipment and
personal guarantees of the
stockholders....................................... -- 300
Notes payable to an affiliate,
interest at prime plus 1%, interest payable
monthly, principal due October 2000................ 1,552 300
Other................................................. 733 671

Leisure --
Notes payable to a bank, interest ranging
from 8.0% to 8.4%, due in monthly installments
of $133,000, maturing December 1997
through September 2002; secured by transportation
equipment, inventories, accounts receivable and
personal guarantee of a stockholder................ 3,178 4,251
Other................................................. 120 82

Community --
Notes payable to financial
institutions, interest ranging from LIBOR
(5.4% at December 31, 1995) plus
1%, to 10.5%, due in monthly installments
of $31,320, maturing March 1996 through
May 2001; secured by certain transportation
equipment and personal guarantees of the
stockholders....................................... 375 1,100
Notes payable to banks, interest
ranging from 7.3% to 9%, due in monthly
installments of $17,250 plus interest,
maturing March 1996 through April 2000;
secured by certain transportation equipment........ 626 480
Other................................................. 98 108

F-16

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
Adventure --
Notes payable to financial
institutions, interest ranging from
prime (8.5% at December 31, 1995) plus
1.5%, to 11.5%, due in monthly installments
of $47,600, maturing at various dates through
November 2004; secured by certain transportation
equipment and the personal guarantees of the
stockholders....................................... $ 3,257 $ 2,758
Obligations under capital leases of certain
transportation equipment, implicit interest
rates ranging from 7.7% to 13.5%, due in
monthly installments of $82,400, maturing at
various dates through 2000......................... 2,986 2,708
Note payable to a bank, interest at
prime plus 1.5%, due in monthly installments
of $3,333 plus interest, maturing
December 1998; secured by the assets of
Adventure and personal guarantees of the
stockholders....................................... 400 360
Note payable to an individual,
interest at 7.5%, due in monthly installments
of $6,224, maturing February 2000; secured
by certain transportation equipment and the personal
guarantees and partial assignment of life
insurance policies of the stockholders............. 319 267
Other................................................. 339 290

F-17

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

DECEMBER 31
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
Arrow --
Obligations under capital leases of certain
transportation equipment, implicit
interest rates ranging from 6.1% to 9.7%,
due in monthly installments of $93,809,
maturing at various dates through 2002............. $ 6,379 $ 5,157
Notes payable to banks, interest ranging
from 7.1% to 8.8%, due in monthly
installments of $84,408 including interest,
maturing at various dates through July 2002;
secured by certain transportation
equipment.......................................... 1,832 4,029
Note payable to a bank, interest at
7.5% until May 1998, at which time
interest accrues at 3.2% above the Federal
Reserve Bank rate on treasury notes, due
in monthly installments of $13,849 including
interest; secured by certain transportation
equipment.......................................... 870 767
Note payable to a bank, interest at 8.8%,
due in monthly installments of $7,267 including
interest, through May 1999; secured by
real property...................................... 568 530
Note payable to a leasing
corporation, interest at 8.2%, due in
monthly installments of $11,756 including
interest, through March 2000; secured by
certain transportation equipment................... 626 521
Notes payable to banks, paid in
1995............................................... 408 --
---------- ----------
31,883 33,114
Less -- Current maturities.............................. (6,685) (8,001)
---------- ----------
$ 25,198 $ 25,113
========== ==========

Certain obligations of the Founding Companies contain warranties and
covenants. At December 31, 1995, two of the Founding Companies were not in
compliance with certain of these warranties and covenants relating to
obligations totaling $10,226,000. These Founding Companies requested and
received waivers from the lenders indicating that the scheduled repayment terms
would not be revised as a result of these covenant violations through January 1,
1997.

F-18

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1995, future principal payments of long-term obligations
and minimum lease payments under capital lease obligations are as follows:

LONG-TERM CAPITAL LEASE
OBLIGATIONS OBLIGATIONS
------------ -------------
(IN THOUSANDS)
Year ending December 31 --
1996............................ $ 5,978 $ 2,737
1997............................ 5,222 3,023
1998............................ 4,276 1,775
1999............................ 3,353 950
2000............................ 2,590 1,151
Thereafter...................... 3,040 862
------------ -------------
$ 24,459 10,498
============
Less -- Amounts representing
interest..................... (1,843)
-------------
$ 8,655
============

Management of each of the Founding Companies estimates that the fair value
of combined debt obligations approximates the historical value of $24,459,000 at
December 31, 1995.

NOTES PAYABLE TO STOCKHOLDERS

Gray Line SF --

Gray Line SF had borrowings from a stockholder totaling $256,000 at
October 31, 1994. The borrowings were unsecured, noninterest-bearing and
payable upon demand.

Community --

Community had borrowings from a stockholder totaling $132,000 and
$171,000 at December 31, 1994 and 1995, respectively. The borrowings are
unsecured, bear interest at 10.5%, and are payable in monthly installments
of approximately $12,000.

Adventure --

Adventure had borrowings from stockholders totaling $315,000 at
December 31, 1994 and 1995. The borrowings are unsecured,
noninterest-bearing and payable upon demand.

5. INCOME TAXES:

The Founding Companies have implemented Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," which provides for a liability
approach to accounting for income taxes. Certain of the Founding Companies are S
Corporations for income tax purposes and are not subject to taxation for federal
purposes. These companies' S Corporation status will terminate with the
effective date of the Mergers.

F-19

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The provisions for taxes on income consist of the following:

YEAR ENDED DECEMBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Current --
Federal......................... $ 104 $ 136 $ 119
State........................... 160 313 298
--------- --------- ---------
264 449 417
Deferred --
Federal......................... 385 254 291
State........................... 117 (85) 221
--------- --------- ---------
502 169 512
--------- --------- ---------
$ 766 $ 618 $ 929
========= ========= =========

Deferred taxes result from the effect of transactions which are recognized
in different periods for financial and tax reporting purposes and relate
primarily to depreciation and accrued insurance claims payable. Deferred income
taxes are recognized for tax consequences of temporary differences by applying
enacted statutory tax rates to differences between the financial reporting and
the tax bases of existing assets and liabilities.

The components of deferred income tax liabilities and assets are as
follows:

DECEMBER 31
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
Deferred income tax liabilities --
Property and equipment.......... $ 3,991 $ 4,068
Other........................... 144 163
---------- ----------
Total deferred income tax
liabilities............. 4,135 4,231
---------- ----------
Deferred income tax assets --
Accrued expenses................ (1,354) (1,334)
General business credits........ (910) (904)
Net operating losses............ (672) (338)
Other........................... (206) (144)
---------- ----------
Gross deferred income tax
assets.................. (3,142) (2,720)
Less valuation
allowance............... 910 904
---------- ----------
Net deferred income tax
assets.................. (2,232) (1,816)
---------- ----------
$ 1,903 $ 2,415
========== ==========

F-20

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:

YEAR ENDED DECEMBER 31
--------------------------------
1993 1994 1995
--------- --------- ----------
(IN THOUSANDS)

Tax at statutory rate................ $ 1,090 $ 1,371 $ 2,476
Add (deduct) --
State income taxes........ 181 195 452
Effect of S Corporation
income.................. (538) (829) (1,869)
Other, net................ 33 (119) (130)
--------- --------- ----------
$ 766 $ 618 $ 929
========= ========= ==========

For financial reporting purposes, the Founding Companies have net operating
loss and general business credit carryforwards, which have been partially offset
by a valuation allowance. These tax attributes expire at various periods from
1996 through 2004.

6. COMMITMENTS AND CONTINGENCIES:

SERVICE CONTRACTS

Suburban --

Suburban provides shuttle and charter operations for a university. The
contract is renewable by mutual agreement of the parties every three years.
The existing contract, if not renewed, expires in June 1996. Revenues from
the shuttle and charter operations totaled approximately $3,000,000,
$3,400,000 and $3,500,000 for the years ended December 31, 1993, 1994 and
1995, respectively.

Gray Line SF --

Gray Line SF has entered into three long-term service contracts with
governmental entities to provide transit and commuter service throughout
northern California. The contracts expire at various dates through June
1998. Under the terms of the contracts, Gray Line SF has recognized
revenues of $8,735,000, $10,085,000 and $12,325,000 for the years ended
October 31, 1993, 1994 and 1995, respectively.

LEASES

The Founding Companies lease various facilities and equipment under
noncancelable leases. Rental expense for the years ended December 31, 1993, 1994
and 1995, was $2,007,000, $2,381,000 and $2,364,000, respectively. The following
represents future minimum rental payments under noncancelable operating leases
(in thousands):

Year ending December 31-
1996............................ $ 1,289
1997............................ 1,203
1998............................ 1,176
1999............................ 1,214
2000............................ 1,212
Thereafter...................... 16,904
----------
$ 22,998
==========

F-21

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

PURCHASE COMMITMENTS

The Founding Companies have entered into commitments to purchase 50
motorcoaches during 1996 for approximately $14,900,000. The Founding Companies
have already secured financing or have received proposals from various financial
institutions related to these purchases.

CLAIMS AND LAWSUITS

The Founding Companies are subject to certain claims and lawsuits arising
in the normal course of business, most of which involve claims for personal
injury and property damage incurred in connection with their operations. The
Founding Companies maintain various insurance coverages in order to minimize
financial risk associated with the claims. The Founding Companies have provided
for certain of these actions in the accompanying financial statements. In the
opinion of management of the Founding Companies, uninsured losses, if any,
resulting from the ultimate resolution of these matters will not be material to
the Founding Companies' combined financial position or results of operations.

Suburban is the plaintiff in a lawsuit against a bus company, Inner Circle
Qonexions, Inc. ("Inner Circle") and the Township of East Brunswick, New Jersey.
Suburban has challenged the award to Inner Circle of a contract for access to
certain bus terminals in that Township and the Township's right to restrict
access to those terminals. Suburban has had access to the terminals under a
contract with the Township and has retained its access to the terminals and
continues to carry passengers between the terminals and New York City while this
litigation is pending. In its complaint, Suburban has alleged that it will lose
significant revenues if denied access to the terminals, although Suburban
acknowledges that access to the terminals should be open to all motorcoach
operators with the proper authority. The suit was filed in United States
District Court for the District of New Jersey in 1994 and proceedings in the
case are continuing. Based upon consultation with legal counsel, Suburban's
management is unable to form an opinion as to the ultimate outcome of this
matter. If Suburban does not prevail, management is uncertain whether it will be
able to recoup a significant portion of its lost revenues.

ESTIMATED INSURANCE CLAIMS PAYABLE

The Founding Companies have commercial motorcoach liability insurance
policies that provide coverage by the respective insurance company subject to
deductibles ranging from $10,000 to $100,000. As such, any claim below the
deductible amount per incident would be the financial obligation of the Founding
Companies.

The accrued insurance claims payable represents management's estimate of
the Founding Companies' potential claims costs in satisfying the deductible
provisions of the insurance policies for claims occurring through December 31,
1995. The accrual is based on known facts and historical trends, and management
believes such accrual to be adequate.

EMPLOYEE BENEFIT PLANS

Certain of the Founding Companies maintain various 401(k) plans which allow
eligible employees to defer a portion of their income through contributions to
the plans. Under provisions of certain of the plans, several of the Founding
Companies match a percentage of the employee contributions, up to a maximum as
specified in the individual plan. Contributions by the Founding Companies to the
various plans were $170,000, $166,000 and $167,000 in 1993, 1994 and 1995,
respectively.

F-22

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

COLLECTIVE BARGAINING AGREEMENTS

The Founding Companies are parties to various collective bargaining
agreements with certain of their employees. These agreements require the
Founding Companies to pay specified wages and provide certain benefits to its
union employees. These agreements expire at various periods from 1996 through
1999.

LETTERS OF CREDIT

Certain of the Founding Companies are contingently liable for letters of
credit totaling $2,065,000 issued in connection with long-term service contracts
and insurance policies. These letters of credit require commitment fees ranging
from one to two percent paid on an annual basis and are secured by certificates
of deposit and guarantees by the stockholders.

RELATED-PARTY TRANSACTIONS

Suburban --

Suburban leases certain operating facilities from a stockholder. The
term of the leases is through 2030 and provides for a 10% escalation in
rent expense every five years. Suburban is responsible for all real estate
taxes, insurance and maintenance.

Leisure --

During 1994 and 1995, Leisure had transactions with related parties
consisting primarily of services for purchased transportation and
motorcoach maintenance. During 1994, total revenues and expenses were
approximately $24,000 and $23,000, respectively. During 1995, total
revenues and expenses were approximately $213,000 and $217,000,
respectively. At December 31, 1994 and 1995, the net amount due to
affiliated companies was $27,000 and $30,000, respectively, which is
included in trade accounts payable.

Community --

Community leases facilities from affiliated companies. Rent expense
for the years ended December 31, 1993, 1994 and 1995 was $97,000, $233,000
and $300,000, respectively.

ENVIRONMENTAL CONCERNS

Certain groundwater contamination has occurred at Leisure's facility in
Mahwah, New Jersey as a result of leakage from an underground storage tank. As a
result of discussions with the State of New Jersey Department of Environmental
Protection (the Department), in December 1989, Leisure submitted a Ground Water
Quality Assessment Program (GWQAP) work plan to the Department which outlined a
two-phase approach for the site assessment. Phase I and Phase II reports were
submitted to the Department in August 1990 and November 1990, respectively. In
August 1991, a Phase III report was submitted to the Department, which detailed
Leisure's final stage of the assessment program. In July 1992, Leisure entered
into a memorandum of agreement with the Department as an alternative to the
GWQAP under which Leisure will sample and monitor the groundwater contamination
under the Department's oversight. A sampling and monitoring schedule was
submitted to the Department in September 1992 and was approved by the state of
New Jersey in November 1994. Leisure has undertaken several remedial measures to
improve groundwater quality at its facility. The most recent groundwater
sampling reports indicate that sampling has been performed in accordance with
the Department's Field Sampling Manual and that the remedial measures taken by
Leisure have made an improvement in groundwater quality at the site. Leisure
believes that the ultimate resolution of this matter will not have a material
adverse effect on its financial position or results of operations. In addition,
at Leisure's facility in Mahwah, it has discharged bus wash and toilet waste
into the groundwater.

F-23

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The Department has indicated that if Leisure continues to discharge this bus
wash and toilet waste into the groundwater, the Department would require Leisure
to connect to the public sanitary sewer system. Leisure ceased discharging bus
wash and bus toilet waste to groundwater. Currently, Leisure periodically hauls
this waste off site for disposal. After consulting with an environmental
engineer, Leisure accrued approximately $220,000 which is included in accounts
payable and accrued liabilities at December 31, 1994 and 1995 for the
anticipated cost of connecting to the sewer system.

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Prepaid insurance.................... $ 1,184 $ 1,319
Deferred tax asset -- current........ 1,549 1,406
Cash surrender value of life
insurance.......................... 533 612
Other................................ 998 803
--------- ---------
$ 4,264 $ 4,140
========= =========

NOTES RECEIVABLE FROM STOCKHOLDERS

Suburban and Gray Line SF had receivables from certain stockholders
totaling $880,000 and $881,000 at December 31, 1994 and 1995, respectively. The
loans are unsecured, noninterest-bearing and payable on demand.

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

DECEMBER 31
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
Trade accounts payable............... $ 4,837 $ 3,697
Accrued compensation and benefits.... 2,418 2,747
Accrued insurance claims payable..... 6,224 7,084
Other................................ 3,245 3,584
---------- ----------
$ 16,724 $ 17,112
========== ==========

9. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND NOTES RECEIVABLE:

The activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
OF PERIOD EXPENSES WRITE-OFFS PERIOD
---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended December 31, 1993......... $ 316 $ 144 $ (136) $ 324
========== ========== ========== =========
Year ended December 31, 1994......... $ 324 $ 215 $ (219) $ 320
========== ========== ========== =========
Year ended December 31, 1995......... $ 320 $ 118 $ (137) $ 301
========== ========== ========== =========
</TABLE>
F-24

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

10. STOCKHOLDERS' EQUITY:

The common stock authorized, issued and outstanding of the Founding
Companies consists of the following:
<TABLE>
<CAPTION>

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Suburban --
Common stock, no par, 13,250 shares
authorized, 549 shares issued ................. $ 73 $ 73
Gray Line SF --
Common stock, no par, 6,000,000
shares authorized, 4,358,879 shares issued .... 6,529 6,529
Leisure --
Common stock, $100 par, 100 shares
authorized, 16 2/3 shares issued .............. 2 2
Community --
Common stock, no par, 7,500 shares
authorized, 3,600 shares issued ............... 75 75
Adventure --
Common stock, no par, 2,500 shares
authorized, 300 shares issued ................. 16 16
Arrow --
Common stock, $100 par, 990 shares
authorized, 10 shares issued .................. 1 1
------ ------
$6,696 $6,696
====== ======
</TABLE>
Treasury stock represents shares of Community common stock acquired from a
related party and are carried at cost.

11. PRO FORMA NET INCOME (UNAUDITED):

The Founding Companies have been managed throughout the periods presented
as independent closely-held companies. Therefore, general and administrative
expenses for the periods presented reflect compensation and related benefits
that owners received from their respective businesses during these periods. Pro
forma information has been presented for the purpose of reflecting net income as
if the Mergers had occurred January 1, 1993. Certain stockholders have agreed to
reductions in salaries and benefits in connection with the Mergers and will
enter into five-year employment agreements which provide for a set base salary,
participation in future incentive bonus plans, certain other benefits and
two-year covenants not to compete following termination of such person's
employment.

The unaudited pro forma data present compensation at the level the
stockholders of the Founding Companies have agreed to receive from the
respective Founding Company subsequent to the Mergers. In addition, the pro
forma data present the incremental provision for income taxes as if all entities
had been subject to federal and state income taxes and for the impact of the
compensation differential discussed above.

F-25

THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

12. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):

In March 1996, Coach USA, through separate wholly-owned subsidiaries,
entered into definitive agreements to acquire the individual Founding Companies.
See "Risk Factors" included elsewhere herein.

In connection with the Mergers, the Founding Companies will dividend
certain assets to their stockholders, consisting of land and buildings, cash
surrender value of life insurance policies and automobiles, with a total
carrying value of $4,180,000 as of December 31, 1995. In addition, the Founding
Companies will make distributions of cash and investments of approximately
$4,484,000 prior to the Mergers, which represent the S Corporation Accumulated
Adjustment Accounts of certain of the Founding Companies. Had these transactions
been recorded at December 31, 1995, the effect on the accompanying balance sheet
would be a decrease in assets of $8,664,000, liabilities of $660,000 and
stockholders' equity of $8,004,000.

Concurrent with the Mergers, certain of the Founding Companies will enter
into agreements with their stockholders to lease land and buildings used in the
operations of the Founding Companies for negotiated amounts and terms.

F-26

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Coach USA, Inc.

We have audited the accompanying balance sheet of Coach USA, Inc. (a
Delaware corporation) as of December 31, 1995. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Coach USA, Inc. as of December 31,
1995, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas,
March 21, 1996

F-27

COACH USA, INC.
BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

CASH AND CASH EQUIVALENTS ..................................... $ 1
DEFERRED OFFERING COSTS ....................................... 188
PROPERTY AND EQUIPMENT, net ................................... 9
-----
Total assets ....................................... $ 198
=====
LIABILITIES AND STOCKHOLDER'S EQUITY

ACCRUED LIABILITIES AND AMOUNTS DUE
TO STOCKHOLDER .............................................. $ 197
-----
Total liabilities .................................. 197
-----

STOCKHOLDER'S EQUITY:
Common stock, $.01 par,
30,000,000 shares authorized,
1,473,724 shares issued ................................ 15
Additional paid-in capital ............................... (14)
-----
Total stockholder's
equity ........................................... 1
-----
Total liabilities and
stockholder's equity ............................. $ 198
=====

The accompanying notes are an integral part of this financial statement.

F-28

COACH USA, INC.
NOTES TO BALANCE SHEET

1. BUSINESS AND ORGANIZATION:

Coach USA, Inc. (Coach USA or the Company) was founded in September 1995,
to create a nationwide motorcoach service provider. Coach USA intends to acquire
local and regional motorcoach companies, complete an initial public offering
(IPO) of its common stock and, subsequent to the IPO, continue to acquire,
through merger or purchase, similar companies to expand their national and
regional operations.

Coach USA's primary assets at December 31, 1995, are cash and deferred
offering costs. Coach USA has not conducted any operations and all activities to
date have related to the acquisitions and the IPO. Cash of $1,000 was generated
from the initial capitalization of the Company (See Note 2). All other
expenditures to date have been funded by the stockholder on behalf of the
Company. Accordingly, statements of operations, changes in stockholder's equity
and cash flows would not provide meaningful information and have been omitted.
There is no assurance that the pending acquisitions discussed below will be
completed and that Coach USA will be able to generate future operating revenues.
Funding for the deferred offering costs has been provided by the stockholder.
Coach USA is dependent upon the IPO to fund the amounts due to the stockholder,
the pending acquisitions and future operations.

2. STOCKHOLDER'S EQUITY:

In connection with the organization and initial capitalization of Coach
USA, the Company issued 147.3724 shares of common stock for $1,000. See Note
3.

3. SUBSEQUENT EVENTS:

In March 1996, Coach USA declared a stock dividend of 9,999 shares of
common stock for each share of common stock then outstanding. In addition, Coach
USA increased the number of authorized shares of common stock to 30,000,000
shares and authorized 500,000 shares of $.01 par value preferred stock. The
effects of the common stock dividend and the increase in the number of common
shares authorized have been retroactively reflected on the balance sheet and in
the accompanying notes. In addition, subsequent to December 31, 1995, the
Company issued 692,000 (which reflects the common stock dividend) shares of
common stock to various members of management at par.

Coach USA and separate wholly-owned subsidiaries have signed definitive
agreements to acquire by merger six companies (Founding Companies) to be
effective with the IPO. The companies to be acquired are Suburban Transit Corp.
and related companies, Grosvenor Bus Lines, Inc. and subsidiaries, (operating as
Gray Line of San Francisco), Leisure Time Tours, Community Bus Lines, Inc. and
related companies, Cape Transit Corp. (operating as Adventure Trails), and Arrow
Stage Lines, Inc. The aggregate consideration that will be paid by Coach USA to
acquire the Founding Companies is approximately $88.4 million (based upon an
assumed offering price of $13 per share) consisting of a combination of cash and
common stock.

4. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):

Subsequent to December 31, 1995, the Company has incurred additional costs,
including professional fees and travel, associated with the acquisition of the
Founding Companies and the IPO. Accordingly, accrued liabilities and amounts due
to the stockholder have increased to approximately $3,000,000 as of April 22,
1996.

The Company has entered into agreements with Exel Motorcoach Partnership
("Exel") whereby Exel will provide introductions to other motorcoach businesses
and other consulting services for a term of three years. The consideration to be
paid to Exel will be approximately $100,000 per year. In addition, Exel will be
paid a commission on any acquisition completed by the Company with motorcoach
businesses introduced to it by Exel, based on a formula ranging from 5% of the
first $1,000,000 of consideration paid for the acquired business to 1% of the
consideration in excess of $4,000,000 paid for such business. Mr. Paul Verrochi,
who will become a director of the Company upon consummation of the Offering, is
a principal of Exel.

On March 22, 1996, Coach USA filed a Registration Statement on Form S-1 for
the sale of its common stock. See "Risk Factors" included elsewhere herein.

F-29

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Suburban Transit Corp.

We have audited the accompanying combined balance sheets of Suburban
Transit Corp. (a New Jersey corporation) and related companies as of December
31, 1994 and 1995, and the related combined statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Suburban
Transit Corp. and related companies as of December 31, 1994 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
February 29, 1996

F-30

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31
----------------------
1994 1995
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................... $ 2,226 $ 1,861
Accounts receivable, less
allowance of $50 ............................ 1,372 952
Notes receivable from
stockholders ................................ 655 652
Inventories ................................... 720 796
Investments -- restricted ..................... 362 365
Prepaid expenses and other
current assets .............................. 919 577
------- -------
Total current assets .................... 6,254 5,203
PROPERTY AND EQUIPMENT, net ........................ 8,759 10,826
OTHER ASSETS ....................................... 83 62
------- -------
Total assets ............................ $15,096 $16,091
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of long-term
obligations ................................. $ 914 $ 1,217
Accounts payable and accrued
liabilities ................................. 4,354 4,067
------- -------
Total current
liabilities ............................. 5,268 5,284
LONG-TERM OBLIGATIONS, net of current
maturities ....................................... 2,944 3,850
DEFERRED INCOME TAXES .............................. 2,084 2,055
------- -------
Total liabilities ....................... 10,296 11,189
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 13,250
shares authorized,
549 shares issued .......................... 73 73
Retained earnings ............................. 4,727 4,829
------- -------
Total stockholders'
equity ................................ 4,800 4,902
------- -------
Total liabilities and
stockholders' equity .................. $15,096 $16,091
======= =======

The accompanying notes are an integral part of these combined financial
statements.

F-31

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
COMBINED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)

YEAR ENDED DECEMBER 31
----------------------------------
1993 1994 1995
---------- ---------- ----------
REVENUES............................. $ 32,274 $ 30,427 $ 29,752
OPERATING EXPENSES................... 28,903 27,526 25,322
---------- ---------- ----------
Gross profit.............. 3,371 2,901 4,430
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,417 2,283 2,563
---------- ---------- ----------
Operating income.......... 954 618 1,867
OTHER (INCOME) EXPENSE:
Interest expense................ 227 282 432
Interest income................. (33) (39) (114)
Other, net...................... (19) (96) (105)
---------- ---------- ----------
INCOME BEFORE INCOME TAXES........... 779 471 1,654
PROVISION FOR INCOME TAXES........... 259 128 423
---------- ---------- ----------
NET INCOME........................... $ 520 $ 343 $ 1,231
========== ========== ==========
PRO FORMA DATA (Unaudited):
Historical net income........... $ 520 $ 343 $ 1,231
Pro forma compensation
differential.................... 569 597 902
Less: Pro forma provision for
income taxes.................... 294 282 621
---------- ---------- ----------
PRO FORMA NET INCOME................. $ 795 $ 658 $ 1,512
========== ========== ==========

The accompanying notes are an integral part of these combined financial
statements.

F-32

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

COMMON STOCK TOTAL
------------------ RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------- ------- -------- -------------
BALANCE AT DECEMBER 31, 1992 .. 549 $ 73 $ 4,624 $ 4,697
Dividends paid ........... -- -- (455) (455)
Net income ............... -- -- 520 520
------- ------- ------- -------
BALANCE AT DECEMBER 31, 1993 .. 549 73 4,689 4,762
Dividends paid ........... -- -- (305) (305)
Net income ............... -- -- 343 343
------- ------- ------- -------
BALANCE AT DECEMBER 31, 1994 .. 549 73 4,727 4,800
Dividends paid ........... -- -- (1,129) (1,129)
Net income ............... -- -- 1,231 1,231
------- ------- ------- -------
BALANCE AT DECEMBER 31, 1995 .. 549 $ 73 $ 4,829 $ 4,902
======= ======= ======= =======

The accompanying notes are an integral part of these combined financial
statements.

F-33

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

YEAR ENDED DECEMBER 31
-------------------------------
1993 1994 1995
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................ $ 520 $ 343 $ 1,231
Adjustments to reconcile net
income to net cash provided by
operating activities --
Depreciation .................... 848 893 878
Gain on sale of assets .......... -- (96) (105)
Deferred tax provision .......... 157 -- 303
Changes in operating
assets and
liabilities --
Accounts receivable,
net ........................... (13) (387) 420
Inventories ................... (75) (77) (76)
Prepaid expenses and
other current
assets ..................... (410) 301 36
Accounts payable and
accrued
liabilities ................ 354 349 (291)
Other ......................... 21 20 2
------- ------- -------
Net cash provided
by operating
activities ........... 1,402 1,346 2,398
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment ........................... (1,074) (1,748) (3,199)
Proceeds from sales of property
and equipment ....................... -- 875 359
Purchases of
investments -- restricted ........... -- (252) (3)
------- ------- -------
Net cash used in
investing
activities ........... (1,074) (1,125) (2,843)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations ......................... (1,196) (1,819) (3,037)
Proceeds from issuance of
long-term obligations ............... 1,390 1,670 4,246
Dividends paid ........................ (455) (305) (1,129)
------- ------- -------
Net cash provided
by (used in)
financing
activities ........... (261) (454) 80
------- ------- -------
NET INCREASE (DECREASE) IN CASH ............ 67 (233) (365)
CASH AND CASH EQUIVALENTS, beginning
of year .................................. 2,392 2,459 2,226
------- ------- -------
CASH AND CASH EQUIVALENTS, end of
year ..................................... $ 2,459 $ 2,226 $ 1,861
======= ======= =======
------- ------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest ................ $ 201 $ 307 $ 232
Cash paid for income taxes ............ 58 160 114

The accompanying notes are an integral part of these combined financial
statements.

F-34

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Suburban Transit Corp. and its six affiliated companies (collectively, the
Company) operate city transit services, provide local commuter service and
provide motorcoach transportation services in the New York/New Jersey
metropolitan area. The Company also provides charter and group tour services.

The Company and its stockholders intend to enter into a definitive
agreement with Coach USA, Inc. (Coach USA), pursuant to which the Company will
merge with a subsidiary of Coach USA (the Merger). All outstanding shares of the
Company's common stock will be exchanged for cash and shares of Coach USA's
common stock concurrent with the consummation of the initial public offering
(the Offering) of the common stock of Coach USA.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The combined financial statements include the accounts and results of
operations of Suburban Transit Corp. and affiliated companies which are under
common control and management of three related stockholders. All significant
intercompany transactions and balances have been eliminated.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less as cash equivalents.

INVENTORIES

Inventories primarily consist of motorcoach replacement parts. Inventory
cost is accounted for on the first-in, first-out basis and reported at the lower
of cost or market.

INVESTMENTS

Included in investments at December 31, 1994 and 1995, are certificates of
deposit of $250,000 which are used as collateral for loans and cash deposits of
$112,000 and $115,000, respectively, which are restricted as to withdrawal
related to the Company's accrued insurance claims payable.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for maintenance
and repairs, including replacement of engines and certain other significant
costs, are expensed as costs are incurred.

CONCENTRATION OF CREDIT RISK

The Company's credit risks primarily consist of accounts receivable from
the state of New Jersey and other governmental entities. Management performs
ongoing credit evaluations of its customers and provides allowances as deemed
necessary.

F-35

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

The Company recognizes revenue from recreation, excursion, commuter and
transit services when such services are rendered. Costs associated with the
revenues are incurred and recorded as services are rendered.

INCOME TAXES

Two of the affiliated companies are S Corporations and the remaining
companies are C Corporations for federal income tax purposes. Federal income
taxes for the C Corporations are provided under the liability method considering
the tax effects of transactions reported in the financial statements which are
different from the tax return. The deferred tax assets and liabilities represent
the future tax consequences of those differences, which will either be taxable
or deductible when the underlying assets or liabilities are recovered or
settled.

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of " (SFAS 121) which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill. Adoption is required in financial
statements for fiscal years beginning after December 15, 1995. The Company does
not expect the adoption of SFAS 121 to have a material effect, if any, on the
combined financial statements. The Company will adopt SFAS 121 in 1996.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

ESTIMATED DECEMBER 31
USEFUL LIVES ----------------------
(YEARS) 1994 1995
------------- ---------- ----------
(IN THOUSANDS)
Transportation equipment............. 5-12 $ 15,683 $ 17,354
Other................................ 5-10 1,007 1,061
---------- ----------
16,690 18,415
Less -- Accumulated depreciation..... (7,931) (7,589)
---------- ----------
$ 8,759 $ 10,826
========== ==========

F-36

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM OBLIGATIONS:
<TABLE>
<CAPTION>
Long-term obligations consist of the following:

DECEMBER 31
------------------------
1994 1995
------- -------
(IN THOUSANDS)
Notes payable to a bank, interest at the bank's floating base rate (8.5% at
December 31, 1995), due in monthly installments of $52,900, maturing at
<S> <C> <C>
various dates through June 2002; secured by transportation equipment .......... $ 1,911 $ 3,739

Notes payable to a bank, interest at prime (8.5% at December 31, 1995)
plus 0.5%, due in monthly installments of $34,700, maturing at various
dates through January 1999; secured by transportation equipment ............... 1,576 1,157

Note payable to a bank, interest at
certificate of deposit rate (3.0% at December 31, 1995) plus 1%, due in
monthly installments of $10,400 plus interest, maturing December 1996;
secured by a certificate of deposit ........................................... 240 115

Other ........................................................................... 131 56
------- -------
3,858 5,067
Less -- Current maturities ...................................................... (914) (1,217)
------- -------
$ 2,944 $ 3,850
======= =======
</TABLE>
At December 31, 1995, future principal payments of long-term obligations are as
follows (in thousands):

Year ending December 31 --
1996............................ $ 1,217
1997............................ 993
1998............................ 863
1999............................ 735
2000............................ 694
Thereafter...................... 565
---------
$ 5,067
=========

Management estimates that the fair value of its debt obligations approximates
the historical value of $5,067,000 at December 31, 1995.

5. INCOME TAXES:

The Company has implemented Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," which provides for a liability approach to
accounting for income taxes. The S Corporations in the affiliated group are not
subject to taxation for federal purposes. Under S Corporation status, the
stockholders report their share of the Company's taxable earnings or losses on
their personal income tax returns. These companies' S Corporation status will
terminate with the effective date of the Merger. These companies are subject to
taxation in certain states based upon the jurisdiction in which revenues are
earned.

F-37

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The provision for taxes on income consists of the following:

YEAR ENDED DECEMBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Current --
Federal......................... $ 84 $ 118 $ 103
State........................... 18 10 17
--------- --------- ---------
102 128 120
--------- --------- ---------
Deferred --
Federal......................... 25 (33) 172
State........................... 132 33 131
--------- --------- ---------
157 -- 303
--------- --------- ---------
$ 259 $ 128 $ 423
========= ========= =========

The components of deferred income tax liabilities and assets are as
follows:

DECEMBER 31
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
Deferred income tax liabilities --
Property and equipment.......... $ 2,084 $ 2,055
Other........................... 95 124
---------- ----------
Total deferred income tax
liabilities............. 2,179 2,179
---------- ----------
Deferred income tax assets --
Accrued expenses................ (605) (318)
General business credits........ (859) (859)
Other........................... (54) (38)
---------- ----------
Gross deferred income tax
assets.................. (1,518) (1,215)
Less valuation
allowance............... 859 859
---------- ----------
Net deferred income tax
assets.................. (659) (356)
---------- ----------
$ 1,520 $ 1,823
========== ==========

F-38

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:

YEAR ENDED DECEMBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Tax at statutory rate................ $ 273 $ 165 $ 579
Add (deduct) --
State income taxes........ 98 28 96
Effect of S Corporation
income.................. (108) (39) (252)
Other, net................ (4) (26) --
--------- --------- ---------
$ 259 $ 128 $ 423
========= ========= =========

For financial reporting purposes, the Company has general business credit
carryforwards which have been fully offset by a valuation allowance. The general
business credit carryforwards will expire at various periods from 1996 through
2000.

6. COMMITMENTS AND CONTINGENCIES:

SERVICE CONTRACTS

The Company provides shuttle and charter operations for a university. The
contract is renewable by mutual agreement of the parties every three years. The
existing contract, if not renewed, expires in June 1996. Revenues from the
shuttle and charter operations totaled approximately $3,000,000, $3,400,000 and
$3,500,000 for the years ended December 31, 1993, 1994 and 1995, respectively.

PURCHASE COMMITMENTS

The Company has entered into a commitment to purchase 10 motorcoaches
during 1996 for approximately $3,000,000. The Company is currently evaluating
various financing alternatives associated with the purchase of these
motorcoaches.

LEASES

The Company leases certain facilities and equipment under noncancelable
leases. Rental expense for the years ended December 31, 1993, 1994 and 1995, was
$830,000, $1,076,000 and $856,000, respectively. Included in these amounts are
rent expenses of $342,000 for operating facilities owned by a stockholder. The
term of the leases is through 2030 and provides for a 10% escalation in rent
expense every five years. The Company is responsible for all real estate taxes,
insurance and maintenance. The following represents future minimum rental
payments under noncancelable operating leases (in thousands):

Year ending December 31 --
1996............................ $ 342
1997............................ 342
1998............................ 348
1999............................ 376
2000............................ 376
Thereafter...................... 15,142
----------
$ 16,926
==========

F-39

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

CLAIMS AND LAWSUITS

The Company is subject to certain claims and lawsuits arising in the normal
course of business, most of which involve claims for personal injury and
property damage incurred in connection with its operations. The Company
maintains various insurance coverages in order to minimize financial risk
associated with the claims. The Company has provided for certain of these
actions in the accompanying combined financial statements. In the opinion of
management, uninsured losses, if any, resulting from the ultimate resolution of
these matters will not be material to the Company's financial position or
results of operations.

The Company is the plaintiff in a lawsuit against a bus company, Inner
Circle Qonexions, Inc. ("Inner Circle") and the Township of East Brunswick, New
Jersey. The Company has challenged the award to Inner Circle of a contract for
access to certain bus terminals in that Township and the Township's right to
restrict access to those terminals. The Company has had exclusive access to the
terminals under a contract with the Township and has retained its access to the
terminals and is continuing to carry passengers between the terminals and New
York City while this litigation is pending. In its complaint, the Company has
alleged that it will lose significant revenues if denied access to the
terminals, although the Company acknowledges that access to the terminals should
be open to all motorcoach operators with the proper authority. The suit was
filed in United States District Court for the District of New Jersey in 1994 and
proceedings in the case are continuing. Based upon consultation with legal
counsel, management is unable to form an opinion as to the ultimate outcome of
this matter. If the Company does not prevail, management is uncertain whether it
will be able to recoup a significant portion of its lost revenues.

ESTIMATED INSURANCE CLAIMS PAYABLE

The Company has a commercial motorcoach liability insurance policy that
provides coverage by the insurance company, subject to a $100,000 deductible. As
such, any claim within the first $100,000 per incident would be the financial
obligation of the Company. The Company is contingently liable for a letter of
credit of $115,000 issued in connection with the Company's insurance policies.

The accrued insurance claims payable represents management's estimate of
the Company's potential claims costs in satisfying the deductible provisions of
the insurance policy for claims occurring through December 31, 1995. The accrual
is based on known facts and historical trends, and management believes such
accrual to be adequate.

EMPLOYEE BENEFIT PLANS

The Company maintains various 401(k) plans which allow eligible employees
to defer a portion of their income through contributions to the plans. Company
contributions to the plans were $134,000, $126,000 and $120,000 in 1993, 1994
and 1995, respectively.

COLLECTIVE BARGAINING AGREEMENTS

The Company is a party to collective bargaining agreements with certain of
its employees. These agreements require the Company to pay specified wages and
provide certain benefits to its union employees. These agreements expire in
1998.

F-40

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Prepaid insurance......... $ 239 $ 139
Deferred tax
asset -- current.......... 610 304
Other..................... 70 134
--------- ---------
$ 919 $ 577
========= =========

NOTES RECEIVABLE FROM STOCKHOLDERS

The Company had receivables from certain stockholders totaling $655,000 and
$652,000 at December 31, 1994 and 1995, respectively. The loans are unsecured,
noninterest-bearing and payable on demand.

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Trade accounts payable.... $ 1,203 $ 922
Accrued compensation and
benefits.................. 940 587
Accrued insurance claims
payable................... 1,069 1,314
Other..................... 1,142 1,244
--------- ---------
$ 4,354 $ 4,067
========= =========

F-41

SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

9. PRO FORMA NET INCOME (UNAUDITED):

Pursuant to the Merger, the pro forma information has been presented for
the purpose of reflecting net income as if the Merger had occurred on January 1,
1993.

General and administrative expenses for the periods presented reflect
compensation and related benefits that owners received during the periods. One
owner has agreed to reductions in salary and benefits in connection with the
Merger and will enter into a five-year employment agreement which provides for a
set base salary, participation in future incentive bonus plans, certain other
benefits and a two-year covenant not to compete following termination of such
person's employment.

The unaudited pro forma data presents compensation at the level the
stockholder of the Company has agreed to receive from the Company subsequent to
the Merger. In addition, the pro forma data present the incremental provision
for income taxes as if the Company had been subject to federal income taxes and
for the income tax impact of the compensation differential discussed above.

10. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):

In March 1996, the Company and its stockholders entered into a definitive
agreement with Coach USA providing for the Merger of the Company with a
subsidiary of Coach USA.

In connection with the Merger, the Company will dividend certain assets to
the stockholders consisting of land and buildings, with a total carrying value
of $57,000 as of December 31, 1995. Had these transactions been recorded at
December 31, 1995, the effect on the accompanying balance sheet would be a
decrease in assets of $57,000 and stockholders' equity of $57,000.

Concurrent with the Merger, the Company will enter into agreements with the
stockholders to lease land and buildings used in the Company's operations for a
negotiated amount and term.

F-42

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Grosvenor Bus Lines, Inc.:

We have audited the accompanying consolidated balance sheets of Grosvenor
Bus Lines, Inc. (a California corporation), and subsidiaries as of October 31,
1994 and 1995, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended October
31, 1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Grosvenor Bus Lines, Inc., and subsidiaries as of October 31, 1994 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended October 31, 1995, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
February 29, 1996

F-43

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

OCTOBER 31
---------------------- JANUARY 31
1994 1995 1996
---------- ---------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 261 $ 401 $ 49
Accounts receivable, less
allowance of $150............ 2,055 2,367 1,747
Notes receivable from
stockholder.................. 225 229 229
Inventories..................... 422 474 470
Investments -- restricted....... 506 759 759
Prepaid expenses and other
current assets............... 1,187 1,001 839
---------- ---------- ----------
Total current assets...... 4,656 5,231 4,093
PROPERTY AND EQUIPMENT, net.......... 8,282 7,668 7,499
OTHER ASSETS......................... 557 365 396
---------- ---------- ----------
Total assets.............. $ 13,495 $ 13,264 $ 11,988
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations.................. $ 1,140 $ 1,358 $ 1,436
Accounts payable and accrued
liabilities.................. 2,355 2,260 1,713
Note payable to stockholder..... 256 -- --
---------- ---------- ----------
Total current
liabilities............... 3,751 3,618 3,149
LONG-TERM OBLIGATIONS, net of current
maturities......................... 4,504 3,281 3,100
DEFERRED INCOME TAXES................ 1,132 1,183 1,184
---------- ---------- ----------
Total liabilities......... 9,387 8,082 7,433
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 6,000,000
shares authorized, 4,358,879
shares issued................ 6,529 6,529 6,529
Retained deficit................ (2,421) (1,347) (1,974)
---------- ---------- ----------
Total stockholders'
equity.................. 4,108 5,182 4,555
---------- ---------- ----------
Total liabilities and
stockholders' equity.... $ 13,495 $ 13,264 $ 11,988
========== ========== =========

The accompanying notes are an integral part of these consolidated financial
statements.

F-44

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>

THREE MONTHS ENDED
YEAR ENDED OCTOBER 31 JANUARY 31
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 22,122 $ 24,487 $ 29,235 $ 5,153 $ 5,728
OPERATING EXPENSES................... 16,590 18,990 22,627 4,760 5,021
---------- ---------- ---------- ---------- ----------
Gross profit.............. 5,532 5,497 6,608 393 707
GENERAL AND ADMINISTRATIVE
EXPENSES............................. 4,129 3,794 4,722 1,208 1,459
---------- ---------- ---------- ---------- ----------
Operating income (loss)... 1,403 1,703 1,886 (815) (752)
OTHER (INCOME) EXPENSE:
Interest expense................ 404 441 583 153 102
Interest income................. (43) (39) (24) (2) (7)
Other, net...................... (133) (79) (129) (24) --
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES.... 1,175 1,380 1,456 (942) (847)
PROVISION (BENEFIT) FOR INCOME
TAXES................................ 503 456 382 (264) (220)
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS).................... $ 672 $ 924 $ 1,074 $ (678) $ (627)
========== ========== ========== ========== ==========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ 672 $ 924 $ 1,074 $ (678) $ (627)
Pro forma compensation
differential.................... 107 119 373 88 166
Less: Pro forma provision
(benefit) for income taxes... 44 176 362 (83) (57)
---------- ---------- ---------- ---------- ----------
PRO FORMA NET INCOME (LOSS).......... $ 735 $ 867 $ 1,085 $ (507) $ (404)
========== ========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-45

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
------------ --------- -------- -------------
<S> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1992.......... 4,358,879 $ 6,529 $ (4,017) $ 2,512
Net income...................... -- -- 672 672
------------ --------- -------- ----------
BALANCE AT OCTOBER 31, 1993.......... 4,358,879 6,529 (3,345) 3,184
Net income...................... -- -- 924 924
------------ --------- -------- ----------
BALANCE AT OCTOBER 31, 1994.......... 4,358,879 6,529 (2,421) 4,108
Net income...................... -- -- 1,074 1,074
------------ --------- -------- ----------
BALANCE AT OCTOBER 31, 1995.......... 4,358,879 6,529 (1,347) 5,182
Net loss (unaudited)............ -- -- (627) (627)
------------ --------- -------- ----------
BALANCE AT JANUARY 31, 1996
(unaudited)........................ 4,358,879 $ 6,529 $ (1,974) $ 4,555
============ ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-46

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31 JANUARY 31
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net income (loss)........................................... $ 672 $ 924 $ 1,074 $ (678) $ (627)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities --
Depreciation.......................................... 833 806 878 210 232
Gain on sale of assets................................ (3) (65) (80) -- --
Deferred tax provision (benefit)...................... 362 346 295 (252) (219)
Changes in operating assets and liabilities --
Accounts receivable, net............................ (401) (486) (312) 728 620
Inventories......................................... (28) 123 (52) 54 4
Prepaid expenses and other current assets........... 90 (421) 225 393 382
Accounts payable and accrued liabilities............ (151) 480 (351) (259) (547)
Other............................................... 64 19 (95) 7 (31)
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities................................. 1,438 1,726 1,582 203 (186)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment......................... (377) (1,617) (355) (75) (63)
Proceeds from sales of property and
equipment................................................ -- 87 171 -- --
Purchases of investments -- restricted...................... -- -- (253) -- --
Proceeds from sales of investments -- restricted............ -- 69 -- 3 --
--------- --------- --------- --------- ---------
Net cash used in investing activities......... (377) (1,461) (437) (72) (63)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations.............................................. (1,310) (1,131) (3,812) (3,148) (103)
Proceeds from issuance of long-term
obligations.............................................. 137 862 2,807 2,807 --
--------- --------- --------- --------- ---------
Net cash used in financing activities......... (1,173) (269) (1,005) (341) (103)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH.................................. (112) (4) 140 (210) (352)
CASH AND CASH EQUIVALENTS, beginning of year..................... 377 265 261 261 401
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year........................... $ 265 $ 261 $ 401 $ 51 $ 49
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest...................................... $ 379 $ 413 $ 524 $ 149 $ 145
Cash paid for income taxes.................................. 142 124 71 8 23
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-47

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Grosvenor Bus Lines, Inc., and subsidiaries (the Company), operating as
Gray Line of San Francisco, provides motorcoach sight-seeing services in the San
Francisco, California, Bay Area. The Company also provides charter and public
transit services.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The consolidated financial statements include the accounts and results of
operations of Grosvenor Bus Lines, Inc., all its subsidiaries, and certain
transportation equipment owned by a stockholder and utilized in the operations
of the business. All significant intercompany transactions and balances have
been eliminated in consolidation.

INTERIM FINANCIAL INFORMATION

The interim consolidated financial statements as of January 31, 1996, and
for the three months ended January 31, 1995 and 1996, are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the consolidated
interim financial statements, have been included. The results of operations for
the interim periods are not necessarily indicative of the results for the entire
fiscal year.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less as cash equivalents.

INVENTORIES

Inventories primarily consist of motorcoach replacement parts. Inventory
cost is accounted for on the first-in, first-out basis and reported at the lower
of cost or market.

INVESTMENTS

Included in investments at December 31, 1994 and 1995, are certificates of
deposit of $506,000 and $759,000 which are used as collateral for letters of
credit.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for maintenance
and repairs, including replacement of engines and certain other significant
costs, are expensed as costs are incurred.

F-48

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATION OF CREDIT RISK

The Company's credit risks primarily consist of accounts receivable from
various tour operators in the travel service industry and governmental entities.
Management performs ongoing credit evaluations of its customers and provides
allowances as deemed necessary.

REVENUE RECOGNITION

INCOME TAXES

The Company files a consolidated return for federal income tax purposes.
Income taxes are provided under the liability method considering the tax effects
of transactions reported in the financial statements which are different from
the tax return. The deferred tax assets and liabilities represent the future tax
consequences of those differences, which will either be taxable or deductible
when the underlying assets or liabilities are recovered or settled.

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of " (SFAS 121) which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill. Adoption is required in financial
statements for fiscal years beginning after December 15, 1995. The Company does
not expect the adoption of SFAS 121 to have a material effect, if any, on the
consolidated financial statements. The Company will adopt SFAS 121 in 1996.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

ESTIMATED OCTOBER 31
USEFUL LIVES ----------------------
(YEARS) 1994 1995
------------ ---------- ----------
(IN THOUSANDS)
Transportation equipment............... 5-12 $ 10,003 $ 9,940
Other.................................. 5-10 3,094 3,193
---------- ----------
13,097 13,133
Less -- Accumulated depreciation....... (4,815) (5,465)
---------- ----------
$ 8,282 $ 7,668
========== ==========

Included in transportation equipment at October 31, 1994 and 1995, are
approximately $1,151,000 and $1,180,000, respectively, of assets held under
capital leases.

F-49

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM OBLIGATIONS:

Long-term obligations consist of the following:
<TABLE>
<CAPTION>

OCTOBER 31
-----------------------
1994 1995
------- -------
(IN THOUSANDS)
Note payable to a financial institution, interest at prime
(8.8% at October 31, 1995) plus 2%, due in monthly installments
of $30,000, maturing December 1999; secured by transportation
<S> <C> <C>
equipment and personal guarantees of the stockholders ....................... $ -- $ 1,431
Notes payable to various third
parties, interest ranging from prime plus 1.8%, to 13%, due
in monthly installments of $45,707, maturing at various dates
through July 1999; secured by transportation equipment and
personal guarantees of the stockholders ..................................... 2,301 1,147
Obligations under capital leases of
certain transportation equipment, implicit interest rates ranging from 6% to
10%, due in monthly installments of $36,763, maturing
at various dates through 1998 ............................................... 1,058 790
Note payable to a bank, interest at
prime plus 1.8%, maturing April
1996; secured by transportation
equipment and personal guarantees
of the stockholders ......................................................... -- 300
Notes payable to an affiliate,
interest at prime plus 1%, interest
payable monthly, principal due
October 2000 ................................................................ 1,552 300
Other ......................................................................... 733 671
------- -------
5,644 4,639
Less -- Current maturities .................................................... (1,140) (1,358)
------- -------
$ 4,504 $ 3,281
======= =======
</TABLE>

At October 31, 1995, future principal payments of long-term obligations and
minimum lease payments under capital lease obligations are as follows:

LONG-TERM CAPITAL LEASE
OBLIGATIONS OBLIGATIONS
----------- -----------
(IN THOUSANDS)
Year ending October 31 --
1996......................... $ 1,089 $ 381
1997......................... 791 453
1998......................... 1,189 169
1999......................... 465 --
2000......................... 313 --
Thereafter................... 2 --
--------- ----------
$ 3,849 1,003
=========
Less -- Amounts representing
interest........................ (213)
----------
$ 790
==========

Management estimates that the fair value of its debt obligations approximates
the historical value of $3,849,000 at October 31, 1995.

F-50

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE PAYABLE TO STOCKHOLDER

The Company had borrowings from a stockholder totaling $256,000 at October
31, 1994. The borrowings were unsecured, noninterest-bearing and payable upon
demand.

5. INCOME TAXES:

The Company has implemented Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," which provides for a liability
approach to accounting for income taxes.

The provision for taxes on income consists of the following:

YEAR ENDED OCTOBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Current --
Federal......................... $ 20 $ 13 $ 15
State........................... 121 97 72
--------- --------- ---------
141 110 87
--------- --------- ---------
Deferred --
Federal......................... 368 338 291
State........................... (6) 8 4
--------- --------- ---------
362 346 295
--------- --------- ---------
$ 503 $ 456 $ 382
========= ========= =========

F-51

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of deferred income tax liabilities and assets are as
follows:

OCTOBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Deferred income tax liabilities --
Property and equipment.......... $ 1,132 $ 1,183
--------- ---------
Total deferred income tax
liabilities............. 1,132 1,183
--------- ---------
Deferred income tax assets --
Accrued expenses................ (74) (179)
General business credits........ (51) (45)
Net operating losses............ (672) (338)
Other........................... (109) (94)
--------- ---------
Gross deferred income tax
assets.................. (906) (656)
Less valuation
allowance............... 51 45
--------- ---------
Net deferred income tax
assets.................. (855) (611)
--------- ---------
$ 277 $ 572
========= =========

The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:

YEAR ENDED OCTOBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)

Tax at statutory rate................ $ 411 $ 483 $ 510
Add (deduct) --
State income taxes........ 74 69 58
Nondeductible expenses.... 18 13 13
Effect of nontaxable
income from personal
assets (transportation
equipment) of stockholder -- (109) (199)
--------- --------- ---------
$ 503 $ 456 $ 382
========= ========= =========

For purposes of the consolidated federal tax return, the Company has net
operating loss carryforwards available to offset taxable income of the Company
in the future. The net operating loss carryforwards will expire in 2004. The
Company also has general business credit carryforwards which have been fully
offset by a valuation allowance. The general business credit carryforwards will
expire at various periods from 1996 through 2002.

F-52

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES:

SERVICE CONTRACTS

The Company has entered into three long-term service contracts with
governmental entities to provide transit and commuter service throughout
northern California. The contracts expire at various dates through June 1998.
Under the terms of the contracts, the Company recognized revenues of $8,735,000,
$10,085,000 and $12,325,000 for the years ended October 31, 1993, 1994 and 1995,
respectively.

LETTERS OF CREDIT

The Company is contingently liable for letters of credit totaling
$1,150,000 issued in connection with the Company's long-term service contracts
and insurance policies. These letters of credit require commitment fees ranging
from one to two percent paid on an annual basis and are secured by certificates
of deposit and a guarantee by a stockholder.

LEASES

The Company leases certain facilities and equipment under noncancelable
leases. Rental expense for the years ended October 31, 1993, 1994 and 1995, was
$862,000, $868,000 and $1,019,000, respectively. The following represents future
minimum rental payments under noncancelable operating leases (in thousands):

Year ending October 31 --
1996............................ $ 629
1997............................ 574
1998............................ 560
1999............................ 568
2000............................ 572
Thereafter...................... 1,419
---------
$ 4,322
=========

CLAIMS AND LAWSUITS

The Company is subject to certain claims and lawsuits arising in the normal
course of business, most of which involve claims for personal injury and
property damage incurred in connection with its operations. The Company
maintains various insurance coverages in order to minimize financial risk
associated with the claims. The Company has provided for certain of these
actions in the accompanying consolidated financial statements. In the opinion of
management, uninsured losses, if any, resulting from the ultimate resolution of
these matters will not be material to the Company's financial position or
results of operations.

ESTIMATED INSURANCE CLAIMS PAYABLE

The Company has a commercial motorcoach liability insurance policy that
provides coverage by the insurance company, subject to a $10,000 deductible. As
such, any claim within the first $10,000 per incident would be the financial
obligation of the Company.

The accrued insurance claims payable represents management's estimate of
the Company's potential claims costs in satisfying the deductible provisions of
the insurance policy for claims occurring through October 31, 1995. The accrual
is based on known facts and historical trends, and management believes such
accrual to be adequate.

F-53

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EMPLOYEE BENEFIT PLANS

The Company maintains a 401(k) plan which allows eligible employees to
defer a portion of their income through contributions to the plan. Under the
provisions of the plan, employees may contribute up to a maximum of four percent
of employee compensation, and the Company matches 50 percent of amounts
contributed by employees. Company contributions to the plan were $23,000,
$26,000 and $27,000 in 1993, 1994, and 1995, respectively.

COLLECTIVE BARGAINING AGREEMENTS

The Company is a party to collective bargaining agreements with certain of
its employees. The agreements require the Company to pay specified wages and
provide certain benefits to its union employees. These agreements expire in
1998.

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

OCTOBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Prepaid insurance.................... $ 196 $ 216
Deferred tax asset -- current........ 476 515
Other................................ 515 270
--------- ---------
$ 1,187 $ 1,001
========= =========

NOTES RECEIVABLE FROM STOCKHOLDER

The Company had receivables from a stockholder totaling $225,000 and
$229,000 at October 31, 1994 and 1995, respectively. The loans are unsecured,
noninterest-bearing and payable on demand.

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

OCTOBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Trade accounts payable............... $ 1,175 $ 828
Accrued compensation and benefits.... 680 769
Accrued insurance claims payable..... 136 170
Other................................ 364 493
--------- ---------
$ 2,355 $ 2,260
========= =========

F-54

GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. PRO FORMA NET INCOME (UNAUDITED):

Pursuant to the Merger, the pro forma information has been presented for
the purpose of reflecting net income as if the Merger had occurred on November
1, 1992.

The unaudited pro forma data present compensation at the level the
stockholder of the Company has agreed to receive from the Company subsequent to
the Merger. In addition, the pro forma data present the incremental provision
for income taxes as if the Company had been subject to federal income taxes and
for the income tax impact of the compensation differential discussed above.

10. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED):

In March 1996, the Company and its stockholders entered into a definitive
agreement with Coach USA providing for the Merger of the Company with a
subsidiary of Coach USA.

F-55

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Leisure Time Tours:

We have audited the accompanying balance sheets of Leisure Time Tours (a
New Jersey corporation) as of December 31, 1994 and 1995, and the related
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Leisure Time Tours as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
February 29, 1996

F-56

LEISURE TIME TOURS
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31
----------------------
1994 1995
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 2,222 $ 1,315
Accounts receivable, less
allowance of $62 and $37...... 462 579
Inventories..................... 237 234
Investments, including
restricted of $300 and $300... 606 885
Prepaid expenses and other
current assets................ 973 1,055
---------- ----------
Total current assets...... 4,500 4,068
PROPERTY AND EQUIPMENT, net.......... 11,182 13,479
OTHER ASSETS......................... 42 90
---------- ----------
Total assets.............. $ 15,724 $ 17,637
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations................... $ 1,009 $ 1,334
Accounts payable and accrued
liabilities................... 5,095 5,271
---------- ----------
Total current
liabilities............... 6,104 6,605
LONG-TERM OBLIGATIONS, net of current
maturities......................... 2,289 2,999
DEFERRED INCOME TAXES................ 554 558
---------- ----------
Total liabilities......... 8,947 10,162
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $100 par, 100
shares authorized, 16 2/3
shares issued................. 2 2
Retained earnings............... 6,775 7,473
---------- ----------
Total stockholders'
equity.................. 6,777 7,475
---------- ----------
Total liabilities and
stockholders' equity.... $ 15,724 $ 17,637
========== ==========

The accompanying notes are an integral part of these financial statements.

F-57

LEISURE TIME TOURS
STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)

YEAR ENDED DECEMBER 31
----------------------------------
1993 1994 1995
---------- ---------- ----------
REVENUES............................. $ 17,534 $ 17,694 $ 18,992
OPERATING EXPENSES................... 15,497 14,139 14,577
---------- ---------- ----------
Gross profit.............. 2,037 3,555 4,415
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,128 1,934 1,895
---------- ---------- ----------
Operating income (loss)... (91) 1,621 2,520
OTHER (INCOME) EXPENSE:
Interest expense................ 380 317 339
Interest income................. (41) (71) (104)
Other, net...................... (26) (62) (103)
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES.... (404) 1,437 2,388
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. (32) 139 225
---------- ---------- ----------
NET INCOME (LOSS).................... $ (372) $ 1,298 $ 2,163
========== ========== ==========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ (372) $ 1,298 $ 2,163
Pro forma compensation
differential................. 203 211 309
Pro forma provision (benefit)
for income taxes............. (42) 546 895
---------- ---------- ----------
PRO FORMA NET INCOME (LOSS).......... $ (127) $ 963 $ 1,577
========== ========== ==========

The accompanying notes are an integral part of these financial statements.

F-58

LEISURE TIME TOURS
STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ --------- ---------
BALANCE AT DECEMBER 31, 1992...... 16 2/3 $ 2 $ 6,270 $ 6,272
Dividends paid............... -- -- (246) (246)
Net loss..................... -- -- (372) (372)
------ ------ --------- ----------
BALANCE AT DECEMBER 31, 1993...... 16 2/3 2 5,652 5,654
Dividends paid............... -- -- (175) (175)
Net income................... -- -- 1,298 1,298
------ ------ --------- ----------
BALANCE AT DECEMBER 31, 1994...... 16 2/3 2 6,775 6,777
Dividends paid............... -- -- (1,465) (1,465)
Net income................... -- -- 2,163 2,163
------ ------ --------- ----------
BALANCE AT DECEMBER 31, 1995...... 16 2/3 $ 2 $ 7,473 $ 7,475
====== ====== ========= ==========

The accompanying notes are an integral part of these financial statements.

F-59

LEISURE TIME TOURS
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

YEAR ENDED DECEMBER 31
----------------------------------
1993 1994 1995
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............... $ (372) $ 1,298 $ 2,163
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities --
Depreciation.............. 1,451 1,164 1,053
(Gain) loss on sale of
assets................. 60 (62) 44
Net gain on sale of
investments............ (33) (17) (153)
Deferred tax provision
(benefit).............. (49) (56) 60
Changes in operating
assets and
liabilities --
Accounts receivable,
net................. 186 (171) (117)
Inventories............. 61 99 3
Investments............. (124) (132) (126)
Prepaid expenses and
other current
assets.............. (35) (146) (156)
Accounts payable and
accrued
liabilities......... 376 643 194
Other................... (12) 74 (48)
---------- ---------- ----------
Net cash provided
by operating
activities.... 1,509 2,694 2,917
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment..................... (911) (94) (5,625)
Proceeds from sales of property
and equipment................. 170 99 2,231
---------- ---------- ----------
Net cash provided
by (used in)
investing
activities.... (741) 5 (3,394)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations................... (1,759) (990) (1,065)
Proceeds from issuance of
long-term obligations......... 422 500 2,100
Dividends paid.................. (246) (175) (1,465)
---------- ---------- ----------
Net cash used in
financing
activities.... (1,583) (665) (430)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH...... (815) 2,034 (907)
CASH AND CASH EQUIVALENTS, beginning
of year............................ 1,003 188 2,222
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of
year............................... $ 188 $ 2,222 $ 1,315
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......... $ 372 $ 310 $ 318
Cash paid for income taxes...... 100 1 364

The accompanying notes are an integral part of these financial statements.

F-60

LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Leisure Time Tours (the Company) provides motorcoach transportation
services through regularly scheduled excursion, charter and group tour services
primarily in the states of New Jersey, New York and Pennsylvania.

The Company has a working capital deficit as of December 31, 1995. The
Company may continue to experience working capital deficits as it pursues its
business strategy of growth and expanding services. The Company has historically
funded its operations with cash flows from operations and debt from lenders and
stockholders. While there can be no assurances, management believes that the
Company has adequate financing alternatives to fund the Company's operations
through the first quarter of 1997.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less as cash equivalents.

INVENTORIES

Inventories primarily consist of motorcoach replacement parts. Inventory
cost is accounted for on the first-in, first-out basis and reported at the lower
of cost or market.

INVESTMENTS

The Company has adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities," which
requires that investments in debt securities and marketable equity securities be
designated as trading, held-to-maturity or available-for-sale. At December 31,
1994 and 1995, investments have been categorized as trading securities, are
stated at fair value, and are classified in the balance sheets as current
assets. Investments at December 31, 1994 and 1995 consist of marketable equity
securities and certificates of deposit. The realized gains and losses on the
sale of investments classified as trading securities are determined using the
specific identification method. Unrealized losses on trading securities totaling
$30,000, $600 and $78,000 are included in net income for the years ended
December 31, 1993, 1994 and 1995, respectively.

Included in investments at December 31, 1994 and 1995, are cash deposits of
$300,000 which are restricted as to withdrawal related to the Company's accrued
insurance claims payable.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for maintenance
and repairs, including replacement of engines and certain other significant
costs, are expensed as costs are incurred.

F-61

LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATION OF CREDIT RISK

The Company's credit risks primarily consist of accounts receivable from
various tour operators in the travel service industry. Management performs
ongoing credit evaluations of its customers and provides allowances as deemed
necessary.

REVENUE RECOGNITION

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of " (SFAS 121) which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill. Adoption is required in financial
statements for fiscal years beginning after December 15, 1995. The Company does
not expect the adoption of SFAS 121 to have a material effect, if any, on the
financial statements. The Company will adopt SFAS 121 in 1996.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

ESTIMATED DECEMBER 31
USEFUL LIVES ----------------------
(YEARS) 1994 1995
-------------- ---------- ----------
(IN THOUSANDS)

Transportation equipment............. 12 $ 18,672 $ 19,107
Other................................ 3-25 3,214 3,221
---------- ----------
21,886 22,328
Less -- Accumulated depreciation..... (10,704) (8,849)
---------- ----------
$ 11,182 $ 13,479
========== ==========

F-62

LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM OBLIGATIONS:

Long-term obligations consist of the following:
<TABLE>
<CAPTION>

DECEMBER 31
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
Notes payable to a bank, interest ranging from 8.0% to 8.4%, due in monthly
installments of $133,000, maturing December 1997 through September 2002;
secured by transportation equipment, inventories, accounts receivable and
personal guarantee of a
<S> <C> <C>
stockholder ............................................................ $ 3,178 $ 4,251
Other .................................................................... 120 82
------- -------
3,298 4,333
Less -- Current maturities ............................................... (1,009) (1,334)
------- -------
$ 2,289 $ 2,999
======= =======
</TABLE>

At December 31, 1995, future principal payments of long-term obligations are as
follows (in thousands):

Year ending December 31 --
1996......................... $ 1,334
1997......................... 1,449
1998......................... 279
1999......................... 302
2000......................... 328
Thereafter................... 641
---------
$ 4,333
=========

Management estimates that the fair value of its debt obligations
approximates the historical value of $4,333,000 at December 31, 1995.

5. INCOME TAXES:

The Company has elected S Corporation status, as defined by the Internal
Revenue Code, whereby the Company is not subject to taxation for federal
purposes. Under S Corporation status, the stockholders report their share of the
Company's taxable earnings or losses on their personal income tax returns. The
Company's S Corporation status will terminate with the effective date of the
Merger. The Company is subject to taxation in certain states based upon the
jurisdiction in which revenues are earned.

The provision for taxes on income consists of the following:

YEAR ENDED DECEMBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
State --
Current......................... $ 17 $ 195 $ 165
Deferred........................ (49) (56) 60
--------- --------- ---------
$ (32) $ 139 $ 225
========= ========= =========

F-63

LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The components of deferred income tax liabilities and assets are as
follows:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Deferred income tax liabilities --
Property and equipment.......... $ 554 $ 558
Other........................... 24 6
--------- ---------
Total deferred income tax
liabilities............. 578 564
--------- ---------
Deferred income tax assets --
Accrued expenses................ (331) (257)
Other........................... (6) (6)
--------- ---------
Total deferred income tax
assets.................. (337) (263)
--------- ---------
$ 241 $ 301
========= ==========

6. COMMITMENTS AND CONTINGENCIES:

PURCHASE COMMITMENTS

The Company has entered into commitments to purchase 12 motorcoaches during
1996 for approximately $3.5 million. The Company has deposited $24,000 for the
purchase of these motorcoaches as of December 31, 1995, and is currently
evaluating financing alternatives with its present lending institution.

LEASES

The Company leases facilities and equipment under cancelable lease
agreements. Rental expense for the years ended December 31, 1993, 1994 and 1995
was $71,000, $79,000 and $60,000, respectively.

CLAIMS AND LAWSUITS

The Company is subject to certain claims and lawsuits arising in the normal
course of business, most of which involve claims for personal injury and
property damage incurred in connection with its operations. The Company
maintains various insurance coverages in order to minimize financial risk
associated with the claims. The Company has provided for certain of these
actions in the accompanying financial statements. In the opinion of management,
uninsured losses, if any, resulting from the ultimate resolution of these
matters will not be material to the Company's financial position or results of
operations.

ESTIMATED INSURANCE CLAIMS PAYABLE

The Company has a commercial motorcoach liability insurance policy that
provides coverage by the insurance company subject to a $50,000 deductible
(prior to April 1, 1995, the deductible was $100,000). As such, any claim within
the first $50,000 per incident would be the financial obligation of the Company.
The Company is contingently liable for a letter of credit of $300,000 issued in
connection with the Company's insurance policies.

F-64

LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

EMPLOYEE BENEFIT PLANS

The Company maintains a 401(k) plan which allows eligible employees to
defer a portion of their income through contributions to the plan. Under the
provisions of the plan, employees may contribute up to a maximum of four percent
of employee compensation, and the Company matches 50 percent of amounts
contributed by employees. Company contributions to the plan were $13,000,
$14,000 and $20,000 in 1993, 1994 and 1995, respectively.

COLLECTIVE BARGAINING AGREEMENT

The Company is a party to a collective bargaining agreement with certain of
its employees. The agreement requires the Company to pay specified wages and
provide certain benefits to its union employees. This agreement will expire in
1999.

RELATED-PARTY TRANSACTIONS

During 1994 and 1995, the Company had transactions with related parties
consisting primarily of services for purchased transportation and motorcoach
maintenance. During 1994, total revenues and expenses were approximately $24,000
and $23,000, respectively. During 1995, total revenues and expenses were
approximately $213,000 and $217,000, respectively. At December 31, 1994 and
1995, the net amount due to affiliated companies was $27,000 and $30,000,
respectively, which is included in trade accounts payable.

ENVIRONMENTAL CONCERNS

Certain groundwater contamination has occurred at the Company's facility in
Mahwah, New Jersey as a result of leakage from an underground storage tank. As a
result of discussions with the State of New Jersey Department of Environmental
Protection (the Department), in December 1989, the Company submitted a Ground
Water Quality Assessment Program (GWQAP) work plan to the Department which
outlined a two-phase approach for the site assessment. Phase I and Phase II
reports were submitted to the Department in August 1990 and November 1990,
respectively. In August 1991, a Phase III report was submitted to the
Department, which detailed the Company's final stage of the assessment program.
In July 1992, the Company entered into a memorandum of agreement with the
Department as an alternative to the GWQAP under which the Company will sample
and monitor the groundwater contamination under the Department's oversight. A
sampling and monitoring schedule was submitted to the Department in September
1992 and was approved by the state of New Jersey in November 1994. The Company
has undertaken several remedial measures to improve groundwater quality at its
facility. The most recent groundwater sampling reports indicate that sampling
has been performed in accordance with the Department's Field Sampling Manual and
that the remedial measures taken by the Company have made an improvement in
groundwater quality at the site. The Company believes that the ultimate
resolution of this matter will not have a material adverse effect on the
financial position or results of operations of the Company. In addition, at the
Company's facility in Mahwah, the Company has discharged bus wash and toilet
waste into the groundwater. The Department has indicated that if the Company
continues to discharge this bus wash and toilet waste into the groundwater, the
Department would require the Company to connect to the public sanitary sewer
system. The Company has ceased discharging bus wash and bus toilet waste to
groundwater. Currently, the Company periodically hauls this waste off site for
disposal.

F-65

LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
After consulting with an environmental engineer, the Company accrued
approximately $220,000 which is included in accounts payable and accrued
liabilities at December 31, 1994 and 1995 for the anticipated cost of connecting
to the sewer system.

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)

Prepaid insurance.................... $ 444 $ 703
Deferred tax asset -- current........ 337 263
Other................................ 192 89
--------- ---------
$ 973 $ 1,055
========= =========

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)

Trade accounts payable............... $ 997 $ 887
Accrued compensation and benefits.... 273 268
Accrued insurance claims payable..... 3,159 3,624
Other................................ 666 492
--------- ---------
$ 5,095 $ 5,271
========= =========

F-66

LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. PRO FORMA NET INCOME (UNAUDITED):

Pursuant to the Merger, the pro forma information has been presented for
the purpose of reflecting net income as if the Merger had occurred on January 1,
1993.

10. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):

In March 1996, the Company and its stockholders entered into a definitive
agreement with Coach USA providing for the Merger of the Company with a
subsidiary of Coach USA.

In connection with the Merger, the Company will dividend certain assets to
the stockholders consisting of land, buildings and automobiles with a total
carrying value of $2,064,000 as of December 31, 1995. In addition, the Company
will make a cash distribution of approximately $3,100,000 prior to the Merger
which represents the Company's estimated S Corporation Accumulated Adjustment
Account. Had these transactions been recorded at December 31, 1995, the effect
on the accompanying balance sheet would be a decrease in assets of $5,164,000
and stockholders' equity of $5,164,000. Pursuant to the dividend of land and
buildings, the stockholders will indemnify Coach USA for existing environmental
remediation liabilities associated with the property, including liabilities
related to those issues discussed in Note 6.

Concurrent with the Merger, the Company will enter into agreements with the
stockholders to lease land and buildings used in the Company's operations for a
negotiated amount and term.

F-67

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Community Bus Lines, Inc.:

We have audited the accompanying combined balance sheets of Community Bus
Lines, Inc. (a New Jersey corporation), and related companies as of December 31,
1994 and 1995, and the related combined statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Community
Bus Lines, Inc., and related companies, as of December 31, 1994 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
February 29, 1996

F-68

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31
--------------------
1994 1995
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 269 $ 209
Accounts receivable, less
allowance of $10.............. 183 183
Inventories..................... 257 307
Investments, including
restricted of $528 and $580... 1,059 1,046
Prepaid expenses and other
current assets................ 766 1,022
--------- ---------
Total current assets...... 2,534 2,767
PROPERTY AND EQUIPMENT, net.......... 2,590 3,241
OTHER ASSETS......................... 182 137
--------- ---------
Total assets.............. $ 5,306 $ 6,145
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations................... $ 315 $ 497
Accounts payable and accrued
liabilities................... 2,485 2,953
Notes payable to stockholder.... 132 171
--------- ---------
Total current
liabilities................ 2,932 3,621
LONG-TERM OBLIGATIONS, net of current
maturities...................... 784 1,191
--------- ---------
Total liabilities......... 3,716 4,812
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 7,500
shares authorized, 3,600
shares issued................. 75 75
Additional paid-in capital...... 102 102
Retained earnings............... 1,837 1,580
Treasury stock, at cost......... (424) (424)
--------- ---------
Total stockholders'
equity................... 1,590 1,333
--------- ---------
Total liabilities and
stockholders' equity..... $ 5,306 $ 6,145
========= =========

The accompanying notes are an integral part of these combined financial
statements.
F-69

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
COMBINED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)

YEAR ENDED DECEMBER 31
----------------------------------
1993 1994 1995
---------- ---------- ----------
REVENUES............................. $ 13,179 $ 14,106 $ 13,807
OPERATING EXPENSES................... 11,057 12,228 11,680
---------- ---------- ----------
Gross profit.............. 2,122 1,878 2,127
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 1,760 1,999 2,193
---------- ---------- ----------
Operating income (loss)... 362 (121) (66)
OTHER (INCOME) EXPENSE:
Interest expense................ 264 228 262
Interest income................. (34) (38) (49)
Other, net...................... 28 49 (40)
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES.... 104 (360) (239)
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. 1 (98) (177)
---------- ---------- ----------
NET INCOME (LOSS).................... $ 103 $ (262) $ (62)
========== ========== ==========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ 103 $ (262) $ (62)
Pro forma compensation
differential................. 818 1,015 1,449
Less: Pro forma provision for
income taxes................. 383 338 669
---------- ---------- ----------
PRO FORMA NET INCOME................. $ 538 $ 415 $ 718
========== ========== ==========

The accompanying notes are an integral part of these combined financial
statements.

F-70

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>

COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN TREASURY RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK EARNINGS EQUITY
------ ------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992......... 3,600 $ 75 $ 102 $ (424) $2,101 $ 1,854
Net income...................... -- -- -- -- 103 103
------ ------ ---------- -------- -------- -------------
BALANCE AT DECEMBER 31, 1993......... 3,600 75 102 (424) 2,204 1,957
Dividends paid.................. -- -- -- -- (105) (105)
Net loss........................ -- -- -- -- (262) (262)
------ ------ ---------- -------- -------- -------------
BALANCE AT DECEMBER 31, 1994......... 3,600 75 102 (424) 1,837 1,590
Dividends paid.................. -- -- -- -- (195) (195)
Net loss........................ -- -- -- -- (62) (62)
------ ------ ---------- -------- -------- -------------
BALANCE AT DECEMBER 31, 1995......... 3,600 $ 75 $ 102 $ (424) $1,580 $ 1,333
====== ====== ========== ======== ======== =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-71

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31
--------------------------------
1993 1994 1995
--------- --------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss)........................................................... $ 103 $ (262) $ (62)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities --
Depreciation.......................................................... 365 349 350
(Gain) loss on sale of assets......................................... -- 15 (4)
Deferred tax benefit.................................................. (3) (114) (204)
Changes in operating assets and liabilities --
Accounts receivable, net............................................ (36) (25) --
Inventories......................................................... (41) (48) (50)
Investments......................................................... -- 132 65
Prepaid expenses and other current assets........................... (693) 404 (48)
Accounts payable and accrued liabilities............................ 68 410 507
Other............................................................... 158 74 41
--------- --------- ----------
Net cash provided by (used in) operating activities........... (79) 935 595
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment......................................... -- (436) (1,001)
Proceeds from sales of property and equipment............................... -- 10 4
Purchases of investments -- restricted...................................... -- (19) (52)
--------- --------- ----------
Net cash used in investing activities......................... -- (445) (1,049)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term obligations................................. (910) (804) (459)
Proceeds from issuance of long-term obligations............................. 700 558 1,048
Dividends paid.............................................................. -- (105) (195)
--------- --------- ----------
Net cash provided by (used in) financing activities........... (210) (351) 394
--------- --------- ----------
NET INCREASE (DECREASE) IN CASH.................................................. (289) 139 (60)
CASH AND CASH EQUIVALENTS, beginning of year..................................... 419 130 269
--------- --------- ----------
CASH AND CASH EQUIVALENTS, end of year........................................... $ 130 $ 269 $ 209
========= ========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest...................................................... $ 248 $ 212 $ 294
Cash paid for income taxes.................................................. 30 31 14
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-72

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Community Bus Lines, Inc., and its six affiliated companies (collectively,
the Company) operate city transit services, provide local commuter service and
provide motorcoach charter and group tour services. The Company operates
primarily in the New York/New Jersey metropolitan area.

The Company has a working capital deficit as of December 31, 1995. The
Company may continue to experience working capital deficits as it pursues its
business strategy of growth and expanding services. The Company has historically
funded its operations with cash flows from operations and debt from lenders and
stockholders. While there can be no assurances, management believes that the
Company has adequate financing alternatives to fund the Company's operations
through the first quarter of 1997.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The combined financial statements include the accounts and results of
operations of Community Bus Lines, Inc., and certain affiliated companies which
are under common control and management of six related stockholders. All
significant intercompany transactions and balances have been eliminated.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less as cash equivalents.

INVENTORIES

Inventories primarily consist of motorcoach replacement parts. Inventory
cost is accounted for on the first-in, first-out basis and reported at the lower
of cost or market.

INVESTMENTS

The realized gains and losses on the sale of investments classified as
trading securities are determined using the specific identification method.
Unrealized gains/(losses) on trading securities totaling $(11,000), $(18,000)
and $25,000 are included in net income for the years ended December 31, 1993,
1994 and 1995, respectively.

Included in investments at December 31, 1994 and 1995, are money market
funds and certificates of deposit of $528,000 and $580,000, respectively, which
are restricted as to withdrawal related to the Company's accrued insurance
claims payable.

F-73

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for maintenance
and repairs, including replacement of engines and certain other significant
costs, are expensed as costs are incurred.

TREASURY STOCK

Treasury stock represents shares of the Company's common stock acquired
from a related party and are carried at cost.

CONCENTRATION OF CREDIT RISK

The Company's credit risks primarily consist of accounts receivable from
governmental entities and various tour operators in the travel service industry.
Management performs ongoing credit evaluations of its customers and provides
allowances as deemed necessary.

REVENUE RECOGNITION

INCOME TAXES

One of the affiliated companies is a C Corporation and the remaining
companies are S Corporations for federal income tax purposes. Federal income
taxes for the C Corporation are provided under the liability method considering
the tax effects of transactions reported in the financial statements which are
different from the tax return. The deferred tax assets and liabilities represent
the future tax consequences of those differences, which will either be taxable
or deductible when the underlying assets or liabilities are recovered or
settled.

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of " (SFAS 121) which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill. Adoption is required in financial
statements for fiscal years beginning after December 15, 1995. The Company does
not expect the adoption of SFAS 121 to have a material effect, if any, on the
combined financial statements. The Company will adopt SFAS 121 in 1996.

F-74

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

ESTIMATED DECEMBER 31
USEFUL LIVES ----------------------
(YEARS) 1994 1995
------------- ---------- ----------
(IN THOUSANDS)

Transportation equipment............. 12 $ 4,300 $ 4,926
Other................................ 3-10 1,471 1,509
---------- ----------
5,771 6,435
Less -- Accumulated depreciation..... (3,181) (3,194)
---------- ----------
$ 2,590 $ 3,241
========== ==========

4. LONG-TERM OBLIGATIONS:

Long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1994 1995
------- -------
(IN THOUSANDS)
Notes payable to financial institutions, interest ranging from LIBOR (5.4% at
December 31, 1995) plus 1%, to 10.5%, due in monthly installments of $31,320,
maturing March 1996 through May 2001; secured by certain transportation
equipment and personal guarantees
<S> <C> <C>
of the stockholders .......................................................... $ 375 $ 1,100
Notes payable to banks, interest
ranging from 7.3% to 9%, due in monthly installments of $17,250 plus interest,
maturing March 1996 through April 2000; secured by
certain transportation equipment ............................................. 626 480
Other .......................................................................... 98 108
------- -------
1,099 1,688
Less -- Current maturities ..................................................... (315) (497)
------- -------
$ 784 $ 1,191
======= =======
</TABLE>

At December 31, 1995, future principal payments of long-term obligations
are as follows (in thousands):

Year ending December 31 --
1996............................ $ 497
1997............................ 360
1998............................ 277
1999............................ 277
2000............................ 208
Thereafter...................... 69
---------
$ 1,688
=========

Management estimates that the fair value of its debt obligations
approximates the historical value of $1,688,000 at December 31, 1995.

F-75

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTES PAYABLE TO STOCKHOLDER

The Company had borrowings from a stockholder totaling $132,000 and
$171,000 at December 31, 1994 and 1995, respectively. The borrowings are
unsecured, bear interest at 10.5%, and are payable in monthly installments of
approximately $12,000.

5. INCOME TAXES:

The provision for taxes on income consists of the following:

YEAR ENDED DECEMBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Current --
Federal......................... $ -- $ 5 $ 1
State........................... 4 11 26
--------- --------- ---------
4 16 27
--------- --------- ---------
Deferred --
Federal......................... (8) (51) (172)
State........................... 5 (63) (32)
--------- --------- ---------
(3) (114) (204)
--------- --------- ---------
$ 1 $ (98) $ (177)
========= ========= =========

F-76

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The components of deferred income tax liabilities and assets are as
follows:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Deferred income tax liabilities --
Property and equipment.......... $ 101 $ 130
Other........................... 25 33
--------- ---------
Total deferred income tax
liabilities............. 126 163
--------- ---------
Deferred income tax assets --
Accrued expenses................ (305) (546)
Other........................... (3) (3)
--------- ---------
Total deferred income tax
assets.................. (308) (549)
--------- ---------
$ (182) $ (386)
========= =========

The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following:

YEAR ENDED DECEMBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)

Tax at statutory rate................ $ 36 $ (126) $ (84)
Add (deduct) --
State income taxes........ 6 (34) (3)
Effect of S Corporation
income.................. (46) 59 (146)
Other, net................ 5 3 56
--------- --------- ---------
$ 1 $ (98) $ (177)
========= ========= =========

6. COMMITMENTS AND CONTINGENCIES:

PURCHASE COMMITMENTS

The Company has entered into a commitment to purchase two motorcoaches
during 1996 for approximately $600,000. The Company intends to trade in one
motorcoach and finance the balance with bank debt which is presently being
negotiated.

F-77

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

LEASES

The Company leases certain facilities and equipment under noncancelable
leases. Rental expense for the years ended December 31, 1993, 1994 and 1995, was
$190,000, $297,000 and $357,000, respectively. Included in these amounts are
rent expenses paid to affiliated companies of $97,000, $233,000 and $300,000 for
the years ended December 31, 1993, 1994 and 1995, respectively. The following
represents future minimum rental payments under noncancelable operating leases
(in thousands):

Year ending December 31 --
1996............................ $ 250
1997............................ 240
1998............................ 226
1999............................ 228
2000............................ 229
Thereafter...................... 343
---------
$ 1,516
=========

Included in the yearly rental payments above is $195,000 to be paid to
affiliated companies in each year through 2000.

CLAIMS AND LAWSUITS

ESTIMATED INSURANCE CLAIMS PAYABLE

The Company has a commercial motorcoach liability insurance policy that
provides coverage by the insurance company, subject to a $100,000 deductible. As
such, any claim within the first $100,000 per incident would be the financial
obligation of the Company. The Company maintains a letter of credit of $500,000
which requires a commitment fee of one percent which is payable annually and is
secured by certificates of deposit.

COLLECTIVE BARGAINING AGREEMENTS

F-78

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)

Prepaid insurance.................... $ 191 $ 226
Deferred tax asset -- current........ 89 297
Cash surrender value of life
insurance............................ 462 479
Other................................ 24 20
--------- ---------
$ 766 $ 1,022
========= =========

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)

Trade accounts payable............... $ 306 $ 263
Accrued compensation and benefits.... 143 634
Accrued insurance claims payable..... 1,755 1,810
Other................................ 281 246
--------- ---------
$ 2,485 $ 2,953
========= =========

9. PRO FORMA NET INCOME (UNAUDITED):

Pursuant to the Merger, the pro forma information has been presented for
the purpose of reflecting net income as if the Merger had occurred on January 1,
1993.

General and administrative expenses for the periods presented reflect
compensation and related benefits that owners received during the periods. One
owner has agreed to reductions in salary and benefits in connection with the
Merger and will enter into five-year employment agreements which provide for a
set base salary, participation in future incentive bonus plans, certain other
benefits and a two-year covenant not to compete following termination of such
person's employment.

The unaudited pro forma data present compensation at the level the
stockholder of the Company has agreed to receive from the Company subsequent to
the Merger. In addition, the pro forma data present the incremental provision
for income taxes as if all of the affiliated companies had been subject to
federal income taxes and for the income tax impact of the compensation
differential discussed above.

F-79

COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

10. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):

In March 1996, the Company and its stockholders entered into a definitive
agreement with Coach USA providing for the Merger of the Company with a
subsidiary of Coach USA.

In connection with the Merger, the Company will dividend certain assets to
the stockholders, consisting of cash surrender value of life insurance policies
and automobiles, with a total carrying value of $514,000 as of December 31,
1995. In addition, the Company will make a cash distribution of approximately
$655,000 prior to the Merger which represents the Company's estimated S
Corporation Accumulated Adjustment Account. Had these transactions been recorded
at December 31, 1995, the effect on the accompanying balance sheet would be a
decrease in assets of $1,169,000, liabilities of $130,000 and stockholders'
equity of $1,039,000.

F-80

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Cape Transit Corp.:

We have audited the accompanying balance sheets of Cape Transit Corp. (a
New Jersey corporation) as of December 31, 1994 and 1995, and the related
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cape Transit Corp. as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
February 29, 1996

F-81

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31
--------------------
1994 1995
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 129 $ 20
Accounts receivable, less
allowance of $14 and $16...... 77 141
Inventories..................... 367 326
Prepaid expenses and other
current assets................ 97 27
--------- ---------
Total current assets...... 670 514
PROPERTY AND EQUIPMENT, net.......... 8,521 8,294
OTHER ASSETS......................... 46 36
--------- ---------
Total assets.............. $ 9,237 $ 8,844
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations................... $ 1,648 $ 1,708
Accounts payable and accrued
liabilities................... 1,397 1,223
Notes payable to stockholders... 315 315
--------- ---------
Total current
liabilities.............. 3,360 3,246
LONG-TERM OBLIGATIONS, net of current
maturities......................... 5,653 4,675
DEFERRED INCOME TAXES................ 120 142
--------- ---------
Total liabilities......... 9,133 8,063
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 2,500
shares authorized, 300 shares
issued........................ 16 16
Retained earnings............... 88 765
--------- ---------
Total stockholders'
equity................... 104 781
--------- ---------
Total liabilities and
stockholders' equity..... $ 9,237 $ 8,844
========= =========

The accompanying notes are an integral part of these financial statements.

F-82

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)

YEAR ENDED DECEMBER 31
---------------------------------
1993 1994 1995
--------- ---------- ----------
REVENUES............................. $ 8,494 $ 10,001 $ 11,053
OPERATING EXPENSES................... 6,665 8,457 8,241
--------- ---------- ----------
Gross profit.............. 1,829 1,544 2,812
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 840 968 1,089
--------- ---------- ----------
Operating income.......... 989 576 1,723
OTHER (INCOME) EXPENSE:
Interest expense................ 640 683 787
Other, net...................... (14) (42) 141
--------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES.... 363 (65) 795
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. 35 (7) 76
--------- ---------- ----------
NET INCOME (LOSS).................... $ 328 $ (58) $ 719
========= ========== ==========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ 328 $ (58) $ 719
Pro forma compensation
differential................. 79 86 142
Less: Pro forma provision for
income taxes................. 152 16 324
--------- ---------- ----------
PRO FORMA NET INCOME................. $ 255 $ 12 $ 537
========= ========== ==========

The accompanying notes are an integral part of these financial statements.

F-83

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ --------- -------------
BALANCE AT DECEMBER 31, 1992...... 300 $ 16 $ (99) $ (83)
Dividends paid............... -- -- (42) (42)
Net income................... -- -- 328 328
------ ------ --------- ------
BALANCE AT DECEMBER 31, 1993...... 300 16 187 203
Dividends paid............... -- -- (41) (41)
Net loss..................... -- -- (58) (58)
------ ------ --------- ------
BALANCE AT DECEMBER 31, 1994...... 300 16 88 104
Dividends paid............... -- -- (42) (42)
Net income................... -- -- 719 719
------ ------ --------- ------
BALANCE AT DECEMBER 31, 1995...... 300 $ 16 $ 765 $ 781
====== ====== ========= ======

The accompanying notes are an integral part of these financial statements.

F-84

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

YEAR ENDED DECEMBER 31
----------------------------------
1993 1994 1995
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............... $ 328 $ (58) $ 719
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities --
Depreciation.............. 377 634 593
(Gain) loss on sale of
assets.................. -- (42) 60
Deferred tax provision
(benefit)............... 35 (7) 58
Changes in operating
assets and
liabilities --
Accounts receivable,
net.................. 52 (8) (64)
Inventories............. (209) (50) 41
Prepaid expenses and
other current
assets............... (61) 9 60
Accounts payable and
accrued
liabilities.......... 447 277 (174)
Other................... (31) 21 (16)
---------- ---------- ----------
Net cash provided
by operating
activities..... 938 776 1,277
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment..................... (954) (2,163) (711)
Proceeds from sales of property
and equipment................. -- 1,172 285
---------- ---------- ----------
Net cash used in
investing
activities..... (954) (991) (426)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations................... (1,012) (2,954) (1,545)
Proceeds from issuance of
long-term obligations......... 1,085 3,294 627
Dividends paid.................. (42) (41) (42)
---------- ---------- ----------
Net cash provided
by (used in)
financing
activities..... 31 299 (960)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH...... 15 84 (109)
CASH AND CASH EQUIVALENTS, beginning
of year............................ 30 45 129
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of
year............................... $ 45 $ 129 $ 20
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......... $ 649 $ 799 $ 680

The accompanying notes are an integral part of these financial statements.

F-85

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Cape Transit Corp., operating as Adventure Trails (the Company), provides
motorcoach services to the Atlantic City, New Jersey, casinos (the casinos),
including shuttles from the airport, scheduled service from Philadelphia,
Pennsylvania, and contract service for employee shuttles. The Company also
provides charter and group tour services.

The Company has a working capital deficit as of December 31, 1995. The
Company may continue to experience working capital deficits as it pursues its
business strategy of growth and expanding services. Management expects that
expanded operations will generate sufficient cash flows from operations to meet
the Company's working capital needs in 1996. In the event that cash flows from
operations are not sufficient in 1996, the Company could initially defer
repayment of its obligations to stockholders and may also consider other
refinancing alternatives. The Company has historically funded its operations
with cash flows from operations and debt from lenders and stockholders. The
Company's operations may be impacted by its concentration of services provided
to the casinos and its geographical concentration in New Jersey and neighboring
states, as the Company could be impacted by changes in the economic or other
conditions of its customer base. Additionally, the Company's operations are
seasonal with the Company achieving the highest levels of operations and net
income during the second and third quarters of the year. While there can be no
assurances, management believes that the Company has adequate financing
alternatives to fund the Company's operations through the first quarter of 1997.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less as cash equivalents.

INVENTORIES

Inventories primarily consist of motorcoach replacement parts. Inventory
cost is accounted for on the first-in, first-out basis and reported at the lower
of cost or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for maintenance
and repairs, including replacement of engines and certain other significant
costs, are expensed as costs are incurred.

F-86

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATION OF CREDIT RISK

The Company's credit risks primarily consist of accounts receivable from
the casinos or their affiliates, or businesses dependent upon the casinos.
Management performs ongoing credit evaluations of its customers and provides
allowances as deemed necessary.

REVENUE RECOGNITION

The Company recognizes revenue from recreation, excursion and commuter
services when such services are rendered. Costs associated with the revenues are
incurred and recorded as services are rendered.

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of " (SFAS 121) which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill. Adoption is required in financial
statements for fiscal years beginning after December 15, 1995. The Company does
not expect the adoption of SFAS 121 to have a material effect, if any, on the
financial statements. The Company will adopt SFAS 121 in 1996.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

ESTIMATED DECEMBER 31
USEFUL LIVES --------------------
(YEARS) 1994 1995
------------- --------- ---------
(IN THOUSANDS)

Transportation equipment............. 12 $ 9,411 $ 9,639
Other................................ 5-10 304 347
--------- ---------
9,715 9,986
Less --Accumulated depreciation...... (1,194) (1,692)
--------- ---------
$ 8,521 $ 8,294
========= =========

Included in transportation equipment at December 31, 1994 and 1995, are
approximately $5,097,000 and $5,325,000, respectively, of assets held under
capital leases.

F-87

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM OBLIGATIONS:

Long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
Notes payable to financial institutions, interest ranging from prime (8.5% at
December 31, 1995) plus 1.5%, to 11.5%, due in monthly installments of
$47,600, maturing at various dates through November 2004; secured by certain
transportation equipment and the personal guarantees of the
<S> <C> <C>
stockholders ................................................................. $ 3,257 $ 2,758
Obligations under capital leases of
certain transportation equipment, implicit interest rates ranging from 7.7% to
13.5%, due in monthly installments of $82,400, maturing
at various dates through 2000 ................................................ 2,986 2,708
Note payable to a bank, interest at
prime plus 1.5%, due in monthly installments of $3,333 plus interest, maturing
December 1998; secured by the assets of the Company and personal guarantees of
the stockholders ............................................................. 400 360
Note payable to an individual,
interest at 7.5%, due in monthly installments of $6,224, maturing February
2000; secured by certain transportation equipment and the personal guarantees
and partial assignment of life insurance
policies of the stockholders ................................................. 319 267
Other .......................................................................... 339 290
------- -------
7,301 6,383
Less -- Current maturities ..................................................... (1,648) (1,708)
------- -------
$ 5,653 $ 4,675
======== =======
</TABLE>

At December 31, 1995, future principal payments of long-term obligations
and minimum lease payments under capital lease obligations are as follows:

LONG-TERM CAPITAL LEASE
OBLIGATIONS OBLIGATIONS
------------ -------------
(IN THOUSANDS)
Year ending December 31 --
1996...................... $ 868 $ 1,074
1997...................... 641 1,048
1998...................... 715 636
1999...................... 319 220
2000...................... 247 103
Thereafter................ 885 123
------------ -------------
$3,675 3,204
============
Less -- Amounts representing
interest..................... (496)
-------------
$ 2,708
=============

F-88

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Certain obligations totaling $4,410,000 contain warranties and covenants
with which the Company was not in compliance as of December 31, 1995. The
Company requested and received waivers from the lenders indicating that the
scheduled repayment terms would not be revised as a result of these covenant
violations through January 1, 1997.

Management estimates that the fair value of its debt obligations
approximates the historical value of $3,675,000 at December 31, 1995.

NOTES PAYABLE TO STOCKHOLDERS

The Company had borrowings from stockholders totaling $315,000 at December
31, 1994 and 1995. The borrowings are unsecured, noninterest-bearing and payable
upon demand.

5. INCOME TAXES:

The provision for taxes on income consists of the following:

YEAR ENDED DECEMBER 31
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
State --
Current................... $ -- $ -- $ 18
Deferred.................. 35 (7) 58
--------- --------- ---------
$ 35 $ (7) $ 76
========= ========= =========

F-89

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The components of deferred income tax liabilities and assets are as
follows:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Deferred income tax liabilities --
Property and equipment.......... $ 120 $ 142
Other........................... -- --
--------- ---------
Total deferred income tax
liabilities............. 120 142
--------- ---------
Deferred income tax assets --
Accrued expenses................ (39) (34)
Other........................... (34) (3)
--------- ---------
Total deferred income tax
assets.................. (73) (37)
--------- ---------
$ 47 $ 105
========= =========

6. COMMITMENTS AND CONTINGENCIES:

PURCHASE COMMITMENTS

The Company has entered into a commitment to purchase 11 motorcoaches
during 1996 for approximately $3,100,000. The Company took delivery of the first
two motorcoaches during January 1996 and financed the transaction by issuing two
installment promissory notes totaling approximately $515,000 bearing interest at
9.8 percent. The notes are payable in monthly installments totaling
approximately $6,700, mature January 2006, and are secured by the two
motorcoaches and personal guarantees of the Company's stockholders. The Company
has received a proposal from the same institution regarding the financing of the
remaining motorcoaches.

LEASES

The Company leases certain facilities and equipment under noncancelable
leases. Rental expense for the years ended December 31, 1993, 1994 and 1995, was
$53,000, $56,000 and $67,000, respectively. The following represents future
minimum rental payments under noncancelable operating leases (in thousands):

Year ending December 31 --
1996............................ $ 63
1997............................ 45
1998............................ 42
1999............................ 42
2000............................ 35
---------
$ 227
=========

F-90

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CLAIMS AND LAWSUITS

The Company is subject to certain claims and lawsuits arising in the normal
course of business, most of which involve claims for personal injury and
property damage incurred in connection with its operations. The Company
maintains various insurance coverages in order to minimize financial risk
associated with the claims. The Company has provided for certain of these
actions in the accompanying financial statements. In the opinion of management,
uninsured losses, if any, resulting from the ultimate resolution of these
matters will not be material to the Company's financial position or results of
operations.

ESTIMATED INSURANCE CLAIMS PAYABLE

COLLECTIVE BARGAINING AGREEMENT

Certain employees of the Company are involved in discussions which could
lead to their representation under a collective bargaining agreement. Such an
agreement could require the Company to pay specified wages to its union
employees over the course of the agreement as well as to contribute to the
union's employee benefit plans.

SUBSEQUENT EVENTS

Subsequent to December 31, 1995, the Company issued a promissory note for
$350,000, secured by certain transportation equipment, and used the proceeds to
retire a capital lease obligation of approximately $166,000 and to provide
working capital. The note bears interest at 10.8 percent and is payable in
monthly installments of principal and interest of $8,210. The note matures July
16, 2000.

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Prepaid insurance.................... $ 60 $ --
Deferred tax asset -- current........ 37 27
--------- ---------
$ 97 $ 27
========= =========

F-91

CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

DECEMBER 31
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Trade accounts payable............... $ 735 $ 371
Accrued compensation and benefits.... 203 197
Accrued insurance claims payable..... 44 99
Other................................ 415 556
--------- ---------
$ 1,397 $ 1,223
========= =========

9. PRO FORMA NET INCOME (UNAUDITED):

Pursuant to the Merger, the pro forma information has been presented for
the purpose of reflecting net income as if the Merger had occurred on January 1,
1993.

The unaudited pro forma data present compensation at the level the
respective stockholder of the Company has agreed to receive from the Company
subsequent to the Merger. In addition, the pro forma data present the
incremental provision for income taxes as if the Company had been subject to
federal income taxes and for the income tax impact of the compensation
differential discussed above.

10. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS (UNAUDITED):

In March 1996, the Company and its stockholders entered into a definitive
agreement with Coach USA providing for the Merger of the Company with a
subsidiary of Coach USA.

F-92

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Arrow Stage Lines, Inc.:

We have audited the accompanying balance sheets of Arrow Stage Lines, Inc.
(a Nebraska corporation), as of September 30, 1994 and 1995, and the related
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Arrow Stage Lines, Inc., as
of September 30, 1994 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1995, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
February 29, 1996

F-93

ARROW STAGE LINES, INC.
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

SEPTEMBER 30
---------------------- DECEMBER 31
1994 1995 1995
---------- ---------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 147 $ 286 $ 95
Accounts receivable, less
allowance of $34, $38 and
$38.......................... 1,067 1,021 334
Inventories..................... 285 297 271
Investments..................... 278 543 526
Prepaid expenses and other
current assets............... 322 458 379
---------- ---------- ------------
Total current assets...... 2,099 2,605 1,605
PROPERTY AND EQUIPMENT, net.......... 13,559 14,581 14,953
OTHER ASSETS......................... 325 196 196
---------- ---------- ------------
Total assets.............. $ 15,983 $ 17,382 $ 16,754
========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations.................. $ 1,659 $ 1,887 $ 2,077
Accounts payable and accrued
liabilities.................. 1,038 1,338 904
---------- ---------- ------------
Total current
liabilities............. 2,697 3,225 2,981
LONG-TERM OBLIGATIONS, net of current
maturities......................... 9,024 9,117 9,094
---------- ---------- ------------
Total liabilities......... 11,721 12,342 12,075
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $100 par, 990
shares authorized,
10 shares issued............. 1 1 1
Retained earnings............... 4,261 5,039 4,678
---------- ---------- ------------
Total stockholders'
equity.................. 4,262 5,040 4,679
---------- ---------- ------------
Total liabilities and
stockholders' equity.... $ 15,983 $ 17,382 $ 16,754
========== ========== ===========

The accompanying notes are an integral part of these financial statements.

F-94

ARROW STAGE LINES, INC.
STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30 DECEMBER 31
--------------------------------- --------------------
1993 1994 1995 1994 1995
--------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 9,469 $ 10,039 $ 10,650 $ 2,425 $ 2,211
OPERATING EXPENSES................... 6,655 6,957 7,222 1,944 1,907
--------- ---------- ---------- --------- ---------
Gross profit.............. 2,814 3,082 3,428 481 304
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 1,216 1,493 1,751 306 337
--------- ---------- ---------- --------- ---------
Operating income (loss)... 1,598 1,589 1,677 175 (33)
OTHER (INCOME) EXPENSE:
Interest expense................ 726 773 807 182 227
Interest income................. (76) (19) (41) (4) (22)
Other, net...................... (149) (220) (108) (10) (6)
--------- ---------- ---------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.... 1,097 1,055 1,019 7 (232)
PROVISION FOR INCOME TAXES........... -- -- -- -- --
--------- ---------- ---------- --------- ---------
NET INCOME (LOSS).................... $ 1,097 $ 1,055 $ 1,019 $ 7 $ (232)
========= ========== ========== ========= =========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ 1,097 $ 1,055 $ 1,019 $ 7 $ (232)
Pro forma compensation
differential................. 60 30 32 7 8
Less: Pro forma provision
(benefit) for income taxes... 480 432 431 6 (92)
--------- ---------- ---------- --------- ---------
PRO FORMA NET INCOME (LOSS).......... $ 677 $ 653 $ 620 $ 8 $ (132)
========= ========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-95

ARROW STAGE LINES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- ------------
BALANCE AT SEPTEMBER 30, 1992.... 10 $ 1 $2,182 $ 2,183
Dividends paid.............. -- -- (73) (73)
Net income.................. -- -- 1,097 1,097
------ ------ -------- ------------
BALANCE AT SEPTEMBER 30, 1993.... 10 1 3,206 3,207
Net income.................. -- -- 1,055 1,055
------ ------ -------- ------------
BALANCE AT SEPTEMBER 30, 1994.... 10 1 4,261 4,262
Dividends paid.............. -- -- (241) (241)
Net income.................. -- -- 1,019 1,019
------ ------ -------- ------------
BALANCE AT SEPTEMBER 30, 1995.... 10 1 5,039 5,040
------ ------ -------- ------------
Dividends paid (unaudited).. -- -- (129) (129)
Net (loss) (unaudited)...... -- -- (232) (232)
------ ------ -------- ------------
BALANCE AT DECEMBER 31, 1995
(unaudited).................... 10 $ 1 $4,678 $ 4,679
====== ====== ======== ============

The accompanying notes are an integral part of these financial statements.

F-96

ARROW STAGE LINES, INC.
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30 DECEMBER 31
---------------------------------- ----------------------
1993 1994 1995 1994 1995
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net income (loss)............... $ 1,097 $ 1,055 $ 1,019 $ 7 $ (232)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities --
Depreciation.................... 766 926 1,240 257 350
Gain on sale of assets.... (146) (180) (49) -- --
Changes in operating
assets and
liabilities --
Accounts receivable,
net.................. (211) (193) 46 327 687
Inventories............. (62) (70) (12) 19 26
Investments............. -- (16) (265) -- 17
Prepaid expenses and
other current
assets............... (179) (120) (136) 78 79
Accounts payable and
accrued
liabilities.......... 167 222 300 (419) (434)
Other................... (9) (154) 129 (51) --
---------- ---------- ---------- ---------- ----------
Net cash provided
by operating
activities..... 1,423 1,470 2,272 218 493
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment.................... (103) (759) (2,513) (287) (722)
Proceeds from sales of property
and equipment................ 183 -- 300 349 --
---------- ---------- ---------- ---------- ----------
Net cash provided
by (used in)
investing
activities..... 80 (759) (2,213) 62 (722)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations.................. (2,115) (1,382) (2,128) (702) (268)
Proceeds from issuance of
long-term obligations........ 753 572 2,449 277 435
Dividends paid.................. (73) -- (241) -- (129)
---------- ---------- ---------- ---------- ----------
Net cash provided
by (used in)
financing
activities..... (1,435) (810) 80 (425) 38
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH...... 68 (99) 139 (145) (191)
CASH AND CASH EQUIVALENTS, beginning
of year............................ 178 246 147 147 286
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of
year................................. $ 246 $ 147 $ 286 $ 2 $ 95
========== ========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......... $ 697 $ 774 $ 807 $ 181 $ 225
</TABLE>
The accompanying notes are an integral part of these financial statements.

F-97

ARROW STAGE LINES, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Arrow Stage Lines, Inc. (the Company), provides motorcoach charter
services principally in the southwestern United States.

The Company has a working capital deficit as of September 30, 1995. The
Company may continue to experience working capital deficits as it pursues its
business strategy of growth and expanding services. The Company has historically
funded its operations with cash flows from operations and debt from lenders and
stockholders. While there can be no assurances, management believes that the
Company has adequate financing alternatives to fund the Company's operations
through the first quarter of 1997.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL INFORMATION

The interim financial statements as of December 31, 1995, and for the three
months ended December 31, 1994 and 1995, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less as cash equivalents.

INVENTORIES

Inventories primarily consist of motorcoach replacement parts. Inventory
cost is accounted for on the first-in, first-out basis and reported at the lower
of cost or market.

INVESTMENTS

The realized gains and losses on the sale of investments classified as
trading securities are determined using the specific identification method.
Unrealized gains, (losses) on trading securities totaling $2,000, $(3,000) and
$52,000 are included in net income for the years ended September 30, 1993, 1994
and 1995, respectively.

F-98

ARROW STAGE LINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for maintenance
and repairs, including replacement of engines and certain other significant
costs, are expensed as costs are incurred.

CONCENTRATION OF CREDIT RISK

The Company's credit risks primarily consist of accounts receivable from
various tour operators in the travel service industry. One of the Company's
customers individually represents 20%, 18% and 20% of total revenues for the
years ended September 30, 1993, 1994 and 1995, respectively. Management performs
ongoing credit evaluations of its customers and provides allowances as deemed
necessary.

REVENUE RECOGNITION

The Company recognizes revenue from recreation and excursion services when
such services are rendered. Costs associated with the revenues are incurred
and recorded as services are rendered.

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of " (SFAS 121) which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill. Adoption is required in financial
statements for fiscal years beginning after December 15, 1995. The Company does
not expect the adoption of SFAS 121 to have a material effect, if any, on the
financial statements. The Company will adopt SFAS 121 in 1996.

3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

ESTIMATED SEPTEMBER 30
USEFUL LIVES ----------------------
(YEARS) 1994 1995
------------ ---------- ----------
(IN THOUSANDS)
Transportation equipment............. 12 $ 14,288 $ 15,720
Other................................ 3-31 1,989 2,075
---------- ----------
16,277 17,795
Less -- Accumulated depreciation..... (2,718) (3,214)
---------- ----------
$ 13,559 $ 14,581
---------- ----------
---------- ----------

F-99

ARROW STAGE LINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Included in transportation equipment at September 30, 1994 and 1995, are
approximately $8,110,000 and $7,726,000, respectively, of assets held under
capital leases.

4. LONG-TERM OBLIGATIONS:
<TABLE>
<CAPTION>
Long-term obligations consist of the following:
SEPTEMBER 30
--------------------
1994 1995
-------- --------
(IN THOUSANDS)
Obligations under capital leases of certain transportation equipment,
implicit interest rates ranging from 6.1% to 9.7%, due in monthly
installments of $93,809, maturing at various dates
<S> <C> <C>
through 2002 ............................................................ $ 6,379 $ 5,157
Notes payable to banks, interest
ranging from 7.1% to 8.8%, due in monthly installments totaling $84,408
including interest, maturing at various dates through July 2002; secured
by certain
transportation equipment ................................................ 1,832 4,029
Note payable to a bank, interest
at 7.5% until May 1998, at which time interest accrues at 3.2% above the
Federal Reserve Bank rate on treasury notes, due in monthly installments
of $13,849 including interest, through May 2001; secured by certain
transportation
equipment ............................................................... 870 767
Note payable to a bank, interest
at 8.8%, due in monthly
installments of $7,267
including interest, through
May 1999; secured by real
property ................................................................ 568 530
Note payable to a leasing
corporation, interest at 8.2%, due in monthly installments of $11,756
including interest, through March 2000; secured by certain transportation
equipment ............................................................... 626 521
Notes payable to banks, paid in
1995 .................................................................... $ 408 $ --
-------- --------
10,683 11,004
Less -- Current maturities ................................................ (1,659) (1,887)
-------- --------
$ 9,024 $ 9,117
======== ========
</TABLE>

F-100

ARROW STAGE LINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

At September 30, 1995, future principal payments of long-term obligations
and minimum lease payments under capital lease obligations are as follows:

LONG-TERM CAPITAL LEASE
OBLIGATIONS OBLIGATIONS
----------- -------------
(IN THOUSANDS)
Year ending September 30 --
1996............................ $ 973 $ 1,282
1997............................ 988 1,522
1998............................ 953 970
1999............................ 1,255 730
2000............................ 800 1,048
Thereafter...................... 878 739
----------- -------------
$ 5,847 6,291
===========
Less -- Amounts representing
interest........................... (1,134)
-------------
$ 5,157
=============

Management estimates that the fair value of its debt obligations
approximates the historical value of $5,847,000 at September 30, 1995.

Certain obligations totaling $5,816,000 contain warranties and covenants
with which the Company was not in compliance as of September 30, 1995. The
Company requested and received waivers from the lenders indicating that the
scheduled repayment terms would not be revised as a result of these covenant
violations through January 1, 1997.

5. INCOME TAXES:

The Company has elected S Corporation status, as defined by the Internal
Revenue Code, whereby the Company is not subject to taxation for federal and
state purposes. Under S Corporation status, the stockholders report their share
of the Company's taxable earnings or losses on their personal income tax
returns. The Company's S Corporation status will terminate with the effective
date of the Merger.

F-101

ARROW STAGE LINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES:

PURCHASE COMMITMENTS

The Company has entered into commitments to purchase 15 motorcoaches during
1996 for approximately $4,700,000. The Company intends to trade in a similar
number of motorcoaches and finance the balance with bank debt which is presently
being negotiated.

LEASES

The Company leases certain equipment under noncancelable leases. Rental
expense for the years ended September 30, 1993, 1994 and 1995, was $1,000,
$5,000 and $5,000, respectively. The following represents future minimum rental
payments under noncancelable operating leases (in thousands):

Year ending September 30 --
1996............................ $ 5
1997............................ 2
1998............................ --
1999............................ --
2000............................ --
---
$ 7
===

CLAIMS AND LAWSUITS

The Company is subject to certain claims and lawsuits arising in the normal
course of business, most of which involve claims for personal injury and
property damage incurred in connection with its operations. The Company
maintains various insurance coverages in order to minimize financial risk
associated with the claims. The Company has provided for certain of these
actions in the accompanying financial statements. In the opinion of management,
uninsured losses, if any, resulting from the ultimate resolution of these
matters will not be material to the Company's financial position or results of
operations.

ESTIMATED INSURANCE CLAIMS PAYABLE

The Company has a commercial motorcoach liability insurance policy that
provides coverage by the insurance company, subject to a $25,000 deductible. As
such, any claim within the first $25,000 per incident would be the financial
obligation of the Company.

The accrued insurance claims payable represents management's estimate of
the Company's potential claims costs in satisfying the deductible provisions of
the insurance policy for claims occurring through September 30, 1995. The
accrual is based on known facts and historical trends, and management believes
such accrual to be adequate.

F-102

ARROW STAGE LINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

SEPTEMBER 30
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)

Prepaid insurance.................... $ 54 $ 35
Cash surrender value of life
insurance.......................... 71 133
Other................................ 197 290
--------- ---------
$ 322 $ 458
========= =========

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consist of the following:

SEPTEMBER 30
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)

Trade accounts payable............... $ 421 $ 426
Accrued compensation and benefits.... 179 292
Deferred revenue..................... 133 195
Accrued insurance claims payable..... 61 67
Other................................ 244 358
--------- ---------
$ 1,038 $ 1,338
========= =========

9. PRO FORMA NET INCOME (UNAUDITED):

Pursuant to the Merger, the pro forma information has been presented for
the purpose of reflecting net income as if the Merger had occurred on October 1,
1992.

General and administrative expenses for the periods presented reflect
compensation and related benefits that owners received during the periods. These
owners have agreed to reductions in salaries and benefits in connection with the
Merger and will enter into five-year employment agreements which provide for a
set base salary, participation in future incentive bonus plans, certain other
benefits and a two-year covenant not to compete following termination of such
person's employment.

The unaudited pro forma data present compensation at the level the
respective stockholders of the Company have agreed to receive from the Company
subsequent to the Merger. In addition, the pro forma data present the
incremental provision for income taxes as if the Company had been subject to
federal and state income taxes and for the income tax impact of the compensation
differential discussed above.

F-103

ARROW STAGE LINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):

In March 1996, the Company and its stockholders entered into a definitive
agreement with Coach USA providing for the Merger of the Company with a
subsidiary of Coach USA.

In connection with the Merger, the Company will dividend certain assets to
the stockholders, consisting of land, buildings, cash surrender value of life
insurance and automobiles, with a total carrying value of $1,545,000 as of
December 31, 1995. In addition, the Company will make a cash distribution of
approximately $729,000 prior to the Merger which represents the Company's
estimated S Corporation Accumulated Adjustment Account. Had these transactions
been recorded at September 30, 1995, the effect on the accompanying balance
sheet would be a decrease in assets of $2,274,000, liabilities of $530,000 and
stockholders' equity of $1,744,000.

Concurrent with the Merger, the Company will enter into agreements with the
stockholders to lease land and buildings used in the Company's operations for a
negotiated amount and term.
F-104
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses (other than underwriting
compensation expected to be incurred) in connection with the offering
described in this Registration Statement. All of such amounts (except the SEC
Registration Fee and the NASD Filing Fee) are estimated.

SEC Registration Fee................................... $ 19,986
Nasdaq National Market Listing Fees.................... 43,663
NASD Filing Fee........................................ 6,296
Blue Sky Fees and Expenses............................. 15,000
Printing and Engraving Costs........................... 200,000
Legal Fees and Expenses................................ 1,100,000
Accounting Fees and Expenses........................... 2,100,000
Transfer Agent and Registrar Fees and Expenses......... 3,000
Miscellaneous.......................................... 112,055
--------------
Total........................................... $ 3,600,000
==============

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's By-laws provide that the Company shall, to the fullest
extent permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto.

Section 145 of the General Corporation Law of the State of Delaware
permits a corporation, under specified circumstances, to indemnify its
directors, officers, employees or agents against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually
and reasonably incurred by them in connection with any action, suit or
proceeding brought by third parties by reason of the fact that they were or
are directors, officers, employees or agents of the corporation, if such
directors, officers, employees or agents acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reason to believe their conduct was unlawful. In a derivative action, i.e.,
one by or in the right of the corporation, indemnification may be made only
for expenses actually and reasonably incurred by directors, officers,
employees or agents in connection with the defense or settlement of an action
or suit, and only with respect to a matter as to which they shall have acted
in good faith and in a manner they reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification shall
be made if such person shall have been adjudged liable to the corporation,
unless and only to the extent that the court in which the action or suit was
brought shall determine upon application that the defendant directors,
officers, employees or agents are fairly and reasonably entitled to indemnity
for such expenses despite such adjudication of liability.

Article Seven of the Company's Certificate of Incorporation provides that
the Company's directors will not be personally liable to the Company or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors except (a) for any breach of the duty of loyalty to the
Company or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the
II-1

General Corporation Law of the State of Delaware, which makes directors liable
for unlawful dividends or unlawful stock repurchases or redemptions, or (d)
for transactions from which directors derive improper personal benefit.

Section 8 of the Underwriting Agreement filed as Exhibit 1.1 provides
that the Underwriters named therein will indemnify and hold harmless the
Company and each director, officer or controlling person of the Company from
and against certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). Section 8 of such Underwriting
Agreement also provides that such Underwriters will contribute to certain
liabilities of such persons under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The following information relates to securities of the Company issued or
sold by the Company within the past three years which were not registered
under the Securities Act:

(i) In December 1995, the Company issued 147.3724 shares of Common
Stock to Notre Capital Ventures II, L.L.C. for $1,000;

(ii) In January 1996, the Company issued 30 shares of Common Stock
at an effective price of $.01 per share to officers of the Company; and

(iii) In March 1996, the Company issued 39.2 shares of Common Stock
at an effective price of $.01 per share to officers of the Company,
Shelli LePori (an employee of Notre), Dominic Pupolo and M Three Trust (a
trust for the benefit of the children of Paul M. Verrochi).

Subsequent to the issuance of the foregoing shares, and prior to the
filing of this Registration Statement, the Company declared a stock dividend
and issued 9,999 shares of Common Stock for each share of Common Stock then
outstanding.

Simultaneously with the completion of this Offering, the Company will
issue 5,099,687 shares of its Common Stock in connection with the Mergers of
the six Founding Companies.

Each of these transactions was effected without registration of the
relevant security under the Securities Act in reliance upon the exemption
provided by Section 4(2) of the Securities Act for transactions not involving
a public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1* -- Form of Underwriting Agreement

2.1* -- Agreement and Plan of Organization, dated as of March 21,
1996, by and among Coach USA, Inc., Suburban Transit Corp. and
affiliated entities, Suburban Trails Acquisition Corp. and
affiliated entities and the Stockholders named therein

2.2* -- Agreement and Plan of Organization, dated as of March 21,
1996, by and among Coach USA, Inc., Grosvenor Bus Lines, Inc.,
Grayline Acquisition Corp. and the Stockholders named therein

2.3* -- Agreement and Plan of Organization, dated as of March 21,
1996, by and among Coach USA, Inc., Leisure Time Tours,
Leisure Line Acquisition Corp. and the Stockholders named
therein

2.4* -- Agreement and Plan of Organization, dated as of March 21,
1996, by and among Coach USA, Inc., Community Coach, Inc. and
affiliated entities, Community Coach Acquisition Corp. and
affiliated entities and the Stockholders named therein

II-2

2.5* -- Agreement and Plan of Organization, dated as of March 21,
1996, by and among Coach USA, Inc., Arrow Stage Lines, Inc.,
Arrow Stage Acquisition Corp. and the Stockholders named
therein

2.6* -- Agreement and Plan of Organization, dated as of March 21,
1996, by and among Coach USA, Inc., Cape Transit Corp.,
Adventure Trails Acquisition Corp. and the Stockholders named
therein

3.1* -- Amended and Restated Certificate of Incorporation of Coach USA

3.2* -- By-Laws of Coach USA

4.1* -- Form of certificate evidencing ownership of Common Stock of
Coach USA

5.1* -- Opinion of Morgan, Lewis & Bockius LLP

10.1* -- Coach USA 1996 Long-Term Incentive Plan

10.2* -- Coach USA 1996 Non-Employee Directors' Stock Plan

10.3* -- Form of Employment Agreement between Coach USA and Richard H.
Kristinik

10.4* -- Form of Employment Agreement between Coach USA and Lawrence
K. King

10.5* -- Form of Employment Agreement between Coach USA and Douglas M.
Cerny

10.6* -- Form of Employment Agreement between Coach USA, Cape Transit
Corp. and John Mercadante, Jr.

10.7* -- Form of Employment Agreement among Coach USA, Community Coach,
Inc. and affiliated entities and Frank P. Gallagher

10.8* -- Form of Employment Agreement among Coach USA, Suburban
Transit Corp. and affiliated entities and Kenneth Kuchin

10.9* -- Form of Employment Agreement among Coach USA, Leisure Time
Tours and Gerald Mercadante

10.10* -- Form of Employment Agreement between Grosvenor Bus Lines, Inc.
and Robert K. Werbe

10.11* -- Form of Employment Agreement between Arrow Stage Lines, Inc.
and Charles D. Busskohl

10.12* -- Form of Consulting Agreement between Coach USA and Exel
Motorcoach Partnership

10.13* -- Form of Agreement between Coach USA and Exel Motorcoach
Partnership with respect to acquisitions

10.14* -- Form of Agreement from Coach USA and certain of its
stockholders to the stockholders of the Founding Companies
with respect to restrictions on transfers of Common Stock,
registration rights and related matters

10.15* -- Forms of Leases by and between Gerdaneu, Inc. and Leisure
Time Tours related to property located in Mahwah and
Pleasantville, New Jersey and Philadelphia, Pennsylvania

10.16* -- Form of Lease by and between Liberty Street Corporation and
Community Coach, Inc. and its affiliated entities related to
property located in Passaic, New Jersey

10.17* -- Forms of Lease and Sublease by and between Tri-County Bus
Lines, Inc. and Community Coach, Inc. and its affiliated
entities related to property located in Passaic, New Jersey

10.18* -- Forms of Leases by and between Sidney Kuchin and Suburban
Transit Corp. or one of its affiliated entities related to
property located in South Plainfield, New Brunswick, and
Monroe Township, New Jersey

10.19* -- Form of Lease by and between a stockholder of Arrow Stage
Lines, Inc. and Arrow Stage Lines, Inc. related to property
located in Phoenix, Arizona

21.1* -- List of subsidiaries of Coach USA

23.1 -- Consent of Arthur Andersen LLP

23.2* -- Consent of Morgan, Lewis & Bockius LLP (contained in
Exhibit 5.1)

II-3

23.3* -- Consent of Charles D. Busskohl to be named as a director

23.4* -- Consent of Frank P. Gallagher to be named as a director

23.5* -- Consent of Kenneth Kuchin to be named as a director

23.6* -- Consent of John Mercadante, Jr. to be named as a director

23.7* -- Consent of Gerald Mercadante to be named as a director

23.8* -- Consent of Thomas A. Werbe to be named as a director

23.9* -- Consent of Paul M. Verrochi to be named as a director

23.10* -- Consent of William J. Lynch to be named as a director

24.1* -- Power of Attorney

* Previously filed.

(b) Financial Statement Schedules

None
II-4

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes as follows:

(1) The undersigned will provide to the underwriters at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance on Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it is declared effective.

(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be the
initial bona fide offering thereof.

(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 14, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
II-5

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
HOUSTON, TEXAS, ON THE 9TH DAY OF MAY, 1996.

COACH USA, INC.

By: *
______________________________
RICHARD H. KRISTINIK
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
AMENDMENT NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.

SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----

* Chairman of the Board and Chief May 9 1996
_________________________ Executive Officer (Principal
RICHARD H. KRISTINIK Executive Officer)

* Senior Vice President, Chief May 9 1996
_________________________ Financial Officer and Director
LAWRENCE K. KING (Principal Financial and Accounting
Officer)

*
_________________________ Director May 9, 1996
STEVEN S. HARTER

*By: DOUGLAS M. CERNY
DOUGLAS M. CERNY
Attorney-In-Fact

II-6

[Coach USA Logo]

[A photograph of a Suburban motorcoach with the New York City skyline
at night in the background.]

[A photograph of the interior of a luxury, European style motorcoach
with television monitors.]

[A photograph of an attendant serving a meal to a passenger on a
motorcoach.]

The Company's charter and tour fleet features luxury, European style
motorcoaches with plush seats, televisions, VCRs and other amenities.

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS

PAGE

Prospectus Summary................... 3
The Company.......................... 8
Risk Factors......................... 11
Use of Proceeds...................... 16
Dividend Policy...................... 16
Capitalization....................... 17
Dilution............................. 18
Selected Combined Founding Companies'
Financial Data..................... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 21
Business............................. 36
Management........................... 49
Certain Transactions................. 54
Principal Stockholders............... 58
Description of Capital Stock......... 59
Shares Eligible for Future Sale...... 61
Underwriting......................... 62
Legal Matters........................ 63
Experts.............................. 63
Additional Information............... 63
Index to Financial Statements........ F-1

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

3,600,000 SHARES

COACH USA, INC.

COMMON STOCK

-----------------
PROSPECTUS
-----------------

ALEX. BROWN & SONS
INCORPORATED

SMITH BARNEY INC.

May , 1996
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INDEX TO EXHIBITS