AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1996
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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)
ONE RIVERWAY - SUITE 600
HOUSTON, TEXAS 77056-1980
(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.
ONE RIVERWAY - SUITE 600
HOUSTON, TEXAS 77056-1980
(888) COACH-US
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
Douglas M. Cerny Christopher T. Jensen, Esq.
Coach USA, Inc. Morgan, Lewis & Bockius LLP
One Riverway - Suite 600 101 Park Avenue
Houston, Texas 77056-1980 New York, New York 10178
(888) COACH-US (212) 309-6000
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. [X]
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share... 3,500,000 $21.00 $73,500,000 $25,344.83
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
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: Price
Range of Common Stock
6. Dilution............................. Not Applicable
7. Selling Security Holders............. Not Applicable.
8. Plan of Distribution................. Outside Front Cover Page of Prospectus
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;
Price Range of Common Stock; Use of
Proceeds; Dividend Policy; 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; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.......................... Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION
JUNE 21, 1996
3,500,000 SHARES
COMMON STOCK
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.
This Prospectus covers 3,500,000 shares of common stock, $.01 par value
(the "Common Stock"), which may be offered and issued by Coach USA, Inc. (the
"Company") from time to time in connection with the merger with or acquisition
by the Company of other businesses or assets. It is expected that the terms of
acquisitions involving the issuance of securities covered by this Prospectus
will be determined by direct negotiations with the owners or controlling persons
of the businesses or assets to be merged with or acquired by the Company, and
that the shares of Common Stock issued will be valued at prices reasonably
related to market prices current either at the time of a merger or acquisition
are agreed upon or at or about the time of delivery of shares. No underwriting
discounts or commissions will be paid, although finder's fees may be paid from
time to time with respect to specific mergers or acquisitions. Any person
receiving any such fees may be deemed to be an underwriter within the meaning of
the Securities Act of 1933, as amended (the "Securities Act").
The Company currently has 11,405,411 shares of its Common Stock listed on
the Nasdaq National Market, of which 4,140,000 are registered and available for
unrestricted trading in the public markets unless owned by affiliates of the
Company. Application will be made to list the shares of Common Stock offered
hereby on the Nasdaq National Market. On June 18, 1996, the closing price of the
Common Stock on the Nasdaq National Market was $21.00 per share as published in
THE WALL STREET JOURNAL on June 19, 1996.
All expenses of this offering will be paid by the Company. The Company is a
Delaware corporation and all references herein to the Company refer to the
Company and its subsidiaries. All references herein to "Coach USA" mean Coach
USA, Inc. prior to the consummation of the Mergers (as defined herein). The
executive offices of the Company are located at One Riverway, Suite 600,
Houston, Texas 77056-1980, and its telephone number is (888) COACH-US.
THE DATE OF THIS PROSPECTUS IS JUNE , 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.
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.
2
PROSPECTUS SUMMARY
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.
THE COMPANY
The Company is 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. 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. On May 17, 1996, Coach USA acquired in separate transactions
(the "Mergers") simultaneously with the closing of its initial public offering
(the "Offering") six motorcoach businesses (the "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 utilizes 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.
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"
3
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 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 the corporate structure which resulted from the Mergers 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.
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."
4
SUMMARY COMBINED FOUNDING COMPANIES' FINANCIAL DATA
Coach USA acquired, simultaneously with the closing of the Offering, the
Founding Companies. The historical financial statements of each of the Founding
Companies and Coach USA 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>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31(1)
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total revenues................... $ 92,653 $ 96,928 $ 103,072 $ 106,754 $ 113,489 $ 23,015 $ 24,221
Operating expenses............... 76,358 79,578 85,367 88,297 89,669 20,130 21,164
Gross profit..................... 16,295 17,350 17,705 18,457 23,820 2,885 3,057
General and administrative
expenses(3).................... 11,582 11,894 12,490 12,471 14,213 3,287 5,566
Interest and other expense,
net............................ 2,014 2,281 2,101 2,068 2,534 680 599
Net income (loss)................ 2,024 3,379 2,348 3,300 6,144 (694) (2,722)
PRO FORMA:(2)
Pro forma operating income(3).... 6,071 7,133 7,051 8,044 12,814 107 162
Pro forma net income
(loss)(3)(4)................... 2,380 2,847 2,873 3,568 6,049 (340) (282)
Pro forma net income (loss) per
share.......................... 0.67 (.04) (.03)
Pro forma weighted average
shares(5)...................... 9,084 9,084 9,084
</TABLE>
MARCH 31, 1996
----------------------------------------
PRO AS
ACTUAL FORMA(6) ADJUSTED(6)(7)
------- ----------- --------------
BALANCE SHEET DATA:
Working capital deficit.......... $(9,030) $ (39,527) $ (904)
Total assets..................... 78,059 73,141 74,044
Total debt, including current
portion.......................... 33,630 33,970 12,036
Stockholders' equity (deficit)... 22,911 (10,803) 39,000
- ------------
(1) The unaudited combined financial statements for the three months ended March
31, 1995 and 1996 have been prepared by subtracting the results of
operations for the two months and three months ended December 31, 1994 and
1995 from the results of operations for the five months and six months ended
March 31, 1995 and 1996 for Gray Line SF and Arrow, respectively. Gray Line
SF's revenues were $3,579,000 and $3,878,000 and it incurred a net loss of
$(295,000) and $(361,000) in the two months ended December 31, 1994 and
1995, respectively. Arrow's revenues were $2,425,000 and $2,211,000 and it
had net income (loss) of $7,000 and $(232,000) for the three months ended
December 31, 1994 and 1995, respectively.
(2) See the Pro Forma Combined Financial Statements of the Company for pro forma
financial information relating to 1995 and to March 31, 1996 and the first
quarter ended on such date.
(3) Gives effect to certain reductions in salaries and benefits to the owners of
the Founding Companies which were agreed to in connection with the Mergers
(the "Compensation Differential"). In addition, the three months ended
March 31, 1996 gives effect to a $2,076,000 non-recurring, non-cash charge
recorded by Coach USA. See Note 11 of Notes to the Combined Founding
Companies' Financial Statements and Note 4 to the Coach USA, Inc. Financial
Statements.
(4) 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.
(5) Includes: (i) 2,165,724 shares issued by Coach USA prior to the Offering;
(ii) 5,099,687 shares issued to the stockholders of the Founding Companies
in connection with the Mergers; (iii) 1,700,714 of the 4,140,000 shares sold
in the Offering to pay the cash portion of the consideration for the
Founding Companies; and (iv) 118,142 of the 4,140,000 shares sold in the
Offering to pay excess S Corporation distributions; but excludes 1,174,717
shares of Common Stock subject to options granted in connection with the
Offering at an exercise price equal to $14.00 per share. See
"Management -- 1996 Long-Term Incentive Plan" and "-- 1996 Non-Employee
Directors' Stock Plan."
(6) Gives effect to: (i) the combination of the Founding Companies with Coach
USA as if such combination had occurred on March 31, 1996; (ii) a liability
for the cash consideration of approximately $23.8 million 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
issuance of 5,099,687 shares of Common Stock to the Founding Companies'
stockholders in connection with the Mergers; and (v) the additional cash to
be borrowed from a bank.
(7) Adjusted for the sale of 4,140,000 shares of Common Stock sold in the
Offering and the application of the net proceeds therefrom and the
elimination of the deferred offering costs.
5
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>
PERIODS ENDED
YEAR ENDED DECEMBER 31(1) MARCH 31(2)
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUBURBAN:
Revenues......................... $ 32,274 $ 30,427 $ 29,752 $ 6,357 $ 6,383
Operating expenses............... 28,903 27,526 25,322 5,838 6,195
Gross profit..................... 3,371 2,901 4,430 519 188
General and administrative
expenses...................... 2,417 2,283 2,563 697 678
Interest and other expense,
net........................... 175 147 213 49 94
Net income (loss)................ 520 343 1,231 (169) (448)
Pro forma net income (loss)(3)... 795 658 1,512 (50) (284)
GRAY LINE SF:
Revenues......................... 22,122 24,487 29,235 8,861 9,778
Operating expenses............... 16,590 18,990 22,627 7,780 8,548
Gross profit..................... 5,532 5,497 6,608 1,081 1,230
General and administrative
expenses...................... 4,129 3,794 4,722 1,936 2,196
Interest and other expense,
net........................... 228 323 430 220 165
Net income (loss)................ 672 924 1,074 (646) (680)
Pro forma net income (loss)(3)... 735 867 1,085 (550) (507)
LEISURE:
Revenues......................... 17,534 17,694 18,992 3,784 4,368
Operating expenses............... 15,497 14,139 14,577 3,318 3,616
Gross profit..................... 2,037 3,555 4,415 466 752
General and administrative
expenses...................... 2,128 1,934 1,895 452 485
Interest and other expense,
net........................... 313 184 132 (3) 21
Net income (loss)................ (372) 1,298 2,163 15 223
Pro forma net income (loss)(3)... (127) 963 1,577 54 194
COMMUNITY:
Revenues......................... 13,179 14,106 13,807 2,840 2,851
Operating expenses............... 11,057 12,228 11,680 2,559 2,582
Gross profit..................... 2,122 1,878 2,127 281 269
General and administrative
expenses...................... 1,760 1,999 2,193 428 424
Interest and other expense,
net........................... 258 239 173 75 (34)
Net income (loss)................ 103 (262) (62) (133) (73)
Pro forma net income (loss)(3)... 538 415 718 (37) 23
ADVENTURE:
Revenues......................... 8,494 10,001 11,053 2,342 2,269
Operating expenses............... 6,665 8,457 8,241 1,996 1,971
Gross profit..................... 1,829 1,544 2,812 346 298
General and administrative
expenses...................... 840 968 1,089 228 250
Interest and other expense,
net........................... 626 641 928 223 183
Net income (loss)................ 328 (58) 719 (95) (122)
Pro forma net income (loss)(3)... 255 12 537 (40) (57)
ARROW:
Revenues......................... 9,469 10,039 10,650 4,835 4,661
Operating expenses............... 6,655 6,957 7,222 3,783 3,668
Gross profit..................... 2,814 3,082 3,428 1,052 993
General and administrative
expenses...................... 1,216 1,493 1,751 646 697
Interest and other expense,
net........................... 501 534 658 360 435
Net income (loss)................ 1,097 1,055 1,019 46 (139)
Pro forma net income (loss)(3)... 677 653 620 35 (73)
</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 five months ended March 31,
1995 and 1996, respectively, and amounts for Arrow are reported for the
six months ended March 31, 1995 and 1996, 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.
6
THE COMPANY
Coach USA was founded in September 1995 to create a nationwide motorcoach
service provider. On May 17, 1996, Coach USA acquired, simultaneously with the
closing of the 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. For a description
of the Mergers pursuant to which these businesses were acquired, see "Certain
Transactions."
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, as of May 14, 1996 operated 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 has signed a five year employment agreement with
Suburban and the Company to continue in that position with Suburban and to be
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 has signed a five
year employment agreement with Gray Line SF to continue in that position with
Gray Line SF. His son, Thomas A. Werbe, is the President of Gray Line SF and is
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, has signed a five year employment agreement with Leisure and the
Company to continue in that position with Leisure and to be 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
7
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 has signed a five year employment agreement with
Community and the Company to continue in that position with Community and to be
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, has signed a five year
employment agreement with Adventure and the Company to continue in that position
with Adventure and to be 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. As of May 14, 1996, Arrow operated 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 has signed a five year employment
agreement with Arrow to continue in that position and to be a director of the
Company.
The aggregate consideration paid by Coach USA in the Mergers was
approximately $95.2 million, consisting of approximately $23.8 million in cash
and 5,099,687 shares of Common Stock. The consideration 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.
8
The following table sets forth the consideration paid for each Founding
Company in connection with the Mergers:
CASH COMMON STOCK TOTAL
---------- -------------------- ----------
VALUE
OF
SHARES SHARES(1)
------ ----------
(IN THOUSANDS)
Suburban.................. $ 8,054 1,342 $ 18,794 $ 26,848
Gray Line SF.............. 5,266 878 12,286 17,552
Leisure................... 4,119 1,243 17,399 21,518
Community................. 2,606 552 7,726 10,332
Adventure................. 3,179 530 7,419 10,598
Arrow..................... 586 555 7,772 8,358
---------- ------ ---------- ----------
Total................ $ 23,810 5,100 $ 71,396 $ 95,206
========== ====== ========== ==========
(1) Represents the aggregate cash value of the shares of Common Stock issued as
consideration in the Mergers, based upon a price per share of $14.00, the
initial public offering price.
In addition, immediately prior to the Mergers, certain of the Founding
Companies made 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 distributed
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 One Riverway, Suite 600, Houston, Texas
77056 -1980, and its telephone number is (888)-COACH-US.
9
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 conducted no operations and generated no revenues prior to the closing
of the Offering. Coach USA acquired the Founding Companies simultaneously with
the closing of the Offering. Prior to the closing of the Offering, the Founding
Companies operated 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 established
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 in the future 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
10
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 "Selected Combined Founding Companies'
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
11
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.
12
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. The Company's executive
officers and directors, and entities affiliated with them, beneficially own
approximately 49.2% of the outstanding shares of Common Stock. These persons, if
acting in concert, will be able to continue to exercise control over the
Company's affairs, and are likely to be able to elect the entire Board of
Directors and to control the disposition of any matter submitted to a vote of
stockholders. See "Principal Stockholders."
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. The Company issued 4,140,000 shares of its Common Stock in
the Offering, all of which are freely tradeable unless held by affiliates of the
Company. In addition, simultaneously with the closing of the Offering, the
stockholders of the Founding Companies received, 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 received these shares have agreed with Coach
USA not to sell, transfer or otherwise dispose of
13
any of these shares for two years following consummation of the 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 received these shares also
have certain demand registration rights with respect to these shares, beginning
two years after the closing of the Offering, as well as certain piggyback
registration rights with respect to these shares. In addition, the original
stockholders of Coach USA 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 3,500,000 shares of Common Stock offered hereby shall, upon
registration thereof, be freely tradable unless the resale thereof is
contractually restricted. The piggyback registration rights described above will
not apply to these 3,500,000 shares. See "Shares Eligible for Future Sale."
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."
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has traded on the Nasdaq National Market since
May 14, 1996. On June 18, 1996, the last sale price of the Common Stock was
$21.00 per share, as published in THE WALL STREET JOURNAL on June 19, 1996. At
June 18, 1996, there were approximately 60 stockholders of record of the
Company's Common Stock. The following table sets forth the range of high and low
sale prices for the Common Stock for the period from May 14, 1996, the date of
the Offering, through June 18, 1996.
HIGH LOW
--------- ---------
May 14, 1996 through June 18, 1996... $ 22.25 $ 17.25
========= =========
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, the Company's line of credit
includes, and any additional lines of credit established in the future may
include, restrictions on the ability of the Company to pay dividends without the
consent of the lender.
14
SELECTED COMBINED FOUNDING COMPANIES' FINANCIAL DATA
Coach USA acquired, simultaneously with the closing of the Offering, the
Founding Companies. The historical financial statements of each of the Founding
Companies and Coach USA 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.
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 March 31, 1995 and
1996, and for the years ended December 31, 1991 and 1992 and for the three
months ended March 31, 1995 and 1996, 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 Company, 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>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31(1)
------------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ----------- ----------- ----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total revenues.................. $ 92,653 $ 96,928 $ 103,072 $ 106,754 $ 113,489 $ 23,015 $ 24,221
Operating expenses.............. 76,358 79,578 85,367 88,297 89,669 20,130 21,164
General and administrative
expenses(3)................... 11,582 11,894 12,490 12,471 14,213 3,287 5,566
Operating income (loss)......... 4,713 5,456 5,215 5,986 9,607 (402) (2,509)
Interest and other expense,
net........................... 2,014 2,281 2,101 2,068 2,534 680 599
Income (loss) before income
taxes......................... 2,699 3,175 3,114 3,918 7,073 (1,082) (3,108)
Provision (benefit) for income
taxes......................... 675 (204) 766 618 929 (388) (386)
Net income (loss)............... 2,024 3,379 2,348 3,300 6,144 (694) (2,722)
PRO FORMA(2):
Pro forma operating income(3)... 6,071 7,133 7,051 8,044 12,814 107 162
Pro forma net income
(loss)(3)(4).................. 2,380 2,847 2,873 3,568 6,049 (340) (282)
Pro forma net income (loss) per
share......................... 0.67 (.04) (.03)
Pro forma weighted average
shares(5)..................... 9,084 9,084 9,084
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital (deficit)....... $ (3,616) $ (2,852) $ (1,965) $ (3,399) $ (5,211) $ (5,864) $ (9,030)
Total assets.................... 66,094 68,614 68,456 74,841 79,363 73,718 78,059
Total debt, including current
portion......................... 36,851 32,569 30,013 31,883 33,114 32,151 33,630
Stockholders' equity............ 16,434 17,435 18,967 21,641 24,713 20,459 22,911
</TABLE>
------------
(1) The unaudited combined financial statements for the three months ended
March 31, 1995 and 1996 have been prepared by subtracting the results of
operations for the two months and three months ended December 31, 1994 and
1995 from the results of operations for the five months and six months
ended March 31, 1995 and 1996 for Gray Line SF and Arrow, respectively.
Gray Line SF's revenues were $3,579,000 and $3,878,000 and it incurred a
net loss of $(295,000) and $(361,000) in the two months ended December 31,
1994 and 1995, respectively. Arrow's revenues were $2,425,000 and
$2,211,000 and it had a net income (loss) of $7,000 and $(232,000) for the
three months ended December 31, 1994 and 1995, respectively.
(2) See the Pro Forma Combined Financial Statements of the Company for pro
forma financial information relating to 1995 and to March 31, 1996 and the
first quarter ended on such date.
(3) Gives effect to the Compensation Differential. In addition, the three
months ended March 31, 1996 gives effect to a $2,076,000 non-recurring,
non-cash charge recorded by Coach USA. See Note 11 of Notes to the
Combined Founding Companies' Financial Statements and Note 4 to the Coach
USA, Inc. Financial Statements.
15
(4) 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.
(5) Includes: (i) 2,165,724 shares issued by Coach USA prior to the Offering;
(ii) 5,099,687 shares issued to the stockholders of the Founding Companies
in connection with the Mergers; (iii) 1,700,714 of the 4,140,000 shares
sold in the Offering to pay the cash portion of the consideration for the
Founding Companies; and (iv) 118,142 of the 4,140,000 shares sold in the
Offering to pay excess S Corporation distributions; but excludes 1,174,717
shares of Common Stock subject to options granted in connection with the
Offering at an exercise price equal to $14.00 per share, the initial
public offering price. See "Management -- 1996 Long-Term Incentive Plan"
and "-- 1996 Non-Employee Directors' Stock Plan."
16
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>
PERIODS ENDED MARCH
YEAR ENDED DECEMBER 31(1) 31(2)
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUBURBAN:
Revenues........................ $ 32,274 $ 30,427 $ 29,752 $ 6,357 $ 6,383
Operating expenses.............. 28,903 27,526 25,322 5,838 6,195
Gross profit.................... 3,371 2,901 4,430 519 188
General and administrative
expenses...................... 2,417 2,283 2,563 697 678
Interest and other expense,
net........................... 175 147 213 49 94
Net income (loss)............... 520 343 1,231 (169) (448)
Pro forma net income
(loss)(3)..................... 795 658 1,512 (50) (284)
GRAY LINE SF:
Revenues........................ 22,122 24,487 29,235 8,861 9,778
Operating expenses.............. 16,590 18,990 22,627 7,780 8,548
Gross profit.................... 5,532 5,497 6,608 1,081 1,230
General and administrative
expenses...................... 4,129 3,794 4,722 1,936 2,196
Interest and other expense,
net........................... 228 323 430 220 165
Net income (loss)............... 672 924 1,074 (646) (680)
Pro forma net income
(loss)(3)..................... 735 867 1,085 (550) (507)
LEISURE:
Revenues........................ 17,534 17,694 18,992 3,784 4,368
Operating expenses.............. 15,497 14,139 14,577 3,318 3,616
Gross profit.................... 2,037 3,555 4,415 466 752
General and administrative
expenses...................... 2,128 1,934 1,895 452 485
Interest and other expense,
net........................... 313 184 132 (3) 21
Net income (loss)............... (372) 1,298 2,163 15 223
Pro forma net income
(loss)(3)..................... (127) 963 1,577 54 194
COMMUNITY:
Revenues........................ 13,179 14,106 13,807 2,840 2,851
Operating expenses.............. 11,057 12,228 11,680 2,559 2,582
Gross profit.................... 2,122 1,878 2,127 281 269
General and administrative
expenses...................... 1,760 1,999 2,193 428 424
Interest and other expense,
net........................... 258 239 173 75 (34)
Net income (loss)............... 103 (262) (62) (133) (73)
Pro forma net income
(loss)(3)..................... 538 415 718 (37) 23
ADVENTURE:
Revenues........................ 8,494 10,001 11,053 2,342 2,269
Operating expenses.............. 6,665 8,457 8,241 1,996 1,971
Gross profit.................... 1,829 1,544 2,812 346 298
General and administrative
expenses...................... 840 968 1,089 228 250
Interest and other expense,
net........................... 626 641 928 223 183
Net income (loss)............... 328 (58) 719 (95) (122)
Pro forma net income
(loss)(3)..................... 255 12 537 (40) (57)
ARROW:
Revenues........................ 9,469 10,039 10,650 4,835 4,661
Operating expenses.............. 6,655 6,957 7,222 3,783 3,668
Gross profit.................... 2,814 3,082 3,428 1,052 993
General and administrative
expenses...................... 1,216 1,493 1,751 646 697
Interest and other expense,
net........................... 501 534 658 360 435
Net income (loss)............... 1,097 1,055 1,019 46 (139)
Pro forma net income
(loss)(3)..................... 677 653 620 35 (73)
</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 five months ended March 31,
1995 and 1996, respectively, and amounts for Arrow are reported for the
six months ended March 31, 1995 and 1996, 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.
17
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 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 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, at this time, quantify these savings. 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.
18
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
19
$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
20
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 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
21
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.
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, (iii) Community of $0.2 million and (iv)
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 advanced certain funds
in order to effect the Mergers and the Offering. Portions of those advances were
repaid out of the proceeds of the Offering. As of March 31, 1996, these advances
totaled $2,741,000.
On May 17, 1996 the Company completed the Offering, which involved the
public sale of 4, 140,000 shares of Common Stock at a price of $14.00 per share.
The proceeds from the transaction, net of underwriting discounts and commissions
and after deducting estimated expenses of the Offering, were approximately $49.8
million. Of this amount, $23.8 million was used to pay the cash portion of the
purchase price for the Founding Companies. In addition, approximately $22.3
million of the net proceeds were used to repay indebtedness assumed by the
Company in the Mergers. The approximately $3.7 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 has established an interim $30 million credit facility with
NationsBank of Texas, N.A. ("NationsBank"). The credit facility is available for
acquisitions, for working capital, to finance equipment replacements and
additions and to refinance indebtedness of the Founding Companies not repaid out
of the net proceeds of the Offering. This credit facility provides for a
revolving credit facility with a term of one year and bears interest at LIBOR
plus 100 basis points, with the interest rate escalating as the Company's level
of funded debt increases relative to its cash flow. NationsBank is also acting
as the agent to establish a syndicate of financial institutions to expand and
extend this facility to a $70 million, three year revolving credit facility. At
March 31, 1996, the combined Founding Companies had total debt of $33.6 million.
Approximately $21.9 million of these obligations were repaid from the net
proceeds of the Offering, with the majority of the remaining balance refinanced
with the credit facility 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 made cash distributions to their
stockholders prior to the Mergers which represented 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 were 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
22
companies believes that it has adequate financing alternatives to fund its
operations through the first quarter of 1997.
INTERIM PERIOD LIQUIDITY
Net cash provided by operating activities was $1.5 million and $2.2 million
for the three months ended March 31, 1995 and 1996, respectively. The increase
in net cash provided by combined operating activities was primarily due to a
decrease in investments and an increase in depreciation expense, a non-cash
expense item.
Cash used in combined investing activities was $2.6 million and $3.5
million for the three months ended March 31, 1995 and 1996, respectively. Cash
used in investing activities was primarily for additions and replacements of
motorcoaches.
Cash provided by financing activities was $1.0 million and $0.4 million for
the three months ended March 31, 1995 and 1996, respectively. Cash used in
combined financing activities for the three months ended March 31, 1996
consisted of principal payments on long-term obligations, largely offset by
proceeds from issuances of long-term obligations and dividends paid to owners of
the Founding Companies, primarily Leisure.
Combined cash and cash equivalents decreased by $0.8 million during the
three months ended March 31, 1996. The decrease primarily resulted from
decreases of $0.9 million at Suburban.
UNAUDITED INTERIM RESULTS -- COMBINED
Revenues for the three months ended March 31, 1996 increased $1.2 million,
or 5.2%, as compared to the three months ended March 31, 1995. The increase in
revenues was largely due to an increase in Gray Line SF's revenues of $0.9
million, primarily attributable to an increase in the level of municipal
contract services, and an increase in Leisure's revenues of $0.6 million,
primarily attributable to significantly increased ridership on scheduled service
to the Atlantic City casinos. These increases were partially offset by revenue
decreases at several other locations resulting from weather conditions.
Operating expenses for the three months ended March 31, 1996 increased $1.0
million, or 5.1%, as compared to the three months ended March 31, 1995. The
increase in operating expenses was largely due to an increase of $0.8 million at
Gray Line SF, which was primarily attributable to higher fuel costs and
increased operations. Operating expenses at several other locations also
increased due to higher fuel costs.
General and administrative expenses increased $0.2 million, or 6.2%, as
compared to the three months ended March 31, 1995. The increase in general and
administrative expenses was largely due to an increase of $0.3 million at Gray
Line SF which resulted from increased expenses consistent with its higher
revenue levels.
Interest expense remained relatively constant between the periods.
Pro forma net loss, which has been adjusted for the Compensation
Differential and the pro forma provision for taxes, decreased during the three
months ended March 31, 1996 as compared to the three months ended March 31,
1995.
23
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.
UNAUDITED INTERIM RESULTS - SUBURBAN
Revenues for the three months ended March 31, 1996 remained relatively
constant with the three months ended March 31, 1995. Operating expenses for the
three months ended March 31,
24
1996 increased $0.4 million as compared to the three months ended March 31,
1995, primarily due to higher fuel costs and increased maintenance and operating
expenses which were largely a result of unusual weather conditions. General and
administrative expenses remained relatively constant between the periods.
Interest expense increased $27,000 during the three months ended March 31, 1996
as compared to the same period in the prior year due to higher levels of average
debt outstanding resulting from additional motorcoaches purchased with borrowed
funds. As a result of the foregoing, the net loss increased from $(0.2 million)
for the three months ended March 31, 1995 to $(0.4 million) for the three months
ended March 31, 1996.
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.
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.
25
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.
UNAUDITED INTERIM RESULTS - GRAY LINE SF
Revenues for the five months ended March 31, 1996 increased $0.9 million as
compared to the five months ended March 31, 1995. This increase was due to an
increase in the level of municipal contract service. Operating expenses for the
five months ended March 31, 1996 increased $0.8 million as compared to the five
months ended March 31, 1995, primarily due to higher fuel costs and increased
operations. General and administrative expenses for the five months ended March
31, 1996 increased $0.3 million as compared to the five months ended March 31,
1995 due to increased expenses to support the higher revenue levels. Interest
expense decreased $0.1 million during the five months ended March 31, 1996 as
compared to the same period in the prior year due to lower levels of average
debt outstanding. As a result of the foregoing, the net loss increased from
$(0.6 million) for the five months ended March 31, 1995 to $(0.7 million) for
the five months ended March 31, 1996.
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%
26
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.
UNAUDITED INTERIM RESULTS - LEISURE
Revenues for the three months ended March 31, 1996 increased $0.6 million
as compared to the three months ended March 31, 1995. The increase in revenues
was primarily the result of significantly increased ridership on scheduled
service to the Atlantic City casinos, which was only partially offset by the
unusual winter weather conditions experienced in much of the Northeast.
Operating expenses for the three months ended March 31, 1996 increased $0.3
million as compared to the three months ended March 31, 1995, primarily due to
increased operating, fuel and maintenance costs. General and administrative
expenses remained relatively constant between the periods due to an increase in
administrative staffing. Interest expense increased $16,000 during the three
months ended March 31, 1996 as compared to the same period in the prior year due
to higher levels of debt outstanding from additional motorcoaches purchased with
borrowed funds. As a result of the foregoing, net income for the three months
ended March 31, 1996 increased to $0.2 million as compared to net income of
$15,000 for the three months ended March 31, 1995.
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.
27
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 the 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 $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.
UNAUDITED INTERIM RESULTS -- COMMUNITY
Revenues for the three months ended March 31, 1996 remained relatively
constant with the three months ended March 31, 1995. Operating expenses for the
three months ended March 31, 1996 increased $23,000, primarily due to higher
fuel costs as compared to the three months ended March 31, 1995. General and
administrative expenses remained relatively constant between the periods. Other
income, net, is principally the result of insurance proceeds following a loss.
As a result of the foregoing, the net loss decreased from $(133,000) for the
three months ended March 31, 1995 to $(73,000) for the three months ended March
31, 1996.
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 $0.5 million, or 4.5% of revenues. The pro forma
provision for taxes includes the incremental
28
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.
UNAUDITED INTERIM RESULTS -- ADVENTURE
Revenues for the three months ended March 31, 1996 declined $(0.1 million)
as compared to the three months ended March 31, 1995. The decrease in revenues
was primarily the result of unusual winter weather conditions that limited the
ability of motorcoaches to operate. Operating expenses for the three months
ended March 31, 1996 remained relatively constant with the three months ended
March 31, 1995, primarily as a result of lower operating levels offset by
increased fuel costs. General and administrative expenses remained relatively
constant between the periods. Interest expense decreased $(21,000) during the
three months ended March 31, 1996 as compared to the same period in the prior
year due to lower levels of average debt outstanding. As a result of the
foregoing, the net loss for the three months ended March 31, 1996 of $(0.1
million) remained relatively constant as compared to the three months ended
March 31, 1995.
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
29
$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.
UNAUDITED INTERIM RESULTS - ARROW
Revenues for the six months ended March 31, 1996 declined $(0.2 million) as
compared to the six months ended March 31, 1995. The decrease in revenues was
primarily due to reduced charter revenues resulting from weather conditions that
produced less snow in the Southwest and less favorable ski conditions. Operating
expenses for the six months ended March 31, 1996 decreased $(0.1 million) as
compared to the six months ended March 31, 1995, primarily due to reduced
maintenance costs. General and administrative expenses increased $51,000 as
compared to the six months ended March 31, 1995 as Arrow expanded its marketing
efforts. Interest expense increased $0.1 million during the six months ended
March 31, 1996 as compared to the same period in the prior year due to higher
levels of debt outstanding from additional motorcoaches purchased with borrowed
funds. As a result of the foregoing, net income decreased $(0.1 million) to a
loss of $(0.1 million) for the six months ended March 31, 1996.
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.
30
BUSINESS
The Company is 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. 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.
Coach USA was founded in September 1995 to create a nationwide motorcoach
service provider and conducted no operations prior to the Offering. Coach USA
acquired, simultaneously with the closing of the 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.
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
31
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:
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.
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.
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:
32
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.
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 did 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 through 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. 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
33
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. 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, including the shares of Common Stock
offered hereby, and cash or, possibly, notes.
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.
34
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 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
35
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.
The Company maintains 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
36
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 are opportunities to increase equipment
utilization 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
37
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 than the individual Founding Companies could because of the increased
negotiating power of the combined Founding Companies. 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 were acquired, the
Founding Companies which owned their facilities transferred ownership of these
facilities to their stockholders or to entities controlled by their
stockholders, who entered 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 :
USE
---------------------
FOUNDING GARAGE AND
COMPANY LOCATION ACREAGE MAINTENANCE OFFICE
- -------------------- -------------------- ---------- ----------- ------
Suburban............ New Brunswick, NJ 5.8 X X
Hightstown, NJ 8.0 X
South Plainfield, NJ 2.3 X
Gray Line SF........ San Francisco, CA 3.0 X X
Leisure............. Mahwah, NJ 4.4 X X
Pleasantville, NJ 2.3 X
Philadelphia, PA 2.5 X
Community........... Passaic, NJ 4.3 X X
Adventure........... Atlantic City, NJ 4.0 X X
Philadelphia, PA 2.0 X
Arrow............... Phoenix, AZ 3.5 X X
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.
The Company leases its principal executive and administrative offices in
Houston, Texas.
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.
38
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 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 approximately 875 employees of the
Company, of whom approximately 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. 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 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.
39
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
40
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.
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
41
Founding Companies and their affiliates that are regulated by the STB, and 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 received in the Mergers, after satisfaction of a threshold payable
by the Company, which varies depending on the Founding Company) 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
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
42
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.
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, Academy
Express, Inc., formerly known as 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 ordered an evidentiary hearing to explore certain
factual issues. The evidentiary hearing took place in late May and early June of
1996. The court is currently deciding whether to vacate its prior denial of the
injunction. 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.
43
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of May 14, 1996 concerning
the Company's directors, executive officers and certain key employees.
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. is President and Chief Operating Officer and a
director of the Company. 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. 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 is Vice Chairman of the Board and Senior Vice
President -- Northeast Region of the Company. He has been employed by Suburban
since 1975 and has served as Suburban's President and Chief Executive Officer
since 1990.
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
44
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 is Senior Vice President -- Corporate Development and a
director of the Company. Mr. Gallagher has served as President and Chief
Executive Officer of Community since 1969. 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 is Regional Vice President and a director of the Company.
Mr. Mercadante co-founded Leisure in 1970 and has been President and Chief
Executive Officer of Leisure since 1980.
Charles D. Busskohl is a director of the Company. He has been employed by
Arrow since 1960 and has served as Arrow's Chairman for six years and has served
as Chief Executive Officer of Arrow for 34 years. Mr. Busskohl was a founder of
the United Motorcoach Association, a motorcoach trade association.
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 is a director of the Company. 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 is a director of the Company. 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 is a director of the Company. 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
45
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 is a director of the Company
The Board of Directors is 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. The members of the Audit Committee and the Compensation
Committee are 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, conducted no operations and
generated no revenue prior to the closing of the Offering 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
has entered 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 is for a term of five years,
46
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
provides 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. Each
of Messrs. Busskohl and Robert Werbe has entered 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 has entered 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 is 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
provides 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.
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.
47
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 administers the Plan and generally selects 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 the Offering, NQSOs to purchase a total of 495,000
shares of Common Stock of the Company were 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 were granted to the employees of the Founding
Companies. The grants of all of the foregoing options were effective as of the
commencement of the Offering and each has an exercise price equal to $14.00 per
share, the initial public offering price. These options vest at the rate of 20%
per year commencing on June 30, 1997, and 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 the 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
the 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 the Offering have
an exercise price equal to $14.00 per share, the initial public offering price.
Options granted under the Directors' Plan 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
48
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 Coach USA, Coach USA 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, Coach USA
declared a stock dividend of 9,999 shares of Common Stock for each share of
Common Stock outstanding. In addition, Coach USA 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. Coach USA issued 75,000 shares of
Common Stock to a trust for the benefit of the children of Paul M. Verrochi, who
became a director of the Company upon the commencement of the Offering, and
granted options to purchase 10,000 shares of Common Stock, effective upon the
commencement of the Offering, to Messrs. Verrochi and Harter and to William J.
Lynch, who also became a director of the Company upon the commencement of the
Offering and who is an investor in Notre. In addition, Notre advanced funds in
order to effect the Mergers and the Offering and had outstanding as of March 31,
1996 advances to the Company in the aggregate amount of $2,741,000, all of which
were on a noninterest-bearing basis. Portions of Notre's advances were repaid
out of the proceeds of the Offering.
Simultaneously with the closing of the Offering, Coach USA acquired by
merger all of the issued and outstanding stock of the six Founding Companies, at
which time each Founding Company became a wholly owned subsidiary of the
Company. The aggregate consideration paid by Coach USA in the Mergers was
approximately $95.2 million, consisting of approximately $23.8 million in cash
and 5,099,687 shares of Common Stock. In addition, immediately prior to the
Mergers certain of the Founding Companies made 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 distributed to their respective stockholders approximately $4.2
million in net book value of assets and approximately $700,000 of related
liabilities.
The aggregate consideration paid by Coach USA for each of the Founding
Companies was as follows: Suburban: $26,847,684, consisting of $8,054,308 paid
in cash and 1,342,384 shares of Common Stock; Gray Line SF: $17,551,924,
consisting of $5,265,580 paid in cash and 877,596 shares of Common Stock;
Leisure: $21,517,999, consisting of $4,118,477 paid in cash and 1,242,823 shares
of Common Stock; Community: $10,331,997, consisting of $2,605,831 paid in cash
and 551,869 shares of Common Stock; Adventure: $10,598,000, consisting of
$3,179,400 paid in cash and 529,900 shares of Common Stock; and Arrow:
$8,357,995, consisting of $586,385 paid in cash and 555,115 shares of Common
Stock.
Pursuant to the agreements entered into in connection with the Mergers, the
stockholders of the Founding Companies agreed not to compete with the Company
for five years, commencing on the date of consummation of the Offering.
Prior to the Offering, each of the Founding Companies incurred indebtedness
which was 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
49
was subject to personal guarantees was approximately $11.6 million. The Company
repaid substantially all of such indebtedness immediately following the
consummation of the Offering and is using its best efforts to have the personal
guarantees of the balance of this indebtedness released within 120 days after
May 17, 1996. In the event that any guarantee cannot be released, the Company
has agreed to repay the balance of such indebtedness.
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, received cash and shares of
Common Stock of the Company as follows: Mr. Kuchin -- $7,267,324 and 1,211,219
shares of Common Stock; Mr. Thomas Werbe -- $2,106,232 and 351,038 shares of
Common Stock; Mr. Robert Werbe -- $526,558 and 87,760 shares of Common Stock;
Mr. Gerald Mercadante -- $3,500,699 and 1,056,400 shares of Common Stock; Mr.
Gallagher -- $934,036 and 197,810 shares of Common Stock; Mr. John Mercadante --
$2,384,550 and 397,425 shares of Common Stock; and Mr. Busskohl -- $585,892 and
550,451 shares of Common Stock.
LEASES OF FACILITIES
In connection with the Mergers, the Company assumed 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 assumed 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 has required the two Founding Companies
described below that owned real property to transfer such real property to their
stockholders or to entities controlled by their stockholders prior to the
Mergers. Accordingly, two properties previously owned by Leisure and used for
its motorcoach operations with a net book value of $1,879,000 as of December 31,
1995 were 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 were distributed, without payment of consideration to Arrow
or Coach USA, to the stockholders thereof, including trusts for which Mr.
Charles Busskohl acts as a trustee, prior to the Mergers and then leased to the
Company. These leases were negotiated between the General
50
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 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 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 USA 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 bore interest at the
prime rate plus 1% and was to mature 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 were 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 were unsecured, bore interest at 10.5% and were
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 were unsecured,
noninterest-bearing and payable upon demand.
Suburban had outstanding accounts receivable from Mr. Kenneth Kuchin
totaling $194,000 and Sidney Kutchin totaling $458,000 as of December 31, 1995.
These receivables were unsecured, noninterest-bearing and payable on demand.
All of the loans to and from the Founding Companies described in this
section were repaid in connection with the Mergers and the Offering.
The Company has negotiated 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 payable to Exel is 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 became a director of the Company upon the commencement of the
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.
51
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of May 17, 1996
regarding the beneficial ownership of the Common Stock of the Company 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; (iii) each named executive
officer; and (iv) all executive officers and 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
----------------------
NAME NUMBER PERCENT
- ------------------------------------- --------- -------
Richard H. Kristinik(1).............. 200,000 1.8%
Kenneth Kuchin(2).................... 1,211,219 10.6
John Mercadante, Jr.(3).............. 397,425 3.5
Douglas M. Cerny(4).................. 114,000 1.0
Frank P. Gallagher(5)................ 197,810 1.7
Lawrence K. King(4).................. 114,000 1.0
Gerald Mercadante(6)................. 1,056,400 9.3
Charles D. Busskohl(7)............... 550,451 4.8
Steven S. Harter(8).................. 1,336,352 11.7
William J. Lynch(9).................. 10,000 0.1
Paul M. Verrochi(10)................. 85,000 0.7
Thomas A. Werbe(11).................. 351,038 3.1
Notre Capital Ventures II,
L.L.C.(12)......................... 1,326,352 11.6
All executive officers and directors
as a group
(12 persons)....................... 5,623,695 49.3
(1) These shares are held by the Kristinik Family Partnership, of which Mr.
Kristinik is a general partner. Does not include 200,000 shares which may
be acquired upon the exercise of options not exercisable within 60 days.
(2) Includes 383,299 shares held by a trust for the benefit of Mr. Kuchin's
sister for which Mr. Kuchin is a trustee, as to which shares Mr. Kuchin
disclaims beneficial ownership.
(3) Includes 137,774 shares held 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 held 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 for which Mr. Gallagher
is a trustee.
(6) Includes 186,423 shares held by Mr. Mercadante's spouse, as to which shares
Mr. Mercadante disclaims beneficial ownership.
(7) These shares are held by two family trusts for 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 the Offering
and 1,326,352 shares of Common Stock held by Notre. Mr. Harter is the
President of Notre.
(9) Includes 10,000 shares which may be acquired upon exercise of options
granted under the Directors' Plan effective as of the commencement of the
Offering.
(10) Includes 10,000 shares which may be acquired upon exercise of options
granted under the Directors' Plan effective as of the commencement of the
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 by the Robert K. Werbe Grantor Retained Annuity Trust
for which Mr. Thomas Werbe is a trustee.
(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 the Offering.
52
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"). Without giving effect to the
issuance of shares as contemplated by this Prospectus, the Company has
outstanding 11,405,411 shares of Common Stock and no shares of 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 Prospectus will be upon payment therefor,
fully paid and non-assessable.
The Board of Directors is 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 trades on the Nasdaq National Market under the symbol
"TOUR."
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
53
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
The Company is 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.
54
SHARES ELIGIBLE FOR FUTURE SALE
The Company has outstanding 11,405,411 shares of Common Stock. The
4,140,000 shares sold in the Offering are 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 the Prospectus relating to the Offering, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of the Common Stock, 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 owned 5,623,695 shares in the aggregate as of May 17, 1996 have
agreed not to sell or otherwise dispose of any shares of Common Stock for a
period ending on November 10, 1996 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"). In
addition, the former 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 May 17, 1996. 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 after May 17, 1998.
The 3,500,000 shares of its Common Stock being offered by this Prospectus
will, upon registration thereof, be freely tradeable in general. 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 of which this
Prospectus is a part. 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.
55
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.
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 is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can 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 Northwest 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.
The Company has filed with the Commission, Washington, D.C., a Registration
Statement on Form S-1 under the Securities Act with respect to the 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 with respect to the Company and such Common Stock, reference
is made to such Registration Statement and exhibits. A copy of the Registration
Statement on file with the Commission may be obtained from the Commission's
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission.
The Company's Common Stock is listed on the Nasdaq National Market. Proxy
statements and other information concerning the Company can also be inspected at
the offices of the Nasdaq National Market, 1735 K Street, Washington, D.C.
20006.
56
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
Statements of Income............ F-29
Notes to Financial Statements... F-30
SUBURBAN TRANSIT CORP. AND RELATED
COMPANIES
Report of Independent Public
Accountants................... F-32
Combined Balance Sheets......... F-33
Combined Statements of Income... F-34
Combined Statements of
Stockholders' Equity.......... F-35
Combined Statements of Cash
Flows......................... F-36
Notes to Combined Financial
Statements.................... F-37
GROSVENOR BUS LINES, INC. AND
SUBSIDIARIES (OPERATING AS GRAY
LINE OF SAN FRANCISCO)
Report of Independent Public
Accountants................... F-45
Consolidated Balance Sheets..... F-46
Consolidated Statements of
Income........................ F-47
Consolidated Statements of
Stockholders' Equity.......... F-48
Consolidated Statements of Cash
Flows......................... F-49
Notes to Consolidated Financial
Statements.................... F-50
LEISURE TIME TOURS
Report of Independent Public
Accountants................... F-58
Balance Sheets.................. F-59
Statements of Income............ F-60
Statements of Stockholders'
Equity........................ F-61
Statements of Cash Flows........ F-62
Notes to Financial Statements... F-63
F-1
COMMUNITY BUS LINES, INC. AND RELATED
COMPANIES
Report of Independent Public
Accountants................... F-70
Combined Balance Sheets......... F-71
Combined Statements of Income... F-72
Combined Statements of
Stockholders' Equity.......... F-73
Combined Statements of Cash
Flows......................... F-74
Notes to Combined Financial
Statements.................... F-75
CAPE TRANSIT CORP. (OPERATING AS
ADVENTURE TRAILS)
Report of Independent Public
Accountants................... F-82
Balance Sheets.................. F-83
Statements of Income............ F-84
Statements of Stockholders'
Equity........................ F-85
Statements of Cash Flows........ F-86
Notes to Financial Statements... F-87
ARROW STAGE LINES, INC.
Report of Independent Public
Accountants................... F-94
Balance Sheets.................. F-95
Statements of Income............ F-96
Statements of Stockholders'
Equity........................ F-97
Statements of Cash Flows........ F-98
Notes to Financial Statements... F-99
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 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 March 31, 1996 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 4,140,000 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.
Coach USA, through its wholly-owned subsidiaries acquired, simultaneously
with the closing of the Offering, 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
transferred 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 obtained 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, at this time,
quantify these savings. 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
<PAGE>
COACH USA, INC.
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------------------------------------------------
COMBINED POST
COACH FOUNDING PRO FORMA MERGER AS
USA COMPANIES ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED
------- --------- ----------- --------- ----------- --------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....... $ 1 $ 2,796 $ (3,010)(a) $ 787 $ 49,803(i) $ 4,422
1,000(h) (22,358)(j)
(23,810)(k)
Accounts receivable, less
allowance..................... -- 4,447 4,447 4,447
Notes receivable from
stockholders.................. -- 638 638 638
Inventories..................... -- 2,492 2,492 2,492
Investments..................... -- 2,750 (1,474)(a) 1,276 1,276
Prepaid expenses and other
current assets................ -- 3,569 (612)(b) 2,957 2,957
------- --------- ----------- --------- ----------- --------
Total current assets....... 1 16,692 (4,096) 12,597 3,635 16,232
PROPERTY AND EQUIPMENT, net.......... 9 60,538 (3,564)(c) 56,983 56,983
OTHER ASSETS......................... 2,732 829 3,561 (2,732)(j) 829
------- --------- ----------- --------- ----------- --------
Total assets............... $ 2,742 $78,059 $ (7,660) $ 73,141 $ 903 $ 74,044
======= ========= =========== ========= =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations................... $ -- $ 8,171 $ (149)(c) $ 8,022 $ (8,022)(j) $ --
Accounts payable and accrued
liabilities................... -- 17,136 17,136 17,136
Amounts due to stockholders..... 2,741 415 3,156 (3,156)(j) --
Pro forma distribution to
Founding Companies'
stockholders.................. -- -- 23,810(d) 23,810 (23,810)(k) --
------- --------- ----------- --------- ----------- --------
Total current
liabilities.............. 2,741 25,722 23,661 52,124 (34,988) 17,136
------- --------- ----------- --------- ----------- --------
LONG-TERM OBLIGATIONS, net of current
maturities......................... -- 25,459 (511)(c) 25,948 (13,912)(j) 12,036
1,000(h)
DEFERRED INCOME TAXES................ -- 3,967 1,905(e) 5,872 5,872
------- --------- ----------- --------- ----------- --------
Total liabilities.......... 2,741 55,148 26,055 83,944 (48,900) 35,044
------- --------- ----------- --------- ----------- --------
COMMITMENTS AND CONTINGENCIES........
STOCKHOLDERS' EQUITY:
Common stock.................... 22 6,696 (6,696)(f) 73 41(i) 114
51(g)
Additional paid-in capital...... 2,055 102 (4,484)(a) 802 49,762(i) 40,962
(612)(b) (424)(m)
(2,904)(c) (9,178)(l)
6,696(f)
(51)(g)
Retained earnings............... (2,076) 16,537 (23,810)(d) (11,254 ) 9,178(l) (2,076)
(1,905)(e)
Treasury stock.................. -- (424) (424 ) 424(m) --
------- --------- ----------- --------- ----------- --------
Total stockholders'
equity................... 1 22,911 (33,715) (10,803 ) 49,803 39,000
------- --------- ----------- --------- ----------- --------
Total liabilities and
stockholders' equity..... $ 2,742 $78,059 $ (7,660) $ 73,141 $ 903 $ 74,044
======= ========= =========== ========= =========== ========
</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.
(h) Records the additional cash to be borrowed from a bank.
(i) Records the proceeds from the issuance of 4,140,000 shares of Coach
USA Common Stock, net of estimated offering costs (based on the
offering price of $14 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> <C>
REVENUES............................. $ -- $113,489 $ $ 113,489
OPERATING EXPENSES................... -- 89,669 89,669
--------- --------- ----------- ---------
Gross profit............... -- 23,820 23,820
GENERAL AND ADMINISTRATIVE
EXPENSES........................... -- 14,213 (3,207)(a) 11,006
--------- --------- ----------- ---------
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(c) 4,231
--------- --------- ----------- ---------
NET INCOME........................... $ -- $ 6,144 $ (95) $ 6,049
========= ========= =========== =========
PRO FORMA NET EARNINGS PER COMMON
SHARE.............................. $ 0.67
=========
WEIGHTED AVERAGE SHARES
OUTSTANDING........................ 9,084(d)
=========
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------------------
COMBINED
FOUNDING PRO FORMA
COACH USA COMPANIES ADJUSTMENTS PRO FORMA
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES............................. $ -- $ 24,221 $ $ 24,221
OPERATING EXPENSES................... -- 21,164 21,164
--------- --------- ----------- ---------
Gross profit............... -- 3,057 3,057
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,076 3,490 (595)(a) 2,895
(2,076)(b)
--------- --------- ----------- ---------
Operating income........... (2,076 ) (433 ) 2,671 162
OTHER (INCOME) EXPENSE:
Interest expense................ -- 786 786
Interest income................. -- (67 ) (67)
Other, net...................... -- (120 ) (120)
--------- --------- ----------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.... (2,076 ) (1,032 ) 2,671 (437)
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. -- (386 ) 231(c) (155)
--------- --------- ----------- ---------
NET INCOME (LOSS).................... $ (2,076 ) $ (646 ) $ 2,440 $ (282)
========= ========= =========== =========
PRO FORMA NET EARNINGS PER COMMON
SHARE.............................. $ (.03)
=========
WEIGHTED AVERAGE SHARES
OUTSTANDING........................ 9,084(d)
=========
</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 the Founding
Companies have agreed to receive subsequent to the Merger.
(b) Adjusts for a non-recurring, non-cash charge of $2,076,000 recorded by
Coach USA.
(c) 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.
(d) Includes: (i) 2,165,724 shares issued by Coach USA prior to the
Offering; (ii) 5,099,687 shares issued to the stockholders of the
Founding Companies in connection with the Mergers; (iii) 1,700,714 of
the 4,140,000 shares issued in connection with the Offering to pay the
cash portion of the consideration for the Founding Companies; and (iv)
118,142 of the 4,140,000 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 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
<PAGE>
THE COMBINED FOUNDING COMPANIES
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
DECEMBER 31
---------------------- MARCH 31
1994 1995 1996
---------- ---------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 5,254 $ 4,092 $ 2,796
Accounts receivable, less
allowance of $320, $301 and
$301......................... 5,216 5,243 4,447
Notes receivable from
stockholders................. 880 881 638
Inventories..................... 2,288 2,434 2,492
Investments, including
restricted of $1,696 and
$2,004 and $2,004............ 2,811 3,598 2,750
Prepaid expenses and other
current assets............... 4,264 4,140 3,569
---------- ---------- ------------
Total current assets...... 20,713 20,388 16,692
PROPERTY AND EQUIPMENT, net.......... 52,893 58,089 60,538
OTHER ASSETS......................... 1,235 886 829
---------- ---------- ------------
Total assets.............. $ 74,841 $ 79,363 $ 78,059
========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations.................. $ 6,685 $ 8,001 $ 8,171
Accounts payable and accrued
liabilities.................. 16,724 17,112 17,136
Notes payable to stockholders... 703 486 415
---------- ---------- ------------
Total current
liabilities............. 24,112 25,599 25,722
---------- ---------- ------------
LONG-TERM OBLIGATIONS, net of current
maturities......................... 25,198 25,113 25,459
DEFERRED INCOME TAXES................ 3,890 3,938 3,967
---------- ---------- ------------
Total liabilities......... 53,200 54,650 55,148
---------- ---------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock.................... 6,696 6,696 6,696
Additional paid-in capital...... 102 102 102
Retained earnings............... 15,267 18,339 16,537
Treasury stock, at cost......... (424) (424) (424)
---------- ---------- ------------
Total stockholders'
equity.................. 21,641 24,713 22,911
---------- ---------- ------------
Total liabilities and
stockholders' equity.... $ 74,841 $ 79,363 $ 78,059
========== ========== ============
The accompanying notes are an integral part of these combined financial
statements.
F-9
<PAGE>
THE COMBINED FOUNDING COMPANIES
COMBINED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------------- ----------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 103,072 $ 106,754 $ 113,489 $ 23,015 $ 24,221
OPERATING EXPENSES................... 85,367 88,297 89,669 20,130 21,164
----------- ----------- ----------- ---------- ----------
Gross profit.............. 17,705 18,457 23,820 2,885 3,057
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 12,490 12,471 14,213 3,287 3,490
----------- ----------- ----------- ---------- ----------
Operating income (loss)... 5,215 5,986 9,607 (402) (433)
OTHER (INCOME) EXPENSE:
Interest expense................ 2,641 2,724 3,210 798 786
Interest income................. (227) (206) (332) (40) (67)
Other, net...................... (313) (450) (344) (78) (120)
----------- ----------- ----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES.... 3,114 3,918 7,073 (1,082) (1,032)
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. 766 618 929 (388) (386)
----------- ----------- ----------- ---------- ----------
NET INCOME (LOSS).................... $ 2,348 $ 3,300 $ 6,144 $ (694) $ (646)
=========== =========== =========== ========== ==========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ 2,348 $ 3,300 $ 6,144 $ (694) $ (646)
Pro forma compensation
differential................. 1,836 2,058 3,207 509 595
Less: Pro forma provision for
income taxes................. 1,311 1,790 3,302 155 231
----------- ----------- ----------- ---------- ----------
PRO FORMA NET INCOME (LOSS).......... $ 2,873 $ 3,568 $ 6,049 $ (340) $ (282)
=========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-10
<PAGE>
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
Dividends paid during conforming
period (unaudited)........... -- -- -- (129) (129)
Net loss during conforming
period (unaudited)........... -- -- -- (593) (593)
Dividends paid (unaudited)...... -- -- -- (434) (434)
Net loss (unaudited)............ -- -- -- (646) (646)
------ ---------- -------- -------- -------------
BALANCE AT MARCH 31, 1996
(unaudited)........................ $6,696 $ 102 $ (424) $ 16,537 $22,911
====== ========== ======== ======== =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-11
<PAGE>
THE COMBINED FOUNDING COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31 ENDED MARCH 31
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............... $ 2,348 $ 3,300 $ 6,144 $ (694) $ (646)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities --
Depreciation................. 4,640 4,772 4,992 1,151 1,341
Gain on sale of assets....... (89) (430) (134) -- (77)
Gain on sale of
investments............... (33) (17) (153) (49) (18)
Deferred tax provision....... 502 169 512 (429) (370)
Changes in operating assets
and liabilities --
Accounts receivable,
net..................... (423) (1,270) (27) 65 (597)
Inventories............... (354) (23) (146) 24 (93)
Investments............... (124) (16) (326) (229) 849
Prepaid expenses and other
current assets.......... (1,288) 27 (19) 791 991
Accounts payable and
accrued liabilities..... 1,261 2,381 185 668 766
Other..................... 191 54 13 201 79
---------- ---------- ---------- ---------- ----------
Net cash provided by
operating
activities........ 6,631 8,947 11,041 1,499 2,225
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment.................... (3,419) (6,817) (13,404) (2,772) (3,851)
Proceeds from sales of property
and equipment................ 353 2,243 3,350 125 383
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) (2,647) (3,468)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations.................. (8,302) (9,080) (12,046) (3,917) (2,124)
Proceeds from issuance of
long-term obligations........ 4,487 7,456 13,277 5,092 2,974
Dividends paid.................. (816) (626) (3,072) (200) (434)
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in)
financing
activities........ (4,631) (2,250) (1,841) 975 416
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH...... (1,066) 1,921 (1,162) (173) (827)
CASH AND CASH EQUIVALENTS, beginning
of year............................ 4,399 3,333 5,254 4,963 3,623
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of
year............................... $ 3,333 $ 5,254 $ 4,092 $ 4,790 $ 2,796
========== ========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......... $ 2,546 $ 2,815 $ 2,855 $ 762 $ 798
Cash paid for income taxes...... 330 316 563 8 37
</TABLE>
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 merged 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 have been 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 merged 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.
INTERIM FINANCIAL INFORMATION
The unaudited combined financial statements for the three months ended
March 31, 1995 and 1996 have been prepared by subtracting the results of
operations and cash flows for the two months and three months ended December 31,
1994 and 1995 from the results of operations and cash flows for the five months
and six months ended March 31, 1995 and 1996 for Gray Line SF and Arrow,
respectively. Gray Line SF's revenues were $3,579,000 and $3,878,000 and it
incurred a net loss of $(295,000) and $(361,000) in the two months ended
December 31, 1994 and 1995. Arrow's revenues were $2,425,000 and $2,211,000 and
it incurred a net income (loss) of $7,000 and $(232,000) for the three months
ended December 31, 1994 and 1995.
The interim combined financial statements as of March 31, 1996, and for the
three months ended March 31, 1995 and 1996, are unaudited, and certain
information and footnote disclosures,
F-13
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 combined 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 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 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.
F-14
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.
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.
F-15
4. LONG-TERM OBLIGATIONS:
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1994 1995
------- ------
(IN THOUSANDS)
Suburban --
<S> <C> <C>
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
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
F-16
DECEMBER 31
----------------
1994 1995
------- ------
(IN THOUSANDS)
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
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
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
======== ========
</TABLE>
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
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 has terminated with the
effective date of the Mergers.
F-19
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
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, Academy
Express, Inc., formerly known as 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. Although the court
initially ruled against Suburban on its request for injunctive relief, the court
ordered an evidentiary hearing to explore certain factual issues. The
evidentiary hearing took place in late May and early June 1996. The court is
currently deciding whether to vacate its prior denial of injunctive relief.
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
F-22
the Founding Companies to the various plans were $170,000, $166,000 and $167,000
in 1993, 1994 and 1995, respectively.
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
F-23
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. 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
========== ==========
F-24
THE COMBINED FOUNDING COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
9. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND NOTES RECEIVABLE:
The activity in the allowance for doubtful accounts is as follows:
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
OF PERIOD EXPENSES WRITE-OFFS PERIOD
---------- ---------- ---------- ---------
(IN THOUSANDS)
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
===== ===== ===== =====
10. STOCKHOLDERS' EQUITY:
The common stock authorized, issued and outstanding of the Founding
Companies consists of the following:
DECEMBER 31
---------------------
1994 1995
------ ------
(IN THOUSANDS)
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
====== ======
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
F-25
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.
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 have dividended
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 approximately $4,180,000. In addition, the Founding Companies
made distributions of cash and investments of approximately $4,484,000 prior to
the Mergers, which represented the S Corporation Accumulated Adjustment Accounts
of certain of the Founding Companies. Had these transactions been recorded at
March 31, 1996, the effect on the accompanying balance sheet would be a decrease
in assets of approximately $8,664,000, liabilities of $660,000 and stockholders'
equity of $8,004,000.
Concurrent with the Mergers, certain of the Founding Companies entered 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
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31 MARCH 31
1995 1996
------- -------
(UNAUDITED)
ASSETS
CASH AND CASH EQUIVALENTS .................... $ 1 $ 1
DEFERRED OFFERING COSTS ...................... 188 2,732
PROPERTY AND EQUIPMENT, net .................. 9 9
------- -------
Total assets ...................... $ 198 $ 2,742
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCRUED LIABILITIES AND AMOUNTS DUE
TO A STOCKHOLDER ........................... $ 197 $ 2,741
------- -------
Total liabilities ................. 197 2,741
------- -------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par,
30,000,000 shares authorized,
1,473,724 and 2,165,724
shares issued ........................ 15 22
Additional paid-in capital .............. (14) 2,055
Retained earnings (deficit) ............. -- (2,076)
------- -------
Total stockholders'
equity .......................... 1 1
------- -------
Total liabilities and
stockholders' equity ............ $ 198 $ 2,742
======= =======
The accompanying notes are an integral part of these financial statements.
F-28
COACH USA, INC.
STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31
----------------------
1995 1996
---------- ----------
(UNAUDITED)
GENERAL AND ADMINISTRATIVE
EXPENSES........................... $ -- $ 2,076
---------- ----------
Operating loss............ -- (2,076)
---------- ----------
LOSS BEFORE INCOME TAXES............. -- (2,076)
---------- ----------
NET LOSS............................. $ -- $ (2,076)
========== ==========
PRO FORMA DATA (Unaudited):
Historical net loss............. $ -- $ (2,076)
Pro forma non-recurring
charge....................... -- 2,076
---------- ----------
PRO FORMA NET INCOME................. $ -- $ --
========== ==========
The accompanying notes are an integral part of these financial statements.
F-29
COACH USA, INC.
NOTES TO FINANCIAL STATEMENTS
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 acquired local and
regional motorcoach companies, completed an initial public offering (IPO) of its
common stock and, subsequent to the IPO, intends to 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 a stockholder on behalf of the Company.
Accordingly, statements of operations, changes in stockholders' equity and cash
flows would not provide meaningful information and have been omitted. There is
no assurance that Coach USA will be able to generate future operating revenues.
Funding for the deferred offering costs was provided by a stockholder.
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 4.
3. INTERIM FINANCIAL INFORMATION
The interim financial statements as of March 31, 1996, and for the three
months ended March 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 and results of
operations 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.
4. 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. The sale of such shares
resulted in 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 Founding Companies were combined.
Coach USA and separate wholly-owned subsidiaries signed definitive
agreements to acquire by merger six companies (Founding Companies) effective
with the IPO. The companies acquired were 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 paid by Coach USA to acquire the
Founding Companies was
F-30
approximately $95.2 million (unaudited) (based upon an offering price of $14 per
share (unaudited)) consisting of a combination of cash and common stock.
5. 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 a stockholder were 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 became a director of the Company upon consummation of the Offering, is a
principal of Exel.
On May 17, 1996 the Company completed the Offering, which involved the
public sale of 4,140,000 shares of Common Stock at a price of $14.00 per share.
The proceeds from the transaction, net of underwriting discounts and commissions
and after deducting estimated expenses of the Offering, were approximately $49.8
million. Of this amount, $23.8 million was used to pay the cash portions of the
purchase price for the Founding Companies. In addition, approximately $22.3
million of the net proceeds were used to repay indebtedness assumed by the
Company in the Mergers. The approximately $3.7 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 has established an interim $30 million credit facility with
NationsBank of Texas, N.A. ("NationsBank"). The credit facility is available for
acquisitions, for working capital, to finance equipment replacements and
additions and to refinance indebtedness of the Founding Companies not repaid out
of the net proceeds of the Offering. This credit facility provides for a
revolving credit facility with a term of one year and bears interest at LIBOR
plus 100 basis points, with the interest rate escalating as the Company's level
of funded debt increases relative to its cash flow. NationsBank is also acting
as the agent to establish a syndicate of financial institutions to expand and
extend this facility to a $70 million, three year revolving credit facility. At
March 31, 1996, the combined Founding Companies had total debt of $33.6 million.
Approximately $21.9 million of these obligations were repaid from the net
proceeds of the Offering, with the majority of the remaining balance refinanced
with the credit facility discussed above.
F-31
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.
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 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-32
<PAGE>
SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS
DECEMBER 31 ENDED
---------------------- MARCH 31
1994 1995 1996
---------- ---------- -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 2,226 $ 1,861 $ 1,004
Accounts receivable, less
allowance of $50............. 1,372 952 1,241
Notes receivable from
stockholders................. 655 652 638
Inventories..................... 720 796 810
Investments -- restricted....... 362 365 365
Prepaid expenses and other
current assets............... 919 577 613
---------- ---------- -------------
Total current assets...... 6,254 5,203 4,671
PROPERTY AND EQUIPMENT, net.......... 8,759 10,826 11,669
OTHER ASSETS......................... 83 62 66
---------- ---------- -------------
Total assets.............. $ 15,096 $ 16,091 $16,406
========== ========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations.................. $ 914 $ 1,217 $ 1,198
Accounts payable and accrued
liabilities.................. 4,354 4,067 4,701
---------- ---------- -------------
Total current
liabilities............... 5,268 5,284 5,899
LONG-TERM OBLIGATIONS, net of current
maturities......................... 2,944 3,850 3,990
DEFERRED INCOME TAXES................ 2,084 2,055 2,063
---------- ---------- -------------
Total liabilities......... 10,296 11,189 11,952
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 13,250
shares authorized,
549 shares issued............ 73 73 73
Retained earnings............... 4,727 4,829 4,381
---------- ---------- -------------
Total stockholders'
equity.................. 4,800 4,902 4,454
---------- ---------- -------------
Total liabilities and
stockholders' equity.... $ 15,096 $ 16,091 $16,406
========== ========== =============
The accompanying notes are an integral part of these combined financial
statements.
F-33
<PAGE>
SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
COMBINED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------- --------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 32,274 $ 30,427 $ 29,752 $ 6,357 $ 6,383
OPERATING EXPENSES................... 28,903 27,526 25,322 5,838 6,195
---------- ---------- ---------- --------- ---------
Gross profit.............. 3,371 2,901 4,430 519 188
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,417 2,283 2,563 697 678
---------- ---------- ---------- --------- ---------
Operating income.......... 954 618 1,867 (178) (490)
OTHER (INCOME) EXPENSE:
Interest expense................ 227 282 432 83 110
Interest income................. (33) (39) (114) (34)
Other, net...................... (19) (96) (105) -- (16)
---------- ---------- ---------- --------- ---------
INCOME BEFORE INCOME TAXES........... 779 471 1,654 (227) (584)
PROVISION FOR INCOME TAXES........... 259 128 423 (58) (136)
---------- ---------- ---------- --------- ---------
NET INCOME........................... $ 520 $ 343 $ 1,231 $ (169) $ (448)
========== ========== ========== ========= =========
PRO FORMA DATA (Unaudited):
Historical net income........... $ 520 $ 343 $ 1,231 (169) (448)
Pro forma compensation
differential................. 569 597 902 143 139
Less: Pro forma provision for
income taxes................. 294 282 621 24 (25)
---------- ---------- ---------- --------- ---------
PRO FORMA NET INCOME................. $ 795 $ 658 $ 1,512 $ (50) $ (284)
========== ========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-34
<PAGE>
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
------ ------ -------- -------------
Net loss (unaudited)........ -- -- (448) (448)
BALANCE AT MARCH 31, 1996
(unaudited).................... 549 $ 73 $ 4,381 $ 4,454
====== ====== ======== =============
The accompanying notes are an integral part of these combined financial
statements.
F-35
<PAGE>
SUBURBAN TRANSIT CORP. AND RELATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............... $ 520 $ 343 $ 1,231 $ (169) $ (448)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities --
Depreciation.............. 848 893 878 219 245
Gain on sale of assets.... -- (96) (105)
Deferred tax provision.... 157 -- 303 (64) (128)
Changes in operating
assets and
liabilities --
Accounts receivable,
net..................... (13) (387) 420 197 (289)
Inventories............. (75) (77) (76) 15 (14)
Prepaid expenses and
other current
assets............... (410) 301 36 139 100
Accounts payable and
accrued liabilities.. 354 349 (291) 367 634
Other................... 21 20 2 (36) 10
---------- ---------- ---------- ---------- ----------
Net cash provided
by operating
activities..... 1,402 1,346 2,398 668 110
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment.................... (1,074) (1,748) (3,199) (1,726) (1,088)
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) (1,726) (1,088)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations.................. (1,196) (1,819) (3,037) (2,890) (841)
Proceeds from issuance of
long-term obligations........ 1,390 1,670 4,246 3,418 962
Dividends paid.................. (455) (305) (1,129) -- --
---------- ---------- ---------- ---------- ----------
Net cash provided
by (used in)
financing
activities..... (261) (454) 80 528 121
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH...... 67 (233) (365) (530) (857)
CASH AND CASH EQUIVALENTS, beginning
of year............................ 2,392 2,459 2,226 2,226 1,861
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of
year............................... $ 2,459 $ 2,226 $ 1,861 $ 1,696 $ 1,004
========== ========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......... $ 201 $ 307 $ 232 $ 81 $ 108
Cash paid for income taxes...... 58 160 114 -- --
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-36
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 entered into a definitive agreement with
Coach USA, Inc. (Coach USA), pursuant to which the Company merged with a
subsidiary of Coach USA (the Merger). All outstanding shares of the Company's
common stock were 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.
INTERIM FINANCIAL INFORMATION
The interim combined financial statements as of March 31, 1996, and for the
three months ended March 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 combined
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 $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.
F-37
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 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.
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
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.
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-38
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
========== ==========
4. LONG-TERM OBLIGATIONS:
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 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
========== ==========
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
=========
F-39
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.
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
========= ========= =========
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.
F-40
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
========== ==========
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.
F-41
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
==========
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, Academy
Express, Inc., formerly known as 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 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, 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. Although the
court initially ruled against the Company on its request for injunctive relief,
the court ordered an evidentiary hearing to explore certain factual issues. The
evidentiary hearing took place in late May and early June 1996. The Court is
currently deciding whether to vacate its prior denial of injunctive relief.
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
F-42
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.
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-43
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 agreed to reductions in salary and benefits in connection with the Merger
and has entered 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 dividended certain assets to the
stockholders consisting of land and buildings, with a total carrying value of
approximately $57,000. Had these transactions been recorded at March 31, 1996,
the effect on the accompanying balance sheet would be a decrease in assets of
approximately $57,000 and stockholders' equity of $57,000.
Concurrent with the Merger, the Company entered into agreements with the
stockholders to lease land and buildings used in the Company's operations for a
negotiated amount and term.
F-44
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.
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 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-45
<PAGE>
GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
OCTOBER 31
---------------------- MARCH 31
1994 1995 1996
---------- ---------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 261 $ 401 $ 172
Accounts receivable, less
allowance of $150............ 2,055 2,367 1,641
Notes receivable from
stockholder.................. 225 229 --
Inventories..................... 422 474 459
Investments -- restricted....... 506 759 759
Prepaid expenses and other
current assets............... 1,187 1,001 997
---------- ---------- ----------
Total current assets...... 4,656 5,231 4,028
PROPERTY AND EQUIPMENT, net.......... 8,282 7,668 7,416
OTHER ASSETS......................... 557 365 302
---------- ---------- ----------
Total assets.............. $ 13,495 $ 13,264 $ 11,746
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations.................. $ 1,140 $ 1,358 $ 1,386
Accounts payable and accrued
liabilities.................. 2,355 2,260 1,716
Note payable to stockholder..... 256 -- --
---------- ---------- ----------
Total current
liabilities............... 3,751 3,618 3,102
LONG-TERM OBLIGATIONS, net of current
maturities......................... 4,504 3,281 2,926
DEFERRED INCOME TAXES................ 1,132 1,183 1,216
---------- ---------- ----------
Total liabilities......... 9,387 8,082 7,244
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) (2,027)
---------- ---------- ----------
Total stockholders'
equity.................. 4,108 5,182 4,502
---------- ---------- ----------
Total liabilities and
stockholders' equity.... $ 13,495 $ 13,264 $ 11,746
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-46
<PAGE>
GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FIVE MONTHS ENDED
YEAR ENDED OCTOBER 31 MARCH 31
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 22,122 $ 24,487 $ 29,235 $ 8,861 $ 9,778
OPERATING EXPENSES................... 16,590 18,990 22,627 7,780 8,548
---------- ---------- ---------- ---------- ----------
Gross profit.............. 5,532 5,497 6,608 1,081 1,230
GENERAL AND ADMINISTRATIVE
EXPENSES............................. 4,129 3,794 4,722 1,936 2,196
---------- ---------- ---------- ---------- ----------
Operating income (loss)... 1,403 1,703 1,886 (855) (966)
OTHER (INCOME) EXPENSE:
Interest expense................ 404 441 583 245 174
Interest income................. (43) (39) (24) (4) (9)
Other, net...................... (133) (79) (129) (21) --
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES.... 1,175 1,380 1,456 (1,075) (1,131)
PROVISION (BENEFIT) FOR INCOME
TAXES................................ 503 456 382 (429) (451)
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS).................... $ 672 $ 924 $ 1,074 $ (646) $ (680)
========== ========== ========== ========== ==========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ 672 $ 924 $ 1,074 $ (646) $ (680)
Pro forma compensation
differential.................... 107 119 373 147 277
Less: Pro forma provision
(benefit) for income taxes... 44 176 362 51 104
---------- ---------- ---------- ---------- ----------
PRO FORMA NET INCOME (LOSS).......... $ 735 $ 867 $ 1,085 $ (550) $ (507)
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-47
<PAGE>
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)............ -- -- (680) (680)
------------ ------ -------- -------------
BALANCE AT MARCH 31, 1996
(unaudited)........................ 4,358,879 $6,529 $ (2,027) $ 4,502
============ ====== ======== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-48
<PAGE>
GROSVENOR BUS LINES, INC. AND SUBSIDIARIES
(OPERATING AS GRAY LINE OF SAN FRANCISCO)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FIVE MONTHS
YEAR ENDED OCTOBER 31 ENDED MARCH 31
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 672 $ 924 $ 1,074 $ (646) $ (680)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Depreciation.......................................... 833 806 878 349 386
Gain on sale of assets................................ (3) (65) (80) -- --
Deferred tax provision (benefit)...................... 362 346 295 (390) (418)
Changes in operating assets and liabilities --
Accounts receivable, net............................ (401) (486) (312) 625 726
Inventories......................................... (28) 123 (52) 24 15
Prepaid expenses and other current assets........... 90 (421) 225 749 684
Accounts payable and accrued liabilities............ (151) 480 (351) (563) (544)
Other............................................... 64 19 (95) 26 63
--------- --------- --------- --------- ---------
Net cash provided by operating activities..... 1,438 1,726 1,582 174 232
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment......................... (377) (1,617) (355) (161) (134)
Proceeds from sales of property and
equipment................................................ -- 87 171 -- --
Purchases of investments -- restricted...................... -- -- (253) -- --
Proceeds from sales of investments -- restricted............ -- 69 -- -- --
--------- --------- --------- --------- ---------
Net cash used in investing activities......... (377) (1,461) (437) (161) (134)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations.............................................. (1,310) (1,131) (3,812) (3,029) (327)
Proceeds from issuance of long-term
obligations.............................................. 137 862 2,807 2,807 --
--------- --------- --------- --------- ---------
Net cash used in financing activities......... (1,173) (269) (1,005) (222) (327)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH.................................. (112) (4) 140 (209) (229)
CASH AND CASH EQUIVALENTS, beginning of year..................... 377 265 261 261 401
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year........................... $ 265 $ 261 $ 401 $ 52 $ 172
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest...................................... $ 379 $ 413 $ 524 $ 200 $ 196
Cash paid for income taxes.................................. 142 124 71 8 23
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-49
<PAGE>
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.
The Company and its stockholders entered into a definitive agreement with
Coach USA, Inc. (Coach USA), pursuant to which the Company merged with a
subsidiary of Coach USA (the Merger). All outstanding shares of the Company's
common stock were 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 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 March 31, 1996, and for
the five months ended March 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.
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.
F-50
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
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
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
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.
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:
<TABLE>
<CAPTION>
ESTIMATED OCTOBER 31
USEFUL LIVES ----------------------
(YEARS) 1994 1995
------------ ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
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
========== ==========
</TABLE>
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-51
<PAGE>
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)
<S> <C> <C>
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
------- -------
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-52
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
========= ========= =========
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.
F-53
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-54
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-55
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-56
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.
General and administrative expenses for the periods presented reflect
compensation and related benefits that owners received during the periods. One
owner agreed to reductions in salary and benefits in connection with the Merger
and entered 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 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-57
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.
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 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-58
<PAGE>
LEISURE TIME TOURS
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31
---------------------- MARCH 31
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 2,222 $ 1,315 $ 1,395
Accounts receivable, less
allowance of $62, $37 and
$37.......................... 462 579 595
Inventories..................... 237 234 234
Investments, including
restricted of $300 and
$300......................... 606 885 794
Prepaid expenses and other
current assets............... 973 1,055 835
---------- ---------- -----------
Total current assets...... 4,500 4,068 3,853
PROPERTY AND EQUIPMENT, net.......... 11,182 13,479 13,570
OTHER ASSETS......................... 42 90 105
---------- ---------- -----------
Total assets.............. $ 15,724 $ 17,637 $17,528
========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations.................. $ 1,009 $ 1,334 $ 1,356
Accounts payable and accrued
liabilities.................. 5,095 5,271 5,524
---------- ---------- -----------
Total current
liabilities............... 6,104 6,605 6,880
LONG-TERM OBLIGATIONS, net of current
maturities......................... 2,289 2,999 2,654
DEFERRED INCOME TAXES................ 554 558 546
---------- ---------- -----------
Total liabilities......... 8,947 10,162 10,080
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $100 par, 100
shares authorized, 16 2/3
shares issued................ 2 2 2
Retained earnings............... 6,775 7,473 7,446
---------- ---------- -----------
Total stockholders'
equity.................. 6,777 7,475 7,448
---------- ---------- -----------
Total liabilities and
stockholders' equity.... $ 15,724 $ 17,637 $17,528
========== ========== ===========
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE>
LEISURE TIME TOURS
STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------- --------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 17,534 $ 17,694 $ 18,992 $ 3,784 $ 4,368
OPERATING EXPENSES................... 15,497 14,139 14,577 3,318 3,616
---------- ---------- ---------- --------- ---------
Gross profit.............. 2,037 3,555 4,415 466 752
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,128 1,934 1,895 452 485
---------- ---------- ---------- --------- ---------
Operating income (loss)... (91) 1,621 2,520 14 267
OTHER (INCOME) EXPENSE:
Interest expense................ 380 317 339 70 86
Interest income................. (41) (71) (104) (2) (45)
Other, net...................... (26) (62) (103) (71) (20)
---------- ---------- ---------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.... (404) 1,437 2,388 17 246
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. (32) 139 225 2 23
---------- ---------- ---------- --------- ---------
NET INCOME (LOSS).................... $ (372) $ 1,298 $ 2,163 $ 15 $ 223
========== ========== ========== ========= =========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ (372) $ 1,298 $ 2,163 $ 15 $ 223
Pro forma compensation
differential................. 203 211 309 76 86
Pro forma provision (benefit)
for income taxes............. (42) 546 895 37 115
---------- ---------- ---------- --------- ---------
PRO FORMA NET INCOME (LOSS).......... $ (127) $ 963 $ 1,577 $ 54 $ 194
========== ========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
LEISURE TIME TOURS
STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ --------- -------------
<S> <C> <C> <C> <C>
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
------ ------ --------- -------------
Dividends paid (unaudited)...... -- -- (250) (250)
Net income (unaudited).......... -- -- 223 223
------ ------ --------- -------------
BALANCE AT MARCH 31, 1996
(unaudited)........................ 16 2/3 $ 2 $ 7,446 $ 7,448
====== ====== ========= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
LEISURE TIME TOURS
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31 ENDED MARCH 31
--------------------------------- --------------------
1993 1994 1995 1995 1996
---------- --------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............... $ (372) $ 1,298 $ 2,163 $ 15 $ 223
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities --
Depreciation.............. 1,451 1,164 1,053 242 230
(Gain) loss on sale of
assets.................. 60 (62) 44
Net gain on sale of
investments............. (33) (17) (153) (49) (18)
Deferred tax provision
(benefit)............... (49) (56) 60 (41) 11
Changes in operating
assets and
liabilities --
Accounts receivable,
net.................. 186 (171) (117) 74 (16)
Inventories............. 61 99 3 -- --
Investments............. (124) (132) (126) (214) 109
Prepaid expenses and
other current
assets............... (35) (146) (156) (90) 197
Accounts payable and
accrued
liabilities.......... 376 643 194 457 253
Other................... (12) 74 (48) (6) (15)
---------- --------- ---------- --------- ---------
Net cash provided
by operating
activities..... 1,509 2,694 2,917 388 974
---------- --------- ---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment.................... (911) (94) (5,625) (20) (542)
Proceeds from sales of property
and equipment................ 170 99 2,231 -- 221
---------- --------- ---------- --------- ---------
Net cash provided
by (used in)
investing
activities..... (741) 5 (3,394) (20) (321)
---------- --------- ---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations.................. (1,759) (990) (1,065) (236) (323)
Proceeds from issuance of
long-term obligations........ 422 500 2,100 744 --
Dividends paid.................. (246) (175) (1,465) (190) (250)
---------- --------- ---------- --------- ---------
Net cash provided
by (used in)
financing
activities..... (1,583) (665) (430) 318 (573)
---------- --------- ---------- --------- ---------
NET INCREASE (DECREASE) IN CASH...... (815) 2,034 (907) 686 80
CASH AND CASH EQUIVALENTS, beginning
of year............................ 1,003 188 2,222 2,222 1,315
---------- --------- ---------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
year............................... $ 188 $ 2,222 $ 1,315 $ 2,908 $ 1,395
========== ========= ========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......... $ 372 $ 310 $ 318 65 86
Cash paid for income taxes...... 100 1 364 -- 14
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE>
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 and its stockholders entered into a definitive agreement with
Coach USA, Inc. (Coach USA), pursuant to which the Company merged with a
subsidiary of Coach USA (the Merger). All outstanding shares of the Company's
common stock were 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.
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:
INTERIM FINANCIAL INFORMATION
The interim financial statements as of March 31, 1996, and for the three
months ended March 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
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.
F-63
LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 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
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.
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.
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.
F-64
<PAGE>
LEISURE TIME TOURS
NOTES TO 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 $ 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
========== ==========
4. LONG-TERM OBLIGATIONS:
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
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
------- -------
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.
F-65
LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 terminated 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
========= ========= =========
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.......... $ 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
========= =========
F-66
LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 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
F-67
LEISURE TIME TOURS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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. 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
========= =========
F-68
LEISURE TIME TOURS
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............... $ 997 $ 887
Accrued compensation and benefits.... 273 268
Accrued insurance claims payable..... 3,159 3,624
Other................................ 666 492
--------- ---------
$ 5,095 $ 5,271
========= =========
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 agreed to reductions in salary and benefits in connection with the Merger
and entered 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 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.
In connection with the Merger, the Company dividended certain assets to the
stockholders consisting of land, buildings and automobiles with a total carrying
value of approximately $2,064,000. In addition, the Company made 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 March 31, 1996, the effect on the accompanying
balance sheet would be a decrease in assets of approximately $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 entered into agreements with the
stockholders to lease land and buildings used in the Company's operations for a
negotiated amount and term.
F-69
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.
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 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-70
<PAGE>
COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31
-------------------- MARCH 31
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 269 $ 209 $ 196
Accounts receivable, less
allowance of $10............. 183 183 143
Inventories..................... 257 307 317
Investments, including
restricted of $528, $580
and $580..................... 1,059 1,046 535
Prepaid expenses and other
current assets............... 766 1,022 753
--------- --------- -----------
Total current assets...... 2,534 2,767 1,944
PROPERTY AND EQUIPMENT, net.......... 2,590 3,241 3,065
OTHER ASSETS......................... 182 137 120
--------- --------- -----------
Total assets.............. $ 5,306 $ 6,145 $ 5,129
========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations.................. $ 315 $ 497 $ 463
Accounts payable and accrued
liabilities.................. 2,485 2,953 2,070
Notes payable to stockholder.... 132 171 100
--------- --------- -----------
Total current
liabilities............... 2,932 3,621 2,633
LONG-TERM OBLIGATIONS, net of current
maturities...................... 784 1,191 1,319
--------- --------- -----------
Total liabilities......... 3,716 4,812 3,952
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 7,500
shares authorized, 3,600
shares issued................ 75 75 75
Additional paid-in capital...... 102 102 102
Retained earnings............... 1,837 1,580 1,424
Treasury stock, at cost......... (424) (424) (424)
--------- --------- -----------
Total stockholders'
equity.................. 1,590 1,333 1,177
--------- --------- -----------
Total liabilities and
stockholders' equity.... $ 5,306 $ 6,145 $ 5,129
========= ========= ===========
The accompanying notes are an integral part of these combined financial
statements.
F-71
<PAGE>
COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
COMBINED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------- --------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 13,179 $ 14,106 $ 13,807 $ 2,840 $ 2,851
OPERATING EXPENSES................... 11,057 12,228 11,680 2,559 2,582
---------- ---------- ---------- --------- ---------
Gross profit.............. 2,122 1,878 2,127 281 269
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 1,760 1,999 2,193 428 424
---------- ---------- ---------- --------- ---------
Operating income (loss)... 362 (121) (66) (147) (155)
OTHER (INCOME) EXPENSE:
Interest expense................ 264 228 262 75 57
Interest income................. (34) (38) (49) -- (13)
Other, net...................... 28 49 (40) -- (78)
---------- ---------- ---------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.... 104 (360) (239) (222) (121)
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. 1 (98) (177) (89) (48)
---------- ---------- ---------- --------- ---------
NET INCOME (LOSS).................... $ 103 $ (262) $ (62) (133) (73)
========== ========== ========== ========= =========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ 103 $ (262) $ (62) $ (133) $ (73)
Pro forma compensation
differential................. 818 1,015 1,449 159 160
Less: Pro forma provision for
income taxes................. 383 338 669 63 64
---------- ---------- ---------- --------- ---------
PRO FORMA NET INCOME................. $ 538 $ 415 $ 718 $ (37) $ 23
========== ========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-72
<PAGE>
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
------ ------ ---------- -------- -------- -------------
Dividends paid (unaudited)...... -- -- -- -- (83) (83)
Net loss (unaudited)............ -- -- -- -- (73) (73)
------ ------ ---------- -------- -------- -------------
BALANCE AT MARCH 31, 1996
(unaudited)........................ 3,600 $ 75 $ 102 $ (424) $1,424 $ 1,117
====== ====== ========== ======== ======== =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-73
<PAGE>
COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
-------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................................... $ 103 $ (262) $ (62) $ (133) $ (73)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Depreciation.................................... 365 349 350 84 91
(Gain) loss on sale of assets................... -- 15 (4) -- (77)
Deferred tax benefit............................ (3) (114) (204) (89) (48)
Changes in operating assets and liabilities --
Accounts receivable, net...................... (36) (25) -- (29) 40
Inventories................................... (41) (48) (50) (12) (10)
Investments................................... -- 132 65 (15) 511
Prepaid expenses and other current assets..... (693) 404 (48) 156 317
Accounts payable and accrued liabilities...... 68 410 507 (537) (883)
Other......................................... 158 74 41 79 17
--------- --------- ---------- --------- ---------
Net cash provided by (used in) operating
activities........................... (79) 935 595 (496) (115)
--------- --------- ---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment................... -- (436) (1,001) (40) --
Proceeds from sales of property and equipment......... -- 10 4 125 162
Purchases of investments -- restricted................ -- (19) (52) -- --
--------- --------- ---------- --------- ---------
Net cash provided by (used in) investing
activities........................... -- (445) (1,049) 85 162
--------- --------- ---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term obligations........... (910) (804) (459) (82) (177)
Proceeds from issuance of long-term obligations....... 700 558 1,048 304 200
Dividends paid........................................ -- (105) (195) -- (83)
--------- --------- ---------- --------- ---------
Net cash provided by (used in) financing
activities........................... (210) (351) 394 222 (60)
--------- --------- ---------- --------- ---------
NET INCREASE (DECREASE) IN CASH............................ (289) 139 (60) (189) (13)
CASH AND CASH EQUIVALENTS, beginning of year............... 419 130 269 269 209
--------- --------- ---------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
year..................................................... $ 130 $ 269 $ 209 $ 80 $ 196
========= ========= ========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................ $ 248 $ 212 $ 294 $ 74 $ 61
Cash paid for income taxes............................ 30 31 14 -- --
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-74
<PAGE>
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 and its stockholders entered into a definitive agreement with
Coach USA, Inc. (Coach USA), pursuant to which the Company merged with a
subsidiary of Coach USA (the Merger). All outstanding shares of the Company's
common stock were 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.
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.
INTERIM FINANCIAL INFORMATION
The interim combined financial statements as of March 31, 1996, and for the
three months ended March 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 combined
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 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 debt securities,
marketable equity securities and certificates of deposit.
F-75
COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
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
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
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
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.
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-76
<PAGE>
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)
<S> <C> <C>
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
------- -------
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.
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.
F-77
COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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
terminated 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.
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)
========= ========= =========
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.......... $ 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)
========= =========
F-78
COMMUNITY BUS LINES, INC. 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................ $ 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.
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
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.
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
F-79
COMMUNITY BUS LINES, INC. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
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:
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 agreed to reductions in salary and benefits in connection with the Merger
and entered 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-80
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 dividended certain assets to the
stockholders, consisting of cash surrender value of life insurance policies and
automobiles, with a total carrying value of approximately $514,000. In addition,
the Company made 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 March 31, 1996, the
effect on the accompanying balance sheet would be a decrease in assets of
approximately $1,169,000, liabilities of $130,000 and stockholders' equity of
$1,039,000.
F-81
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.
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 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-82
<PAGE>
CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31
-------------------- MARCH 31
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 129 $ 20 $ 19
Accounts receivable, less
allowance of $14, $16 and
$16.......................... 77 141 157
Inventories..................... 367 326 326
Prepaid expenses and other
current assets............... 97 27 27
--------- --------- -----------
Total current assets...... 670 514 529
PROPERTY AND EQUIPMENT, net.......... 8,521 8,294 8,680
OTHER ASSETS......................... 46 36 32
--------- --------- -----------
Total assets.............. $ 9,237 $ 8,844 $ 9,241
========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations.................. $ 1,648 $ 1,708 $ 1,691
Accounts payable and accrued
liabilities.................. 1,397 1,223 1,281
Notes payable to stockholders... 315 315 315
--------- --------- -----------
Total current
liabilities............. 3,360 3,246 3,287
LONG-TERM OBLIGATIONS, net of current
maturities......................... 5,653 4,675 5,163
DEFERRED INCOME TAXES................ 120 142 142
--------- --------- -----------
Total liabilities......... 9,133 8,063 8,592
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par, 2,500
shares authorized, 300 shares
issued....................... 16 16 16
Retained earnings............... 88 765 633
--------- --------- -----------
Total stockholders'
equity.................. 104 781 649
--------- --------- -----------
Total liabilities and
stockholders' equity.... $ 9,237 $ 8,844 $ 9,241
========= ========= ===========
The accompanying notes are an integral part of these financial statements.
F-83
<PAGE>
CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
--------------------------------- --------------------
1993 1994 1995 1995 1996
--------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 8,494 $ 10,001 $ 11,053 $ 2,342 $ 2,269
OPERATING EXPENSES................... 6,665 8,457 8,241 1,996 1,971
--------- ---------- ---------- --------- ---------
Gross profit.............. 1,829 1,544 2,812 346 298
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 840 968 1,089 228 250
--------- ---------- ---------- --------- ---------
Operating income.......... 989 576 1,723 118 48
OTHER (INCOME) EXPENSE:
Interest expense................ 640 683 787 206 185
Other, net...................... (14) (42) 141 17 (2)
--------- ---------- ---------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.... 363 (65) 795 (105) (135)
PROVISION (BENEFIT) FOR INCOME
TAXES.............................. 35 (7) 76 (10) (13)
--------- ---------- ---------- --------- ---------
NET INCOME (LOSS).................... $ 328 $ (58) $ 719 $ (95) $ (122)
========= ========== ========== ========= =========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ 328 $ (58) $ 719 $ (95) $ (122)
Pro forma compensation differential.. 79 86 142 35 35
Less: Pro forma provision for
income taxes................. 152 16 324 (20) (30)
--------- ---------- ---------- --------- ---------
PRO FORMA NET INCOME................. $ 255 $ 12 $ 537 $ (40) $ (57)
========= ========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-84
<PAGE>
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
------ ------ --------- -------------
Dividends paid (unaudited). -- -- (10) (10)
Net loss (unaudited)....... -- -- (122) (122)
------ ------ --------- -------------
BALANCE AT MARCH 31, 1996
(unaudited)................... 300 $ 16 $ 633 $ 649
====== ====== ========= =============
The accompanying notes are an integral part of these financial statements.
F-85
<PAGE>
CAPE TRANSIT CORP.
(OPERATING AS ADVENTURE TRAILS)
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............... $ 328 $ (58) $ 719 $ (95) $ (122)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities --
Depreciation.............. 377 634 593 141 156
(Gain) loss on sale of
assets.................. -- (42) 60
Deferred tax provision
(benefit)............... 35 (7) 58 (7) (13)
Changes in operating
assets and
liabilities --
Accounts receivable,
net.................. 52 (8) (64) (74) (16)
Inventories............. (209) (50) 41 32 --
Prepaid expenses and
other current
assets............... (61) 9 60 92 13
Accounts payable and
accrued liabilities.. 447 277 (174) 153 58
Other................... (31) 21 (16) 7 4
---------- ---------- ---------- ---------- ----------
Net cash provided
by operating
activities..... 938 776 1,277 249 80
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment.................... (954) (2,163) (711) (14) (542)
Proceeds from sales of property
and equipment................ -- 1,172 285 -- --
---------- ---------- ----------
Net cash used in
investing
activities..... (954) (991) (426) (14) (542)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations.................. (1,012) (2,954) (1,545) (350) (227)
Proceeds from issuance of
long-term obligations........ 1,085 3,294 627 698
Dividends paid.................. (42) (41) (42) (10) (10)
---------- ---------- ---------- ---------- ----------
Net cash provided
by (used in)
financing
activities..... 31 299 (960) (360) 461
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH...... 15 84 (109) (125) (1)
CASH AND CASH EQUIVALENTS, beginning
of year............................ 30 45 129 129 20
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of
year............................... $ 45 $ 129 $ 20 $ 4 $ 19
========== ========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......... $ 649 $ 799 $ 680 $ 180 $ 147
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-86
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 and its stockholders entered into a definitive agreement with
Coach USA, Inc. (Coach USA), pursuant to which the Company merged with a
subsidiary of Coach USA (the Merger). All outstanding shares of the Company's
common stock were 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.
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.
INTERIM FINANCIAL INFORMATION
The interim financial statements as of March 31, 1996, and for the three
months ended March 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 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.
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.
F-87
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 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
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.
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
========= =========
F-88
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.
4. LONG-TERM OBLIGATIONS:
Long-term obligations consist of the following:
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
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
========== ==========
F-89
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
=============
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 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 terminated 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................... $ -- $ -- $ 18
Deferred.................. 35 (7) 58
--------- --------- ---------
$ 35 $ (7) $ 76
========= ========= =========
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
F-90
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.......... $ 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-91
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 $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 December 31, 1995. The accrual
is based on known facts and historical trends, and management believes such
accrual to be adequate.
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-92
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.
General and administrative expenses for the periods presented reflect
compensation and related benefits that owners received during the periods. One
owner agreed to reductions in salary and benefits in connection with the Merger
and entered 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 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-93
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.
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 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-94
<PAGE>
ARROW STAGE LINES, INC.
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30
---------------------- MARCH 31,
1994 1995 1996
---------- ---------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 147 $ 286 $ 10
Accounts receivable, less
allowance of $34, $38
and $38...................... 1,067 1,021 670
Inventories..................... 285 297 346
Investments..................... 278 543 297
Prepaid expenses and other
current assets............... 322 458 344
---------- ---------- ----------
Total current assets...... 2,099 2,605 1,667
PROPERTY AND EQUIPMENT, net.......... 13,559 14,581 16,138
OTHER ASSETS......................... 325 196 204
---------- ---------- ----------
Total assets.............. $ 15,983 $ 17,382 $ 18,009
========== ========== ==========
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 1,844
---------- ---------- ----------
Total current
liabilities............. 2,697 3,225 3,921
LONG-TERM OBLIGATIONS, net of current
maturities......................... 9,024 9,117 9,407
---------- ---------- ----------
Total liabilities......... 11,721 12,342 13,328
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $100 par, 990
shares authorized,
10 shares issued............. 1 1 1
Retained earnings............... 4,261 5,039 4,680
---------- ---------- ----------
Total stockholders'
equity.................. 4,262 5,040 4,681
---------- ---------- ----------
Total liabilities and
stockholders' equity.... $ 15,983 $ 17,382 $ 18,009
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-95
<PAGE>
ARROW STAGE LINES, INC.
STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30 MARCH 31
--------------------------------- --------------------
1993 1994 1995 1995 1996
--------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 9,469 $ 10,039 $ 10,650 $ 4,835 $ 4,661
OPERATING EXPENSES................... 6,655 6,957 7,222 3,783 3,668
--------- ---------- ---------- --------- ---------
Gross profit.............. 2,814 3,082 3,428 1,052 993
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 1,216 1,493 1,751 646 697
--------- ---------- ---------- --------- ---------
Operating income (loss)... 1,598 1,589 1,677 406 296
OTHER (INCOME) EXPENSE:
Interest expense................ 726 773 807 377 467
Interest income................. (76) (19) (41) (4) (22)
Other, net...................... (149) (220) (108) (13) (10)
--------- ---------- ---------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.... 1,097 1,055 1,019 46 (139)
PROVISION FOR INCOME TAXES........... -- -- -- -- --
--------- ---------- ---------- --------- ---------
NET INCOME (LOSS).................... $ 1,097 $ 1,055 $ 1,019 $ 46 $ (139)
========= ========== ========== ========= =========
PRO FORMA DATA (Unaudited):
Historical net income (loss).... $ 1,097 $ 1,055 $ 1,019 $ 46 $ (139)
Pro forma compensation
differential................. 60 30 32 15 17
Less: Pro forma provision
(benefit) for income taxes... 480 432 431 26 (49)
--------- ---------- ---------- --------- ---------
PRO FORMA NET INCOME (LOSS).......... $ 677 $ 653 $ 620 $ 35 $ (73)
========= ========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-96
<PAGE>
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). -- -- (220) (220)
Net loss (unaudited)....... -- -- (139) (139)
------ ------ -------- -------------
BALANCE AT MARCH 31, 1996
(unaudited)................... 10 $ 1 $4,680 $ 4,681
====== ====== ======== =============
The accompanying notes are an integral part of these financial statements.
F-97
<PAGE>
ARROW STAGE LINES, INC.
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH
YEAR ENDED SEPTEMBER 30 31
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............... $ 1,097 $ 1,055 $ 1,019 $ 46 $ (139)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities --
Depreciation.................... 766 926 1,240 506 735
Gain on sale of assets.... (146) (180) (49) -- --
Changes in operating
assets and
liabilities --
Accounts receivable,
net.................. (211) (193) 46 331 351
Inventories............. (62) (70) (12) (1) (49)
Investments............. -- (16) (265) -- 246
Prepaid expenses and
other current
assets............... (179) (120) (136) 226 114
Accounts payable and
accrued
liabilities.......... 167 222 300 25 506
Other................... (9) (154) 129 89 (8)
---------- ---------- ---------- ---------- ----------
Net cash provided
by operating
activities..... 1,423 1,470 2,272 1,222 1,756
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and
equipment.................... (103) (759) (2,513) (1,146) (2,292)
Proceeds from sales of property
and equipment................ 183 -- 300 349 --
---------- ---------- ---------- ---------- ----------
Net cash provided
by (used in)
investing
activities..... 80 (759) (2,213) (797) (2,292)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations.................. (2,115) (1,382) (2,128) (1,062) (824)
Proceeds from issuance of
long-term obligations........ 753 572 2,449 540 1,304
Dividends paid.................. (73) -- (241) -- (220)
---------- ---------- ---------- ---------- ----------
Net cash provided
by (used in)
financing
activities..... (1,435) (810) 80 (522) 260
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH...... 68 (99) 139 (97) (276)
CASH AND CASH EQUIVALENTS, beginning
of year............................ 178 246 147 147 286
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of
year................................. $ 246 $ 147 $ 286 $ 50 $ 10
========== ========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest.......... $ 697 $ 774 $ 807 $ 378 $ 483
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-98
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 and its stockholders entered into a definitive agreement with
Coach USA, Inc. (Coach USA), pursuant to which the Company merged with a
subsidiary of Coach USA (the Merger). All outstanding shares of the Company's
common stock were 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.
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 March 31, 1996 and for the six
months ended March 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 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 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 September 30,
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 September 30, 1994 and 1995, consist of money market and
mutual funds.
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-99
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 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
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.
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-100
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:
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
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
========== ==========
F-101
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 terminated with the effective date
of the Merger.
F-102
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-103
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 agreed to reductions in salaries and benefits in connection with the
Merger and entered 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-104
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 dividended certain assets to the
stockholders, consisting of land, buildings, cash surrender value of life
insurance and automobiles, with a total carrying value of approximately
$1,545,000. In addition, the Company made 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 March 31, 1996, the effect on the accompanying balance sheet would be a
decrease in assets of approximately $2,274,000, liabilities of $530,000 and
stockholders' equity of $1,744,000.
Concurrent with the Merger, the Company entered into agreements with the
stockholders to lease land and buildings used in the Company's operations for a
negotiated amount and term.
F-105
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.......................... 7
Risk Factors......................... 10
Price Range of Common Stock.......... 14
Dividend Policy...................... 14
Selected Combined Founding Companies'
Financial Data..................... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 18
Business............................. 31
Management........................... 44
Certain Transactions................. 49
Principal Stockholders............... 52
Description of Capital Stock......... 53
Shares Eligible for Future Sale...... 55
Legal Matters........................ 56
Experts.............................. 56
Additional Information............... 56
Index to Financial Statements........ F-1
3,500,000 SHARES
COACH USA, INC.
COMMON STOCK
PROSPECTUS
June , 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the offering
described in this Registration Statement. All of such amounts (except the SEC
Registration Fee) are estimated.
SEC Registration Fee................. $ 25,300
Blue Sky Fees and Expenses........... 1,000
Printing and Engraving Costs......... 12,000
Legal Fees and Expenses.............. 20,000
Accounting Fees and Expenses......... 20,000
Transfer Agent and Registrar Fees and
Expenses........................... 1,000
Miscellaneous........................ 5,700
----------
Total..................... $ 85,000
==========
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 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.
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:
II-1
(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
completion of the Offering, Coach USA 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 the Offering, the Company issued
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
- ------- -----------
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 (Incorporated by reference to
Exhibit 2.1 to Amendment No. 1 to the Registration Statement on Form
S-1 (File No. 333- 2704) of the Company)
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 (Incorporated by
reference to Exhibit 2.2 to Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-2704) of the Company)
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 (Incorporated by
reference to Exhibit 2.3 to Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-2704) of the Company)
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 (Incorporated by reference to
Exhibit 2.4 to Amendment No. 1 to the Registration Statement on Form
S-1 (File No. 333- 2704) of the Company)
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 (Incorporated by
reference to Exhibit 2.5 to Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-2704) of the Company)
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 (Incorporated by
reference to Exhibit 2.6 to Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-2704) of the Company)
II-2
3.1 -- Amended and Restated Certificate of Incorporation of Coach USA
(Incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-1 (File No. 333-2704) of the Company)
3.2 -- By-Laws of Coach USA (Incorporated by reference to Exhibit 3.2 to
the Registration Statement on Form S-1 (File No. 333-2704) of the
Company)
4.1 -- Form of certificate evidencing ownership of Common Stock of Coach
USA (Incorporated by reference to Exhibit 4.1 to the Registration
Statement on Form S-1 (File No. 333-2704) of the Company)
5.1 -- Opinion of Morgan, Lewis & Bockius LLP
10.1 -- Coach USA 1996 Long-Term Incentive Plan (Incorporated by reference
to Exhibit 10.1 to Amendment No. 2 to the Registration Statement on
Form S-1 (File No. 333-2704) of the Company)
10.2 -- Coach USA 1996 Non-Employee Directors' Stock Plan (Incorporated by
reference to Exhibit 10.2 to Amendment No. 2 to the Registration
Statement on Form S-1 (File No. 333-2704) of the Company)
10.3 -- Employment Agreement between Coach USA and Richard H. Kristinik
10.4 -- Employment Agreement between Coach USA and Lawrence K. King
10.5 -- Employment Agreement between Coach USA and Douglas M. Cerny
10.6 -- Employment Agreement between Coach USA, Cape Transit Corp. and John
Mercadante, Jr.
10.7 -- Employment Agreement among Coach USA, Community Coach, Inc. and
affiliated entities and Frank P. Gallagher
10.8 -- Employment Agreement among Coach USA, Suburban Transit Corp. and
affiliated entities and Kenneth Kuchin
10.9 -- Employment Agreement among Coach USA, Leisure Time Tours and Gerald
Mercadante
10.10 -- Employment Agreement between Grosvenor Bus Lines, Inc. and Robert
K. Werbe
10.11 -- Employment Agreement betwen 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 -- 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 -- 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 -- 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 -- 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 -- 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 (the
"Leases") (Incorporated by reference to Exhibit 10.18 to Amendment No.
1 to the Registration Statement on Form S-1 (File No. 333-2704) of the
Company) together with riders and amendments to the Lease.
10.19 -- Lease by and between a stockholder of Arrow Stage Lines, Inc. and
Arrow Stage Lines, Inc. related to property located in Phoenix,
Arizona
10.20 -- Credit Agreement dated May 17, 1996 in the amount of $30,000,000 among
Coach USA, Inc. as Borrower and The Financial Institutions named
therein ("Barks") and NationsBank of Texas, N.A., as Agent for the
Banks.
21.1 -- List of subsidiaries of Coach USA
23.1 -- Consent of Arthur Andersen LLP
II-3
23.2 -- Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1)
24.1 -- Power of Attorney (included with the signature page hereof)
(b) Financial Statement Schedules
None
ITEM 17. UNDERTAKINGS
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.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represents a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b), if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-4
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON, TEXAS, ON THE
20TH DAY OF JUNE, 1996.
COACH USA, INC.
By: RICHARD H. KRISTINIK
RICHARD H. KRISTINIK
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS BELOW
HEREBY AUTHORIZES AND CONSTITUTES DOUGLAS M. CERNY AND LAWRENCE K. KING, AND
EACH OF THEM SINGLY, HIS TRUE AND LAWFUL ATTORNEYS WITH FULL POWER TO THEM, AND
EACH OF THEM SINGLY, TO SIGN FOR HIM AND IN HIS NAME IN THE CAPACITIES INDICATED
BELOW AND FILE ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO
THIS REGISTRATION STATEMENT, AND HE HEREBY RATIFIES AND CONFIRMS HIS SIGNATURE
AS IT MAY BE SIGNED BY SAID ATTORNEYS, OR EITHER OF THEM, TO ANY AND ALL SUCH
AMENDMENTS.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
RICHARD H. KRISTINIK Chairman of the Board and Chief June 21, 1996
RICHARD H. KRISTINIK Executive Officer (Principal
Executive Officer)
LAWRENCE K. KING Senior Vice President, Chief June 21, 1996
LAWRENCE K. KING Financial Officer and Director
(Principal Financial and
Accounting Officer)
STEVEN S. HARTER Director June 21, 1996
STEVEN S. HARTER
JOHN MERCADANTE, JR. President, Chief Operating Officer June 21, 1996
JOHN MERCADANTE, JR. and Director
KENNETH KUCHIN Vice Chairman of the Board June 21, 1996
KENNETH KUCHIN
II-5
FRANK P. GALLAGHER Senior Vice President -- Corporate June 21, 1996
FRANK P. GALLAGHER Development and Director
GERALD MERCADANTE Senior Vice President -- Northeast June 21, 1996
GERALD MERCADANTE Region Operations and Director
CHARLES D. BUSSKOHL Director June 21, 1996
CHARLES D. BUSSKOHL
WILLIAM J. LYNCH Director June 21, 1996
WILLIAM J. LYNCH
________________________ Director June , 1996
PAUL M. VERROCHI
THOMAS A. WERBE Director June 21, 1996
THOMAS A. WERBE
II-6
EXHIBIT 5.1
101 Park Avenue MORGAN, LEWIS
New York, NY 10178-0060 & BOCKIUS LLP
212-309-5000
Fax: 212-309-6273 Counselors at Law
June 20, 1996
Coach USA, Inc.
One Riverway
Suite 600
Houston, Texas 77056-1980
Re: Issuance of Shares Pursuant to
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to Coach USA, Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, of a
Registration Statement on Form S-1 (the "Registration Statement") relating to
the public offering by the Company of an aggregate of 3,500,000 shares (the
"Shares") of the Company's Common Stock, $.01 par value per share.
In so acting, we have examined originals, or copies certified or otherwise
identified to our satisfaction, of (a) the Amended and Restated Certificate of
Incorporation of the Company, (b) the By-Laws of the Company, (c) a good
standing certificate dated June 19, 1996 from the State of Delaware and (d) such
other documents, records, certificates and other instruments as in our judgment
are necessary or appropriate for purposes of this opinion. We have assumed that
(i) the Shares will be issued against receipt of the consideration approved by
the Board of Directors of the Company or a committee thereof, which will be no
less than the par value thereof, and (ii) the Shares will be issued in
compliance with applicable federal and state securities laws.
Based on the foregoing, we are of the following opinion:
1. The Company is a corporation duly incorporated and validly
existing under the laws of the State of Delaware.
2. The Shares, when issued as contemplated by the Registration
Statement, will be duly authorized, validly issued, fully paid and
non-assessable.
We are expressing the opinions above as members of the Bar of the State of
New York and express no opinion as to any law other than the General Corporation
Law of the State of Delaware.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of our name under the caption "Legal Matters" in the
Registration Statement.
Very truly yours,
MORGAN, LEWIS AND BOCKIUS LLP
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Coach USA, Inc., a
Delaware corporation (the "Company," which term shall include the Company's
subsidiaries as appropriate), and Richard H. Kristinik ("Employee") is hereby
entered into and effective as of the 17th day of May, 1996, the date of the
consummation of the initial public offering of the common stock of Coach USA.
This Agreement hereby supersedes any other employment agreements or
understandings, written or oral, between the Company and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
business of providing passenger ground transportation services.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
and Coach USA's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and future plans
with respect thereto, all of which has been and will be established and
maintained at great expense to the Company; this information is a trade secret
and constitutes the valuable good will of the Company.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Chairman of the Board and Chief
Executive Officer . As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of a Chairman of the Board and a
Chief Executive Officer and will report directly to the Board of Directors of
the Company (the "Board"). Employee hereby accepts this employment upon the
terms and conditions herein contained and, subject to paragraph 1(c), agrees to
devote his time, attention and efforts to promote and further the business of
the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective retroactive to April 1, 1996, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) INCENTIVE BONUS PLAN. For 1996 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan setting forth the
criteria under which Employee and other officers and key employees will be
eligible to receive year-end bonus awards.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company may have in effect
from time to time, benefits provided to Employee under this clause (i) to
be at least equal to such benefits provided to other Company executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide benefits as
available from time to time.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any motorcoach passenger transportation business in
direct competition with the Company within 100 miles of the Company or
where the Company conducts business, including any territory serviced by
the Company (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company in a managerial capacity for the
purpose or with the intent of enticing such employee away from or out of
the employ of the Company;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company within the Territory for the purpose of soliciting or selling
products or services in direct competition with the Company within the
Territory;
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company or for which the Company made an acquisition analysis, for the
purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to the Company for which it would
have no other adequate remedy, Employee agrees that the foregoing covenant may
be enforced by the Company in the event of breach by him, by injunctions and
restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the current plans of; but it is also the intent of the Company and Employee that
such covenants be construed and enforced in accordance with the changing
activities, business and locations of the Company throughout the term of this
covenant, whether before or after the date of termination of the employment of
Employee. For example, if, during the term of this Agreement, the Company
engages in new and different activities, enters a new business or establishes
new locations for its current activities or business in addition to or other
than the activities or business enumerated under the Recitals above or the
locations currently established therefor, then Employee will be precluded from
soliciting the customers or employees of such new activities or business or from
such new location and from directly competing with such new business within 100
miles of its then-established operating location(s) through the term of this
covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company, or similar
activities or business in locations the operation of which, under such
circumstances, does not violate clause (i) of this paragraph 3, and in any event
such new business, activities or location are not in violation of this paragraph
3 or of Employee's obligations under this paragraph 3, if any, Employee shall
not be chargeable with a violation of this paragraph 3 if the Company shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period of two (2) years following termination of employment
stated at the beginning of this paragraph 3, during which the agreements and
covenants of Employee made in this paragraph 3 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board to relocate
from his present residence to another geographic location in order to more
efficiently carry out his duties and responsibilities under this Agreement or as
part of a promotion or other increase in duties and responsibilities. In such
event, if Employee agrees to relocate, the Company will pay all relocation costs
to move Employee, his immediate family and their personal property and effects.
Such costs may include, by way of example, but are not limited to, pre-move
visits to search for a new residence, investigate schools or for other purposes;
temporary lodging and living costs prior to moving into a new permanent
residence; duplicate home carrying costs; all closing costs on the sale of
Employee's present residence and on the purchase of a comparable residence in
the new location; and added income taxes that Employee may incur if any
relocation costs are not deductible for tax purposes. The general intent of the
foregoing is that Employee shall not personally bear any out-of-pocket cost as a
result of the relocation, with an understanding that Employee will use his best
efforts to incur only those costs which are reasonable and necessary to effect a
smooth, efficient and orderly relocation with minimal disruption to the business
affairs of the Company and the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, one
year's base salary at the rate then in effect .
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company which materially and adversely affects the operations or reputation of
the Company; (4) Employee's conviction of a felony crime; or (5) chronic alcohol
abuse or illegal drug abuse by Employee. In the event of a termination for good
cause, as enumerated above, Employee shall have no right to any severance
compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board of Directors of Coach USA. Should Employee be terminated by
the Company without cause during the Term, Employee shall receive from the
Company, in a lump-sum payment due on the effective date of termination, one
years base salary at the rate then in effect. Further, any termination without
cause by the Company shall operate to shorten the period set forth in paragraph
3(a) and during which the terms of paragraph 3 apply to one (1) year from the
date of termination of employment. If Employee resigns or otherwise terminates
his employment without cause pursuant to this paragraph 5(d), Employee shall
receive no severance compensation.
(e) CHANGE IN CONTROL OF COACH USA. In the event of a "Change in Control
of Coach USA" (as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of, the Company and Employee
under this Agreement shall cease as of the effective date of termination, except
that the Company's obligations under paragraph 9 herein and Employee's
obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive such
termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement is terminated as a result of a breach by
the Company.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company, or its
representatives, vendors or customers which pertain to the business of the
Company shall be and remain the property of the Company, and be subject at all
times to their discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials and other similar data pertaining to the
business, activities or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to and the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company and which Employee conceives as a result of his
employment by the Company. Employee hereby assigns and agrees to assign all his
interests therein to the Company or its nominee. Whenever requested to do so by
the Company, Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's relationships or agreements with its significant vendors or customers
or any other significant and material trade secret of the Company, whether in
existence or proposed, to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Employee in connection
therewith. In the event that both Employee and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company or shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful and wanton negligence
and misconduct or performed criminal and fraudulent acts which materially damage
the business of the Company.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Term and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the non-competition
provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Term; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the non-competition
provisions of paragraph 3 shall all apply for a period of two (2) years from the
effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Common Stock of the Company, including any options with
accelerated vesting under the provisions of the Company's 1996 Long-Term
Incentive Plan, such that he may convert the options to shares of the Company's
Common Stock at or prior to the closing of the transaction giving rise to the
Change in Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than the Company or an employee benefit plan
of the Company, acquires directly or indirectly the Beneficial Ownership
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of the Company: (A) the individuals
who, as of the closing date of the Company's initial public offering,
constitute the Board of Directors of the Company (the "Original
Directors"); (B) the individuals who thereafter are elected to the Board
of Directors of the Company and whose election, or nomination for
election, to the Board of Directors of the Company was approved by a vote
of at least two-thirds (2/3) of the Original Directors then still in
office (such directors becoming "Additional Original Directors"
immediately following their election); and (C) the individuals who are
elected to the Board of Directors of the Company and whose election, or
nomination for election, to the Board of Directors of the Company was
approved by a vote of at least two-thirds (2/3) of the Original Directors
and Additional Original Directors then still in office (such directors
also becoming "Additional Original Directors" immediately following their
election).
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially Owned by
at least 75% of the holders of outstanding voting securities of the
Company immediately prior to the transaction, with the voting power of
each such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the Company).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
To Employee: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
COACH USA, INC.
By:
Name
Title:
EMPLOYEE:
/s/ RICHARD H. KRISTINIK
Richard H. Kristinik
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Coach USA, Inc., a
Delaware corporation (the "Company", which term shall include the company's
subsidiaries as appropriate), and Lawrence K. King ("Employee") is hereby
entered into and effective as of the 17th day of May, 1996, the date of the
consummation of the initial public offering of the common stock of Coach USA.
This Agreement hereby supersedes any other employment agreements or
understandings, written or oral, between the Company and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
business of providing passenger ground transportation services.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
and Coach USA's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and future plans
with respect thereto, all of which has been and will be established and
maintained at great expense to the Company; this information is a trade secret
and constitutes the valuable good will of the Company.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Senior Vice President and Chief
Financial Officer. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of a Senior Vice President and
Chief Financial Officer and will report directly to the Chief Executive Officer
of the Company. Employee hereby accepts this employment upon the terms and
conditions herein contained and, subject to paragraph 1(c), agrees to devote his
time, attention and efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective retroactive to April 1, 1996, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) INCENTIVE BONUS PLAN. For 1996 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan setting forth the
criteria under which Employee and other officers and key employees will be
eligible to receive year-end bonus awards.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company may have in effect
from time to time, benefits provided to Employee under this clause (i) to
be at least equal to such benefits provided to other Company executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide benefits as
available from time to time.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any motorcoach passenger transportation business in
direct competition with the Company within 100 miles of the Company where
the Company conducts business, including any territory serviced by the
Company (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company in a managerial capacity for the
purpose or with the intent of enticing such employee away from or out of
the employ of the Company;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company within the Territory for the purpose of soliciting or selling
products or services in direct competition with the Company within the
Territory;
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company or for which the Company made an acquisition analysis, for the
purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to the Company for which it would
have no other adequate remedy, Employee agrees that the foregoing covenant may
be enforced by the Company in the event of breach by him, by injunctions and
restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the current plans of; but it is also the intent of the Company and Employee that
such covenants be construed and enforced in accordance with the changing
activities, business and locations of the Company throughout the term of this
covenant, whether before or after the date of termination of the employment of
Employee. For example, if, during the term of this Agreement, the Company
engages in new and different activities, enters a new business or establishes
new locations for its current activities or business in addition to or other
than the activities or business enumerated under the Recitals above or the
locations currently established therefor, then Employee will be precluded from
soliciting the customers or employees of such new activities or business or from
such new location and from directly competing with such new business within 100
miles of its then-established operating location(s) through the term of this
covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company, or similar
activities or business in locations the operation of which, under such
circumstances, does not violate clause (i) of this paragraph 3, and in any event
such new business, activities or location are not in violation of this paragraph
3 or of Employee's obligations under this paragraph 3, if any, Employee shall
not be chargeable with a violation of this paragraph 3 if the Company shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period of two (2) years following termination of employment
stated at the beginning of this paragraph 3, during which the agreements and
covenants of Employee made in this paragraph 3 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board to relocate
from his present residence to another geographic location in order to more
efficiently carry out his duties and responsibilities under this Agreement or as
part of a promotion or other increase in duties and responsibilities. In such
event, if Employee agrees to relocate, the Company will pay all relocation costs
to move Employee, his immediate family and their personal property and effects.
Such costs may include, by way of example, but are not limited to, pre-move
visits to search for a new residence, investigate schools or for other purposes;
temporary lodging and living costs prior to moving into a new permanent
residence; duplicate home carrying costs; all closing costs on the sale of
Employee's present residence and on the purchase of a comparable residence in
the new location; and added income taxes that Employee may incur if any
relocation costs are not deductible for tax purposes. The general intent of the
foregoing is that Employee shall not personally bear any out-of-pocket cost as a
result of the relocation, with an understanding that Employee will use his best
efforts to incur only those costs which are reasonable and necessary to effect a
smooth, efficient and orderly relocation with minimal disruption to the business
affairs of the Company and the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, one
year's base salary at the rate then in effect .
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company which materially and adversely affects the operations or reputation of
the Company; (4) Employee's conviction of a felony crime; or (5) chronic alcohol
abuse or illegal drug abuse by Employee. In the event of a termination for good
cause, as enumerated above, Employee shall have no right to any severance
compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board of Directors of Coach USA. Should Employee be terminated by
the Company without cause during the Term, Employee shall receive from the
Company, in a lump-sum payment due on the effective date of termination, one
years base salary at the rate then in effect. Further, any termination without
cause by the Company shall operate to shorten the period set forth in paragraph
3(a) and during which the terms of paragraph 3 apply to one (1) year from the
date of termination of employment. If Employee resigns or otherwise terminates
his employment without cause pursuant to this paragraph 5(d), Employee shall
receive no severance compensation.
(e) CHANGE IN CONTROL OF COACH USA. In the event of a "Change in Control
of Coach USA" (as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of, the Company and Employee
under this Agreement shall cease as of the effective date of termination, except
that the Company's obligations under paragraph 9 herein and Employee's
obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive such
termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement is terminated as a result of a breach by
the Company.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company, or its
representatives, vendors or customers which pertain to the business of the
Company shall be and remain the property of the Company, and be subject at all
times to their discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials and other similar data pertaining to the
business, activities or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to and the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company and which Employee conceives as a result of his
employment by the Company. Employee hereby assigns and agrees to assign all his
interests therein to the Company or its nominee. Whenever requested to do so by
the Company, Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's relationships or agreements with its significant vendors or customers
or any other significant and material trade secret of the Company, whether in
existence or proposed, to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Employee in connection
therewith. In the event that both Employee and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company or shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful and wanton negligence
and misconduct or performed criminal and fraudulent acts which materially damage
the business of the Company.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Term and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the non-competition
provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Term; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the non-competition
provisions of paragraph 3 shall all apply for a period of two (2) years from the
effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Common Stock of the Company, including any options with
accelerated vesting under the provisions of the Company's 1996 Long-Term
Incentive Plan, such that he may convert the options to shares of the Company's
Common Stock at or prior to the closing of the transaction giving rise to the
Change in Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than the Company or an employee benefit plan
of the Company, acquires directly or indirectly the Beneficial Ownership
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of the Company: (A) the individuals
who, as of the closing date of the Company's initial public offering,
constitute the Board of Directors of the Company (the "Original
Directors"); (B) the individuals who thereafter are elected to the Board
of Directors of the Company and whose election, or nomination for
election, to the Board of Directors of the Company was approved by a vote
of at least two-thirds (2/3) of the Original Directors then still in
office (such directors becoming "Additional Original Directors"
immediately following their election); and (C) the individuals who are
elected to the Board of Directors of the Company and whose election, or
nomination for election, to the Board of Directors of the Company was
approved by a vote of at least two-thirds (2/3) of the Original Directors
and Additional Original Directors then still in office (such directors
also becoming "Additional Original Directors" immediately following their
election).
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially Owned by
at least 75% of the holders of outstanding voting securities of the
Company immediately prior to the transaction, with the voting power of
each such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the Company).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
To Employee: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
COACH USA, INC.
By:
Name
Title:
EMPLOYEE:
/s/ LAWRENCE K. KING
Lawrence K. King
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Coach USA, Inc., a
Delaware corporation (the "Company," which term shall include the company's
subsidiaries as appropriate), and Douglas Cerny ("Employee") is hereby entered
into and effective as of the 17th day of May, 1996, the date of the consummation
of the initial public offering of the common stock of Coach USA. This Agreement
hereby supersedes any other employment agreements or understandings, written or
oral, between the Company and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
business of providing passenger ground transportation services.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by the Company and future plans with
respect thereto, all of which has been and will be established and maintained at
great expense to the Company; this information is a trade secret and constitutes
the valuable good will of the Company.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Senior Vice President, General
Counsel and Secretary of the Company. As such, Employee shall have
responsibilities, duties and authority reasonably accorded to and expected of a
Senior Vice President, General Counsel and Secretary and will report directly to
the Chief Executive Officer of the Company. Employee hereby accepts this
employment upon the terms and conditions herein contained and, subject to
paragraph 1(c), agrees to devote his time, attention and efforts to promote and
further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective retroactive to April 1, 1996, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) INCENTIVE BONUS PLAN. For 1996 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan setting forth the
criteria under which Employee and other officers and key employees will be
eligible to receive year-end bonus awards.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company may have in effect
from time to time, benefits provided to Employee under this clause (i) to
be at least equal to such benefits provided to other Company executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide employee benefits as
available from time to time.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any motorcoach pasenger transportation business in
direct competition with the Company within 100 miles of the Company or
where the Company conducts business, including any territory serviced by
the Company (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company in a managerial capacity for the
purpose or with the intent of enticing such employee away from or out of
the employ of the Company ;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company within the Territory for the purpose of soliciting or selling
products or services in direct competition with the Company within the
Territory;
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company or for which the Company made an acquisition analysis, for the
purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to the Company for which it would
have no other adequate remedy, Employee agrees that the foregoing covenant may
be enforced by the Company in the event of breach by him, by injunctions and
restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company on the date of the execution of this Agreement and
the current plans of the Company; but it is also the intent of the Company and
Employee that such covenants be construed and enforced in accordance with the
changing activities, business and locations of the Company throughout the term
of this covenant, whether before or after the date of termination of the
employment of Employee. For example, if, during the term of this Agreement, the
Company engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company, or similar
activities or business in locations the operation of which, under such
circumstances, does not violate clause (i) of this paragraph 3, and in any event
such new business, activities or location are not in violation of this paragraph
3 or of Employee's obligations under this paragraph 3, if any, Employee shall
not be chargeable with a violation of this paragraph 3 if the Company shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period of two (2) years following termination of employment
stated at the beginning of this paragraph 3, during which the agreements and
covenants of Employee made in this paragraph 3 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board to relocate
from his present residence to another geographic location in order to more
efficiently carry out his duties and responsibilities under this Agreement or as
part of a promotion or other increase in duties and responsibilities. In such
event, if Employee agrees to relocate, the Company will pay all relocation costs
to move Employee, his immediate family and their personal property and effects.
Such costs may include, by way of example, but are not limited to, pre-move
visits to search for a new residence, investigate schools or for other purposes;
temporary lodging and living costs prior to moving into a new permanent
residence; duplicate home carrying costs; all closing costs on the sale of
Employee's present residence and on the purchase of a comparable residence in
the new location; and added income taxes that Employee may incur if any
relocation costs are not deductible for tax purposes. The general intent of the
foregoing is that Employee shall not personally bear any out-of-pocket cost as a
result of the relocation, with an understanding that Employee will use his best
efforts to incur only those costs which are reasonable and necessary to effect a
smooth, efficient and orderly relocation with minimal disruption to the business
affairs of the Company and the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, one
year's base salary at the rate then in effect .
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company which materially and adversely affects the operations or reputation of
the Company; (4) Employee's conviction of a felony crime; or (5) chronic alcohol
abuse or illegal drug abuse by Employee. In the event of a termination for good
cause, as enumerated above, Employee shall have no right to any severance
compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board of Directors of Coach USA. Should Employee be terminated by
the Company without cause during the Term, Employee shall receive from the
Company, in a lump-sum payment due on the effective date of termination, one
year's base salary at the rate then in effect. Further, any termination without
cause by the Company shall operate to shorten the period set forth in paragraph
3(a) and during which the terms of paragraph 3 apply to one (1) year from the
date of termination of employment. If Employee resigns or otherwise terminates
his employment without cause pursuant to this paragraph 5(d), Employee shall
receive no severance compensation.
(e) CHANGE IN CONTROL OF COACH USA. In the event of a "Change in Control
of Coach USA" (as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of the Company and Employee under
this Agreement shall cease as of the effective date of termination, except that
the Company's obligations under paragraph 9 herein and Employee's obligations
under paragraphs 3, 6, 7, 8 and 10 herein shall survive such termination in
accordance with their terms.
If termination of Employee's employment arises out of the Company's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement is terminated as a result of a breach by
the Company.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company, or its
representatives, vendors or customers which pertain to the business of the
Company shall be and remain the property of the Company, and be subject at all
times to their discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials and other similar data pertaining to the
business, activities or future plans of the Company which is collected by
Employee shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company and which Employee conceives as a result of his
employment by the Company. Employee hereby assigns and agrees to assign all his
interests therein to the Company or its nominee. Whenever requested to do so by
the Company, Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's relationships or agreements with its significant vendors or customers
or any other significant and material trade secret of the Company, whether in
existence or proposed, to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Employee in connection
therewith. In the event that both Employee and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful and wanton negligence
and misconduct or performed criminal and fraudulent acts which materially damage
the business of the Company.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Initial Term and the
applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Term; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the non-competition
provisions of paragraph 3 shall all apply for a period of two (2) years from the
effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Common Stock of the Company, including any options with
accelerated vesting under the provisions of the Company's 1996 Long-Term
Incentive Plan, such that he may convert the options to shares of the Company's
Common Stock at or prior to the closing of the transaction giving rise to the
Change in Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than the Company or an employee benefit plan
of the Company, acquires directly or indirectly the Beneficial Ownership
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of the Company: (A) the individuals
who, as of the closing date of the Company's initial public offering,
constitute the Board of Directors of the Company (the "Original
Directors"); (B) the individuals who thereafter are elected to the Board
of Directors of the Company and whose election, or nomination for
election, to the Board of Directors of the Company was approved by a vote
of at least two-thirds (2/3) of the Original Directors then still in
office (such directors becoming "Additional Original Directors"
immediately following their election); and (C) the individuals who are
elected to the Board of Directors of the Company and whose election, or
nomination for election, to the Board of Directors of the Company was
approved by a vote of at least two-thirds (2/3) of the Original Directors
and Additional Original Directors then still in office (such directors
also becoming "Additional Original Directors" immediately following their
election).
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving entity
outstanding immediately after such transaction being Beneficially Owned by
at least 75% of the holders of outstanding voting securities of the
Company immediately prior to the transaction, with the voting power of
each such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of The Company).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
To Employee: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
COACH USA, INC.
By:
Name
Title:
EMPLOYEE:
/s/ DOUGLAS CERNY
Douglas Cerny
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and among Coach USA, Inc., a
Delaware corporation ("Coach USA"), Cape Transit Corp. T/A Adventure Trails,
Inc., a New Jersey corporation and a wholly-owned subsidiary of Coach USA (the
"Company"), and John Mercadante, Jr. ("Employee") is hereby entered into and
effective as of the 17th day of May, 1996, the date of the consummation of the
initial public offering of the common stock of Coach USA. This Agreement hereby
supersedes any other employment agreements or understandings, written or oral,
between the Company, Coach USA and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
business of providing passenger ground transportation services.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
and Coach USA's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and Coach USA,
and future plans with respect thereto, all of which has been and will be
established and maintained at great expense to the Company and Coach USA; this
information is a trade secret and constitutes the valuable good will of the
Company and Coach USA.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as President and Chief Executive
Officer of the Company and Coach USA hereby employs Employee as President and
Chief Operating Officer of Coach USA. As such, Employee shall have
responsibilities, duties and authority reasonably accorded to and expected of a
President and Chief Executive Officer and President and Chief Operating Officer,
respectively, of the Company and Coach USA and will report directly to the Board
of Directors of the Company (the "Board") and to the Chief Executive Officer of
Coach USA. Employee hereby accepts this employment upon the terms and conditions
herein contained and, subject to paragraph 1(c), agrees to devote his time,
attention and efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective retroactive to April 1, 1996, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) INCENTIVE BONUS PLAN. For 1996 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be Coach
USA's Incentive Bonus Plan) setting forth the criteria under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company or Coach USA may
have in effect from time to time, benefits provided to Employee under this
clause (i) to be at least equal to such benefits provided to Coach USA
executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide or Coach USA-wide
employee benefits as available from time to time.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any motorcoach passenger transportation business in
direct competition with the Company or Coach USA, within 100 miles of the
Company or Coach USA or where any of the Company's or Coach USA's
subsidiaries conducts business, including any territory serviced by the
Company or Coach USA or any of such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or Coach USA (including the
respective subsidiaries thereof) in a managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the
employ of the Company or Coach USA (including the respective subsidiaries
thereof);
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company or Coach USA (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling products or
services in direct competition with the Company or Coach USA within the
Territory;
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company or Coach USA (including the respective subsidiaries thereof) or
for which the Company or Coach USA made an acquisition analysis, for the
purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
and Coach USA as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company and
Coach USA for which they would have no other adequate remedy, Employee agrees
that the foregoing covenant may be enforced by Coach USA or the Company in the
event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or Coach USA (including Coach USA's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Coach USA (including Coach USA's other subsidiaries); but it is also
the intent of the Company and Employee that such covenants be construed and
enforced in accordance with the changing activities, business and locations of
the Company and Coach USA (including Coach USA's other subsidiaries) throughout
the term of this covenant, whether before or after the date of termination of
the employment of Employee. For example, if, during the term of this Agreement,
the Company or Coach USA (including Coach USA's other subsidiaries) engages in
new and different activities, enters a new business or establishes new locations
for its current activities or business in addition to or other than the
activities or business enumerated under the Recitals above or the locations
currently established therefor, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within 100 miles of
its then-established operating location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or Coach USA
(including Coach USA's other subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (i) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Company or Coach USA (including
Coach USA's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
Coach USA, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Coach USA or the Company of such
covenants. It is specifically agreed that the period of two (2) years following
termination of employment stated at the beginning of this paragraph 3, during
which the agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or Coach
USA to relocate from his present residence to another geographic location in
order to more efficiently carry out his duties and responsibilities under this
Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence, investigate
schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any relocation costs are not deductible for tax purposes. The
general intent of the foregoing is that Employee shall not personally bear any
out-of-pocket cost as a result of the relocation, with an understanding that
Employee will use his best efforts to incur only those costs which are
reasonable and necessary to effect a smooth, efficient and orderly relocation
with minimal disruption to the business affairs of the Company and the personal
life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for five (5) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater.
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company or Coach USA which materially and adversely affects the operations or
reputation of the Company or Coach USA; (4) Employee's conviction of a felony
crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board of Directors of Coach USA. Should Employee be terminated by
the Company without cause during the first three (3) years of the Term (the
"Initial Term"), Employee shall receive from the Company, in a lump-sum payment
due on the effective date of termination, the base salary at the rate then in
effect for whatever time period is remaining under the Initial Term of this
Agreement or for one (1) year, whichever amount is greater. Should Employee be
terminated by the Company without cause during the final two (2) year period of
the Term, Employee shall receive from the Company, in a lump-sum payment due on
the effective date of termination, the base salary rate then in effect
equivalent to one (1) year of salary. Further, any termination without cause by
the Company shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Employee resigns or otherwise terminates his
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation.
(e) CHANGE IN CONTROL OF COACH USA. In the event of a "Change in
Control of Coach USA" (as defined below) during the Initial Term, refer to
paragraph 12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Coach USA, the Company and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 herein and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement is terminated as a result of a breach by
the Company.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company, Coach USA
or their representatives, vendors or customers which pertain to the business of
the Company or Coach USA shall be and remain the property of the Company or
Coach USA, as the case may be, and be subject at all times to their discretion
and control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company or Coach USA which is collected by Employee shall be
delivered promptly to the Company without request by it upon termination of
Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to Coach USA and the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Company or Coach USA and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or Coach USA's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or Coach USA, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
or Coach USA against Employee), by reason of the fact that he is or was
performing services under this Agreement, then the Company shall indemnify
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit or proceeding, the Company
or Coach USA agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by
Coach USA shall have a conflict of interest that prevents such counsel from
representing Employee, Employee may engage separate counsel and the Company or
Coach USA shall pay all attorneys' fees of such separate counsel. Further, while
Employee is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Employee cannot be held liable to the
Company or Coach USA for errors or omissions made in good faith where Employee
has not exhibited gross, willful and wanton negligence and misconduct or
performed criminal and fraudulent acts which materially damage the business of
the Company.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Initial Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Initial Term and the
applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Initial Term; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be double the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Coach USA Common Stock, including any options with
accelerated vesting under the provisions of Coach USA's 1996 Long-Term Incentive
Plan, such that he may convert the options to shares of Coach USA Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than Coach USA or an employee benefit plan of
Coach USA, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Coach USA: (A) the individuals
who, as of the closing date of Coach USA's initial public offering,
constitute the Board of Directors of Coach USA (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of Directors
of Coach USA and whose election, or nomination for election, to the Board
of Directors of Coach USA was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of Coach USA and whose election, or nomination for election, to
the Board of Directors of Coach USA was approved by a vote of at least
two-thirds (2/3) of the Original Directors and Additional Original
Directors then still in office (such directors also becoming "Additional
Original Directors" immediately following their election).
(iii) the stockholders of Coach USA shall approve a merger,
consolidation, recapitalization, or reorganization of Coach USA, a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by at least
75% of the holders of outstanding voting securities of Coach USA
immediately prior to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of Coach USA shall approve a plan of complete
liquidation of Coach USA or an agreement for the sale or disposition by
Coach USA of all or a substantial portion of Coach USA's assets (i.e., 50%
or more of the total assets of Coach USA).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement and
expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
To Employee: Cape Transit Corp.
350 N. Georgia Avenue
Atlantic City, New Jersey 08401
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
CAPE TRANSIT CORP. T/A ADVENTURE
TRAILS, INC.
By:
Name:
Title:
COACH USA, INC.
By:
Name:
Title:
EMPLOYEE:
/s/ JOHN MERCADANTE, JR.
John Mercadante, Jr.
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and among Coach USA, Inc., a
Delaware corporation ("Coach USA"), Community Coach, Inc., Barclay Airport
Services, Inc., Community Bus Lines, Inc., Community Tours, Inc., Community
Transit Lines, Community Transportation Inc., New Jersey corporations and
wholly-owned subsidiaries of Coach USA (collectively, the "Company"), and Frank
Gallagher ("Employee") is hereby entered into and effective as of the 17th day
of May, 1996, the date of the consummation of the initial public offering of the
common stock of Coach USA. This Agreement hereby supersedes any other employment
agreements or understandings, written or oral, between the Company, Coach USA
and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
business of providing passenger ground transportation services.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
and Coach USA's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and Coach USA,
and future plans with respect thereto, all of which has been and will be
established and maintained at great expense to the Company and Coach USA; this
information is a trade secret and constitutes the valuable good will of the
Company and Coach USA.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as President and Chief Executive
Officer of the Company and Coach USA hereby employs Employee as Senior Vice
President; Corporate Development Officer of Coach USA. As such, Employee shall
have responsibilities, duties and authority reasonably accorded to and expected
of a President and a Chief Executive Officer of the Company and a Senior Vice
President of Coach USA and will report directly to each Board of Directors of
the Company (collectively, the "Board") and to the Chief Executive Officer of
Coach USA. Employee hereby accepts this employment upon the terms and conditions
herein contained and, subject to paragraph 1(c), agrees to devote his time,
attention and efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective retroactive to April 1, 1996, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) INCENTIVE BONUS PLAN. For 1996 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be Coach
USA's Incentive Bonus Plan) setting forth the criteria under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company or Coach USA may
have in effect from time to time, benefits provided to Employee under this
clause (i) to be at least equal to such benefits provided to Coach USA
executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide or Coach USA-wide
employee benefits as available from time to time.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any
motorcoach passenger transportation business (except with respect to One Bus) in
direct competition with the Company or Coach USA, within 100 miles of the
Company or Coach USA or where any of the Company's or Coach USA's subsidiaries
conducts business, including any territory serviced by the Company or Coach USA
or any of such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the Territory, an
employee of the Company or Coach USA (including the respective subsidiaries
thereof) in a managerial capacity for the purpose or with the intent of enticing
such employee away from or out of the employ of the Company or Coach USA
(including the respective subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or which has
been, within one (1) year prior to that time, a customer of the Company or Coach
USA (including the respective subsidiaries thereof) within the Territory for the
purpose of soliciting or selling products or services in direct competition with
the Company or Coach USA within the Territory;
(iv) call upon any prospective acquisition candidate, on Employee's own
behalf or on behalf of any competitor, which candidate was, to Employee's actual
knowledge after due inquiry, either called upon by the Company or Coach USA
(including the respective subsidiaries thereof) or for which the Company or
Coach USA made an acquisition analysis, for the purpose of acquiring such
entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
and Coach USA as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company and
Coach USA for which they would have no other adequate remedy, Employee agrees
that the foregoing covenant may be enforced by Coach USA or the Company in the
event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or Coach USA (including Coach USA's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Coach USA (including Coach USA's other subsidiaries); but it is also
the intent of the Company and Employee that such covenants be construed and
enforced in accordance with the changing activities, business and locations of
the Company and Coach USA (including Coach USA's other subsidiaries) throughout
the term of this covenant, whether before or after the date of termination of
the employment of Employee. For example, if, during the term of this Agreement,
the Company or Coach USA (including Coach USA's other subsidiaries) engages in
new and different activities, enters a new business or establishes new locations
for its current activities or business in addition to or other than the
activities or business enumerated under the Recitals above or the locations
currently established therefor, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within 100 miles of
its then-established operating location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or Coach USA
(including Coach USA's other subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (i) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Company or Coach USA (including
Coach USA's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
Coach USA, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Coach USA or the Company of such
covenants. It is specifically agreed that the period of two (2) years following
termination of employment stated at the beginning of this paragraph 3, during
which the agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or Coach
USA to relocate from his present residence to another geographic location in
order to more efficiently carry out his duties and responsibilities under this
Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence, investigate
schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any relocation costs are not deductible for tax purposes. The
general intent of the foregoing is that Employee shall not personally bear any
out-of-pocket cost as a result of the relocation, with an understanding that
Employee will use his best efforts to incur only those costs which are
reasonable and necessary to effect a smooth, efficient and orderly relocation
with minimal disruption to the business affairs of the Company and the personal
life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for five (5) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater.
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company or Coach USA which materially and adversely affects the operations or
reputation of the Company or Coach USA; (4) Employee's conviction of a felony
crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board of Directors of Coach USA. Should Employee be terminated by
the Company without cause during the first three (3) years of the Term (the
"Initial Term"), Employee shall receive from the Company, in a lump-sum payment
due on the effective date of termination, the base salary at the rate then in
effect for whatever time period is remaining under the Initial Term of this
Agreement or for one (1) year, whichever amount is greater. Should Employee be
terminated by the Company without cause during the final two (2) year period of
the Term, Employee shall receive from the Company, in a lump-sum payment due on
the effective date of termination, the base salary rate then in effect
equivalent to one (1) year of salary. Further, any termination without cause by
the Company shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Employee resigns or otherwise terminates his
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation.
(e) CHANGE IN CONTROL OF COACH USA. In the event of a "Change in Control
of Coach USA" (as defined below) during the Initial Term, refer to paragraph 12
below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Coach USA, the Company and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 herein and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement is terminated as a result of a breach by
the Company.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company, Coach USA
or their representatives, vendors or customers which pertain to the business of
the Company or Coach USA shall be and remain the property of the Company or
Coach USA, as the case may be, and be subject at all times to their discretion
and control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company or Coach USA which is collected by Employee shall be
delivered promptly to the Company without request by it upon termination of
Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to Coach USA and the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Company or Coach USA and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or Coach USA's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or Coach USA, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
or Coach USA against Employee), by reason of the fact that he is or was
performing services under this Agreement, then the Company shall indemnify
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit or proceeding, the Company
or Coach USA agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by
Coach USA shall have a conflict of interest that prevents such counsel from
representing Employee, Employee may engage separate counsel and the Company or
Coach USA shall pay all attorneys' fees of such separate counsel. Further, while
Employee is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Employee cannot be held liable to the
Company or Coach USA for errors or omissions made in good faith where Employee
has not exhibited gross, willful and wanton negligence and misconduct or
performed criminal and fraudulent acts which materially damage the business of
the Company.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Initial Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Initial Term and the
applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Initial Term; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be double the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Coach USA Common Stock, including any options with
accelerated vesting under the provisions of Coach USA's 1996 Long-Term Incentive
Plan, such that he may convert the options to shares of Coach USA Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than Coach USA or an employee benefit plan of
Coach USA, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Coach USA: (A) the individuals
who, as of the closing date of Coach USA's initial public offering,
constitute the Board of Directors of Coach USA (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of Directors
of Coach USA and whose election, or nomination for election, to the Board
of Directors of Coach USA was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of Coach USA and whose election, or nomination for election, to
the Board of Directors of Coach USA was approved by a vote of at least
two-thirds (2/3) of the Original Directors and Additional Original
Directors then still in office (such directors also becoming "Additional
Original Directors" immediately following their election).
(iii) the stockholders of Coach USA shall approve a merger,
consolidation, recapitalization, or reorganization of Coach USA, a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by at least
75% of the holders of outstanding voting securities of Coach USA
immediately prior to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of Coach USA shall approve a plan of complete
liquidation of Coach USA or an agreement for the sale or disposition by
Coach USA of all or a substantial portion of Coach USA's assets (i.e., 50%
or more of the total assets of Coach USA).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
To Employee: Community Coach, Inc.
315 Howe Avenue
Passaic, New Jersey 07055
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
COMMUNITY COACH, INC.
By:
Name:
Title:
BARCLAY AIRPORT SERVICES, INC.
By:
Name:
Title:
COMMUNITY BUS LINES, INC.
By:
Name:
Title:
COMMUNITY TOURS, INC.
By:
Name:
Title:
COMMUNITY TRANSIT LINES, INC.
By:
Name:
Title:
COMMUNITY TRANSPORTATION, INC.
By:
Name:
Title:
COACH USA, INC.
By:
Name
Title:
EMPLOYEE:
/s/ FRANK GALLAGHER
Frank Gallagher
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and among Coach USA, Inc., a
Delaware corporation ("Coach USA"), Suburban Transit Corp., Central Jersey
Transit, Inc., H.A.M.L. Corporation, L.E.R. Transportation Company, Mister
Sparkle, Inc., Suburban Management Corp., and Suburban Trails, Inc., New Jersey
corporations and wholly-owned subsidiaries of Coach USA (collectively, the
"Company"), and Kenneth Kuchin ("Employee") is hereby entered into and effective
as of the 17th day of May, 1996, the date of the consummation of the initial
public offering of the common stock of Coach USA. This Agreement hereby
supersedes any other employment agreements or understandings, written or oral,
between the Company, Coach USA and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
business of providing passenger ground transportation services.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
and Coach USA's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and Coach USA,
and future plans with respect thereto, all of which has been and will be
established and maintained at great expense to the Company and Coach USA; this
information is a trade secret and constitutes the valuable good will of the
Company and Coach USA.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as President of the Company and
Coach USA hereby employs Employee as Senior Vice President - Northeast Region of
Coach USA. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a President and a Senior Vice President,
respectively, of the Company and Coach USA and will report directly to each
Board of Directors of the Company (collectively, the "Board") and to the Chief
Executive Officer of Coach USA. Employee hereby accepts this employment upon the
terms and conditions herein contained and, subject to paragraph 1(c), agrees to
devote his time, attention and efforts to promote and further the business of
the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective retroactive to April 1, 1996, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) INCENTIVE BONUS PLAN. For 1996 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be Coach
USA's Incentive Bonus Plan) setting forth the criteria under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company or Coach USA may
have in effect from time to time, benefits provided to Employee under this
clause (i) to be at least equal to such benefits provided to Coach USA
executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide or Coach USA-wide
employee benefits as available from time to time.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any motorcoach passenger transportation business in
direct competition with the Company or Coach USA, within 100 miles of the
Company or Coach USA or where any of the Company's or Coach USA's
subsidiaries conducts business, including any territory serviced by the
Company or Coach USA or any of such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or Coach USA (including the
respective subsidiaries thereof) in a managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the
employ of the Company or Coach USA (including the respective subsidiaries
thereof);
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company or Coach USA (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling products or
services in direct competition with the Company or Coach USA within the
Territory;
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company or Coach USA (including the respective subsidiaries thereof) or
for which the Company or Coach USA made an acquisition analysis, for the
purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
and Coach USA as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company and
Coach USA for which they would have no other adequate remedy, Employee agrees
that the foregoing covenant may be enforced by Coach USA or the Company in the
event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or Coach USA (including Coach USA's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Coach USA (including Coach USA's other subsidiaries); but it is also
the intent of the Company and Employee that such covenants be construed and
enforced in accordance with the changing activities, business and locations of
the Company and Coach USA (including Coach USA's other subsidiaries) throughout
the term of this covenant, whether before or after the date of termination of
the employment of Employee. For example, if, during the term of this Agreement,
the Company or Coach USA (including Coach USA's other subsidiaries) engages in
new and different activities, enters a new business or establishes new locations
for its current activities or business in addition to or other than the
activities or business enumerated under the Recitals above or the locations
currently established therefor, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within 100 miles of
its then-established operating location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or Coach USA
(including Coach USA's other subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (i) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Company or Coach USA (including
Coach USA's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
Coach USA, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Coach USA or the Company of such
covenants. It is specifically agreed that the period of two (2) years following
termination of employment stated at the beginning of this paragraph 3, during
which the agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or Coach
USA to relocate from his present residence to another geographic location in
order to more efficiently carry out his duties and responsibilities under this
Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence, investigate
schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any relocation costs are not deductible for tax purposes. The
general intent of the foregoing is that Employee shall not personally bear any
out-of-pocket cost as a result of the relocation, with an understanding that
Employee will use his best efforts to incur only those costs which are
reasonable and necessary to effect a smooth, efficient and orderly relocation
with minimal disruption to the business affairs of the Company and the personal
life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for five (5) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal . This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater.
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company or Coach USA which materially and adversely affects the operations or
reputation of the Company or Coach USA; (4) Employee's conviction of a felony
crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board of Directors of Coach USA. Should Employee be terminated by
the Company without cause during the first three (3) years of the Term (the
"Initial Term"), Employee shall receive from the Company, in a lump-sum payment
due on the effective date of termination, the base salary at the rate then in
effect for whatever time period is remaining under the Initial Term of this
Agreement or for one (1) year, whichever amount is greater. Should Employee be
terminated by the Company without cause during the final two (2) year period of
the Term, Employee shall receive from the Company, in a lump-sum payment due on
the effective date of termination, the base salary rate then in effect
equivalent to one (1) year of salary. Further, any termination without cause by
the Company shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Employee resigns or otherwise terminates his
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation.
(e) CHANGE IN CONTROL OF COACH USA. In the event of a "Change in Control
of Coach USA" (as defined below) during the Initial Term, refer to paragraph 12
below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Coach USA, the Company and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 herein and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement is terminated as a result of a breach by
the Company.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company, Coach USA
or their representatives, vendors or customers which pertain to the business of
the Company or Coach USA shall be and remain the property of the Company or
Coach USA, as the case may be, and be subject at all times to their discretion
and control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company or Coach USA which is collected by Employee shall be
delivered promptly to the Company without request by it upon termination of
Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to Coach USA and the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Company or Coach USA and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or Coach USA's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or Coach USA, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
or Coach USA against Employee), by reason of the fact that he is or was
performing services under this Agreement, then the Company shall indemnify
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit or proceeding, the Company
or Coach USA agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by
Coach USA shall have a conflict of interest that prevents such counsel from
representing Employee, Employee may engage separate counsel and the Company or
Coach USA shall pay all attorneys' fees of such separate counsel. Further, while
Employee is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Employee cannot be held liable to the
Company or Coach USA for errors or omissions made in good faith where Employee
has not exhibited gross, willful and wanton negligence and misconduct or
performed criminal and fraudulent acts which materially damage the business of
the Company.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Initial Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Initial Term and the
applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Initial Term; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be double the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Coach USA Common Stock, including any options with
accelerated vesting under the provisions of Coach USA's 1996 Long-Term Incentive
Plan, such that he may convert the options to shares of Coach USA Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than Coach USA or an employee benefit plan of
Coach USA, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Coach USA: (A) the individuals
who, as of the closing date of Coach USA's initial public offering,
constitute the Board of Directors of Coach USA (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of Directors
of Coach USA and whose election, or nomination for election, to the Board
of Directors of Coach USA was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of Coach USA and whose election, or nomination for election, to
the Board of Directors of Coach USA was approved by a vote of at least
two-thirds (2/3) of the Original Directors and Additional Original
Directors then still in office (such directors also becoming "Additional
Original Directors" immediately following their election).
(iii) the stockholders of Coach USA shall approve a merger,
consolidation, recapitalization, or reorganization of Coach USA, a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by at least
75% of the holders of outstanding voting securities of Coach USA
immediately prior to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of Coach USA shall approve a plan of complete
liquidation of Coach USA or an agreement for the sale or disposition by
Coach USA of all or a substantial portion of Coach USA's assets (i.e., 50%
or more of the total assets of Coach USA).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
To Employee: Suburban Trails, Inc.
750 Somerset Street
New Brunswick, New Jersey 08901
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
SUBURBAN TRANSIT CORP.
By:
Name:
Title:
CENTRAL JERSEY TRANSIT, INC.
By:
Name:
Title:
H.A.M.L. CORPORATION
By:
Name:
Title:
L.E.R. TRANSPORTATION COMPANY
By:
Name:
Title:
MISTER SPARKLE, INC.
By:
Name:
Title:
SUBURBAN MANAGEMENT CORP.
By:
Name:
Title:
SUBURBAN TRAILS INC.
By:
Name:
Title:
COACH USA, INC.
By:
Name:
Title:
EMPLOYEE:
/s/ KENNETH KUTCHIN
Kenneth Kutchin
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and among Coach USA, Inc., a
Delaware corporation ("Coach USA"), Leisure Time Tours, a New Jersey corporation
and a wholly-owned subsidiary of Coach USA (the "Company"), and Gerald
Mercadante ("Employee") is hereby entered into and effective as of the 17th day
of May, 1996, the date of the consummation of the initial public offering of the
common stock of Coach USA. This Agreement hereby supersedes any other employment
agreements or understandings, written or oral, between the Company, Coach USA
and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
business of providing passenger ground transportation services.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
and Coach USA's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and Coach USA,
and future plans with respect thereto, all of which has been and will be
established and maintained at great expense to the Company and Coach USA; this
information is a trade secret and constitutes the valuable good will of the
Company and Coach USA.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as President of the Company and
Coach USA hereby employs Employee as Senior Vice President - Northeast Region
Operations of Coach USA. As such, Employee shall have responsibilities, duties
and authority reasonably accorded to and expected of a President and a Senior
Vice President, respectively, of the Company and Coach USA and will report
directly to the Board of Directors of the Company (the "Board") and to the Chief
Executive Officer of Coach USA. Employee hereby accepts this employment upon the
terms and conditions herein contained and, subject to paragraph 1(c), agrees to
devote his time, attention and efforts to promote and further the business of
the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective retroactive to April 1, 1996, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) INCENTIVE BONUS PLAN. For 1996 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be Coach
USA's Incentive Bonus Plan) setting forth the criteria under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company or Coach USA may
have in effect from time to time, benefits provided to Employee under this
clause (i) to be at least equal to such benefits provided to Coach USA
executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide or Coach USA-wide
employee benefits as available from time to time.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any motorcoach passenger transportation business in
direct competition with the Company or Coach USA, within 100 miles of the
Company or Coach USA or where any of the Company's or Coach USA's
subsidiaries conducts business, including any territory serviced by the
Company or Coach USA or any of such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or Coach USA (including the
respective subsidiaries thereof) in a managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the
employ of the Company or Coach USA (including the respective subsidiaries
thereof);
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company or Coach USA (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling products or
services in direct competition with the Company or Coach USA within the
Territory;
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company or Coach USA (including the respective subsidiaries thereof) or
for which the Company or Coach USA made an acquisition analysis, for the
purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
and Coach USA as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company and
Coach USA for which they would have no other adequate remedy, Employee agrees
that the foregoing covenant may be enforced by Coach USA or the Company in the
event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or Coach USA (including Coach USA's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Coach USA (including Coach USA's other subsidiaries); but it is also
the intent of the Company and Employee that such covenants be construed and
enforced in accordance with the changing activities, business and locations of
the Company and Coach USA (including Coach USA's other subsidiaries) throughout
the term of this covenant, whether before or after the date of termination of
the employment of Employee. For example, if, during the term of this Agreement,
the Company or Coach USA (including Coach USA's other subsidiaries) engages in
new and different activities, enters a new business or establishes new locations
for its current activities or business in addition to or other than the
activities or business enumerated under the Recitals above or the locations
currently established therefor, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within 100 miles of
its then-established operating location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or Coach USA
(including Coach USA's other subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (i) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Company or Coach USA (including
Coach USA's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
Coach USA, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Coach USA or the Company of such
covenants. It is specifically agreed that the period of two (2) years following
termination of employment stated at the beginning of this paragraph 3, during
which the agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or Coach
USA to relocate from his present residence to another geographic location in
order to more efficiently carry out his duties and responsibilities under this
Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence, investigate
schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any relocation costs are not deductible for tax purposes. The
general intent of the foregoing is that Employee shall not personally bear any
out-of-pocket cost as a result of the relocation, with an understanding that
Employee will use his best efforts to incur only those costs which are
reasonable and necessary to effect a smooth, efficient and orderly relocation
with minimal disruption to the business affairs of the Company and the personal
life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for five (5) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater.
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company or Coach USA which materially and adversely affects the operations or
reputation of the Company or Coach USA; (4) Employee's conviction of a felony
crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board of Directors of Coach USA. Should Employee be terminated by
the Company without cause during the first three (3) years of the Term (the
"Initial Term"), Employee shall receive from the Company, in a lump-sum payment
due on the effective date of termination, the base salary at the rate then in
effect for whatever time period is remaining under the Initial Term of this
Agreement or for one (1) year, whichever amount is greater. Should Employee be
terminated by the Company without cause during the final two (2) year period of
the Term, Employee shall receive from the Company, in a lump-sum payment due on
the effective date of termination, the base salary rate then in effect
equivalent to one (1) year of salary. Further, any termination without cause by
the Company shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Employee resigns or otherwise terminates his
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation.
(e) CHANGE IN CONTROL OF COACH USA. In the event of a "Change in Control
of Coach USA" (as defined below) during the Initial Term, refer to paragraph 12
below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Coach USA, the Company and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 herein and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement is terminated as a result of a breach by
the Company.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company, Coach USA
or their representatives, vendors or customers which pertain to the business of
the Company or Coach USA shall be and remain the property of the Company or
Coach USA, as the case may be, and be subject at all times to their discretion
and control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company or Coach USA which is collected by Employee shall be
delivered promptly to the Company without request by it upon termination of
Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to Coach USA and the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Company or Coach USA and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or Coach USA's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or Coach USA, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
or Coach USA against Employee), by reason of the fact that he is or was
performing services under this Agreement, then the Company shall indemnify
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit or proceeding, the Company
or Coach USA agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by
Coach USA shall have a conflict of interest that prevents such counsel from
representing Employee, Employee may engage separate counsel and the Company or
Coach USA shall pay all attorneys' fees of such separate counsel. Further, while
Employee is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Employee cannot be held liable to the
Company or Coach USA for errors or omissions made in good faith where Employee
has not exhibited gross, willful and wanton negligence and misconduct or
performed criminal and fraudulent acts which materially damage the business of
the Company.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Initial Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Initial Term and the
applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Initial Term; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be double the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Coach USA Common Stock, including any options with
accelerated vesting under the provisions of Coach USA's 1996 Long-Term Incentive
Plan, such that he may convert the options to shares of Coach USA Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than Coach USA or an employee benefit plan of
Coach USA, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Coach USA: (A) the individuals
who, as of the closing date of Coach USA's initial public offering,
constitute the Board of Directors of Coach USA (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of Directors
of Coach USA and whose election, or nomination for election, to the Board
of Directors of Coach USA was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of Coach USA and whose election, or nomination for election, to
the Board of Directors of Coach USA was approved by a vote of at least
two-thirds (2/3) of the Original Directors and Additional Original
Directors then still in office (such directors also becoming "Additional
Original Directors" immediately following their election).
(iii) the stockholders of Coach USA shall approve a merger,
consolidation, recapitalization, or reorganization of Coach USA, a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by at least
75% of the holders of outstanding voting securities of Coach USA
immediately prior to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of Coach USA shall approve a plan of complete
liquidation of Coach USA or an agreement for the sale or disposition by
Coach USA of all or a substantial portion of Coach USA's assets (i.e., 50%
or more of the total assets of Coach USA).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement and
expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
To Employee: Leisure Time Tours
4 Leisure Lane
Mahwah, New Jersey 07430
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LEISURE TIME TOURS
By:
Name
Title:
COACH USA, INC.
By:
Name:
Title:
EMPLOYEE:
/s/ GERALD MERCADANTE
Gerald Mercadante
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Grosvenor Bus Lines,
Inc., a California corporation (the "Company"), a wholly-owned subsidiary of
Coach USA, Inc., a Delaware corporation ("Coach USA"), and Robert K. Werbe
("Employee") is hereby entered into and effective as of the 17th day of May,
1996, the date of the consummation of the initial public offering of the common
stock of Coach USA. This Agreement hereby supersedes any other employment
agreements or understandings, written or oral, between the Company, Coach USA
and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
business of providing passenger ground transportation services.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
and Coach USA's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and Coach USA,
and future plans with respect thereto, all of which has been and will be
established and maintained at great expense to the Company and Coach USA; this
information is a trade secret and constitutes the valuable good will of the
Company and Coach USA.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Chairman of the Board. As such,
Employee shall have responsibilities, duties and authority reasonably accorded
to and expected of a Chairman of the Board and will report directly to the Board
of Directors of the Company (the "Board"). Employee hereby accepts this
employment upon the terms and conditions herein contained and, subject to
paragraph 1(c), agrees to devote his time, attention and efforts to promote and
further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective retroactive to April 1, 1996, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) INCENTIVE BONUS PLAN. For 1996 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be Coach
USA's Incentive Bonus Plan) setting forth the criteria under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization,
disability, dental, life and other insurance plans that the
Company or Coach USA may have in effect from time to time,
benefits provided to Employee under this clause (i) to be at
least equal to such benefits provided to Coach USA executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of
his services pursuant to this Agreement. All reimbursable
expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the
Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for
Employee by the Board and participation in all other
Company-wide or Coach USA-wide employee benefits as available
from time to time.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any motorcoach passenger transportation business
in direct competition with the Company or Coach USA, within 100
miles of the Company or Coach USA or where any of the Company's or
Coach USA's subsidiaries conducts business, including any territory
serviced by the Company or Coach USA or any of such subsidiaries
(the "Territory");
(ii) call upon any person who is, at that time, within the Territory, an
employee of the Company or Coach USA (including the respective
subsidiaries thereof) in a managerial capacity for the purpose or
with the intent of enticing such employee away from or out of the
employ of the Company or Coach USA (including the respective
subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or which has
been, within one (1) year prior to that time, a customer of the
Company or Coach USA (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling
products or services in direct competition with the Company or Coach
USA within the Territory;
(iv) call upon any prospective acquisition candidate, on Employee's own
behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by
the Company or Coach USA (including the respective subsidiaries
thereof) or for which the Company or Coach USA made an acquisition
analysis, for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
and Coach USA as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company and
Coach USA for which they would have no other adequate remedy, Employee agrees
that the foregoing covenant may be enforced by Coach USA or the Company in the
event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or Coach USA (including Coach USA's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Coach USA (including Coach USA's other subsidiaries); but it is also
the intent of the Company and Employee that such covenants be construed and
enforced in accordance with the changing activities, business and locations of
the Company and Coach USA (including Coach USA's other subsidiaries) throughout
the term of this covenant, whether before or after the date of termination of
the employment of Employee. For example, if, during the term of this Agreement,
the Company or Coach USA (including Coach USA's other subsidiaries) engages in
new and different activities, enters a new business or establishes new locations
for its current activities or business in addition to or other than the
activities or business enumerated under the Recitals above or the locations
currently established therefor, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within 100 miles of
its then-established operating location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or Coach USA
(including Coach USA's other subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (i) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Company or Coach USA (including
Coach USA's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
Coach USA, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Coach USA or the Company of such
covenants. It is specifically agreed that the period of two (2) years following
termination of employment stated at the beginning of this paragraph 3, during
which the agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or Coach
USA to relocate from his present residence to another geographic location in
order to more efficiently carry out his duties and responsibilities under this
Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence, investigate
schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any relocation costs are not deductible for tax purposes. The
general intent of the foregoing is that Employee shall not personally bear any
out-of-pocket cost as a result of the relocation, with an understanding that
Employee will use his best efforts to incur only those costs which are
reasonable and necessary to effect a smooth, efficient and orderly relocation
with minimal disruption to the business affairs of the Company and the personal
life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for five (5) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein as in
effect as of the time of renewal. This Agreement and Employee's employment may
be terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater.
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company or Coach USA which materially and adversely affects the operations or
reputation of the Company or Coach USA; (4) Employee's conviction of a felony
crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board of Directors of Coach USA. Should Employee be terminated by
the Company without cause during the first three (3) years of the Term (the
"Initial Term"), Employee shall receive from the Company, in a lump-sum payment
due on the effective date of termination, the base salary at the rate then in
effect for whatever time period is remaining under the Initial Term of this
Agreement or for one (1) year, whichever amount is greater. Should Employee be
terminated by the Company without cause during the final two (2) year period of
the Term, Employee shall receive from the Company, in a lump-sum payment due on
the effective date of termination, the base salary rate then in effect
equivalent to one (1) year of salary. Further, any termination without cause by
the Company shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Employee resigns or otherwise terminates his
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation.
(e) CHANGE IN CONTROL OF COACH USA. In the event of a "Change in Control
of Coach USA" (as defined below) during the Initial Term, refer to paragraph 12
below.
Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Coach USA, the Company and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 herein and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's
failure to pay Employee on a timely basis the amounts to which he is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 16 below, the Company shall pay all amounts and damages
to which Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce his rights hereunder. Further, none of the provisions of
paragraph 3 shall apply in the event this Agreement is terminated as a result of
a breach by the Company.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company, Coach USA
or their representatives, vendors or customers which pertain to the business of
the Company or Coach USA shall be and remain the property of the Company or
Coach USA, as the case may be, and be subject at all times to their discretion
and control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company or Coach USA which is collected by Employee shall be
delivered promptly to the Company without request by it upon termination of
Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to Coach USA and the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Company or Coach USA and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or Coach USA's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or Coach USA, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
or Coach USA against Employee), by reason of the fact that he is or was
performing services under this Agreement, then the Company shall indemnify
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit or proceeding, the Company
or Coach USA agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by
Coach USA shall have a conflict of interest that prevents such counsel from
representing Employee, Employee may engage separate counsel and the Company or
Coach USA shall pay all attorneys' fees of such separate counsel. Further, while
Employee is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Employee cannot be held liable to the
Company or Coach USA for errors or omissions made in good faith where Employee
has not exhibited gross, willful and wanton negligence and misconduct or
performed criminal and fraudulent acts which materially damage the business of
the Company.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Initial Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Initial Term and the
applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Initial Term; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be double the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Coach USA Common Stock, including any options with
accelerated vesting under the provisions of Coach USA's 1996 Long-Term Incentive
Plan, such that he may convert the options to shares of Coach USA Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than Coach USA or an employee benefit plan
of Coach USA, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of
the Company and immediately after such acquisition such Person
is, directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power
of all of the then-outstanding voting securities of the
Company;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Coach USA: (A) the
individuals who, as of the closing date of Coach USA's initial
public offering, constitute the Board of Directors of Coach
USA (the "Original Directors"); (B) the individuals who
thereafter are elected to the Board of Directors of Coach USA
and whose election, or nomination for election, to the Board
of Directors of Coach USA was approved by a vote of at least
two-thirds (2/3) of the Original Directors then still in
office (such directors becoming "Additional Original
Directors" immediately following their election); and (C) the
individuals who are elected to the Board of Directors of Coach
USA and whose election, or nomination for election, to the
Board of Directors of Coach USA was approved by a vote of at
least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors"
immediately following their election);
(iii) the stockholders of Coach USA shall approve a merger,
consolidation, recapitalization, or reorganization of Coach
USA, a reverse stock split of outstanding voting securities,
or consummation of any such transaction if stockholder
approval is not obtained, other than any such transaction
which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity
outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of
outstanding voting securities of Coach USA immediately prior
to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders
not substantially altered in the transaction; or
(iv) the stockholders of Coach USA shall approve a plan of complete
liquidation of Coach USA or an agreement for the sale or
disposition by Coach USA of all or a substantial portion of
Coach USA's assets (i.e., 50% or more of the total assets of
Coach USA).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement and
expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
To Employee: Grosvenor Bus Lines, Inc.
160 Sansome Street, Suite 800
San Francisco, California 94104-3714
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
GROSVENOR BUS LINES, INC.
By:___________________________
Name:
Title:
EMPLOYEE:
/s/ ROBERT K. WERBE
Robert K. Werbe
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Arrow Stage Lines,
Inc., a Nebraska corporation (the "Company"), a wholly-owned subsidiary of Coach
USA, Inc., a Delaware corporation ("Coach USA"), and Charles Busskohl
("Employee") is hereby entered into and effective as of the 17th day of May,
1996, the date of the consummation of the initial public offering of the common
stock of Coach USA. This Agreement hereby supersedes any other employment
agreements or understandings, written or oral, between the Company, Coach USA
and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the
business of providing passenger ground transportation services.
Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of his employment with the Company, has and will
continue to become familiar with and aware of information as to the Company's
and Coach USA's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and Coach USA,
and future plans with respect thereto, all of which has been and will be
established and maintained at great expense to the Company and Coach USA; this
information is a trade secret and constitutes the valuable good will of the
Company and Coach USA.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Chief Executive Officer. As
such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a Chief Executive Officer and will report directly
to the Board of Directors of the Company (the "Board"). Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
paragraph 1(c), agrees to devote his time, attention and efforts to promote and
further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
(a) BASE SALARY. Effective retroactive to April 1, 1996, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) INCENTIVE BONUS PLAN. For 1996 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be Coach
USA's Incentive Bonus Plan) setting forth the criteria under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company or Coach USA may
have in effect from time to time, benefits provided to Employee under this
clause (i) to be at least equal to such benefits provided to Coach USA
executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide or Coach USA-wide
employee benefits as available from time to time.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period of two (2) years immediately following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any motorcoach passenger transportation business in
direct competition with the Company or Coach USA, within 100 miles of the
Company or Coach USA or where any of the Company's or Coach USA's
subsidiaries conducts business, including any territory serviced by the
Company or Coach USA or any of such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or Coach USA (including the
respective subsidiaries thereof) in a managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the
employ of the Company or Coach USA (including the respective subsidiaries
thereof);
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of the
Company or Coach USA (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling products or
services in direct competition with the Company or Coach USA within the
Territory;
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company or Coach USA (including the respective subsidiaries thereof) or
for which the Company or Coach USA made an acquisition analysis, for the
purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
and Coach USA as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company and
Coach USA for which they would have no other adequate remedy, Employee agrees
that the foregoing covenant may be enforced by Coach USA or the Company in the
event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or Coach USA (including Coach USA's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Coach USA (including Coach USA's other subsidiaries); but it is also
the intent of the Company and Employee that such covenants be construed and
enforced in accordance with the changing activities, business and locations of
the Company and Coach USA (including Coach USA's other subsidiaries) throughout
the term of this covenant, whether before or after the date of termination of
the employment of Employee. For example, if, during the term of this Agreement,
the Company or Coach USA (including Coach USA's other subsidiaries) engages in
new and different activities, enters a new business or establishes new locations
for its current activities or business in addition to or other than the
activities or business enumerated under the Recitals above or the locations
currently established therefor, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within 100 miles of
its then-established operating location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or Coach USA
(including Coach USA's other subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, does not violate
clause (i) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Company or Coach USA (including
Coach USA's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
Coach USA, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Coach USA or the Company of such
covenants. It is specifically agreed that the period of two (2) years following
termination of employment stated at the beginning of this paragraph 3, during
which the agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or Coach
USA to relocate from his present residence to another geographic location in
order to more efficiently carry out his duties and responsibilities under this
Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, his immediate family and their
personal property and effects. Such costs may include, by way of example, but
are not limited to, pre-move visits to search for a new residence, investigate
schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all
closing costs on the sale of Employee's present residence and on the purchase of
a comparable residence in the new location; and added income taxes that Employee
may incur if any relocation costs are not deductible for tax purposes. The
general intent of the foregoing is that Employee shall not personally bear any
out-of-pocket cost as a result of the relocation, with an understanding that
Employee will use his best efforts to incur only those costs which are
reasonable and necessary to effect a smooth, efficient and orderly relocation
with minimal disruption to the business affairs of the Company and the personal
life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date hereof and continue for five (5) years (the "Term"),
and, unless terminated sooner as herein provided, shall continue thereafter on a
year-to-year basis on the same terms and conditions contained herein in effect
as of the time of renewal . This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater.
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of the
Company or Coach USA which materially and adversely affects the operations or
reputation of the Company or Coach USA; (4) Employee's conviction of a felony
crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least eighty percent (80%) of the
members of the Board of Directors of Coach USA. Should Employee be terminated by
the Company without cause during the first three (3) years of the Term (the
"Initial Term"), Employee shall receive from the Company, in a lump-sum payment
due on the effective date of termination, the base salary at the rate then in
effect for whatever time period is remaining under the Initial Term of this
Agreement or for one (1) year, whichever amount is greater. Should Employee be
terminated by the Company without cause during the final two (2) year period of
the Term, Employee shall receive from the Company, in a lump-sum payment due on
the effective date of termination, the base salary rate then in effect
equivalent to one (1) year of salary. Further, any termination without cause by
the Company shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Employee resigns or otherwise terminates his
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation.
(e) CHANGE IN CONTROL OF COACH USA. In the event of a "Change in Control
of Coach USA" (as defined below) during the Initial Term, refer to paragraph 12
below.
Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Coach USA, the Company and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 herein and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's
failure to pay Employee on a timely basis the amounts to which he is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 16 below, the Company shall pay all amounts and damages
to which Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce his rights hereunder. Further, none of the provisions of
paragraph 3 shall apply in the event this Agreement is terminated as a result of
a breach by the Company.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company, Coach USA
or their representatives, vendors or customers which pertain to the business of
the Company or Coach USA shall be and remain the property of the Company or
Coach USA, as the case may be, and be subject at all times to their discretion
and control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company or Coach USA which is collected by Employee shall be
delivered promptly to the Company without request by it upon termination of
Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to Coach USA and the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Company or Coach USA and which Employee
conceives as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or Coach USA's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or Coach USA, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
or Coach USA against Employee), by reason of the fact that he is or was
performing services under this Agreement, then the Company shall indemnify
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit or proceeding, the Company
or Coach USA agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by
Coach USA shall have a conflict of interest that prevents such counsel from
representing Employee, Employee may engage separate counsel and the Company or
Coach USA shall pay all attorneys' fees of such separate counsel. Further, while
Employee is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Employee cannot be held liable to the
Company or Coach USA for errors or omissions made in good faith where Employee
has not exhibited gross, willful and wanton negligence and misconduct or
performed criminal and fraudulent acts which materially damage the business of
the Company.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Initial Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Initial Term and the
applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause during the Initial Term; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be double the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing. Further, Employee will be given sufficient
time and opportunity to elect whether to exercise all or any of his vested
options to purchase Coach USA Common Stock, including any options with
accelerated vesting under the provisions of Coach USA's 1996 Long-Term Incentive
Plan, such that he may convert the options to shares of Coach USA Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than Coach USA or an employee benefit plan of
Coach USA, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner
of voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of the Company;
(ii) the following individuals no longer constitute a majority of
the members of the Board of Directors of Coach USA: (A) the individuals
who, as of the closing date of Coach USA's initial public offering,
constitute the Board of Directors of Coach USA (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of Directors
of Coach USA and whose election, or nomination for election, to the Board
of Directors of Coach USA was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of Coach USA and whose election, or nomination for election, to
the Board of Directors of Coach USA was approved by a vote of at least
two-thirds (2/3) of the Original Directors and Additional Original
Directors then still in office (such directors also becoming "Additional
Original Directors" immediately following their election);
(iii) the stockholders of Coach USA shall approve a merger,
consolidation, recapitalization, or reorganization of Coach USA, a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by at least
75% of the holders of outstanding voting securities of Coach USA
immediately prior to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of Coach USA shall approve a plan of complete
liquidation of Coach USA or an agreement for the sale or disposition by
Coach USA of all or a substantial portion of Coach USA's assets (i.e., 50%
or more of the total assets of Coach USA).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Coach USA, Inc.
4801 Woodway, Suite 300E
Houston, Texas 77056
To Employee: Arrow Stage Lines, Inc.
4001 S. 34th Street
Phoenix, Arizona 85040
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company.
17. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
ARROW STAGE LINES, INC.
By:___________________________
Name:
Title:
EMPLOYEE:
/s/ CHARLES BUSSKOHL
Charles Busskohl
EXHIBIT 10.14
Coach USA, Inc.
4801 Woodway - Suite 300E
Houston, Texas 77056
May 14, 1996
To the Stockholders of the Companies referenced below:
Reference is made to those certain Agreements and Plans of Organization (the
"Agreements"), each dated as of March 21, 1996, by and among the parties as
reflected on Rider A attached hereto. Each of the undersigned hereby agrees, and
Coach USA, Inc., a Delaware corporation, ("Coach"), hereby agrees solely with
respect to Section 5 hereof, as follows:
1. NONCOMPETITION. Each of the undersigned hereby agrees to
adhere to and be bound by the terms, covenants, restrictions, prohibitions and
limitations of Section 13 of the Agreements as if each of the undersigned was a
STOCKHOLDER as defined therein.
2. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Each of the
undersigned hereby agrees to adhere to and be bound by the terms, covenants,
restrictions, prohibitions and limitations of Section 14.1, 14.3 and 14.4 of the
Agreements as if each of the undersigned was a STOCKHOLDER as defined therein,
and agrees to adhere to and be bound by the terms, covenants, restrictions,
prohibitions and limitations of Sections 14.2, 14.3 and 14.4 of the Agreements
as if each was COACH and NEWCO as defined therein.
3. TRANSFER RESTRICTIONS. Each of the undersigned hereby
agrees to adhere to and be bound by the terms, covenants, restrictions,
prohibitions and limitations of Section 15 of the Agreements with respect to all
of the shares of Coach Common Stock owned of record by each of the undersigned
prior to the Funding and Consummation Date (as defined in the Agreements) as if
each of the undersigned was a STOCKHOLDER as defined therein. Each of the
undersigned expressly acknowledges and agrees that the stock certificates
evidencing all of such shares shall bear the restrictive legend contained in
Section 15.1 of the Agreements.
4. FEDERAL SECURITIES ACT REPRESENTATIONS. Each of the
undersigned hereby agrees to adhere to and be bound by the terms, covenants,
restrictions, prohibitions and limitations of Section 16 of the Agreements with
respect to all of the shares of Coach Common Stock owned of record by the
undersigned as of the Funding and Consummation Date as if each of the
undersigned was a STOCKHOLDER as defined therein. Further, each of the
undersigned expressly acknowledges and agrees that the stock certificates
evidencing all of such shares shall bear the restrictive legend contained in
Section 16.1 of the Agreements.
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5. REGISTRATION RIGHTS. Coach hereby grants each of the
undersigned the same piggyback registration rights set forth in Section 17.1 of
the Agreements granted to the STOCKHOLDERS (as defined in the Agreements),
subject to the terms, covenants, restrictions, prohibitions and limitations of
Sections 17.3, 17.4 and 17.5 of the Agreements, which the undersigned agree to
adhere to and to be bound by.
6. COUNTERPARTS. This letter may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
2
IN WITNESS WHEREOF, the parties hereto have set their hands as
of the day and year first above written.
/s/ RICHARD H. KRISTINIK
/s/ DOUGLAS M. CERNY
/s/ LAWRENCE K. KING
Notre Capital Ventures, II L.L.C.
By: /s/ STEVEN HARTER
Name: Steven Harter
Title: President
/s/ STEVEN T. ZELLERS
/s/ RAYMOND TURNER
/s/ JON GARFIELD
/s/ DOMINIC PUOPOLO
3
M Three Trust
By:
Name:
Title: Trustee
/s/ RONALD SHAPSS
/s/ WILLIAM J. LYNCH
ACCEPTED AND AGREED, as of the day and year first above written as to Section 5.
COACH USA, INC.
By: /s/ DOUGLAS M. CERNY
Douglas M. Cerny
Senior Vice President
4
RIDER A
(1) Coach USA, Inc., a Delaware corporation ("Coach"),
Arrow Stage Lines, Inc., a Nebraska corporation, Arrow
Stage Acquisition Corp., a Delaware corporation and the
Stockholders named therein.
(2) Coach, Leisure Time Tours, a New Jersey corporation,
Leisure Line Acquisition Corp., a Delaware corporation
and the Stockholders named therein.
(3) Coach, Cape Transit Corp., a New Jersey corporation,
Adventure Trails Acquisition Corp., a Delaware
corporation and the Stockholders named therein.
(4) Coach, Grosvenor Bus Lines, Inc., a California
corporation, Grayline Acquisition Corp., a Delaware
corporation and the Stockholders named therein.
(5) Coach, Community Coach, Inc. and certain affiliated
entities, each of which is a New Jersey corporation,
Community Coach Acquisition Corp. and certain
affiliated entities, each of which is a Delaware
corporation and the Stockholders named therein.
(6) Coach, Suburban Transit Inc. and certain affiliated
entities, each of which is a New Jersey corporation,
Suburban Transit Acquisition Corp. and certain
affiliated entities, each of which is a Delaware
corporation and the Stockholders named therein.
5
EXHIBIT 10.15
AGREEMENT OF LEASE
BETWEEN
GERDANEU, INC.,
LANDLORD
AND
LEISURE TIME TOURS,
TENANT
------------------------------------------
DATED: MAY 13, 1996
------------------------------------------
PREMISES
4 LEISURE LANE
MAHWAH, NEW JERSEY 07430
BLOCK 26, LOTS 3 AND 4 ON THE
OFFICIAL TAX MAP OF THE TOWNSHIP OF MAHWAH
AGREEMENT OF LEASE, made as of the 13th day of May, 1996, between GERDANEU,
INC., a New Jersey corporation, having an address at 4 Leisure Lane, Mahwah, New
Jersey 07430, as Landlord, and LEISURE TIME TOURS, a New Jersey corporation,
having an address at 4801 Woodway, Suite 300E, Houston, Texas 77056, as
Tenant.
WITNESSETH:
WHEREAS, the Landlord is the owner of certain premises known as and by the
street address of 4 Leisure Lane, Mahwah, New Jersey 07430 and known and
designated on the Official Tax Map of the Township of Mahwah as Block 26, Lots 3
and 4, as more particularly described on Schedule "A", annexed hereto and made a
part hereof; and
WHEREAS, the Landlord desires to rent the aforementioned premises to the
Tenant and the Tenant desires to rent the aforementioned premises from the
Landlord.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, for themselves,
as well as their respective legal representatives, heirs, successors and
assigns, hereby agree as follows:
ARTICLE 1
GLOSSARY
For the purposes of this Lease, the following terms shall have the meanings
indicated below:
"ADA" shall have the meaning set forth in Section 9.1
hereof.
"ADDITIONAL RENT" shall have the meaning set forth in
Section 2.2 hereof.
"ALTERATION" or "ALTERATIONS" shall mean any and all alterations,
decorations, installations, repairs, improvements, additions, replacements or
other physical changes of any nature whatsoever in or about the Premises at any
time, now or hereafter.
"APPLICABLE PRICE INDEX" shall have the meaning set forth in Section
8.1(iv) hereof.
"APPLICABLE RATE" shall mean the lesser of (x) three percentage points
above the then current Base Rate, or (y) the maximum rate permitted by
applicable law.
"BANKRUPTCY CODE" shall mean 11 U.S.C. Section 101 ET SEQ., or any statute,
federal or state, of similar nature and purpose, now or hereafter.
"BASE INDEX" shall have the meaning set forth in
Section 8.1(iii) hereof.
"BASE RATE" shall mean the rate of interest publicly announced from time to
time by Citibank, N.A., or its successor, as its "base rate" (or such other term
as may be used by Citibank, N.A., from time to time, for the rate presently
referred to as its "base rate").
"BUILDING SYSTEMS" shall mean the mechanical, electrical, sanitary,
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service or support systems of any nature whatsoever located at or on the
Premises, BUT shall not include installations made by Tenant or fixtures or
appliances (regardless of whether or not such fixtures or appliances are owned
by the Tenant or the Landlord).
"BUILDING INSURANCE" shall have the meaning set forth in
Section 11.2 hereof.
"BUREAU" shall have the meaning set forth in
Section 8.1(i) hereof.
"BUSINESS DAYS" shall mean all days, excluding Saturdays, Sundays and all
days observed as holidays by the State of New Jersey or the federal government.
"COMMENCEMENT DATE" May 13, 1996.
"DEFICIENCY" shall have the meaning set forth in Section
18.2(A)(2) hereof.
"ECRA" shall have the meaning set forth in Section 9.2(B)
hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in
Section 17.1 hereof.
"EXPIRATION DATE" shall mean the Fixed Expiration Date or such other date
on which the Term ends pursuant to any of the terms, conditions or covenants of
this Lease or pursuant to law.
"FIXED EXPIRATION DATE" May 12, 2006.
"FIXED RENT" $32,172.00 per annum ($2,681.00 per month) for the first
Lease Year (as such term is hereinafter defined) to be adjusted thereafter on
each anniversary date from and after the Commencement Date in accordance with
the provisions of Article 8 of this Lease.
"GOVERNMENT AUTHORITY" or "GOVERNMENT AUTHORITIES" shall
mean the United States of America, the State of New Jersey, the
3
Township of Mahwah, and/or any political subdivision thereof and any agency,
department, commission, board, bureau or instrumentality of any of the
foregoing, now existing or hereafter created, having jurisdiction over the
Premises or any portion thereof.
"HAZARDOUS MATERIALS" shall have the meaning set forth in
Section 9.2(A) hereof.
"INCREASE NOTICE" shall have the meaning set forth in
Section 8.3 hereof.
"INDEMNITEES" shall mean Landlord, its shareholders, officers, directors,
employees, agents and contractors (and the partners, shareholders, officers,
directors and employees of any of the Landlord's agents or contractors).
"INITIAL TERM" shall mean ten (10) years.
"LANDLORD", on the date as of which this Lease is made, shall mean
Gerdaneu, Inc., a New Jersey corporation, but thereafter, "Landlord" shall mean
any fee owner of the Premises.
"LEASE YEAR" shall mean each twelve (12) month period commencing on each
anniversary date from and after the Commencement Date.
"MORTGAGE(S)" shall mean any trust indenture or mortgage which may now or
hereafter affect the Premises and all extensions, supplements, amendments,
modifications, consolidations, refinancings and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"MORTGAGEE(S)" shall mean any trustee or mortgagee or holder
of a Mortgage.
"NJDEP" shall have the meaning set forth in Section 9.2(B)
hereof.
"NOTICE(S)" shall have the meaning set forth in Section
27.1(A) hereof.
"OPTION" or "OPTIONS" shall have the meaning set forth in
Section 31.1 hereof.
"OPTION PERIOD" or "OPTION PERIODS" shall have the meaning set forth in
Section 31.1 hereof.
"PARTIES" shall have the meaning set forth in Section 34.2
hereof.
4
"PERMITTED USE" shall mean general, executive and administrative offices,
parking and terminal facilities in connection with Tenant's business as a motor
vehicle transportation company and uses related thereto including the evolution
of the Tenant's business consistent with the evolution of the motor vehicle
transportation industry in general.
"PERSON(S) OR PERSON(S)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"PERSONS WITHIN TENANT'S CONTROL" shall mean and include Tenant, all of
Tenant's respective shareholders, directors, officers, agents, contractors,
sub-contractors, servants, employees, licensees and invitees as well as any of
the heirs, successors, representatives and assigns of any of the foregoing.
"PREMISES" shall mean all that certain plot, piece and parcel of land,
together with all buildings and improvements thereon erected, known as and by
the street address of 4 Leisure Lane, Mahwah, New Jersey 07430 and known and
designated on the Official Tax Map of the Township of Mahwah as Block 26, Lots 3
and 4, as more particularly described on Schedule "A", annexed hereto and made a
part hereof.
"PRICE INDEX" shall have the meaning set forth in
Section 8.1(ii) hereof.
"RENTAL" shall mean and be deemed to include Fixed Rent, Additional Rent
and any other sums payable, now or hereafter, by Tenant hereunder.
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, retroactive and prospective, of all
Governmental Authorities, now existing or hereafter created, which affect,
directly or indirectly, the Premises and/or the maintenance, use, operation or
occupation of the Premises, (ii) all requirements, obligations and conditions of
all instruments of record on the date of this Lease, and (iii) all requirements,
obligations and conditions imposed by any fire rating agency or by the carrier
of Landlord's hazard insurance policy for the Premises.
"TAXES" shall have the meaning set forth in Section 3.1
hereof.
"TENANT", on the date as of which this Lease is made, shall mean the Tenant
named in this Lease, but thereafter "Tenant" shall mean only the tenant under
this Lease at the time in question; provided, however, that the Tenant named in
this Lease and any and all successor tenant(s) hereunder shall not be
5
released and relieved from any liability hereunder in the event of any
assignment of this Lease or a sublet, in whole or in part, of the Premises.
"TENANT'S PROPERTY" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings and other
movable items of personal property owned by the Tenant.
"TERM", on the date as of which this Lease is made shall mean ten (10)
years, but thereafter shall be deemed to include any Option Period for which the
Tenant exercises its Option pursuant to the provisions of Article 31 hereof.
"TERMINATION NOTICE PERIOD" shall have the meaning set forth in Section
27.1 hereof.
"UNAVOIDABLE DELAYS" shall have the meaning set forth in
Article 25 hereof.
ARTICLE 2
DEMISE; PREMISES; TERM; RENT
SECTION 2.1. Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the Premises for the Term to commence on the Commencement Date and to
end on the Fixed Expiration Date, unless earlier terminated as provided herein.
SECTION 2.2. Commencing upon the Commencement Date, Tenant shall pay to
Landlord, in lawful money of the United States of America, without notice or
demand, by good and sufficient check at the office of Landlord or at such other
place as Landlord may designate from time to time, the following:
(A) the Fixed Rent, as such term is defined in Article 1 hereof,
which shall be payable in equal monthly installments in advance on the first day
of each and every calendar month during the Term, except that the first monthly
installment of Fixed Rent shall be payable by Tenant upon execution and delivery
of this Lease; and
(B) additional rent ("ADDITIONAL RENT") consisting of all other sums
of money as shall become due from and be payable by Tenant hereunder (for
default in the payment of which Landlord shall have the same remedies as for a
default in the payment of Fixed Rent).
SECTION 2.3. If the Commencement Date is other than the first day of a
calendar month, or the Fixed Expiration Date is
6
other than the last day of a calendar month, Fixed Rent for such month shall be
prorated on a per diem basis.
SECTION 2.4. Tenant shall pay the Fixed Rent and Additional Rent when due
without abatement, deduction, counterclaim, setoff or defense of any nature
whatsoever.
ARTICLE 3
REAL ESTATE TAXES; MORTGAGE(S)
SECTION 3.1. The Tenant represents, warrants, covenants and agrees that it
shall, within five (5) days of written demand by the Landlord to the Tenant, pay
to the Landlord, as Additional Rent, any and all Taxes (as hereinafter defined)
of any nature whatsoever assessed or imposed against the Premises for each and
every Lease Year during the Term of this Lease. The Landlord hereby agrees that
any demand given by the Landlord to the Tenant pursuant to the provisions of
this Section 3.1 shall include an accurate copy of the invoice, statement, bill
or similar document issued by the relevant Governmental Authority or
Governmental Authorities, as the case may be, with respect to the Taxes for
which payment is demanded. For purposes of this Section 3.1, "TAXES" shall
include, without limitation, any and all taxes assessed against the Premises,
all personal property taxes, all ad valorem taxes and any and all other taxes
assessed against the Premises by any Governmental Authority, now or hereafter.
SECTION 3.2. The Tenant represents, warrants and covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage or
Mortgages, as the case may be, encumbering the Premises, now or hereafter,
during the Term of this Lease including, but not limited to, any extensions,
supplements, amendments, modifications, consolidations, refinancings and
replacements of any such Mortgage or Mortgages provided that:
(A) the principal balance of any Mortgage subsequent to any extension,
supplement, amendment, modification, consolidation, refinancing or
replacement shall not exceed the outstanding principal balance of the
Mortgage which is to be extended, supplemented, amended, modified,
consolidated, refinanced or replaced at the time of such extension,
supplement, amendment, modification, consolidation, refinancing or
replacement, as the case may be; and
7
(B) the amount of the monthly payments of principal and interest payable
pursuant to the terms and conditions of any Mortgage subsequent to any
extension, supplement, amendment, modification, consolidation, refinancing
or replacement shall not exceed the amount of the monthly payments with
respect to the Mortgage which is to be extended, supplemented, amended,
modified, consolidated, refinanced or replaced at the time of such
extension, supplement, amendment, modification, consolidation, refinancing
or replacement, as the case may be; and
(C) the terms of any extended, supplemented, amended, modified,
consolidated, refinanced or replaced Mortgage shall be no more financially
onerous than the provisions of the such Mortgage prior to such extension,
supplement, amendment, modification, consolidation, refinancing or
replacement, as the case may be; and
(D) the term of any Mortgage extended, supplemented, amended, modified,
consolidated, refinanced or replaced shall be no less than the term of
such Mortgage prior to such extension, supplementation, amendment,
modification, consolidation, refinancing or replacement, as the case may
be.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 shall not apply with respect to any amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage
securing additional indebtedness (above and beyond any Mortgage or Mortgages
existing as of the date hereof) which first becomes a recorded lien on the
Premises subsequent to the date of this Lease and which is executed and
delivered by the Landlord without the consent of the Tenant. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant for payment of
Additional Rent pursuant to the provisions of this Section 3.2 shall include,
ONLY to the extent provided to the Landlord by the Mortgagee, an accurate copy
of the invoice, statement, bill or similar document issued by such Mortgagee or
Mortgagees, as the case may be, with respect to any amount for which payment of
Additional Rent is demanded by the Landlord under and pursuant to the provisions
of this Section 3.2.
8
ARTICLE 4
UTILITIES
SECTION 4.1. The Tenant represents, warrants, covenants and agrees that it
shall, within five (5) days of written demand by the Landlord to the Tenant, pay
to the Landlord, as Additional Rent, any and all charges incurred by the
Landlord for any and all utilities supplied to the Premises including, without
limitation, electricity, water, heating oil and/or natural gas. The Landlord
hereby agrees that any demand given by the Landlord to the Tenant pursuant to
the provisions of this Section 4.1 shall include an accurate copy of the
invoice, statement, bill or similar document issued by the public utility or any
private company providing such utility, as the case may be, with respect to any
utility for which payment is demanded.
SECTION 4.2. Landlord shall not be liable in any way to Tenant for any
interruption or failure of or defect in the supply or character of any utility
furnished to the Premises, now or hereafter, or for any loss, damage or expense
Tenant may sustain if either the quantity or character of any utility is changed
or is no longer suitable for Tenant's requirements, whether by reason of any
requirement, act or omission of the public utility serving the Premises or for
any other reason whatsoever. Notwithstanding the provisions of this Section 4.2,
the Landlord shall be responsible for any and all actual damages suffered by the
Tenant as a result of any interruption of utility service caused solely by the
Landlord's failure to remit (prior to the expiration of any applicable grace
period) to the appropriate public utility or private company providing such
utility, as the case may be, any amount which has been paid by the Tenant to the
Landlord pursuant to the provisions of Section 4.1 hereof.
SECTION 4.3. Tenant shall at all times comply with the rules, regulations,
terms and conditions applicable to service, equipment, wiring, as well as any
and all requirements of the public utility supplying electricity to the
Premises. Tenant shall not, without Landlord's prior written consent in each
instance (which consent may be withheld by the Landlord in its reasonable
discretion), connect any fixtures, machinery, appliances or equipment to the
Premises electric distribution system or make any alteration or addition to
Tenant's machinery, appliances or equipment, or the electric system of the
Premises, if the effect thereof would be to increase the electrical load in the
Premises. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall be provided by Landlord and the cost thereof
shall be deemed Additional Rent due hereunder and shall be forthwith paid by
Tenant upon Landlord's demand.
9
SECTION 4.4. If any Taxes are imposed upon Landlord with respect to any
utility furnished as a service to Tenant by any Governmental Authority, Tenant
agrees that such Taxes shall be reimbursed by Tenant to Landlord upon written
demand. The Landlord hereby agrees that any demand given by the Landlord to the
Tenant pursuant to the provisions of this Section 4.4 shall include an accurate
copy of the invoice, statement, bill or similar document issued by the relevant
Governmental Authority or Governmental Authorities, as the case may be, with
respect to the Taxes for which payment is demanded.
ARTICLE 5
USE AND OCCUPANCY
SECTION 5.1. Tenant shall use and occupy the Premises for the Permitted Use
and for no other purpose of any nature whatsoever.
ARTICLE 6
ALTERATIONS
SECTION 6.1.
(A) (1) Prior to making any Alterations, Tenant shall (i) submit to
Landlord detailed plans and specifications for approval by the Landlord
(including layout, architectural, electrical, mechanical and structural
drawings) and that comply with all Requirements for each proposed Alteration,
and Tenant shall not commence any such Alteration without first obtaining
Landlord's approval of such plans and specifications, (ii) at Tenant's expense,
obtain all permits, approvals and certificates required by any Governmental
Authorities, and (iii) furnish to Landlord duplicate original policies or
certificates thereof for worker's compensation insurance (covering all persons
to be employed by Tenant, and Tenant's contractors and subcontractors, in
connection with such Alteration) and commercial general liability insurance
(including premises operation, bodily injury, personal injury, death,
independent contractors, products and completed operations, broad form
contractual liability and broad form property damage coverages) in such form,
with such companies, for such periods and in such amounts as Landlord may
reasonably approve, naming Landlord and its agents and any Mortgagee, as
additional insureds. Upon completion of such Alteration, Tenant, at Tenant's
expense, shall obtain certificates of final approval of such Alterations
required by any Governmental Authority and shall furnish Landlord with copies
thereof, together with the "as-built" plans and specifications
10
for such Alterations. All Alterations shall be made and performed in accordance
with the plans and specifications therefor as approved by Landlord and otherwise
in accordance with all Requirements. All materials and equipment to be
incorporated in the Premises as a result of any Alterations shall be first
quality and no such materials or equipment shall be subject to any lien,
encumbrance, chattel mortgage, title retention or security agreement.
(2) Landlord reserves the right to disapprove any plans and
specifications, in whole or in part, to reserve approval of items shown thereon
pending its review and approval of other plans and specifications, and to
condition its approval upon Tenant making revisions to the plans and
specifications or supplying additional information. Tenant agrees that any
review or approval by Landlord of any plans and/or specifications with respect
to any Alteration is solely for Landlord's benefit, and without any
representation or warranty whatsoever to Tenant or any other Person with respect
to the adequacy, correctness or sufficiency thereof or with respect to
Requirements or otherwise.
(B) All Alterations shall become a part of the Premises and shall be
Landlord's property from and after the installation thereof and may not be
removed or changed without Landlord's prior written consent. Notwithstanding the
foregoing, Landlord, upon notice given at least thirty (30) days prior to the
Expiration Date or upon such shorter notice as is reasonable under the
circumstances upon the earlier expiration of the Term, may require Tenant to
remove any specified Alterations and to repair and restore in a good and
workmanlike manner any damage to the Premises caused by such removal. All
Tenant's Property shall remain the property of Tenant and, on or before the
Expiration Date or earlier end of the Term, may be removed from the Premises by
Tenant at Tenant's sole cost and option; provided, however, that Tenant shall
repair and restore in a good and workmanlike manner any damage to the Premises
caused by such removal. The provisions of this Section 6.1(B) shall survive the
expiration or earlier termination of this Lease.
(C) (1) Any and all Alterations shall be performed, at Tenant's sole
cost and expense, by contractors, subcontractors or mechanics previously
approved in writing by Landlord. Prior to making an Alteration, at Tenant's
request, Landlord shall furnish Tenant with a list of contractors who may
perform Alterations to the Premises on behalf of Tenant.
(2) Notwithstanding the terms and conditions of Section
6.1(C)(1) hereof, with respect to any Alteration affecting any Building Systems,
(i) Tenant shall only employ Landlord's designated contractor, and (ii) the
Alteration shall, at Tenant's expense, be designed by Landlord's engineer.
11
(D) (1) Any mechanic's lien filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant shall be cancelled or discharged by Tenant, at Tenant's expense, within
twenty (20) days after such lien shall be filed, by payment or filing of the
bond required by law, and Tenant shall indemnify and hold Landlord harmless from
and against any and all costs, expenses, claims, losses or damages resulting
therefrom by reason thereof.
(2) If Tenant shall fail to discharge such mechanic's lien
within the aforesaid period, then, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, discharge the same either
by paying the amount claimed to be due or by procuring the discharge of such
lien by deposit in court or bonding, and in any such event, Landlord shall be
entitled, if Landlord so elects, to compel the prosecution of an action for the
foreclosure of such mechanics lien by the lienor and to pay the amount of the
judgment, if any, in favor of the lienor, with interest, costs and allowances.
(3) Any amount paid by Landlord for any of the aforesaid charges
and for all expenses of Landlord (including, but not limited to, attorneys' fees
and disbursements) incurred in defending any such action, discharging said lien
or in procuring the discharge of said lien, with interest on all such amounts at
the maximum legal rate of interest then chargeable to Tenant from the date of
payment, shall be repaid by Tenant within ten (10) days after written demand
therefor, and all amounts so repayable, together with such interest, shall be
considered Additional Rent.
SECTION 6.2. Landlord, at Tenant's expense, and upon the request of Tenant,
shall join in any applications for any permits, approvals or certificates
required to be obtained by Tenant in connection with any permitted Alteration
(provided that the provisions of the applicable Requirements shall require that
Landlord join in such application) and shall otherwise cooperate with Tenant in
connection therewith; provided, however, that Landlord shall not be obligated to
incur any cost or expense or liability in connection therewith.
SECTION 6.3. Tenant shall furnish to Landlord copies of records of all
Alterations and of the cost thereof within fifteen (15) days after the
completion of such Alterations.
SECTION 6.4. Tenant shall not, at any time prior to or during the Term,
directly or indirectly, employ, or permit the employment of, any contractor,
mechanic or laborer in the Premises, whether in connection with any Alteration
or otherwise, if such employment would interfere or cause any conflict with
other contractors, mechanics or laborers engaged in the
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construction, maintenance or operation of the Premises by Landlord, Tenant or
others, or of any other property owned by Landlord. In the event of any such
interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Premises immediately.
ARTICLE 7
REPAIRS; REPLACEMENTS; MAINTENANCE
SECTION 7.1. Tenant, at Tenant's sole cost and expense, shall take good
care of the Premises and the fixtures, equipment and appurtenances therein and
make all repairs and replacements thereto, BOTH STRUCTURAL AND NON-STRUCTURAL,
of any nature whatsoever as and when needed to preserve them in good working
order and condition, except for (a) reasonable wear and tear and (b)
obsolescence. If Tenant shall fail, after five (5) days notice (or such shorter
period as may be required because of an emergency), to proceed with due
diligence to make repairs required to be made by Tenant, the same may be made by
Landlord, at the expense of Tenant, and the expenses thereof incurred by
Landlord, with interest thereon at the Applicable Rate, shall be paid to
Landlord, as Additional Rent, within ten (10) days after rendition of a bill or
statement therefor. Tenant shall give Landlord prompt notice of any defective
condition in any Building Systems located in, servicing or passing through the
Premises.
ARTICLE 8
INCREASES IN FIXED RENT
SECTION 8.1. For purposes of this Lease:
(i) "BUREAU" means the Federal Bureau of Labor Statistics or any
successor agency that shall issue the indices or data referred to in
subparagraph (ii) below.
(ii) "PRICE INDEX" means the Consumer Price Index for All Urban
Consumers for the New York-Northeastern New Jersey geographic area,
1982-1984=100, issued from time to time by the Bureau or any other successor
measure hereafter employed by the Bureau in lieu of such price index that
measures the cost of living for such geographic area, failing such successor,
the most nearly comparable index (reflecting changes in costs of housing
including rental housing, energy and services), published by a Governmental
Authority, appropriately adjusted. Furthermore, if hereafter the Price Index is
converted to a different standard reference base or a substantial change is made
in the terms or
13
number of items contained therein, the Price Index shall be adjusted (with the
use of such conversion factor, formula or table as is published by the Bureau,
or if it shall not publish same, the conversion factor published by Prentice
Hall, Inc., or, failing such publication, by any other nationally recognized
publisher of similar statistical information) to the figure that would have
resulted if not for such conversion or change.
(iii)"BASE INDEX" means the Price Index issued for April, 1996.
(iv) "APPLICABLE PRICE INDEX" for a Lease Year means the Price
Index issued for April of the year in which such Lease Year commences.
SECTION 8.2. (A) Tenant shall pay to Landlord Fixed Rent in the amount set
forth in Article 1 of this Lease for the first Lease Year.
(B) For each Lease Year subsequent to the first Lease Year
(and for each and every Lease Year thereafter during the Term hereof), the
Tenant shall pay to the Landlord, as Fixed Rent, an amount equal to the GREATER
of:
(I) an amount equal to the sum of (x)
the percentage by which the Applicable Price Index for such Lease Year exceeds
the Applicable Price Index for the immediately preceding Lease Year, multiplied
by the Fixed Rent payable for such immediately preceding Lease Year and (y) such
Fixed Rent payable for the immediately preceding Lease Year (e.g., if the Base
Index is 200, the Applicable Price Index for the second Lease Year is 203, the
Applicable Price Index for the third Lease Year is 215, and the Fixed Rent
payable for the second Lease Year is $50,000.00, then the Applicable Price Index
for the third Lease Year exceeds the Applicable Price Index for the second Year
by 5.91% (i.e., the difference between 203 and 215), and the Fixed Rent derived
from the aforesaid calculation shall be $52,955.75 (5.91% of $50,000.00,
$2,955.00, plus $50,000.00); or
(II) an amount equal to the sum of (x)
five (5%) percent of the Fixed Rent for the immediately preceding Lease Year and
(y) such Fixed Rent for the immediately preceding Lease Year (e.g. if the Fixed
Rent for the second Lease Year is $50,000.00, the Fixed Rent derived from the
aforesaid calculation for the third Lease Year shall be 5% of $50,000.00, i.e.,
$2,500.00, plus $50,000.00 or $52,500.00).
The Landlord and the Tenant hereby acknowledge that it is the mutual intention
of the parties that for each and every Lease Year subsequent to the first Lease
Year during the Term hereof, the Fixed Rent payable by the Tenant to the
Landlord hereunder shall be increased by no less than five (5%) percent for each
and
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every Lease Year during the Term hereof subsequent to the first Lease Year.
SECTION 8.3. Upon notice by the Landlord to the Tenant of an increase in
the Fixed Rent pursuant to the provisions of this Article 8 ("INCREASE NOTICE"),
the Tenant shall pay the Fixed Rent as set forth in the Increase Notice.
Additionally, within ten (10) days of the date of the Increase Notice, the
Tenant shall pay any retroactive increases in Fixed Rent as set forth in the
Increase Notice.
ARTICLE 9
REQUIREMENTS OF LAW
SECTION 9.1. Tenant shall not do, and shall not permit any act or thing in
or upon the Premises which will invalidate or be in conflict with the
certificate of occupancy for the Premises or violate any Requirements. Tenant
shall, at Tenant's sole cost and expense, immediately take all action, including
but not limited to, making any required Alterations necessary to comply with all
Requirements [including, but not limited to, the Americans With Disabilities Act
of 1990 (the "ADA"), as modified and supplemented from time to time] which shall
or may impose any violation, order or duty upon Landlord or Tenant arising from,
or in connection with, the Premises, Tenant's occupancy, use or manner of use of
the Premises (including, without limitation, any occupancy, use or manner of use
that constitutes a "place of public accommodation" under the ADA), or any
installations in the Premises, or required by reason of a breach of any of
Tenant's covenants or agreements under this Lease, whether or not such
Requirements shall now be in effect or hereafter enacted or issued, and whether
or not any work required shall be ordinary or extraordinary or foreseen or
unforeseen as of the date hereof.
SECTION 9.2. (A) Tenant covenants and agrees that Tenant shall, at Tenant's
sole cost and expense, comply at all times with all Requirements governing the
use, generation, storage, treatment and/or disposal of any Hazardous Materials
(as defined below), the presence of which results from or in connection with the
act or omission of Tenant or Persons Within Tenant's Control or the breach of
this Lease by Tenant or Persons Within Tenant's Control. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other toxic or
hazardous wastes, pollutants or substances, including, without limitation,
asbestos, PCBS, petroleum products and by-products, substances defined or listed
as "hazardous substances" or "toxic substances" or similarly identified in or
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 ET SEQ., and as hazardous wastes under
15
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6010, ET SEQ., any
chemical substance or mixture regulated under the Toxic Substance Control Act of
1976, as amended, 15 U.S.C. 2601, ET SEQ., any "toxic pollutant" under the Clean
Water Act, 33 U.S.C. ss. 466 ET SEQ., as amended, any hazardous air pollutant
under the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ., hazardous materials
identified in or pursuant to the Hazardous Materials Transportation Act, 49
U.S.C. ss. 1802, ET SEQ., and any hazardous or toxic substances or pollutant
regulated under any other Requirements including, without limitation, ECRA (as
such term is hereinafter defined). Tenant agrees to execute, from time to time,
at Landlord's request, affidavits, representations and the like concerning
Tenant's best knowledge and belief regarding the presence of Hazardous Materials
in, on, under or about the Premises. Tenant shall indemnify and hold harmless
all Indemnitees from and against any loss, claim, cost, damage, liability or
expense (including attorneys' fees and disbursements) arising by reason of any
clean up, removal, remediation, detoxification action or any other activity
required or recommended of any Indemnitees by any Governmental Authority by
reason of the presence in, on, under or about the Premises of any Hazardous
Materials, as a result of or in connection with the act or omission of Tenant or
Persons Within Tenant's Control or the breach of this Lease by Tenant or Persons
Within Tenant's Control. The foregoing covenants and indemnity shall survive the
expiration or any termination of this Lease.
(B) In addition to the foregoing, Tenant shall, at its sole
cost and expense, comply with any and all environmental monitoring requirements
of the New Jersey Department of Environmental Protection and the Environmental
Cleanup Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 ET. SEQ. In order to comply
with ECRA, the Tenant shall undertake, at its sole cost and expense, all
sampling required by the Landlord or the New Jersey Department of Environmental
protection ("NJDEP") and shall execute and deliver, upon request, all documents
and pay all fees necessary or desirable for such compliance, which execution,
delivery and/or payment may be requested by either the Landlord and/or NJDEP. It
is understood that this provision shall apply with regard to any action which
may or might require compliance with ECRA, including without limitation, the
termination of this Lease, the change of use of the Premises, an assignment or
sublease of all or part of the Premises, bankruptcy, or the conveyance of title
to the Premises. It is understood that the provisions of this Section 9.2(B)
shall survive the expiration or earlier termination of this Lease.
SECTION 9.3. If Tenant shall receive notice of any violation of, or
defaults under, any Requirements, liens or other encumbrances applicable to the
Premises, Tenant shall give immediate written notice thereof to Landlord.
16
SECTION 9.4. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business and if the failure to secure
such license or permit would, in any way, affect Landlord or the Premises, then
Tenant, at Tenant's expense, shall promptly procure and thereafter maintain,
submit for inspection by Landlord, and at all times comply with the terms and
conditions of, each such license or permit.
ARTICLE 10
SUBORDINATION
SECTION 10.1. This Lease shall at all times, now and hereafter, be subject
and subordinate to each and every Mortgage, whether made prior to or after the
execution of this Lease, and to all extensions, supplements, amendments,
modifications, consolidations and replacements thereof or thereto, substitutions
therefor, and advances made thereunder. This clause shall be self-operative and
no further agreement of subordination shall be required to make the interest of
any Mortgagee superior to the interest of Tenant hereunder. In confirmation of
such subordination, Tenant shall promptly execute and deliver, at its own cost
and expense, any document, in recordable form if requested, that Landlord or any
Mortgagee may request to evidence such subordination; and if Tenant fails to
execute, acknowledge or deliver any such document within five (5) days after
request therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge and
deliver any such document for and on behalf of Tenant. Tenant shall not do
anything that would constitute a default under any Mortgage, or omit to do
anything that Tenant is obligated to do under the terms of this Lease so as to
cause Landlord to be in default thereunder.
SECTION 10.2. If, at any time prior to the expiration of the Term, any
Mortgagee comes into possession of the Premises, by receiver or otherwise,
Tenant agrees, at the election and upon demand of any owner of the Premises, or
of any Mortgagee in possession of the Premises, to attorn, from time to time, to
any such owner or Mortgagee or any person acquiring the interest of Landlord as
a result of any such termination or as a result of a foreclosure of the Mortgage
or the granting of a deed in lieu of foreclosure, upon the then executory terms
and conditions of this Lease (except as provided below), for the remainder of
the Term, provided that such owner or Mortgagee, as the case may be, or receiver
caused to be appointed by any of the foregoing, is then entitled to possession
of the Premises. Any such attornment shall be made upon the condition that no
such owner or Mortgagee shall be:
17
(1) liable for any act or omission of any prior landlord
(including, without limitation, the then defaulting landlord); or
(2) subject to any defense or offsets (except as expressly set
forth in this Lease) which Tenant may have against any prior landlord
(including, without limitation, the then defaulting landlord); or
(3) bound by any payment of Rental which Tenant might have paid
for more than the current month to any prior landlord (including, without
limitation, the then defaulting landlord); or
(4) bound by any obligation to make any payment to Tenant which
was required to be made prior to the time such owner or Mortgagee succeeded to
any prior landlord's interest; or
(5) bound by any obligation to perform any work or to make
improvements to the Premises except for (i) repairs to the Premises or any part
thereof as a result of damage by fire or other casualty pursuant to Article 12,
but only to the extent that such repairs can be reasonably made from the net
proceeds of any insurance actually made available to such owner or Mortgagee and
(ii) repairs to the Premises as a result of a partial condemnation pursuant to
Article 13, but only to the extent that such repairs can be reasonably made from
the net proceeds of any award made available to such owner or Mortgagee. Tenant,
upon demand of any such owner or Mortgagee, shall execute, from time to time,
agreements in confirmation of the foregoing provisions of this Section 10.2,
satisfactory to any such owner or Mortgagee, and acknowledging such attornment
and setting forth the terms and conditions of its tenancy. Nothing contained in
this Section 10.2 shall be construed to impair any right otherwise exercisable
by any such owner or Mortgagee.
SECTION 10.3. If requested by any Mortgagee or Landlord, Tenant shall
promptly execute and deliver, at Tenant's own cost and expense, any document in
accordance with the terms of this Article 10, in recordable form, to evidence
such subordination.
SECTION 10.4. At any time and from time to time upon not less than ten (10)
days' prior notice to Tenant or Landlord given by the other, or to Tenant given
by a Mortgagee, Tenant or Landlord, as the case may be, shall, without charge,
execute, acknowledge and deliver a statement in writing addressed to such party
as Tenant, Landlord or Mortgagee, as the case may be, may designate, in form
satisfactory to Tenant, Landlord or Mortgagee, as the case may be, certifying
all or any of the following: (i) that this Lease is unmodified and in full force
and effect (or if there have been modifications, that this Lease is in full
force
18
and effect as modified and stating the modifications); (ii) the date that the
Term commenced and the date(s) that Fixed Rent and Additional Rent became
payable hereunder and the dates to which they have been paid; (iii) whether or
not, to the best knowledge of the signer of such certificate, Landlord is in
default in performance of any of the terms of this Lease and, if so, specifying
each such event of default of which the signer may have knowledge; (iv) whether
or not, to the best knowledge of the signer of such certificate, Tenant has
accepted possession of the Premises; (v) whether Tenant has made any claim
against Landlord under this Lease and, if so, the nature thereof and the dollar
amount, if any, of such claim; (vi) either that Tenant does not know of any
default in the performance of any provision of this Lease or specifying the
details of any default of which Tenant may have knowledge and stating what
action Tenant is taking or proposes to take with respect thereto; (vii) that, to
the best knowledge of Tenant, there are no proceedings pending or threatened
against Tenant before or by any court or administrative agency which, if
adversely decided, would materially or adversely affect the financial condition
or operations of Tenant or, if any such proceedings are pending or threatened to
the best knowledge of Tenant, specifying and describing the same; and (viii)
such further information with respect to the Lease or the Premises as Landlord
may reasonably request or Mortgagee may require; it being intended that any such
statement delivered pursuant hereto may be relied upon by any prospective
purchaser of the Premises or any part thereof or of the interest of Landlord in
any part thereof, by any Mortgagee or prospective Mortgagee or by any
prospective assignee of any Mortgage or by any assignee of Tenant.
The failure of either Tenant or Landlord to execute, acknowledge and
deliver a statement in accordance with the provisions of this Section 10.4
within said ten (10) day period shall constitute an acknowledgment by Tenant or
Landlord, as the case may be, which may be relied on by any person or entity of
any nature whatsoever who would be entitled to rely upon any such statement,
that such statement as submitted by Landlord or Tenant, as the case may be, is
true and correct.
SECTION 10.5. As long as any Mortgage exists, Tenant shall not seek to
terminate this Lease by reason of any act or omission of Landlord until Tenant
has given not less than thirty (30) days prior written notice of such act or
omission to all Mortgagees, and if any such Mortgagee notifies Tenant within
thirty (30) days following receipt of such notice of its intention to remedy
such act or omission, until a reasonable period of time shall have elapsed
following the giving of such notice, during which period such Mortgagee shall
have the right, but not the obligation, to remedy such act or omission.
19
ARTICLE 11
INSURANCE; PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
SECTION 11.1.
(A) Neither Landlord nor Landlord's agents shall be liable for any
injury or damage to persons or property, or interruption of Tenant's business,
resulting from fire or other casualty; nor shall Landlord or Landlord's agents
be liable for any such damage caused by Persons other than the Landlord or the
Landlord's agents or by construction of any private, public or quasi-public
work; nor shall Landlord be liable for any latent defect in the Premises.
(B) Tenant shall give written notice to Landlord, immediately after
Tenant learns thereof, of any accident, emergency, occurrence for which Landlord
might be liable, fire or other casualty and all damages to or defects in the
Premises for the repair of which Landlord might be responsible or which
constitutes Landlord's property. Such notice shall be given by telecopy or
personal delivery to the address(es) of Landlord in effect for notice.
SECTION 11.2. Tenant shall not do or permit to be done any act or thing in
or upon the Premises which will invalidate or be in conflict with the terms of
the State of New Jersey standard form of fire insurance with extended coverage,
or with rental, liability, boiler, sprinkler, water damage, war risk or other
insurance policies covering the Premises and the fixtures and property therein
(hereinafter referred to as "BUILDING INSURANCE"); and Tenant, at Tenant's own
expense, shall comply with all rules, orders, regulations and requirements of
all insurance boards, and shall not do or permit anything to be done in or upon
the Premises or bring or keep anything therein or use the Premises in a manner
which increases the rate of premium for any of the Building Insurance or any
property or equipment located therein over the rate in effect at the
commencement of the Term of this Lease.
SECTION 11.3.
(A) If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the rate of premium for Building Insurance or other
insurance on the property and equipment of Landlord shall be higher than it
otherwise would be, Tenant shall reimburse Landlord for that part of the
insurance premiums thereafter paid by Landlord which shall have been charged
because of such failure by Tenant. Tenant shall make said reimbursement on the
first day of the month following such payment by Landlord.
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(B) In any action or proceeding wherein Landlord and Tenant are
parties, a schedule of any insurance rate for the Premises issued by any
insurance board establishing insurance premium rates for the Premises shall be
prima facie evidence of the facts therein stated and of the several items and
charges in the insurance premium rates then applicable to the Premises.
SECTION 11.4.
(A) Tenant shall, at Tenant's own cost and expense, obtain, maintain
and keep in full force and effect during the Term, for the benefit of Landlord,
any Mortgagees and Tenant, commercial general liability insurance (including
premises operation, bodily injury, personal injury, death, independent
contractors, products and completed operations, broad form contractual liability
and broad form property damage coverages) in a combined single limit amount of
not less than Five Million and 00/100 ($5,000,000.00) Dollars, against all
claims, demands or actions with respect to damage, injury or death made by or on
behalf of any person or entity, arising from or relating to the conduct and
operation of Tenant's business in, on or about the Premises (which shall include
Tenant's signs, if any), or arising from or related to any act or omission of
Tenant or of Persons Within Tenant's Control. If Tenant shall install or
maintain one or more pressure vessels to serve Tenant's operations at the
Premises, Tenant shall, at Tenant's own cost and expense, obtain, maintain and
keep in full force and effect, for the benefit of Landlord, any Mortgagees and
Tenant, appropriate boiler or other insurance coverage therefor in an amount not
less than Three Million and 00/100 ($3,000,000.00) Dollars (it being understood
and agreed, however, that the foregoing shall not be deemed a consent by
Landlord to the installation and/or maintenance of any such pressure vessels in
the Premises, which installation and/or maintenance shall at all times be
subject to the prior written consent of Landlord). Whenever, in Landlord's
reasonable judgment, good business practice and changing conditions indicate a
need for additional amounts or different types of insurance coverage, Tenant
shall, within ten (10) days after Landlord's request, obtain such insurance
coverage, at Tenant's expense.
(B) Tenant, at Tenant's sole cost and expense, shall maintain
insurance protecting and indemnifying Tenant against any and all damage to or
loss of any Alterations and leasehold improvements, including any made by
Landlord to prepare the Premises for Tenant's occupancy, and Tenant's Property,
and all claims and liabilities relating thereto.
(C) Landlord and any Mortgagees shall be named as insureds in said
policies and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be: (i) written
as "occurrence" policies; (ii) written as primary policy coverage and not
21
contributing with or in excess of any coverage which Landlord may carry; and
(iii) issued by reputable and independent insurance companies rated in Best's
Insurance Guide, or any successor thereto (or if there be none, an organization
having a national reputation) as having a general policyholder rating of "A+"
and a financial rating of at least "13", and which are licensed to do business
in the State of New Jersey. Tenant shall, not later than ten (10) Business Days
prior to the Commencement Date, deliver to Landlord the policies of insurance or
certificates thereof, together with evidence of payment of premiums thereon, and
shall thereafter furnish to Landlord, at least thirty (30) days prior to the
expiration of any such policies and any renewal thereof, a new policy or
certificate in lieu thereof, with evidence of the payment of premiums thereon.
Each of said policies shall also contain a provision whereby the insurer agrees
not to cancel, fail to renew, diminish or materially modify said insurance
policy(ies) without having given Landlord and any Mortgagees at least thirty
(30) days prior written notice thereof.
(D) Tenant shall pay all premiums and charges for all of said
policies, and, if Tenant shall fail to make any payment when due or carry any
such policy, Landlord may, but shall not be obligated to, make such payment or
carry such policy, and the amount paid by Landlord, with interest thereon (at
the Applicable Rate), shall be repaid to Landlord by Tenant on demand, and all
such amounts so repayable, together with such interest, shall be deemed to
constitute Additional Rent hereunder. Payment by Landlord of any such premium,
or the carrying by Landlord of any such policy, shall not be deemed to waive or
release the default of Tenant with respect thereto.
SECTION 11.5.
(A) Tenant shall cause each insurance policy carried by Tenant and
insuring the Premises and Tenant's Alterations, leasehold improvements, space
equipment, furnishings, furniture, contents and fixtures against loss, damage or
destruction by fire or other casualty, to be written in a manner so as to
provide that the insurance company waives all rights of recovery by way of
subrogation against Landlord or Tenant in connection with any loss or damage
covered by any such policy. If the release of either Landlord or Tenant shall
contravene any law with respect to exculpatory agreements, the liability of the
party in question shall be deemed not released, but no action or rights shall be
sought or enforced against such party unless and until all rights and remedies
against the insurer are exhausted and such party shall be unable to collect such
insurance proceeds.
(B) The waiver of subrogation referred to in Section 11.5(A) above
shall extend to the agents and employees of each party, but only if and to the
extent that such waiver can be obtained without additional charge (unless such
party shall pay
22
such charge). Nothing contained in this Section 11.5 shall be deemed to relieve
the Tenant from any duty imposed elsewhere in this Lease to repair, restore and
rebuild the Premises, in whole or in part.
ARTICLE 12
DESTRUCTION BY FIRE OR OTHER CAUSE
SECTION 12.1. If the Premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate written notice thereof to
Landlord. Landlord shall, subject to the provisions of Sections 12.2 and 12.3
below, proceed with reasonable diligence, after receipt of the net proceeds of
insurance, to repair or cause to be repaired such damage at its expense, but in
no event shall such repair or restoration be greater in scope than the quantity
or quality of construction of the Premises as of the Commencement Date; and, if
the Premises, or any part thereof, shall be rendered untenantable by reason of
such damage and such damage shall not be due to the fault of Tenant or Persons
Within Tenant's Control, then the Fixed Rent hereunder, or an amount thereof
apportioned according to the area of the Premises so rendered untenantable (if
less than the entire Premises shall be so rendered untenantable), shall be
abated for the period from the date of such damage to the date when the repair
of such damage shall have been substantially completed. If Landlord or any
Mortgagee shall be unable to collect the insurance proceeds (including rent
insurance proceeds) applicable to such damage because of some action or inaction
on the part of Tenant or Persons Within Tenant's Control, then the cost of
repairing such damage shall be paid by Tenant and there shall be no abatement of
Fixed Rent. Tenant covenants and agrees to cooperate with Landlord and any
Mortgagee in their efforts to collect insurance proceeds (including rent
insurance proceeds) payable to such parties. Landlord shall not be liable for
any delay which may arise by reason of adjustment of insurance on the part of
Landlord and/or Tenant, or any cause beyond the control of Landlord or
contractors employed by Landlord.
It is expressly understood that if Landlord is prevented from substantially
completing the repairs by reason of any acts of Tenant or Persons Within
Tenant's Control, including, without limitation, by reason of the performance of
any Alterations, or by reason of Tenant's failure or refusal to comply or to
cause its architects, engineers, designers and contractors to comply with any of
Tenant's obligations described or referred to in this Lease, then such work
shall be deemed substantially completed on the date when the work would have
been substantially completed but for such delay, and the expiration of the
abatement of Tenant's obligations to pay Fixed Rent shall not be postponed
23
by reason of such delay. Any additional costs to Landlord to complete any work
occasioned by such delay shall be paid by Tenant to Landlord, as Additional
Rent, within ten (10) days after demand therefor by Landlord.
SECTION 12.2. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from damage from fire or other casualty or the repair thereof. Tenant
understands that Landlord, in reliance upon Section 11.4 hereof, will not carry
insurance of any kind on Tenant's furnishings, furniture, contents, fixtures,
space equipment and leasehold improvements, and that Landlord shall not be
obligated to repair any damage thereto or replace the same.
SECTION 12.3. (A) Notwithstanding anything to the contrary contained in
Sections 12.1 and 12.2 above, in the event that:
(I) at least fifty (50%) percent of the rentable square feet of
the Premises shall be damaged by a fire or other casualty so that substantial
alteration or reconstruction of the Premises shall, in Landlord's sole opinion,
be required (whether or not the Premises shall have been damaged by such fire or
other casualty and without regard to the structural integrity of the Premises);
or
(II) the Premises shall be totally or substantially damaged or
shall be rendered wholly or substantially untenantable; or
(III) there shall be any damage to the Premises within the last
two (2) years of the Term wherein the cost of repair exceeds an amount equal to
three (3) monthly installments of Fixed Rent, then, as a result of any
circumstances described in subparagraphs (i), (ii) or (iii) hereof, the Landlord
may, in Landlord's sole and absolute discretion, terminate this Lease and the
term and estate hereby granted, by notifying Tenant in writing of such
termination within one hundred twenty (120) days after the date of such damage.
In the event that such a notice of termination shall be given, then this Lease
and the term and estate hereby granted shall expire as of the date of
termination stated in said notice with the same effect as if that were the Fixed
Expiration Date, and the Fixed Rent and Additional Rent hereunder shall be
apportioned as of such date.
SECTION 12.4. Except as may be provided in Section 11.5, nothing herein
contained shall relieve Tenant from any liability to Landlord or to Landlord's
insurers in connection with any damage to the Premises by fire or other casualty
if Tenant shall be legally liable in such respect.
24
ARTICLE 13
EMINENT DOMAIN
SECTION 13.1. If the whole of the Premises is acquired or condemned for any
public or quasi-public use or purpose, this Lease and the Term shall end as of
the date of the vesting of title with the same effect as if said date were the
Fixed Expiration Date. If only a part of the Premises is so acquired or
condemned then, (1) except as hereinafter provided in this Section 13.1, this
Lease and the Term shall continue in effect but, if a part of the Premises is so
acquired or condemned, from and after the date of the vesting of title, the
Fixed Rent and Additional Rent, if any, shall be reduced in the proportion which
the area of the part of the Premises so acquired or condemned bears to the total
area of the Premises immediately prior to such acquisition or condemnation; (2)
whether or not the Premises are affected thereby, Landlord, at Landlord's
option, may give to Tenant, within sixty (60) days next following the date upon
which Landlord receives notice of vesting of title, a thirty (30) day notice of
termination of this Lease; and (3) if the part of the Premises so acquired or
condemned contains more than seventy-five (75%) percent of the total area of the
Premises immediately prior to such acquisition or condemnation, or if, by reason
of such acquisition or condemnation, Tenant no longer has access to the
Premises, Tenant, at Tenant's option, may give to Landlord, within thirty (30)
days next following the date upon which Tenant receives notice of vesting of
title, a thirty (30) day notice of termination of this Lease. If any such thirty
(30) day notice of termination is given, by Landlord or Tenant, this Lease and
the Term shall come to an end and expire upon the expiration of said thirty (30)
days with the same effect as if the date of expiration of said thirty (30) days
were the Fixed Expiration Date. In the event of any termination of this Lease
and the Term pursuant to the provisions of this Section 13.1, the Fixed Rent or
Additional Rent shall be apportioned as of the date of sooner termination and
any prepaid portion of the Fixed Rent for any period after such date shall be
refunded by Landlord to Tenant.
SECTION 13.2. In the event of any such acquisition or condemnation of all
or any part of the Premises, Landlord shall be entitled to receive the entire
award for any such acquisition or condemnation. Tenant shall have no claim
against Landlord or the condemning authority for the value of any unexpired
portion of the Term and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this Section 13.2 shall be
deemed to prevent Tenant from making a separate claim in any condemnation
proceedings for the value of any Tenant's Property included in such taking, and
for any moving expenses, so long as Landlord's award is not reduced thereby.
25
ARTICLE 14
ASSIGNMENT; SUBLETTING; MORTGAGE; ETC.
SECTION 14.1. (A) The Tenant shall not (a) assign this Lease (whether by
operation of law, transfers of interests in Tenant or otherwise); or (b)
mortgage or encumber Tenant's interest in this Lease, in whole or in part; or
(c) sublet, or permit the subletting of, the Premises or any part thereof.
Notwithstanding the provisions of this Section 14.1, the use of the Premises by
any Person AFFILIATED (as such term is hereinafter defined) with the Tenant or
under the COMMON CONTROL (as such term is hereinafter defined) of Coach USA,
Inc., as the case may be, shall not be deemed an assignment of this Lease or a
sublet of the Premises; PROVIDED, HOWEVER, that such use of the Premises as
aforesaid shall not violate or be prohibited by any of the provisions of any
Mortgage then encumbering the Premises, if any. For purposes of this Article 14,
a Person shall be deemed to be an "AFFILIATE" of the Tenant or under the "COMMON
CONTROL" of Coach USA if such Person is a member of a "parentsubsidiary
controlled group" [as such term is defined by Section 1563(a)(1) of the Internal
Revenue Code of 1986, as amended] or a member of a "brother-sister controlled
group" [as such term is defined by Section 1563(a)(2) of the Internal Revenue
Code of 1986, as amended] of which either Coach USA, Inc. or the Tenant, as the
case may be, is a member.
(B) Notwithstanding the provisions otherwise set forth in this
Article 14, any reorganization, consolidation and/or restructuring of the Tenant
in which the issued and outstanding stock of the Tenant remains under the COMMON
CONTROL (as such term is defined in Section 14.1 hereinabove) of Coach USA, Inc.
shall not be deemed an assignment of this Lease or a sublet of the Premises;
PROVIDED, HOWEVER, that the same shall not violate or be prohibited by any of
the provisions of any Mortgage then encumbering the Premises, if any.
SECTION 14.2. If Tenant's interest in this Lease shall be assigned in
violation of the provisions of this Article 14, such assignment shall be invalid
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy. If the Premises or any
part thereof are sublet to, or occupied by, or used by, any person other than
Tenant, whether or not in violation of this Article 14, Landlord, after default
by Tenant under this Lease, may collect any item of Rental or other sums paid by
the subtenant, user or occupant as a fee for its use and occupancy, and shall
apply the net amount collected to the Fixed Rent and the items of Rental
reserved in this Lease. No such assignment,
26
subletting, occupancy, or use, nor any such collection or application of Rental
or fee for use and occupancy, shall be deemed a waiver by Landlord of any term,
covenant or condition of this Lease or the acceptance by Landlord of such
assignee, subtenant, occupant or user as Tenant hereunder, nor shall the same,
in any circumstances, relieve Tenant of any of its obligations under this Lease.
SECTION 14.3.
Except as otherwise set forth in Section 14.1 hereof, for purposes of
this Article 14, (i) any increase in the amount of issued and/or outstanding
capital stock of any corporate tenant and/or the creation of one or more
additional classes of capital stock of any corporate tenant, in a single
transaction or a series of related or unrelated transactions, resulting in a
change in the legal or beneficial ownership of such tenant so that the
shareholders of such tenant existing immediately prior to such transaction or
series of transactions shall no longer own a majority of the issued and
outstanding capital stock of such tenant shall be deemed an assignment of this
Lease and (ii) any Person or legal representative of Tenant, to whom Tenant's
interest under this Lease passes by operation of law, or otherwise, shall be
bound by the provisions of this Article 14. Tenant agrees to furnish to Landlord
on request at any time such information and assurances as Landlord may
reasonably request that Tenant has not violated the provisions of this Article
14.
ARTICLE 15
ACCESS TO PREMISES
SECTION 15.1. Tenant shall permit Landlord, Landlord's agents and any
public utilities servicing the Premises to erect, use and maintain, now and
hereafter, concealed ducts, pipes and conduits in and through the Premises.
Landlord or Landlord's agents shall have the right to enter the Premises at all
reasonable times upon (except in case of emergency) reasonable prior notice,
which notice may be oral, to examine the same, to show the same to prospective
purchasers or Mortgagees and to make such repairs, alterations, improvements or
additions (i) as Landlord may deem necessary or desirable to the Premises, or
(ii) which Landlord may elect to perform at least ten (10) days after notice
(except in an emergency when no notice shall be required) following Tenant's
failure to make repairs or perform any work which Tenant is obligated to make or
perform under this Lease, or (iii) for the purpose of complying with
Requirements, and Landlord shall be allowed to take all material into and upon
the Premises that may be required therefor without the same constituting an
eviction or constructive eviction of Tenant in
27
whole or in part and the Fixed Rent (and any other item of Rental) shall in no
respect abate or be reduced by reason of said repairs, alterations, improvements
or additions, wherever located, or while the same are being made, by reason of
loss or interruption of business of Tenant, or otherwise. Landlord shall
promptly repair any damage caused to the Premises by such work, alterations,
improvements or additions.
SECTION 15.2. If Tenant is not present when for any reason entry into the
Premises may be necessary or permissible, Landlord or Landlord's agents may
enter the same without rendering Landlord or such agents liable therefor.
SECTION 15.3. Landlord also shall have the right at any time, without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, stairs, toilets or other
parts of the Premises, provided any such change does not unreasonably interfere
with, or deprive Tenant of access to, the Premises; to put so-called "solar
film" or other energy-saving installations on the inside and outside of the
windows; and to change the name, number or designation by which the Premises is
commonly known.
ARTICLE 16
CERTIFICATE OF OCCUPANCY
SECTION 16.1. Tenant shall not at any time, now or hereafter, use or occupy
the Premises, directly or indirectly, in violation of the certificate of
occupancy for the Premises and in the event that any Governmental Authority
hereafter contends or declares by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose that is a violation
of such certificate of occupancy, Tenant shall, upon three (3) Business Days'
written notice from Landlord or any Government Authority, immediately
discontinue such use of the Premises.
ARTICLE 17
DEFAULT
SECTION 17.1. Each of the following events shall be an "EVENT OF DEFAULT"
under this Lease:
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(A) if Tenant shall on any occasion default in the payment when due of
any installment of Fixed Rent or Additional Rent or in the payment when due of
any other item of Rental and such default shall continue for five (5) business
days from and after the date when the same shall be due; or
(B) if the Premises shall become vacant or abandoned; or
(C) if Tenant's interest in this Lease shall devolve upon or pass to
any person, whether by operation of law or otherwise, except as specifically
permitted by the provisions of Article 14 hereof; or
(D) (1) if Tenant shall not, or shall be unable to, or shall admit in
writing Tenant's inability to, as to any obligation, pay Tenant's debts as they
become due; or
(2) if Tenant shall commence or institute any case, proceeding or
other action (a) seeking relief on Tenant's behalf as debtor, or to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to Tenant or Tenant's debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (b) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property; or
(3) if Tenant shall make a general assignment for the benefit of
creditors; or
(4) if any case, proceeding or other action shall be commenced or
instituted against Tenant (a) seeking to have an order for relief entered
against Tenant as debtor or to adjudicate Tenant a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to Tenant or Tenant's
debts under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, or (b)
seeking appointment of a receiver, trustee, custodian or other similar official
for Tenant or for all or any substantial part of Tenant's property, which either
(i) results in any such entry of an order for relief, adjudication of bankruptcy
or insolvency or such an appointment or the issuance or entry of any other order
having a similar effect or (ii) remains undismissed for a period of sixty (60)
days; or
(5) if a trustee, receiver or other custodian shall be appointed
for any substantial part of the assets of
29
Tenant which appointment is not vacated or effectively stayed
within thirty (30) days; or
(E) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be observed
or performed including, without limitation, the terms and conditions of Article
27 hereof, and Tenant shall fail to remedy such default within ten (10) days
after written notice by Landlord to Tenant of such default, or if such default
is of such a nature that it cannot with due diligence be completely remedied
within said period of ten (10) days and the continuation of which for the period
required for cure will not subject Landlord to the risk of criminal liability or
foreclosure of any Mortgage, if Tenant shall not, (i) within said ten (10) day
period advise Landlord of Tenant's intention duly to institute all steps
necessary to remedy such situation, (ii) duly institute within said ten (10) day
period, and thereafter diligently and continuously prosecutes to completion all
steps necessary to remedy the same and (iii) completes such remedy within such
time after the date of the giving of said notice by Landlord as shall reasonably
be necessary.
SECTION 17.2. If an Event of Default shall occur, Landlord may, at any time
thereafter, at Landlord's option, give written notice to Tenant stating that
this Lease and the Term shall expire and terminate on the date specified in such
notice, which date shall not be less than three (3) days after the giving of
such notice, whereupon this Lease and the Term and all rights of Tenant under
this Lease shall automatically expire and terminate as if the date specified in
the notice given pursuant to this Section 17.2 were the Fixed Expiration Date
and Tenant immediately shall quit and surrender the Premises, but Tenant shall
remain liable for damages as provided herein or pursuant to law. Anything
contained herein to the contrary notwithstanding, if such termination shall be
stayed by order of any court having jurisdiction over any proceeding described
in Section 17.1(D), or by federal or state statute, then, following the
expiration of any such stay, or if the trustee appointed in any such proceeding,
Tenant or Tenant as debtor-in-possession fails to assume Tenant's obligations
under this Lease within the period prescribed therefor by law or within one
hundred twenty (120) days after entry of the order for relief or as may be
allowed by the court, or if said trustee, Tenant or Tenant as debtor-in-
possession shall fail to provide adequate protection of Landlord's right, title
and interest in and to the Premises or adequate assurance of the complete and
continuous future performance of Tenant's obligations under this Lease,
Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on three (3) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon
30
the expiration of said three (3) day period this Lease shall cease and expire as
aforesaid and Tenant, Tenant as debtor-inpossession or said trustee shall
immediately quit and surrender the Premises as aforesaid.
SECTION 17.3. If, at any time, (i) Tenant shall consist of two (2) or more
Persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (iii) Tenant's interest in this
Lease has been assigned, the word "Tenant" as used and referred to in this
Lease, shall be deemed to mean any one or more of the persons primarily or
secondarily liable for Tenant's obligations under this Lease. Any monies
received by Landlord from or on behalf of Tenant during the pendency of any
proceeding of the types referred to in Section 17.1(D) hereof shall be deemed
paid as compensation for the use and occupancy of the Premises and the
acceptance of any such compensation by Landlord shall not be deemed an
acceptance of Rental or a waiver on the part of Landlord of any rights under
Section 17.2 hereof.
ARTICLE 18
REMEDIES AND DAMAGES
SECTION 18.1.
(A) If any Event of Default shall occur, or this Lease and the Term
shall expire and come to an end as provided in Article 17 hereof:
(1) Tenant shall quit and peacefully surrender the Premises to
Landlord, and Landlord and its agents may immediately, or at any time after such
Event of Default or after the date upon which this Lease and the Term shall
expire and come to an end, re-enter the Premises or any part thereof, without
notice, either by summary proceedings, or by any other applicable action or
proceeding or otherwise (without being liable to indictment, prosecution or
damages therefor), and may repossess the Premises and dispossess Tenant and any
other persons from the Premises by summary proceedings or otherwise and remove
any and all of their property and effects from the Premises (and Tenant shall
remain liable for damages as provided herein or pursuant to law); and
(2) Landlord, at Landlord's option, may relet the whole or any
part or parts of the Premises from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Fixed Expiration Date, at such rent or rentals and upon such
other conditions, which may include concessions and
31
free rent periods, as Landlord, in Landlord's sole discretion, may determine;
provided, however, that Landlord shall have no obligation to relet the Premises
or any part thereof and shall in no event be liable for refusal or failure to
relet the Premises or any part thereof, or, in the event of any such reletting,
for refusal or failure to collect any rent due upon any such reletting, and no
such refusal or failure shall operate to relieve Tenant of any liability under
this Lease or otherwise affect any such liability, and Landlord, at Landlord's
option, may make such Alterations, in and to the Premises as Landlord, in
Landlord's sole discretion, shall consider advisable or necessary in connection
with any such reletting or proposed reletting, without relieving Tenant of any
liability under this Lease or otherwise affecting any such liability.
(B) Tenant hereby waives the service of any notice of intention to
re-enter or to institute legal proceedings to that end that may otherwise be
required to be given under any present or future law. Tenant, on its own behalf
and on behalf of all persons claiming through or under Tenant, including all
creditors of Tenant, does further hereby waive any and all rights that Tenant
and all such persons might otherwise have under any present or future law to
redeem the Premises, or to re-enter or repossess the Premises, or to restore the
operation of this Lease, after (a) Tenant shall have been dispossessed by a
judgment or by warrant of any court, or (b) any re-entry by Landlord, or (c) any
expiration or termination of this Lease and the Term, whether such dispossess,
re-entry, expiration or termination is by operation of law or pursuant to the
provisions of this Lease. The words "re-entry", "re-enter" and "re-entered" as
used in this Lease shall not be deemed to be restricted to their technical legal
meanings. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any term, covenant or condition of
this Lease, Landlord shall have the right to enjoin such breach and the right to
invoke any other remedy allowed by law or in equity as if re-entry, summary
proceedings and other special remedies were not provided in this Lease for such
breach. The right to invoke the remedies hereinbefore set forth are cumulative
and shall not preclude Landlord from invoking any other remedy allowed at law or
in equity.
SECTION 18.2.
(A) If this Lease and the Term shall expire and come to an end as
provided in Article 17 hereof, or by or under any summary proceeding or any
other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 18.1 hereof, or by or under any summary proceeding or any
other action or proceeding, then, in any of said events:
32
(1) Tenant shall pay to Landlord all Fixed Rent, Additional Rent
and other items of Rental payable under this Lease by Tenant to Landlord to the
date upon which this Lease and the Term shall have expired and come to an end or
to the date of re-entry upon the Premises by Landlord, as the case may be;
(2) Tenant also shall be liable for and shall pay to Landlord, as
damages, any deficiency ("DEFICIENCY") between the Rental for the period which
otherwise would have constituted the unexpired portion of the Term and the net
amount, if any, of rents collected under any reletting effected pursuant to the
provisions of Section 18.1(A)(2) for any part of such period (after first
deducting from the rents collected under any such reletting all of Landlord's
expenses in connection with the termination of this Lease, Landlord's re-entry
upon the Premises and such reletting including, but not limited to, all
repossession costs, brokerage commissions, attorneys' fees and disbursements,
alteration costs and other expenses of preparing the Premises for such
reletting); any such Deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for payment of installments of Fixed Rent;
Landlord shall be entitled to recover from Tenant each monthly Deficiency as the
same shall arise, and no suit to collect the amount of the Deficiency for any
month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any Deficiency
as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant
shall pay to Landlord, on demand, in lieu of any further Deficiency as and for
liquidated and agreed final damages, a sum equal to the amount by which the
unpaid Rental for the period which otherwise would have constituted the
unexpired portion of the Term exceeds the then fair and reasonable rental value
of the Premises for the same period; if, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the Premises, or any
part thereof, are relet by Landlord for the period which otherwise would have
constituted the unexpired portion of the Term, or any part thereof, the amount
of rent reserved upon such reletting shall be deemed, prima facie, to be the
fair and reasonable rental value for the part or the whole of the Premises so
relet during the term of the reletting.
(B) Tenant shall in no event be entitled to any rents collected or
payable under any reletting, whether or not such rents exceed the Fixed Rent
reserved in this Lease. Nothing contained in Article 17 hereof or this Article
18 shall be deemed to limit or preclude the recovery by Landlord from Tenant of
the maximum amount allowed to be obtained as damages by any statute
33
or rule of law, or of any sums or damages to which Landlord may be entitled in
addition to the damages set forth in this Section 18.2.
ARTICLE 19
FEES AND EXPENSES
SECTION 19.1. If an Event of Default shall have occurred, Landlord may (1)
perform the same for the account of Tenant, or (2) make any expenditure or incur
any obligation for the payment of money in connection with any obligation owed
to Landlord, including, but not limited to, reasonable attorneys' fees and
disbursements in instituting, prosecuting or defending any action or proceeding,
and in either case the cost thereof, with interest thereon at the Applicable
Rate, shall be deemed to be Additional Rent hereunder and shall be paid by
Tenant to Landlord within ten (10) days after rendition of any bill or statement
to Tenant therefor. In addition, Tenant shall pay Landlord any reasonable
attorneys' fees and disbursements incurred by Landlord in connection with any
proceeding in which the value for the use and occupancy of the Premises by
Tenant is being determined (whether or not any such proceeding results from a
default by Tenant under this Lease).
SECTION 19.2. If Tenant shall fail to pay any installment of Fixed Rent,
Additional Rent or any other item of Rental for a period longer than five (5)
days after the same shall have become due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent, Additional Rent or other item of
Rental, as the case may be, as a late charge and as Additional Rent, a sum equal
to interest at the Applicable Rate on the amount unpaid, computed from the date
such payment was due, without regard to any such grace period, to and including
the date of payment.
ARTICLE 20
NO REPRESENTATIONS BY LANDLORD
SECTION 20.1. Landlord and Landlord's agents have made no representations
or promises with respect to the Premises except as herein expressly set forth,
and no rights, easements or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth herein. Tenant shall accept possession
of the Premises in its "as is" condition on the Commencement Date, and Landlord
shall have no obligation to perform any work or make any installations in order
to prepare the Premises for Tenant's occupancy. The taking of occupancy of
34
the whole or any part of the Premises by Tenant shall be conclusive evidence, as
against Tenant, that Tenant accepts possession of the same and that the Premises
were in good and satisfactory condition at the time such occupancy was so taken.
All references in this Lease to the consent or approval of Landlord shall be
deemed to mean the written consent or approval executed by Landlord and no other
consent or approval of Landlord shall be effective for any purpose whatsoever.
ARTICLE 21
END OF TERM
SECTION 21.1. Upon the expiration or other termination of this Lease,
Tenant shall quit and surrender to Landlord the Premises, vacant, broom clean,
in good order and condition, ordinary wear and tear excepted, and Tenant shall
remove all of Tenant's Alterations as may be required pursuant to Article 6.
Tenant shall also remove all of Tenant's Property and all other personal
property and personal effects of all persons claiming through or under Tenant,
and shall pay the cost of repairing all damage to the Premises occasioned by
such removal. Any Tenant's Property or other personal property that remains in,
on or at the Premises after the termination of this Lease shall be deemed to
have been abandoned and either may be retained by Landlord as its property or
may be disposed of in such manner as Landlord may see fit. If Tenant's Property
or other personal property or any part thereof is sold, Landlord may receive and
retain the proceeds of such sale as the property of Landlord. Any expense
incurred by Landlord in removing or disposing of Tenant's Property or other
personal property or Alterations required to be removed as provided in Article
6, as well as the cost of repairing all damage to the Premises caused by such
removal, shall be reimbursed to Landlord by Tenant, as Additional Rent, on
demand.
SECTION 21.2. If the Expiration Date falls on a day which is not a Business
Day, then Tenant's obligations under Section 21.1 shall be performed on or prior
to such Business Day.
SECTION 21.3. If the Premises are not surrendered upon the expiration or
other termination of this Lease, Tenant hereby indemnifies Landlord against
liability resulting from delay by Tenant in so surrendering the Premises,
including any claims made by any succeeding tenant or prospective tenant founded
upon such delay and agrees to be liable to Landlord for (i) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the Premises in order to induce such tenant not
to terminate its
35
lease by reason of the holding-over by Tenant and (ii) the loss of the benefit
of the bargain if any such tenant shall terminate its lease by reason of the
holding-over by Tenant.
SECTION 21.4. Tenant's obligations under this Article 21 shall survive the
expiration or termination of this Lease.
ARTICLE 22
POSSESSION
SECTION 22.1. If Landlord shall be unable to deliver possession of the
Premises on the Commencement Date for any reason whatsoever, Landlord shall not
be subject to any liability therefor and the validity of this Lease shall not be
impaired thereby nor the Expiration Date extended, but the Commencement Date
shall be postponed until five (5) Business Days following notice from Landlord
that the Premises are available for occupancy by Tenant. Tenant expressly waives
any right to rescind this Lease under any present or future statute and further
expressly waives the right to recover any damages that may result from
Landlord's failure to deliver possession of the Premises on the Commencement
Date.
ARTICLE 23
NO WAIVER
SECTION 23.1. No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys to the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises.
SECTION 23.2. The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease shall not prevent a subsequent act, which would have originally
constituted a violation, from having all of the force and effect of an original
violation. The receipt by Landlord of Fixed Rent, Additional Rent or any other
item of Rental with knowledge of the breach of any covenant of this Lease shall
not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord, unless such waiver shall be in writing
and shall be signed by Landlord. No payment by Tenant or receipt by
36
Landlord of a lesser amount than the Rental then due and payable shall be deemed
to be other than on account of the earliest item(s) of Rental, or as Landlord
may elect to apply the same, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance due of the Rental or to otherwise pursue
any other remedy in this Lease provided. This Lease contains the entire
agreement between the parties and all prior negotiations and agreements are
merged herein. Any executory agreement hereafter made shall be ineffective to
change, discharge or effect an abandonment of this Lease in whole or in part
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, discharge or abandonment is sought.
ARTICLE 24
WAIVER OF TRIAL BY JURY
SECTION 24.1. Tenant hereby waives trial by jury in any action or
proceeding brought by or against the Tenant with respect to any matters
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
whether during or after the Term, or for the enforcement of any remedy under any
statute, emergency or otherwise. If Landlord shall commence any summary
proceeding against Tenant, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding, and will not seek to
consolidate such proceeding with any other action which may have been or will be
brought in any other court by Tenant or Landlord.
ARTICLE 25
INABILITY TO PERFORM
SECTION 25.1. This Lease and the obligation of Tenant to pay Rental
hereunder and to perform all of the other covenants and agreements hereunder on
the part of Tenant to be performed shall in no way be affected, impaired or
excused because Landlord is unable to fulfill any of Landlord's obligations
under this Lease, expressly or implicitly to be performed by Landlord, or
because Landlord is unable to make or is delayed in making any repairs, or is
unable to supply or is delayed in supplying any services, if Landlord is
prevented from or delayed in so doing by reason of acts of God, casualty,
strikes or labor troubles, accident, governmental preemption in connection with
an emergency, Requirements, conditions of supply and demand which
37
have been or are affected by war or other emergency, or any other cause
whatsoever, whether similar or dissimilar to the foregoing, beyond Landlord's
reasonable control ("UNAVOIDABLE DELAYS").
ARTICLE 26
NOTICES
SECTION 26.1.
(A) Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease ("NOTICE(S)") shall be in writing and
shall be deemed sufficiently given or rendered if delivered by hand (against a
signed receipt) or if deposited with a nationally recognized overnight courier
and in either case addressed:
IF TO TENANT:
(a) at Tenant's address first set forth in this Lease or (b) at any
place where Tenant or any agent or employee of Tenant may be found
if given subsequent to Tenant's vacating, deserting, abandoning or
surrendering the Premises, and
IF TO LANDLORD:
at Landlord's address first set forth in this
Lease, Attn: Mr. Gerald Mercadante, with a
copy to Todtman, Young, Tunick, Nachamie,
Hendler & Spizz, P.C., 425 Park Avenue, New
York, New York 10022 Attention: Martin
Todtman, Esq. and (y) any Mortgagee who may
have requested the same, by Notice given in
accordance with the provisions of this
Article 26, at the address designated by such
Mortgagee,
or to such other address(es) as either Landlord or Tenant may
designate as its new address(es) for such purpose by notice given to
the other in accordance with the provisions of this Article 26.
(B) Notices shall be deemed to have been rendered or given (a) on the
date delivered, if delivered by hand, or (b) on
38
the day after being deposited with a nationally recognized overnight courier as
provided in Section 26.1(A) hereof.
ARTICLE 27
LANDLORD'S RIGHT TO TERMINATE
SECTION 27.1 Notwithstanding anything contained herein to the contrary,
the Landlord shall have the sole and exclusive option to terminate this Lease
upon ninety (90) days prior written notice ("TERMINATION NOTICE PERIOD") to the
Tenant in the event that the Landlord shall have received an offer to purchase
the Premises, or any part thereof. Time shall be of the essence with respect to
the Tenant's obligation to vacate the Premises in accordance with the provisions
of Article 21 hereof on or before the expiration of the Termination Notice
Period. In the event that the Tenant shall fail to vacate the Premises as
aforesaid, then in such event, the Landlord shall be entitled to avail itself of
any and all rights and remedies against the Tenant, whether at law, equity or
under and pursuant to the terms and conditions of this Lease including, without
limitation, any rights and/or remedies which may be available to the Landlord in
accordance with the provisions of Article 18 hereof.
ARTICLE 28
BROKER
SECTION 28.1. Landlord represents and warrants to Tenant that Landlord has
not dealt with any broker or Person in connection with this Lease. Tenant
represents and warrants to Landlord that Tenant has not dealt with any broker or
Person in connection with this Lease. The execution and delivery of this Lease
by Tenant shall be conclusive evidence that Tenant acknowledges that Landlord
has relied upon the foregoing representation and warranty. Tenant shall
indemnify and hold harmless Landlord from and against any and all claims for
commission, fee or other compensation by any broker or Person who claims to have
dealt with Tenant in connection with this Lease and for any and all costs
incurred by Landlord in connection with such claims, including, without
limitation, attorneys' fees and disbursements. The provisions of this Article 28
shall survive the expiration or earlier termination of this Lease.
39
ARTICLE 29
INDEMNITY
SECTION 29.1. Tenant shall not do or permit any act or thing to be done in,
at or upon the Premises that may subject any Indemnitee to any liability or
responsibility for injury, damage to persons or property or to any liability by
reason of the existence or application of, compliance with or violation of any
Requirement, but shall exercise such control over the Premises as to protect
each Indemnitee fully against any such liability and responsibility. Tenant
shall indemnify and save harmless the Indemnitees from and against (a) all
claims of whatever nature against the Indemnitees arising from any act, omission
or negligence of Tenant or Persons Within Tenant's Control, (b) all claims
against the Indemnitees arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring in or about
the Premises during the Term or during Tenant's occupancy of the Premises,
unless and to the extent caused by the gross negligence of Landlord or its
shareholders, officers and employees, (c) all claims against the Indemnitees
arising from any accident, injury or damage occurring outside of the Premises
but anywhere within or about the Premises, where such accident, injury or damage
results or is claimed to have resulted from an act, omission or negligence of
Tenant or Persons Within Tenant's Control, and (d) any breach, violation or
non-performance of any covenant, condition or agreement contained in this Lease
to be fulfilled, kept, observed and performed by Tenant. This indemnity and hold
harmless agreement shall include indemnity from and against any and all
liability, claims, fines, suits, demands, costs and expenses of any kind or
nature (including, without limitation, attorneys' fees and disbursements)
incurred in or in connection with any such claim or proceeding brought thereon,
and the defense thereof.
SECTION 29.2. If any claim, action or proceeding is made or brought against
any Indemnitee, against which claim, action or proceeding Tenant is obligated to
indemnify such Indemnitee pursuant to the terms of this Lease, then, upon demand
by the Indemnitee, Tenant, at its sole cost and expense, shall resist or defend
such claim, action or proceeding in the Indemnitee's name, if necessary, by such
attorneys as the Indemnitee may select, including, without limitation, attorneys
for the Indemnitee's insurer. The provisions of this Article 29 shall survive
the expiration or earlier termination of this Lease.
40
ARTICLE 30
ADJACENT EXCAVATION; SHORING
SECTION 30.1. If an excavation shall be made upon land adjacent to the
Premises, or shall be authorized to be made, Tenant shall, upon reasonable
advance notice, afford to the person or entity causing or authorized to cause
such excavation, a limited license to enter upon the Premises for the purpose of
doing such work as said person or entity deems necessary to preserve the walls
of any building located on the Premises from injury or damage and to support the
same by proper foundations without any claim for eviction or constructive
eviction, damages or indemnity against Landlord, or diminution or abatement of
Rental.
ARTICLE 31
RENEWAL OPTIONS
SECTION 31.1. Provided that the Tenant is not in default with respect to
any of its obligations to the Landlord under and pursuant to the terms and
conditions of this Lease at the time each Option (as such term is hereinafter
defined) is to be exercised, the Tenant shall have the option to renew this
Lease for three (3) additional ten (10) year periods [the option with respect to
each additional ten (10) year period is referred to herein as an "OPTION" and,
collectively, all of the options granted herein are referred to as the
"OPTIONS"] as follows:
OPTION PERIOD 1 shall commence on May 13, 2006 and shall continue up to
and including May 12, 2016.
OPTION PERIOD 2 shall commence on May 13, 2016 and shall continue up to
and including May 12, 2026.
OPTION PERIOD 3 shall commence on May 13, 2026 and shall continue up to
and including May 12, 2036.
(each of the aforementioned option periods individually referred to herein
as an "OPTION PERIOD" and, collectively, all of the aforementioned Option
Periods are referred to herein as "OPTION PERIODS")
SECTION 31.2. Each Option granted to the Tenant pursuant to the provisions
of Section 31.1 hereof shall be exercised by the Tenant giving written notice to
the Landlord of the Tenant's intent to exercise the Option not less than
one-hundred eighty (180) days prior to the expiration of the Initial Term or not
41
less than one-hundred eighty (180) days prior to the expiration of the Option
Period which is then in effect, as the case may be.
SECTION 31.3. In the event that the Tenant exercises the Option with
respect to any Option Period, the Landlord and the Tenant hereby agree that this
Lease shall continue in full force and effect and remain unamended during the
applicable Option Period AND specifically, without limitation, that the Fixed
Rent payable by the Tenant to the Landlord during such Option Period shall be
increased on each anniversary date from and after the Commencement Date in
accordance with the provisions of Article 8 hereof.
ARTICLE 32
RENT REGULATION
SECTION 32.1. If at any time or times during the Term of this Lease, the
Rental reserved in this Lease is not fully collectible by reason of any
Requirement, Tenant shall enter into such agreements and take such other steps
as Landlord may request and as may be legally permissible to permit Landlord to
collect the maximum rents that may from time to time during the continuance of
such legal rent restriction be legally permissible (and not in excess of the
amounts reserved under this Lease). Upon the termination of such legal rent
restriction (a) the Rental shall become and thereafter be payable hereunder in
accordance with the amounts reserved in this Lease for the remainder of the
Term, and (b) Tenant shall pay to Landlord, if legally permissible, an amount
equal to (i) the items of Rental that would have been paid pursuant to this
Lease but for such legal rent restriction less (ii) the rents paid by Tenant to
Landlord during the period or periods such legal rent restriction was in effect.
This provision shall survive the expiration or earlier termination of this Lease
to the maximum enforceable extent.
ARTICLE 33
COVENANT OF QUIET ENJOYMENT
SECTION 33.1 Landlord covenants that, upon Tenant paying all Fixed Rent
and Additional Rent and observing and performing all the terms, agreements,
covenants, provisions and conditions of this Lease on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Premises,
subject nevertheless to the terms and conditions of this Lease; provided,
however, that no eviction of Tenant by reason of the
42
foreclosure of any Mortgage now or hereafter affecting the Premises shall be
construed as a breach of this covenant nor shall any action by reason thereof be
brought against Landlord, and provided further that this covenant shall bind and
be enforceable against Landlord or any successor to Landlord's interest, subject
to the terms hereof, only so long as Landlord or any successor to Landlord's
interest, is in possession and is collecting rent from Tenant but not
thereafter.
ARTICLE 34
MISCELLANEOUS
SECTION 34.1. This Lease is presented for signature by Tenant and it is
understood that this Lease shall not constitute an offer by or be binding upon
Landlord unless and until Landlord shall have executed and delivered a fully
executed copy of this Lease to Tenant.
SECTION 34.2. The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Premises, as the case may be, and in the event of any such sale,
conveyance, assignment or transfer, Landlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord under this Lease
thereafter arising, and the transferee shall be deemed to have assumed, subject
to the remaining provisions of this Section 34.2, all obligations of the
Landlord under this Lease arising after the effective date of the transfer. No
trustee, partner, principal, shareholder, director or officer of Landlord
(collectively, the "PARTIES") shall have any direct or personal liability for
the performance of Landlord's obligations under this Lease, and Tenant shall
look solely to Landlord's interest in the Premises to enforce Landlord's
obligations hereunder and shall not otherwise seek any damages against Landlord
or any of the Parties whatsoever. Tenant shall not look to any other property or
assets of Landlord or any property or assets of any of the Parties in seeking
either to enforce Landlord's obligations under this Lease or to satisfy a
judgment for Landlord's failure to perform such obligations.
SECTION 34.3. Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Additional Rent or
Rental, shall constitute rent for the purposes of Section 502(b)(7) of the
Bankruptcy Code.
43
SECTION 34.4. Neither this Lease nor any memorandum of this Lease shall be
recorded without the prior written consent of the Landlord, which consent may be
withheld by the Landlord in its sole and absolute discretion.
SECTION 34.5. Except as otherwise expressly stated in this Lease, any
consent or approval required to be obtained from Landlord may be granted by
Landlord in its sole and absolute discretion. In any instance in which Landlord
agrees not to act unreasonably, Tenant hereby waives any claim for damages
against or liability of Landlord that Tenant may have based upon any assertion
that Landlord has unreasonably withheld or unreasonably delayed any consent or
approval requested by Tenant, and Tenant agrees that its sole remedy shall be an
action or proceeding to enforce any related provision or for specific
performance, injunction or declaratory judgment. If with respect to any required
consent or approval Landlord is required by the express provisions of this Lease
not to unreasonably withhold or delay its consent or approval, and if it is
determined in any such proceeding referred to in the preceding sentence that
Landlord acted unreasonably, the requested consent or approval shall be deemed
to have been granted; however, Landlord shall have no liability whatsoever to
Tenant for its refusal or failure to give such consent or approval. Tenant's
sole remedy for Landlord's unreasonably withholding or delaying consent or
approval shall be as provided in this Section 34.5.
SECTION 34.6. Landlord shall have the right at any time, and from time to
time, to amend unilaterally the provisions of this Lease if Landlord is advised
by its counsel that all or any portion of the Rental paid by Tenant to Landlord
hereunder is, or may be deemed to be, unrelated business taxable income within
the meaning of the United States Internal Revenue Code or regulations issued
thereunder, and Tenant agrees that it will execute all documents necessary to
effect any such amendment, provided that no such amendment shall increase
Tenant's payment obligations or other liability under this Lease nor reduce
Landlord's obligations hereunder.
SECTION 34.7. If Tenant shall remain in possession of the Premises after
the Expiration Date, without the execution by both Tenant and Landlord of a new
lease, Tenant, at the election of Landlord, shall be deemed to be occupying the
Premises as a Tenant from month-to-month, at a monthly rental equal to three
(3x) times the Rental payable during the last month of the Term, subject to all
the other conditions, provisions and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy.
SECTION 34.8. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted. If any words or
44
phrases in this Lease are stricken out or otherwise eliminated, whether or not
any other words or phrases have been added, this Lease shall be construed as if
the words or phrases so stricken out or otherwise eliminated were never included
in this Lease and no implication or inference shall be drawn from the fact that
such words or phrases were stricken out or otherwise eliminated.
SECTION 34.9. If any of the provisions of this Lease, or the application
thereof to any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
provisions to persons or circumstances other than those as to whom or which it
is held invalid or unenforceable, shall not be affected thereby and shall remain
valid and enforceable, and every provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
SECTION 34.10. Landlord shall have the right to erect any gate, chain or
other obstruction or to close off any portion of the Premises to the public at
any time to the extent necessary to prevent a dedication thereof for public use.
SECTION 34.11. Tenant hereby represents to Landlord that it is not
entitled, directly or indirectly, to diplomatic or sovereign immunity and Tenant
agrees that in all disputes arising directly or indirectly out of this Lease
Tenant shall be subject to service of process in, and the jurisdiction of the
courts of, the State of New Jersey. The provisions of this Section 34.11 shall
survive the expiration of this Lease.
SECTION 34.12. This Lease contains the entire agreement between the parties
and all prior negotiations and agreements are merged into this Lease. Except as
provided in Section 34.6 this Lease may not be changed, abandoned or discharged,
in whole or in part, nor may any of its provisions be waived except by a written
agreement that (a) expressly refers to this Lease, (b) is executed by the party
against whom enforcement of the change, abandonment, discharge or waiver is
sought and (c) is permissible under the Mortgage(s).
SECTION 34.13. Any apportionment or prorations of Rental to be made under
this Lease shall be computed on the basis of a three hundred sixty (360) day
year, with twelve (12) months of thirty (30) days each.
SECTION 34.14. The laws of the State of Jersey applicable to contracts made
and to be performed wholly within the State of New Jersey shall govern and
control the validity, interpretation, performance and enforcement of this Lease
without regard to principles of conflicts of law.
45
SECTION 34.15. If Tenant is a corporation, each person executing this Lease
on behalf of Tenant hereby covenants, represents and warrants that Tenant is a
duly incorporated or duly qualified (if foreign) corporation and is authorized
to do business in the State of New Jersey (a copy of evidence thereof to be
supplied to Landlord upon request); and that each person executing this Lease on
behalf of Tenant is an officer of Tenant and that he or she is duly authorized
to execute, acknowledge and deliver this Lease to Landlord (a copy of a
resolution to that effect to be supplied to Landlord upon request).
SECTION 34.16. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Lease nor the intent of any provision thereof.
SECTION 34.17. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective legal representatives, heirs, successors, and, except as otherwise
provided in this Lease, their assigns.
SECTION 34.18. For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(A) The words "herein", "hereof", "hereunder" and "hereby"and words of
similar import shall be construed to refer to this Lease as a whole and not to
any particular Article or Section unless expressly so stated.
(B) Tenant's obligations hereunder shall be construed in every instance as
conditions as well as covenants, each separate and independent of any other
terms of this Lease.
(C) Reference to Landlord as having "no liability" or being "without
liability" shall mean that Tenant shall not be entitled to terminate this Lease,
or to claim actual or constructive eviction, partial or total, or to receive any
abatement or diminution of rent, or to be relieved in any manner of any of its
other obligations hereunder, or to be compensated for loss or injury suffered or
to enforce any other right or liability whatsoever against Landlord under or
with respect to this Lease or with respect to Tenant's use or occupancy of the
Premises.
(D) Reference to "termination of this Lease" or "expiration of this Lease"
and words of like import includes expiration or sooner termination of this Lease
and the Term and the estate hereby granted or cancellation of this Lease
pursuant to any of the provisions of this Lease or by law. Upon the termination
of this Lease, the Term
46
and estate granted by this Lease shall end at noon on the date of termination as
if such date were the Fixed Expiration Date, and neither party shall have any
further obligation or liability to the other after such termination except (i)
as shall be expressly provided for in this Lease, and (ii) for such obligations
as by their nature under the circumstances can only be, or by the provisions of
this Lease, may be, performed after such termination, and, in any event, unless
expressly otherwise provided in this Lease, any liability for a payment (which
shall be apportioned as of such termination) which shall have accrued to or with
respect to any period ending at the time of termination shall survive the
termination of this Lease.
(E) Words and phrases used in the singular shall be deemed to include the
plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender.
(F) The rule of "ejusdem generis" shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as
of the day and year first above written.
GERDANEU, INC., LANDLORD
By: ____________________________
LEISURE TIME TOURS, TENANT
By: ____________________________
47
<PAGE>
AGREEMENT OF LEASE
BETWEEN
GERDANEU, INC.,
LANDLORD
AND
LEISURE TIME TOURS,
TENANT
=========================================================
DATED: MAY 13, 1996
=========================================================
PREMISES
745 WEST DELILAH ROAD
PLEASANTVILLE, NEW JERSEY
BLOCK 164, LOT 10 ON THE
OFFICIAL TAX MAP OF THE MUNICIPALITY OF PLEASANTVILLE
AGREEMENT OF LEASE, made as of the 13th day of May, 1996, between GERDANEU,
INC., a New Jersey corporation, having an address at 4 Leisure Lane, Mahwah, New
Jersey 07430, as Landlord, and LEISURE TIME TOURS, a New Jersey corporation,
having an address at 4801 Woodway, Suite 300E, Houston, Texas 77056, as
Tenant.
WITNESSETH:
WHEREAS, the Landlord is the owner of certain premises known as and by
the street address of 745 West Delilah Road, Pleasantville, New Jersey and known
and designated on the Official Tax Map of the Municipality of Pleasantville as
Block 164, Lot 10, as more particularly described on Schedule "A", annexed
hereto and made a part hereof; and
WHEREAS, the Landlord desires to rent the aforementioned premises to
the Tenant and the Tenant desires to rent the aforementioned premises from the
Landlord.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, for themselves,
as well as their respective legal representatives, heirs, successors and
assigns, hereby agree as follows:
ARTICLE 1
GLOSSARY
For the purposes of this Lease, the following terms shall have the meanings
indicated below:
"ADA" shall have the meaning set forth in Section 9.1
hereof.
"ADDITIONAL RENT" shall have the meaning set forth in
Section 2.2 hereof.
"ALTERATION" or "ALTERATIONS" shall mean any and all alterations,
decorations, installations, repairs, improvements, additions, replacements or
other physical changes of any nature whatsoever in or about the Premises at any
time, now or hereafter.
"APPLICABLE RATE" shall mean the lesser of (x) three percentage points
above the then current Base Rate, or (y) the maximum rate permitted by
applicable law.
"BANKRUPTCY CODE" shall mean 11 U.S.C. Section 101 ET SEQ., or any statute,
federal or state, of similar nature and purpose, now or hereafter.
"BASE RATE" shall mean the rate of interest publicly announced from time to
time by Citibank, N.A., or its successor, as its "base rate" (or such other term
as may be used by Citibank, N.A., from time to time, for the rate presently
referred to as its "base rate").
"BUILDING SYSTEMS" shall mean the mechanical, electrical, sanitary,
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service or support systems of any nature whatsoever located at or on the
Premises, BUT shall not include installations made by Tenant or fixtures or
appliances (regardless of whether or not such fixtures or appliances are owned
by the Tenant or the Landlord).
"BUILDING INSURANCE" shall have the meaning set forth in
Section 11.2 hereof.
"BUSINESS DAYS" shall mean all days, excluding Saturdays, Sundays and all
days observed as holidays by the State of New Jersey or the federal government.
"COMMENCEMENT DATE" May 13, 1996.
"DEFICIENCY" shall have the meaning set forth in Section
18.2(A)(2) hereof.
"ECRA" shall have the meaning set forth in Section 9.2(B)
hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in
Section 17.1 hereof.
"EXPIRATION DATE" shall mean the Fixed Expiration Date or such other date
on which the Term ends pursuant to any of the terms, conditions or covenants of
this Lease or pursuant to law.
"FIXED EXPIRATION DATE" May 12, 2001.
"FIXED RENT" shall mean the sum of Ten ($10.00) Dollars.
"GOVERNMENT AUTHORITY" or "GOVERNMENT AUTHORITIES" shall mean the United
States of America, the State of New Jersey, the Municipality of Pleasantville,
and/or any political subdivision thereof and any agency, department, commission,
board, bureau or instrumentality of any of the foregoing, now existing or
hereafter created, having jurisdiction over the Premises or any portion thereof.
"HAZARDOUS MATERIALS" shall have the meaning set forth in
Section 9.2(A) hereof.
3
"INDEMNITEES" shall mean Landlord, its shareholders, officers, directors,
employees, agents and contractors (and the partners, shareholders, officers,
directors and employees of any of the Landlord's agents or contractors).
"INITIAL TERM" shall mean five (5) years.
"LANDLORD", on the date as of which this Lease is made, shall mean
Gerdaneu, Inc., a New Jersey corporation, but thereafter, "Landlord" shall mean
any fee owner of the Premises.
"LEASE YEAR" shall mean each twelve (12) month period commencing on each
anniversary date from and after the Commencement Date.
"MORTGAGE(S)" shall mean any trust indenture or mortgage which may now or
hereafter affect the Premises and all extensions, supplements, amendments,
modifications, consolidations, refinancings and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"MORTGAGEE(S)" shall mean any trustee or mortgagee or holder
of a Mortgage.
"NJDEP" shall have the meaning set forth in Section 9.2(B) hereof.
"NOTICE(S)" shall have the meaning set forth in Section 27.1(A) hereof.
"OPTION" or "OPTIONS" shall have the meaning set forth in
Section 31.1 hereof.
"OPTION PERIOD" or "OPTION PERIODS" shall have the meaning set forth in
Section 31.1 hereof.
"PARTIES" shall have the meaning set forth in Section 34.2 hereof.
"PERMITTED USE" shall mean general, executive and administrative offices,
parking and terminal facilities in connection with Tenant's business as a motor
vehicle transportation company and uses related thereto including the evolution
of the Tenant's business consistent with the evolution of the motor vehicle
transportation industry in general.
"PERSON(S) OR PERSON(S)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"PERSONS WITHIN TENANT'S CONTROL" shall mean and include Tenant, all of
Tenant's respective shareholders, directors,
4
officers, agents, contractors, sub-contractors, servants, employees, licensees
and invitees as well as any of the heirs, successors, representatives and
assigns of any of the foregoing.
"PREMISES" shall mean all that certain plot, piece and parcel of land,
together with all buildings and improvements thereon erected, known as and by
the street address of 745 West Delilah Road, Pleasantville, New Jersey and known
and designated on the Official Tax Map of the Municipality of Pleasantville as
Block 164, Lot 10, as more particularly described on Schedule "A", annexed
hereto and made a part hereof.
"PRICE INDEX" shall have the meaning set forth in Section 8.1(ii) hereof.
"RENTAL" shall mean and be deemed to include Fixed Rent, Additional Rent
and any other sums payable, now or hereafter, by Tenant hereunder.
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, retroactive and prospective, of all
Governmental Authorities, now existing or hereafter created, which affect,
directly or indirectly, the Premises and/or the maintenance, use, operation or
occupation of the Premises, (ii) all requirements, obligations and conditions of
all instruments of record on the date of this Lease, and (iii) all requirements,
obligations and conditions imposed by any fire rating agency or by the carrier
of Landlord's hazard insurance policy for the Premises.
"TAXES" shall have the meaning set forth in Section 3.1 hereof.
"TENANT", on the date as of which this Lease is made, shall mean the Tenant
named in this Lease, but thereafter "Tenant" shall mean only the tenant under
this Lease at the time in question; provided, however, that the Tenant named in
this Lease and any and all successor tenant(s) hereunder shall not be released
and relieved from any liability hereunder in the event of any assignment of this
Lease or a sublet, in whole or in part, of the Premises.
"TENANT'S PROPERTY" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings and other
movable items of personal property owned by the Tenant.
"TERM", on the date as of which this Lease is made shall mean five (5)
years, but thereafter shall be deemed to include any Option Period for which the
Tenant exercises its Option pursuant to the provisions of Article 31 hereof.
5
"TERMINATION NOTICE PERIOD" shall have the meaning set forth in Section
27.1 hereof.
"UNAVOIDABLE DELAYS" shall have the meaning set forth in
Article 25 hereof.
ARTICLE 2
DEMISE; PREMISES; TERM; RENT
SECTION 2.1. Landlord hereby leases to Tenant and Tenant hereby hires
from Landlord the Premises for the Term to commence on the Commencement Date and
to end on the Fixed Expiration Date, unless earlier terminated as provided
herein.
SECTION 2.2. Commencing upon the Commencement Date, Tenant shall pay to
Landlord, in lawful money of the United States of America, without notice or
demand, by good and sufficient check at the office of Landlord or at such other
place as Landlord may designate from time to time, the following:
(A) the Fixed Rent, as such term is defined in Article 1 hereof, shall
be payable in advance on the first day of each and every Lease Year during the
Term, except that the first payment of Fixed Rent shall be payable by Tenant
upon execution and delivery of this Lease; and
(B) additional rent ("ADDITIONAL RENT") consisting of all other sums
of money as shall become due from and be payable by Tenant hereunder (for
default in the payment of which Landlord shall have the same remedies as for a
default in the payment of Fixed Rent).
SECTION 2.3. Tenant shall pay the Fixed Rent and Additional Rent when
due without abatement, deduction, counterclaim, setoff or defense of any nature.
ARTICLE 3
REAL ESTATE TAXES; MORTGAGE(S)
SECTION 3.1. The Tenant represents, warrants, covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all Taxes (as hereinafter
defined) of any nature whatsoever assessed or imposed against the Premises for
each and every Lease Year during the Term of this Lease. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant
6
pursuant to the provisions of this Section 3.1 shall include an accurate copy of
the invoice, statement, bill or similar document issued by the relevant
Governmental Authority or Governmental Authorities, as the case may be, with
respect to the Taxes for which payment is demanded. The Landlord hereby agrees
that any demand given by the Landlord to the Tenant pursuant to the provisions
of this Section 3.1 shall include an accurate copy of the invoice, statement,
bill or similar document issued by the relevant Governmental Authority or
Governmental Authorities, as the case may be, with respect to the Taxes for
which payment is demanded. For purposes of this Section 3.1, "TAXES" shall
include, without limitation, any and all taxes assessed against the Premises,
all personal property taxes, all ad valorem taxes and any and all other taxes
assessed against the Premises by any Governmental Authority, now or hereafter.
SECTION 3.2. The Tenant represents, warrants and covenants and agrees
that it shall, within five (5) days of written demand by the Landlord to the
Tenant, pay to the Landlord, as Additional Rent, any and all amounts which may
be due and owing under and pursuant to the terms and conditions of any Mortgage
or Mortgages, as the case may be, encumbering the Premises, now or hereafter,
during the Term of this Lease including, but not limited to, any extensions,
supplements, amendments, modifications, consolidations, refinancings and
replacements of any such Mortgage or Mortgages provided that:
(A) the principal balance of any Mortgage subsequent to any extension,
supplement, amendment, modification, consolidation, refinancing or
replacement shall not exceed the outstanding principal balance of the
Mortgage which is to be extended, supplemented, amended, modified,
consolidated, refinanced or replaced at the time of such extension,
supplement, amendment, modification, consolidation, refinancing or
replacement, as the case may be; and
(B) the amount of the monthly payments of principal and interest
payable pursuant to the terms and conditions of any Mortgage subsequent
to any extension, supplement, amendment, modification, consolidation,
refinancing or replacement shall not exceed the amount of the monthly
payments with respect to the Mortgage which is to be extended,
supplemented, amended, modified, consolidated, refinanced or replaced
at the time of such extension, supplement, amendment, modification,
consolidation, refinancing or replacement, as the case may be; and
(C) the terms of any extended, supplemented, amended, modified,
consolidated, refinanced or replaced Mortgage shall be no more
financially onerous than the
7
provisions of the such Mortgage prior to such extension, supplement,
amendment, modification, consolidation, refinancing or replacement, as
the case may be; and
(D) the term of any Mortgage extended, supplemented, amended, modified,
consolidated, refinanced or replaced shall be no less than the term of
such Mortgage prior to such extension, supplementation, amendment,
modification, consolidation, refinancing or replacement, as the case
may be.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 shall not apply with respect to any amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage
securing additional indebtedness (above and beyond any Mortgage or Mortgages
existing as of the date hereof) which first becomes a recorded lien on the
Premises subsequent to the date of this Lease and which is executed and
delivered by the Landlord without the consent of the Tenant. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant for payment of
Additional Rent pursuant to the provisions of this Section 3.2 shall include,
ONLY to the extent provided to the Landlord by the Mortgagee, an accurate copy
of the invoice, statement, bill or similar document issued by such Mortgagee or
Mortgagees, as the case may be, with respect to any amount for which payment of
Additional Rent is demanded by the Landlord under and pursuant to the provisions
of this Section 3.2.
ARTICLE 4
UTILITIES
SECTION 4.1. The Tenant represents, warrants, covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all charges incurred by the
Landlord for any and all utilities supplied to the Premises including, without
limitation, electricity, water, heating oil and/or natural gas. The Landlord
hereby agrees that any demand given by the Landlord to the Tenant pursuant to
the provisions of this Section 4.1 shall include an accurate copy of the
invoice, statement, bill or similar document issued by the public utility or any
private company providing such utility, as the case may be, with respect to any
utility for which payment is demanded.
SECTION 4.2. Landlord shall not be liable in any way to
Tenant for any interruption or failure of or defect in the supply
or character of any utility furnished to the Premises, now or
8
hereafter, or for any loss, damage or expense Tenant may sustain if either the
quantity or character of any utility is changed or is no longer suitable for
Tenant's requirements, whether by reason of any requirement, act or omission of
the public utility serving the Premises or for any other reason whatsoever.
Notwithstanding the provisions of this Section 4.2, the Landlord shall be
responsible for any and all actual damages suffered by the Tenant as a result of
any interruption of utility service caused solely by the Landlord's failure to
remit (prior to the expiration of any applicable grace period) to the
appropriate public utility or private company providing such utility, as the
case may be, any amount which has been paid by the Tenant to the Landlord
pursuant to the provisions of Section 4.1 hereof.
SECTION 4.3. Tenant shall at all times comply with the rules, regulations,
terms and conditions applicable to service, equipment, wiring, as well as any
and all requirements of the public utility supplying electricity to the
Premises. Tenant shall not, without Landlord's prior written consent in each
instance (which consent may be withheld by the Landlord in its reasonable
discretion), connect any fixtures, machinery, appliances or equipment to the
Premises electric distribution system or make any alteration or addition to
Tenant's machinery, appliances or equipment, or the electric system of the
Premises, if the effect thereof would be to increase the electrical load in the
Premises. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall be provided by Landlord and the cost thereof
shall be deemed Additional Rent due hereunder and shall be forthwith paid by
Tenant upon Landlord's demand.
SECTION 4.4. If any Taxes are imposed upon Landlord with respect to any
utility furnished as a service to Tenant by any Governmental Authority, Tenant
agrees that such Taxes shall be reimbursed by Tenant to Landlord upon written
demand. The Landlord hereby agrees that any demand given by the Landlord to the
Tenant pursuant to the provisions of this Section 4.4 shall include an accurate
copy of the invoice, statement, bill or similar document issued by the relevant
Governmental Authority or Governmental Authorities, as the case may be, with
respect to the Taxes for which payment is demanded.
ARTICLE 5
USE AND OCCUPANCY
SECTION 5.1. Tenant shall use and occupy the Premises for the Permitted Use
and for no other purpose of any nature whatsoever.
9
ARTICLE 6
ALTERATIONS
SECTION 6.1.
(A) (1) Prior to making any Alterations, Tenant shall (i)
submit to Landlord detailed plans and specifications for approval by the
Landlord (including layout, architectural, electrical, mechanical and structural
drawings) and that comply with all Requirements for each proposed Alteration,
and Tenant shall not commence any such Alteration without first obtaining
Landlord's approval of such plans and specifications, (ii) at Tenant's expense,
obtain all permits, approvals and certificates required by any Governmental
Authorities, and (iii) furnish to Landlord duplicate original policies or
certificates thereof for worker's compensation insurance (covering all persons
to be employed by Tenant, and Tenant's contractors and subcontractors, in
connection with such Alteration) and commercial general liability insurance
(including premises operation, bodily injury, personal injury, death,
independent contractors, products and completed operations, broad form
contractual liability and broad form property damage coverages) in such form,
with such companies, for such periods and in such amounts as Landlord may
reasonably approve, naming Landlord and its agents and any Mortgagee, as
additional insureds. Upon completion of such Alteration, Tenant, at Tenant's
expense, shall obtain certificates of final approval of such Alterations
required by any Governmental Authority and shall furnish Landlord with copies
thereof, together with the "as-built" plans and specifications for such
Alterations. All Alterations shall be made and performed in accordance with the
plans and specifications therefor as approved by Landlord and otherwise in
accordance with all Requirements. All materials and equipment to be incorporated
in the Premises as a result of any Alterations shall be first quality and no
such materials or equipment shall be subject to any lien, encumbrance, chattel
mortgage, title retention or security agreement.
(2) Landlord reserves the right to disapprove
any plans and specifications, in whole or in part, to reserve approval of items
shown thereon pending its review and approval of other plans and specifications,
and to condition its approval upon Tenant making revisions to the plans and
specifications or supplying additional information. Tenant agrees that any
review or approval by Landlord of any plans and/or specifications with respect
to any Alteration is solely for Landlord's benefit, and without any
representation or warranty whatsoever to Tenant or any other Person with respect
to the adequacy, correctness or sufficiency thereof or with respect to
Requirements or otherwise.
10
(B) All Alterations shall become a part of the Premises and
shall be Landlord's property from and after the installation thereof and may not
be removed or changed without Landlord's prior written consent. Notwithstanding
the foregoing, Landlord, upon notice given at least thirty (30) days prior to
the Expiration Date or upon such shorter notice as is reasonable under the
circumstances upon the earlier expiration of the Term, may require Tenant to
remove any specified Alterations and to repair and restore in a good and
workmanlike manner any damage to the Premises caused by such removal. All
Tenant's Property shall remain the property of Tenant and, on or before the
Expiration Date or earlier end of the Term, may be removed from the Premises by
Tenant at Tenant's sole cost and option; provided, however, that Tenant shall
repair and restore in a good and workmanlike manner any damage to the Premises
caused by such removal. The provisions of this Section 6.1(B) shall survive the
expiration or earlier termination of this Lease.
(C) (1) Any and all Alterations shall be performed, at Tenant's sole
cost and expense, by contractors, subcontractors or mechanics previously
approved in writing by Landlord. Prior to making an Alteration, at Tenant's
request, Landlord shall furnish Tenant with a list of contractors who may
perform Alterations to the Premises on behalf of Tenant.
(2) Notwithstanding the terms and conditions of Section 6.1(C)(1)
hereof, with respect to any Alteration affecting any Building Systems, (i)
Tenant shall only employ Landlord's designated contractor, and (ii) the
Alteration shall, at Tenant's expense, be designed by Landlord's engineer.
(D) (1) Any mechanic's lien filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant shall be cancelled or discharged by Tenant, at Tenant's expense, within
twenty (20) days after such lien shall be filed, by payment or filing of the
bond required by law, and Tenant shall indemnify and hold Landlord harmless from
and against any and all costs, expenses, claims, losses or damages resulting
therefrom by reason thereof.
(2) If Tenant shall fail to discharge such mechanic's lien within the
aforesaid period, then, in addition to any other right or remedy of Landlord,
Landlord may, but shall not be obligated to, discharge the same either by paying
the amount claimed to be due or by procuring the discharge of such lien by
deposit in court or bonding, and in any such event, Landlord shall be entitled,
if Landlord so elects, to compel the prosecution of an action for the
foreclosure of such mechanics lien by the lienor and to pay the amount of the
judgment, if any, in favor of the lienor, with interest, costs and allowances.
11
(3) Any amount paid by Landlord for any of the aforesaid charges and
for all expenses of Landlord (including, but not limited to, attorneys' fees and
disbursements) incurred in defending any such action, discharging said lien or
in procuring the discharge of said lien, with interest on all such amounts at
the maximum legal rate of interest then chargeable to Tenant from the date of
payment, shall be repaid by Tenant within ten (10) days after written demand
therefor, and all amounts so repayable, together with such interest, shall be
considered Additional Rent.
SECTION 6.2. Landlord, at Tenant's expense, and upon the request of Tenant,
shall join in any applications for any permits, approvals or certificates
required to be obtained by Tenant in connection with any permitted Alteration
(provided that the provisions of the applicable Requirements shall require that
Landlord join in such application) and shall otherwise cooperate with Tenant in
connection therewith; provided, however, that Landlord shall not be obligated to
incur any cost or expense or liability in connection therewith.
SECTION 6.3. Tenant shall furnish to Landlord copies of records of all
Alterations and of the cost thereof within fifteen (15) days after the
completion of such Alterations.
SECTION 6.4. Tenant shall not, at any time prior to or during the Term,
directly or indirectly, employ, or permit the employment of, any contractor,
mechanic or laborer in the Premises, whether in connection with any Alteration
or otherwise, if such employment would interfere or cause any conflict with
other contractors, mechanics or laborers engaged in the construction,
maintenance or operation of the Premises by Landlord, Tenant or others, or of
any other property owned by Landlord. In the event of any such interference or
conflict, Tenant, upon demand of Landlord, shall cause all contractors,
mechanics or laborers causing such interference or conflict to leave the
Premises immediately.
ARTICLE 7
REPAIRS; REPLACEMENTS; MAINTENANCE
SECTION 7.1. Tenant, at Tenant's sole cost and expense, shall take good
care of the Premises and the fixtures, equipment and appurtenances therein and
make all repairs and replacements thereto, BOTH STRUCTURAL AND NON-STRUCTURAL,
of any nature whatsoever as and when needed to preserve them in good working
order and condition, except for (a) reasonable wear and tear and (b)
obsolescence. If Tenant shall fail, after five (5) days notice (or such shorter
period as may be required because of an
12
emergency), to proceed with due diligence to make repairs required to be made by
Tenant, the same may be made by Landlord, at the expense of Tenant, and the
expenses thereof incurred by Landlord, with interest thereon at the Applicable
Rate, shall be paid to Landlord, as Additional Rent, within ten (10) days after
rendition of a bill or statement therefor. Tenant shall give Landlord prompt
notice of any defective condition in any Building Systems located in, servicing
or passing through the Premises.
ARTICLE 8
INTENTIONALLY OMITTED
ARTICLE 9
REQUIREMENTS OF LAW
SECTION 9.1. Tenant shall not do, and shall not permit any act or thing in
or upon the Premises which will invalidate or be in conflict with the
certificate of occupancy for the Premises or violate any Requirements. Tenant
shall, at Tenant's sole cost and expense, immediately take all action, including
but not limited to, making any required Alterations necessary to comply with all
Requirements [including, but not limited to, the Americans With Disabilities Act
of 1990 (the "ADA"), as modified and supplemented from time to time] which shall
or may impose any violation, order or duty upon Landlord or Tenant arising from,
or in connection with, the Premises, Tenant's occupancy, use or manner of use of
the Premises (including, without limitation, any occupancy, use or manner of use
that constitutes a "place of public accommodation" under the ADA), or any
installations in the Premises, or required by reason of a breach of any of
Tenant's covenants or agreements under this Lease, whether or not such
Requirements shall now be in effect or hereafter enacted or issued, and whether
or not any work required shall be ordinary or extraordinary or foreseen or
unforeseen as of the date hereof.
SECTION 9.2. (A) Tenant covenants and agrees that Tenant shall, at Tenant's
sole cost and expense, comply at all times with all Requirements governing the
use, generation, storage, treatment and/or disposal of any Hazardous Materials
(as defined below), the presence of which results from or in connection with the
act or omission of Tenant or Persons Within Tenant's Control or the breach of
this Lease by Tenant or Persons Within Tenant's Control. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other toxic or
hazardous wastes, pollutants or substances, including, without limitation,
asbestos, PCBS, petroleum products and by-products, substances defined or listed
as "hazardous substances" or "toxic
13
substances" or similarly identified in or pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 ET
SEQ., and as hazardous wastes under the Resource Conservation and Recovery Act,
42 U.S.C. ss. 6010, ET SEQ., any chemical substance or mixture regulated under
the Toxic Substance Control Act of 1976, as amended, 15 U.S.C. 2601, ET SEQ.,
any "toxic pollutant" under the Clean Water Act, 33 U.S.C. ss. 466 ET SEQ., as
amended, any hazardous air pollutant under the Clean Air Act, 42 U.S.C. ss. 7401
ET SEQ., hazardous materials identified in or pursuant to the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 1802, ET SEQ., and any hazardous or
toxic substances or pollutant regulated under any other Requirements including,
without limitation, ECRA (as such term is hereinafter defined). Tenant agrees to
execute, from time to time, at Landlord's request, affidavits, representations
and the like concerning Tenant's best knowledge and belief regarding the
presence of Hazardous Materials in, on, under or about the Premises. Tenant
shall indemnify and hold harmless all Indemnitees from and against any loss,
claim, cost, damage, liability or expense (including attorneys' fees and
disbursements) arising by reason of any clean up, removal, remediation,
detoxification action or any other activity required or recommended of any
Indemnitees by any Governmental Authority by reason of the presence in, on,
under or about the Premises of any Hazardous Materials, as a result of or in
connection with the act or omission of Tenant or Persons Within Tenant's Control
or the breach of this Lease by Tenant or Persons Within Tenant's Control. The
foregoing covenants and indemnity shall survive the expiration or any
termination of this Lease.
(B) In addition to the foregoing, Tenant shall, at its sole cost and
expense, comply with any and all environmental monitoring requirements of the
New Jersey Department of Environmental Protection and the Environmental Cleanup
Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 ET. SEQ. In order to comply with
ECRA, the Tenant shall undertake, at its sole cost and expense, all sampling
required by the Landlord or the New Jersey Department of Environmental
protection ("NJDEP") and shall execute and deliver, upon request, all documents
and pay all fees necessary or desirable for such compliance, which execution,
delivery and/or payment may be requested by either the Landlord and/or NJDEP. It
is understood that this provision shall apply with regard to any action which
may or might require compliance with ECRA, including without limitation, the
termination of this Lease, the change of use of the Premises, an assignment or
sublease of all or part of the Premises, bankruptcy, or the conveyance of title
to the Premises. It is understood that the provisions of this Section 9.2(B)
shall survive the expiration or earlier termination of this Lease.
SECTION 9.3. If Tenant shall receive notice of any violation of, or
defaults under, any Requirements, liens or other
14
encumbrances applicable to the Premises, Tenant shall give immediate written
notice thereof to Landlord.
SECTION 9.4. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business and if the failure to secure
such license or permit would, in any way, affect Landlord or the Premises, then
Tenant, at Tenant's expense, shall promptly procure and thereafter maintain,
submit for inspection by Landlord, and at all times comply with the terms and
conditions of, each such license or permit.
ARTICLE 10
SUBORDINATION
SECTION 10.1. This Lease shall at all times, now and hereafter, be subject
and subordinate to each and every Mortgage, whether made prior to or after the
execution of this Lease, and to all extensions, supplements, amendments,
modifications, consolidations and replacements thereof or thereto, substitutions
therefor, and advances made thereunder. This clause shall be self-operative and
no further agreement of subordination shall be required to make the interest of
any Mortgagee superior to the interest of Tenant hereunder. In confirmation of
such subordination, Tenant shall promptly execute and deliver, at its own cost
and expense, any document, in recordable form if requested, that Landlord or any
Mortgagee may request to evidence such subordination; and if Tenant fails to
execute, acknowledge or deliver any such document within five (5) days after
request therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge and
deliver any such document for and on behalf of Tenant. Tenant shall not do
anything that would constitute a default under any Mortgage, or omit to do
anything that Tenant is obligated to do under the terms of this Lease so as to
cause Landlord to be in default thereunder.
SECTION 10.2. If, at any time prior to the expiration of the Term, any
Mortgagee comes into possession of the Premises, by receiver or otherwise,
Tenant agrees, at the election and upon demand of any owner of the Premises, or
of any Mortgagee in possession of the Premises, to attorn, from time to time, to
any such owner or Mortgagee or any person acquiring the interest of Landlord as
a result of any such termination or as a result of a foreclosure of the Mortgage
or the granting of a deed in lieu of foreclosure, upon the then executory terms
and conditions of this Lease (except as provided below), for the remainder of
the Term, provided that such owner or Mortgagee, as the case may be, or receiver
caused to be appointed by any of the foregoing, is then
15
entitled to possession of the Premises. Any such attornment shall be made upon
the condition that no such owner or Mortgagee shall be:
(1) liable for any act or omission of any prior landlord (including,
without limitation, the then defaulting landlord); or
(2) subject to any defense or offsets (except as expressly set forth
in this Lease) which Tenant may have against any prior landlord (including,
without limitation, the then defaulting landlord); or
(3) bound by any payment of Rental which Tenant might have paid for
more than the current month to any prior landlord (including, without
limitation, the then defaulting landlord); or
(4) bound by any obligation to make any payment to Tenant which was
required to be made prior to the time such owner or Mortgagee succeeded to any
prior landlord's interest; or
(5) bound by any obligation to perform any work or to make
improvements to the Premises except for (i) repairs to the Premises or any part
thereof as a result of damage by fire or other casualty pursuant to Article 12,
but only to the extent that such repairs can be reasonably made from the net
proceeds of any insurance actually made available to such owner or Mortgagee and
(ii) repairs to the Premises as a result of a partial condemnation pursuant to
Article 13, but only to the extent that such repairs can be reasonably made from
the net proceeds of any award made available to such owner or Mortgagee. Tenant,
upon demand of any such owner or Mortgagee, shall execute, from time to time,
agreements in confirmation of the foregoing provisions of this Section 10.2,
satisfactory to any such owner or Mortgagee, and acknowledging such attornment
and setting forth the terms and conditions of its tenancy. Nothing contained in
this Section 10.2 shall be construed to impair any right otherwise exercisable
by any such owner or Mortgagee.
SECTION 10.3. If requested by any Mortgagee or Landlord, Tenant shall
promptly execute and deliver, at Tenant's own cost and expense, any document in
accordance with the terms of this Article 10, in recordable form, to evidence
such subordination.
SECTION 10.4. At any time and from time to time upon not less than ten
(10) days' prior notice to Tenant or Landlord given by the other, or to Tenant
given by a Mortgagee, Tenant or Landlord, as the case may be, shall, without
charge, execute, acknowledge and deliver a statement in writing addressed to
such party as Tenant, Landlord or Mortgagee, as the case may be, may
16
designate, in form satisfactory to Tenant, Landlord or Mortgagee, as the case
may be, certifying all or any of the following: (i) that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that this Lease is in full force and effect as modified and stating the
modifications); (ii) the date that the Term commenced and the date(s) that Fixed
Rent and Additional Rent became payable hereunder and the dates to which they
have been paid; (iii) whether or not, to the best knowledge of the signer of
such certificate, Landlord is in default in performance of any of the terms of
this Lease and, if so, specifying each such event of default of which the signer
may have knowledge; (iv) whether or not, to the best knowledge of the signer of
such certificate, Tenant has accepted possession of the Premises; (v) whether
Tenant has made any claim against Landlord under this Lease and, if so, the
nature thereof and the dollar amount, if any, of such claim; (vi) either that
Tenant does not know of any default in the performance of any provision of this
Lease or specifying the details of any default of which Tenant may have
knowledge and stating what action Tenant is taking or proposes to take with
respect thereto; (vii) that, to the best knowledge of Tenant, there are no
proceedings pending or threatened against Tenant before or by any court or
administrative agency which, if adversely decided, would materially or adversely
affect the financial condition or operations of Tenant or, if any such
proceedings are pending or threatened to the best knowledge of Tenant,
specifying and describing the same; and (viii) such further information with
respect to the Lease or the Premises as Landlord may reasonably request or
Mortgagee may require; it being intended that any such statement delivered
pursuant hereto may be relied upon by any prospective purchaser of the Premises
or any part thereof or of the interest of Landlord in any part thereof, by any
Mortgagee or prospective Mortgagee or by any prospective assignee of any
Mortgage or by any assignee of Tenant.
The failure of either Tenant or Landlord to execute, acknowledge and
deliver a statement in accordance with the provisions of this Section 10.4
within said ten (10) day period shall constitute an acknowledgment by Tenant or
Landlord, as the case may be, which may be relied on by any person or entity of
any nature whatsoever who would be entitled to rely upon any such statement,
that such statement as submitted by Landlord or Tenant, as the case may be, is
true and correct.
SECTION 10.5. As long as any Mortgage exists, Tenant shall not seek to
terminate this Lease by reason of any act or omission of Landlord until Tenant
has given not less than thirty (30) days prior written notice of such act or
omission to all Mortgagees, and if any such Mortgagee notifies Tenant within
thirty (30) days following receipt of such notice of its intention to remedy
such act or omission, until a reasonable period of time shall have elapsed
following the giving of such notice, during which period
17
such Mortgagee shall have the right, but not the obligation, to
remedy such act or omission.
ARTICLE 11
INSURANCE; PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
SECTION 11.1.
(A) Neither Landlord nor Landlord's agents shall be liable for
any injury or damage to persons or property, or interruption of Tenant's
business, resulting from fire or other casualty; nor shall Landlord or
Landlord's agents be liable for any such damage caused by Persons other than the
Landlord or the Landlord's agents or by construction of any private, public or
quasi-public work; nor shall Landlord be liable for any latent defect in the
Premises.
(B) Tenant shall give written notice to Landlord, immediately after
Tenant learns thereof, of any accident, emergency, occurrence for which Landlord
might be liable, fire or other casualty and all damages to or defects in the
Premises for the repair of which Landlord might be responsible or which
constitutes Landlord's property. Such notice shall be given by telecopy or
personal delivery to the address(es) of Landlord in effect for notice.
SECTION 11.2. Tenant shall not do or permit to be done any act or thing in
or upon the Premises which will invalidate or be in conflict with the terms of
the State of New Jersey standard form of fire insurance with extended coverage,
or with rental, liability, boiler, sprinkler, water damage, war risk or other
insurance policies covering the Premises and the fixtures and property therein
(hereinafter referred to as "BUILDING INSURANCE"); and Tenant, at Tenant's own
expense, shall comply with all rules, orders, regulations and requirements of
all insurance boards, and shall not do or permit anything to be done in or upon
the Premises or bring or keep anything therein or use the Premises in a manner
which increases the rate of premium for any of the Building Insurance or any
property or equipment located therein over the rate in effect at the
commencement of the Term of this Lease.
SECTION 11.3.
(A) If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the rate of premium for Building Insurance or other
insurance on the property and equipment of Landlord shall be higher than it
otherwise would be, Tenant shall reimburse Landlord for that part of the
insurance
18
premiums thereafter paid by Landlord which shall have been charged because of
such failure by Tenant. Tenant shall make said reimbursement on the first day of
the month following such payment by Landlord.
(B) In any action or proceeding wherein Landlord and Tenant are
parties, a schedule of any insurance rate for the Premises issued by any
insurance board establishing insurance premium rates for the Premises shall be
prima facie evidence of the facts therein stated and of the several items and
charges in the insurance premium rates then applicable to the Premises.
SECTION 11.4.
(A) Tenant shall, at Tenant's own cost and expense, obtain, maintain
and keep in full force and effect during the Term, for the benefit of Landlord,
any Mortgagees and Tenant, commercial general liability insurance (including
premises operation, bodily injury, personal injury, death, independent
contractors, products and completed operations, broad form contractual liability
and broad form property damage coverages) in a combined single limit amount of
not less than Five Million and 00/100 ($5,000,000.00) Dollars, against all
claims, demands or actions with respect to damage, injury or death made by or on
behalf of any person or entity, arising from or relating to the conduct and
operation of Tenant's business in, on or about the Premises (which shall include
Tenant's signs, if any), or arising from or related to any act or omission of
Tenant or of Persons Within Tenant's Control. If Tenant shall install or
maintain one or more pressure vessels to serve Tenant's operations at the
Premises, Tenant shall, at Tenant's own cost and expense, obtain, maintain and
keep in full force and effect, for the benefit of Landlord, any Mortgagees and
Tenant, appropriate boiler or other insurance coverage therefor in an amount not
less than Three Million and 00/100 ($3,000,000.00) Dollars (it being understood
and agreed, however, that the foregoing shall not be deemed a consent by
Landlord to the installation and/or maintenance of any such pressure vessels in
the Premises, which installation and/or maintenance shall at all times be
subject to the prior written consent of Landlord). Whenever, in Landlord's
reasonable judgment, good business practice and changing conditions indicate a
need for additional amounts or different types of insurance coverage, Tenant
shall, within ten (10) days after Landlord's request, obtain such insurance
coverage, at Tenant's expense.
(B) Tenant, at Tenant's sole cost and expense, shall maintain
insurance protecting and indemnifying Tenant against any and all damage to or
loss of any Alterations and leasehold improvements, including any made by
Landlord to prepare the Premises for Tenant's occupancy, and Tenant's Property,
and all claims and liabilities relating thereto.
19
(C) Landlord and any Mortgagees shall be named as insureds in said
policies and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be: (i) written
as "occurrence" policies; (ii) written as primary policy coverage and not
contributing with or in excess of any coverage which Landlord may carry; and
(iii) issued by reputable and independent insurance companies rated in Best's
Insurance Guide, or any successor thereto (or if there be none, an organization
having a national reputation) as having a general policyholder rating of "A+"
and a financial rating of at least "13", and which are licensed to do business
in the State of New Jersey. Tenant shall, not later than ten (10) Business Days
prior to the Commencement Date, deliver to Landlord the policies of insurance or
certificates thereof, together with evidence of payment of premiums thereon, and
shall thereafter furnish to Landlord, at least thirty (30) days prior to the
expiration of any such policies and any renewal thereof, a new policy or
certificate in lieu thereof, with evidence of the payment of premiums thereon.
Each of said policies shall also contain a provision whereby the insurer agrees
not to cancel, fail to renew, diminish or materially modify said insurance
policy(ies) without having given Landlord and any Mortgagees at least thirty
(30) days prior written notice thereof.
(D) Tenant shall pay all premiums and charges for all of said
policies, and, if Tenant shall fail to make any payment when due or carry any
such policy, Landlord may, but shall not be obligated to, make such payment or
carry such policy, and the amount paid by Landlord, with interest thereon (at
the Applicable Rate), shall be repaid to Landlord by Tenant on demand, and all
such amounts so repayable, together with such interest, shall be deemed to
constitute Additional Rent hereunder. Payment by Landlord of any such premium,
or the carrying by Landlord of any such policy, shall not be deemed to waive or
release the default of Tenant with respect thereto.
SECTION 11.5.
(A) Tenant shall cause each insurance policy carried by Tenant and
insuring the Premises and Tenant's Alterations, leasehold improvements, space
equipment, furnishings, furniture, contents and fixtures against loss, damage or
destruction by fire or other casualty, to be written in a manner so as to
provide that the insurance company waives all rights of recovery by way of
subrogation against Landlord or Tenant in connection with any loss or damage
covered by any such policy. If the release of either Landlord or Tenant shall
contravene any law with respect to exculpatory agreements, the liability of the
party in question shall be deemed not released, but no action or rights shall be
sought or enforced against such party unless and until all rights and remedies
against the insurer are exhausted and such party shall be unable to collect such
insurance proceeds.
20
(B) The waiver of subrogation referred to in Section 11.5(A) above
shall extend to the agents and employees of each party, but only if and to the
extent that such waiver can be obtained without additional charge (unless such
party shall pay such charge). Nothing contained in this Section 11.5 shall be
deemed to relieve the Tenant from any duty imposed elsewhere in this Lease to
repair, restore and rebuild the Premises, in whole or in part.
ARTICLE 12
DESTRUCTION BY FIRE OR OTHER CAUSE
SECTION 12.1. If the Premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate written notice thereof to
Landlord. Landlord shall, subject to the provisions of Sections 12.2 and 12.3
below, proceed with reasonable diligence, after receipt of the net proceeds of
insurance, to repair or cause to be repaired such damage at its expense, but in
no event shall such repair or restoration be greater in scope than the quantity
or quality of construction of the Premises as of the Commencement Date; and, if
the Premises, or any part thereof, shall be rendered untenantable by reason of
such damage and such damage shall not be due to the fault of Tenant or Persons
Within Tenant's Control, then the Fixed Rent hereunder, or an amount thereof
apportioned according to the area of the Premises so rendered untenantable (if
less than the entire Premises shall be so rendered untenantable), shall be
abated for the period from the date of such damage to the date when the repair
of such damage shall have been substantially completed. If Landlord or any
Mortgagee shall be unable to collect the insurance proceeds (including rent
insurance proceeds) applicable to such damage because of some action or inaction
on the part of Tenant or Persons Within Tenant's Control, then the cost of
repairing such damage shall be paid by Tenant and there shall be no abatement of
Fixed Rent. Tenant covenants and agrees to cooperate with Landlord and any
Mortgagee in their efforts to collect insurance proceeds (including rent
insurance proceeds) payable to such parties. Landlord shall not be liable for
any delay which may arise by reason of adjustment of insurance on the part of
Landlord and/or Tenant, or any cause beyond the control of Landlord or
contractors employed by Landlord.
It is expressly understood that if Landlord is prevented from substantially
completing the repairs by reason of any acts of Tenant or Persons Within
Tenant's Control, including, without limitation, by reason of the performance of
any Alterations, or by reason of Tenant's failure or refusal to comply or to
cause its architects, engineers, designers and contractors to comply with any of
Tenant's obligations described or referred to in
21
this Lease, then such work shall be deemed substantially completed on the date
when the work would have been substantially completed but for such delay, and
the expiration of the abatement of Tenant's obligations to pay Fixed Rent shall
not be postponed by reason of such delay. Any additional costs to Landlord to
complete any work occasioned by such delay shall be paid by Tenant to Landlord,
as Additional Rent, within ten (10) days after demand therefor by Landlord.
SECTION 12.2. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from damage from fire or other casualty or the repair thereof. Tenant
understands that Landlord, in reliance upon Section 11.4 hereof, will not carry
insurance of any kind on Tenant's furnishings, furniture, contents, fixtures,
space equipment and leasehold improvements, and that Landlord shall not be
obligated to repair any damage thereto or replace the same.
SECTION 12.3. (A) Notwithstanding anything to the contrary contained in
Sections 12.1 and 12.2 above, in the event that:
(I) at least fifty (50%) percent of the rentable square feet of the
Premises shall be damaged by a fire or other casualty so that substantial
alteration or reconstruction of the Premises shall, in Landlord's sole opinion,
be required (whether or not the Premises shall have been damaged by such fire or
other casualty and without regard to the structural integrity of the Premises);
or
(II) the Premises shall be totally or substantially damaged or shall
be rendered wholly or substantially untenantable; or
(III) there shall be any damage to the Premises within the last two
(2) years of the Term wherein the cost of repair exceeds an amount equal to
three (3) monthly installments of Fixed Rent, then, as a result of any
circumstances described in subparagraphs (i), (ii) or (iii) hereof, the Landlord
may, in Landlord's sole and absolute discretion, terminate this Lease and the
term and estate hereby granted, by notifying Tenant in writing of such
termination within one hundred twenty (120) days after the date of such damage.
In the event that such a notice of termination shall be given, then this Lease
and the term and estate hereby granted shall expire as of the date of
termination stated in said notice with the same effect as if that were the Fixed
Expiration Date, and the Fixed Rent and Additional Rent hereunder shall be
apportioned as of such date.
SECTION 12.4. Except as may be provided in Section 11.5, nothing
herein contained shall relieve Tenant from any liability to Landlord or to
Landlord's insurers in connection with any
22
damage to the Premises by fire or other casualty if Tenant shall be legally
liable in such respect.
ARTICLE 13
EMINENT DOMAIN
SECTION 13.1. If the whole of the Premises is acquired or condemned for any
public or quasi-public use or purpose, this Lease and the Term shall end as of
the date of the vesting of title with the same effect as if said date were the
Fixed Expiration Date. If only a part of the Premises is so acquired or
condemned then, (1) except as hereinafter provided in this Section 13.1, this
Lease and the Term shall continue in effect but, if a part of the Premises is so
acquired or condemned, from and after the date of the vesting of title, the
Fixed Rent and Additional Rent, if any, shall be reduced in the proportion which
the area of the part of the Premises so acquired or condemned bears to the total
area of the Premises immediately prior to such acquisition or condemnation; (2)
whether or not the Premises are affected thereby, Landlord, at Landlord's
option, may give to Tenant, within sixty (60) days next following the date upon
which Landlord receives notice of vesting of title, a thirty (30) day notice of
termination of this Lease; and (3) if the part of the Premises so acquired or
condemned contains more than seventy-five (75%) percent of the total area of the
Premises immediately prior to such acquisition or condemnation, or if, by reason
of such acquisition or condemnation, Tenant no longer has access to the
Premises, Tenant, at Tenant's option, may give to Landlord, within thirty (30)
days next following the date upon which Tenant receives notice of vesting of
title, a thirty (30) day notice of termination of this Lease. If any such thirty
(30) day notice of termination is given, by Landlord or Tenant, this Lease and
the Term shall come to an end and expire upon the expiration of said thirty (30)
days with the same effect as if the date of expiration of said thirty (30) days
were the Fixed Expiration Date. In the event of any termination of this Lease
and the Term pursuant to the provisions of this Section 13.1, the Fixed Rent or
Additional Rent shall be apportioned as of the date of sooner termination and
any prepaid portion of the Fixed Rent for any period after such date shall be
refunded by Landlord to Tenant.
SECTION 13.2. In the event of any such acquisition or condemnation of all
or any part of the Premises, Landlord shall be entitled to receive the entire
award for any such acquisition or condemnation. Tenant shall have no claim
against Landlord or the condemning authority for the value of any unexpired
portion of the Term and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this Section 13.2 shall be
deemed to prevent Tenant
23
from making a separate claim in any condemnation proceedings for the value of
any Tenant's Property included in such taking, and for any moving expenses, so
long as Landlord's award is not reduced thereby.
ARTICLE 14
ASSIGNMENT; SUBLETTING; MORTGAGE; ETC.
SECTION 14.1. (A) The Tenant shall not (a) assign this Lease (whether by
operation of law, transfers of interests in Tenant or otherwise); or (b)
mortgage or encumber Tenant's interest in this Lease, in whole or in part; or
(c) sublet, or permit the subletting of, the Premises or any part thereof.
Notwithstanding the provisions of this Section 14.1, the use of the Premises by
any Person AFFILIATED (as such term is hereinafter defined) with the Tenant or
under the COMMON CONTROL (as such term is hereinafter defined) of Coach USA,
Inc., as the case may be, shall not be deemed an assignment of this Lease or a
sublet of the Premises; PROVIDED, HOWEVER, that such use of the Premises as
aforesaid shall not violate or be prohibited by any of the provisions of any
Mortgage then encumbering the Premises, if any. For purposes of this Article 14,
a Person shall be deemed to be an "AFFILIATE" of the Tenant or under the "COMMON
CONTROL" of Coach USA if such Person is a member of a "parent-subsidiary
controlled group" [as such term is defined by Section 1563(a)(1) of the Internal
Revenue Code of 1986, as amended] or a member of a "brother-sister controlled
group" [as such term is defined by Section 1563(a)(2) of the Internal Revenue
Code of 1986, as amended] of which either Coach USA, Inc. or the Tenant, as the
case may be, is a member.
(B) Notwithstanding the provisions otherwise set forth in this
Article 14, any reorganization, consolidation and/or restructuring of the Tenant
in which the issued and outstanding stock of the Tenant remains under the COMMON
CONTROL (as such term is defined in Section 14.1 hereinabove) of Coach USA, Inc.
shall not be deemed an assignment of this Lease or a sublet of the Premises;
PROVIDED, HOWEVER, that the same shall not violate or be prohibited by any of
the provisions of any Mortgage then encumbering the Premises, if any.
SECTION 14.2. If Tenant's interest in this Lease shall be assigned in
violation of the provisions of this Article 14, such assignment shall be invalid
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy. If the Premises or any
part thereof are sublet to, or occupied by, or used by, any person other than
Tenant, whether or not in violation of
24
this Article 14, Landlord, after default by Tenant under this Lease, may collect
any item of Rental or other sums paid by the subtenant, user or occupant as a
fee for its use and occupancy, and shall apply the net amount collected to the
Fixed Rent and the items of Rental reserved in this Lease. No such assignment,
subletting, occupancy, or use, nor any such collection or application of Rental
or fee for use and occupancy, shall be deemed a waiver by Landlord of any term,
covenant or condition of this Lease or the acceptance by Landlord of such
assignee, subtenant, occupant or user as Tenant hereunder, nor shall the same,
in any circumstances, relieve Tenant of any of its obligations under this Lease.
SECTION 14.3.
Except as otherwise set forth in Section 14.1 hereof, for purposes of
this Article 14, (i) any increase in the amount of issued and/or outstanding
capital stock of any corporate tenant and/or the creation of one or more
additional classes of capital stock of any corporate tenant, in a single
transaction or a series of related or unrelated transactions, resulting in a
change in the legal or beneficial ownership of such tenant so that the
shareholders of such tenant existing immediately prior to such transaction or
series of transactions shall no longer own a majority of the issued and
outstanding capital stock of such tenant shall be deemed an assignment of this
Lease and (ii) any Person or legal representative of Tenant, to whom Tenant's
interest under this Lease passes by operation of law, or otherwise, shall be
bound by the provisions of this Article 14. Tenant agrees to furnish to Landlord
on request at any time such information and assurances as Landlord may
reasonably request that Tenant has not violated the provisions of this Article
14.
ARTICLE 15
ACCESS TO PREMISES
SECTION 15.1. Tenant shall permit Landlord, Landlord's agents and any
public utilities servicing the Premises to erect, use and maintain, now and
hereafter, concealed ducts, pipes and conduits in and through the Premises.
Landlord or Landlord's agents shall have the right to enter the Premises at all
reasonable times upon (except in case of emergency) reasonable prior notice,
which notice may be oral, to examine the same, to show the same to prospective
purchasers or Mortgagees and to make such repairs, alterations, improvements or
additions (i) as Landlord may deem necessary or desirable to the Premises, or
(ii) which Landlord may elect to perform at least ten (10) days after notice
(except in an emergency when no notice shall be required) following Tenant's
failure to make repairs or perform any work
25
which Tenant is obligated to make or perform under this Lease, or (iii) for the
purpose of complying with Requirements, and Landlord shall be allowed to take
all material into and upon the Premises that may be required therefor without
the same constituting an eviction or constructive eviction of Tenant in whole or
in part and the Fixed Rent (and any other item of Rental) shall in no respect
abate or be reduced by reason of said repairs, alterations, improvements or
additions, wherever located, or while the same are being made, by reason of loss
or interruption of business of Tenant, or otherwise. Landlord shall promptly
repair any damage caused to the Premises by such work, alterations, improvements
or additions.
SECTION 15.2. If Tenant is not present when for any reason entry into the
Premises may be necessary or permissible, Landlord or Landlord's agents may
enter the same without rendering Landlord or such agents liable therefor.
SECTION 15.3. Landlord also shall have the right at any time, without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, stairs, toilets or other
parts of the Premises, provided any such change does not unreasonably interfere
with, or deprive Tenant of access to, the Premises; to put so-called "solar
film" or other energy-saving installations on the inside and outside of the
windows; and to change the name, number or designation by which the Premises is
commonly known.
ARTICLE 16
CERTIFICATE OF OCCUPANCY
SECTION 16.1. Tenant shall not at any time, now or hereafter, use or occupy
the Premises, directly or indirectly, in violation of the certificate of
occupancy for the Premises and in the event that any Governmental Authority
hereafter contends or declares by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose that is a violation
of such certificate of occupancy, Tenant shall, upon three (3) Business Days'
written notice from Landlord or any Government Authority, immediately
discontinue such use of the Premises.
26
ARTICLE 17
DEFAULT
SECTION 17.1. Each of the following events shall be an "EVENT OF DEFAULT"
under this Lease:
(A) if Tenant shall on any occasion default in the payment when due of
any installment of Fixed Rent or Additional Rent or in the payment when due of
any other item of Rental and such default shall continue for five (5) business
days from and after the date when the same shall be due; or
(B) if the Premises shall become vacant or abandoned; or
(C) if Tenant's interest in this Lease shall devolve upon or pass to
any person, whether by operation of law or otherwise, except as specifically
permitted by the provisions of Article 14 hereof; or
(D) (1) if Tenant shall not, or shall be unable to, or shall admit in
writing Tenant's inability to, as to any obligation, pay Tenant's debts as they
become due; or
(2) if Tenant shall commence or institute any case, proceeding or
other action (a) seeking relief on Tenant's behalf as debtor, or to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to Tenant or Tenant's debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (b) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property; or
(3) if Tenant shall make a general assignment for the benefit of
creditors; or
(4) if any case, proceeding or other action shall be commenced or
instituted against Tenant (a) seeking to have an order for relief entered
against Tenant as debtor or to adjudicate Tenant a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to Tenant or Tenant's
debts under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, or (b)
seeking appointment of a receiver, trustee, custodian or other similar official
for Tenant or for all or any substantial part of
27
Tenant's property, which either (i) results in any such entry of an order for
relief, adjudication of bankruptcy or insolvency or such an appointment or the
issuance or entry of any other order having a similar effect or (ii) remains
undismissed for a period of sixty (60) days; or
(5) if a trustee, receiver or other custodian shall be appointed for
any substantial part of the assets of Tenant which appointment is not vacated or
effectively stayed within thirty (30) days; or
(E) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be observed
or performed including, without limitation, the terms and conditions of Article
27 hereof, and Tenant shall fail to remedy such default within ten (10) days
after written notice by Landlord to Tenant of such default, or if such default
is of such a nature that it cannot with due diligence be completely remedied
within said period of ten (10) days and the continuation of which for the period
required for cure will not subject Landlord to the risk of criminal liability or
foreclosure of any Mortgage, if Tenant shall not, (i) within said ten (10) day
period advise Landlord of Tenant's intention duly to institute all steps
necessary to remedy such situation, (ii) duly institute within said ten (10) day
period, and thereafter diligently and continuously prosecutes to completion all
steps necessary to remedy the same and (iii) completes such remedy within such
time after the date of the giving of said notice by Landlord as shall reasonably
be necessary.
SECTION 17.2. If an Event of Default shall occur, Landlord may, at any time
thereafter, at Landlord's option, give written notice to Tenant stating that
this Lease and the Term shall expire and terminate on the date specified in such
notice, which date shall not be less than three (3) days after the giving of
such notice, whereupon this Lease and the Term and all rights of Tenant under
this Lease shall automatically expire and terminate as if the date specified in
the notice given pursuant to this Section 17.2 were the Fixed Expiration Date
and Tenant immediately shall quit and surrender the Premises, but Tenant shall
remain liable for damages as provided herein or pursuant to law. Anything
contained herein to the contrary notwithstanding, if such termination shall be
stayed by order of any court having jurisdiction over any proceeding described
in Section 17.1(D), or by federal or state statute, then, following the
expiration of any such stay, or if the trustee appointed in any such proceeding,
Tenant or Tenant as debtor-in-possession fails to assume Tenant's obligations
under this Lease within the period prescribed therefor by law or within one
hundred twenty (120) days after entry of the order for relief or as may be
allowed by the court, or if said trustee, Tenant or Tenant as debtor-in-
28
possession shall fail to provide adequate protection of Landlord's right, title
and interest in and to the Premises or adequate assurance of the complete and
continuous future performance of Tenant's obligations under this Lease,
Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on three (3) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon the expiration of said three (3)
day period this Lease shall cease and expire as aforesaid and Tenant, Tenant as
debtor-in-possession or said trustee shall immediately quit and surrender the
Premises as aforesaid.
SECTION 17.3. If, at any time, (i) Tenant shall consist of two (2) or more
Persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (iii) Tenant's interest in this
Lease has been assigned, the word "Tenant" as used and referred to in this
Lease, shall be deemed to mean any one or more of the persons primarily or
secondarily liable for Tenant's obligations under this Lease. Any monies
received by Landlord from or on behalf of Tenant during the pendency of any
proceeding of the types referred to in Section 17.1(D) hereof shall be deemed
paid as compensation for the use and occupancy of the Premises and the
acceptance of any such compensation by Landlord shall not be deemed an
acceptance of Rental or a waiver on the part of Landlord of any rights under
Section 17.2 hereof.
ARTICLE 18
REMEDIES AND DAMAGES
SECTION 18.1.
(A) If any Event of Default shall occur, or this Lease and the Term
shall expire and come to an end as provided in Article 17 hereof:
(1) Tenant shall quit and peacefully surrender the Premises to
Landlord, and Landlord and its agents may immediately, or at any time after such
Event of Default or after the date upon which this Lease and the Term shall
expire and come to an end, re-enter the Premises or any part thereof, without
notice, either by summary proceedings, or by any other applicable action or
proceeding or otherwise (without being liable to indictment, prosecution or
damages therefor), and may repossess the Premises and dispossess Tenant and any
other persons from the Premises by summary proceedings or otherwise and remove
any and
29
all of their property and effects from the Premises (and Tenant shall remain
liable for damages as provided herein or pursuant to law); and
(2) Landlord, at Landlord's option, may relet the whole or any
part or parts of the Premises from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Fixed Expiration Date, at such rent or rentals and upon such
other conditions, which may include concessions and free rent periods, as
Landlord, in Landlord's sole discretion, may determine; provided, however, that
Landlord shall have no obligation to relet the Premises or any part thereof and
shall in no event be liable for refusal or failure to relet the Premises or any
part thereof, or, in the event of any such reletting, for refusal or failure to
collect any rent due upon any such reletting, and no such refusal or failure
shall operate to relieve Tenant of any liability under this Lease or otherwise
affect any such liability, and Landlord, at Landlord's option, may make such
Alterations, in and to the Premises as Landlord, in Landlord's sole discretion,
shall consider advisable or necessary in connection with any such reletting or
proposed reletting, without relieving Tenant of any liability under this Lease
or otherwise affecting any such liability.
(B) Tenant hereby waives the service of any notice of intention to
re-enter or to institute legal proceedings to that end that may otherwise be
required to be given under any present or future law. Tenant, on its own behalf
and on behalf of all persons claiming through or under Tenant, including all
creditors of Tenant, does further hereby waive any and all rights that Tenant
and all such persons might otherwise have under any present or future law to
redeem the Premises, or to re-enter or repossess the Premises, or to restore the
operation of this Lease, after (a) Tenant shall have been dispossessed by a
judgment or by warrant of any court, or (b) any re-entry by Landlord, or (c) any
expiration or termination of this Lease and the Term, whether such dispossess,
re-entry, expiration or termination is by operation of law or pursuant to the
provisions of this Lease. The words "re-entry", "re-enter" and "re-entered" as
used in this Lease shall not be deemed to be restricted to their technical legal
meanings. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any term, covenant or condition of
this Lease, Landlord shall have the right to enjoin such breach and the right to
invoke any other remedy allowed by law or in equity as if re-entry, summary
proceedings and other special remedies were not provided in this Lease for such
breach. The right to invoke the remedies hereinbefore set forth are cumulative
and shall not preclude Landlord from invoking any other remedy allowed at law or
in equity.
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SECTION 18.2.
(A) If this Lease and the Term shall expire and come to an end as
provided in Article 17 hereof, or by or under any summary proceeding or any
other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 18.1 hereof, or by or under any summary proceeding or any
other action or proceeding, then, in any of said events:
(1) Tenant shall pay to Landlord all Fixed Rent, Additional Rent
and other items of Rental payable under this Lease by Tenant to Landlord to the
date upon which this Lease and the Term shall have expired and come to an end or
to the date of re-entry upon the Premises by Landlord, as the case may be;
(2) Tenant also shall be liable for and shall pay to Landlord, as
damages, any deficiency ("DEFICIENCY") between the Rental for the period which
otherwise would have constituted the unexpired portion of the Term and the net
amount, if any, of rents collected under any reletting effected pursuant to the
provisions of Section 18.1(A)(2) for any part of such period (after first
deducting from the rents collected under any such reletting all of Landlord's
expenses in connection with the termination of this Lease, Landlord's re-entry
upon the Premises and such reletting including, but not limited to, all
repossession costs, brokerage commissions, attorneys' fees and disbursements,
alteration costs and other expenses of preparing the Premises for such
reletting); any such Deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for payment of installments of Fixed Rent;
Landlord shall be entitled to recover from Tenant each monthly Deficiency as the
same shall arise, and no suit to collect the amount of the Deficiency for any
month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any Deficiency
as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant
shall pay to Landlord, on demand, in lieu of any further Deficiency as and for
liquidated and agreed final damages, a sum equal to the amount by which the
unpaid Rental for the period which otherwise would have constituted the
unexpired portion of the Term exceeds the then fair and reasonable rental value
of the Premises for the same period; if, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the Premises, or any
part thereof, are relet by Landlord for the period which otherwise would have
constituted the unexpired portion of the Term, or any part thereof, the amount
of rent reserved upon such reletting shall be deemed, prima facie, to be the
fair and reasonable rental value for the part or the whole of the Premises so
relet during the term of the reletting.
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(B) Tenant shall in no event be entitled to any rents collected or
payable under any reletting, whether or not such rents exceed the Fixed Rent
reserved in this Lease. Nothing contained in Article 17 hereof or this Article
18 shall be deemed to limit or preclude the recovery by Landlord from Tenant of
the maximum amount allowed to be obtained as damages by any statute or rule of
law, or of any sums or damages to which Landlord may be entitled in addition to
the damages set forth in this Section 18.2.
ARTICLE 19
FEES AND EXPENSES
SECTION 19.1. If an Event of Default shall have occurred, Landlord may (1)
perform the same for the account of Tenant, or (2) make any expenditure or incur
any obligation for the payment of money in connection with any obligation owed
to Landlord, including, but not limited to, reasonable attorneys' fees and
disbursements in instituting, prosecuting or defending any action or proceeding,
and in either case the cost thereof, with interest thereon at the Applicable
Rate, shall be deemed to be Additional Rent hereunder and shall be paid by
Tenant to Landlord within ten (10) days after rendition of any bill or statement
to Tenant therefor. In addition, Tenant shall pay Landlord any reasonable
attorneys' fees and disbursements incurred by Landlord in connection with any
proceeding in which the value for the use and occupancy of the Premises by
Tenant is being determined (whether or not any such proceeding results from a
default by Tenant under this Lease).
SECTION 19.2. If Tenant shall fail to pay any installment of Fixed Rent,
Additional Rent or any other item of Rental for a period longer than five (5)
days after the same shall have become due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent, Additional Rent or other item of
Rental, as the case may be, as a late charge and as Additional Rent, a sum equal
to interest at the Applicable Rate on the amount unpaid, computed from the date
such payment was due, without regard to any such grace period, to and including
the date of payment.
ARTICLE 20
NO REPRESENTATIONS BY LANDLORD
SECTION 20.1. Landlord and Landlord's agents have made no representations
or promises with respect to the Premises except as herein expressly set forth,
and no rights, easements or
32
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth herein. Tenant shall accept possession of the Premises in its "as is"
condition on the Commencement Date, and Landlord shall have no obligation to
perform any work or make any installations in order to prepare the Premises for
Tenant's occupancy. The taking of occupancy of the whole or any part of the
Premises by Tenant shall be conclusive evidence, as against Tenant, that Tenant
accepts possession of the same and that the Premises were in good and
satisfactory condition at the time such occupancy was so taken. All references
in this Lease to the consent or approval of Landlord shall be deemed to mean the
written consent or approval executed by Landlord and no other consent or
approval of Landlord shall be effective for any purpose whatsoever.
ARTICLE 21
END OF TERM
SECTION 21.1. Upon the expiration or other termination of this Lease,
Tenant shall quit and surrender to Landlord the Premises, vacant, broom clean,
in good order and condition, ordinary wear and tear excepted, and Tenant shall
remove all of Tenant's Alterations as may be required pursuant to Article 6.
Tenant shall also remove all of Tenant's Property and all other personal
property and personal effects of all persons claiming through or under Tenant,
and shall pay the cost of repairing all damage to the Premises occasioned by
such removal. Any Tenant's Property or other personal property that remains in,
on or at the Premises after the termination of this Lease shall be deemed to
have been abandoned and either may be retained by Landlord as its property or
may be disposed of in such manner as Landlord may see fit. If Tenant's Property
or other personal property or any part thereof is sold, Landlord may receive and
retain the proceeds of such sale as the property of Landlord. Any expense
incurred by Landlord in removing or disposing of Tenant's Property or other
personal property or Alterations required to be removed as provided in Article
6, as well as the cost of repairing all damage to the Premises caused by such
removal, shall be reimbursed to Landlord by Tenant, as Additional Rent, on
demand.
SECTION 21.2. If the Expiration Date falls on a day which is not a Business
Day, then Tenant's obligations under Section 21.1 shall be performed on or prior
to such Business Day.
SECTION 21.3. If the Premises are not surrendered upon the expiration or
other termination of this Lease, Tenant hereby indemnifies Landlord against
liability resulting from delay by
33
Tenant in so surrendering the Premises, including any claims made by any
succeeding tenant or prospective tenant founded upon such delay and agrees to be
liable to Landlord for (i) any payment or rent concession which Landlord may be
required to make to any tenant obtained by Landlord for all or any part of the
Premises in order to induce such tenant not to terminate its lease by reason of
the holding-over by Tenant and (ii) the loss of the benefit of the bargain if
any such tenant shall terminate its lease by reason of the holding-over by
Tenant.
SECTION 21.4. Tenant's obligations under this Article 21 shall survive the
expiration or termination of this Lease.
ARTICLE 22
POSSESSION
SECTION 22.1. If Landlord shall be unable to deliver possession of the
Premises on the Commencement Date for any reason whatsoever, Landlord shall not
be subject to any liability therefor and the validity of this Lease shall not be
impaired thereby nor the Expiration Date extended, but the Commencement Date
shall be postponed until five (5) Business Days following notice from Landlord
that the Premises are available for occupancy by Tenant. Tenant expressly waives
any right to rescind this Lease under any present or future statute and further
expressly waives the right to recover any damages that may result from
Landlord's failure to deliver possession of the Premises on the Commencement
Date.
ARTICLE 23
NO WAIVER
SECTION 23.1. No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys to the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises.
SECTION 23.2. The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease shall not prevent a subsequent act, which would have originally
constituted a violation, from having all of the force and effect of an original
34
violation. The receipt by Landlord of Fixed Rent, Additional Rent or any other
item of Rental with knowledge of the breach of any covenant of this Lease shall
not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord, unless such waiver shall be in writing
and shall be signed by Landlord. No payment by Tenant or receipt by Landlord of
a lesser amount than the Rental then due and payable shall be deemed to be other
than on account of the earliest item(s) of Rental, or as Landlord may elect to
apply the same, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance due of the Rental or to otherwise pursue any other
remedy in this Lease provided. This Lease contains the entire agreement between
the parties and all prior negotiations and agreements are merged herein. Any
executory agreement hereafter made shall be ineffective to change, discharge or
effect an abandonment of this Lease in whole or in part unless such executory
agreement is in writing and signed by the party against whom enforcement of the
change, discharge or abandonment is sought.
ARTICLE 24
WAIVER OF TRIAL BY JURY
SECTION 24.1. Tenant hereby waives trial by jury in any action or
proceeding brought by or against the Tenant with respect to any matters
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
whether during or after the Term, or for the enforcement of any remedy under any
statute, emergency or otherwise. If Landlord shall commence any summary
proceeding against Tenant, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding, and will not seek to
consolidate such proceeding with any other action which may have been or will be
brought in any other court by Tenant or Landlord.
ARTICLE 25
INABILITY TO PERFORM
SECTION 25.1. This Lease and the obligation of Tenant to pay Rental
hereunder and to perform all of the other covenants and agreements hereunder on
the part of Tenant to be performed shall in no way be affected, impaired or
excused because Landlord is unable to fulfill any of Landlord's obligations
under this Lease, expressly or implicitly to be performed by Landlord,
35
or because Landlord is unable to make or is delayed in making any repairs, or is
unable to supply or is delayed in supplying any services, if Landlord is
prevented from or delayed in so doing by reason of acts of God, casualty,
strikes or labor troubles, accident, governmental preemption in connection with
an emergency, Requirements, conditions of supply and demand which have been or
are affected by war or other emergency, or any other cause whatsoever, whether
similar or dissimilar to the foregoing, beyond Landlord's reasonable control
("UNAVOIDABLE DELAYS").
ARTICLE 26
NOTICES
SECTION 26.1.
(A) Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease ("NOTICE(S)") shall be in writing and
shall be deemed sufficiently given or rendered if delivered by hand (against a
signed receipt) or if deposited with a nationally recognized overnight courier
and in either case addressed:
IF TO TENANT:
(a) at Tenant's address first set forth in this Lease or (b)
at any place where Tenant or any agent or employee of Tenant
may be found if given subsequent to Tenant's vacating,
deserting, abandoning or surrendering the Premises, and
IF TO LANDLORD:
at Landlord's address first set forth in this
Lease, Attn: Mr. Gerald Mercadante, with a
copy to Todtman, Young, Tunick, Nachamie,
Hendler & Spizz, P.C., 425 Park Avenue, New
York, New York 10022 Attention: Martin
Todtman, Esq. and (y) any Mortgagee who may
have requested the same, by Notice given in
accordance with the provisions of this
Article 26, at the address designated by such
Mortgagee,
or to such other address(es) as either
Landlord or Tenant may designate as its new
address(es) for such purpose by notice given
36
to the other in accordance with the
provisions of this Article 26.
(B) Notices shall be deemed to have been rendered or given (a) on the
date delivered, if delivered by hand, or (b) on the day after being deposited
with a nationally recognized overnight courier as provided in Section 26.1(A)
hereof.
ARTICLE 27
LANDLORD'S RIGHT TO TERMINATE
SECTION 27.1 Notwithstanding anything contained herein to the contrary,
the Landlord shall have the sole and exclusive option to terminate this Lease
upon ninety (90) days prior written notice ("TERMINATION NOTICE PERIOD") to the
Tenant in the event that the Landlord shall have received an offer to purchase
the Premises, or any part thereof. Time shall be of the essence with respect to
the Tenant's obligation to vacate the Premises in accordance with the provisions
of Article 21 hereof on or before the expiration of the Termination Notice
Period. In the event that the Tenant shall fail to vacate the Premises as
aforesaid, then in such event, the Landlord shall be entitled to avail itself of
any and all rights and remedies against the Tenant, whether at law, equity or
under and pursuant to the terms and conditions of this Lease including, without
limitation, any rights and/or remedies which may be available to the Landlord in
accordance with the provisions of Article 18 hereof.
ARTICLE 28
BROKER
SECTION 28.1. Landlord represents and warrants to Tenant that Landlord has
not dealt with any broker or Person in connection with this Lease. Tenant
represents and warrants to Landlord that Tenant has not dealt with any broker or
Person in connection with this Lease. The execution and delivery of this Lease
by Tenant shall be conclusive evidence that Tenant acknowledges that Landlord
has relied upon the foregoing representation and warranty. Tenant shall
indemnify and hold harmless Landlord from and against any and all claims for
commission, fee or other compensation by any broker or Person who claims to have
dealt with Tenant in connection with this Lease and for any and all costs
incurred by Landlord in connection with such claims, including, without
limitation, attorneys' fees and disbursements. The provisions of this Article 28
shall survive the expiration or earlier termination of this Lease.
37
ARTICLE 29
INDEMNITY
SECTION 29.1. Tenant shall not do or permit any act or thing to be done in,
at or upon the Premises that may subject any Indemnitee to any liability or
responsibility for injury, damage to persons or property or to any liability by
reason of the existence or application of, compliance with or violation of any
Requirement, but shall exercise such control over the Premises as to protect
each Indemnitee fully against any such liability and responsibility. Tenant
shall indemnify and save harmless the Indemnitees from and against (a) all
claims of whatever nature against the Indemnitees arising from any act, omission
or negligence of Tenant or Persons Within Tenant's Control, (b) all claims
against the Indemnitees arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring in or about
the Premises during the Term or during Tenant's occupancy of the Premises,
unless and to the extent caused by the gross negligence of Landlord or its
shareholders, officers and employees, (c) all claims against the Indemnitees
arising from any accident, injury or damage occurring outside of the Premises
but anywhere within or about the Premises, where such accident, injury or damage
results or is claimed to have resulted from an act, omission or negligence of
Tenant or Persons Within Tenant's Control, and (d) any breach, violation or
non-performance of any covenant, condition or agreement contained in this Lease
to be fulfilled, kept, observed and performed by Tenant. This indemnity and hold
harmless agreement shall include indemnity from and against any and all
liability, claims, fines, suits, demands, costs and expenses of any kind or
nature (including, without limitation, attorneys' fees and disbursements)
incurred in or in connection with any such claim or proceeding brought thereon,
and the defense thereof.
SECTION 29.2. If any claim, action or proceeding is made or brought against
any Indemnitee, against which claim, action or proceeding Tenant is obligated to
indemnify such Indemnitee pursuant to the terms of this Lease, then, upon demand
by the Indemnitee, Tenant, at its sole cost and expense, shall resist or defend
such claim, action or proceeding in the Indemnitee's name, if necessary, by such
attorneys as the Indemnitee may select, including, without limitation, attorneys
for the Indemnitee's insurer. The provisions of this Article 29 shall survive
the expiration or earlier termination of this Lease.
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ARTICLE 30
ADJACENT EXCAVATION; SHORING
SECTION 30.1. If an excavation shall be made upon land adjacent to the
Premises, or shall be authorized to be made, Tenant shall, upon reasonable
advance notice, afford to the person or entity causing or authorized to cause
such excavation, a limited license to enter upon the Premises for the purpose of
doing such work as said person or entity deems necessary to preserve the walls
of any building located on the Premises from injury or damage and to support the
same by proper foundations without any claim for eviction or constructive
eviction, damages or indemnity against Landlord, or diminution or abatement of
Rental.
ARTICLE 31
RENEWAL OPTIONS
SECTION 31.1. Provided that the Tenant is not in default with respect
to any of its obligations to the Landlord under and pursuant to the terms and
conditions of this Lease at the time each Option (as such term is hereinafter
defined) is to be exercised, the Tenant shall have the option to renew this
Lease for seven (7) additional five (5) year periods [the option with respect to
each additional five (5) year period is referred to herein as an "OPTION" and,
collectively, all of the options granted herein are referred to as the
"OPTIONS"] as follows:
OPTION PERIOD 1 shall commence on May 13, 2001 and shall continue up to
and including May 12, 2006.
OPTION PERIOD 2 shall commence on May 13, 2006 and shall continue up to
and including May 12, 2011.
OPTION PERIOD 3 shall commence on May 13, 2011 and shall continue up to
and including May 12, 2016.
OPTION PERIOD 4 shall commence on May 13, 2016 and shall continue up to
and including May 12, 2021.
OPTION PERIOD 5 shall commence on May 13, 2021 and shall continue up to
and including May 12, 2026.
OPTION PERIOD 6 shall commence on May 13, 2026 and shall continue up to
and including May 12, 2031.
OPTION PERIOD 7 shall commence on May 13, 2031 and shall continue up to
and including May 12, 2036.
39
(each of the aforementioned option periods is individually referred to
herein as an "OPTION PERIOD" and, collectively, all of the
aforementioned Option Periods are referred to herein as "OPTION
PERIODS")
SECTION 31.2. Each Option granted to the Tenant pursuant to the
provisions of Section 31.1 hereof shall be exercised by the Tenant giving
written notice to the Landlord of the Tenant's intent to exercise the Option not
less than one-hundred eighty (180) days prior to the expiration of the Initial
Term or not less than one-hundred eighty (180) days prior to the expiration of
the Option Period which is then in effect, as the case may be.
SECTION 31.3. In the event that the Tenant exercises the Option with
respect to any Option Period, the Landlord and the Tenant hereby agree that this
Lease shall continue in full force and effect and remain unamended during the
applicable Option Period AND specifically, without limitation, that the Fixed
Rent payable by the Tenant to the Landlord during such Option Period shall be
increased on each anniversary date from and after the Commencement Date in
accordance with the provisions of Article 8 hereof.
ARTICLE 32
RENT REGULATION
SECTION 32.1. If at any time or times during the Term of this Lease, the
Rental reserved in this Lease is not fully collectible by reason of any
Requirement, Tenant shall enter into such agreements and take such other steps
as Landlord may request and as may be legally permissible to permit Landlord to
collect the maximum rents that may from time to time during the continuance of
such legal rent restriction be legally permissible (and not in excess of the
amounts reserved under this Lease). Upon the termination of such legal rent
restriction (a) the Rental shall become and thereafter be payable hereunder in
accordance with the amounts reserved in this Lease for the remainder of the
Term, and (b) Tenant shall pay to Landlord, if legally permissible, an amount
equal to (i) the items of Rental that would have been paid pursuant to this
Lease but for such legal rent restriction less (ii) the rents paid by Tenant to
Landlord during the period or periods such legal rent restriction was in effect.
This provision shall survive the expiration or earlier termination of this Lease
to the maximum enforceable extent.
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ARTICLE 33
COVENANT OF QUIET ENJOYMENT
SECTION 33.1. Landlord covenants that, upon Tenant paying all Fixed Rent
and Additional Rent and observing and performing all the terms, agreements,
covenants, provisions and conditions of this Lease on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Premises,
subject nevertheless to the terms and conditions of this Lease; provided,
however, that no eviction of Tenant by reason of the foreclosure of any Mortgage
now or hereafter affecting the Premises shall be construed as a breach of this
covenant nor shall any action by reason thereof be brought against Landlord, and
provided further that this covenant shall bind and be enforceable against
Landlord or any successor to Landlord's interest, subject to the terms hereof,
only so long as Landlord or any successor to Landlord's interest, is in
possession and is collecting rent from Tenant but not thereafter.
ARTICLE 34
MISCELLANEOUS
SECTION 34.1. This Lease is presented for signature by Tenant and it is
understood that this Lease shall not constitute an offer by or be binding upon
Landlord unless and until Landlord shall have executed and delivered a fully
executed copy of this Lease to Tenant.
SECTION 34.2. The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Premises, as the case may be, and in the event of any such sale,
conveyance, assignment or transfer, Landlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord under this Lease
thereafter arising, and the transferee shall be deemed to have assumed, subject
to the remaining provisions of this Section 34.2, all obligations of the
Landlord under this Lease arising after the effective date of the transfer. No
trustee, partner, principal, shareholder, director or officer of Landlord
(collectively, the "PARTIES") shall have any direct or personal liability for
the performance of Landlord's obligations under this Lease, and Tenant shall
look solely to Landlord's interest in the Premises to enforce Landlord's
obligations hereunder and shall not otherwise seek any damages against Landlord
or any of the Parties whatsoever. Tenant shall not look to any other property or
assets of Landlord or any property or assets of any of the Parties in seeking
either to
41
enforce Landlord's obligations under this Lease or to satisfy a judgment for
Landlord's failure to perform such obligations.
SECTION 34.3. Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Additional Rent or
Rental, shall constitute rent for the purposes of Section 502(b)(7) of the
Bankruptcy Code.
SECTION 34.4. Neither this Lease nor any memorandum of this Lease shall be
recorded without the prior written consent of the Landlord, which consent may be
withheld by the Landlord in its sole and absolute discretion.
SECTION 34.5. Except as otherwise expressly stated in this Lease, any
consent or approval required to be obtained from Landlord may be granted by
Landlord in its sole and absolute discretion. In any instance in which Landlord
agrees not to act unreasonably, Tenant hereby waives any claim for damages
against or liability of Landlord that Tenant may have based upon any assertion
that Landlord has unreasonably withheld or unreasonably delayed any consent or
approval requested by Tenant, and Tenant agrees that its sole remedy shall be an
action or proceeding to enforce any related provision or for specific
performance, injunction or declaratory judgment. If with respect to any required
consent or approval Landlord is required by the express provisions of this Lease
not to unreasonably withhold or delay its consent or approval, and if it is
determined in any such proceeding referred to in the preceding sentence that
Landlord acted unreasonably, the requested consent or approval shall be deemed
to have been granted; however, Landlord shall have no liability whatsoever to
Tenant for its refusal or failure to give such consent or approval. Tenant's
sole remedy for Landlord's unreasonably withholding or delaying consent or
approval shall be as provided in this Section 34.5.
SECTION 34.6. Landlord shall have the right at any time, and from time to
time, to amend unilaterally the provisions of this Lease if Landlord is advised
by its counsel that all or any portion of the Rental paid by Tenant to Landlord
hereunder is, or may be deemed to be, unrelated business taxable income within
the meaning of the United States Internal Revenue Code or regulations issued
thereunder, and Tenant agrees that it will execute all documents necessary to
effect any such amendment, provided that no such amendment shall increase
Tenant's payment obligations or other liability under this Lease nor reduce
Landlord's obligations hereunder.
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SECTION 34.7. If Tenant shall remain in possession of the Premises after
the Expiration Date, without the execution by both Tenant and Landlord of a new
lease, Tenant, at the election of Landlord, shall be deemed to be occupying the
Premises as a Tenant from month-to-month, at a monthly rental equal to three
(3x) times the Rental payable during the last month of the Term, subject to all
the other conditions, provisions and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy.
SECTION 34.8. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted. If any words or phrases in this Lease are stricken out or
otherwise eliminated, whether or not any other words or phrases have been added,
this Lease shall be construed as if the words or phrases so stricken out or
otherwise eliminated were never included in this Lease and no implication or
inference shall be drawn from the fact that such words or phrases were stricken
out or otherwise eliminated.
SECTION 34.9. If any of the provisions of this Lease, or the application
thereof to any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
provisions to persons or circumstances other than those as to whom or which it
is held invalid or unenforceable, shall not be affected thereby and shall remain
valid and enforceable, and every provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
SECTION 34.10. Landlord shall have the right to erect any gate, chain or
other obstruction or to close off any portion of the Premises to the public at
any time to the extent necessary to prevent a dedication thereof for public use.
SECTION 34.11. Tenant hereby represents to Landlord that it is not
entitled, directly or indirectly, to diplomatic or sovereign immunity and Tenant
agrees that in all disputes arising directly or indirectly out of this Lease
Tenant shall be subject to service of process in, and the jurisdiction of the
courts of, the State of New Jersey. The provisions of this Section 34.11 shall
survive the expiration of this Lease.
SECTION 34.12. This Lease contains the entire agreement between the parties
and all prior negotiations and agreements are merged into this Lease. Except as
provided in Section 34.6 this Lease may not be changed, abandoned or discharged,
in whole or in part, nor may any of its provisions be waived except by a written
agreement that (a) expressly refers to this Lease, (b) is executed by the party
against whom enforcement of the change, abandonment, discharge or waiver is
sought and (c) is permissible under the Mortgage(s).
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SECTION 34.13. Any apportionment or prorations of Rental to be made under
this Lease shall be computed on the basis of a three hundred sixty (360) day
year, with twelve (12) months of thirty (30) days each.
SECTION 34.14. The laws of the State of Jersey applicable to contracts made
and to be performed wholly within the State of New Jersey shall govern and
control the validity, interpretation, performance and enforcement of this Lease
without regard to principles of conflicts of law.
SECTION 34.15. If Tenant is a corporation, each person executing this Lease
on behalf of Tenant hereby covenants, represents and warrants that Tenant is a
duly incorporated or duly qualified (if foreign) corporation and is authorized
to do business in the State of New Jersey (a copy of evidence thereof to be
supplied to Landlord upon request); and that each person executing this Lease on
behalf of Tenant is an officer of Tenant and that he or she is duly authorized
to execute, acknowledge and deliver this Lease to Landlord (a copy of a
resolution to that effect to be supplied to Landlord upon request).
SECTION 34.16. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Lease nor the intent of any provision thereof.
SECTION 34.17. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective legal representatives, heirs, successors, and, except as otherwise
provided in this Lease, their assigns.
SECTION 34.18. For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(A) The words "herein", "hereof", "hereunder" and "hereby"and words of
similar import shall be construed to refer to this Lease as a whole and not to
any particular Article or Section unless expressly so stated.
(B) Tenant's obligations hereunder shall be construed in every instance as
conditions as well as covenants, each separate and independent of any other
terms of this Lease.
(C) Reference to Landlord as having "no liability" or being "without
liability" shall mean that Tenant shall not be entitled to terminate this Lease,
or to claim actual or constructive eviction, partial or total, or to receive any
abatement or diminution of rent, or to be relieved in any manner of any of its
other obligations hereunder, or to be compensated for loss or injury suffered or
to enforce any
44
other right or liability whatsoever against Landlord under or with respect to
this Lease or with respect to Tenant's use or occupancy of the Premises.
(D) Reference to "termination of this Lease" or "expiration of this Lease"
and words of like import includes expiration or sooner termination of this Lease
and the Term and the estate hereby granted or cancellation of this Lease
pursuant to any of the provisions of this Lease or by law. Upon the termination
of this Lease, the Term and estate granted by this Lease shall end at noon on
the date of termination as if such date were the Fixed Expiration Date, and
neither party shall have any further obligation or liability to the other after
such termination except (i) as shall be expressly provided for in this Lease,
and (ii) for such obligations as by their nature under the circumstances can
only be, or by the provisions of this Lease, may be, performed after such
termination, and, in any event, unless expressly otherwise provided in this
Lease, any liability for a payment (which shall be apportioned as of such
termination) which shall have accrued to or with respect to any period ending at
the time of termination shall survive the termination of this Lease.
(E) Words and phrases used in the singular shall be deemed to include the
plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender.
(F) The rule of "ejusdem generis" shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
as of the day and year first above written.
GERDANEU, INC., LANDLORD
By: ______________________________
LEISURE TIME TOURS, TENANT
By: ______________________________
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<PAGE>
AGREEMENT OF LEASE
BETWEEN
GERDANEU, INC.,
LANDLORD
AND
LEISURE TIME TOURS,
TENANT
=========================================================
DATED: MAY 13, 1996
=========================================================
PREMISES
740 WEST DELILAH ROAD
PLEASANTVILLE, NEW JERSEY
BLOCK 190, LOT 4 ON THE
OFFICIAL TAX MAP OF THE MUNICIPALITY OF PLEASANTVILLE
AGREEMENT OF LEASE, made as of the 13th day of May, 1996, between GERDANEU,
INC., a New Jersey corporation, having an address at 4 Leisure Lane, Mahwah, New
Jersey 07430, as Landlord, and LEISURE TIME TOURS, a New Jersey corporation,
having an address at 4801 Woodway, Suite 300E, Houston, Texas 77056, as Tenant.
W I T N E S S E T H:
WHEREAS, the Landlord is the owner of certain premises known as and by the
street address of 740 West Delilah Road, Pleasantville, New Jersey and known and
designated on the Official Tax Map of the Municipality of Pleasantville as Block
190, Lot 4, as more particularly described on Schedule "A", annexed hereto and
made a part hereof; and
WHEREAS, the Landlord desires to rent the aforementioned premises to the
Tenant and the Tenant desires to rent the aforementioned premises from the
Landlord.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, for themselves,
as well as their respective legal representatives, heirs, successors and
assigns, hereby agree as follows:
ARTICLE 1
GLOSSARY
For the purposes of this Lease, the following terms shall have the meanings
indicated below:
"ADA" shall have the meaning set forth in Section 9.1 hereof.
"ADDITIONAL RENT" shall have the meaning set forth in Section 2.2 hereof.
"ALTERATION" or "ALTERATIONS" shall mean any and all alterations,
decorations, installations, repairs, improvements, additions, replacements or
other physical changes of any nature whatsoever in or about the Premises at any
time, now or hereafter.
"APPLICABLE PRICE INDEX" shall have the meaning set forth in Section
8.1(iv) hereof.
"APPLICABLE RATE" shall mean the lesser of (x) three percentage points
above the then current Base Rate, or (y) the maximum rate permitted by
applicable law.
"BANKRUPTCY CODE" shall mean 11 U.S.C. Section 101 ET SEQ., or any statute,
federal or state, of similar nature and purpose, now or hereafter.
"BASE INDEX" shall have the meaning set forth in Section 8.1(iii) hereof.
"BASE RATE" shall mean the rate of interest publicly announced from time to
time by Citibank, N.A., or its successor, as its "base rate" (or such other term
as may be used by Citibank, N.A., from time to time, for the rate presently
referred to as its "base rate").
"BUILDING SYSTEMS" shall mean the mechanical, electrical, sanitary,
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service or support systems of any nature whatsoever located at or on the
Premises, BUT shall not include installations made by Tenant or fixtures or
appliances (regardless of whether or not such fixtures or appliances are owned
by the Tenant or the Landlord).
"BUILDING INSURANCE" shall have the meaning set forth in Section 11.2
hereof.
"BUREAU" shall have the meaning set forth in Section 8.1(i) hereof.
"BUSINESS DAYS" shall mean all days, excluding Saturdays, Sundays and all
days observed as holidays by the State of New Jersey or the federal government.
"COMMENCEMENT DATE" May 13, 1996.
"DEFICIENCY" shall have the meaning set forth in Section 18.2(A)(2) hereof.
"ECRA" shall have the meaning set forth in Section 9.2(B) hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 17.1 hereof.
"EXPIRATION DATE" shall mean the Fixed Expiration Date or such other date
on which the Term ends pursuant to any of the terms, conditions or covenants of
this Lease or pursuant to law.
"FIXED EXPIRATION DATE" May 12, 2001.
"FIXED RENT" $28,800.00 per annum ($2,400.00 per month) for the first Lease
Year (as such term is hereinafter defined) to be adjusted thereafter on each
anniversary date from and after the Commencement Date in accordance with the
provisions of Article 8 of this Lease.
"GOVERNMENT AUTHORITY" or "GOVERNMENT AUTHORITIES" shall mean the United
States of America, the State of New Jersey, the
3
Municipality of Pleasantville, and/or any political subdivision thereof and any
agency, department, commission, board, bureau or instrumentality of any of the
foregoing, now existing or hereafter created, having jurisdiction over the
Premises or any portion thereof.
"HAZARDOUS MATERIALS" shall have the meaning set forth in Section 9.2(A)
hereof.
"INCREASE NOTICE" shall have the meaning set forth in Section 8.3 hereof.
"INDEMNITEES" shall mean Landlord, its shareholders, officers, directors,
employees, agents and contractors (and the partners, shareholders, officers,
directors and employees of any of the Landlord's agents or contractors).
"INITIAL TERM" shall mean five (5) years.
"LANDLORD", on the date as of which this Lease is made, shall mean
Gerdaneu, Inc., a New Jersey corporation, but thereafter, "Landlord" shall mean
any fee owner of the Premises.
"LEASE YEAR" shall mean each twelve (12) month period commencing on each
anniversary date from and after the Commencement Date.
"MORTGAGE(S)" shall mean any trust indenture or mortgage which may now or
hereafter affect the Premises and all extensions, supplements, amendments,
modifications, consolidations, refinancings and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"MORTGAGEE(S)" shall mean any trustee or mortgagee or holder of a Mortgage.
"NJDEP" shall have the meaning set forth in Section 9.2(B) hereof.
"NOTICE(S)" shall have the meaning set forth in Section 27.1(A) hereof.
"OPTION" or "OPTIONS" shall have the meaning set forth in Section 31.1
hereof.
"OPTION PERIOD" or "OPTION PERIODS" shall have the meaning set forth in
Section 31.1 hereof.
"PARTIES" shall have the meaning set forth in Section 34.2 hereof.
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"PERMITTED USE" shall mean general, executive and administrative offices,
parking and terminal facilities in connection with Tenant's business as a motor
vehicle transportation company and uses related thereto including the evolution
of the Tenant's business consistent with the evolution of the motor vehicle
transportation industry in general.
"PERSON(S) OR PERSON(S)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"PERSONS WITHIN TENANT'S CONTROL" shall mean and include Tenant, all of
Tenant's respective shareholders, directors, officers, agents, contractors,
sub-contractors, servants, employees, licensees and invitees as well as any of
the heirs, successors, representatives and assigns of any of the foregoing.
"PREMISES" shall mean all that certain plot, piece and parcel of land,
together with all buildings and improvements thereon erected, known as and by
the street address of 740 West Delilah Road, Pleasantville, New Jersey and known
and designated on the Official Tax Map of the Municipality of Pleasantville as
Block 190, Lot 4, as more particularly described on Schedule "A", annexed hereto
and made a part hereof.
"PRICE INDEX" shall have the meaning set forth in Section 8.1(ii) hereof.
"RENTAL" shall mean and be deemed to include Fixed Rent, Additional Rent
and any other sums payable, now or hereafter, by Tenant hereunder.
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, retroactive and prospective, of all
Governmental Authorities, now existing or hereafter created, which affect,
directly or indirectly, the Premises and/or the maintenance, use, operation or
occupation of the Premises, (ii) all requirements, obligations and conditions of
all instruments of record on the date of this Lease, and (iii) all requirements,
obligations and conditions imposed by any fire rating agency or by the carrier
of Landlord's hazard insurance policy for the Premises.
"TAXES" shall have the meaning set forth in Section 3.1 hereof.
"TENANT", on the date as of which this Lease is made, shall mean the Tenant
named in this Lease, but thereafter "Tenant" shall mean only the tenant under
this Lease at the time in question; provided, however, that the Tenant named in
this Lease and any and all successor tenant(s) hereunder shall not be
5
released and relieved from any liability hereunder in the event of any
assignment of this Lease or a sublet, in whole or in part, of the Premises.
"TENANT'S PROPERTY" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings and other
movable items of personal property owned by the Tenant.
"TERM", on the date as of which this Lease is made shall mean five (5)
years, but thereafter shall be deemed to include any Option Period for which the
Tenant exercises its Option pursuant to the provisions of Article 31 hereof.
"TERMINATION NOTICE PERIOD" shall have the meaning set forth in Section
27.1 hereof.
"UNAVOIDABLE DELAYS" shall have the meaning set forth in Article 25 hereof.
ARTICLE 2
DEMISE; PREMISES; TERM; RENT
SECTION 2.1. Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the Premises for the Term to commence on the Commencement Date and to
end on the Fixed Expiration Date, unless earlier terminated as provided herein.
SECTION 2.2. Commencing upon the Commencement Date, Tenant shall pay to
Landlord, in lawful money of the United States of America, without notice or
demand, by good and sufficient check at the office of Landlord or at such other
place as Landlord may designate from time to time, the following:
(A) the Fixed Rent, as such term is defined in Article 1 hereof, which
shall be payable in equal monthly installments in advance on the first day
of each and every calendar month during the Term, except that the first
monthly installment of Fixed Rent shall be payable by Tenant upon execution
and delivery of this Lease; and
(B) additional rent ("ADDITIONAL RENT") consisting of all other sums
of money as shall become due from and be payable by Tenant hereunder (for
default in the payment of which Landlord shall have the same remedies as
for a default in the payment of Fixed Rent).
SECTION 2.3. If the Commencement Date is other than the first day of a
calendar month, or the Fixed Expiration Date is other than the last day of a
calendar month, Fixed Rent for such month shall be prorated on a per diem basis.
SECTION 2.4. Tenant shall pay the Fixed Rent and Additional Rent when due
without abatement, deduction, counterclaim, setoff or defense of any nature
whatsoever.
ARTICLE 3
REAL ESTATE TAXES; MORTGAGE(S)
SECTION 3.1. The Tenant represents, warrants, covenants and agrees that it
shall, within five (5) days of written demand by the Landlord to the Tenant, pay
to the Landlord, as Additional Rent, any and all Taxes (as hereinafter defined)
of any nature whatsoever assessed or imposed against the Premises for each and
every Lease Year during the Term of this Lease. The Landlord hereby agrees that
any demand given by the Landlord to the Tenant pursuant to the provisions of
this Section 3.1 shall include an accurate copy of the invoice, statement, bill
or similar document issued by the relevant Governmental Authority or
Governmental Authorities, as the case may be, with respect to the Taxes for
which payment is demanded. For purposes of this Section 3.1, "TAXES" shall
include, without limitation, any and all taxes assessed against the Premises,
all personal property taxes, all ad valorem taxes and any and all other taxes
assessed against the Premises by any Governmental Authority, now or hereafter.
SECTION 3.2. The Tenant represents, warrants and covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage or
Mortgages, as the case may be, encumbering the Premises, now or hereafter,
during the Term of this Lease including, but not limited to, any extensions,
supplements, amendments, modifications, consolidations, refinancings and
replacements of any such Mortgage or Mortgages provided that:
(A) the principal balance of any Mortgage subsequent to any extension,
supplement, amendment, modification, consolidation, refinancing or
replacement shall not exceed the outstanding principal balance of the
Mortgage which is to be extended, supplemented, amended, modified,
consolidated, refinanced or replaced at the time of such extension,
supplement, amendment, modification, consolidation, refinancing or
replacement, as the case may be; and
7
(B) the amount of the monthly payments of principal and interest
payable pursuant to the terms and conditions of any Mortgage subsequent to
any extension, supplement, amendment, modification, consolidation,
refinancing or replacement shall not exceed the amount of the monthly
payments with respect to the Mortgage which is to be extended,
supplemented, amended, modified, consolidated, refinanced or replaced at
the time of such extension, supplement, amendment, modification,
consolidation, refinancing or replacement, as the case may be; and
(C) the terms of any extended, supplemented, amended, modified,
consolidated, refinanced or replaced Mortgage shall be no more financially
onerous than the provisions of the such Mortgage prior to such extension,
supplement, amendment, modification, consolidation, refinancing or
replacement, as the case may be; and
(D) the term of any Mortgage extended, supplemented, amended,
modified, consolidated, refinanced or replaced shall be no less than the
term of such Mortgage prior to such extension, supplementation, amendment,
modification, consolidation, refinancing or replacement, as the case may
be.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 shall not apply with respect to any amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage
securing additional indebtedness (above and beyond any Mortgage or Mortgages
existing as of the date hereof) which first becomes a recorded lien on the
Premises subsequent to the date of this Lease and which is executed and
delivered by the Landlord without the consent of the Tenant. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant for payment of
Additional Rent pursuant to the provisions of this Section 3.2 shall include,
ONLY to the extent provided to the Landlord by the Mortgagee, an accurate copy
of the invoice, statement, bill or similar document issued by such Mortgagee or
Mortgagees, as the case may be, with respect to any amount for which payment of
Additional Rent is demanded by the Landlord under and pursuant to the provisions
of this Section 3.2.
8
ARTICLE 4
UTILITIES
SECTION 4.1. The Tenant represents, warrants, covenants and agrees that it
shall, within five (5) days of written demand by the Landlord to the Tenant, pay
to the Landlord, as Additional Rent, any and all charges incurred by the
Landlord for any and all utilities supplied to the Premises including, without
limitation, electricity, water, heating oil and/or natural gas. The Landlord
hereby agrees that any demand given by the Landlord to the Tenant pursuant to
the provisions of this Section 4.1 shall include an accurate copy of the
invoice, statement, bill or similar document issued by the public utility or any
private company providing such utility, as the case may be, with respect to any
utility for which payment is demanded.
SECTION 4.2. Landlord shall not be liable in any way to Tenant for any
interruption or failure of or defect in the supply or character of any utility
furnished to the Premises, now or hereafter, or for any loss, damage or expense
Tenant may sustain if either the quantity or character of any utility is changed
or is no longer suitable for Tenant's requirements, whether by reason of any
requirement, act or omission of the public utility serving the Premises or for
any other reason whatsoever. Notwithstanding the provisions of this Section 4.2,
the Landlord shall be responsible for any and all actual damages suffered by the
Tenant as a result of any interruption of utility service caused solely by the
Landlord's failure to remit (prior to the expiration of any applicable grace
period) to the appropriate public utility or private company providing such
utility, as the case may be, any amount which has been paid by the Tenant to the
Landlord pursuant to the provisions of Section 4.1 hereof.
SECTION 4.3. Tenant shall at all times comply with the rules, regulations,
terms and conditions applicable to service, equipment, wiring, as well as any
and all requirements of the public utility supplying electricity to the
Premises. Tenant shall not, without Landlord's prior written consent in each
instance (which consent may be withheld by the Landlord in its reasonable
discretion), connect any fixtures, machinery, appliances or equipment to the
Premises electric distribution system or make any alteration or addition to
Tenant's machinery, appliances or equipment, or the electric system of the
Premises, if the effect thereof would be to increase the electrical load in the
Premises. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall be provided by Landlord and the cost thereof
shall be deemed Additional Rent due hereunder and shall be forthwith paid by
Tenant upon Landlord's demand.
9
SECTION 4.4. If any Taxes are imposed upon Landlord with respect to any
utility furnished as a service to Tenant by any Governmental Authority, Tenant
agrees that such Taxes shall be reimbursed by Tenant to Landlord upon written
demand. The Landlord hereby agrees that any demand given by the Landlord to the
Tenant pursuant to the provisions of this Section 4.4 shall include an accurate
copy of the invoice, statement, bill or similar document issued by the relevant
Governmental Authority or Governmental Authorities, as the case may be, with
respect to the Taxes for which payment is demanded.
ARTICLE 5
USE AND OCCUPANCY
SECTION 5.1. Tenant shall use and occupy the Premises for the Permitted Use
and for no other purpose of any nature whatsoever.
ARTICLE 6
ALTERATIONS
SECTION 6.1.
(A) (1) Prior to making any Alterations, Tenant shall (i) submit to
Landlord detailed plans and specifications for approval by the Landlord
(including layout, architectural, electrical, mechanical and structural
drawings) and that comply with all Requirements for each proposed Alteration,
and Tenant shall not commence any such Alteration without first obtaining
Landlord's approval of such plans and specifications, (ii) at Tenant's expense,
obtain all permits, approvals and certificates required by any Governmental
Authorities, and (iii) furnish to Landlord duplicate original policies or
certificates thereof for worker's compensation insurance (covering all persons
to be employed by Tenant, and Tenant's contractors and subcontractors, in
connection with such Alteration) and commercial general liability insurance
(including premises operation, bodily injury, personal injury, death,
independent contractors, products and completed operations, broad form
contractual liability and broad form property damage coverages) in such form,
with such companies, for such periods and in such amounts as Landlord may
reasonably approve, naming Landlord and its agents and any Mortgagee, as
additional insureds. Upon completion of such Alteration, Tenant, at Tenant's
expense, shall obtain certificates of final approval of such Alterations
required by any Governmental Authority and shall furnish Landlord with copies
thereof, together with the "as-built" plans and specifications
10
for such Alterations. All Alterations shall be made and performed in accordance
with the plans and specifications therefor as approved by Landlord and otherwise
in accordance with all Requirements. All materials and equipment to be
incorporated in the Premises as a result of any Alterations shall be first
quality and no such materials or equipment shall be subject to any lien,
encumbrance, chattel mortgage, title retention or security agreement.
(2) Landlord reserves the right to disapprove any plans and specifications,
in whole or in part, to reserve approval of items shown thereon pending its
review and approval of other plans and specifications, and to condition its
approval upon Tenant making revisions to the plans and specifications or
supplying additional information. Tenant agrees that any review or approval by
Landlord of any plans and/or specifications with respect to any Alteration is
solely for Landlord's benefit, and without any representation or warranty
whatsoever to Tenant or any other Person with respect to the adequacy,
correctness or sufficiency thereof or with respect to Requirements or otherwise.
(B) All Alterations shall become a part of the Premises and shall be
Landlord's property from and after the installation thereof and may not be
removed or changed without Landlord's prior written consent. Notwithstanding the
foregoing, Landlord, upon notice given at least thirty (30) days prior to the
Expiration Date or upon such shorter notice as is reasonable under the
circumstances upon the earlier expiration of the Term, may require Tenant to
remove any specified Alterations and to repair and restore in a good and
workmanlike manner any damage to the Premises caused by such removal. All
Tenant's Property shall remain the property of Tenant and, on or before the
Expiration Date or earlier end of the Term, may be removed from the Premises by
Tenant at Tenant's sole cost and option; provided, however, that Tenant shall
repair and restore in a good and workmanlike manner any damage to the Premises
caused by such removal. The provisions of this Section 6.1(B) shall survive the
expiration or earlier termination of this Lease.
(C) (1) Any and all Alterations shall be performed, at Tenant's sole cost
and expense, by contractors, subcontractors or mechanics previously approved in
writing by Landlord. Prior to making an Alteration, at Tenant's request,
Landlord shall furnish Tenant with a list of contractors who may perform
Alterations to the Premises on behalf of Tenant.
(2) Notwithstanding the terms and conditions of Section 6.1(C)(1) hereof,
with respect to any Alteration affecting any Building Systems, (i) Tenant shall
only employ Landlord's designated contractor, and (ii) the Alteration shall, at
Tenant's expense, be designed by Landlord's engineer.
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(D) (1) Any mechanic's lien filed against the Premises for work claimed to
have been done for, or materials claimed to have been furnished to, Tenant shall
be cancelled or discharged by Tenant, at Tenant's expense, within twenty (20)
days after such lien shall be filed, by payment or filing of the bond required
by law, and Tenant shall indemnify and hold Landlord harmless from and against
any and all costs, expenses, claims, losses or damages resulting therefrom by
reason thereof.
(2) If Tenant shall fail to discharge such mechanic's lien within the
aforesaid period, then, in addition to any other right or remedy of Landlord,
Landlord may, but shall not be obligated to, discharge the same either by paying
the amount claimed to be due or by procuring the discharge of such lien by
deposit in court or bonding, and in any such event, Landlord shall be entitled,
if Landlord so elects, to compel the prosecution of an action for the
foreclosure of such mechanics lien by the lienor and to pay the amount of the
judgment, if any, in favor of the lienor, with interest, costs and allowances.
(3) Any amount paid by Landlord for any of the aforesaid charges and for
all expenses of Landlord (including, but not limited to, attorneys' fees and
disbursements) incurred in defending any such action, discharging said lien or
in procuring the discharge of said lien, with interest on all such amounts at
the maximum legal rate of interest then chargeable to Tenant from the date of
payment, shall be repaid by Tenant within ten (10) days after written demand
therefor, and all amounts so repayable, together with such interest, shall be
considered Additional Rent.
SECTION 6.2. Landlord, at Tenant's expense, and upon the request of Tenant,
shall join in any applications for any permits, approvals or certificates
required to be obtained by Tenant in connection with any permitted Alteration
(provided that the provisions of the applicable Requirements shall require that
Landlord join in such application) and shall otherwise cooperate with Tenant in
connection therewith; provided, however, that Landlord shall not be obligated to
incur any cost or expense or liability in connection therewith.
SECTION 6.3. Tenant shall furnish to Landlord copies of records of all
Alterations and of the cost thereof within fifteen (15) days after the
completion of such Alterations.
SECTION 6.4. Tenant shall not, at any time prior to or during the Term,
directly or indirectly, employ, or permit the employment of, any contractor,
mechanic or laborer in the Premises, whether in connection with any Alteration
or otherwise, if such employment would interfere or cause any conflict with
other contractors, mechanics or laborers engaged in the
12
construction, maintenance or operation of the Premises by Landlord, Tenant or
others, or of any other property owned by Landlord. In the event of any such
interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Premises immediately.
ARTICLE 7
REPAIRS; REPLACEMENTS; MAINTENANCE
SECTION 7.1. Tenant, at Tenant's sole cost and expense, shall take good
care of the Premises and the fixtures, equipment and appurtenances therein and
make all repairs and replacements thereto, BOTH STRUCTURAL AND NON-STRUCTURAL,
of any nature whatsoever as and when needed to preserve them in good working
order and condition, except for (a) reasonable wear and tear and (b)
obsolescence. If Tenant shall fail, after five (5) days notice (or such shorter
period as may be required because of an emergency), to proceed with due
diligence to make repairs required to be made by Tenant, the same may be made by
Landlord, at the expense of Tenant, and the expenses thereof incurred by
Landlord, with interest thereon at the Applicable Rate, shall be paid to
Landlord, as Additional Rent, within ten (10) days after rendition of a bill or
statement therefor. Tenant shall give Landlord prompt notice of any defective
condition in any Building Systems located in, servicing or passing through the
Premises.
ARTICLE 8
INCREASES IN FIXED RENT
SECTION 8.1. For purposes of this Lease:
(i) "BUREAU" means the Federal Bureau of Labor Statist)cs or any
wtccdr agency that shall issue the indices or data referred to in
subparagraph (ii) below.
(ii) "PRICE INDEX" means the Consumer Price Index for All Urban
Consumers for the New York-Northeastern New Jersey geographic area,
1982-1984=100, issued from time to time by the Bureau or any other
successor measure hereafter employed by the Bureau in lieu of such price
index that measures the cost of living for such geographic area, failing
such successor, the most nearly comparable index (reflecting changes in
costs of housing including rental housing, energy and services), published
by a Governmental Authority, appropriately adjusted. Furthermore, if
hereafter the Price Index is converted to a different standard reference
base or a substantial change is made in the terms or
13
number of items contained therein, the Price Index shall be adjusted (with
the use of such conversion factor, formula or table as is published by the
Bureau, or if it shall not publish same, the conversion factor published by
Prentice Hall, Inc., or, failing such publication, by any other nationally
recognized publisher of similar statistical information) to the figure that
would have resulted if not for such conversion or change.
(iii) "BASE INDEX" means the Price Index issued for April, 1996.
(iv) "APPLICABLE PRICE INDEX" for a Lease Year means the Price Index
issued for April of the year in which such Lease Year commences.
SECTION 8.2. (A) Tenant shall pay to Landlord Fixed Rent in the amount set
forth in Article 1 of this Lease for the first Lease Year.
(B) For each Lease Year subsequent to the first Lease Year (and for each
and every Lease Year thereafter during the Term hereof), the Tenant shall pay to
the Landlord, as Fixed Rent, an amount equal to the GREATER of:
(I) an amount equal to the sum of (x) the percentage by which the
Applicable Price Index for such Lease Year exceeds the Applicable Price
Index for the immediately preceding Lease Year, multiplied by the Fixed
Rent payable for such immediately preceding Lease Year and (y) such Fixed
Rent payable for the immediately preceding Lease Year (e.g., if the Base
Index is 200, the Applicable Price Index for the second Lease Year is 203,
the Applicable Price Index for the third Lease Year is 215, and the Fixed
Rent payable for the second Lease Year is $50,000.00, then the Applicable
Price Index for the third Lease Year exceeds the Applicable Price Index for
the second Year by 5.91% (i.e., the difference between 203 and 215), and
the Fixed Rent derived from the aforesaid calculation shall be $52,955.75
(5.91% of $50,000.00, $2,955.00, plus $50,000.00); or
(II) an amount equal to the sum of (x) five (5%) percent of the Fixed
Rent for the immediately preceding Lease Year and (y) such Fixed Rent for
the immediately preceding Lease Year (e.g. if the Fixed Rent for the second
Lease Year is $50,000.00, the Fixed Rent derived from the aforesaid
calculation for the third Lease Year shall be 5% of $50,000.00, i.e.,
$2,500.00, plus $50,000.00 or $52,500.00).
The Landlord and the Tenant hereby acknowledge that it is the mutual intention
of the parties that for each and every Lease Year subsequent to the first Lease
Year during the Term hereof, the Fixed Rent payable by the Tenant to the
Landlord hereunder shall be increased by no less than five (5%) percent for each
and
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every Lease Year during the Term hereof subsequent to the first Lease Year.
SECTION 8.3. Upon notice by the Landlord to the Tenant of an increase in
the Fixed Rent pursuant to the provisions of this Article 8 ("INCREASE NOTICE"),
the Tenant shall pay the Fixed Rent as set forth in the Increase Notice.
Additionally, within ten (10) days of the date of the Increase Notice, the
Tenant shall pay any retroactive increases in Fixed Rent as set forth in the
Increase Notice.
ARTICLE 9
REQUIREMENTS OF LAW
SECTION 9.1. Tenant shall not do, and shall not permit any act or thing in
or upon the Premises which will invalidate or be in conflict with the
certificate of occupancy for the Premises or violate any Requirements. Tenant
shall, at Tenant's sole cost and expense, immediately take all action, including
but not limited to, making any required Alterations necessary to comply with all
Requirements [including, but not limited to, the Americans With Disabilities Act
of 1990 (the "ADA"), as modified and supplemented from time to time] which shall
or may impose any violation, order or duty upon Landlord or Tenant arising from,
or in connection with, the Premises, Tenant's occupancy, use or manner of use of
the Premises (including, without limitation, any occupancy, use or manner of use
that constitutes a "place of public accommodation" under the ADA), or any
installations in the Premises, or required by reason of a breach of any of
Tenant's covenants or agreements under this Lease, whether or not such
Requirements shall now be in effect or hereafter enacted or issued, and whether
or not any work required shall be ordinary or extraordinary or foreseen or
unforeseen as of the date hereof.
SECTION 9.2. (A) Tenant covenants and agrees that Tenant shall, at Tenant's
sole cost and expense, comply at all times with all Requirements governing the
use, generation, storage, treatment and/or disposal of any Hazardous Materials
(as defined below), the presence of which results from or in connection with the
act or omission of Tenant or Persons Within Tenant's Control or the breach of
this Lease by Tenant or Persons Within Tenant's Control. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other toxic or
hazardous wastes, pollutants or substances, including, without limitation,
asbestos, PCBS, petroleum products and by-products, substances defined or listed
as "hazardous substances" or "toxic substances" or similarly identified in or
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 ET SEQ., and as hazardous wastes under
15
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6010, ET SEQ., any
chemical substance or mixture regulated under the Toxic Substance Control Act of
1976, as amended, 15 U.S.C. 2601, ET SEQ., any "toxic pollutant" under the Clean
Water Act, 33 U.S.C. ss. 466 ET SEQ., as amended, any hazardous air pollutant
under the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ., hazardous materials
identified in or pursuant to the Hazardous Materials Transportation Act, 49
U.S.C. ss. 1802, ET SEQ., and any hazardous or toxic substances or pollutant
regulated under any other Requirements including, without limitation, ECRA (as
such term is hereinafter defined). Tenant agrees to execute, from time to time,
at Landlord's request, affidavits, representations and the like concerning
Tenant's best knowledge and belief regarding the presence of Hazardous Materials
in, on, under or about the Premises. Tenant shall indemnify and hold harmless
all Indemnitees from and against any loss, claim, cost, damage, liability or
expense (including attorneys' fees and disbursements) arising by reason of any
clean up, removal, remediation, detoxification action or any other activity
required or recommended of any Indemnitees by any Governmental Authority by
reason of the presence in, on, under or about the Premises of any Hazardous
Materials, as a result of or in connection with the act or omission of Tenant or
Persons Within Tenant's Control or the breach of this Lease by Tenant or Persons
Within Tenant's Control. The foregoing covenants and indemnity shall survive the
expiration or any termination of this Lease.
(B) In addition to the foregoing, Tenant shall, at its sole cost and
expense, comply with any and all environmental monitoring requirements of the
New Jersey Department of Environmental Protection and the Environmental Cleanup
Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 ET. SEQ. In order to comply with
ECRA, the Tenant shall undertake, at its sole cost and expense, all sampling
required by the Landlord or the New Jersey Department of Environmental
protection ("NJDEP") and shall execute and deliver, upon request, all documents
and pay all fees necessary or desirable for such compliance, which execution,
delivery and/or payment may be requested by either the Landlord and/or NJDEP. It
is understood that this provision shall apply with regard to any action which
may or might require compliance with ECRA, including without limitation, the
termination of this Lease, the change of use of the Premises, an assignment or
sublease of all or part of the Premises, bankruptcy, or the conveyance of title
to the Premises. It is understood that the provisions of this Section 9.2(B)
shall survive the expiration or earlier termination of this Lease.
SECTION 9.3. If Tenant shall receive notice of any violation of, or
defaults under, any Requirements, liens or other encumbrances applicable to the
Premises, Tenant shall give immediate written notice thereof to Landlord.
16
SECTION 9.4. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business and if the failure to secure
such license or permit would, in any way, affect Landlord or the Premises, then
Tenant, at Tenant's expense, shall promptly procure and thereafter maintain,
submit for inspection by Landlord, and at all times comply with the terms and
conditions of, each such license or permit.
ARTICLE 10
SUBORDINATION
SECTION 10.1. This Lease shall at all times, now and hereafter, be subject
and subordinate to each and every Mortgage, whether made prior to or after the
execution of this Lease, and to all extensions, supplements, amendments,
modifications, consolidations and replacements thereof or thereto, substitutions
therefor, and advances made thereunder. This clause shall be self-operative and
no further agreement of subordination shall be required to make the interest of
any Mortgagee superior to the interest of Tenant hereunder. In confirmation of
such subordination, Tenant shall promptly execute and deliver, at its own cost
and expense, any document, in recordable form if requested, that Landlord or any
Mortgagee may request to evidence such subordination; and if Tenant fails to
execute, acknowledge or deliver any such document within five (5) days after
request therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge and
deliver any such document for and on behalf of Tenant. Tenant shall not do
anything that would constitute a default under any Mortgage, or omit to do
anything that Tenant is obligated to do under the terms of this Lease so as to
cause Landlord to be in default thereunder.
SECTION 10.2. If, at any time prior to the expiration of the Term, any
Mortgagee comes into possession of the Premises, by receiver or otherwise,
Tenant agrees, at the election and upon demand of any owner of the Premises, or
of any Mortgagee in possession of the Premises, to attorn, from time to time, to
any such owner or Mortgagee or any person acquiring the interest of Landlord as
a result of any such termination or as a result of a foreclosure of the Mortgage
or the granting of a deed in lieu of foreclosure, upon the then executory terms
and conditions of this Lease (except as provided below), for the remainder of
the Term, provided that such owner or Mortgagee, as the case may be, or receiver
caused to be appointed by any of the foregoing, is then entitled to possession
of the Premises. Any such attornment shall be made upon the condition that no
such owner or Mortgagee shall be:
17
(1) liable for any act or omission of any prior landlord (including,
without limitation, the then defaulting landlord); or
(2) subject to any defense or offsets (except as expressly set forth
in this Lease) which Tenant may have against any prior landlord (including,
without limitation, the then defaulting landlord); or
(3) bound by any payment of Rental which Tenant might have paid for
more than the current month to any prior landlord (including, without
limitation, the then defaulting landlord); or
(4) bound by any obligation to make any payment to Tenant which was
required to be made prior to the time such owner or Mortgagee succeeded to
any prior landlord's interest; or
(5) bound by any obligation to perform any work or to make
improvements to the Premises except for (i) repairs to the Premises or any
part thereof as a result of damage by fire or other casualty pursuant to
Article 12, but only to the extent that such repairs can be reasonably made
from the net proceeds of any insurance actually made available to such
owner or Mortgagee and (ii) repairs to the Premises as a result of a
partial condemnation pursuant to Article 13, but only to the extent that
such repairs can be reasonably made from the net proceeds of any award made
available to such owner or Mortgagee. Tenant, upon demand of any such owner
or Mortgagee, shall execute, from time to time, agreements in confirmation
of the foregoing provisions of this Section 10.2, satisfactory to any such
owner or Mortgagee, and acknowledging such attornment and setting forth the
terms and conditions of its tenancy. Nothing contained in this Section 10.2
shall be construed to impair any right otherwise exercisable by any such
owner or Mortgagee.
SECTION 10.3. If requested by any Mortgagee or Landlord, Tenant shall
promptly execute and deliver, at Tenant's own cost and expense, any document in
accordance with the terms of this Article 10, in recordable form, to evidence
such subordination.
SECTION 10.4. At any time and from time to time upon not less than ten (10)
days' prior notice to Tenant or Landlord given by the other, or to Tenant given
by a Mortgagee, Tenant or Landlord, as the case may be, shall, without charge,
execute, acknowledge and deliver a statement in writing addressed to such party
as Tenant, Landlord or Mortgagee, as the case may be, may designate, in form
satisfactory to Tenant, Landlord or Mortgagee, as the case may be, certifying
all or any of the following: (i) that this Lease is unmodified and in full force
and effect (or if there have been modifications, that this Lease is in full
force
18
and effect as modified and stating the modifications); (ii) the date that the
Term commenced and the date(s) that Fixed Rent and Additional Rent became
payable hereunder and the dates to which they have been paid; (iii) whether or
not, to the best knowledge of the signer of such certificate, Landlord is in
default in performance of any of the terms of this Lease and, if so, specifying
each such event of default of which the signer may have knowledge; (iv) whether
or not, to the best knowledge of the signer of such certificate, Tenant has
accepted possession of the Premises; (v) whether Tenant has made any claim
against Landlord under this Lease and, if so, the nature thereof and the dollar
amount, if any, of such claim; (vi) either that Tenant does not know of any
default in the performance of any provision of this Lease or specifying the
details of any default of which Tenant may have knowledge and stating what
action Tenant is taking or proposes to take with respect thereto; (vii) that, to
the best knowledge of Tenant, there are no proceedings pending or threatened
against Tenant before or by any court or administrative agency which, if
adversely decided, would materially or adversely affect the financial condition
or operations of Tenant or, if any such proceedings are pending or threatened to
the best knowledge of Tenant, specifying and describing the same; and (viii)
such further information with respect to the Lease or the Premises as Landlord
may reasonably request or Mortgagee may require; it being intended that any such
statement delivered pursuant hereto may be relied upon by any prospective
purchaser of the Premises or any part thereof or of the interest of Landlord in
any part thereof, by any Mortgagee or prospective Mortgagee or by any
prospective assignee of any Mortgage or by any assignee of Tenant.
The failure of either Tenant or Landlord to execute, acknowledge and
deliver a statement in accordance with the provisions of this Section 10.4
within said ten (10) day period shall constitute an acknowledgment by Tenant or
Landlord, as the case may be, which may be relied on by any person or entity of
any nature whatsoever who would be entitled to rely upon any such statement,
that such statement as submitted by Landlord or Tenant, as the case may be, is
true and correct.
SECTION 10.5. As long as any Mortgage exists, Tenant shall not seek to
terminate this Lease by reason of any act or omission of Landlord until Tenant
has given not less than thirty (30) days prior written notice of such act or
omission to all Mortgagees, and if any such Mortgagee notifies Tenant within
thirty (30) days following receipt of such notice of its intention to remedy
such act or omission, until a reasonable period of time shall have elapsed
following the giving of such notice, during which period such Mortgagee shall
have the right, but not the obligation, to remedy such act or omission.
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ARTICLE 11
INSURANCE; PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
SECTION 11.1.
(A) Neither Landlord nor Landlord's agents shall be liable for any injury
or damage to persons or property, or interruption of Tenant's business,
resulting from fire or other casualty; nor shall Landlord or Landlord's agents
be liable for any such damage caused by Persons other than the Landlord or the
Landlord's agents or by construction of any private, public or quasi-public
work; nor shall Landlord be liable for any latent defect in the Premises.
(B) Tenant shall give written notice to Landlord, immediately after Tenant
learns thereof, of any accident, emergency, occurrence for which Landlord might
be liable, fire or other casualty and all damages to or defects in the Premises
for the repair of which Landlord might be responsible or which constitutes
Landlord's property. Such notice shall be given by telecopy or personal delivery
to the address(es) of Landlord in effect for notice.
SECTION 11.2. Tenant shall not do or permit to be done any act or thing in
or upon the Premises which will invalidate or be in conflict with the terms of
the State of New Jersey standard form of fire insurance with extended coverage,
or with rental, liability, boiler, sprinkler, water damage, war risk or other
insurance policies covering the Premises and the fixtures and property therein
(hereinafter referred to as "BUILDING INSURANCE"); and Tenant, at Tenant's own
expense, shall comply with all rules, orders, regulations and requirements of
all insurance boards, and shall not do or permit anything to be done in or upon
the Premises or bring or keep anything therein or use the Premises in a manner
which increases the rate of premium for any of the Building Insurance or any
property or equipment located therein over the rate in effect at the
commencement of the Term of this Lease.
SECTION 11.3.
(A) If, by reason of any failure of Tenant to comply with the provisions of
this Lease, the rate of premium for Building Insurance or other insurance on the
property and equipment of Landlord shall be higher than it otherwise would be,
Tenant shall reimburse Landlord for that part of the insurance premiums
thereafter paid by Landlord which shall have been charged because of such
failure by Tenant. Tenant shall make said reimbursement on the first day of the
month following such payment by Landlord.
20
(B) In any action or proceeding wherein Landlord and Tenant are parties, a
schedule of any insurance rate for the Premises issued by any insurance board
establishing insurance premium rates for the Premises shall be prima facie
evidence of the facts therein stated and of the several items and charges in the
insurance premium rates then applicable to the Premises.
SECTION 11.4.
(A) Tenant shall, at Tenant's own cost and expense, obtain, maintain and
keep in full force and effect during the Term, for the benefit of Landlord, any
Mortgagees and Tenant, commercial general liability insurance (including
premises operation, bodily injury, personal injury, death, independent
contractors, products and completed operations, broad form contractual liability
and broad form property damage coverages) in a combined single limit amount of
not less than Five Million and 00/100 ($5,000,000.00) Dollars, against all
claims, demands or actions with respect to damage, injury or death made by or on
behalf of any person or entity, arising from or relating to the conduct and
operation of Tenant's business in, on or about the Premises (which shall include
Tenant's signs, if any), or arising from or related to any act or omission of
Tenant or of Persons Within Tenant's Control. If Tenant shall install or
maintain one or more pressure vessels to serve Tenant's operations at the
Premises, Tenant shall, at Tenant's own cost and expense, obtain, maintain and
keep in full force and effect, for the benefit of Landlord, any Mortgagees and
Tenant, appropriate boiler or other insurance coverage therefor in an amount not
less than Three Million and 00/100 ($3,000,000.00) Dollars (it being understood
and agreed, however, that the foregoing shall not be deemed a consent by
Landlord to the installation and/or maintenance of any such pressure vessels in
the Premises, which installation and/or maintenance shall at all times be
subject to the prior written consent of Landlord). Whenever, in Landlord's
reasonable judgment, good business practice and changing conditions indicate a
need for additional amounts or different types of insurance coverage, Tenant
shall, within ten (10) days after Landlord's request, obtain such insurance
coverage, at Tenant's expense.
(B) Tenant, at Tenant's sole cost and expense, shall maintain insurance
protecting and indemnifying Tenant against any and all damage to or loss of any
Alterations and leasehold improvements, including any made by Landlord to
prepare the Premises for Tenant's occupancy, and Tenant's Property, and all
claims and liabilities relating thereto.
(C) Landlord and any Mortgagees shall be named as insureds in said policies
and shall be protected against all liability occasioned by an occurrence insured
against. All said policies of insurance shall be: (i) written as "occurrence"
policies; (ii) written as primary policy coverage and not
21
contributing with or in excess of any coverage which Landlord may carry; and
(iii) issued by reputable and independent insurance companies rated in Best's
Insurance Guide, or any successor thereto (or if there be none, an organization
having a national reputation) as having a general policyholder rating of "A+"
and a financial rating of at least "13", and which are licensed to do business
in the State of New Jersey. Tenant shall, not later than ten (10) Business Days
prior to the Commencement Date, deliver to Landlord the policies of insurance or
certificates thereof, together with evidence of payment of premiums thereon, and
shall thereafter furnish to Landlord, at least thirty (30) days prior to the
expiration of any such policies and any renewal thereof, a new policy or
certificate in lieu thereof, with evidence of the payment of premiums thereon.
Each of said policies shall also contain a provision whereby the insurer agrees
not to cancel, fail to renew, diminish or materially modify said insurance
policy(ies) without having given Landlord and any Mortgagees at least thirty
(30) days prior written notice thereof.
(D) Tenant shall pay all premiums and charges for all of said policies,
and, if Tenant shall fail to make any payment when due or carry any such policy,
Landlord may, but shall not be obligated to, make such payment or carry such
policy, and the amount paid by Landlord, with interest thereon (at the
Applicable Rate), shall be repaid to Landlord by Tenant on demand, and all such
amounts so repayable, together with such interest, shall be deemed to constitute
Additional Rent hereunder. Payment by Landlord of any such premium, or the
carrying by Landlord of any such policy, shall not be deemed to waive or release
the default of Tenant with respect thereto.
SECTION 11.5.
(A) Tenant shall cause each insurance policy carried by Tenant and insuring
the Premises and Tenant's Alterations, leasehold improvements, space equipment,
furnishings, furniture, contents and fixtures against loss, damage or
destruction by fire or other casualty, to be written in a manner so as to
provide that the insurance company waives all rights of recovery by way of
subrogation against Landlord or Tenant in connection with any loss or damage
covered by any such policy. If the release of either Landlord or Tenant shall
contravene any law with respect to exculpatory agreements, the liability of the
party in question shall be deemed not released, but no action or rights shall be
sought or enforced against such party unless and until all rights and remedies
against the insurer are exhausted and such party shall be unable to collect such
insurance proceeds.
(B) The waiver of subrogation referred to in Section 11.5(A) above shall
extend to the agents and employees of each party, but only if and to the extent
that such waiver can be obtained without additional charge (unless such party
shall pay
22
such charge). Nothing contained in this Section 11.5 shall be deemed to relieve
the Tenant from any duty imposed elsewhere in this Lease to repair, restore and
rebuild the Premises, in whole or in part.
ARTICLE 12
DESTRUCTION BY FIRE OR OTHER CAUSE
SECTION 12.1. If the Premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate written notice thereof to
Landlord. Landlord shall, subject to the provisions of Sections 12.2 and 12.3
below, proceed with reasonable diligence, after receipt of the net proceeds of
insurance, to repair or cause to be repaired such damage at its expense, but in
no event shall such repair or restoration be greater in scope than the quantity
quality of construction of the Premises as of the Commencement Date; and, if the
Premises, or any part thereof, shall be rendered untenantable by reason of such
damage and such damage shall not be due to the fault of Tenant or Persons Within
Tenant's Control, then the Fixed Rent hereunder, or an amount thereof
apportioned according to the area of the Premises so rendered untenantable (if
less than the entire Premises shall be so rendered untenantable), shall be
abated for the period from the date of such damage to the date when the repair
of such damage shall have been substantially completed. If Landlord or any
Mortgagee shall be unable to collect the insurance proceeds (including rent
insurance proceeds) applicable to such damage because of some action or inaction
on the part of Tenant or Persons Within Tenant's Control, then the cost of
repairing such damage shall be paid by Tenant and there shall be no abatement of
Fixed Rent. Tenant covenants and agrees to cooperate with Landlord and any
Mortgagee in their efforts to collect insurance proceeds (including rent
insurance proceeds) payable to such parties. Landlord shall not be liable for
any delay which may arise by reason of adjustment of insurance on the part of
Landlord and/or Tenant, or any cause beyond the control of Landlord or
contractors employed by Landlord.
It is expressly understood that if Landlord is prevented from substantially
completing the repairs by reason of any acts of Tenant or Persons Within
Tenant's Control, including, without limitation, by reason of the performance of
any Alterations, or by reason of Tenant's failure or refusal to comply or to
cause its architects, engineers, designers and contractors to comply with any of
Tenant's obligations described or referred to in this Lease, then such work
shall be deemed substantially completed on the date when the work would have
been substantially completed but for such delay, and the expiration of the
abatement of Tenant's obligations to pay Fixed Rent shall not be postponed
23
by reason of such delay. Any additional costs to Landlord to complete any work
occasioned by such delay shall be paid by Tenant to Landlord, as Additional
Rent, within ten (10) days after demand therefor by Landlord.
SECTION 12.2. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from damage from fire or other casualty or the repair thereof. Tenant
understands that Landlord, in reliance upon Section 11.4 hereof, will not carry
insurance of any kind on Tenant's furnishings, furniture, contents, fixtures,
space equipment and leasehold improvements, and that Landlord shall not be
obligated to repair any damage thereto or replace the same.
SECTION 12.3. (A) Notwithstanding anything to the contrary contained in
Sections 12.1 and 12.2 above, in the event that:
(I) at least fifty (50%) percent of the rentable square feet of the
Premises shall be damaged by a fire or other casualty so that substantial
alteration or reconstruction of the Premises shall, in Landlord's sole
opinion, be required (whether or not the Premises shall have been damaged
by such fire or other casualty and without regard to the structural
integrity of the Premises); or
(II) the Premises shall be totally or substantially damaged or shall
be rendered wholly or substantially untenantable; or
(III) there shall be any damage to the Premises within the last two
(2) years of the Term wherein the cost of repair exceeds an amount equal to
three (3) monthly installments of Fixed Rent, then, as a result of any
circumstances described in subparagraphs (i), (ii) or (iii) hereof, the
Landlord may, in Landlord's sole and absolute discretion, terminate this
Lease and the term and estate hereby granted, by notifying Tenant in
writing of such termination within one hundred twenty (120) days after the
date of such damage. In the event that such a notice of termination shall
be given, then this Lease and the term and estate hereby granted shall
expire as of the date of termination stated in said notice with the same
effect as if that were the Fixed Expiration Date, and the Fixed Rent and
Additional Rent hereunder shall be apportioned as of such date.
SECTION 12.4. Except as may be provided in Section 11.5, nothing herein
contained shall relieve Tenant from any liability to Landlord or to Landlord's
insurers in connection with any damage to the Premises by fire or other casualty
if Tenant shall be legally liable in such respect.
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ARTICLE 13
EMINENT DOMAIN
SECTION 13.1. If the whole of the Premises is acquired or condemned for any
public or quasi-public use or purpose, this Lease and the Term shall end as of
the date of the vesting of title with the same effect as if said date were the
Fixed Expiration Date. If only a part of the Premises is so acquired or
condemned then, (1) except as hereinafter provided in this Section 13.1, this
Lease and the Term shall continue in effect but, if a part of the Premises is so
acquired or condemned, from and after the date of the vesting of title, the
Fixed Rent and Additional Rent, if any, shall be reduced in the proportion which
the area of the part of the Premises so acquired or condemned bears to the total
area of the Premises immediately prior to such acquisition or condemnation; (2)
whether or not the Premises are affected thereby, Landlord, at Landlord's
option, may give to Tenant, within sixty (60) days next following the date upon
which Landlord receives notice of vesting of title, a thirty (30) day notice of
termination of this Lease; and (3) if the part of the Premises so acquired or
condemned contains more than seventy-five (75%) percent of the total area of the
Premises immediately prior to such acquisition or condemnation, or if, by reason
of such acquisition or condemnation, Tenant no longer has access to the
Premises, Tenant, at Tenant's option, may give to Landlord, within thirty (30)
days next following the date upon which Tenant receives notice of vesting of
title, a thirty (30) day notice of termination of this Lease. If any such thirty
(30) day notice of termination is given, by Landlord or Tenant, this Lease and
the Term shall come to an end and expire upon the expiration of said thirty (30)
days with the same effect as if the date of expiration of said thirty (30) days
were the Fixed Expiration Date. In the event of any termination of this Lease
and the Term pursuant to the provisions of this Section 13.1, the Fixed Rent or
Additional Rent shall be apportioned as of the date of sooner termination and
any prepaid portion of the Fixed Rent for any period after such date shall be
refunded by Landlord to Tenant.
SECTION 13.2. In the event of any such acquisition or condemnation of all
or any part of the Premises, Landlord shall be entitled to receive the entire
award for any such acquisition or condemnation. Tenant shall have no claim
against Landlord or the condemning authority for the value of any unexpired
portion of the Term and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this Section 13.2 shall be
deemed to prevent Tenant from making a separate claim in any condemnation
proceedings for the value of any Tenant's Property included in such taking, and
for any moving expenses, so long as Landlord's award is not reduced thereby.
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ARTICLE 14
ASSIGNMENT; SUBLETTING; MORTGAGE; ETC.
SECTION 14.1. (A) The Tenant shall not (a) assign this Lease (whether by
operation of law, transfers of interests in Tenant or otherwise); or (b)
mortgage or encumber Tenant's interest in this Lease, in whole or in part; or
(c) sublet, or permit the subletting of, the Premises or any part thereof.
Notwithstanding the provisions of this Section 14.1, the use of the Premises by
any Person AFFILIATED (as such term is hereinafter defined) with the Tenant or
under the COMMON CONTROL (as such term is hereinafter defined) of Coach USA,
Inc., as the case may be, shall not be deemed an assignment of this Lease or a
sublet of the Premises; PROVIDED, HOWEVER, that such use of the Premises as
aforesaid shall not violate or be prohibited by any of the provisions of any
Mortgage then encumbering the Premises, if any. For purposes of this Article 14,
a Person shall be deemed to be an "AFFILIATE" of the Tenant or under the "COMMON
CONTROL" of Coach USA if such Person is a member of a "parentsubsidiary
controlled group" [as such term is defined by Section 1563(a)(1) of the Internal
Revenue Code of 1986, as amended] or a member of a "brother-sister controlled
group" [as such term is defined by Section 1563(a)(2) of the Internal Revenue
Code of 1986, as amended] of which either Coach USA, Inc. or the Tenant, as the
case may be, is a member.
(B) Notwithstanding the provisions otherwise set forth in this Article 14,
any reorganization, consolidation and/or restructuring of the Tenant in which
the issued and outstanding stock of the Tenant remains under the COMMON CONTROL
(as such term is defined in Section 14.1 hereinabove) of Coach USA, Inc. shall
not be deemed an assignment of this Lease or a sublet of the Premises; PROVIDED,
HOWEVER, that the same shall not violate or be prohibited by any of the
provisions of any Mortgage then encumbering the Premises, if any.
SECTION 14.2. If Tenant's interest in this Lease shall be assigned in
violation of the provisions of this Article 14, such assignment shall be invalid
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy. If the Premises or any
part thereof are sublet to, or occupied by, or used by, any person other than
Tenant, whether or not in violation of this Article 14, Landlord, after default
by Tenant under this Lease, may collect any item of Rental or other sums paid by
the subtenant, user or occupant as a fee for its use and occupancy, and shall
apply the net amount collected to the Fixed Rent and
26
the items of Rental reserved in this Lease. No such assignment, subletting,
occupancy, or use, nor any such collection or application of Rental or fee for
use and occupancy, shall be deemed a waiver by Landlord of any term, covenant or
condition of this Lease or the acceptance by Landlord of such assignee,
subtenant, occupant or user as Tenant hereunder, nor shall the same, in any
circumstances, relieve Tenant of any of its obligations under this Lease.
SECTION 14.3.
Except as otherwise set forth in Section 14.1 hereof, for purposes of this
Article 14, (i) any increase in the amount of issued and/or outstanding capital
stock of any corporate tenant and/or the creation of one or more additional
classes of capital stock of any corporate tenant, in a single transaction or a
series of related or unrelated transactions, resulting in a change in the legal
or beneficial ownership of such tenant so that the shareholders of such tenant
existing immediately prior to such transaction or series of transactions shall
no longer own a majority of the issued and outstanding capital stock of such
tenant shall be deemed an assignment of this Lease and (ii) any Person or legal
representative of Tenant, to whom Tenant's interest under this Lease passes by
operation of law, or otherwise, shall be bound by the provisions of this Article
14. Tenant agrees to furnish to Landlord on request at any time such information
and assurances as Landlord may reasonably request that Tenant has not violated
the provisions of this Article 14.
ARTICLE 15
ACCESS TO PREMISES
SECTION 15.1. Tenant shall permit Landlord, Landlord's agents and any
public utilities servicing the Premises to erect, use and maintain, now and
hereafter, concealed ducts, pipes and conduits in and through the Premises.
Landlord or Landlord's agents shall have the right to enter the Premises at all
reasonable times upon (except in case of emergency) reasonable prior notice,
which notice may be oral, to examine the same, to show the same to prospective
purchasers or Mortgagees and to make such repairs, alterations, improvements or
additions (i) as Landlord may deem necessary or desirable to the Premises, or
(ii) which Landlord may elect to perform at least ten (10) days after notice
(except in an emergency when no notice shall be required) following Tenant's
failure to make repairs or perform any work which Tenant is obligated to make or
perform under this Lease, or (iii) for the purpose of complying with
Requirements, and Landlord shall be allowed to take all material into and upon
the Premises that may be required therefor without the same
27
constituting an eviction or constructive eviction of Tenant in whole or in part
and the Fixed Rent (and any other item of Rental) shall in no respect abate or
be reduced by reason of said repairs, alterations, improvements or additions,
wherever located, or while the same are being made, by reason of loss or
interruption of business of Tenant, or otherwise. Landlord shall promptly repair
any damage caused to the Premises by such work, alterations, improvements or
additions.
SECTION 15.2. If Tenant is not present when for any reason entry into the
Premises may be necessary or permissible, Landlord or Landlord's agents may
enter the same without rendering Landlord or such agents liable therefor.
SECTION 15.3. Landlord also shall have the right at any time, without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, stairs, toilets or other
parts of the Premises, provided any such change does not unreasonably interfere
with, or deprive Tenant of access to, the Premises; to put so-called "solar
film" or other energy-saving installations on the inside and outside of the
windows; and to change the name, number or designation by which the Premises is
commonly known.
ARTICLE 16
CERTIFICATE OF OCCUPANCY
SECTION 16.1. Tenant shall not at any time, now or hereafter, use or occupy
the Premises, directly or indirectly, in violation of the certificate of
occupancy for the Premises and in the event that any Governmental Authority
hereafter contends or declares by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose that is a violation
of such certificate of occupancy, Tenant shall, upon three (3) Business Days'
written notice from Landlord or any Government Authority, immediately
discontinue such use of the Premises.
ARTICLE 17
DEFAULT
SECTION 17.1. Each of the following events shall be an "EVENT OF DEFAULT"
under this Lease:
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(A) if Tenant shall on any occasion default in the payment when due of
any installment of Fixed Rent or Additional Rent or in the payment when due
of any other item of Rental and such default shall continue for five (5)
business days from and after the date when the same shall be due; or
(B) if the Premises shall become vacant or abandoned; or
(C) if Tenant's interest in this Lease shall devolve upon or pass to
any person, whether by operation of law or otherwise, except as
specifically permitted by the provisions of Article 14 hereof; or
(D) (1) if Tenant shall not, or shall be unable to, or shall admit in
writing Tenant's inability to, as to any obligation, pay Tenant's debts as
they become due; or
(2) if Tenant shall commence or institute any case, proceeding or
other action (a) seeking relief on Tenant's behalf as debtor, or to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to Tenant or Tenant's debts under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, or (b) seeking
appointment of a receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its property; or
(3) if Tenant shall make a general assignment for the benefit of
creditors; or
(4) if any case, proceeding or other action shall be commenced or
instituted against Tenant (a) seeking to have an order for relief entered
against Tenant as debtor or to adjudicate Tenant a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to
Tenant or Tenant's debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (b) seeking appointment of a
receiver, trustee, custodian or other similar official for Tenant or for
all or any substantial part of Tenant's property, which either (i) results
in any such entry of an order for relief, adjudication of bankruptcy or
insolvency or such an appointment or the issuance or entry of any other
order having a similar effect or (ii) remains undismissed for a period of
sixty (60) days; or
(5) if a trustee, receiver or other custodian shall be appointed
for any substantial part of the assets of
29
Tenant which appointment is not vacated or effectively stayed within thirty
(30) days; or
(E) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be
observed or performed including, without limitation, the terms and
conditions of Article 27 hereof, and Tenant shall fail to remedy such
default within ten (10) days after written notice by Landlord to Tenant of
such default, or if such default is of such a nature that it cannot with
due diligence be completely remedied within said period of ten (10) days
and the continuation of which for the period required for cure will not
subject Landlord to the risk of criminal liability or foreclosure of any
Mortgage, if Tenant shall not, (i) within said ten (10) day period advise
Landlord of Tenant's intention duly to institute all steps necessary to
remedy such situation, (ii) duly institute within said ten (10) day period,
and thereafter diligently and continuously prosecutes to completion all
steps necessary to remedy the same and (iii) completes such remedy within
such time after the date of the giving of said notice by Landlord as shall
reasonably be necessary.
SECTION 17.2. If an Event of Default shall occur, Landlord may, at any time
thereafter, at Landlord's option, give written notice to Tenant stating that
this Lease and the Term shall expire and terminate on the date specified in such
notice, which date shall not be less than three (3) days after the giving of
such notice, whereupon this Lease and the Term and all rights of Tenant under
this Lease shall automatically expire and terminate as if the date specified in
the notice given pursuant to this Section 17.2 were the Fixed Expiration Date
and Tenant immediately shall quit and surrender the Premises, but Tenant shall
remain liable for damages as provided herein or pursuant to law. Anything
contained herein to the contrary notwithstanding, if such termination shall be
stayed by order of any court having jurisdiction over any proceeding described
in Section 17.1(D), or by federal or state statute, then, following the
expiration of any such stay, or if the trustee appointed in any such proceeding,
Tenant or Tenant as debtor-in-possession fails to assume Tenant's obligations
under this Lease within the period prescribed therefor by law or within one
hundred twenty (120) days after entry of the order for relief or as may be
allowed by the court, or if said trustee, Tenant or Tenant as
debtor-inpossession shall fail to provide adequate protection of Landlord's
right, title and interest in and to the Premises or adequate assurance of the
complete and continuous future performance of Tenant's obligations under this
Lease, Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on three (3) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon
30
the expiration of said three (3) day period this Lease shall cease and expire as
aforesaid and Tenant, Tenant as debtor-inpossession or said trustee shall
immediately quit and surrender the Premises as aforesaid.
SECTION 17.3. If, at any time, (i) Tenant shall consist of two (2) or more
Persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (iii) Tenant's interest in this
Lease has been assigned, the word "Tenant" as used and referred to in this
Lease, shall be deemed to mean any one or more of the persons primarily or
secondarily liable for Tenant's obligations under this Lease. Any monies
received by Landlord from or on behalf of Tenant during the pendency of any
proceeding of the types referred to in Section 17.1(D) hereof shall be deemed
paid as compensation for the use and occupancy of the Premises and the
acceptance of any such compensation by Landlord shall not be deemed an
acceptance of Rental or a waiver on the part of Landlord of any rights under
Section 17.2 hereof.
ARTICLE 18
REMEDIES AND DAMAGES
SECTION 18.1.
(A) If any Event of Default shall occur, or this Lease and the Term shall
expire and come to an end as provided in Article 17 hereof:
(1) Tenant shall quit and peacefully surrender the Premises to
Landlord, and Landlord and its agents may immediately, or at any time after
such Event of Default or after the date upon which this Lease and the Term
shall expire and come to an end, re-enter the Premises or any part thereof,
without notice, either by summary proceedings, or by any other applicable
action or proceeding or otherwise (without being liable to indictment,
prosecution or damages therefor), and may repossess the Premises and
dispossess Tenant and any other persons from the Premises by summary
proceedings or otherwise and remove any and all of their property and
effects from the Premises (and Tenant shall remain liable for damages as
provided herein or pursuant to law); and
(2) Landlord, at Landlord's option, may relet the whole or any part or
parts of the Premises from time to time, either in the name of Landlord or
otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Fixed Expiration Date, at such rent or rentals and upon
such other conditions, which may include concessions and
31
free rent periods, as Landlord, in Landlord's sole discretion, may
determine; provided, however, that Landlord shall have no obligation to
relet the Premises or any part thereof and shall in no event be liable for
refusal or failure to relet the Premises or any part thereof, or, in the
event of any such reletting, for refusal or failure to collect any rent due
upon any such reletting, and no such refusal or failure shall operate to
relieve Tenant of any liability under this Lease or otherwise affect any
such liability, and Landlord, at Landlord's option, may make such
Alterations, in and to the Premises as Landlord, in Landlord's sole
discretion, shall consider advisable or necessary in connection with any
such reletting or proposed reletting, without relieving Tenant of any
liability under this Lease or otherwise affecting any such liability.
(B) Tenant hereby waives the service of any notice of intention to re-enter
or to institute legal proceedings to that end that may otherwise be required to
be given under any present or future law. Tenant, on its own behalf and on
behalf of all persons claiming through or under Tenant, including all creditors
of Tenant, does further hereby waive any and all rights that Tenant and all such
persons might otherwise have under any present or future law to redeem the
Premises, or to re-enter or repossess the Premises, or to restore the operation
of this Lease, after (a) Tenant shall have been dispossessed by a judgment or by
warrant of any court, or (b) any re-entry by Landlord, or (c) any expiration or
termination of this Lease and the Term, whether such dispossess, re-entry,
expiration or termination is by operation of law or pursuant to the provisions
of this Lease. The words "re-entry", "re-enter" and "re-entered" as used in this
Lease shall not be deemed to be restricted to their technical legal meanings. In
the event of a breach or threatened breach by Tenant, or any persons claiming
through or under Tenant, of any term, covenant or condition of this Lease,
Landlord shall have the right to enjoin such breach and the right to invoke any
other remedy allowed by law or in equity as if re-entry, summary proceedings and
other special remedies were not provided in this Lease for such breach. The
right to invoke the remedies hereinbefore set forth are cumulative and shall not
preclude Landlord from invoking any other remedy allowed at law or in equity.
SECTION 18.2.
(A) If this Lease and the Term shall expire and come to an end as provided
in Article 17 hereof, or by or under any summary proceeding or any other action
or proceeding, or if Landlord shall re-enter the Premises as provided in Section
18.1 hereof, or by or under any summary proceeding or any other action or
proceeding, then, in any of said events:
32
(1) Tenant shall pay to Landlord all Fixed Rent, Additional Rent and
other items of Rental payable under this Lease by Tenant to Landlord to the
date upon which this Lease and the Term shall have expired and come to an
end or to the date of re-entry upon the Premises by Landlord, as the case
may be;
(2) Tenant also shall be liable for and shall pay to Landlord, as
damages, any deficiency ("DEFICIENCY") between the Rental for the period
which otherwise would have constituted the unexpired portion of the Term
and the net amount, if any, of rents collected under any reletting effected
pursuant to the provisions of Section 18.1(A)(2) for any part of such
period (after first deducting from the rents collected under any such
reletting all of Landlord's expenses in connection with the termination of
this Lease, Landlord's re-entry upon the Premises and such reletting
including, but not limited to, all repossession costs, brokerage
commissions, attorneys' fees and disbursements, alteration costs and other
expenses of preparing the Premises for such reletting); any such Deficiency
shall be paid in monthly installments by Tenant on the days specified in
this Lease for payment of installments of Fixed Rent; Landlord shall be
entitled to recover from Tenant each monthly Deficiency as the same shall
arise, and no suit to collect the amount of the Deficiency for any month
shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any Deficiency as
aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant
shall pay to Landlord, on demand, in lieu of any further Deficiency as and
for liquidated and agreed final damages, a sum equal to the amount by which
the unpaid Rental for the period which otherwise would have constituted the
unexpired portion of the Term exceeds the then fair and reasonable rental
value of the Premises for the same period; if, before presentation of proof
of such liquidated damages to any court, commission or tribunal, the
Premises, or any part thereof, are relet by Landlord for the period which
otherwise would have constituted the unexpired portion of the Term, or any
part thereof, the amount of rent reserved upon such reletting shall be
deemed, prima facie, to be the fair and reasonable rental value for the
part or the whole of the Premises so relet during the term of the
reletting.
(B) Tenant shall in no event be entitled to any rents collected or payable
under any reletting, whether or not such rents exceed the Fixed Rent reserved in
this Lease. Nothing contained in Article 17 hereof or this Article 18 shall be
deemed to limit or preclude the recovery by Landlord from Tenant of the
33
maximum amount allowed to be obtained as damages by any statute or rule of law,
or of any sums or damages to which Landlord may be entitled in addition to the
damages set forth in this Section 18.2.
ARTICLE 19
FEES AND EXPENSES
SECTION 19.1. If an Event of Default shall have occurred, Landlord may (1)
perform the same for the account of Tenant, or (2) make any expenditure or incur
any obligation for the payment of money in connection with any obligation owed
to Landlord, including, but not limited to, reasonable attorneys' fees and
disbursements in instituting, prosecuting or defending any action or proceeding,
and in either case the cost thereof, with interest thereon at the Applicable
Rate, shall be deemed to be Additional Rent hereunder and shall be paid by
Tenant to Landlord within ten (10) days after rendition of any bill or statement
to Tenant therefor. In addition, Tenant shall pay Landlord any reasonable
attorneys' fees and disbursements incurred by Landlord in connection with any
proceeding in which the value for the use and occupancy of the Premises by
Tenant is being determined (whether or not any such proceeding results from a
default by Tenant under this Lease).
SECTION 19.2. If Tenant shall fail to pay any installment of Fixed Rent,
Additional Rent or any other item of Rental for a period longer than five (5)
days after the same shall have become due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent, Additional Rent or other item of
Rental, as the case may be, as a late charge and as Additional Rent, a sum equal
to interest at the Applicable Rate on the amount unpaid, computed from the date
such payment was due, without regard to any such grace period, to and including
the date of payment.
ARTICLE 20
NO REPRESENTATIONS BY LANDLORD
SECTION 20.1. Landlord and Landlord's agents have made no representations
or promises with respect to the Premises except as herein expressly set forth,
and no rights, easements or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth herein. Tenant shall accept possession
of the Premises in its "as is" condition on the Commencement Date, and Landlord
shall have no obligation to perform any work or make any installations in order
to prepare
34
the Premises for Tenant's occupancy. The taking of occupancy of the whole or any
part of the Premises by Tenant shall be conclusive evidence, as against Tenant,
that Tenant accepts possession of the same and that the Premises were in good
and satisfactory condition at the time such occupancy was so taken. All
references in this Lease to the consent or approval of Landlord shall be deemed
to mean the written consent or approval executed by Landlord and no other
consent or approval of Landlord shall be effective for any purpose whatsoever.
ARTICLE 21
END OF TERM
SECTION 21.1. Upon the expiration or other termination of this Lease,
Tenant shall quit and surrender to Landlord the Premises, vacant, broom clean,
in good order and condition, ordinary wear and tear excepted, and Tenant shall
remove all of Tenant's Alterations as may be required pursuant to Article 6.
Tenant shall also remove all of Tenant's Property and all other personal
property and personal effects of all persons claiming through or under Tenant,
and shall pay the cost of repairing all damage to the Premises occasioned by
such removal. Any Tenant's Property or other personal property that remains in,
on or at the Premises after the termination of this Lease shall be deemed to
have been abandoned and either may be retained by Landlord as its property or
may be disposed of in such manner as Landlord may see fit. If Tenant's Property
or other personal property or any part thereof is sold, Landlord may receive and
retain the proceeds of such sale as the property of Landlord. Any expense
incurred by Landlord in removing or disposing of Tenant's Property or other
personal property or Alterations required to be removed as provided in Article
6, as well as the cost of repairing all damage to the Premises caused by such
removal, shall be reimbursed to Landlord by Tenant, as Additional Rent, on
demand.
SECTION 21.2. If the Expiration Date falls on a day which is not a Business
Day, then Tenant's obligations under Section 21.1 shall be performed on or prior
to such Business Day.
SECTION 21.3. If the Premises are not surrendered upon the expiration or
other termination of this Lease, Tenant hereby indemnifies Landlord against
liability resulting from delay by Tenant in so surrendering the Premises,
including any claims made by any succeeding tenant or prospective tenant founded
upon such delay and agrees to be liable to Landlord for (i) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the
35
Premises in order to induce such tenant not to terminate its lease by reason of
the holding-over by Tenant and (ii) the loss of the benefit of the bargain if
any such tenant shall terminate its lease by reason of the holding-over by
Tenant.
SECTION 21.4. Tenant's obligations under this Article 21 shall survive the
expiration or termination of this Lease.
ARTICLE 22
POSSESSION
SECTION 22.1. If Landlord shall be unable to deliver possession of the
Premises on the Commencement Date for any reason whatsoever, Landlord shall not
be subject to any liability therefor and the validity of this Lease shall not be
impaired thereby nor the Expiration Date extended, but the Commencement Date
shall be postponed until five (5) Business Days following notice from Landlord
that the Premises are available for occupancy by Tenant. Tenant expressly waives
any right to rescind this Lease under any present or future statute and further
expressly waives the right to recover any damages that may result from
Landlord's failure to deliver possession of the Premises on the Commencement
Date.
ARTICLE 23
NO WAIVER
SECTION 23.1. No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys to the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises.
SECTION 23.2. The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease shall not prevent a subsequent act, which would have originally
constituted a violation, from having all of the force and effect of an original
violation. The receipt by Landlord of Fixed Rent, Additional Rent or any other
item of Rental with knowledge of the breach of any covenant of this Lease shall
not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord, unless such waiver shall be in writing
and
36
shall be signed by Landlord. No payment by Tenant or receipt by Landlord of a
lesser amount than the Rental then due and payable shall be deemed to be other
than on account of the earliest item(s) of Rental, or as Landlord may elect to
apply the same, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance due of the Rental or to otherwise pursue any other
remedy in this Lease provided. This Lease contains the entire agreement between
the parties and all prior negotiations and agreements are merged herein. Any
executory agreement hereafter made shall be ineffective to change, discharge or
effect an abandonment of this Lease in whole or in part unless such executory
agreement is in writing and signed by the party against whom enforcement of the
change, discharge or abandonment is sought.
ARTICLE 24
WAIVER OF TRIAL BY JURY
SECTION 24.1. Tenant hereby waives trial by jury in any action or
proceeding brought by or against Tenant with respect to any matters whatsoever
arising out of or in any way connected with this Lease, the relationship of
Landlord and Tenant, Tenant's use or occupancy of the Premises, whether during
or after the Term, or for the enforcement of any remedy under any statute,
emergency or otherwise. If Landlord shall commence any summary proceeding
against Tenant, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding, and will not seek to consolidate such
proceeding with any other action which may have been or will be brought in any
other court by Tenant or Landlord.
ARTICLE 25
INABILITY TO PERFORM
SECTION 25.1. This Lease and the obligation of Tenant to pay Rental
hereunder and to perform all of the other covenants and agreements hereunder on
the part of Tenant to be performed shall in no way be affected, impaired or
excused because Landlord is unable to fulfill any of Landlord's obligations
under this Lease, expressly or implicitly to be performed by Landlord, or
because Landlord is unable to make or is delayed in making any repairs, or is
unable to supply or is delayed in supplying any services, if Landlord is
prevented from or delayed in so doing by reason of acts of God, casualty,
strikes or labor troubles, accident, governmental preemption in connection with
an
37
emergency, Requirements, conditions of supply and demand which have been or are
affected by war or other emergency, or any other cause whatsoever, whether
similar or dissimilar to the foregoing, beyond Landlord's reasonable control
("UNAVOIDABLE DELAYS").
ARTICLE 26
NOTICES
SECTION 26.1.
(A) Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease ("NOTICE(S)") shall be in writing and
shall be deemed sufficiently given or rendered if delivered by hand (against a
signed receipt) or if deposited with a nationally recognized overnight courier
and in either case addressed:
IF TO TENANT:
(a) at Tenant's address first set forth in this Lease or (b) at any
place where Tenant or any agent or employee of Tenant may be found if
given subsequent to Tenant's vacating, deserting, abandoning or
surrendering the Premises, and
IF TO LANDLORD:
at Landlord's address first set forth in this Lease, Attn: Mr. Gerald
Mercadante, with a copy to Todtman, Young, Tunick, Nachamie, Hendler &
Spizz, P.C., 425 Park Avenue, New York, New York 10022 Attention:
Martin Todtman, Esq. and (y) any Mortgagee who may have requested the
same, by Notice given in accordance with the provisions of this
Article 26, at the address designated by such Mortgagee,
or to such other address(es) as either Landlord or Tenant may
designate as its new address(es) for such purpose by notice given to
the other in accordance with the provisions of this Article 26.
(B) Notices shall be deemed to have been rendered or given (a) on the
date delivered, if delivered by hand, or (b) on
38
the day after being deposited with a nationally recognized overnight
courier as provided in Section 26.1(A) hereof.
ARTICLE 27
LANDLORD'S RIGHT TO TERMINATE
SECTION 27.1 Notwithstanding anything contained herein to the contrary, the
Landlord shall have the sole and exclusive option to terminate this Lease upon
ninety (90) days prior written notice ("TERMINATION NOTICE PERIOD") to the
Tenant in the event that the Landlord shall have received an offer to purchase
the Premises, or any part thereof. Time shall be of the essence with respect to
the Tenant's obligation to vacate the Premises in accordance with the provisions
of Article 21 hereof on or before the expiration of the Termination Notice
Period. In the event that the Tenant shall fail to vacate the Premises as
aforesaid, then in such event, the Landlord shall be entitled to avail itself of
any and all rights and remedies against the Tenant, whether at law, equity or
under and pursuant to the terms and conditions of this Lease including, without
limitation, any rights and/or remedies which may be available to the Landlord in
accordance with the provisions of Article 18 hereof.
ARTICLE 28
BROKER
SECTION 28.1. Landlord represents and warrants to Tenant that Landlord has
not dealt with any broker or Person in connection with this Lease. Tenant
represents and warrants to Landlord that Tenant has not dealt with any broker or
Person in connection with this Lease. The execution and delivery of this Lease
by Tenant shall be conclusive evidence that Tenant acknowledges that Landlord
has relied upon the foregoing representation and warranty. Tenant shall
indemnify and hold harmless Landlord from and against any and all claims for
commission, fee or other compensation by any broker or Person who claims to have
dealt with Tenant in connection with this Lease and for any and all costs
incurred by Landlord in connection with such claims, including, without
limitation, attorneys' fees and disbursements. The provisions of this Article 28
shall survive the expiration or earlier termination of this Lease.
39
ARTICLE 29
INDEMNITY
SECTION 29.1. Tenant shall not do or permit any act or thing to be done in,
at or upon the Premises that may subject any Indemnitee to any liability or
responsibility for injury, damage to persons or property or to any liability by
reason of the existence or application of, compliance with or violation of any
Requirement, but shall exercise such control over the Premises as to protect
each Indemnitee fully against any such liability and responsibility. Tenant
shall indemnify and save harmless the Indemnitees from and against (a) all
claims of whatever nature against the Indemnitees arising from any act, omission
or negligence of Tenant or Persons Within Tenant's Control, (b) all claims
against the Indemnitees arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring in or about
the Premises during the Term or during Tenant's occupancy of the Premises,
unless and to the extent caused by the gross negligence of Landlord or its
shareholders, officers and employees, (c) all claims against the Indemnitees
arising from any accident, injury or damage occurring outside of the Premises
but anywhere within or about the Premises, where such accident, injury or damage
results or is claimed to have resulted from an act, omission or negligence of
Tenant or Persons Within Tenant's Control, and (d) any breach, violation or
non-performance of any covenant, condition or agreement contained in this Lease
to be fulfilled, kept, observed and performed by Tenant. This indemnity and hold
harmless agreement shall include indemnity from and against any and all
liability, claims, fines, suits, demands, costs and expenses of any kind or
nature (including, without limitation, attorneys' fees and disbursements)
incurred in or in connection with any such claim or proceeding brought thereon,
and the defense thereof.
SECTION 29.2. If any claim, action or proceeding is made or brought against
any Indemnitee, against which claim, action or proceeding Tenant is obligated to
indemnify such Indemnitee pursuant to the terms of this Lease, then, upon demand
by the Indemnitee, Tenant, at its sole cost and expense, shall resist or defend
such claim, action or proceeding in the Indemnitee's name, if necessary, by such
attorneys as the Indemnitee may select, including, without limitation, attorneys
for the Indemnitee's insurer. The provisions of this Article 29 shall survive
the expiration or earlier termination of this Lease.
40
ARTICLE 30
ADJACENT EXCAVATION; SHORING
SECTION 30.1. If an excavation shall be made upon land adjacent to the
Premises, or shall be authorized to be made, Tenant shall, upon reasonable
advance notice, afford to the person or entity causing or authorized to cause
such excavation, a limited license to enter upon the Premises for the purpose of
doing such work as said person or entity deems necessary to preserve the walls
of any building located on the Premises from injury or damage and to support the
same by proper foundations without any claim for eviction or constructive
eviction, damages or indemnity against Landlord, or diminution or abatement of
Rental.
ARTICLE 31
RENEWAL OPTIONS
SECTION 31.1. Provided that the Tenant is not in default with respect to
any of its obligations to the Landlord under and pursuant to the terms and
conditions of this Lease at the time each Option (as such term is hereinafter
defined) is to be exercised, the Tenant shall have the option to renew this
Lease for seven (7) additional five (5) year periods [the option with respect to
each additional five (5) year period is referred to herein as an "OPTION" and,
collectively, all of the options granted herein are referred to as the
"OPTIONS"] as follows:
OPTION PERIOD 1 shall commence on May 13, 2001 and shall continue up to
and including May 12, 2006.
OPTION PERIOD 2 shall commence on May 13, 2006 and shall continue up to
and including May 12, 2011.
OPTION PERIOD 3 shall commence on May 13, 2011 and shall continue up to
and including May 12, 2016.
OPTION PERIOD 4 shall commence on May 13, 2016 and shall continue up to
and including May 12, 2021.
OPTION PERIOD 5 shall commence on May 13, 2021 and shall continue up to
and including May 12, 2026.
OPTION PERIOD 6 shall commence on May 13, 2026 and shall continue up to
and including May 12, 2031.
OPTION PERIOD 7 shall commence on May 13, 2031 and shall continue up to
and including May 12, 2036.
41
(each of the aforementioned option periods is individually referred to
herein as an "OPTION PERIOD" and, collectively, all of the
aforementioned Option Periods are referred to herein as "OPTION
PERIODS")
SECTION 31.2. Each Option granted to the Tenant pursuant to the
provisions of Section 31.1 hereof shall be exercised by the Tenant giving
written notice to the Landlord of the Tenant's intent to exercise the Option not
less than one-hundred eighty (180) days prior to the expiration of the Initial
Term or not less than one-hundred eighty (180) days prior to the expiration of
the Option Period which is then in effect, as the case may be.
SECTION 31.3. In the event that the Tenant exercises the Option with
respect to any Option Period, the Landlord and the Tenant hereby agree that this
Lease shall continue in full force and effect and remain unamended during the
applicable Option Period AND specifically, without limitation, that the Fixed
Rent payable by the Tenant to the Landlord during such Option Period shall be
increased on each anniversary date from and after the Commencement Date in
accordance with the provisions of Article 8 hereof.
ARTICLE 32
RENT REGULATION
SECTION 32.1. If at any time or times during the Term of this Lease, the
Rental reserved in this Lease is not fully collectible by reason of any
Requirement, Tenant shall enter into such agreements and take such other steps
as Landlord may request and as may be legally permissible to permit Landlord to
collect the maximum rents that may from time to time during the continuance of
such legal rent restriction be legally permissible (and not in excess of the
amounts reserved under this Lease). Upon the termination of such legal rent
restriction (a) the Rental shall become and thereafter be payable hereunder in
accordance with the amounts reserved in this Lease for the remainder of the
Term, and (b) Tenant shall pay to Landlord, if legally permissible, an amount
equal to (i) the items of Rental that would have been paid pursuant to this
Lease but for such legal rent restriction less (ii) the rents paid by Tenant to
Landlord during the period or periods such legal rent restriction was in effect.
This provision shall survive the expiration or earlier termination of this Lease
to the maximum enforceable extent.
42
ARTICLE 33
COVENANT OF QUIET ENJOYMENT
SECTION 33.1. Landlord covenants that, upon Tenant paying all Fixed Rent
and Additional Rent and observing and performing all the terms, agreements,
covenants, provisions and conditions of this Lease on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Premises,
subject nevertheless to the terms and conditions of this Lease; provided,
however, that no eviction of Tenant by reason of the foreclosure of any Mortgage
now or hereafter affecting the Premises shall be construed as a breach of this
covenant nor shall any action by reason thereof be brought against Landlord, and
provided further that this covenant shall bind and be enforceable against
Landlord or any successor to Landlord's interest, subject to the terms hereof,
only so long as Landlord or any successor to Landlord's interest, is in
possession and is collecting rent from Tenant but not thereafter.
ARTICLE 34
MISCELLANEOUS
SECTION 34.1. This Lease is presented for signature by Tenant and it is
understood that this Lease shall not constitute an offer by or be binding upon
Landlord unless and until Landlord shall have executed and delivered a fully
executed copy of this Lease to Tenant.
SECTION 34.2. The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Premises, as the case may be, and in the event of any such sale,
conveyance, assignment or transfer, Landlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord under this Lease
thereafter arising, and the transferee shall be deemed to have assumed, subject
to the remaining provisions of this Section 34.2, all obligations of the
Landlord under this Lease arising after the effective date of the transfer. No
trustee, partner, principal, shareholder, director or officer of Landlord
(collectively, the "PARTIES") shall have any direct or personal liability for
the performance of Landlord's obligations under this Lease, and Tenant shall
look solely to Landlord's interest in the Premises to enforce Landlord's
obligations hereunder and shall not otherwise seek any damages against Landlord
or any of the Parties whatsoever. Tenant shall not look to any other property or
assets of Landlord or any
43
property or assets of any of the Parties in seeking either to enforce Landlord's
obligations under this Lease or to satisfy a judgment for Landlord's failure to
perform such obligations.
SECTION 34.3. Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Additional Rent or
Rental, shall constitute rent for the purposes of Section 502(b)(7) of the
Bankruptcy Code.
SECTION 34.4. Neither this Lease nor any memorandum of this Lease shall be
recorded without the prior written consent of the Landlord, which consent may be
withheld by the Landlord in its sole and absolute discretion.
SECTION 34.5. Except as otherwise expressly stated in this Lease, any
consent or approval required to be obtained from Landlord may be granted by
Landlord in its sole and absolute discretion. In any instance in which Landlord
agrees not to act unreasonably, Tenant hereby waives any claim for damages
against or liability of Landlord that Tenant may have based upon any assertion
that Landlord has unreasonably withheld or unreasonably delayed any consent or
approval requested by Tenant, and Tenant agrees that its sole remedy shall be an
action or proceeding to enforce any related provision or for specific
performance, injunction or declaratory judgment. If with respect to any required
consent or approval Landlord is required by the express provisions of this Lease
not to unreasonably withhold or delay its consent or approval, and if it is
determined in any such proceeding referred to in the preceding sentence that
Landlord acted unreasonably, the requested consent or approval shall be deemed
to have been granted; however, Landlord shall have no liability whatsoever to
Tenant for its refusal or failure to give such consent or approval. Tenant's
sole remedy for Landlord's unreasonably withholding or delaying consent or
approval shall be as provided in this Section 34.5.
SECTION 34.6. Landlord shall have the right at any time, and from time to
time, to amend unilaterally the provisions of this Lease if Landlord is advised
by its counsel that all or any portion of the Rental paid by Tenant to Landlord
hereunder is, or may be deemed to be, unrelated business taxable income within
the meaning of the United States Internal Revenue Code or regulations issued
thereunder, and Tenant agrees that it will execute all documents necessary to
effect any such amendment, provided that no such amendment shall increase
Tenant's payment obligations or other liability under this Lease nor reduce
Landlord's obligations hereunder.
SECTION 34.7. If Tenant shall remain in possession of the Premises after
the Expiration Date, without the execution by both Tenant and Landlord of a new
lease, Tenant, at the election
44
of Landlord, shall be deemed to be occupying the Premises as a Tenant from
month-to-month, at a monthly rental equal to three (3x) times the Rental payable
during the last month of the Term, subject to all the other conditions,
provisions and obligations of this Lease insofar as the same are applicable to a
month-to-month tenancy.
SECTION 34.8. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted. If any words or phrases in this Lease are stricken out or
otherwise eliminated, whether or not any other words or phrases have been added,
this Lease shall be construed as if the words or phrases so stricken out or
otherwise eliminated were never included in this Lease and no implication or
inference shall be drawn from the fact that such words or phrases were stricken
out or otherwise eliminated.
SECTION 34.9. If any of the provisions of this Lease, or the application
thereof to any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
provisions to persons or circumstances other than those as to whom or which it
is held invalid or unenforceable, shall not be affected thereby and shall remain
valid and enforceable, and every provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
SECTION 34.10. Landlord shall have the right to erect any gate, chain or
other obstruction or to close off any portion of the Premises to the public at
any time to the extent necessary to prevent a dedication thereof for public use.
SECTION 34.11. Tenant hereby represents to Landlord that it is not
entitled, directly or indirectly, to diplomatic or sovereign immunity and Tenant
agrees that in all disputes arising directly or indirectly out of this Lease
Tenant shall be subject to service of process in, and the jurisdiction of the
courts of, the State of New Jersey. The provisions of this Section 34.11 shall
survive the expiration of this Lease.
SECTION 34.12. This Lease contains the entire agreement between the parties
and all prior negotiations and agreements are merged into this Lease. Except as
provided in Section 34.6 this Lease may not be changed, abandoned or discharged,
in whole or in part, nor may any of its provisions be waived except by a written
agreement that (a) expressly refers to this Lease, (b) is executed by the party
against whom enforcement of the change, abandonment, discharge or waiver is
sought and (c) is permissible under the Mortgage(s).
SECTION 34.13. Any apportionment or prorations of Rental to be made under
this Lease shall be computed on the basis of
45
a three hundred sixty (360) day year, with twelve (12) months of thirty (30)
days each.
SECTION 34.14. The laws of the State of Jersey applicable to contracts made
and to be performed wholly within the State of New Jersey shall govern and
control the validity, interpretation, performance and enforcement of this Lease
without regard to principles of conflicts of law.
SECTION 34.15. If Tenant is a corporation, each person executing this Lease
on behalf of Tenant hereby covenants, represents and warrants that Tenant is a
duly incorporated or duly qualified (if foreign) corporation and is authorized
to do business in the State of New Jersey (a copy of evidence thereof to be
supplied to Landlord upon request); and that each person executing this Lease on
behalf of Tenant is an officer of Tenant and that he or she is duly authorized
to execute, acknowledge and deliver this Lease to Landlord (a copy of a
resolution to that effect to be supplied to Landlord upon request).
SECTION 34.16. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Lease nor the intent of any provision thereof.
SECTION 34.17. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective legal representatives, heirs, successors, and, except as otherwise
provided in this Lease, their assigns.
SECTION 34.18. For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(A) The words "herein", "hereof", "hereunder" and "hereby"and words of
similar import shall be construed to refer to this Lease as a whole and not
to any particular Article or Section unless expressly so stated.
(B) Tenant's obligations hereunder shall be construed in every
instance as conditions as well as covenants, each separate and independent
of any other terms of this Lease.
46
(C) Reference to Landlord as having "no liability" or being "without
liability" shall mean that Tenant shall not be entitled to terminate this
Lease, or to claim actual or constructive eviction, partial or total, or to
receive any abatement or diminution of rent, or to be relieved in any
manner of any of its other obligations hereunder, or to be compensated for
loss or injury suffered or to enforce any other right or liability
whatsoever against Landlord under or with respect to this Lease or with
respect to Tenant's use or occupancy of the Premises.
(D) Reference to "termination of this Lease" or "expiration of this
Lease" and words of like import includes expiration or sooner termination
of this Lease and the Term and the estate hereby granted or cancellation of
this Lease pursuant to any of the provisions of this Lease or by law. Upon
the termination of this Lease, the Term and estate granted by this Lease
shall end at noon on the date of termination as if such date were the Fixed
Expiration Date, and neither party shall have any further obligation or
liability to the other after such termination except (i) as shall be
expressly provided for in this Lease, and (ii) for such obligations as by
their nature under the circumstances can only be, or by the provisions of
this Lease, may be, performed after such termination, and, in any event,
unless expressly otherwise provided in this Lease, any liability for a
payment (which shall be apportioned as of such termination) which shall
have accrued to or with respect to any period ending at the time of
termination shall survive the termination of this Lease.
(E) Words and phrases used in the singular shall be deemed to include
the plural and vice versa, and nouns and pronouns used in any particular
gender shall be deemed to include any other gender.
(F) The rule of "ejusdem generis" shall not be applicable to limit a
general statement following or referable to an enumeration of specific
matters to matters similar to the matters specifically mentioned.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of
the day and year first above written.
GERDANEU, INC., LANDLORD
By: ______________________________
LEISURE TIME TOURS, TENANT
By: ______________________________
47
<PAGE>
AGREEMENT OF LEASE
BETWEEN
GERDANEU, INC.,
LANDLORD
AND
LEISURE TIME TOURS,
TENANT
=========================================================
DATED: MAY 13, 1996
=========================================================
PREMISES
2425-2431 SOUTH SWANSON STREET
PHILADELPHIA, PENNSYLVANIA
SECTION 2, BLOCK 34, LOT 51 AND SECTION 21, BLOCK
34, LOT 20 ON THE OFFICIAL TAX MAP OF THE CITY OF PHILADELPHIA
AGREEMENT OF LEASE, made as of the 13th day of May, 1996, between GERDANEU,
INC., a New Jersey corporation, having an address at 4 Leisure Lane, Mahwah, New
Jersey 07430, as Landlord, and LEISURE TIME TOURS, a New Jersey corporation,
having an address at 4801 Woodway, Suite 300E, Houston, Texas 77056, as
Tenant.
WITNESSETH:
WHEREAS, the Landlord is the owner of certain premises known as and by
the street address of 2425-2431 South Swanson Street, Philadelphia, Pennsylvania
and known and designated on the Official Tax Map of the City of Philadelphia as
Section 2, Block 34, Lot 51 and Section 21, Block 34, Lot 20, as more
particularly described on Schedule "A", annexed hereto and made a part hereof;
and
WHEREAS, the Landlord desires to rent the aforementioned premises to
the Tenant and the Tenant desires to rent the aforementioned premises from the
Landlord.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, for themselves,
as well as their respective legal representatives, heirs, successors and
assigns, hereby agree as follows:
ARTICLE 1
GLOSSARY
For the purposes of this Lease, the following terms shall have the meanings
indicated below:
"ADA" shall have the meaning set forth in Section 9.1
hereof.
"ADDITIONAL RENT" shall have the meaning set forth in
Section 2.2 hereof.
"ALTERATION" or "ALTERATIONS" shall mean any and all alterations,
decorations, installations, repairs, improvements, additions, replacements or
other physical changes of any nature whatsoever in or about the Premises at any
time, now or hereafter.
"APPLICABLE PRICE INDEX" shall have the meaning set forth in Section
8.1(iv) hereof.
"APPLICABLE RATE" shall mean the lesser of (x) three percentage points
above the then current Base Rate, or (y) the maximum rate permitted by
applicable law.
"BANKRUPTCY CODE" shall mean 11 U.S.C. Section 101 ET SEQ., or any statute,
federal or state, of similar nature and purpose, now or hereafter.
"BASE INDEX" shall have the meaning set forth in
Section 8.1(iii) hereof.
"BASE RATE" shall mean the rate of interest publicly announced from time to
time by Citibank, N.A., or its successor, as its "base rate" (or such other term
as may be used by Citibank, N.A., from time to time, for the rate presently
referred to as its "base rate").
2
"BUILDING SYSTEMS" shall mean the mechanical, electrical, sanitary,
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service or support systems of any nature whatsoever located at or on the
Premises, BUT shall not include installations made by Tenant or fixtures or
appliances (regardless of whether or not such fixtures or appliances are owned
by the Tenant or the Landlord).
"BUILDING INSURANCE" shall have the meaning set forth in
Section 11.2 hereof.
"BUREAU" shall have the meaning set forth in
Section 8.1(i) hereof.
"BUSINESS DAYS" shall mean all days, excluding Saturdays, Sundays and all
days observed as holidays by the State of Pennsylvania or the federal
government.
"COMMENCEMENT DATE" May 13, 1996.
"DEFICIENCY" shall have the meaning set forth in Section
18.2(A)(2) hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in
Section 17.1 hereof.
"EXPIRATION DATE" shall mean the Fixed Expiration Date or such other date
on which the Term ends pursuant to any of the terms, conditions or covenants of
this Lease or pursuant to law.
"FIXED EXPIRATION DATE" May 12, 2001.
"FIXED RENT" $16,080.00 per annum ($1,340.00 per month) for the first
Lease Year (as such term is hereinafter defined) to be adjusted thereafter on
each anniversary date from and after the Commencement Date in accordance with
the provisions of Article 8 of this Lease.
3
"GOVERNMENT AUTHORITY" or "GOVERNMENT AUTHORITIES" shall mean the United
States of America, the State of Pennsylvania, the City or County of
Philadelphia, and/or any political subdivision thereof and any agency,
department, commission, board, bureau or instrumentality of any of the
foregoing, now existing or hereafter created, having jurisdiction over the
Premises or any portion thereof.
"HAZARDOUS MATERIALS" shall have the meaning set forth in
Section 9.2(A) hereof.
"INCREASE NOTICE" shall have the meaning set forth in
Section 8.3 hereof.
"INDEMNITEES" shall mean Landlord, its shareholders, officers, directors,
employees, agents and contractors (and the partners, shareholders, officers,
directors and employees of any of the Landlord's agents or contractors).
"INITIAL TERM" shall mean five (5) years.
"LANDLORD", on the date as of which this Lease is made, shall mean
Gerdaneu, Inc., a New Jersey corporation, but thereafter, "Landlord" shall mean
any fee owner of the Premises.
"LEASE YEAR" shall mean each twelve (12) month period commencing on each
anniversary date from and after the Commencement Date.
"MORTGAGE(S)" shall mean any trust indenture or mortgage which may now or
hereafter affect the Premises and all extensions, supplements, amendments,
modifications, consolidations, refinancings and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"MORTGAGEE(S)" shall mean any trustee or mortgagee or holder
of a Mortgage.
"NOTICE(S)" shall have the meaning set forth in Section
27.1(A) hereof.
"OPTION" or "OPTIONS" shall have the meaning set forth in
Section 31.1 hereof.
"OPTION PERIOD" or "OPTION PERIODS" shall have the meaning set forth in
Section 31.1 hereof.
"PARTIES" shall have the meaning set forth in Section 34.2 hereof.
"PERMITTED USE" shall mean general, executive and administrative offices,
parking and terminal facilities in
4
connection with Tenant's business as a motor vehicle transportation company and
uses related thereto including the evolution of the Tenant's business consistent
with the evolution of the motor vehicle transportation industry in general.
"PERSON(S) OR PERSON(S)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"PERSONS WITHIN TENANT'S CONTROL" shall mean and include Tenant, all of
Tenant's respective shareholders, directors, officers, agents, contractors,
sub-contractors, servants, employees, licensees and invitees as well as any of
the heirs, successors, representatives and assigns of any of the foregoing.
"PREMISES" shall mean all that certain plot, piece and parcel of land,
together with all buildings and improvements thereon erected, known as and by
the street address of 2425-2431 South Swanson Street, Philadelphia, Pennsylvania
and known and designated on the Official Tax Map of the City of Philadelphia as
Section 2, Block 34, Lot 51 and Section 21, Block 34, Lot 20, as more
particularly described on Schedule "A", annexed hereto and made a part hereof.
"PRICE INDEX" shall have the meaning set forth in
Section 8.1(ii) hereof.
"RENTAL" shall mean and be deemed to include Fixed Rent, Additional Rent
and any other sums payable, now or hereafter, by Tenant hereunder.
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, retroactive and prospective, of all
Governmental Authorities, now existing or hereafter created, which affect,
directly or indirectly, the Premises and/or the maintenance, use, operation or
occupation of the Premises, (ii) all requirements, obligations and conditions of
all instruments of record on the date of this Lease, and (iii) all requirements,
obligations and conditions imposed by any fire rating agency or by the carrier
of Landlord's hazard insurance policy for the Premises.
"TAXES" shall have the meaning set forth in Section 3.1
hereof.
"TENANT", on the date as of which this Lease is made, shall mean the Tenant
named in this Lease, but thereafter "Tenant" shall mean only the tenant under
this Lease at the time in question; provided, however, that the Tenant named in
this Lease and any and all successor tenant(s) hereunder shall not be released
and relieved from any liability hereunder in the event
5
of any assignment of this Lease or a sublet, in whole or in part,
of the Premises.
"TENANT'S PROPERTY" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings and other
movable items of personal property owned by the Tenant.
"TERM", on the date as of which this Lease is made shall mean five (5)
years, but thereafter shall be deemed to include any Option Period for which the
Tenant exercises its Option pursuant to the provisions of Article 31 hereof.
"TERMINATION NOTICE PERIOD" shall have the meaning set forth in Section
27.1 hereof.
"UNAVOIDABLE DELAYS" shall have the meaning set forth in
Article 25 hereof.
ARTICLE 2
DEMISE; PREMISES; TERM; RENT
SECTION 2.1. Landlord hereby leases to Tenant and Tenant hereby hires
from Landlord the Premises for the Term to commence on the Commencement Date and
to end on the Fixed Expiration Date, unless earlier terminated as provided
herein.
SECTION 2.2. Commencing upon the Commencement Date, Tenant shall pay to
Landlord, in lawful money of the United States of America, without notice or
demand, by good and sufficient check at the office of Landlord or at such other
place as Landlord may designate from time to time, the following:
(A) the Fixed Rent, as such term is defined in Article 1
hereof, which shall be payable in equal monthly installments in advance on the
first day of each and every calendar month during the Term, except that the
first monthly installment of Fixed Rent shall be payable by Tenant upon
execution and delivery of this Lease; and
(B) additional rent ("ADDITIONAL RENT") consisting of all other sums
of money as shall become due from and be payable by Tenant hereunder (for
default in the payment of which Landlord shall have the same remedies as for a
default in the payment of Fixed Rent).
6
SECTION 2.3. If the Commencement Date is other than the first day of a
calendar month, or the Fixed Expiration Date is other than the last day of a
calendar month, Fixed Rent for such month shall be prorated on a per diem basis.
SECTION 2.4. Tenant shall pay the Fixed Rent and Additional Rent when
due without abatement, deduction, counterclaim, setoff or defense of any nature
whatsoever.
ARTICLE 3
REAL ESTATE TAXES; MORTGAGE(S)
SECTION 3.1. The Tenant represents, warrants, covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all Taxes (as hereinafter
defined) of any nature whatsoever assessed or imposed against the Premises for
each and every Lease Year during the Term of this Lease. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant pursuant to the
provisions of this Section 3.1 shall include an accurate copy of the invoice,
statement, bill or similar document issued by the relevant Governmental
Authority or Governmental Authorities, as the case may be, with respect to the
Taxes for which payment is demanded. The Landlord hereby agrees that any demand
given by the Landlord to the Tenant pursuant to the provisions of this Section
3.1 shall include an accurate copy of the invoice, statement, bill or similar
document issued by the relevant Governmental Authority or Governmental
Authorities, as the case may be, with respect to the Taxes for which payment is
demanded. For purposes of this Section 3.1, "TAXES" shall include, without
limitation, any and all taxes assessed against the Premises, all personal
property taxes, all ad valorem taxes and any and all other taxes assessed
against the Premises by any Governmental Authority, now or hereafter.
SECTION 3.2. The Tenant represents, warrants and covenants and agrees
that it shall, within five (5) days of written demand by the Landlord to the
Tenant, pay to the Landlord, as Additional Rent, any and all amounts which may
be due and owing under and pursuant to the terms and conditions of any Mortgage
or Mortgages, as the case may be, encumbering the Premises, now or hereafter,
during the Term of this Lease including, but not limited to, any extensions,
supplements, amendments, modifications, consolidations, refinancings and
replacements of any such Mortgage or Mortgages provided that:
(A) the principal balance of any Mortgage subsequent to any extension,
supplement, amendment, modification, consolidation, refinancing or
replacement shall not
7
exceed the outstanding principal balance of the Mortgage which is to be
extended, supplemented, amended, modified, consolidated, refinanced or
replaced at the time of such extension, supplement, amendment,
modification, consolidation, refinancing or replacement, as the case
may be; and
(B) the amount of the monthly payments of principal and interest
payable pursuant to the terms and conditions of any Mortgage subsequent
to any extension, supplement, amendment, modification, consolidation,
refinancing or replacement shall not exceed the amount of the monthly
payments with respect to the Mortgage which is to be extended,
supplemented, amended, modified, consolidated, refinanced or replaced
at the time of such extension, supplement, amendment, modification,
consolidation, refinancing or replacement, as the case may be; and
(C) the terms of any extended, supplemented, amended, modified,
consolidated, refinanced or replaced Mortgage shall be no more
financially onerous than the provisions of the such Mortgage prior to
such extension, supplement, amendment, modification, consolidation,
refinancing or replacement, as the case may be; and
(D) the term of any Mortgage extended, supplemented, amended, modified,
consolidated, refinanced or replaced shall be no less than the term of
such Mortgage prior to such extension, supplementation, amendment,
modification, consolidation, refinancing or replacement, as the case
may be.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 shall not apply with respect to any amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage
securing additional indebtedness (above and beyond any Mortgage or Mortgages
existing as of the date hereof) which first becomes a recorded lien on the
Premises subsequent to the date of this Lease and which is executed and
delivered by the Landlord without the consent of the Tenant. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant for payment of
Additional Rent pursuant to the provisions of this Section 3.2 shall include,
ONLY to the extent provided to the Landlord by the Mortgagee, an accurate copy
of the invoice, statement, bill or similar document issued by such Mortgagee or
Mortgagees, as the case may be, with respect to any amount for which payment of
Additional Rent is demanded by the Landlord under and pursuant to the provisions
of this Section 3.2.
8
ARTICLE 4
UTILITIES
SECTION 4.1. The Tenant represents, warrants, covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all charges incurred by the
Landlord for any and all utilities supplied to the Premises including, without
limitation, electricity, water, heating oil and/or natural gas. The Landlord
hereby agrees that any demand given by the Landlord to the Tenant pursuant to
the provisions of this Section 4.1 shall include an accurate copy of the
invoice, statement, bill or similar document issued by the public utility or any
private company providing such utility, as the case may be, with respect to any
utility for which payment is demanded.
SECTION 4.2. Landlord shall not be liable in any way to Tenant for any
interruption or failure of or defect in the supply or character of any utility
furnished to the Premises, now or hereafter, or for any loss, damage or expense
Tenant may sustain if either the quantity or character of any utility is changed
or is no longer suitable for Tenant's requirements, whether by reason of any
requirement, act or omission of the public utility serving the Premises or for
any other reason whatsoever. Notwithstanding the provisions of this Section 4.2,
the Landlord shall be responsible for any and all actual damages suffered by the
Tenant as a result of any interruption of utility service caused solely by the
Landlord's failure to remit (prior to the expiration of any applicable grace
period) to the appropriate public utility or private company providing such
utility, as the case may be, any amount which has been paid by the Tenant to the
Landlord pursuant to the provisions of Section 4.1 hereof.
SECTION 4.3. Tenant shall at all times comply with the rules, regulations,
terms and conditions applicable to service, equipment, wiring, as well as any
and all requirements of the public utility supplying electricity to the
Premises. Tenant shall not, without Landlord's prior written consent in each
instance (which consent may be withheld by the Landlord in its reasonable
discretion), connect any fixtures, machinery, appliances or equipment to the
Premises electric distribution system or make any alteration or addition to
Tenant's machinery, appliances or equipment, or the electric system of the
Premises, if the effect thereof would be to increase the electrical load in the
Premises. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall be provided by Landlord and the cost thereof
shall be deemed Additional Rent due hereunder and shall be forthwith paid by
Tenant upon Landlord's demand.
9
SECTION 4.4. If any Taxes are imposed upon Landlord with respect to any
utility furnished as a service to Tenant by any Governmental Authority, Tenant
agrees that such Taxes shall be reimbursed by Tenant to Landlord upon written
demand. The Landlord hereby agrees that any demand given by the Landlord to the
Tenant pursuant to the provisions of this Section 4.4 shall include an accurate
copy of the invoice, statement, bill or similar document issued by the relevant
Governmental Authority or Governmental Authorities, as the case may be, with
respect to the Taxes for which payment is demanded.
ARTICLE 5
USE AND OCCUPANCY
SECTION 5.1. Tenant shall use and occupy the Premises for the Permitted Use
and for no other purpose of any nature whatsoever.
ARTICLE 6
ALTERATIONS
SECTION 6.1.
(A) (1) Prior to making any Alterations, Tenant shall (i)
submit to Landlord detailed plans and specifications for approval by the
Landlord (including layout, architectural, electrical, mechanical and structural
drawings) and that comply with all Requirements for each proposed Alteration,
and Tenant shall not commence any such Alteration without first obtaining
Landlord's approval of such plans and specifications, (ii) at Tenant's expense,
obtain all permits, approvals and certificates required by any Governmental
Authorities, and (iii) furnish to Landlord duplicate original policies or
certificates thereof for worker's compensation insurance (covering all persons
to be employed by Tenant, and Tenant's contractors and subcontractors, in
connection with such Alteration) and commercial general liability insurance
(including premises operation, bodily injury, personal injury, death,
independent contractors, products and completed operations, broad form
contractual liability and broad form property damage coverages) in such form,
with such companies, for such periods and in such amounts as Landlord may
reasonably approve, naming Landlord and its agents and any Mortgagee, as
additional insureds. Upon completion of such Alteration, Tenant, at Tenant's
expense, shall obtain certificates of final approval of such Alterations
required by any Governmental Authority and shall furnish Landlord with copies
thereof, together with the "as-built" plans and specifications
10
for such Alterations. All Alterations shall be made and performed in accordance
with the plans and specifications therefor as approved by Landlord and otherwise
in accordance with all Requirements. All materials and equipment to be
incorporated in the Premises as a result of any Alterations shall be first
quality and no such materials or equipment shall be subject to any lien,
encumbrance, chattel mortgage, title retention or security agreement.
(2) Landlord reserves the right to disapprove
any plans and specifications, in whole or in part, to reserve approval of items
shown thereon pending its review and approval of other plans and specifications,
and to condition its approval upon Tenant making revisions to the plans and
specifications or supplying additional information. Tenant agrees that any
review or approval by Landlord of any plans and/or specifications with respect
to any Alteration is solely for Landlord's benefit, and without any
representation or warranty whatsoever to Tenant or any other Person with respect
to the adequacy, correctness or sufficiency thereof or with respect to
Requirements or otherwise.
(B) All Alterations shall become a part of the Premises and
shall be Landlord's property from and after the installation thereof and may not
be removed or changed without Landlord's prior written consent. Notwithstanding
the foregoing, Landlord, upon notice given at least thirty (30) days prior to
the Expiration Date or upon such shorter notice as is reasonable under the
circumstances upon the earlier expiration of the Term, may require Tenant to
remove any specified Alterations and to repair and restore in a good and
workmanlike manner any damage to the Premises caused by such removal. All
Tenant's Property shall remain the property of Tenant and, on or before the
Expiration Date or earlier end of the Term, may be removed from the Premises by
Tenant at Tenant's sole cost and option; provided, however, that Tenant shall
repair and restore in a good and workmanlike manner any damage to the Premises
caused by such removal. The provisions of this Section 6.1(B) shall survive the
expiration or earlier termination of this Lease.
(C) (1) Any and all Alterations shall be performed, at
Tenant's sole cost and expense, by contractors, subcontractors or mechanics
previously approved in writing by Landlord. Prior to making an Alteration, at
Tenant's request, Landlord shall furnish Tenant with a list of contractors who
may perform Alterations to the Premises on behalf of Tenant.
(2) Notwithstanding the terms and conditions of
Section 6.1(C)(1) hereof, with respect to any Alteration affecting any Building
Systems, (i) Tenant shall only employ Landlord's designated contractor, and (ii)
the Alteration shall, at Tenant's expense, be designed by Landlord's engineer.
11
(D) (1) Any mechanic's lien filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant shall be cancelled or discharged by Tenant, at Tenant's expense, within
twenty (20) days after such lien shall be filed, by payment or filing of the
bond required by law, and Tenant shall indemnify and hold Landlord harmless from
and against any and all costs, expenses, claims, losses or damages resulting
therefrom by reason thereof.
(2) If Tenant shall fail to discharge such
mechanic's lien within the aforesaid period, then, in addition to any other
right or remedy of Landlord, Landlord may, but shall not be obligated to,
discharge the same either by paying the amount claimed to be due or by procuring
the discharge of such lien by deposit in court or bonding, and in any such
event, Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such mechanics lien by the
lienor and to pay the amount of the judgment, if any, in favor of the lienor,
with interest, costs and allowances.
(3) Any amount paid by Landlord for any of the aforesaid charges
and for all expenses of Landlord (including, but not limited to, attorneys' fees
and disbursements) incurred in defending any such action, discharging said lien
or in procuring the discharge of said lien, with interest on all such amounts at
the maximum legal rate of interest then chargeable to Tenant from the date of
payment, shall be repaid by Tenant within ten (10) days after written demand
therefor, and all amounts so repayable, together with such interest, shall be
considered Additional Rent.
SECTION 6.2. Landlord, at Tenant's expense, and upon the request of Tenant,
shall join in any applications for any permits, approvals or certificates
required to be obtained by Tenant in connection with any permitted Alteration
(provided that the provisions of the applicable Requirements shall require that
Landlord join in such application) and shall otherwise cooperate with Tenant in
connection therewith; provided, however, that Landlord shall not be obligated to
incur any cost or expense or liability in connection therewith.
SECTION 6.3. Tenant shall furnish to Landlord copies of records of all
Alterations and of the cost thereof within fifteen (15) days after the
completion of such Alterations.
SECTION 6.4. Tenant shall not, at any time prior to or during the Term,
directly or indirectly, employ, or permit the employment of, any contractor,
mechanic or laborer in the Premises, whether in connection with any Alteration
or otherwise, if such employment would interfere or cause any conflict with
other contractors, mechanics or laborers engaged in the
12
construction, maintenance or operation of the Premises by Landlord, Tenant or
others, or of any other property owned by Landlord. In the event of any such
interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Premises immediately.
ARTICLE 7
REPAIRS; REPLACEMENTS; MAINTENANCE
SECTION 7.1. Tenant, at Tenant's sole cost and expense, shall take good
care of the Premises and the fixtures, equipment and appurtenances therein and
make all repairs and replacements thereto, BOTH STRUCTURAL AND NON-STRUCTURAL,
of any nature whatsoever as and when needed to preserve them in good working
order and condition, except for (a) reasonable wear and tear and (b)
obsolescence. If Tenant shall fail, after five (5) days notice (or such shorter
period as may be required because of an emergency), to proceed with due
diligence to make repairs required to be made by Tenant, the same may be made by
Landlord, at the expense of Tenant, and the expenses thereof incurred by
Landlord, with interest thereon at the Applicable Rate, shall be paid to
Landlord, as Additional Rent, within ten (10) days after rendition of a bill or
statement therefor. Tenant shall give Landlord prompt notice of any defective
condition in any Building Systems located in, servicing or passing through the
Premises.
ARTICLE 8
INTENTIONALLY OMITTED
ARTICLE 9
REQUIREMENTS OF LAW
SECTION 9.1. Tenant shall not do, and shall not permit any act or thing in
or upon the Premises which will invalidate or be in conflict with the
certificate of occupancy for the Premises or violate any Requirements. Tenant
shall, at Tenant's sole cost and expense, immediately take all action, including
but not limited to, making any required Alterations necessary to comply with all
Requirements [including, but not limited to, the Americans With Disabilities Act
of 1990 (the "ADA"), as modified and supplemented from time to time] which shall
or may impose any violation, order or duty upon Landlord or Tenant arising from,
or in connection with, the Premises, Tenant's occupancy, use or manner of use of
the Premises (including, without limitation, any occupancy, use or manner of use
that constitutes a "place of public accommodation" under the ADA), or any
installations in the Premises, or required by reason of a breach of any of
Tenant's covenants or agreements under this Lease, whether or not such
Requirements shall now be in effect or hereafter enacted or issued, and whether
or not any work required shall be ordinary or extraordinary or foreseen or
unforeseen as of the date hereof.
SECTION 9.2. (A) Tenant covenants and agrees that Tenant shall, at Tenant's
sole cost and expense, comply at all times with all Requirements governing the
use, generation, storage, treatment and/or disposal of any Hazardous Materials
(as defined below), the presence of which results from or in connection with the
act or omission of Tenant or Persons Within Tenant's Control or the breach of
this Lease by Tenant or Persons Within Tenant's Control. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other toxic or
hazardous wastes, pollutants or substances, including, without limitation,
asbestos, PCBS, petroleum products and by-products, substances defined or listed
as "hazardous substances" or "toxic substances" or similarly identified in or
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 ET SEQ., and as hazardous wastes under
13
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6010, ET SEQ., any
chemical substance or mixture regulated under the Toxic Substance Control Act of
1976, as amended, 15 U.S.C. 2601, ET SEQ., any "toxic pollutant" under the Clean
Water Act, 33 U.S.C. ss. 466 ET SEQ., as amended, any hazardous air pollutant
under the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ., hazardous materials
identified in or pursuant to the Hazardous Materials Transportation Act, 49
U.S.C. ss. 1802, ET SEQ., and any hazardous or toxic substances or pollutant
regulated under any other Requirements. Tenant agrees to execute, from time to
time, at Landlord's request, affidavits, representations and the like concerning
Tenant's best knowledge and belief regarding the presence of Hazardous Materials
in, on, under or about the Premises. Tenant shall indemnify and hold harmless
all Indemnitees from and against any loss, claim, cost, damage, liability or
expense (including attorneys' fees and disbursements) arising by reason of any
clean up, removal, remediation, detoxification action or any other activity
required or recommended of any Indemnitees by any Governmental Authority by
reason of the presence in, on, under or about the Premises of any Hazardous
Materials, as a result of or in connection with the act or omission of Tenant or
Persons Within Tenant's Control or the breach of this Lease by Tenant or Persons
Within Tenant's Control. The foregoing covenants and indemnity shall survive the
expiration or any termination of this Lease.
SECTION 9.3. If Tenant shall receive notice of any violation of, or
defaults under, any Requirements, liens or other encumbrances applicable to the
Premises, Tenant shall give immediate written notice thereof to Landlord.
SECTION 9.4. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business and if the failure to secure
such license or permit would, in any way, affect Landlord or the Premises, then
Tenant, at Tenant's expense, shall promptly procure and thereafter maintain,
submit for inspection by Landlord, and at all times comply with the terms and
conditions of, each such license or permit.
ARTICLE 10
SUBORDINATION
SECTION 10.1. This Lease shall at all times, now and hereafter, be subject
and subordinate to each and every Mortgage, whether made prior to or after the
execution of this Lease, and to all extensions, supplements, amendments,
modifications, consolidations and replacements thereof or thereto, substitutions
therefor, and advances made thereunder. This clause shall be
15
self-operative and no further agreement of subordination shall be required to
make the interest of any Mortgagee superior to the interest of Tenant hereunder.
In confirmation of such subordination, Tenant shall promptly execute and
deliver, at its own cost and expense, any document, in recordable form if
requested, that Landlord or any Mortgagee may request to evidence such
subordination; and if Tenant fails to execute, acknowledge or deliver any such
document within five (5) days after request therefor, Tenant hereby irrevocably
constitutes and appoints Landlord as Tenant's attorney-in-fact, coupled with an
interest, to execute, acknowledge and deliver any such document for and on
behalf of Tenant. Tenant shall not do anything that would constitute a default
under any Mortgage, or omit to do anything that Tenant is obligated to do under
the terms of this Lease so as to cause Landlord to be in default thereunder.
SECTION 10.2. If, at any time prior to the expiration of the Term, any
Mortgagee comes into possession of the Premises, by receiver or otherwise,
Tenant agrees, at the election and upon demand of any owner of the Premises, or
of any Mortgagee in possession of the Premises, to attorn, from time to time, to
any such owner or Mortgagee or any person acquiring the interest of Landlord as
a result of any such termination or as a result of a foreclosure of the Mortgage
or the granting of a deed in lieu of foreclosure, upon the then executory terms
and conditions of this Lease (except as provided below), for the remainder of
the Term, provided that such owner or Mortgagee, as the case may be, or receiver
caused to be appointed by any of the foregoing, is then entitled to possession
of the Premises. Any such attornment shall be made upon the condition that no
such owner or Mortgagee shall be:
(1) liable for any act or omission of any prior
landlord (including, without limitation, the then defaulting
landlord); or
(2) subject to any defense or offsets (except as expressly set
forth in this Lease) which Tenant may have against any prior landlord
(including, without limitation, the then defaulting landlord); or
(3) bound by any payment of Rental which Tenant might have paid
for more than the current month to any prior landlord (including, without
limitation, the then defaulting landlord); or
(4) bound by any obligation to make any payment to Tenant which
was required to be made prior to the time such owner or Mortgagee succeeded to
any prior landlord's interest; or
16
(5) bound by any obligation to perform any work
or to make improvements to the Premises except for (i) repairs to the Premises
or any part thereof as a result of damage by fire or other casualty pursuant to
Article 12, but only to the extent that such repairs can be reasonably made from
the net proceeds of any insurance actually made available to such owner or
Mortgagee and (ii) repairs to the Premises as a result of a partial condemnation
pursuant to Article 13, but only to the extent that such repairs can be
reasonably made from the net proceeds of any award made available to such owner
or Mortgagee. Tenant, upon demand of any such owner or Mortgagee, shall execute,
from time to time, agreements in confirmation of the foregoing provisions of
this Section 10.2, satisfactory to any such owner or Mortgagee, and
acknowledging such attornment and setting forth the terms and conditions of its
tenancy. Nothing contained in this Section 10.2 shall be construed to impair any
right otherwise exercisable by any such owner or Mortgagee.
SECTION 10.3. If requested by any Mortgagee or Landlord, Tenant shall
promptly execute and deliver, at Tenant's own cost and expense, any document in
accordance with the terms of this Article 10, in recordable form, to evidence
such subordination.
SECTION 10.4. At any time and from time to time upon not less than ten (10)
days' prior notice to Tenant or Landlord given by the other, or to Tenant given
by a Mortgagee, Tenant or Landlord, as the case may be, shall, without charge,
execute, acknowledge and deliver a statement in writing addressed to such party
as Tenant, Landlord or Mortgagee, as the case may be, may designate, in form
satisfactory to Tenant, Landlord or Mortgagee, as the case may be, certifying
all or any of the following: (i) that this Lease is unmodified and in full force
and effect (or if there have been modifications, that this Lease is in full
force and effect as modified and stating the modifications); (ii) the date that
the Term commenced and the date(s) that Fixed Rent and Additional Rent became
payable hereunder and the dates to which they have been paid; (iii) whether or
not, to the best knowledge of the signer of such certificate, Landlord is in
default in performance of any of the terms of this Lease and, if so, specifying
each such event of default of which the signer may have knowledge; (iv) whether
or not, to the best knowledge of the signer of such certificate, Tenant has
accepted possession of the Premises; (v) whether Tenant has made any claim
against Landlord under this Lease and, if so, the nature thereof and the dollar
amount, if any, of such claim; (vi) either that Tenant does not know of any
default in the performance of any provision of this Lease or specifying the
details of any default of which Tenant may have knowledge and stating what
action Tenant is taking or proposes to take with respect thereto; (vii) that, to
the best knowledge of Tenant, there are no proceedings pending or threatened
against Tenant before or by any court or administrative agency which, if
adversely decided, would
17
materially or adversely affect the financial condition or operations of Tenant
or, if any such proceedings are pending or threatened to the best knowledge of
Tenant, specifying and describing the same; and (viii) such further information
with respect to the Lease or the Premises as Landlord may reasonably request or
Mortgagee may require; it being intended that any such statement delivered
pursuant hereto may be relied upon by any prospective purchaser of the Premises
or any part thereof or of the interest of Landlord in any part thereof, by any
Mortgagee or prospective Mortgagee or by any prospective assignee of any
Mortgage or by any assignee of Tenant.
The failure of either Tenant or Landlord to execute, acknowledge and
deliver a statement in accordance with the provisions of this Section 10.4
within said ten (10) day period shall constitute an acknowledgment by Tenant or
Landlord, as the case may be, which may be relied on by any person or entity of
any nature whatsoever who would be entitled to rely upon any such statement,
that such statement as submitted by Landlord or Tenant, as the case may be, is
true and correct.
SECTION 10.5. As long as any Mortgage exists, Tenant shall not seek to
terminate this Lease by reason of any act or omission of Landlord until Tenant
has given not less than thirty (30) days prior written notice of such act or
omission to all Mortgagees, and if any such Mortgagee notifies Tenant within
thirty (30) days following receipt of such notice of its intention to remedy
such act or omission, until a reasonable period of time shall have elapsed
following the giving of such notice, during which period such Mortgagee shall
have the right, but not the obligation, to remedy such act or omission.
ARTICLE 11
INSURANCE; PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
SECTION 11.1.
(A) Neither Landlord nor Landlord's agents shall be liable for
any injury or damage to persons or property, or interruption of Tenant's
business, resulting from fire or other casualty; nor shall Landlord or
Landlord's agents be liable for any such damage caused by Persons other than the
Landlord or the Landlord's agents or by construction of any private, public or
quasi-public work; nor shall Landlord be liable for any latent defect in the
Premises.
(B) Tenant shall give written notice to Landlord, immediately after
Tenant learns thereof, of any accident, emergency, occurrence for which Landlord
might be liable, fire or
18
other casualty and all damages to or defects in the Premises for the repair of
which Landlord might be responsible or which constitutes Landlord's property.
Such notice shall be given by telecopy or personal delivery to the address(es)
of Landlord in effect for notice.
SECTION 11.2. Tenant shall not do or permit to be done any act or thing in
or upon the Premises which will invalidate or be in conflict with the terms of
the State of Pennsylvania standard form of fire insurance with extended
coverage, or with rental, liability, boiler, sprinkler, water damage, war risk
or other insurance policies covering the Premises and the fixtures and property
therein (hereinafter referred to as "BUILDING INSURANCE"); and Tenant, at
Tenant's own expense, shall comply with all rules, orders, regulations and
requirements of all insurance boards, and shall not do or permit anything to be
done in or upon the Premises or bring or keep anything therein or use the
Premises in a manner which increases the rate of premium for any of the Building
Insurance or any property or equipment located therein over the rate in effect
at the commencement of the Term of this Lease.
SECTION 11.3.
(A) If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the rate of premium for Building Insurance or other
insurance on the property and equipment of Landlord shall be higher than it
otherwise would be, Tenant shall reimburse Landlord for that part of the
insurance premiums thereafter paid by Landlord which shall have been charged
because of such failure by Tenant. Tenant shall make said reimbursement on the
first day of the month following such payment by Landlord.
(B) In any action or proceeding wherein Landlord and Tenant are
parties, a schedule of any insurance rate for the Premises issued by any
insurance board establishing insurance premium rates for the Premises shall be
prima facie evidence of the facts therein stated and of the several items and
charges in the insurance premium rates then applicable to the Premises.
SECTION 11.4.
(A) Tenant shall, at Tenant's own cost and expense, obtain, maintain
and keep in full force and effect during the Term, for the benefit of Landlord,
any Mortgagees and Tenant, commercial general liability insurance (including
premises operation, bodily injury, personal injury, death, independent
contractors, products and completed operations, broad form contractual liability
and broad form property damage coverages) in a combined single limit amount of
not less than Five Million and 00/100 ($5,000,000.00) Dollars, against all
claims, demands
19
or actions with respect to damage, injury or death made by or on behalf of any
person or entity, arising from or relating to the conduct and operation of
Tenant's business in, on or about the Premises (which shall include Tenant's
signs, if any), or arising from or related to any act or omission of Tenant or
of Persons Within Tenant's Control. If Tenant shall install or maintain one or
more pressure vessels to serve Tenant's operations at the Premises, Tenant
shall, at Tenant's own cost and expense, obtain, maintain and keep in full force
and effect, for the benefit of Landlord, any Mortgagees and Tenant, appropriate
boiler or other insurance coverage therefor in an amount not less than Three
Million and 00/100 ($3,000,000.00) Dollars (it being understood and agreed,
however, that the foregoing shall not be deemed a consent by Landlord to the
installation and/or maintenance of any such pressure vessels in the Premises,
which installation and/or maintenance shall at all times be subject to the prior
written consent of Landlord). Whenever, in Landlord's reasonable judgment, good
business practice and changing conditions indicate a need for additional amounts
or different types of insurance coverage, Tenant shall, within ten (10) days
after Landlord's request, obtain such insurance coverage, at Tenant's expense.
(B) Tenant, at Tenant's sole cost and expense, shall maintain
insurance protecting and indemnifying Tenant against any and all damage to or
loss of any Alterations and leasehold improvements, including any made by
Landlord to prepare the Premises for Tenant's occupancy, and Tenant's Property,
and all claims and liabilities relating thereto.
(C) Landlord and any Mortgagees shall be named as insureds in said
policies and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be: (i) written
as "occurrence" policies; (ii) written as primary policy coverage and not
contributing with or in excess of any coverage which Landlord may carry; and
(iii) issued by reputable and independent insurance companies rated in Best's
Insurance Guide, or any successor thereto (or if there be none, an organization
having a national reputation) as having a general policyholder rating of "A+"
and a financial rating of at least "13", and which are licensed to do business
in the State of Pennsylvania. Tenant shall, not later than ten (10) Business
Days prior to the Commencement Date, deliver to Landlord the policies of
insurance or certificates thereof, together with evidence of payment of premiums
thereon, and shall thereafter furnish to Landlord, at least thirty (30) days
prior to the expiration of any such policies and any renewal thereof, a new
policy or certificate in lieu thereof, with evidence of the payment of premiums
thereon. Each of said policies shall also contain a provision whereby the
insurer agrees not to cancel, fail to renew, diminish or materially
20
modify said insurance policy(ies) without having given Landlord and any
Mortgagees at least thirty (30) days prior written notice thereof.
(D) Tenant shall pay all premiums and charges for all of said
policies, and, if Tenant shall fail to make any payment when due or carry any
such policy, Landlord may, but shall not be obligated to, make such payment or
carry such policy, and the amount paid by Landlord, with interest thereon (at
the Applicable Rate), shall be repaid to Landlord by Tenant on demand, and all
such amounts so repayable, together with such interest, shall be deemed to
constitute Additional Rent hereunder. Payment by Landlord of any such premium,
or the carrying by Landlord of any such policy, shall not be deemed to waive or
release the default of Tenant with respect thereto.
SECTION 11.5.
(A) Tenant shall cause each insurance policy carried by Tenant and
insuring the Premises and Tenant's Alterations, leasehold improvements, space
equipment, furnishings, furniture, contents and fixtures against loss, damage or
destruction by fire or other casualty, to be written in a manner so as to
provide that the insurance company waives all rights of recovery by way of
subrogation against Landlord or Tenant in connection with any loss or damage
covered by any such policy. If the release of either Landlord or Tenant shall
contravene any law with respect to exculpatory agreements, the liability of the
party in question shall be deemed not released, but no action or rights shall be
sought or enforced against such party unless and until all rights and remedies
against the insurer are exhausted and such party shall be unable to collect such
insurance proceeds.
(B) The waiver of subrogation referred to in Section 11.5(A) above
shall extend to the agents and employees of each party, but only if and to the
extent that such waiver can be obtained without additional charge (unless such
party shall pay such charge). Nothing contained in this Section 11.5 shall be
deemed to relieve the Tenant from any duty imposed elsewhere in this Lease to
repair, restore and rebuild the Premises, in whole or in part.
ARTICLE 12
DESTRUCTION BY FIRE OR OTHER CAUSE
SECTION 12.1. If the Premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate written notice thereof to
Landlord. Landlord shall, subject to the provisions of Sections 12.2 and 12.3
below, proceed with
21
reasonable diligence, after receipt of the net proceeds of insurance, to repair
or cause to be repaired such damage at its expense, but in no event shall such
repair or restoration be greater in scope than the quantity or quality of
construction of the Premises as of the Commencement Date; and, if the Premises,
or any part thereof, shall be rendered untenantable by reason of such damage and
such damage shall not be due to the fault of Tenant or Persons Within Tenant's
Control, then the Fixed Rent hereunder, or an amount thereof apportioned
according to the area of the Premises so rendered untenantable (if less than the
entire Premises shall be so rendered untenantable), shall be abated for the
period from the date of such damage to the date when the repair of such damage
shall have been substantially completed. If Landlord or any Mortgagee shall be
unable to collect the insurance proceeds (including rent insurance proceeds)
applicable to such damage because of some action or inaction on the part of
Tenant or Persons Within Tenant's Control, then the cost of repairing such
damage shall be paid by Tenant and there shall be no abatement of Fixed Rent.
Tenant covenants and agrees to cooperate with Landlord and any Mortgagee in
their efforts to collect insurance proceeds (including rent insurance proceeds)
payable to such parties. Landlord shall not be liable for any delay which may
arise by reason of adjustment of insurance on the part of Landlord and/or
Tenant, or any cause beyond the control of Landlord or contractors employed by
Landlord.
It is expressly understood that if Landlord is prevented from substantially
completing the repairs by reason of any acts of Tenant or Persons Within
Tenant's Control, including, without limitation, by reason of the performance of
any Alterations, or by reason of Tenant's failure or refusal to comply or to
cause its architects, engineers, designers and contractors to comply with any of
Tenant's obligations described or referred to in this Lease, then such work
shall be deemed substantially completed on the date when the work would have
been substantially completed but for such delay, and the expiration of the
abatement of Tenant's obligations to pay Fixed Rent shall not be postponed by
reason of such delay. Any additional costs to Landlord to complete any work
occasioned by such delay shall be paid by Tenant to Landlord, as Additional
Rent, within ten (10) days after demand therefor by Landlord.
SECTION 12.2. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from damage from fire or other casualty or the repair thereof. Tenant
understands that Landlord, in reliance upon Section 11.4 hereof, will not carry
insurance of any kind on Tenant's furnishings, furniture, contents, fixtures,
space equipment and leasehold improvements, and that Landlord shall not be
obligated to repair any damage thereto or replace the same.
22
SECTION 12.3. (A) Notwithstanding anything to the contrary contained in
Sections 12.1 and 12.2 above, in the event that:
(I) at least fifty (50%) percent of the rentable
square feet of the Premises shall be damaged by a fire or other casualty so that
substantial alteration or reconstruction of the Premises shall, in Landlord's
sole opinion, be required (whether or not the Premises shall have been damaged
by such fire or other casualty and without regard to the structural integrity of
the Premises); or
(II) the Premises shall be totally or
substantially damaged or shall be rendered wholly or
substantially untenantable; or
(III) there shall be any damage to the Premises within the last
two (2) years of the Term wherein the cost of repair exceeds an amount equal to
three (3) monthly installments of Fixed Rent, then, as a result of any
circumstances described in subparagraphs (i), (ii) or (iii) hereof, the Landlord
may, in Landlord's sole and absolute discretion, terminate this Lease and the
term and estate hereby granted, by notifying Tenant in writing of such
termination within one hundred twenty (120) days after the date of such damage.
In the event that such a notice of termination shall be given, then this Lease
and the term and estate hereby granted shall expire as of the date of
termination stated in said notice with the same effect as if that were the Fixed
Expiration Date, and the Fixed Rent and Additional Rent hereunder shall be
apportioned as of such date.
SECTION 12.4. Except as may be provided in Section 11.5, nothing herein
contained shall relieve Tenant from any liability to Landlord or to Landlord's
insurers in connection with any damage to the Premises by fire or other casualty
if Tenant shall be legally liable in such respect.
ARTICLE 13
EMINENT DOMAIN
SECTION 13.1. If the whole of the Premises is acquired or condemned for any
public or quasi-public use or purpose, this Lease and the Term shall end as of
the date of the vesting of title with the same effect as if said date were the
Fixed Expiration Date. If only a part of the Premises is so acquired or
condemned then, (1) except as hereinafter provided in this Section 13.1, this
Lease and the Term shall continue in effect but, if a part of the Premises is so
acquired or condemned, from and after the date of the vesting of title, the
Fixed Rent and Additional Rent, if any, shall be reduced in the proportion which
23
the area of the part of the Premises so acquired or condemned bears to the total
area of the Premises immediately prior to such acquisition or condemnation; (2)
whether or not the Premises are affected thereby, Landlord, at Landlord's
option, may give to Tenant, within sixty (60) days next following the date upon
which Landlord receives notice of vesting of title, a thirty (30) day notice of
termination of this Lease; and (3) if the part of the Premises so acquired or
condemned contains more than seventy-five (75%) percent of the total area of the
Premises immediately prior to such acquisition or condemnation, or if, by reason
of such acquisition or condemnation, Tenant no longer has access to the
Premises, Tenant, at Tenant's option, may give to Landlord, within thirty (30)
days next following the date upon which Tenant receives notice of vesting of
title, a thirty (30) day notice of termination of this Lease. If any such thirty
(30) day notice of termination is given, by Landlord or Tenant, this Lease and
the Term shall come to an end and expire upon the expiration of said thirty (30)
days with the same effect as if the date of expiration of said thirty (30) days
were the Fixed Expiration Date. In the event of any termination of this Lease
and the Term pursuant to the provisions of this Section 13.1, the Fixed Rent or
Additional Rent shall be apportioned as of the date of sooner termination and
any prepaid portion of the Fixed Rent for any period after such date shall be
refunded by Landlord to Tenant.
SECTION 13.2. In the event of any such acquisition or condemnation of all
or any part of the Premises, Landlord shall be entitled to receive the entire
award for any such acquisition or condemnation. Tenant shall have no claim
against Landlord or the condemning authority for the value of any unexpired
portion of the Term and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this Section 13.2 shall be
deemed to prevent Tenant from making a separate claim in any condemnation
proceedings for the value of any Tenant's Property included in such taking, and
for any moving expenses, so long as Landlord's award is not reduced thereby.
ARTICLE 14
ASSIGNMENT; SUBLETTING; MORTGAGE; ETC.
SECTION 14.1. (A) The Tenant shall not (a) assign this Lease (whether by
operation of law, transfers of interests in Tenant or otherwise); or (b)
mortgage or encumber Tenant's interest in this Lease, in whole or in part; or
(c) sublet, or permit the subletting of, the Premises or any part thereof.
Notwithstanding the provisions of this Section 14.1, the use of the Premises by
any Person AFFILIATED (as such term is hereinafter defined) with the Tenant or
under the COMMON CONTROL
24
(as such term is hereinafter defined) of Coach USA, Inc., as the case may be,
shall not be deemed an assignment of this Lease or a sublet of the Premises;
PROVIDED, HOWEVER, that such use of the Premises as aforesaid shall not violate
or be prohibited by any of the provisions of any Mortgage then encumbering the
Premises, if any. For purposes of this Article 14, a Person shall be deemed to
be an "AFFILIATE" of the Tenant or under the "COMMON CONTROL" of Coach USA if
such Person is a member of a "parent-subsidiary controlled group" [as such term
is defined by Section 1563(a)(1) of the Internal Revenue Code of 1986, as
amended] or a member of a "brother-sister controlled group" [as such term is
defined by Section 1563(a)(2) of the Internal Revenue Code of 1986, as amended]
of which either Coach USA, Inc. or the Tenant, as the case may be, is a member.
(B) Notwithstanding the provisions otherwise set forth in this
Article 14, any reorganization, consolidation and/or restructuring of the Tenant
in which the issued and outstanding stock of the Tenant remains under the COMMON
CONTROL (as such term is defined in Section 14.1 hereinabove) of Coach USA, Inc.
shall not be deemed an assignment of this Lease or a sublet of the Premises;
PROVIDED, HOWEVER, that the same shall not violate or be prohibited by any of
the provisions of any Mortgage then encumbering the Premises, if any.
SECTION 14.2. If Tenant's interest in this Lease shall be assigned in
violation of the provisions of this Article 14, such assignment shall be invalid
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy. If the Premises or any
part thereof are sublet to, or occupied by, or used by, any person other than
Tenant, whether or not in violation of this Article 14, Landlord, after default
by Tenant under this Lease, may collect any item of Rental or other sums paid by
the subtenant, user or occupant as a fee for its use and occupancy, and shall
apply the net amount collected to the Fixed Rent and the items of Rental
reserved in this Lease. No such assignment, subletting, occupancy, or use, nor
any such collection or application of Rental or fee for use and occupancy, shall
be deemed a waiver by Landlord of any term, covenant or condition of this Lease
or the acceptance by Landlord of such assignee, subtenant, occupant or user as
Tenant hereunder, nor shall the same, in any circumstances, relieve Tenant of
any of its obligations under this Lease.
SECTION 14.3.
Except as otherwise set forth in Section 14.1 hereof, for purposes of
this Article 14, (i) any increase in the amount of issued and/or outstanding
capital stock of any corporate tenant and/or the creation of one or more
additional classes of
25
capital stock of any corporate tenant, in a single transaction or a series of
related or unrelated transactions, resulting in a change in the legal or
beneficial ownership of such tenant so that the shareholders of such tenant
existing immediately prior to such transaction or series of transactions shall
no longer own a majority of the issued and outstanding capital stock of such
tenant shall be deemed an assignment of this Lease and (ii) any Person or legal
representative of Tenant, to whom Tenant's interest under this Lease passes by
operation of law, or otherwise, shall be bound by the provisions of this Article
14. Tenant agrees to furnish to Landlord on request at any time such information
and assurances as Landlord may reasonably request that Tenant has not violated
the provisions of this Article 14.
ARTICLE 15
ACCESS TO PREMISES
SECTION 15.1. Tenant shall permit Landlord, Landlord's agents and any
public utilities servicing the Premises to erect, use and maintain, now and
hereafter, concealed ducts, pipes and conduits in and through the Premises.
Landlord or Landlord's agents shall have the right to enter the Premises at all
reasonable times upon (except in case of emergency) reasonable prior notice,
which notice may be oral, to examine the same, to show the same to prospective
purchasers or Mortgagees and to make such repairs, alterations, improvements or
additions (i) as Landlord may deem necessary or desirable to the Premises, or
(ii) which Landlord may elect to perform at least ten (10) days after notice
(except in an emergency when no notice shall be required) following Tenant's
failure to make repairs or perform any work which Tenant is obligated to make or
perform under this Lease, or (iii) for the purpose of complying with
Requirements, and Landlord shall be allowed to take all material into and upon
the Premises that may be required therefor without the same constituting an
eviction or constructive eviction of Tenant in whole or in part and the Fixed
Rent (and any other item of Rental) shall in no respect abate or be reduced by
reason of said repairs, alterations, improvements or additions, wherever
located, or while the same are being made, by reason of loss or interruption of
business of Tenant, or otherwise. Landlord shall promptly repair any damage
caused to the Premises by such work, alterations, improvements or additions.
SECTION 15.2. If Tenant is not present when for any reason entry into the
Premises may be necessary or permissible, Landlord or Landlord's agents may
enter the same without rendering Landlord or such agents liable therefor.
26
SECTION 15.3. Landlord also shall have the right at any time, without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, stairs, toilets or other
parts of the Premises, provided any such change does not unreasonably interfere
with, or deprive Tenant of access to, the Premises; to put so-called "solar
film" or other energy-saving installations on the inside and outside of the
windows; and to change the name, number or designation by which the Premises is
commonly known.
ARTICLE 16
CERTIFICATE OF OCCUPANCY
SECTION 16.1. Tenant shall not at any time, now or hereafter, use or occupy
the Premises, directly or indirectly, in violation of the certificate of
occupancy for the Premises and in the event that any Governmental Authority
hereafter contends or declares by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose that is a violation
of such certificate of occupancy, Tenant shall, upon three (3) Business Days'
written notice from Landlord or any Government Authority, immediately
discontinue such use of the Premises.
ARTICLE 17
DEFAULT
SECTION 17.1. Each of the following events shall be an "EVENT OF DEFAULT"
under this Lease:
(A) if Tenant shall on any occasion default in the payment when due of
any installment of Fixed Rent or Additional Rent or in the payment when due of
any other item of Rental and such default shall continue for five (5) business
days from and after the date when the same shall be due; or
(B) if the Premises shall become vacant or abandoned;
or
(C) if Tenant's interest in this Lease shall devolve upon or pass to
any person, whether by operation of law or otherwise, except as specifically
permitted by the provisions of Article 14 hereof; or
27
(D) (1) if Tenant shall not, or shall be unable to, or shall admit in
writing Tenant's inability to, as to any obligation, pay Tenant's debts as they
become due; or
(2) if Tenant shall commence or institute any case, proceeding or
other action (a) seeking relief on Tenant's behalf as debtor, or to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to Tenant or Tenant's debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (b) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property; or
(3) if Tenant shall make a general assignment
for the benefit of creditors; or
(4) if any case, proceeding or other action shall be commenced or
instituted against Tenant (a) seeking to have an order for relief entered
against Tenant as debtor or to adjudicate Tenant a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to Tenant or Tenant's
debts under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, or (b)
seeking appointment of a receiver, trustee, custodian or other similar official
for Tenant or for all or any substantial part of Tenant's property, which either
(i) results in any such entry of an order for relief, adjudication of bankruptcy
or insolvency or such an appointment or the issuance or entry of any other order
having a similar effect or (ii) remains undismissed for a period of sixty (60)
days; or
(5) if a trustee, receiver or other custodian shall be appointed
for any substantial part of the assets of Tenant which appointment is not
vacated or effectively stayed within thirty (30) days; or
(E) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be observed
or performed including, without limitation, the terms and conditions of Article
27 hereof, and Tenant shall fail to remedy such default within ten (10) days
after written notice by Landlord to Tenant of such default, or if such default
is of such a nature that it cannot with due diligence be completely remedied
within said period of ten (10) days and the continuation of which for the period
required for cure will not subject Landlord to the risk of criminal liability or
foreclosure of any Mortgage, if Tenant
28
shall not, (i) within said ten (10) day period advise Landlord of Tenant's
intention duly to institute all steps necessary to remedy such situation, (ii)
duly institute within said ten (10) day period, and thereafter diligently and
continuously prosecutes to completion all steps necessary to remedy the same and
(iii) completes such remedy within such time after the date of the giving of
said notice by Landlord as shall reasonably be necessary.
SECTION 17.2. If an Event of Default shall occur, Landlord may, at any time
thereafter, at Landlord's option, give written notice to Tenant stating that
this Lease and the Term shall expire and terminate on the date specified in such
notice, which date shall not be less than three (3) days after the giving of
such notice, whereupon this Lease and the Term and all rights of Tenant under
this Lease shall automatically expire and terminate as if the date specified in
the notice given pursuant to this Section 17.2 were the Fixed Expiration Date
and Tenant immediately shall quit and surrender the Premises, but Tenant shall
remain liable for damages as provided herein or pursuant to law. Anything
contained herein to the contrary notwithstanding, if such termination shall be
stayed by order of any court having jurisdiction over any proceeding described
in Section 17.1(D), or by federal or state statute, then, following the
expiration of any such stay, or if the trustee appointed in any such proceeding,
Tenant or Tenant as debtor-in-possession fails to assume Tenant's obligations
under this Lease within the period prescribed therefor by law or within one
hundred twenty (120) days after entry of the order for relief or as may be
allowed by the court, or if said trustee, Tenant or Tenant as
debtor-in-possession shall fail to provide adequate protection of Landlord's
right, title and interest in and to the Premises or adequate assurance of the
complete and continuous future performance of Tenant's obligations under this
Lease, Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on three (3) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon the expiration of said three (3)
day period this Lease shall cease and expire as aforesaid and Tenant, Tenant as
debtor-in-possession or said trustee shall immediately quit and surrender the
Premises as aforesaid.
SECTION 17.3. If, at any time, (i) Tenant shall consist of two (2) or more
Persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (iii) Tenant's interest in this
Lease has been assigned, the word "Tenant" as used and referred to in this
Lease, shall be deemed to mean any one or more of the persons primarily or
secondarily liable for Tenant's obligations under this Lease. Any monies
received by Landlord from or on behalf of Tenant during the pendency of any
proceeding of the types referred to in
29
Section 17.1(D) hereof shall be deemed paid as compensation for the use and
occupancy of the Premises and the acceptance of any such compensation by
Landlord shall not be deemed an acceptance of Rental or a waiver on the part of
Landlord of any rights under Section 17.2 hereof.
ARTICLE 18
REMEDIES AND DAMAGES
SECTION 18.1.
(A) If any Event of Default shall occur, or this Lease and the Term
shall expire and come to an end as provided in Article 17 hereof:
(1) Tenant shall quit and peacefully surrender the Premises to
Landlord, and Landlord and its agents may immediately, or at any time after such
Event of Default or after the date upon which this Lease and the Term shall
expire and come to an end, re-enter the Premises or any part thereof, without
notice, either by summary proceedings, or by any other applicable action or
proceeding or otherwise (without being liable to indictment, prosecution or
damages therefor), and may repossess the Premises and dispossess Tenant and any
other persons from the Premises by summary proceedings or otherwise and remove
any and all of their property and effects from the Premises (and Tenant shall
remain liable for damages as provided herein or pursuant to law); and
(2) Landlord, at Landlord's option, may relet the whole or any
part or parts of the Premises from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Fixed Expiration Date, at such rent or rentals and upon such
other conditions, which may include concessions and free rent periods, as
Landlord, in Landlord's sole discretion, may determine; provided, however, that
Landlord shall have no obligation to relet the Premises or any part thereof and
shall in no event be liable for refusal or failure to relet the Premises or any
part thereof, or, in the event of any such reletting, for refusal or failure to
collect any rent due upon any such reletting, and no such refusal or failure
shall operate to relieve Tenant of any liability under this Lease or otherwise
affect any such liability, and Landlord, at Landlord's option, may make such
Alterations, in and to the Premises as Landlord, in Landlord's sole discretion,
shall consider advisable or necessary in connection with any such reletting or
proposed reletting, without relieving Tenant of any liability under this Lease
or otherwise affecting any such liability.
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(B) Tenant hereby waives the service of any notice of intention to
re-enter or to institute legal proceedings to that end that may otherwise be
required to be given under any present or future law. Tenant, on its own behalf
and on behalf of all persons claiming through or under Tenant, including all
creditors of Tenant, does further hereby waive any and all rights that Tenant
and all such persons might otherwise have under any present or future law to
redeem the Premises, or to re-enter or repossess the Premises, or to restore the
operation of this Lease, after (a) Tenant shall have been dispossessed by a
judgment or by warrant of any court, or (b) any re-entry by Landlord, or (c) any
expiration or termination of this Lease and the Term, whether such dispossess,
re-entry, expiration or termination is by operation of law or pursuant to the
provisions of this Lease. The words "re-entry", "re-enter" and "re-entered" as
used in this Lease shall not be deemed to be restricted to their technical legal
meanings. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any term, covenant or condition of
this Lease, Landlord shall have the right to enjoin such breach and the right to
invoke any other remedy allowed by law or in equity as if re-entry, summary
proceedings and other special remedies were not provided in this Lease for such
breach. The right to invoke the remedies hereinbefore set forth are cumulative
and shall not preclude Landlord from invoking any other remedy allowed at law or
in equity.
SECTION 18.2.
(A) If this Lease and the Term shall expire and come to an end as
provided in Article 17 hereof, or by or under any summary proceeding or any
other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 18.1 hereof, or by or under any summary proceeding or any
other action or proceeding, then, in any of said events:
(1) Tenant shall pay to Landlord all Fixed Rent, Additional Rent
and other items of Rental payable under this Lease by Tenant to Landlord to the
date upon which this Lease and the Term shall have expired and come to an end or
to the date of re-entry upon the Premises by Landlord, as the case may be;
(2) Tenant also shall be liable for and shall pay to Landlord, as
damages, any deficiency ("DEFICIENCY") between the Rental for the period which
otherwise would have constituted the unexpired portion of the Term and the net
amount, if any, of rents collected under any reletting effected pursuant to the
provisions of Section 18.1(A)(2) for any part of such period (after first
deducting from the rents collected under any such reletting all of Landlord's
expenses in connection with the termination of this Lease, Landlord's re-entry
upon the Premises and such reletting including, but not limited to, all
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repossession costs, brokerage commissions, attorneys' fees and disbursements,
alteration costs and other expenses of preparing the Premises for such
reletting); any such Deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for payment of installments of Fixed Rent;
Landlord shall be entitled to recover from Tenant each monthly Deficiency as the
same shall arise, and no suit to collect the amount of the Deficiency for any
month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any Deficiency
as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant
shall pay to Landlord, on demand, in lieu of any further Deficiency as and for
liquidated and agreed final damages, a sum equal to the amount by which the
unpaid Rental for the period which otherwise would have constituted the
unexpired portion of the Term exceeds the then fair and reasonable rental value
of the Premises for the same period; if, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the Premises, or any
part thereof, are relet by Landlord for the period which otherwise would have
constituted the unexpired portion of the Term, or any part thereof, the amount
of rent reserved upon such reletting shall be deemed, prima facie, to be the
fair and reasonable rental value for the part or the whole of the Premises so
relet during the term of the reletting.
(B) Tenant shall in no event be entitled to any rents collected or
payable under any reletting, whether or not such rents exceed the Fixed Rent
reserved in this Lease. Nothing contained in Article 17 hereof or this Article
18 shall be deemed to limit or preclude the recovery by Landlord from Tenant of
the maximum amount allowed to be obtained as damages by any statute or rule of
law, or of any sums or damages to which Landlord may be entitled in addition to
the damages set forth in this Section 18.2.
ARTICLE 19
FEES AND EXPENSES
SECTION 19.1. If an Event of Default shall have occurred, Landlord may (1)
perform the same for the account of Tenant, or (2) make any expenditure or incur
any obligation for the payment of money in connection with any obligation owed
to Landlord, including, but not limited to, reasonable attorneys' fees and
disbursements in instituting, prosecuting or defending any action or proceeding,
and in either case the cost thereof, with interest thereon at the Applicable
Rate, shall be deemed to be Additional
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Rent hereunder and shall be paid by Tenant to Landlord within ten (10) days
after rendition of any bill or statement to Tenant therefor. In addition, Tenant
shall pay Landlord any reasonable attorneys' fees and disbursements incurred by
Landlord in connection with any proceeding in which the value for the use and
occupancy of the Premises by Tenant is being determined (whether or not any such
proceeding results from a default by Tenant under this Lease).
SECTION 19.2. If Tenant shall fail to pay any installment of Fixed Rent,
Additional Rent or any other item of Rental for a period longer than five (5)
days after the same shall have become due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent, Additional Rent or other item of
Rental, as the case may be, as a late charge and as Additional Rent, a sum equal
to interest at the Applicable Rate on the amount unpaid, computed from the date
such payment was due, without regard to any such grace period, to and including
the date of payment.
ARTICLE 20
NO REPRESENTATIONS BY LANDLORD
SECTION 20.1. Landlord and Landlord's agents have made no representations
or promises with respect to the Premises except as herein expressly set forth,
and no rights, easements or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth herein. Tenant shall accept possession
of the Premises in its "as is" condition on the Commencement Date, and Landlord
shall have no obligation to perform any work or make any installations in order
to prepare the Premises for Tenant's occupancy. The taking of occupancy of the
whole or any part of the Premises by Tenant shall be conclusive evidence, as
against Tenant, that Tenant accepts possession of the same and that the Premises
were in good and satisfactory condition at the time such occupancy was so taken.
All references in this Lease to the consent or approval of Landlord shall be
deemed to mean the written consent or approval executed by Landlord and no other
consent or approval of Landlord shall be effective for any purpose whatsoever.
ARTICLE 21
END OF TERM
SECTION 21.1. Upon the expiration or other termination of this Lease,
Tenant shall quit and surrender to Landlord the Premises, vacant, broom clean,
in good order and condition,
33
ordinary wear and tear excepted, and Tenant shall remove all of Tenant's
Alterations as may be required pursuant to Article 6. Tenant shall also remove
all of Tenant's Property and all other personal property and personal effects of
all persons claiming through or under Tenant, and shall pay the cost of
repairing all damage to the Premises occasioned by such removal. Any Tenant's
Property or other personal property that remains in, on or at the Premises after
the termination of this Lease shall be deemed to have been abandoned and either
may be retained by Landlord as its property or may be disposed of in such manner
as Landlord may see fit. If Tenant's Property or other personal property or any
part thereof is sold, Landlord may receive and retain the proceeds of such sale
as the property of Landlord. Any expense incurred by Landlord in removing or
disposing of Tenant's Property or other personal property or Alterations
required to be removed as provided in Article 6, as well as the cost of
repairing all damage to the Premises caused by such removal, shall be reimbursed
to Landlord by Tenant, as Additional Rent, on demand.
SECTION 21.2. If the Expiration Date falls on a day which is not a Business
Day, then Tenant's obligations under Section 21.1 shall be performed on or prior
to such Business Day.
SECTION 21.3. If the Premises are not surrendered upon the expiration or
other termination of this Lease, Tenant hereby indemnifies Landlord against
liability resulting from delay by Tenant in so surrendering the Premises,
including any claims made by any succeeding tenant or prospective tenant founded
upon such delay and agrees to be liable to Landlord for (i) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the Premises in order to induce such tenant not
to terminate its lease by reason of the holding-over by Tenant and (ii) the loss
of the benefit of the bargain if any such tenant shall terminate its lease by
reason of the holding-over by Tenant.
SECTION 21.4. Tenant's obligations under this Article 21 shall survive the
expiration or termination of this Lease.
ARTICLE 22
POSSESSION
SECTION 22.1. If Landlord shall be unable to deliver possession of the
Premises on the Commencement Date for any reason whatsoever, Landlord shall not
be subject to any liability therefor and the validity of this Lease shall not be
impaired thereby nor the Expiration Date extended, but the Commencement Date
shall be postponed until five (5) Business Days following
34
notice from Landlord that the Premises are available for occupancy by Tenant.
Tenant expressly waives any right to rescind this Lease under any present or
future statute and further expressly waives the right to recover any damages
that may result from Landlord's failure to deliver possession of the Premises on
the Commencement Date.
ARTICLE 23
NO WAIVER
SECTION 23.1. No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys to the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises.
SECTION 23.2. The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease shall not prevent a subsequent act, which would have originally
constituted a violation, from having all of the force and effect of an original
violation. The receipt by Landlord of Fixed Rent, Additional Rent or any other
item of Rental with knowledge of the breach of any covenant of this Lease shall
not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord, unless such waiver shall be in writing
and shall be signed by Landlord. No payment by Tenant or receipt by Landlord of
a lesser amount than the Rental then due and payable shall be deemed to be other
than on account of the earliest item(s) of Rental, or as Landlord may elect to
apply the same, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance due of the Rental or to otherwise pursue any other
remedy in this Lease provided. This Lease contains the entire agreement between
the parties and all prior negotiations and agreements are merged herein. Any
executory agreement hereafter made shall be ineffective to change, discharge or
effect an abandonment of this Lease in whole or in part unless such executory
agreement is in writing and signed by the party against whom enforcement of the
change, discharge or abandonment is sought.
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ARTICLE 24
WAIVER OF TRIAL BY JURY
SECTION 24.1. Tenant hereby waives trial by jury in any action or
proceeding brought by or against the Tenant with respect to any matters
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
whether during or after the Term, or for the enforcement of any remedy under any
statute, emergency or otherwise. If Landlord shall commence any summary
proceeding against Tenant, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding, and will not seek to
consolidate such proceeding with any other action which may have been or will be
brought in any other court by Tenant or Landlord.
ARTICLE 25
INABILITY TO PERFORM
SECTION 25.1. This Lease and the obligation of Tenant to pay Rental
hereunder and to perform all of the other covenants and agreements hereunder on
the part of Tenant to be performed shall in no way be affected, impaired or
excused because Landlord is unable to fulfill any of Landlord's obligations
under this Lease, expressly or implicitly to be performed by Landlord, or
because Landlord is unable to make or is delayed in making any repairs, or is
unable to supply or is delayed in supplying any services, if Landlord is
prevented from or delayed in so doing by reason of acts of God, casualty,
strikes or labor troubles, accident, governmental preemption in connection with
an emergency, Requirements, conditions of supply and demand which have been or
are affected by war or other emergency, or any other cause whatsoever, whether
similar or dissimilar to the foregoing, beyond Landlord's reasonable control
("UNAVOIDABLE DELAYS").
ARTICLE 26
NOTICES
SECTION 26.1.
(A) Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease ("NOTICE(S)") shall be in writing and
shall be deemed sufficiently given or rendered if delivered by hand
36
(against a signed receipt) or if deposited with a nationally recognized
overnight courier and in either case addressed:
IF TO TENANT:
(a) at Tenant's address first set forth in this Lease or (b)
at any place where Tenant or any agent or employee of Tenant
may be found if given subsequent to Tenant's vacating,
deserting, abandoning or surrendering the Premises, and
IF TO LANDLORD:
at Landlord's address first set forth in this
Lease, Attn: Mr. Gerald Mercadante, with a
copy to Todtman, Young, Tunick, Nachamie,
Hendler & Spizz, P.C., 425 Park Avenue, New
York, New York 10022 Attention: Martin
Todtman, Esq. and (y) any Mortgagee who may
have requested the same, by Notice given in
accordance with the provisions of this
Article 26, at the address designated by such
Mortgagee,
or to such other address(es) as either Landlord or Tenant may
designate as its new address(es) for such purpose by notice
given to the other in accordance with the provisions of this
Article 26.
(B) Notices shall be deemed to have been rendered or given (a) on the
date delivered, if delivered by hand, or (b) on the day after being deposited
with a nationally recognized overnight courier as provided in Section 26.1(A)
hereof.
ARTICLE 27
LANDLORD'S RIGHT TO TERMINATE
SECTION 27.1 Notwithstanding anything contained herein to the contrary,
the Landlord shall have the sole and exclusive option to terminate this Lease
upon ninety (90) days prior written notice ("TERMINATION NOTICE PERIOD") to the
Tenant in the event that the Landlord shall have received an offer to purchase
the Premises, or any part thereof. Time shall be of the essence with respect to
the Tenant's obligation to vacate the Premises in accordance with the provisions
of Article 21 hereof on or before the expiration of the Termination Notice
Period. In the event that the Tenant shall fail to vacate the Premises as
aforesaid,
37
then in such event, the Landlord shall be entitled to avail itself of any and
all rights and remedies against the Tenant, whether at law, equity or under and
pursuant to the terms and conditions of this Lease including, without
limitation, any rights and/or remedies which may be available to the Landlord in
accordance with the provisions of Article 18 hereof.
ARTICLE 28
BROKER
SECTION 28.1. Landlord represents and warrants to Tenant that Landlord has
not dealt with any broker or Person in connection with this Lease. Tenant
represents and warrants to Landlord that Tenant has not dealt with any broker or
Person in connection with this Lease. The execution and delivery of this Lease
by Tenant shall be conclusive evidence that Tenant acknowledges that Landlord
has relied upon the foregoing representation and warranty. Tenant shall
indemnify and hold harmless Landlord from and against any and all claims for
commission, fee or other compensation by any broker or Person who claims to have
dealt with Tenant in connection with this Lease and for any and all costs
incurred by Landlord in connection with such claims, including, without
limitation, attorneys' fees and disbursements. The provisions of this Article 28
shall survive the expiration or earlier termination of this Lease.
ARTICLE 29
INDEMNITY
SECTION 29.1. Tenant shall not do or permit any act or thing to be done in,
at or upon the Premises that may subject any Indemnitee to any liability or
responsibility for injury, damage to persons or property or to any liability by
reason of the existence or application of, compliance with or violation of any
Requirement, but shall exercise such control over the Premises as to protect
each Indemnitee fully against any such liability and responsibility. Tenant
shall indemnify and save harmless the Indemnitees from and against (a) all
claims of whatever nature against the Indemnitees arising from any act, omission
or negligence of Tenant or Persons Within Tenant's Control, (b) all claims
against the Indemnitees arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring in or about
the Premises during the Term or during Tenant's occupancy of the Premises,
unless and to the extent caused by the gross negligence of Landlord or its
shareholders, officers and employees, (c) all claims against the Indemnitees
arising from any accident, injury or damage occurring
38
outside of the Premises but anywhere within or about the Premises, where such
accident, injury or damage results or is claimed to have resulted from an act,
omission or negligence of Tenant or Persons Within Tenant's Control, and (d) any
breach, violation or non-performance of any covenant, condition or agreement
contained in this Lease to be fulfilled, kept, observed and performed by Tenant.
This indemnity and hold harmless agreement shall include indemnity from and
against any and all liability, claims, fines, suits, demands, costs and expenses
of any kind or nature (including, without limitation, attorneys' fees and
disbursements) incurred in or in connection with any such claim or proceeding
brought thereon, and the defense thereof.
SECTION 29.2. If any claim, action or proceeding is made or brought against
any Indemnitee, against which claim, action or proceeding Tenant is obligated to
indemnify such Indemnitee pursuant to the terms of this Lease, then, upon demand
by the Indemnitee, Tenant, at its sole cost and expense, shall resist or defend
such claim, action or proceeding in the Indemnitee's name, if necessary, by such
attorneys as the Indemnitee may select, including, without limitation, attorneys
for the Indemnitee's insurer. The provisions of this Article 29 shall survive
the expiration or earlier termination of this Lease.
ARTICLE 30
ADJACENT EXCAVATION; SHORING
SECTION 30.1. If an excavation shall be made upon land adjacent to the
Premises, or shall be authorized to be made, Tenant shall, upon reasonable
advance notice, afford to the person or entity causing or authorized to cause
such excavation, a limited license to enter upon the Premises for the purpose of
doing such work as said person or entity deems necessary to preserve the walls
of any building located on the Premises from injury or damage and to support the
same by proper foundations without any claim for eviction or constructive
eviction, damages or indemnity against Landlord, or diminution or abatement of
Rental.
ARTICLE 31
RENEWAL OPTIONS
SECTION 31.1. Provided that the Tenant is not in default with respect
to any of its obligations to the Landlord under and pursuant to the terms and
conditions of this Lease at the time each Option (as such term is hereinafter
defined) is to be
39
exercised, the Tenant shall have the option to renew this Lease for seven (7)
additional five (5) year periods [the option with respect to each additional
five (5) year period is referred to herein as an "OPTION" and, collectively, all
of the options granted herein are referred to as the "OPTIONS"] as follows:
OPTION PERIOD 1 shall commence on May 13, 2001 and shall continue up to
and including May 12, 2006.
OPTION PERIOD 2 shall commence on May 13, 2006 and shall continue up to
and including May 12, 2011.
OPTION PERIOD 3 shall commence on May 13, 2011 and shall continue up to
and including May 12, 2016.
OPTION PERIOD 4 shall commence on May 13, 2016 and shall continue up to
and including May 12, 2021.
OPTION PERIOD 5 shall commence on May 13, 2021 and shall continue up to
and including May 12, 2026.
OPTION PERIOD 6 shall commence on May 13, 2026 and shall continue up to
and including May 12, 2031.
OPTION PERIOD 7 shall commence on May 13, 2031 and shall continue up to
and including May 12, 2036.
(each of the aforementioned option periods is individually referred to
herein as an "OPTION PERIOD" and, collectively, all of the
aforementioned Option Periods are referred to herein as "OPTION
PERIODS")
SECTION 31.2. Each Option granted to the Tenant pursuant to the
provisions of Section 31.1 hereof shall be exercised by the Tenant giving
written notice to the Landlord of the Tenant's intent to exercise the Option not
less than one-hundred eighty (180) days prior to the expiration of the Initial
Term or not less than one-hundred eighty (180) days prior to the expiration of
the Option Period which is then in effect, as the case may be.
SECTION 31.3. In the event that the Tenant exercises the Option with
respect to any Option Period, the Landlord and the Tenant hereby agree that this
Lease shall continue in full force and effect and remain unamended during the
applicable Option Period AND specifically, without limitation, that the Fixed
Rent payable by the Tenant to the Landlord during such Option Period shall be
increased on each anniversary date from and after the Commencement Date in
accordance with the provisions of Article 8 hereof.
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ARTICLE 32
RENT REGULATION
SECTION 32.1. If at any time or times during the Term of this Lease, the
Rental reserved in this Lease is not fully collectible by reason of any
Requirement, Tenant shall enter into such agreements and take such other steps
as Landlord may request and as may be legally permissible to permit Landlord to
collect the maximum rents that may from time to time during the continuance of
such legal rent restriction be legally permissible (and not in excess of the
amounts reserved under this Lease). Upon the termination of such legal rent
restriction (a) the Rental shall become and thereafter be payable hereunder in
accordance with the amounts reserved in this Lease for the remainder of the
Term, and (b) Tenant shall pay to Landlord, if legally permissible, an amount
equal to (i) the items of Rental that would have been paid pursuant to this
Lease but for such legal rent restriction less (ii) the rents paid by Tenant to
Landlord during the period or periods such legal rent restriction was in effect.
This provision shall survive the expiration or earlier termination of this Lease
to the maximum enforceable extent.
ARTICLE 33
COVENANT OF QUIET ENJOYMENT
SECTION 33.1. Landlord covenants that, upon Tenant paying all Fixed Rent
and Additional Rent and observing and performing all the terms, agreements,
covenants, provisions and conditions of this Lease on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Premises,
subject nevertheless to the terms and conditions of this Lease; provided,
however, that no eviction of Tenant by reason of the foreclosure of any Mortgage
now or hereafter affecting the Premises shall be construed as a breach of this
covenant nor shall any action by reason thereof be brought against Landlord, and
provided further that this covenant shall bind and be enforceable against
Landlord or any successor to Landlord's interest, subject to the terms hereof,
only so long as Landlord or any successor to Landlord's interest, is in
possession and is collecting rent from Tenant but not thereafter.
ARTICLE 34
MISCELLANEOUS
SECTION 34.1. This Lease is presented for signature by
Tenant and it is understood that this Lease shall not constitute
41
an offer by or be binding upon Landlord unless and until Landlord shall have
executed and delivered a fully executed copy of this Lease to Tenant.
SECTION 34.2. The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Premises, as the case may be, and in the event of any such sale,
conveyance, assignment or transfer, Landlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord under this Lease
thereafter arising, and the transferee shall be deemed to have assumed, subject
to the remaining provisions of this Section 34.2, all obligations of the
Landlord under this Lease arising after the effective date of the transfer. No
trustee, partner, principal, shareholder, director or officer of Landlord
(collectively, the "PARTIES") shall have any direct or personal liability for
the performance of Landlord's obligations under this Lease, and Tenant shall
look solely to Landlord's interest in the Premises to enforce Landlord's
obligations hereunder and shall not otherwise seek any damages against Landlord
or any of the Parties whatsoever. Tenant shall not look to any other property or
assets of Landlord or any property or assets of any of the Parties in seeking
either to enforce Landlord's obligations under this Lease or to satisfy a
judgment for Landlord's failure to perform such obligations.
SECTION 34.3. Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Additional Rent or
Rental, shall constitute rent for the purposes of Section 502(b)(7) of the
Bankruptcy Code.
SECTION 34.4. Neither this Lease nor any memorandum of this Lease shall be
recorded without the prior written consent of the Landlord, which consent may be
withheld by the Landlord in its sole and absolute discretion.
SECTION 34.5. Except as otherwise expressly stated in this Lease, any
consent or approval required to be obtained from Landlord may be granted by
Landlord in its sole and absolute discretion. In any instance in which Landlord
agrees not to act unreasonably, Tenant hereby waives any claim for damages
against or liability of Landlord that Tenant may have based upon any assertion
that Landlord has unreasonably withheld or unreasonably delayed any consent or
approval requested by Tenant, and Tenant agrees that its sole remedy shall be an
action or proceeding to enforce any related provision or for specific
performance, injunction or declaratory judgment. If with respect to any required
consent or approval Landlord is required by the express provisions of this Lease
not to unreasonably withhold or delay
42
its consent or approval, and if it is determined in any such proceeding referred
to in the preceding sentence that Landlord acted unreasonably, the requested
consent or approval shall be deemed to have been granted; however, Landlord
shall have no liability whatsoever to Tenant for its refusal or failure to give
such consent or approval. Tenant's sole remedy for Landlord's unreasonably
withholding or delaying consent or approval shall be as provided in this Section
34.5.
SECTION 34.6. Landlord shall have the right at any time, and from time to
time, to amend unilaterally the provisions of this Lease if Landlord is advised
by its counsel that all or any portion of the Rental paid by Tenant to Landlord
hereunder is, or may be deemed to be, unrelated business taxable income within
the meaning of the United States Internal Revenue Code or regulations issued
thereunder, and Tenant agrees that it will execute all documents necessary to
effect any such amendment, provided that no such amendment shall increase
Tenant's payment obligations or other liability under this Lease nor reduce
Landlord's obligations hereunder.
SECTION 34.7. If Tenant shall remain in possession of the Premises after
the Expiration Date, without the execution by both Tenant and Landlord of a new
lease, Tenant, at the election of Landlord, shall be deemed to be occupying the
Premises as a Tenant from month-to-month, at a monthly rental equal to three
(3x) times the Rental payable during the last month of the Term, subject to all
the other conditions, provisions and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy.
SECTION 34.8. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted. If any words or phrases in this Lease are stricken out or
otherwise eliminated, whether or not any other words or phrases have been added,
this Lease shall be construed as if the words or phrases so stricken out or
otherwise eliminated were never included in this Lease and no implication or
inference shall be drawn from the fact that such words or phrases were stricken
out or otherwise eliminated.
SECTION 34.9. If any of the provisions of this Lease, or the application
thereof to any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
provisions to persons or circumstances other than those as to whom or which it
is held invalid or unenforceable, shall not be affected thereby and shall remain
valid and enforceable, and every provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
43
SECTION 34.10. Landlord shall have the right to erect any gate, chain or
other obstruction or to close off any portion of the Premises to the public at
any time to the extent necessary to prevent a dedication thereof for public use.
SECTION 34.11. Tenant hereby represents to Landlord that it is not
entitled, directly or indirectly, to diplomatic or sovereign immunity and Tenant
agrees that in all disputes arising directly or indirectly out of this Lease
Tenant shall be subject to service of process in, and the jurisdiction of the
courts of, the State of Pennsylvania. The provisions of this Section 34.11 shall
survive the expiration of this Lease.
SECTION 34.12. This Lease contains the entire agreement between the parties
and all prior negotiations and agreements are merged into this Lease. Except as
provided in Section 34.6 this Lease may not be changed, abandoned or discharged,
in whole or in part, nor may any of its provisions be waived except by a written
agreement that (a) expressly refers to this Lease, (b) is executed by the party
against whom enforcement of the change, abandonment, discharge or waiver is
sought and (c) is permissible under the Mortgage(s).
SECTION 34.13. Any apportionment or prorations of Rental to be made under
this Lease shall be computed on the basis of a three hundred sixty (360) day
year, with twelve (12) months of thirty (30) days each.
SECTION 34.14. The laws of the State of Pennsylvania shall govern and
control the validity, interpretation, performance and enforcement of this Lease
without regard to principles of conflicts of law.
SECTION 34.15. If Tenant is a corporation, each person executing this Lease
on behalf of Tenant hereby covenants, represents and warrants that Tenant is a
duly incorporated or duly qualified (if foreign) corporation and is authorized
to do business in the State of New Pennsylvania (a copy of evidence thereof to
be supplied to Landlord upon request); and that each person executing this Lease
on behalf of Tenant is an officer of Tenant and that he or she is duly
authorized to execute, acknowledge and deliver this Lease to Landlord (a copy of
a resolution to that effect to be supplied to Landlord upon request).
44
SECTION 34.16. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Lease nor the intent of any provision thereof.
SECTION 34.17. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective legal representatives, heirs, successors, and, except as otherwise
provided in this Lease, their assigns.
SECTION 34.18. For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(A) The words "herein", "hereof", "hereunder" and "hereby"and words of
similar import shall be construed to refer to this Lease as a whole and not to
any particular Article or Section unless expressly so stated.
(B) Tenant's obligations hereunder shall be construed in every instance as
conditions as well as covenants, each separate and independent of any other
terms of this Lease.
(C) Reference to Landlord as having "no liability" or being "without
liability" shall mean that Tenant shall not be entitled to terminate this Lease,
or to claim actual or constructive eviction, partial or total, or to receive any
abatement or diminution of rent, or to be relieved in any manner of any of its
other obligations hereunder, or to be compensated for loss or injury suffered or
to enforce any other right or liability whatsoever against Landlord under or
with respect to this Lease or with respect to Tenant's use or occupancy of the
Premises.
(D) Reference to "termination of this Lease" or "expiration of this Lease"
and words of like import includes expiration or sooner termination of this Lease
and the Term and the estate hereby granted or cancellation of this Lease
pursuant to any of the provisions of this Lease or by law. Upon the termination
of this Lease, the Term and estate granted by this Lease shall end at noon on
the date of termination as if such date were the Fixed Expiration Date, and
neither party shall have any further obligation or liability to the other after
such termination except (i) as shall be expressly provided for in this Lease,
and (ii) for such obligations as by their nature under the circumstances can
only be, or by the provisions of this Lease, may be, performed after such
termination, and, in any event, unless expressly otherwise provided in this
Lease, any liability for a payment (which shall be apportioned as of such
termination) which shall have accrued to or with respect to any period ending at
the time of termination shall survive the termination of this Lease.
45
(E) Words and phrases used in the singular shall be deemed to include the
plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender.
(F) The rule of "ejusdem generis" shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
as of the day and year first above written.
GERDANEU, INC., LANDLORD
By: ______________________________
LEISURE TIME TOURS, TENANT
By: ______________________________
46
EXHIBIT 10.16
AGREEMENT OF LEASE
BETWEEN
LIBERTY STREET CORPORATION,
LANDLORD
AND
COMMUNITY TRANSIT LINES, INC.,
COMMUNITY BUS LINES, INC.,
COMMUNITY TOURS, INC.,
COMMUNITY COACH, INC.,
COMMUNITY TRANSPORTATION, INC.,
(COLLECTIVELY, THE TENANT)
=========================================================
DATED: MAY 13, 1996
=========================================================
PREMISES
55-63 LIBERTY STREET
PASSAIC, NEW JERSEY
BLOCK 3274.A, LOT 1 ON THE
OFFICIAL TAX MAP OF THE CITY OF PASSAIC
AGREEMENT OF LEASE, made as of the 13th day of May, 1996, between LIBERTY
STREET CORPORATION, a New Jersey corporation, having an address at 315 Howe
Avenue, Passaic, New Jersey 07055, as Landlord, and COMMUNITY TRANSIT LINES,
INC., a New Jersey corporation, having an address at 315 Howe Avenue, Passaic,
New Jersey 07055 ("TRANSIT"), COMMUNITY TOURS, INC., a New Jersey corporation,
having an address at 315 Howe Avenue, Passaic, New Jersey 07055 ("TOURS"),
COMMUNITY COACH, INC., a New Jersey corporation, having an address at 315 Howe
Avenue, Passaic, New Jersey 07055 ("COACH"), COMMUNITY BUS LINES, INC., a New
Jersey corporation, having an address at 315 Howe Avenue, Passaic, New Jersey
07055 ("BUS"), COMMUNITY TRANSPORTATION, INC., a New Jersey corporation, having
an address at 315 Howe Avenue, Passaic, New Jersey 07055
("TRANSPORTATION")[Transit, Tours, Coach, Bus and Transportation are
collectively referred to herein as the "TENANT"].
W I T N E S S E T H:
WHEREAS, the Landlord is the owner of certain premises known as and by
the street address of 55-63 Liberty Street, Passaic, New Jersey and known and
designated on the Official Tax Map of the City of Passaic as Block 3274.A, Lot
1, as more particularly described on Schedule "A", annexed hereto and made a
part hereof; and
WHEREAS, the Landlord desires to rent the aforementioned premises to
the Tenant and the Tenant desires to rent the aforementioned premises from the
Landlord.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, for themselves,
as well as their respective legal representatives, heirs, successors and
assigns, hereby agree as follows:
ARTICLE 1
GLOSSARY
For the purposes of this Lease, the following terms shall have the meanings
indicated below:
"ADA" shall have the meaning set forth in Section 9.1
hereof.
"ADDITIONAL RENT" shall have the meaning set forth in
Section 2.2 hereof.
"ALTERATION" or "ALTERATIONS" shall mean any and all alterations,
decorations, installations, repairs, improvements, additions, replacements or
other physical changes of any nature whatsoever in or about the Premises at any
time, now or hereafter.
"APPLICABLE PRICE INDEX" shall have the meaning set forth in Section
8.1(iv) hereof.
"APPLICABLE RATE" shall mean the lesser of (x) three percentage points
above the then current Base Rate, or (y) the maximum rate permitted by
applicable law.
"BANKRUPTCY CODE" shall mean 11 U.S.C. Section 101 ET SEQ., or any statute,
federal or state, of similar nature and purpose, now or hereafter.
"BASE INDEX" shall have the meaning set forth in
Section 8.1(iii) hereof.
"BASE RATE" shall mean the rate of interest publicly announced from time to
time by Citibank, N.A., or its successor, as its "base rate" (or such other term
as may be used by Citibank, N.A., from time to time, for the rate presently
referred to as its "base rate").
"BUILDING SYSTEMS" shall mean the mechanical, electrical, sanitary,
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service or support systems of any nature whatsoever located at or on the
Premises, BUT shall not include installations made by Tenant or fixtures or
appliances (regardless of whether or not such fixtures or appliances are owned
by the Tenant or the Landlord).
"BUILDING INSURANCE" shall have the meaning set forth in
Section 11.2 hereof.
"BUREAU" shall have the meaning set forth in
Section 8.1(i) hereof.
"BUSINESS DAYS" shall mean all days, excluding Saturdays, Sundays and all
days observed as holidays by the State of New Jersey or the federal government.
"COMMENCEMENT DATE" May 13, 1996.
"DEFICIENCY" shall have the meaning set forth in Section
18.2(A)(2) hereof.
"ECRA" shall have the meaning set forth in Section 9.2(B)
hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in
Section 17.1 hereof.
"EXPIRATION DATE" shall mean the Fixed Expiration Date or such other date
on which the Term ends pursuant to any of the terms, conditions or covenants of
this Lease or pursuant to law.
3
"FIXED EXPIRATION DATE" May 12, 2001.
"FIXED RENT" $42,000.00 per annum ($3,500.00 per month) for the first
Lease Year (as such term is hereinafter defined) to be adjusted thereafter on
each anniversary date from and after the Commencement Date in accordance with
the provisions of Article 8 of this Lease.
"GOVERNMENT AUTHORITY" or "GOVERNMENT AUTHORITIES" shall mean the United
States of America, the State of New Jersey, the City of Passaic, and/or any
political subdivision thereof and any agency, department, commission, board,
bureau or instrumentality of any of the foregoing, now existing or hereafter
created, having jurisdiction over the Premises or any portion thereof.
"HAZARDOUS MATERIALS" shall have the meaning set forth in
Section 9.2(A) hereof.
"INCREASE NOTICE" shall have the meaning set forth in
Section 8.3 hereof.
"INDEMNITEES" shall mean Landlord, its shareholders, officers, directors,
employees, agents and contractors (and the partners, shareholders, officers,
directors and employees of any of the Landlord's agents or contractors).
"INITIAL TERM" shall mean five (5) years.
"LANDLORD", on the date as of which this Lease is made, shall mean Liberty
Street Corporation, a New Jersey corporation, but thereafter, "Landlord" shall
mean any fee owner of the Premises.
"LEASE YEAR" shall mean each twelve (12) month period commencing on
each anniversary date from and after the Commencement Date.
"MORTGAGE(S)" shall mean any trust indenture or mortgage which may now
or hereafter affect the Premises and all extensions, supplements, amendments,
modifications, consolidations, refinancings and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"MORTGAGEE(S)" shall mean any trustee or mortgagee or holder
of a Mortgage.
"NJDEP" shall have the meaning set forth in Section 9.2(B)
hereof.
"NOTICE(S)" shall have the meaning set forth in Section
27.1(A) hereof.
4
"OPTION" or "OPTIONS" shall have the meaning set forth in
Section 31.1 hereof.
"OPTION PERIOD" or "OPTION PERIODS" shall have the meaning set forth in
Section 31.1 hereof.
"PARTIES" shall have the meaning set forth in Section 34.2
hereof.
"PERMITTED USE" shall mean general, executive and administrative
offices, parking and terminal facilities in connection with Tenant's business as
a motor vehicle transportation company and uses related thereto including the
evolution of the Tenant's business consistent with the evolution of the motor
vehicle transportation industry in general.
"PERSON(S) OR PERSON(S)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"PERSONS WITHIN TENANT'S CONTROL" shall mean and include Tenant, all of
Tenant's respective shareholders, directors, officers, agents, contractors,
sub-contractors, servants, employees, licensees and invitees as well as any of
the heirs, successors, representatives and assigns of any of the foregoing.
"PREMISES" shall mean all that certain plot, piece and parcel of land,
together with all buildings and improvements thereon erected, known as and by
the street address of 55-63 Liberty Street, Passaic, New Jersey and known and
designated on the Official Tax Map of the City of Passaic as Block
, Lot , as more particularly described on Schedule "A", annexed hereto and
made a part hereof.
"PRICE INDEX" shall have the meaning set forth in
Section 8.1(ii) hereof.
"RENTAL" shall mean and be deemed to include Fixed Rent, Additional Rent
and any other sums payable, now or hereafter, by Tenant hereunder.
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, retroactive and prospective, of all
Governmental Authorities, now existing or hereafter created, which affect,
directly or indirectly, the Premises and/or the maintenance, use, operation or
occupation of the Premises, (ii) all requirements, obligations and conditions of
all instruments of record on the date of this Lease, and (iii) all requirements,
obligations and conditions imposed by any fire rating agency or by the carrier
of Landlord's hazard insurance policy for the Premises.
5
"TAXES" shall have the meaning set forth in Section 3.1
hereof.
"TENANT", on the date as of which this Lease is made, shall mean the Tenant
named in this Lease, but thereafter "Tenant" shall mean only the tenant under
this Lease at the time in question; provided, however, that the Tenant named in
this Lease and any and all successor tenant(s) hereunder shall not be released
and relieved from any liability hereunder in the event of any assignment of this
Lease or a sublet, in whole or in part, of the Premises.
"TENANT'S PROPERTY" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings and other
movable items of personal property owned by the Tenant.
"TERM", on the date as of which this Lease is made shall mean five (5)
years, but thereafter shall be deemed to include any Option Period for which the
Tenant exercises its Option pursuant to the provisions of Article 31 hereof.
"TERMINATION NOTICE PERIOD" shall have the meaning set forth in Section
27.1 hereof.
"UNAVOIDABLE DELAYS" shall have the meaning set forth in
Article 25 hereof.
ARTICLE 2
DEMISE; PREMISES; TERM; RENT
SECTION 2.1. Landlord hereby leases to Tenant and Tenant hereby hires
from Landlord the Premises for the Term to commence on the Commencement Date and
to end on the Fixed Expiration Date, unless earlier terminated as provided
herein.
SECTION 2.2. Commencing upon the Commencement Date, Tenant shall pay to
Landlord, in lawful money of the United States of America, without notice or
demand, by good and sufficient check at the office of Landlord or at such other
place as Landlord may designate from time to time, the following:
(A) the Fixed Rent, as such term is defined in Article 1
hereof, which shall be payable in equal monthly installments in advance on the
first day of each and every calendar month during the Term, except that the
first monthly installment of Fixed Rent shall be payable by Tenant upon
execution and delivery of this Lease; and
6
(B) additional rent ("ADDITIONAL RENT") consisting of all other sums
of money as shall become due from and be payable by Tenant hereunder (for
default in the payment of which Landlord shall have the same remedies as for a
default in the payment of Fixed Rent).
SECTION 2.3. If the Commencement Date is other than the first day of a
calendar month, or the Fixed Expiration Date is other than the last day of a
calendar month, Fixed Rent for such month shall be prorated on a per diem basis.
SECTION 2.4. Tenant shall pay the Fixed Rent and Additional Rent when
due without abatement, deduction, counterclaim, setoff or defense of any nature
whatsoever.
ARTICLE 3
REAL ESTATE TAXES; MORTGAGE(S)
SECTION 3.1. The Tenant represents, warrants, covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all Taxes (as hereinafter
defined) of any nature whatsoever assessed or imposed against the Premises for
each and every Lease Year during the Term of this Lease. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant pursuant to the
provisions of this Section 3.1 shall include an accurate copy of the invoice,
statement, bill or similar document issued by the relevant Governmental
Authority or Governmental Authorities, as the case may be, with respect to the
Taxes for which payment is demanded. For purposes of this Section 3.1, "TAXES"
shall include, without limitation, any and all taxes assessed against the
Premises, all personal property taxes, all ad valorem taxes and any and all
other taxes assessed against the Premises by any Governmental Authority, now or
hereafter.
SECTION 3.2. The Tenant represents, warrants and covenants and agrees
that it shall, within five (5) days of written demand by the Landlord to the
Tenant, pay to the Landlord, as Additional Rent, any and all amounts which may
be due and owing under and pursuant to the terms and conditions of any Mortgage
or Mortgages, as the case may be, encumbering the Premises, now or hereafter,
during the Term of this Lease including, but not limited to, any extensions,
supplements, amendments, modifications, consolidations, refinancings and
replacements of any such Mortgage or Mortgages provided that:
(A) the principal balance of any Mortgage subsequent to any extension,
supplement, amendment, modification, consolidation, refinancing or
replacement shall not
7
exceed the outstanding principal balance of the Mortgage which is to be
extended, supplemented, amended, modified, consolidated, refinanced or
replaced at the time of such extension, supplement, amendment,
modification, consolidation, refinancing or replacement, as the case
may be; and
(B) the amount of the monthly payments of principal and interest
payable pursuant to the terms and conditions of any Mortgage subsequent
to any extension, supplement, amendment, modification, consolidation,
refinancing or replacement shall not exceed the amount of the monthly
payments with respect to the Mortgage which is to be extended,
supplemented, amended, modified, consolidated, refinanced or replaced
at the time of such extension, supplement, amendment, modification,
consolidation, refinancing or replacement, as the case may be; and
(C) the terms of any extended, supplemented, amended, modified,
consolidated, refinanced or replaced Mortgage shall be no more
financially onerous than the provisions of the such Mortgage prior to
such extension, supplement, amendment, modification, consolidation,
refinancing or replacement, as the case may be; and
(D) the term of any Mortgage extended, supplemented, amended, modified,
consolidated, refinanced or replaced shall be no less than the term of
such Mortgage prior to such extension, supplementation, amendment,
modification, consolidation, refinancing or replacement, as the case
may be.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 shall not apply with respect to any amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage
securing additional indebtedness (above and beyond any Mortgage or Mortgages
existing as of the date hereof) which first becomes a recorded lien on the
Premises subsequent to the date of this Lease and which is executed and
delivered by the Landlord without the consent of the Tenant. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant for payment of
Additional Rent pursuant to the provisions of this Section 3.2 shall include,
ONLY to the extent provided to the Landlord by the Mortgagee, an accurate copy
of the invoice, statement, bill or similar document issued by such Mortgagee or
Mortgagees, as the case may be, with respect to any amount for which payment of
Additional Rent is demanded by the Landlord under and pursuant to the provisions
of this Section 3.2.
8
ARTICLE 4
UTILITIES
SECTION 4.1. The Tenant represents, warrants, covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all charges incurred by the
Landlord for any and all utilities supplied to the Premises including, without
limitation, electricity, water, heating oil and/or natural gas. The Landlord
hereby agrees that any demand given by the Landlord to the Tenant pursuant to
the provisions of this Section 4.1 shall include an accurate copy of the
invoice, statement, bill or similar document issued by the public utility or any
private company providing such utility, as the case may be, with respect to any
utility for which payment is demanded.
SECTION 4.2. Landlord shall not be liable in any way to Tenant for any
interruption or failure of or defect in the supply or character of any utility
furnished to the Premises, now or hereafter, or for any loss, damage or expense
Tenant may sustain if either the quantity or character of any utility is changed
or is no longer suitable for Tenant's requirements, whether by reason of any
requirement, act or omission of the public utility serving the Premises or for
any other reason whatsoever. Notwithstanding the provisions of this Section 4.2,
the Landlord shall be responsible for any and all actual damages suffered by the
Tenant as a result of any interruption of utility service caused solely by the
Landlord's failure to remit (prior to the expiration of any applicable grace
period) to the appropriate public utility or private company providing such
utility, as the case may be, any amount which has been paid by the Tenant to the
Landlord pursuant to the provisions of Section 4.1 hereof.
SECTION 4.3. Tenant shall at all times comply with the rules, regulations,
terms and conditions applicable to service, equipment, wiring, as well as any
and all requirements of the public utility supplying electricity to the
Premises. Tenant shall not, without Landlord's prior written consent in each
instance (which consent may be withheld by the Landlord in its reasonable
discretion), connect any fixtures, machinery, appliances or equipment to the
Premises electric distribution system or make any alteration or addition to
Tenant's machinery, appliances or equipment, or the electric system of the
Premises, if the effect thereof would be to increase the electrical load in the
Premises. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall be provided by Landlord and the cost thereof
shall be deemed Additional Rent due hereunder and shall be forthwith paid by
Tenant upon Landlord's demand.
9
SECTION 4.4. If any Taxes are imposed upon Landlord with respect to any
utility furnished as a service to Tenant by any Governmental Authority, Tenant
agrees that such Taxes shall be reimbursed by Tenant to Landlord upon written
demand. The Landlord hereby agrees that any demand given by the Landlord to the
Tenant pursuant to the provisions of this Section 4.4 shall include an accurate
copy of the invoice, statement, bill or similar document issued by the relevant
Governmental Authority or Governmental Authorities, as the case may be, with
respect to the Taxes for which payment is demanded.
ARTICLE 5
USE AND OCCUPANCY
SECTION 5.1. Tenant shall use and occupy the Premises for the Permitted Use
and for no other purpose of any nature whatsoever.
ARTICLE 6
ALTERATIONS
SECTION 6.1.
(A) (1) Prior to making any Alterations, Tenant shall (i)
submit to Landlord detailed plans and specifications for approval by the
Landlord (including layout, architectural, electrical, mechanical and structural
drawings) and that comply with all Requirements for each proposed Alteration,
and Tenant shall not commence any such Alteration without first obtaining
Landlord's approval of such plans and specifications, (ii) at Tenant's expense,
obtain all permits, approvals and certificates required by any Governmental
Authorities, and (iii) furnish to Landlord duplicate original policies or
certificates thereof for worker's compensation insurance (covering all persons
to be employed by Tenant, and Tenant's contractors and subcontractors, in
connection with such Alteration) and commercial general liability insurance
(including premises operation, bodily injury, personal injury, death,
independent contractors, products and completed operations, broad form
contractual liability and broad form property damage coverages) in such form,
with such companies, for such periods and in such amounts as Landlord may
reasonably approve, naming Landlord and its agents and any Mortgagee, as
additional insureds. Upon completion of such Alteration, Tenant, at Tenant's
expense, shall obtain certificates of final approval of such Alterations
required by any Governmental Authority and shall furnish Landlord with copies
thereof, together with the "as-built" plans and specifications
10
for such Alterations. All Alterations shall be made and performed in accordance
with the plans and specifications therefor as approved by Landlord and otherwise
in accordance with all Requirements. All materials and equipment to be
incorporated in the Premises as a result of any Alterations shall be first
quality and no such materials or equipment shall be subject to any lien,
encumbrance, chattel mortgage, title retention or security agreement.
(2) Landlord reserves the right to disapprove
any plans and specifications, in whole or in part, to reserve approval of items
shown thereon pending its review and approval of other plans and specifications,
and to condition its approval upon Tenant making revisions to the plans and
specifications or supplying additional information. Tenant agrees that any
review or approval by Landlord of any plans and/or specifications with respect
to any Alteration is solely for Landlord's benefit, and without any
representation or warranty whatsoever to Tenant or any other Person with respect
to the adequacy, correctness or sufficiency thereof or with respect to
Requirements or otherwise.
(B) All Alterations shall become a part of the Premises and
shall be Landlord's property from and after the installation thereof and may not
be removed or changed without Landlord's prior written consent. Notwithstanding
the foregoing, Landlord, upon notice given at least thirty (30) days prior to
the Expiration Date or upon such shorter notice as is reasonable under the
circumstances upon the earlier expiration of the Term, may require Tenant to
remove any specified Alterations and to repair and restore in a good and
workmanlike manner any damage to the Premises caused by such removal. All
Tenant's Property shall remain the property of Tenant and, on or before the
Expiration Date or earlier end of the Term, may be removed from the Premises by
Tenant at Tenant's sole cost and option; provided, however, that Tenant shall
repair and restore in a good and workmanlike manner any damage to the Premises
caused by such removal. The provisions of this Section 6.1(B) shall survive the
expiration or earlier termination of this Lease.
(C) (1) Any and all Alterations shall be performed, at
Tenant's sole cost and expense, by contractors, subcontractors or mechanics
previously approved in writing by Landlord. Prior to making an Alteration, at
Tenant's request, Landlord shall furnish Tenant with a list of contractors who
may perform Alterations to the Premises on behalf of Tenant.
(2) Notwithstanding the terms and conditions of
Section 6.1(C)(1) hereof, with respect to any Alteration affecting any Building
Systems, (i) Tenant shall only employ Landlord's designated contractor, and (ii)
the Alteration shall, at Tenant's expense, be designed by Landlord's engineer.
11
(D) (1) Any mechanic's lien filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant shall be cancelled or discharged by Tenant, at Tenant's expense, within
twenty (20) days after such lien shall be filed, by payment or filing of the
bond required by law, and Tenant shall indemnify and hold Landlord harmless from
and against any and all costs, expenses, claims, losses or damages resulting
therefrom by reason thereof.
(2) If Tenant shall fail to discharge such
mechanic's lien within the aforesaid period, then, in addition to any other
right or remedy of Landlord, Landlord may, but shall not be obligated to,
discharge the same either by paying the amount claimed to be due or by procuring
the discharge of such lien by deposit in court or bonding, and in any such
event, Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such mechanics lien by the
lienor and to pay the amount of the judgment, if any, in favor of the lienor,
with interest, costs and allowances.
(3) Any amount paid by Landlord for any of the aforesaid charges
and for all expenses of Landlord (including, but not limited to, attorneys' fees
and disbursements) incurred in defending any such action, discharging said lien
or in procuring the discharge of said lien, with interest on all such amounts at
the maximum legal rate of interest then chargeable to Tenant from the date of
payment, shall be repaid by Tenant within ten (10) days after written demand
therefor, and all amounts so repayable, together with such interest, shall be
considered Additional Rent.
SECTION 6.2. Landlord, at Tenant's expense, and upon the request of Tenant,
shall join in any applications for any permits, approvals or certificates
required to be obtained by Tenant in connection with any permitted Alteration
(provided that the provisions of the applicable Requirements shall require that
Landlord join in such application) and shall otherwise cooperate with Tenant in
connection therewith; provided, however, that Landlord shall not be obligated to
incur any cost or expense or liability in connection therewith.
SECTION 6.3. Tenant shall furnish to Landlord copies of records of all
Alterations and of the cost thereof within fifteen (15) days after the
completion of such Alterations.
SECTION 6.4. Tenant shall not, at any time prior to or during the Term,
directly or indirectly, employ, or permit the employment of, any contractor,
mechanic or laborer in the Premises, whether in connection with any Alteration
or otherwise, if such employment would interfere or cause any conflict with
other contractors, mechanics or laborers engaged in the
12
construction, maintenance or operation of the Premises by Landlord, Tenant or
others, or of any other property owned by Landlord. In the event of any such
interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Premises immediately.
ARTICLE 7
REPAIRS; REPLACEMENTS; MAINTENANCE
SECTION 7.1. Tenant, at Tenant's sole cost and expense, shall take good
care of the Premises and the fixtures, equipment and appurtenances therein and
make all repairs and replacements thereto, BOTH STRUCTURAL AND NON-STRUCTURAL,
of any nature whatsoever as and when needed to preserve them in good working
order and condition, except for (a) reasonable wear and tear and (b)
obsolescence. If Tenant shall fail, after five (5) days notice (or such shorter
period as may be required because of an emergency), to proceed with due
diligence to make repairs required to be made by Tenant, the same may be made by
Landlord, at the expense of Tenant, and the expenses thereof incurred by
Landlord, with interest thereon at the Applicable Rate, shall be paid to
Landlord, as Additional Rent, within ten (10) days after rendition of a bill or
statement therefor. Tenant shall give Landlord prompt notice of any defective
condition in any Building Systems located in, servicing or passing through the
Premises.
ARTICLE 8
INCREASES IN FIXED RENT
SECTION 8.1. For purposes of this Lease:
(i) "BUREAU" means the Federal Bureau of Labor Statistics or
any successor agency that shall issue the indices or data referred to in
subparagraph (ii) below.
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(ii) "PRICE INDEX" means the Consumer Price Index for All
Urban Consumers for the New York-Northeastern New Jersey geographic area,
1982-1984=100, issued from time to time by the Bureau or any other successor
measure hereafter employed by the Bureau in lieu of such price index that
measures the cost of living for such geographic area, failing such successor,
the most nearly comparable index (reflecting changes in costs of housing
including rental housing, energy and services), published by a Governmental
Authority, appropriately adjusted. Furthermore, if hereafter the Price Index is
converted to a different standard reference base or a substantial change is made
in the terms or number of items contained therein, the Price Index shall be
adjusted (with the use of such conversion factor, formula or table as is
published by the Bureau, or if it shall not publish same, the conversion factor
published by Prentice Hall, Inc., or, failing such publication, by any other
nationally recognized publisher of similar statistical information) to the
figure that would have resulted if not for such conversion or change.
(iii) "BASE INDEX" means the Price Index issued for
April, 1996.
(iv) "APPLICABLE PRICE INDEX" for a Lease Year means the Price
Index issued for April of the year in which such Lease Year commences.
SECTION 8.2. (A) Tenant shall pay to Landlord Fixed Rent in the amount
set forth in Article 1 of this Lease for the first Lease Year.
(B) For each Lease Year subsequent to the
first Lease Year (and for each and every Lease Year thereafter during the Term
hereof), the Tenant shall pay to the Landlord, as Fixed Rent, an amount equal to
the GREATER of:
(I) an amount equal to the sum of (x)
the percentage by which the Applicable Price Index for such Lease Year exceeds
the Applicable Price Index for the immediately preceding Lease Year, multiplied
by the Fixed Rent payable for such immediately preceding Lease Year and (y) such
Fixed Rent payable for the immediately preceding Lease Year (e.g., if the Base
Index is 200, the Applicable Price Index for the second Lease Year is 203, the
Applicable Price Index for the third Lease Year is 215, and the Fixed Rent
payable for the second Lease Year is $50,000.00, then the Applicable Price Index
for the third Lease Year exceeds the Applicable Price Index for the second Year
by 5.91% (i.e., the difference between 203 and 215), and the Fixed Rent derived
from the aforesaid calculation shall be $52,955.75 (5.91% of $50,000.00,
$2,955.00, plus $50,000.00); or
(II) an amount equal to the sum of (x)
five (5%) percent of the Fixed Rent for the immediately preceding
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Lease Year and (y) such Fixed Rent for the immediately preceding Lease Year
(e.g. if the Fixed Rent for the second Lease Year is $50,000.00, the Fixed Rent
derived from the aforesaid calculation for the third Lease Year shall be 5% of
$50,000.00, i.e., $2,500.00, plus $50,000.00 or $52,500.00).
The Landlord and the Tenant hereby acknowledge that it is the mutual intention
of the parties that for each and every Lease Year subsequent to the first Lease
Year during the Term hereof, the Fixed Rent payable by the Tenant to the
Landlord hereunder shall be increased by no less than five (5%) percent for each
and every Lease Year during the Term hereof subsequent to the first Lease Year.
SECTION 8.3. Upon notice by the Landlord to the Tenant of an increase
in the Fixed Rent pursuant to the provisions of this Article 8 ("INCREASE
NOTICE"), the Tenant shall pay the Fixed Rent as set forth in the Increase
Notice. Additionally, within ten (10) days of the date of the Increase Notice,
the Tenant shall pay any retroactive increases in Fixed Rent as set forth in the
Increase Notice.
ARTICLE 9
REQUIREMENTS OF LAW
SECTION 9.1. Tenant shall not do, and shall not permit any act or thing in
or upon the Premises which will invalidate or be in conflict with the
certificate of occupancy for the Premises or violate any Requirements. Tenant
shall, at Tenant's sole cost and expense, immediately take all action, including
but not limited to, making any required Alterations necessary to comply with all
Requirements [including, but not limited to, the Americans With Disabilities Act
of 1990 (the "ADA"), as modified and supplemented from time to time] which shall
or may impose any violation, order or duty upon Landlord or Tenant arising from,
or in connection with, the Premises, Tenant's occupancy, use or manner of use of
the Premises (including, without limitation, any occupancy, use or manner of use
that constitutes a "place of public accommodation" under the ADA), or any
installations in the Premises, or required by reason of a breach of any of
Tenant's covenants or agreements under this Lease, whether or not such
Requirements shall now be in effect or hereafter enacted or issued, and whether
or not any work required shall be ordinary or extraordinary or foreseen or
unforeseen as of the date hereof.
SECTION 9.2. (A) Tenant covenants and agrees that Tenant shall, at Tenant's
sole cost and expense, comply at all times with all Requirements governing the
use, generation, storage, treatment and/or disposal of any Hazardous Materials
(as defined
15
below), the presence of which results from or in connection with the act or
omission of Tenant or Persons Within Tenant's Control or the breach of this
Lease by Tenant or Persons Within Tenant's Control. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other toxic or
hazardous wastes, pollutants or substances, including, without limitation,
asbestos, PCBS, petroleum products and by-products, substances defined or listed
as "hazardous substances" or "toxic substances" or similarly identified in or
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 ET SEQ., and as hazardous wastes under the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6010, ET SEQ., any chemical
substance or mixture regulated under the Toxic Substance Control Act of 1976, as
amended, 15 U.S.C. 2601, ET SEQ., any "toxic pollutant" under the Clean Water
Act, 33 U.S.C. ss. 466 ET SEQ., as amended, any hazardous air pollutant under
the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ., hazardous materials identified in
or pursuant to the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802,
ET SEQ., and any hazardous or toxic substances or pollutant regulated under any
other Requirements including, without limitation, ECRA (as such term is
hereinafter defined). Tenant agrees to execute, from time to time, at Landlord's
request, affidavits, representations and the like concerning Tenant's best
knowledge and belief regarding the presence of Hazardous Materials in, on, under
or about the Premises. Tenant shall indemnify and hold harmless all Indemnitees
from and against any loss, claim, cost, damage, liability or expense (including
attorneys' fees and disbursements) arising by reason of any clean up, removal,
remediation, detoxification action or any other activity required or recommended
of any Indemnitees by any Governmental Authority by reason of the presence in,
on, under or about the Premises of any Hazardous Materials, as a result of or in
connection with the act or omission of Tenant or Persons Within Tenant's Control
or the breach of this Lease by Tenant or Persons Within Tenant's Control. The
foregoing covenants and indemnity shall survive the expiration or any
termination of this Lease.
(B) In addition to the foregoing, Tenant
shall, at its sole cost and expense, comply with any and all environmental
monitoring requirements of the New Jersey Department of Environmental Protection
and the Environmental Cleanup Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 ET.
SEQ. In order to comply with ECRA, the Tenant shall undertake, at its sole cost
and expense, all sampling required by the Landlord or the New Jersey Department
of Environmental protection ("NJDEP") and shall execute and deliver, upon
request, all documents and pay all fees necessary or desirable for such
compliance, which execution, delivery and/or payment may be requested by either
the Landlord and/or NJDEP. It is understood that this provision shall apply with
regard to any action which may or might require compliance with ECRA, including
without limitation, the
16
termination of this Lease, the change of use of the Premises, an assignment or
sublease of all or part of the Premises, bankruptcy, or the conveyance of title
to the Premises. It is understood that the provisions of this Section 9.2(B)
shall survive the expiration or earlier termination of this Lease.
SECTION 9.3. If Tenant shall receive notice of any violation of, or
defaults under, any Requirements, liens or other encumbrances applicable to the
Premises, Tenant shall give immediate written notice thereof to Landlord.
SECTION 9.4. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business and if the failure to secure
such license or permit would, in any way, affect Landlord or the Premises, then
Tenant, at Tenant's expense, shall promptly procure and thereafter maintain,
submit for inspection by Landlord, and at all times comply with the terms and
conditions of, each such license or permit.
ARTICLE 10
SUBORDINATION
SECTION 10.1. This Lease shall at all times, now and hereafter, be subject
and subordinate to each and every Mortgage, whether made prior to or after the
execution of this Lease, and to all extensions, supplements, amendments,
modifications, consolidations and replacements thereof or thereto, substitutions
therefor, and advances made thereunder. This clause shall be self-operative and
no further agreement of subordination shall be required to make the interest of
any Mortgagee superior to the interest of Tenant hereunder. In confirmation of
such subordination, Tenant shall promptly execute and deliver, at its own cost
and expense, any document, in recordable form if requested, that Landlord or any
Mortgagee may request to evidence such subordination; and if Tenant fails to
execute, acknowledge or deliver any such document within five (5) days after
request therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge and
deliver any such document for and on behalf of Tenant. Tenant shall not do
anything that would constitute a default under any Mortgage, or omit to do
anything that Tenant is obligated to do under the terms of this Lease so as to
cause Landlord to be in default thereunder.
SECTION 10.2. If, at any time prior to the expiration of the Term, any
Mortgagee comes into possession of the Premises, by receiver or otherwise,
Tenant agrees, at the election and upon demand of any owner of the Premises, or
of any Mortgagee in
17
possession of the Premises, to attorn, from time to time, to any such owner or
Mortgagee or any person acquiring the interest of Landlord as a result of any
such termination or as a result of a foreclosure of the Mortgage or the granting
of a deed in lieu of foreclosure, upon the then executory terms and conditions
of this Lease (except as provided below), for the remainder of the Term,
provided that such owner or Mortgagee, as the case may be, or receiver caused to
be appointed by any of the foregoing, is then entitled to possession of the
Premises. Any such attornment shall be made upon the condition that no such
owner or Mortgagee shall be:
(1) liable for any act or omission of any prior landlord
(including, without limitation, the then defaulting landlord); or
(2) subject to any defense or offsets (except as expressly set
forth in this Lease) which Tenant may have against any prior landlord
(including, without limitation, the then defaulting landlord); or
(3) bound by any payment of Rental which Tenant might have paid
for more than the current month to any prior landlord (including, without
limitation, the then defaulting landlord); or
(4) bound by any obligation to make any payment to Tenant which
was required to be made prior to the time such owner or Mortgagee succeeded to
any prior landlord's interest; or
(5) bound by any obligation to perform any work or to make
improvements to the Premises except for (i) repairs to the Premises or any part
thereof as a result of damage by fire or other casualty pursuant to Article 12,
but only to the extent that such repairs can be reasonably made from the net
proceeds of any insurance actually made available to such owner or Mortgagee and
(ii) repairs to the Premises as a result of a partial condemnation pursuant to
Article 13, but only to the extent that such repairs can be reasonably made from
the net proceeds of any award made available to such owner or Mortgagee. Tenant,
upon demand of any such owner or Mortgagee, shall execute, from time to time,
agreements in confirmation of the foregoing provisions of this Section 10.2,
satisfactory to any such owner or Mortgagee, and acknowledging such attornment
and setting forth the terms and conditions of its tenancy. Nothing contained in
this Section 10.2 shall be construed to impair any right otherwise exercisable
by any such owner or Mortgagee.
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SECTION 10.3. If requested by any Mortgagee or Landlord, Tenant shall
promptly execute and deliver, at Tenant's own cost and expense, any document in
accordance with the terms of this Article 10, in recordable form, to evidence
such subordination.
SECTION 10.4. At any time and from time to time upon not less than ten (10)
days' prior notice to Tenant or Landlord given by the other, or to Tenant given
by a Mortgagee, Tenant or Landlord, as the case may be, shall, without charge,
execute, acknowledge and deliver a statement in writing addressed to such party
as Tenant, Landlord or Mortgagee, as the case may be, may designate, in form
satisfactory to Tenant, Landlord or Mortgagee, as the case may be, certifying
all or any of the following: (i) that this Lease is unmodified and in full force
and effect (or if there have been modifications, that this Lease is in full
force and effect as modified and stating the modifications); (ii) the date that
the Term commenced and the date(s) that Fixed Rent and Additional Rent became
payable hereunder and the dates to which they have been paid; (iii) whether or
not, to the best knowledge of the signer of such certificate, Landlord is in
default in performance of any of the terms of this Lease and, if so, specifying
each such event of default of which the signer may have knowledge; (iv) whether
or not, to the best knowledge of the signer of such certificate, Tenant has
accepted possession of the Premises; (v) whether Tenant has made any claim
against Landlord under this Lease and, if so, the nature thereof and the dollar
amount, if any, of such claim; (vi) either that Tenant does not know of any
default in the performance of any provision of this Lease or specifying the
details of any default of which Tenant may have knowledge and stating what
action Tenant is taking or proposes to take with respect thereto; (vii) that, to
the best knowledge of Tenant, there are no proceedings pending or threatened
against Tenant before or by any court or administrative agency which, if
adversely decided, would materially or adversely affect the financial condition
or operations of Tenant or, if any such proceedings are pending or threatened to
the best knowledge of Tenant, specifying and describing the same; and (viii)
such further information with respect to the Lease or the Premises as Landlord
may reasonably request or Mortgagee may require; it being intended that any such
statement delivered pursuant hereto may be relied upon by any prospective
purchaser of the Premises or any part thereof or of the interest of Landlord in
any part thereof, by any Mortgagee or prospective Mortgagee or by any
prospective assignee of any Mortgage or by any assignee of Tenant.
The failure of either Tenant or Landlord to execute, acknowledge and
deliver a statement in accordance with the provisions of this Section 10.4
within said ten (10) day period shall constitute an acknowledgment by Tenant or
Landlord, as the case may be, which may be relied on by any person or entity of
any nature whatsoever who would be entitled to rely upon any such
19
statement, that such statement as submitted by Landlord or Tenant, as the case
may be, is true and correct.
SECTION 10.5. As long as any Mortgage exists, Tenant shall not seek to
terminate this Lease by reason of any act or omission of Landlord until Tenant
has given not less than thirty (30) days prior written notice of such act or
omission to all Mortgagees, and if any such Mortgagee notifies Tenant within
thirty (30) days following receipt of such notice of its intention to remedy
such act or omission, until a reasonable period of time shall have elapsed
following the giving of such notice, during which period such Mortgagee shall
have the right, but not the obligation, to remedy such act or omission.
ARTICLE 11
INSURANCE; PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
SECTION 11.1.
(A) Neither Landlord nor Landlord's agents shall be liable for
any injury or damage to persons or property, or interruption of Tenant's
business, resulting from fire or other casualty; nor shall Landlord or
Landlord's agents be liable for any such damage caused by Persons other than the
Landlord or the Landlord's agents or by construction of any private, public or
quasi-public work; nor shall Landlord be liable for any latent defect in the
Premises.
(B) Tenant shall give written notice to Landlord, immediately after
Tenant learns thereof, of any accident, emergency, occurrence for which Landlord
might be liable, fire or other casualty and all damages to or defects in the
Premises for the repair of which Landlord might be responsible or which
constitutes Landlord's property. Such notice shall be given by telecopy or
personal delivery to the address(es) of Landlord in effect for notice.
SECTION 11.2. Tenant shall not do or permit to be done any act or thing in
or upon the Premises which will invalidate or be in conflict with the terms of
the State of New Jersey standard form of fire insurance with extended coverage,
or with rental, liability, boiler, sprinkler, water damage, war risk or other
insurance policies covering the Premises and the fixtures and property therein
(hereinafter referred to as "BUILDING INSURANCE"); and Tenant, at Tenant's own
expense, shall comply with all rules, orders, regulations and requirements of
all insurance boards, and shall not do or permit anything to be done in or upon
the Premises or bring or keep anything therein or use the Premises in a manner
which increases the rate of premium for
20
any of the Building Insurance or any property or equipment located therein over
the rate in effect at the commencement of the Term of this Lease.
SECTION 11.3.
(A) If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the rate of premium for Building Insurance or other
insurance on the property and equipment of Landlord shall be higher than it
otherwise would be, Tenant shall reimburse Landlord for that part of the
insurance premiums thereafter paid by Landlord which shall have been charged
because of such failure by Tenant. Tenant shall make said reimbursement on the
first day of the month following such payment by Landlord.
(B) In any action or proceeding wherein Landlord and Tenant are
parties, a schedule of any insurance rate for the Premises issued by any
insurance board establishing insurance premium rates for the Premises shall be
prima facie evidence of the facts therein stated and of the several items and
charges in the insurance premium rates then applicable to the Premises.
SECTION 11.4.
(A) Tenant shall, at Tenant's own cost and expense, obtain, maintain
and keep in full force and effect during the Term, for the benefit of Landlord,
any Mortgagees and Tenant, commercial general liability insurance (including
premises operation, bodily injury, personal injury, death, independent
contractors, products and completed operations, broad form contractual liability
and broad form property damage coverages) in a combined single limit amount of
not less than Five Million and 00/100 ($5,000,000.00) Dollars, against all
claims, demands or actions with respect to damage, injury or death made by or on
behalf of any person or entity, arising from or relating to the conduct and
operation of Tenant's business in, on or about the Premises (which shall include
Tenant's signs, if any), or arising from or related to any act or omission of
Tenant or of Persons Within Tenant's Control. If Tenant shall install or
maintain one or more pressure vessels to serve Tenant's operations at the
Premises, Tenant shall, at Tenant's own cost and expense, obtain, maintain and
keep in full force and effect, for the benefit of Landlord, any Mortgagees and
Tenant, appropriate boiler or other insurance coverage therefor in an amount not
less than Three Million and 00/100 ($3,000,000.00) Dollars (it being understood
and agreed, however, that the foregoing shall not be deemed a consent by
Landlord to the installation and/or maintenance of any such pressure vessels in
the Premises, which installation and/or maintenance shall at all times be
subject to the prior written consent of Landlord). Whenever, in Landlord's
reasonable judgment, good business practice and changing conditions indicate
21
a need for additional amounts or different types of insurance coverage, Tenant
shall, within ten (10) days after Landlord's request, obtain such insurance
coverage, at Tenant's expense.
(B) Tenant, at Tenant's sole cost and expense, shall maintain
insurance protecting and indemnifying Tenant against any and all damage to or
loss of any Alterations and leasehold improvements, including any made by
Landlord to prepare the Premises for Tenant's occupancy, and Tenant's Property,
and all claims and liabilities relating thereto.
(C) Landlord and any Mortgagees shall be named as insureds in said
policies and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be: (i) written
as "occurrence" policies; (ii) written as primary policy coverage and not
contributing with or in excess of any coverage which Landlord may carry; and
(iii) issued by reputable and independent insurance companies rated in Best's
Insurance Guide, or any successor thereto (or if there be none, an organization
having a national reputation) as having a general policyholder rating of "A+"
and a financial rating of at least "13", and which are licensed to do business
in the State of New Jersey. Tenant shall, not later than ten (10) Business Days
prior to the Commencement Date, deliver to Landlord the policies of insurance or
certificates thereof, together with evidence of payment of premiums thereon, and
shall thereafter furnish to Landlord, at least thirty (30) days prior to the
expiration of any such policies and any renewal thereof, a new policy or
certificate in lieu thereof, with evidence of the payment of premiums thereon.
Each of said policies shall also contain a provision whereby the insurer agrees
not to cancel, fail to renew, diminish or materially modify said insurance
policy(ies) without having given Landlord and any Mortgagees at least thirty
(30) days prior written notice thereof.
(D) Tenant shall pay all premiums and charges for all of said
policies, and, if Tenant shall fail to make any payment when due or carry any
such policy, Landlord may, but shall not be obligated to, make such payment or
carry such policy, and the amount paid by Landlord, with interest thereon (at
the Applicable Rate), shall be repaid to Landlord by Tenant on demand, and all
such amounts so repayable, together with such interest, shall be deemed to
constitute Additional Rent hereunder. Payment by Landlord of any such premium,
or the carrying by Landlord of any such policy, shall not be deemed to waive or
release the default of Tenant with respect thereto.
SECTION 11.5.
(A) Tenant shall cause each insurance policy carried by Tenant and
insuring the Premises and Tenant's Alterations, leasehold improvements, space
equipment, furnishings, furniture,
22
contents and fixtures against loss, damage or destruction by fire or other
casualty, to be written in a manner so as to provide that the insurance company
waives all rights of recovery by way of subrogation against Landlord or Tenant
in connection with any loss or damage covered by any such policy. If the release
of either Landlord or Tenant shall contravene any law with respect to
exculpatory agreements, the liability of the party in question shall be deemed
not released, but no action or rights shall be sought or enforced against such
party unless and until all rights and remedies against the insurer are exhausted
and such party shall be unable to collect such insurance proceeds.
(B) The waiver of subrogation referred to in Section 11.5(A) above
shall extend to the agents and employees of each party, but only if and to the
extent that such waiver can be obtained without additional charge (unless such
party shall pay such charge). Nothing contained in this Section 11.5 shall be
deemed to relieve the Tenant from any duty imposed elsewhere in this Lease to
repair, restore and rebuild the Premises, in whole or in part.
ARTICLE 12
DESTRUCTION BY FIRE OR OTHER CAUSE
SECTION 12.1. If the Premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate written notice thereof to
Landlord. Landlord shall, subject to the provisions of Sections 12.2 and 12.3
below, proceed with reasonable diligence, after receipt of the net proceeds of
insurance, to repair or cause to be repaired such damage at its expense, but in
no event shall such repair or restoration be greater in scope than the quantity
quality of construction of the Premises as of the Commencement Date; and, if the
Premises, or any part thereof, shall be rendered untenantable by reason of such
damage and such damage shall not be due to the fault of Tenant or Persons Within
Tenant's Control, then the Fixed Rent hereunder, or an amount thereof
apportioned according to the area of the Premises so rendered untenantable (if
less than the entire Premises shall be so rendered untenantable), shall be
abated for the period from the date of such damage to the date when the repair
of such damage shall have been substantially completed. If Landlord or any
Mortgagee shall be unable to collect the insurance proceeds (including rent
insurance proceeds) applicable to such damage because of some action or inaction
on the part of Tenant or Persons Within Tenant's Control, then the cost of
repairing such damage shall be paid by Tenant and there shall be no abatement of
Fixed Rent. Tenant covenants and agrees to cooperate with Landlord and any
Mortgagee in their efforts to collect insurance proceeds (including rent
insurance proceeds)
23
payable to such parties. Landlord shall not be liable for any delay which may
arise by reason of adjustment of insurance on the part of Landlord and/or
Tenant, or any cause beyond the control of Landlord or contractors employed by
Landlord.
It is expressly understood that if Landlord is prevented from substantially
completing the repairs by reason of any acts of Tenant or Persons Within
Tenant's Control, including, without limitation, by reason of the performance of
any Alterations, or by reason of Tenant's failure or refusal to comply or to
cause its architects, engineers, designers and contractors to comply with any of
Tenant's obligations described or referred to in this Lease, then such work
shall be deemed substantially completed on the date when the work would have
been substantially completed but for such delay, and the expiration of the
abatement of Tenant's obligations to pay Fixed Rent shall not be postponed by
reason of such delay. Any additional costs to Landlord to complete any work
occasioned by such delay shall be paid by Tenant to Landlord, as Additional
Rent, within ten (10) days after demand therefor by Landlord.
SECTION 12.2. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from damage from fire or other casualty or the repair thereof. Tenant
understands that Landlord, in reliance upon Section 11.4 hereof, will not carry
insurance of any kind on Tenant's furnishings, furniture, contents, fixtures,
space equipment and leasehold improvements, and that Landlord shall not be
obligated to repair any damage thereto or replace the same.
SECTION 12.3. (A) Notwithstanding anything to the contrary contained in
Sections 12.1 and 12.2 above, in the event that:
(I) at least fifty (50%) percent of the rentable square feet of
the Premises shall be damaged by a fire or other casualty so that substantial
alteration or reconstruction of the Premises shall, in Landlord's sole opinion,
be required (whether or not the Premises shall have been damaged by such fire or
other casualty and without regard to the structural integrity of the Premises);
or
(II) the Premises shall be totally or substantially damaged or
shall be rendered wholly or substantially untenantable; or
(III) there shall be any damage to the Premises within the last
two (2) years of the Term wherein the cost of repair exceeds an amount equal to
three (3) monthly installments of Fixed Rent, then, as a result of any
circumstances described in subparagraphs (i), (ii) or (iii) hereof, the Landlord
may, in Landlord's sole and absolute discretion, terminate this Lease and
24
the term and estate hereby granted, by notifying Tenant in writing of such
termination within one hundred twenty (120) days after the date of such damage.
In the event that such a notice of termination shall be given, then this Lease
and the term and estate hereby granted shall expire as of the date of
termination stated in said notice with the same effect as if that were the Fixed
Expiration Date, and the Fixed Rent and Additional Rent hereunder shall be
apportioned as of such date.
SECTION 12.4. Except as may be provided in Section 11.5, nothing herein
contained shall relieve Tenant from any liability to Landlord or to Landlord's
insurers in connection with any damage to the Premises by fire or other casualty
if Tenant shall be legally liable in such respect.
ARTICLE 13
EMINENT DOMAIN
SECTION 13.1. If the whole of the Premises is acquired or condemned for any
public or quasi-public use or purpose, this Lease and the Term shall end as of
the date of the vesting of title with the same effect as if said date were the
Fixed Expiration Date. If only a part of the Premises is so acquired or
condemned then, (1) except as hereinafter provided in this Section 13.1, this
Lease and the Term shall continue in effect but, if a part of the Premises is so
acquired or condemned, from and after the date of the vesting of title, the
Fixed Rent and Additional Rent, if any, shall be reduced in the proportion which
the area of the part of the Premises so acquired or condemned bears to the total
area of the Premises immediately prior to such acquisition or condemnation; (2)
whether or not the Premises are affected thereby, Landlord, at Landlord's
option, may give to Tenant, within sixty (60) days next following the date upon
which Landlord receives notice of vesting of title, a thirty (30) day notice of
termination of this Lease; and (3) if the part of the Premises so acquired or
condemned contains more than seventy-five (75%) percent of the total area of the
Premises immediately prior to such acquisition or condemnation, or if, by reason
of such acquisition or condemnation, Tenant no longer has access to the
Premises, Tenant, at Tenant's option, may give to Landlord, within thirty (30)
days next following the date upon which Tenant receives notice of vesting of
title, a thirty (30) day notice of termination of this Lease. If any such thirty
(30) day notice of termination is given, by Landlord or Tenant, this Lease and
the Term shall come to an end and expire upon the expiration of said thirty (30)
days with the same effect as if the date of expiration of said thirty (30) days
were the Fixed Expiration Date. In the event of any termination of this Lease
and the Term pursuant to the provisions of this Section 13.1, the Fixed Rent
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or Additional Rent shall be apportioned as of the date of sooner termination and
any prepaid portion of the Fixed Rent for any period after such date shall be
refunded by Landlord to Tenant.
SECTION 13.2. In the event of any such acquisition or condemnation of all
or any part of the Premises, Landlord shall be entitled to receive the entire
award for any such acquisition or condemnation. Tenant shall have no claim
against Landlord or the condemning authority for the value of any unexpired
portion of the Term and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this Section 13.2 shall be
deemed to prevent Tenant from making a separate claim in any condemnation
proceedings for the value of any Tenant's Property included in such taking, and
for any moving expenses, so long as Landlord's award is not reduced thereby.
ARTICLE 14
ASSIGNMENT; SUBLETTING; MORTGAGE; ETC.
SECTION 14.1. (A) The Tenant shall not (a) assign this Lease (whether by
operation of law, transfers of interests in Tenant or otherwise); or (b)
mortgage or encumber Tenant's interest in this Lease, in whole or in part; or
(c) sublet, or permit the subletting of, the Premises or any part thereof.
Notwithstanding the provisions of this Section 14.1, the use of the Premises by
any Person AFFILIATED (as such term is hereinafter defined) with the Tenant or
under the COMMON CONTROL (as such term is hereinafter defined) of Coach USA,
Inc., as the case may be, shall not be deemed an assignment of this Lease or a
sublet of the Premises; PROVIDED, HOWEVER, that such use of the Premises as
aforesaid shall not violate or be prohibited by any of the provisions of any
Mortgage then encumbering the Premises, if any. For purposes of this Article 14,
a Person shall be deemed to be an "AFFILIATE" of the Tenant or under the "COMMON
CONTROL" of Coach USA if such Person is a member of a "parent-subsidiary
controlled group" [as such term is defined by Section 1563(a)(1) of the Internal
Revenue Code of 1986, as amended] or a member of a "brother-sister controlled
group" [as such term is defined by Section 1563(a)(2) of the Internal Revenue
Code of 1986, as amended] of which either Coach USA, Inc. or the Tenant, as the
case may be, is a member.
(B) Notwithstanding the provisions otherwise set forth in this
Article 14, any reorganization, consolidation and/or restructuring of the Tenant
in which the issued and outstanding stock of the Tenant remains under the COMMON
CONTROL (as such term is defined in Section 14.1 hereinabove) of Coach USA, Inc.
26
shall not be deemed an assignment of this Lease or a sublet of the Premises;
PROVIDED, HOWEVER, that the same shall not violate or be prohibited by any of
the provisions of any Mortgage then encumbering the Premises, if any.
SECTION 14.2. If Tenant's interest in this Lease shall be assigned in
violation of the provisions of this Article 14, such assignment shall be invalid
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy. If the Premises or any
part thereof are sublet to, or occupied by, or used by, any person other than
Tenant, whether or not in violation of this Article 14, Landlord, after default
by Tenant under this Lease, may collect any item of Rental or other sums paid by
the subtenant, user or occupant as a fee for its use and occupancy, and shall
apply the net amount collected to the Fixed Rent and the items of Rental
reserved in this Lease. No such assignment, subletting, occupancy, or use, nor
any such collection or application of Rental or fee for use and occupancy, shall
be deemed a waiver by Landlord of any term, covenant or condition of this Lease
or the acceptance by Landlord of such assignee, subtenant, occupant or user as
Tenant hereunder, nor shall the same, in any circumstances, relieve Tenant of
any of its obligations under this Lease.
SECTION 14.3.
Except as otherwise set forth in Section 14.1 hereof, for purposes of
this Article 14, (i) any increase in the amount of issued and/or outstanding
capital stock of any corporate tenant and/or the creation of one or more
additional classes of capital stock of any corporate tenant, in a single
transaction or a series of related or unrelated transactions, resulting in a
change in the legal or beneficial ownership of such tenant so that the
shareholders of such tenant existing immediately prior to such transaction or
series of transactions shall no longer own a majority of the issued and
outstanding capital stock of such tenant shall be deemed an assignment of this
Lease and (ii) any Person or legal representative of Tenant, to whom Tenant's
interest under this Lease passes by operation of law, or otherwise, shall be
bound by the provisions of this Article 14. Tenant agrees to furnish to Landlord
on request at any time such information and assurances as Landlord may
reasonably request that Tenant has not violated the provisions of this Article
14.
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ARTICLE 15
ACCESS TO PREMISES
SECTION 15.1. Tenant shall permit Landlord, Landlord's agents and any
public utilities servicing the Premises to erect, use and maintain, now and
hereafter, concealed ducts, pipes and conduits in and through the Premises.
Landlord or Landlord's agents shall have the right to enter the Premises at all
reasonable times upon (except in case of emergency) reasonable prior notice,
which notice may be oral, to examine the same, to show the same to prospective
purchasers or Mortgagees and to make such repairs, alterations, improvements or
additions (i) as Landlord may deem necessary or desirable to the Premises, or
(ii) which Landlord may elect to perform at least ten (10) days after notice
(except in an emergency when no notice shall be required) following Tenant's
failure to make repairs or perform any work which Tenant is obligated to make or
perform under this Lease, or (iii) for the purpose of complying with
Requirements, and Landlord shall be allowed to take all material into and upon
the Premises that may be required therefor without the same constituting an
eviction or constructive eviction of Tenant in whole or in part and the Fixed
Rent (and any other item of Rental) shall in no respect abate or be reduced by
reason of said repairs, alterations, improvements or additions, wherever
located, or while the same are being made, by reason of loss or interruption of
business of Tenant, or otherwise. Landlord shall promptly repair any damage
caused to the Premises by such work, alterations, improvements or additions.
SECTION 15.2. If Tenant is not present when for any reason entry into the
Premises may be necessary or permissible, Landlord or Landlord's agents may
enter the same without rendering Landlord or such agents liable therefor.
SECTION 15.3. Landlord also shall have the right at any time, without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, stairs, toilets or other
parts of the Premises, provided any such change does not unreasonably interfere
with, or deprive Tenant of access to, the Premises; to put so-called "solar
film" or other energy-saving installations on the inside and outside of the
windows; and to change the name, number or designation by which the Premises is
commonly known.
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ARTICLE 16
CERTIFICATE OF OCCUPANCY
SECTION 16.1. Tenant shall not at any time, now or hereafter, use or occupy
the Premises, directly or indirectly, in violation of the certificate of
occupancy for the Premises and in the event that any Governmental Authority
hereafter contends or declares by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose that is a violation
of such certificate of occupancy, Tenant shall, upon three (3) Business Days'
written notice from Landlord or any Government Authority, immediately
discontinue such use of the Premises.
ARTICLE 17
DEFAULT
SECTION 17.1. Each of the following events shall be an "EVENT OF DEFAULT"
under this Lease:
(A) if Tenant shall on any occasion default in the payment when due of
any installment of Fixed Rent or Additional Rent or in the payment when due of
any other item of Rental and such default shall continue for five (5) business
days from and after the date when the same shall be due; or
(B) if the Premises shall become vacant or abandoned; or
(C) if Tenant's interest in this Lease shall devolve upon or pass to
any person, whether by operation of law or otherwise, except as specifically
permitted by the provisions of Article 14 hereof; or
(D) (1) if Tenant shall not, or shall be unable to, or shall admit in
writing Tenant's inability to, as to any obligation, pay Tenant's debts as they
become due; or
(2) if Tenant shall commence or institute any case, proceeding or
other action (a) seeking relief on Tenant's behalf as debtor, or to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to Tenant or Tenant's debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or
29
(b) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part
of its property; or
(3) if Tenant shall make a general assignment
for the benefit of creditors; or
(4) if any case, proceeding or other action shall be commenced or
instituted against Tenant (a) seeking to have an order for relief entered
against Tenant as debtor or to adjudicate Tenant a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to Tenant or Tenant's
debts under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, or (b)
seeking appointment of a receiver, trustee, custodian or other similar official
for Tenant or for all or any substantial part of Tenant's property, which either
(i) results in any such entry of an order for relief, adjudication of bankruptcy
or insolvency or such an appointment or the issuance or entry of any other order
having a similar effect or (ii) remains undismissed for a period of sixty (60)
days; or
(5) if a trustee, receiver or other custodian shall be appointed
for any substantial part of the assets of Tenant which appointment is not
vacated or effectively stayed within thirty (30) days; or
(E) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be observed
or performed including, without limitation, the terms and conditions of Article
27 hereof, and Tenant shall fail to remedy such default within ten (10) days
after written notice by Landlord to Tenant of such default, or if such default
is of such a nature that it cannot with due diligence be completely remedied
within said period of ten (10) days and the continuation of which for the period
required for cure will not subject Landlord to the risk of criminal liability or
foreclosure of any Mortgage, if Tenant shall not, (i) within said ten (10) day
period advise Landlord of Tenant's intention duly to institute all steps
necessary to remedy such situation, (ii) duly institute within said ten (10) day
period, and thereafter diligently and continuously prosecutes to completion all
steps necessary to remedy the same and (iii) completes such remedy within such
time after the date of the giving of said notice by Landlord as shall reasonably
be necessary.
SECTION 17.2. If an Event of Default shall occur, Landlord may, at any time
thereafter, at Landlord's option, give written notice to Tenant stating that
this Lease and the Term shall
30
expire and terminate on the date specified in such notice, which date shall not
be less than three (3) days after the giving of such notice, whereupon this
Lease and the Term and all rights of Tenant under this Lease shall automatically
expire and terminate as if the date specified in the notice given pursuant to
this Section 17.2 were the Fixed Expiration Date and Tenant immediately shall
quit and surrender the Premises, but Tenant shall remain liable for damages as
provided herein or pursuant to law. Anything contained herein to the contrary
notwithstanding, if such termination shall be stayed by order of any court
having jurisdiction over any proceeding described in Section 17.1(D), or by
federal or state statute, then, following the expiration of any such stay, or if
the trustee appointed in any such proceeding, Tenant or Tenant as
debtor-in-possession fails to assume Tenant's obligations under this Lease
within the period prescribed therefor by law or within one hundred twenty (120)
days after entry of the order for relief or as may be allowed by the court, or
if said trustee, Tenant or Tenant as debtor-in-possession shall fail to provide
adequate protection of Landlord's right, title and interest in and to the
Premises or adequate assurance of the complete and continuous future performance
of Tenant's obligations under this Lease, Landlord, to the extent permitted by
law or by leave of the court having jurisdiction over such proceeding, shall
have the right, at its election, to terminate this Lease on three (3) days'
notice to Tenant, Tenant as debtor-in-possession or said trustee and upon the
expiration of said three (3) day period this Lease shall cease and expire as
aforesaid and Tenant, Tenant as debtor-in-possession or said trustee shall
immediately quit and surrender the Premises as aforesaid.
SECTION 17.3. If, at any time, (i) Tenant shall consist of two (2) or more
Persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (iii) Tenant's interest in this
Lease has been assigned, the word "Tenant" as used and referred to in this
Lease, shall be deemed to mean any one or more of the persons primarily or
secondarily liable for Tenant's obligations under this Lease. Any monies
received by Landlord from or on behalf of Tenant during the pendency of any
proceeding of the types referred to in Section 17.1(D) hereof shall be deemed
paid as compensation for the use and occupancy of the Premises and the
acceptance of any such compensation by Landlord shall not be deemed an
acceptance of Rental or a waiver on the part of Landlord of any rights under
Section 17.2 hereof.
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ARTICLE 18
REMEDIES AND DAMAGES
SECTION 18.1.
(A) If any Event of Default shall occur, or this Lease and the Term
shall expire and come to an end as provided in Article 17 hereof:
(1) Tenant shall quit and peacefully surrender the Premises to
Landlord, and Landlord and its agents may immediately, or at any time after such
Event of Default or after the date upon which this Lease and the Term shall
expire and come to an end, re-enter the Premises or any part thereof, without
notice, either by summary proceedings, or by any other applicable action or
proceeding or otherwise (without being liable to indictment, prosecution or
damages therefor), and may repossess the Premises and dispossess Tenant and any
other persons from the Premises by summary proceedings or otherwise and remove
any and all of their property and effects from the Premises (and Tenant shall
remain liable for damages as provided herein or pursuant to law); and
(2) Landlord, at Landlord's option, may relet the whole or any
part or parts of the Premises from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Fixed Expiration Date, at such rent or rentals and upon such
other conditions, which may include concessions and free rent periods, as
Landlord, in Landlord's sole discretion, may determine; provided, however, that
Landlord shall have no obligation to relet the Premises or any part thereof and
shall in no event be liable for refusal or failure to relet the Premises or any
part thereof, or, in the event of any such reletting, for refusal or failure to
collect any rent due upon any such reletting, and no such refusal or failure
shall operate to relieve Tenant of any liability under this Lease or otherwise
affect any such liability, and Landlord, at Landlord's option, may make such
Alterations, in and to the Premises as Landlord, in Landlord's sole discretion,
shall consider advisable or necessary in connection with any such reletting or
proposed reletting, without relieving Tenant of any liability under this Lease
or otherwise affecting any such liability.
(B) Tenant hereby waives the service of any notice of intention to
re-enter or to institute legal proceedings to that end that may otherwise be
required to be given under any present or future law. Tenant, on its own behalf
and on behalf of all persons claiming through or under Tenant, including all
creditors of Tenant, does further hereby waive any and all rights that
32
Tenant and all such persons might otherwise have under any present or future law
to redeem the Premises, or to re-enter or repossess the Premises, or to restore
the operation of this Lease, after (a) Tenant shall have been dispossessed by a
judgment or by warrant of any court, or (b) any re-entry by Landlord, or (c) any
expiration or termination of this Lease and the Term, whether such dispossess,
re-entry, expiration or termination is by operation of law or pursuant to the
provisions of this Lease. The words "re-entry", "re-enter" and "re-entered" as
used in this Lease shall not be deemed to be restricted to their technical legal
meanings. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any term, covenant or condition of
this Lease, Landlord shall have the right to enjoin such breach and the right to
invoke any other remedy allowed by law or in equity as if re-entry, summary
proceedings and other special remedies were not provided in this Lease for such
breach. The right to invoke the remedies hereinbefore set forth are cumulative
and shall not preclude Landlord from invoking any other remedy allowed at law or
in equity.
SECTION 18.2.
(A) If this Lease and the Term shall expire and come to an end as
provided in Article 17 hereof, or by or under any summary proceeding or any
other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 18.1 hereof, or by or under any summary proceeding or any
other action or proceeding, then, in any of said events:
(1) Tenant shall pay to Landlord all Fixed Rent, Additional Rent
and other items of Rental payable under this Lease by Tenant to Landlord to the
date upon which this Lease and the Term shall have expired and come to an end or
to the date of re-entry upon the Premises by Landlord, as the case may be;
(2) Tenant also shall be liable for and shall pay to Landlord, as
damages, any deficiency ("DEFICIENCY") between the Rental for the period which
otherwise would have constituted the unexpired portion of the Term and the net
amount, if any, of rents collected under any reletting effected pursuant to the
provisions of Section 18.1(A)(2) for any part of such period (after first
deducting from the rents collected under any such reletting all of Landlord's
expenses in connection with the termination of this Lease, Landlord's re-entry
upon the Premises and such reletting including, but not limited to, all
repossession costs, brokerage commissions, attorneys' fees and disbursements,
alteration costs and other expenses of preparing the Premises for such
reletting); any such Deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for payment of installments of Fixed Rent;
Landlord shall be entitled to recover from Tenant each monthly Deficiency
33
as the same shall arise, and no suit to collect the amount of the Deficiency for
any month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any Deficiency
as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant
shall pay to Landlord, on demand, in lieu of any further Deficiency as and for
liquidated and agreed final damages, a sum equal to the amount by which the
unpaid Rental for the period which otherwise would have constituted the
unexpired portion of the Term exceeds the then fair and reasonable rental value
of the Premises for the same period; if, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the Premises, or any
part thereof, are relet by Landlord for the period which otherwise would have
constituted the unexpired portion of the Term, or any part thereof, the amount
of rent reserved upon such reletting shall be deemed, prima facie, to be the
fair and reasonable rental value for the part or the whole of the Premises so
relet during the term of the reletting.
(B) Tenant shall in no event be entitled to any rents collected or
payable under any reletting, whether or not such rents exceed the Fixed Rent
reserved in this Lease. Nothing contained in Article 17 hereof or this Article
18 shall be deemed to limit or preclude the recovery by Landlord from Tenant of
the maximum amount allowed to be obtained as damages by any statute or rule of
law, or of any sums or damages to which Landlord may be entitled in addition to
the damages set forth in this Section 18.2.
ARTICLE 19
FEES AND EXPENSES
SECTION 19.1. If an Event of Default shall have occurred, Landlord may (1)
perform the same for the account of Tenant, or (2) make any expenditure or incur
any obligation for the payment of money in connection with any obligation owed
to Landlord, including, but not limited to, reasonable attorneys' fees and
disbursements in instituting, prosecuting or defending any action or proceeding,
and in either case the cost thereof, with interest thereon at the Applicable
Rate, shall be deemed to be Additional Rent hereunder and shall be paid by
Tenant to Landlord within ten (10) days after rendition of any bill or statement
to Tenant therefor. In addition, Tenant shall pay Landlord any reasonable
attorneys' fees and disbursements incurred by Landlord in connection with any
proceeding in which the value for the use and occupancy of the Premises by
Tenant is being
34
determined (whether or not any such proceeding results from a default by Tenant
under this Lease).
SECTION 19.2. If Tenant shall fail to pay any installment of Fixed Rent,
Additional Rent or any other item of Rental for a period longer than five (5)
days after the same shall have become due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent, Additional Rent or other item of
Rental, as the case may be, as a late charge and as Additional Rent, a sum equal
to interest at the Applicable Rate on the amount unpaid, computed from the date
such payment was due, without regard to any such grace period, to and including
the date of payment.
ARTICLE 20
NO REPRESENTATIONS BY LANDLORD
SECTION 20.1. Landlord and Landlord's agents have made no representations
or promises with respect to the Premises except as herein expressly set forth,
and no rights, easements or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth herein. Tenant shall accept possession
of the Premises in its "as is" condition on the Commencement Date, and Landlord
shall have no obligation to perform any work or make any installations in order
to prepare the Premises for Tenant's occupancy. The taking of occupancy of the
whole or any part of the Premises by Tenant shall be conclusive evidence, as
against Tenant, that Tenant accepts possession of the same and that the Premises
were in good and satisfactory condition at the time such occupancy was so taken.
All references in this Lease to the consent or approval of Landlord shall be
deemed to mean the written consent or approval executed by Landlord and no other
consent or approval of Landlord shall be effective for any purpose whatsoever.
ARTICLE 21
END OF TERM
SECTION 21.1. Upon the expiration or other termination of this Lease,
Tenant shall quit and surrender to Landlord the Premises, vacant, broom clean,
in good order and condition, ordinary wear and tear excepted, and Tenant shall
remove all of Tenant's Alterations as may be required pursuant to Article 6.
Tenant shall also remove all of Tenant's Property and all other personal
property and personal effects of all persons claiming through or under Tenant,
and shall pay the cost of repairing
35
all damage to the Premises occasioned by such removal. Any Tenant's Property or
other personal property that remains in, on or at the Premises after the
termination of this Lease shall be deemed to have been abandoned and either may
be retained by Landlord as its property or may be disposed of in such manner as
Landlord may see fit. If Tenant's Property or other personal property or any
part thereof is sold, Landlord may receive and retain the proceeds of such sale
as the property of Landlord. Any expense incurred by Landlord in removing or
disposing of Tenant's Property or other personal property or Alterations
required to be removed as provided in Article 6, as well as the cost of
repairing all damage to the Premises caused by such removal, shall be reimbursed
to Landlord by Tenant, as Additional Rent, on demand.
SECTION 21.2. If the Expiration Date falls on a day which is not a Business
Day, then Tenant's obligations under Section 21.1 shall be performed on or prior
to such Business Day.
SECTION 21.3. If the Premises are not surrendered upon the expiration or
other termination of this Lease, Tenant hereby indemnifies Landlord against
liability resulting from delay by Tenant in so surrendering the Premises,
including any claims made by any succeeding tenant or prospective tenant founded
upon such delay and agrees to be liable to Landlord for (i) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the Premises in order to induce such tenant not
to terminate its lease by reason of the holding-over by Tenant and (ii) the loss
of the benefit of the bargain if any such tenant shall terminate its lease by
reason of the holding-over by Tenant.
SECTION 21.4. Tenant's obligations under this Article 21 shall survive the
expiration or termination of this Lease.
ARTICLE 22
POSSESSION
SECTION 22.1. If Landlord shall be unable to deliver possession of the
Premises on the Commencement Date for any reason whatsoever, Landlord shall not
be subject to any liability therefor and the validity of this Lease shall not be
impaired thereby nor the Expiration Date extended, but the Commencement Date
shall be postponed until five (5) Business Days following notice from Landlord
that the Premises are available for occupancy by Tenant. Tenant expressly waives
any right to rescind
36
this Lease under any present or future statute and further expressly waives the
right to recover any damages that may result from Landlord's failure to deliver
possession of the Premises on the Commencement Date.
ARTICLE 23
NO WAIVER
SECTION 23.1. No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys to the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises.
SECTION 23.2. The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease shall not prevent a subsequent act, which would have originally
constituted a violation, from having all of the force and effect of an original
violation. The receipt by Landlord of Fixed Rent, Additional Rent or any other
item of Rental with knowledge of the breach of any covenant of this Lease shall
not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord, unless such waiver shall be in writing
and shall be signed by Landlord. No payment by Tenant or receipt by Landlord of
a lesser amount than the Rental then due and payable shall be deemed to be other
than on account of the earliest item(s) of Rental, or as Landlord may elect to
apply the same, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance due of the Rental or to otherwise pursue any other
remedy in this Lease provided. This Lease contains the entire agreement between
the parties and all prior negotiations and agreements are merged herein. Any
executory agreement hereafter made shall be ineffective to change, discharge or
effect an abandonment of this Lease in whole or in part unless such executory
agreement is in writing and signed by the party against whom enforcement of the
change, discharge or abandonment is sought.
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ARTICLE 24
WAIVER OF TRIAL BY JURY
SECTION 24.1. Tenant hereby waives trial by jury in any action or
proceeding brought by or against Tenant with respect to any matters whatsoever
arising out of or in any way connected with this Lease, the relationship of
Landlord and Tenant, Tenant's use or occupancy of the Premises, whether during
or after the Term, or for the enforcement of any remedy under any statute,
emergency or otherwise. If Landlord shall commence any summary proceeding
against Tenant, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding, and will not seek to consolidate such
proceeding with any other action which may have been or will be brought in any
other court by Tenant or Landlord.
ARTICLE 25
INABILITY TO PERFORM
SECTION 25.1. This Lease and the obligation of Tenant to pay Rental
hereunder and to perform all of the other covenants and agreements hereunder on
the part of Tenant to be performed shall in no way be affected, impaired or
excused because Landlord is unable to fulfill any of Landlord's obligations
under this Lease, expressly or implicitly to be performed by Landlord, or
because Landlord is unable to make or is delayed in making any repairs, or is
unable to supply or is delayed in supplying any services, if Landlord is
prevented from or delayed in so doing by reason of acts of God, casualty,
strikes or labor troubles, accident, governmental preemption in connection with
an emergency, Requirements, conditions of supply and demand which have been or
are affected by war or other emergency, or any other cause whatsoever, whether
similar or dissimilar to the foregoing, beyond Landlord's reasonable control
("UNAVOIDABLE DELAYS").
ARTICLE 26
NOTICES
SECTION 26.1.
(A) Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease ("NOTICE(S)") shall be in writing and
shall be deemed sufficiently given or rendered if delivered by hand
38
(against a signed receipt) or if deposited with a nationally recognized
overnight courier and in either case addressed:
IF TO TENANT:
(a) at Tenant's address first set forth in this Lease or (b)
at any place where Tenant or any agent or employee of Tenant
may be found if given subsequent to Tenant's vacating,
deserting, abandoning or surrendering the Premises, and
IF TO LANDLORD:
at Landlord's address first set forth in this
Lease, Attn: Mr. Frank Gallagher, with a copy
to Todtman, Young, Tunick, Nachamie, Hendler
& Spizz, P.C., 425 Park Avenue, New York, New
York 10022 Attention: Martin Todtman, Esq.
and (y) any Mortgagee who may have requested
the same, by Notice given in accordance with
the provisions of this Article 26, at the
address designated by such Mortgagee,
or to such other address(es) as either Landlord or Tenant may
designate as its new address(es) for such purpose by notice
given to the other in accordance with the provisions of this
Article 26.
(B) Notices shall be deemed to have been rendered or given (a) on the
date delivered, if delivered by hand, or (b) on the day after being deposited
with a nationally recognized overnight courier as provided in Section 26.1(A)
hereof.
ARTICLE 27
LANDLORD'S RIGHT TO TERMINATE
SECTION 27.1 Notwithstanding anything contained herein to the contrary,
the Landlord shall have the sole and exclusive option to terminate this Lease
upon ninety (90) days prior written notice ("TERMINATION NOTICE PERIOD") to the
Tenant in the event that the Landlord shall have received an offer to purchase
the Premises, or any part thereof. Time shall be of the essence with respect to
the Tenant's obligation to vacate the Premises in accordance with the provisions
of Article 21 hereof on or before the expiration of the Termination Notice
Period. In the event that the Tenant shall fail to vacate the Premises as
aforesaid, then in such event, the Landlord shall be entitled to avail
39
itself of any and all rights and remedies against the Tenant, whether at law,
equity or under and pursuant to the terms and conditions of this Lease
including, without limitation, any rights and/or remedies which may be available
to the Landlord in accordance with the provisions of Article 18 hereof.
ARTICLE 28
BROKER
SECTION 28.1. Landlord represents and warrants to Tenant that Landlord has
not dealt with any broker or Person in connection with this Lease. Tenant
represents and warrants to Landlord that Tenant has not dealt with any broker or
Person in connection with this Lease. The execution and delivery of this Lease
by Tenant shall be conclusive evidence that Tenant acknowledges that Landlord
has relied upon the foregoing representation and warranty. Tenant shall
indemnify and hold harmless Landlord from and against any and all claims for
commission, fee or other compensation by any broker or Person who claims to have
dealt with Tenant in connection with this Lease and for any and all costs
incurred by Landlord in connection with such claims, including, without
limitation, attorneys' fees and disbursements. The provisions of this Article 28
shall survive the expiration or earlier termination of this Lease.
ARTICLE 29
INDEMNITY
SECTION 29.1. Tenant shall not do or permit any act or thing to be done in,
at or upon the Premises that may subject any Indemnitee to any liability or
responsibility for injury, damage to persons or property or to any liability by
reason of the existence or application of, compliance with or violation of any
Requirement, but shall exercise such control over the Premises as to protect
each Indemnitee fully against any such liability and responsibility. Tenant
shall indemnify and save harmless the Indemnitees from and against (a) all
claims of whatever nature against the Indemnitees arising from any act, omission
or negligence of Tenant or Persons Within Tenant's Control, (b) all claims
against the Indemnitees arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring in or about
the Premises during the Term or during Tenant's occupancy of the Premises,
unless and to the extent caused by the gross negligence of Landlord or its
shareholders, officers and employees, (c) all claims against the Indemnitees
arising from any accident, injury or damage occurring outside of the Premises
but anywhere within or about the
40
Premises, where such accident, injury or damage results or is claimed to have
resulted from an act, omission or negligence of Tenant or Persons Within
Tenant's Control, and (d) any breach, violation or non-performance of any
covenant, condition or agreement contained in this Lease to be fulfilled, kept,
observed and performed by Tenant. This indemnity and hold harmless agreement
shall include indemnity from and against any and all liability, claims, fines,
suits, demands, costs and expenses of any kind or nature (including, without
limitation, attorneys' fees and disbursements) incurred in or in connection with
any such claim or proceeding brought thereon, and the defense thereof.
SECTION 29.2. If any claim, action or proceeding is made or brought against
any Indemnitee, against which claim, action or proceeding Tenant is obligated to
indemnify such Indemnitee pursuant to the terms of this Lease, then, upon demand
by the Indemnitee, Tenant, at its sole cost and expense, shall resist or defend
such claim, action or proceeding in the Indemnitee's name, if necessary, by such
attorneys as the Indemnitee may select, including, without limitation, attorneys
for the Indemnitee's insurer. The provisions of this Article 29 shall survive
the expiration or earlier termination of this Lease.
ARTICLE 30
ADJACENT EXCAVATION; SHORING
SECTION 30.1. If an excavation shall be made upon land adjacent to the
Premises, or shall be authorized to be made, Tenant shall, upon reasonable
advance notice, afford to the person or entity causing or authorized to cause
such excavation, a limited license to enter upon the Premises for the purpose of
doing such work as said person or entity deems necessary to preserve the walls
of any building located on the Premises from injury or damage and to support the
same by proper foundations without any claim for eviction or constructive
eviction, damages or indemnity against Landlord, or diminution or abatement of
Rental.
ARTICLE 31
RENEWAL OPTIONS
SECTION 31.1. Provided that the Tenant is not in default with respect
to any of its obligations to the Landlord under and pursuant to the terms and
conditions of this Lease at the time each Option (as such term is hereinafter
defined) is to be exercised, the Tenant shall have the option to renew this
Lease
41
for seven (7) additional five (5) year periods [the option with respect to each
additional five (5) year period is referred to herein as an "OPTION" and,
collectively, all of the options granted herein are referred to as the
"OPTIONS"] as follows:
OPTION PERIOD 1 shall commence on May 13, 2001 and shall continue up to
and including May 12, 2006.
OPTION PERIOD 2 shall commence on May 13, 2006 and shall continue up to
and including May 12, 2011.
OPTION PERIOD 3 shall commence on May 13, 2011 and shall continue up to
and including May 12, 2016.
OPTION PERIOD 4 shall commence on May 13, 2016 and shall continue up to
and including May 12, 2021.
OPTION PERIOD 5 shall commence on May 13, 2021 and shall continue up to
and including May 12, 2026.
OPTION PERIOD 6 shall commence on May 13, 2026 and shall continue up to
and including May 12, 2031.
OPTION PERIOD 7 shall commence on May 13, 2031 and shall continue up to
and including May 12, 2036.
(each of the aforementioned option periods is individually referred to
herein as an "OPTION PERIOD" and, collectively, all of the
aforementioned Option Periods are referred to herein as "OPTION
PERIODS")
SECTION 31.2. Each Option granted to the Tenant pursuant to the
provisions of Section 31.1 hereof shall be exercised by the Tenant giving
written notice to the Landlord of the Tenant's intent to exercise the Option not
less than one-hundred eighty (180) days prior to the expiration of the Initial
Term or not less than one-hundred eighty (180) days prior to the expiration of
the Option Period which is then in effect, as the case may be.
SECTION 31.3. In the event that the Tenant exercises the Option with
respect to any Option Period, the Landlord and the Tenant hereby agree that this
Lease shall continue in full force and effect and remain unamended during the
applicable Option Period AND specifically, without limitation, that the Fixed
Rent payable by the Tenant to the Landlord during such Option Period shall be
increased on each anniversary date from and after the Commencement Date in
accordance with the provisions of Article 8 hereof.
42
ARTICLE 32
RENT REGULATION
SECTION 32.1. If at any time or times during the Term of this Lease, the
Rental reserved in this Lease is not fully collectible by reason of any
Requirement, Tenant shall enter into such agreements and take such other steps
as Landlord may request and as may be legally permissible to permit Landlord to
collect the maximum rents that may from time to time during the continuance of
such legal rent restriction be legally permissible (and not in excess of the
amounts reserved under this Lease). Upon the termination of such legal rent
restriction (a) the Rental shall become and thereafter be payable hereunder in
accordance with the amounts reserved in this Lease for the remainder of the
Term, and (b) Tenant shall pay to Landlord, if legally permissible, an amount
equal to (i) the items of Rental that would have been paid pursuant to this
Lease but for such legal rent restriction less (ii) the rents paid by Tenant to
Landlord during the period or periods such legal rent restriction was in effect.
This provision shall survive the expiration or earlier termination of this Lease
to the maximum enforceable extent.
ARTICLE 33
COVENANT OF QUIET ENJOYMENT
SECTION 33.1. Landlord covenants that, upon Tenant paying all Fixed Rent
and Additional Rent and observing and performing all the terms, agreements,
covenants, provisions and conditions of this Lease on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Premises,
subject nevertheless to the terms and conditions of this Lease; provided,
however, that no eviction of Tenant by reason of the foreclosure of any Mortgage
now or hereafter affecting the Premises shall be construed as a breach of this
covenant nor shall any action by reason thereof be brought against Landlord, and
provided further that this covenant shall bind and be enforceable against
Landlord or any successor to Landlord's interest, subject to the terms hereof,
only so long as Landlord or any successor to Landlord's interest, is in
possession and is collecting rent from Tenant but not thereafter.
43
ARTICLE 34
MISCELLANEOUS
SECTION 34.1. This Lease is presented for signature by Tenant and it is
understood that this Lease shall not constitute an offer by or be binding upon
Landlord unless and until Landlord shall have executed and delivered a fully
executed copy of this Lease to Tenant.
SECTION 34.2. The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Premises, as the case may be, and in the event of any such sale,
conveyance, assignment or transfer, Landlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord under this Lease
thereafter arising, and the transferee shall be deemed to have assumed, subject
to the remaining provisions of this Section 34.2, all obligations of the
Landlord under this Lease arising after the effective date of the transfer. No
trustee, partner, principal, shareholder, director or officer of Landlord
(collectively, the "PARTIES") shall have any direct or personal liability for
the performance of Landlord's obligations under this Lease, and Tenant shall
look solely to Landlord's interest in the Premises to enforce Landlord's
obligations hereunder and shall not otherwise seek any damages against Landlord
or any of the Parties whatsoever. Tenant shall not look to any other property or
assets of Landlord or any property or assets of any of the Parties in seeking
either to enforce Landlord's obligations under this Lease or to satisfy a
judgment for Landlord's failure to perform such obligations.
SECTION 34.3. Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Additional Rent or
Rental, shall constitute rent for the purposes of Section 502(b)(7) of the
Bankruptcy Code.
SECTION 34.4. Neither this Lease nor any memorandum of this Lease shall be
recorded without the prior written consent of the Landlord, which consent may be
withheld by the Landlord in its sole and absolute discretion.
SECTION 34.5. Except as otherwise expressly stated in this Lease, any
consent or approval required to be obtained from Landlord may be granted by
Landlord in its sole and absolute discretion. In any instance in which Landlord
agrees not to act unreasonably, Tenant hereby waives any claim for damages
against or liability of Landlord that Tenant may have based upon any assertion
that Landlord has unreasonably withheld or unreasonably
44
delayed any consent or approval requested by Tenant, and Tenant agrees that its
sole remedy shall be an action or proceeding to enforce any related provision or
for specific performance, injunction or declaratory judgment. If with respect to
any required consent or approval Landlord is required by the express provisions
of this Lease not to unreasonably withhold or delay its consent or approval, and
if it is determined in any such proceeding referred to in the preceding sentence
that Landlord acted unreasonably, the requested consent or approval shall be
deemed to have been granted; however, Landlord shall have no liability
whatsoever to Tenant for its refusal or failure to give such consent or
approval. Tenant's sole remedy for Landlord's unreasonably withholding or
delaying consent or approval shall be as provided in this Section 34.5.
SECTION 34.6. Landlord shall have the right at any time, and from time to
time, to amend unilaterally the provisions of this Lease if Landlord is advised
by its counsel that all or any portion of the Rental paid by Tenant to Landlord
hereunder is, or may be deemed to be, unrelated business taxable income within
the meaning of the United States Internal Revenue Code or regulations issued
thereunder, and Tenant agrees that it will execute all documents necessary to
effect any such amendment, provided that no such amendment shall increase
Tenant's payment obligations or other liability under this Lease nor reduce
Landlord's obligations hereunder.
SECTION 34.7. If Tenant shall remain in possession of the Premises after
the Expiration Date, without the execution by both Tenant and Landlord of a new
lease, Tenant, at the election of Landlord, shall be deemed to be occupying the
Premises as a Tenant from month-to-month, at a monthly rental equal to three
(3x) times the Rental payable during the last month of the Term, subject to all
the other conditions, provisions and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy.
SECTION 34.8. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted. If any words or phrases in this Lease are stricken out or
otherwise eliminated, whether or not any other words or phrases have been added,
this Lease shall be construed as if the words or phrases so stricken out or
otherwise eliminated were never included in this Lease and no implication or
inference shall be drawn from the fact that such words or phrases were stricken
out or otherwise eliminated.
SECTION 34.9. If any of the provisions of this Lease, or the application
thereof to any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
provisions to persons or circumstances other than those as to whom or which it
is held
45
invalid or unenforceable, shall not be affected thereby and shall remain valid
and enforceable, and every provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
SECTION 34.10. Landlord shall have the right to erect any gate, chain or
other obstruction or to close off any portion of the Premises to the public at
any time to the extent necessary to prevent a dedication thereof for public use.
SECTION 34.11. Tenant hereby represents to Landlord that it is not
entitled, directly or indirectly, to diplomatic or sovereign immunity and Tenant
agrees that in all disputes arising directly or indirectly out of this Lease
Tenant shall be subject to service of process in, and the jurisdiction of the
courts of, the State of New Jersey. The provisions of this Section 34.11 shall
survive the expiration of this Lease.
SECTION 34.12. This Lease contains the entire agreement between the parties
and all prior negotiations and agreements are merged into this Lease. Except as
provided in Section 34.6 this Lease may not be changed, abandoned or discharged,
in whole or in part, nor may any of its provisions be waived except by a written
agreement that (a) expressly refers to this Lease, (b) is executed by the party
against whom enforcement of the change, abandonment, discharge or waiver is
sought and (c) is permissible under the Mortgage(s).
SECTION 34.13. Any apportionment or prorations of Rental to be made under
this Lease shall be computed on the basis of a three hundred sixty (360) day
year, with twelve (12) months of thirty (30) days each.
SECTION 34.14. The laws of the State of Jersey applicable to contracts made
and to be performed wholly within the State of New Jersey shall govern and
control the validity, interpretation, performance and enforcement of this Lease
without regard to principles of conflicts of law.
SECTION 34.15. If Tenant is a corporation, each person executing this Lease
on behalf of Tenant hereby covenants, represents and warrants that Tenant is a
duly incorporated or duly qualified (if foreign) corporation and is authorized
to do business in the State of New Jersey (a copy of evidence thereof to be
supplied to Landlord upon request); and that each person executing this Lease on
behalf of Tenant is an officer of Tenant and that he or she is duly authorized
to execute, acknowledge and deliver this Lease to Landlord (a copy of a
resolution to that effect to be supplied to Landlord upon request).
46
SECTION 34.16. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Lease nor the intent of any provision thereof.
SECTION 34.17. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective legal representatives, heirs, successors, and, except as otherwise
provided in this Lease, their assigns.
SECTION 34.18. For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(A) The words "herein", "hereof", "hereunder" and "hereby"and words of
similar import shall be construed to refer to this Lease as a whole and not to
any particular Article or Section unless expressly so stated.
(B) Tenant's obligations hereunder shall be construed in every instance as
conditions as well as covenants, each separate and independent of any other
terms of this Lease.
(C) Reference to Landlord as having "no liability" or being "without
liability" shall mean that Tenant shall not be entitled to terminate this Lease,
or to claim actual or constructive eviction, partial or total, or to receive any
abatement or diminution of rent, or to be relieved in any manner of any of its
other obligations hereunder, or to be compensated for loss or injury suffered or
to enforce any other right or liability whatsoever against Landlord under or
with respect to this Lease or with respect to Tenant's use or occupancy of the
Premises.
(D) Reference to "termination of this Lease" or "expiration of this Lease"
and words of like import includes expiration or sooner termination of this Lease
and the Term and the estate hereby granted or cancellation of this Lease
pursuant to any of the provisions of this Lease or by law. Upon the termination
of this Lease, the Term and estate granted by this Lease shall end at noon on
the date of termination as if such date were the Fixed Expiration Date, and
neither party shall have any further obligation or liability to the other after
such termination except (i) as shall be expressly provided for in this Lease,
and (ii) for such obligations as by their nature under the circumstances can
only be, or by the provisions of this Lease, may be, performed after such
termination, and, in any event, unless expressly otherwise provided in this
Lease, any liability for a payment (which shall be apportioned as of such
termination) which shall have accrued to or with respect to any period ending at
the time of termination shall survive the termination of this Lease.
47
(E) Words and phrases used in the singular shall be deemed to include the
plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender.
(F) The rule of "ejusdem generis" shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
(G) Transit, Coach, Tours, Bus Lines and Transportation, each hereby
represent, warrant, acknowledge and agree that they shall be JOINTLY AND
SEVERALLY liable for any and all of the obligations of the Tenant hereunder of
any nature whatsoever, and that the failure by any one of Transit, Coach, Tours,
Bus Lines or Transportation to perform any obligation of the Tenant hereunder
shall not affect, in any manner whatsoever, the Tenant's liability with respect
to such obligation.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
as of the day and year first above written.
LIBERTY STREET CORPORATION, LANDLORD
By: ______________________________
COMMUNITY TRANSIT LINES, INC., TENANT
By: ______________________________
COMMUNITY TOURS, INC., TENANT
By: ______________________________
COMMUNITY COACH, INC., TENANT
By: ______________________________
COMMUNITY BUS LINES, INC., TENANT
By: ______________________________
COMMUNITY TRANSPORTATION, INC., TENANT
By: ______________________________
48
EXHIBIT 10.17
AGREEMENT OF LEASE
BETWEEN
TRI-COUNTY BUS LINES, INC.,
LANDLORD
AND
COMMUNITY TRANSIT LINES, INC.,
COMMUNITY BUS LINES, INC.,
COMMUNITY TOURS, INC.,
COMMUNITY COACH, INC.,
COMMUNITY TRANSPORTATION, INC.,
(COLLECTIVELY, THE TENANT)
=========================================================
DATED: MAY 13, 1996
=========================================================
PREMISES
312-330 BROADWAY (BLOCK 3272.A, LOTS 11,14,17 AND 19);
65-71 LIBERTY STREET (BLOCK 3274.B, LOT 5); AND
324 HOWE AVENUE (BLOCK 3273.A, LOT 19)
PASSAIC, NEW JERSEY
ON THE
OFFICIAL TAX MAP OF THE CITY OF PASSAIC
AGREEMENT OF LEASE, made as of the 13th day of May, 1996, between
TRI-COUNTY BUS LINES, INC., a New Jersey corporation, having an address at 315
Howe Avenue, Passaic, New Jersey 07055, as Landlord, and COMMUNITY TRANSIT
LINES, INC., a New Jersey corporation, having an address at 315 Howe Avenue,
Passaic, New Jersey 07055 ("TRANSIT"), COMMUNITY TOURS, INC., a New Jersey
corporation, having an address at 315 Howe Avenue, Passaic, New Jersey 07055
("TOURS"), COMMUNITY COACH, INC., a New Jersey corporation, having an address at
315 Howe Avenue, Passaic, New Jersey 07055 ("COACH"), COMMUNITY BUS LINES, INC.,
a New Jersey corporation, having an address at 315 Howe Avenue, Passaic, New
Jersey 07055 ("BUS"), COMMUNITY TRANSPORTATION, INC., a New Jersey corporation,
having an address at 315 Howe Avenue, Passaic, New Jersey 07055
("TRANSPORTATION")[Transit, Tours, Coach, Bus and Transportation are
collectively referred to herein as the "TENANT"].
WITNESSETH:
WHEREAS, the Landlord is the owner of certain premises known as and by
the street address of 312-330 Broadway, Passaic, New Jersey and known and
designated on the Official Tax Map of the City of Passaic as Block 3272.A, Lots
11,14,17 and 19 AND certain premises known as and by the street address of 324
Howe Avenue, Pasaic, New Jersey and known and designated on the Official Tax Map
of the City of Passaic as Block 3273.A, Lot 19 AND certain premises known as and
by the street address of 65-71 Liberty Street, Passaic, New Jersey and known and
designated on the Official Tax Map of the City of Passaic as Block 3274.B, Lot
5, as more particularly described on Schedule "A", annexed hereto and made a
part hereof; and
WHEREAS, the Landlord desires to rent the aforementioned premises to
the Tenant and the Tenant desires to rent the aforementioned premises from the
Landlord.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, for themselves,
as well as their respective legal representatives, heirs, successors and
assigns, hereby agree as follows:
ARTICLE 1
GLOSSARY
For the purposes of this Lease, the following terms shall have the meanings
indicated below:
"ADA" shall have the meaning set forth in Section 9.1
hereof.
"ADDITIONAL RENT" shall have the meaning set forth in
Section 2.2 hereof.
"ALTERATION" or "ALTERATIONS" shall mean any and all alterations,
decorations, installations, repairs, improvements, additions, replacements or
other physical changes of any nature whatsoever in or about the Premises at any
time, now or hereafter.
"APPLICABLE PRICE INDEX" shall have the meaning set forth in Section
8.1(iv) hereof.
"APPLICABLE RATE" shall mean the lesser of (x) three percentage points
above the then current Base Rate, or (y) the maximum rate permitted by
applicable law.
"BANKRUPTCY CODE" shall mean 11 U.S.C. Section 101 ET SEQ., or any statute,
federal or state, of similar nature and purpose, now or hereafter.
"BASE INDEX" shall have the meaning set forth in
Section 8.1(iii) hereof.
"BASE RATE" shall mean the rate of interest publicly announced from time to
time by Citibank, N.A., or its successor, as its "base rate" (or such other term
as may be used by Citibank, N.A., from time to time, for the rate presently
referred to as its "base rate").
"BUILDING SYSTEMS" shall mean the mechanical, electrical, sanitary,
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service or support systems of any nature whatsoever located at or on the
Premises, BUT shall not include installations made by Tenant or fixtures or
appliances (regardless of whether or not such fixtures or appliances are owned
by the Tenant or the Landlord).
"BUILDING INSURANCE" shall have the meaning set forth in
Section 11.2 hereof.
"BUREAU" shall have the meaning set forth in
Section 8.1(i) hereof.
"BUSINESS DAYS" shall mean all days, excluding Saturdays, Sundays and all
days observed as holidays by the State of New Jersey or the federal government.
"COMMENCEMENT DATE" May 13, 1996.
"DEFICIENCY" shall have the meaning set forth in Section
18.2(A)(2) hereof.
"ECRA" shall have the meaning set forth in Section 9.2(B)
hereof.
3
"EVENT OF DEFAULT" shall have the meaning set forth in
Section 17.1 hereof.
"EXPIRATION DATE" shall mean the Fixed Expiration Date or such other date
on which the Term ends pursuant to any of the terms, conditions or covenants of
this Lease or pursuant to law.
"FIXED EXPIRATION DATE" May 12, 2001.
"FIXED RENT" $152,580.00 per annum ($12,715.00 per month) for the first
Lease Year (as such term is hereinafter defined) to be adjusted thereafter on
each anniversary date from and after the Commencement Date in accordance with
the provisions of Article 8 of this Lease.
"GOVERNMENT AUTHORITY" or "GOVERNMENT AUTHORITIES" shall mean the United
States of America, the State of New Jersey, the City of Passaic, and/or any
political subdivision thereof and any agency, department, commission, board,
bureau or instrumentality of any of the foregoing, now existing or hereafter
created, having jurisdiction over the Premises or any portion thereof.
"HAZARDOUS MATERIALS" shall have the meaning set forth in
Section 9.2(A) hereof.
"INCREASE NOTICE" shall have the meaning set forth in
Section 8.3 hereof.
"INDEMNITEES" shall mean Landlord, its shareholders, officers, directors,
employees, agents and contractors (and the partners, shareholders, officers,
directors and employees of any of the Landlord's agents or contractors).
"INITIAL TERM" shall mean five (5) years.
"LANDLORD", on the date as of which this Lease is made, shall mean
Tri-County Bus Lines, Inc., a New Jersey corporation, but thereafter, "Landlord"
shall mean any fee owner of the Premises.
"LEASE YEAR" shall mean each twelve (12) month period commencing on
each anniversary date from and after the Commencement Date.
"MORTGAGE(S)" shall mean any trust indenture or mortgage which may now
or hereafter affect the Premises and all extensions, supplements, amendments,
modifications, consolidations, refinancings and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"MORTGAGEE(S)" shall mean any trustee or mortgagee or holder
of a Mortgage.
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"NJDEP" shall have the meaning set forth in Section 9.2(B)
hereof.
"NOTICE(S)" shall have the meaning set forth in Section
27.1(A) hereof.
"OPTION" or "OPTIONS" shall have the meaning set forth in
Section 31.1 hereof.
"OPTION PERIOD" or "OPTION PERIODS" shall have the meaning set forth in
Section 31.1 hereof.
"PARTIES" shall have the meaning set forth in Section 34.2
hereof.
"PERMITTED USE" shall mean general, executive and administrative
offices, parking and terminal facilities in connection with Tenant's business as
a motor vehicle transportation company and uses related thereto including the
evolution of the Tenant's business consistent with the evolution of the motor
vehicle transportation industry in general.
"PERSON(S) OR PERSON(S)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"PERSONS WITHIN TENANT'S CONTROL" shall mean and include Tenant, all of
Tenant's respective shareholders, directors, officers, agents, contractors,
sub-contractors, servants, employees, licensees and invitees as well as any of
the heirs, successors, representatives and assigns of any of the foregoing.
"PREMISES" shall mean all that certain plot, piece and parcel of land,
together with all buildings and improvements thereon erected, known as and by
the street address of 312-330 Broadway, Passaic, New Jersey and known and
designated on the Official Tax Map of the City of Passaic as Block 3272.A, Lots
11,14,17 and 19 AND all that certain plot, piece and parcel of land, together
with all buildings and improvements thereon erected, known as and by the street
address of 324 Howe Avenue, Pasaic, New Jersey and known and designated on the
Official Tax Map of the City of Passaic as Block 3273.A, Lot 19 AND all that
certain plot, piece and parcel of land, together with all buildings and
improvements thereon erected, known as and by the street address of 65-71
Liberty Street, Passaic, New Jersey and known and designated on the Official Tax
Map of the City of Passaic as Block 3274.B, Lot 5, as more particularly
described on Schedule "A", annexed hereto and made a part hereof.
"PRICE INDEX" shall have the meaning set forth in
Section 8.1(ii) hereof.
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"RENTAL" shall mean and be deemed to include Fixed Rent, Additional Rent
and any other sums payable, now or hereafter, by Tenant hereunder.
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, retroactive and prospective, of all
Governmental Authorities, now existing or hereafter created, which affect,
directly or indirectly, the Premises and/or the maintenance, use, operation or
occupation of the Premises, (ii) all requirements, obligations and conditions of
all instruments of record on the date of this Lease, and (iii) all requirements,
obligations and conditions imposed by any fire rating agency or by the carrier
of Landlord's hazard insurance policy for the Premises.
"TAXES" shall have the meaning set forth in Section 3.1
hereof.
"TENANT", on the date as of which this Lease is made, shall mean the Tenant
named in this Lease, but thereafter "Tenant" shall mean only the tenant under
this Lease at the time in question; provided, however, that the Tenant named in
this Lease and any and all successor tenant(s) hereunder shall not be released
and relieved from any liability hereunder in the event of any assignment of this
Lease or a sublet, in whole or in part, of the Premises.
"TENANT'S PROPERTY" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings and other
movable items of personal property owned by the Tenant.
"TERM", on the date as of which this Lease is made shall mean five (5)
years, but thereafter shall be deemed to include any Option Period for which the
Tenant exercises its Option pursuant to the provisions of Article 31 hereof.
"TERMINATION NOTICE PERIOD" shall have the meaning set forth in Section
27.1 hereof.
"UNAVOIDABLE DELAYS" shall have the meaning set forth in
Article 25 hereof.
ARTICLE 2
DEMISE; PREMISES; TERM; RENT
SECTION 2.1. Landlord hereby leases to Tenant and Tenant
hereby hires from Landlord the Premises for the Term to commence
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on the Commencement Date and to end on the Fixed Expiration Date, unless earlier
terminated as provided herein.
SECTION 2.2. Commencing upon the Commencement Date, Tenant shall pay to
Landlord, in lawful money of the United States of America, without notice or
demand, by good and sufficient check at the office of Landlord or at such other
place as Landlord may designate from time to time, the following:
(A) the Fixed Rent, as such term is defined in Article 1
hereof, which shall be payable in equal monthly installments in advance on the
first day of each and every calendar month during the Term, except that the
first monthly installment of Fixed Rent shall be payable by Tenant upon
execution and delivery of this Lease; and
(B) additional rent ("ADDITIONAL RENT") consisting of all other sums
of money as shall become due from and be payable by Tenant hereunder (for
default in the payment of which Landlord shall have the same remedies as for a
default in the payment of Fixed Rent).
SECTION 2.3. If the Commencement Date is other than the first day of a
calendar month, or the Fixed Expiration Date is other than the last day of a
calendar month, Fixed Rent for such month shall be prorated on a per diem basis.
SECTION 2.4. Tenant shall pay the Fixed Rent and Additional Rent when
due without abatement, deduction, counterclaim, setoff or defense of any nature
whatsoever.
ARTICLE 3
REAL ESTATE TAXES; MORTGAGE(S)
SECTION 3.1. The Tenant represents, warrants, covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all Taxes (as hereinafter
defined) of any nature whatsoever assessed or imposed against the Premises for
each and every Lease Year during the Term of this Lease. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant pursuant to the
provisions of this Section 3.1 shall include an accurate copy of the invoice,
statement, bill or similar document issued by the relevant Governmental
Authority or Governmental Authorities, as the case may be, with respect to the
Taxes for which payment is demanded. For purposes of this Section 3.1, "TAXES"
shall include, without limitation, any and all taxes assessed against the
Premises, all personal property taxes, all ad valorem taxes and any and all
other taxes assessed against the
7
Premises by any Governmental Authority, now or hereafter.
SECTION 3.2. The Tenant represents, warrants and covenants and agrees
that it shall, within five (5) days of written demand by the Landlord to the
Tenant, pay to the Landlord, as Additional Rent, any and all amounts which may
be due and owing under and pursuant to the terms and conditions of any Mortgage
or Mortgages, as the case may be, encumbering the Premises, now or hereafter,
during the Term of this Lease including, but not limited to, any extensions,
supplements, amendments, modifications, consolidations, refinancings and
replacements of any such Mortgage or Mortgages provided that:
(A) the principal balance of any Mortgage subsequent to any extension,
supplement, amendment, modification, consolidation, refinancing or
replacement shall not exceed the outstanding principal balance of the
Mortgage which is to be extended, supplemented, amended, modified,
consolidated, refinanced or replaced at the time of such extension,
supplement, amendment, modification, consolidation, refinancing or
replacement, as the case may be; and
(B) the amount of the monthly payments of principal and interest
payable pursuant to the terms and conditions of any Mortgage subsequent
to any extension, supplement, amendment, modification, consolidation,
refinancing or replacement shall not exceed the amount of the monthly
payments with respect to the Mortgage which is to be extended,
supplemented, amended, modified, consolidated, refinanced or replaced
at the time of such extension, supplement, amendment, modification,
consolidation, refinancing or replacement, as the case may be; and
(C) the terms of any extended, supplemented, amended, modified,
consolidated, refinanced or replaced Mortgage shall be no more
financially onerous than the provisions of the such Mortgage prior to
such extension, supplement, amendment, modification, consolidation,
refinancing or replacement, as the case may be; and
(D) the term of any Mortgage extended, supplemented, amended, modified,
consolidated, refinanced or replaced shall be no less than the term of
such Mortgage prior to such extension, supplementation, amendment,
modification, consolidation, refinancing or replacement, as the case
may be.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 shall not apply with respect to
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any amounts which may be due and owing under and pursuant to the terms and
conditions of any Mortgage securing additional indebtedness (above and beyond
any Mortgage or Mortgages existing as of the date hereof) which first becomes a
recorded lien on the Premises subsequent to the date of this Lease and which is
executed and delivered by the Landlord without the consent of the Tenant. The
Landlord hereby agrees that any demand given by the Landlord to the Tenant for
payment of Additional Rent pursuant to the provisions of this Section 3.2 shall
include, ONLY to the extent provided to the Landlord by the Mortgagee, an
accurate copy of the invoice, statement, bill or similar document issued by such
Mortgagee or Mortgagees, as the case may be, with respect to any amount for
which payment of Additional Rent is demanded by the Landlord under and pursuant
to the provisions of this Section 3.2.
ARTICLE 4
UTILITIES
SECTION 4.1. The Tenant represents, warrants, covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all charges incurred by the
Landlord for any and all utilities supplied to the Premises including, without
limitation, electricity, water, heating oil and/or natural gas. The Landlord
hereby agrees that any demand given by the Landlord to the Tenant pursuant to
the provisions of this Section 4.1 shall include an accurate copy of the
invoice, statement, bill or similar document issued by the public utility or any
private company providing such utility, as the case may be, with respect to any
utility for which payment is demanded.
SECTION 4.2. Landlord shall not be liable in any way to Tenant for any
interruption or failure of or defect in the supply or character of any utility
furnished to the Premises, now or hereafter, or for any loss, damage or expense
Tenant may sustain if either the quantity or character of any utility is changed
or is no longer suitable for Tenant's requirements, whether by reason of any
requirement, act or omission of the public utility serving the Premises or for
any other reason whatsoever. Notwithstanding the provisions of this Section 4.2,
the Landlord shall be responsible for any and all actual damages suffered by the
Tenant as a result of any interruption of utility service caused solely by the
Landlord's failure to remit (prior to the expiration of any applicable grace
period) to the appropriate public utility or private company providing such
utility, as the case may be, any amount which has been paid by the Tenant to the
Landlord pursuant to the provisions of Section 4.1 hereof.
9
SECTION 4.3. Tenant shall at all times comply with the rules, regulations,
terms and conditions applicable to service, equipment, wiring, as well as any
and all requirements of the public utility supplying electricity to the
Premises. Tenant shall not, without Landlord's prior written consent in each
instance (which consent may be withheld by the Landlord in its reasonable
discretion), connect any fixtures, machinery, appliances or equipment to the
Premises electric distribution system or make any alteration or addition to
Tenant's machinery, appliances or equipment, or the electric system of the
Premises, if the effect thereof would be to increase the electrical load in the
Premises. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall be provided by Landlord and the cost thereof
shall be deemed Additional Rent due hereunder and shall be forthwith paid by
Tenant upon Landlord's demand.
SECTION 4.4. If any Taxes are imposed upon Landlord with respect to any
utility furnished as a service to Tenant by any Governmental Authority, Tenant
agrees that such Taxes shall be reimbursed by Tenant to Landlord upon written
demand. The Landlord hereby agrees that any demand given by the Landlord to the
Tenant pursuant to the provisions of this Section 4.4 shall include an accurate
copy of the invoice, statement, bill or similar document issued by the relevant
Governmental Authority or Governmental Authorities, as the case may be, with
respect to the Taxes for which payment is demanded.
ARTICLE 5
USE AND OCCUPANCY
SECTION 5.1. Tenant shall use and occupy the Premises for the Permitted Use
and for no other purpose of any nature whatsoever.
ARTICLE 6
ALTERATIONS
SECTION 6.1.
(A) (1) Prior to making any Alterations, Tenant shall (i)
submit to Landlord detailed plans and specifications for approval by the
Landlord (including layout, architectural, electrical, mechanical and structural
drawings) and that comply with all Requirements for each proposed Alteration,
and Tenant shall not commence any such Alteration without first obtaining
Landlord's approval of such plans and specifications, (ii) at
10
Tenant's expense, obtain all permits, approvals and certificates required by any
Governmental Authorities, and (iii) furnish to Landlord duplicate original
policies or certificates thereof for worker's compensation insurance (covering
all persons to be employed by Tenant, and Tenant's contractors and
subcontractors, in connection with such Alteration) and commercial general
liability insurance (including premises operation, bodily injury, personal
injury, death, independent contractors, products and completed operations, broad
form contractual liability and broad form property damage coverages) in such
form, with such companies, for such periods and in such amounts as Landlord may
reasonably approve, naming Landlord and its agents and any Mortgagee, as
additional insureds. Upon completion of such Alteration, Tenant, at Tenant's
expense, shall obtain certificates of final approval of such Alterations
required by any Governmental Authority and shall furnish Landlord with copies
thereof, together with the "as-built" plans and specifications for such
Alterations. All Alterations shall be made and performed in accordance with the
plans and specifications therefor as approved by Landlord and otherwise in
accordance with all Requirements. All materials and equipment to be incorporated
in the Premises as a result of any Alterations shall be first quality and no
such materials or equipment shall be subject to any lien, encumbrance, chattel
mortgage, title retention or security agreement.
(2) Landlord reserves the right to disapprove
any plans and specifications, in whole or in part, to reserve approval of items
shown thereon pending its review and approval of other plans and specifications,
and to condition its approval upon Tenant making revisions to the plans and
specifications or supplying additional information. Tenant agrees that any
review or approval by Landlord of any plans and/or specifications with respect
to any Alteration is solely for Landlord's benefit, and without any
representation or warranty whatsoever to Tenant or any other Person with respect
to the adequacy, correctness or sufficiency thereof or with respect to
Requirements or otherwise.
(B) All Alterations shall become a part of the Premises and
shall be Landlord's property from and after the installation thereof and may not
be removed or changed without Landlord's prior written consent. Notwithstanding
the foregoing, Landlord, upon notice given at least thirty (30) days prior to
the Expiration Date or upon such shorter notice as is reasonable under the
circumstances upon the earlier expiration of the Term, may require Tenant to
remove any specified Alterations and to repair and restore in a good and
workmanlike manner any damage to the Premises caused by such removal. All
Tenant's Property shall remain the property of Tenant and, on or before the
Expiration Date or earlier end of the Term, may be removed from the Premises by
Tenant at Tenant's sole cost and option; provided, however,
11
that Tenant shall repair and restore in a good and workmanlike manner any damage
to the Premises caused by such removal. The provisions of this Section 6.1(B)
shall survive the expiration or earlier termination of this Lease.
(C) (1) Any and all Alterations shall be performed, at Tenant's
sole cost and expense, by contractors, subcontractors or mechanics previously
approved in writing by Landlord. Prior to making an Alteration, at Tenant's
request, Landlord shall furnish Tenant with a list of contractors who may
perform Alterations to the Premises on behalf of Tenant.
(2) Notwithstanding the terms and conditions of Section
6.1(C)(1) hereof, with respect to any Alteration affecting any Building Systems,
(i) Tenant shall only employ Landlord's designated contractor, and (ii) the
Alteration shall, at Tenant's expense, be designed by Landlord's engineer.
(D) (1) Any mechanic's lien filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant shall be cancelled or discharged by Tenant, at Tenant's expense, within
twenty (20) days after such lien shall be filed, by payment or filing of the
bond required by law, and Tenant shall indemnify and hold Landlord harmless from
and against any and all costs, expenses, claims, losses or damages resulting
therefrom by reason thereof.
(2) If Tenant shall fail to discharge such mechanic's lien
within the aforesaid period, then, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, discharge the same either
by paying the amount claimed to be due or by procuring the discharge of such
lien by deposit in court or bonding, and in any such event, Landlord shall be
entitled, if Landlord so elects, to compel the prosecution of an action for the
foreclosure of such mechanics lien by the lienor and to pay the amount of the
judgment, if any, in favor of the lienor, with interest, costs and allowances.
(3) Any amount paid by Landlord for any of the aforesaid charges
and for all expenses of Landlord (including, but not limited to, attorneys' fees
and disbursements) incurred in defending any such action, discharging said lien
or in procuring the discharge of said lien, with interest on all such amounts at
the maximum legal rate of interest then chargeable to Tenant from the date of
payment, shall be repaid by Tenant within ten (10) days after written demand
therefor, and all amounts so repayable, together with such interest, shall be
considered Additional Rent.
SECTION 6.2. Landlord, at Tenant's expense, and upon therequest
of Tenant, shall join in any applications for any
12
permits, approvals or certificates required to be obtained by Tenant in
connection with any permitted Alteration (provided that the provisions of the
applicable Requirements shall require that Landlord join in such application)
and shall otherwise cooperate with Tenant in connection therewith; provided,
however, that Landlord shall not be obligated to incur any cost or expense or
liability in connection therewith.
SECTION 6.3. Tenant shall furnish to Landlord copies of records of all
Alterations and of the cost thereof within fifteen (15) days after the
completion of such Alterations.
SECTION 6.4. Tenant shall not, at any time prior to or during the Term,
directly or indirectly, employ, or permit the employment of, any contractor,
mechanic or laborer in the Premises, whether in connection with any Alteration
or otherwise, if such employment would interfere or cause any conflict with
other contractors, mechanics or laborers engaged in the construction,
maintenance or operation of the Premises by Landlord, Tenant or others, or of
any other property owned by Landlord. In the event of any such interference or
conflict, Tenant, upon demand of Landlord, shall cause all contractors,
mechanics or laborers causing such interference or conflict to leave the
Premises immediately.
ARTICLE 7
REPAIRS; REPLACEMENTS; MAINTENANCE
SECTION 7.1. Tenant, at Tenant's sole cost and expense, shall take good
care of the Premises and the fixtures, equipment and appurtenances therein and
make all repairs and replacements thereto, BOTH STRUCTURAL AND NON-STRUCTURAL,
of any nature whatsoever as and when needed to preserve them in good working
order and condition, except for (a) reasonable wear and tear and (b)
obsolescence. If Tenant shall fail, after five (5) days notice (or such shorter
period as may be required because of an emergency), to proceed with due
diligence to make repairs required to be made by Tenant, the same may be made by
Landlord, at the expense of Tenant, and the expenses thereof incurred by
Landlord, with interest thereon at the Applicable Rate, shall be paid to
Landlord, as Additional Rent, within ten (10) days after rendition of a bill or
statement therefor. Tenant shall give Landlord prompt notice of any defective
condition in any Building Systems located in, servicing or passing through the
Premises.
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ARTICLE 8
INCREASES IN FIXED RENT
SECTION 8.1. For purposes of this Lease:
(i) "BUREAU" means the Federal Bureau of Labor Statistics or
any successor agency that shall issue the indices or data referred to in
subparagraph (ii) below.
(ii) "PRICE INDEX" means the Consumer Price Index for All
Urban Consumers for the New York-Northeastern New Jersey geographic area,
1982-1984=100, issued from time to time by the Bureau or any other successor
measure hereafter employed by the Bureau in lieu of such price index that
measures the cost of living for such geographic area, failing such successor,
the most nearly comparable index (reflecting changes in costs of housing
including rental housing, energy and services), published by a Governmental
Authority, appropriately adjusted. Furthermore, if hereafter the Price Index is
converted to a different standard reference base or a substantial change is made
in the terms or number of items contained therein, the Price Index shall be
adjusted (with the use of such conversion factor, formula or table as is
published by the Bureau, or if it shall not publish same, the conversion factor
published by Prentice Hall, Inc., or, failing such publication, by any other
nationally recognized publisher of similar statistical information) to the
figure that would have resulted if not for such conversion or change.
(iii) "BASE INDEX" means the Price Index issued for
April, 1996.
(iv) "APPLICABLE PRICE INDEX" for a Lease Year means the Price
Index issued for April of the year in which such Lease Year commences.
SECTION 8.2. (A) Tenant shall pay to Landlord Fixed Rent in the amount
set forth in Article 1 of this Lease for the first Lease Year.
(B) For each Lease Year subsequent to the
first Lease Year (and for each and every Lease Year thereafter during the Term
hereof), the Tenant shall pay to the Landlord, as Fixed Rent, an amount equal to
the GREATER of:
(I) an amount equal to the sum of (x)
the percentage by which the Applicable Price Index for such Lease Year exceeds
the Applicable Price Index for the immediately preceding Lease Year, multiplied
by the Fixed Rent payable for such immediately preceding Lease Year and (y) such
Fixed Rent payable for the immediately preceding Lease Year (e.g., if the
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Base Index is 200, the Applicable Price Index for the second Lease Year is 203,
the Applicable Price Index for the third Lease Year is 215, and the Fixed Rent
payable for the second Lease Year is $50,000.00, then the Applicable Price Index
for the third Lease Year exceeds the Applicable Price Index for the second Year
by 5.91% (i.e., the difference between 203 and 215), and the Fixed Rent derived
from the aforesaid calculation shall be $52,955.75 (5.91% of $50,000.00,
$2,955.00, plus $50,000.00); or
(II) an amount equal to the sum of (x) five (5%) percent of the
Fixed Rent for the immediately preceding Lease Year and (y) such Fixed Rent for
the immediately preceding Lease Year (e.g. if the Fixed Rent for the second
Lease Year is $50,000.00, the Fixed Rent derived from the aforesaid calculation
for the third Lease Year shall be 5% of $50,000.00, i.e., $2,500.00, plus
$50,000.00 or $52,500.00).
The Landlord and the Tenant hereby acknowledge that it is the mutual intention
of the parties that for each and every Lease Year subsequent to the first Lease
Year during the Term hereof, the Fixed Rent payable by the Tenant to the
Landlord hereunder shall be increased by no less than five (5%) percent for each
and every Lease Year during the Term hereof subsequent to the first Lease Year.
SECTION 8.3. Upon notice by the Landlord to the Tenant of an increase
in the Fixed Rent pursuant to the provisions of this Article 8 ("INCREASE
NOTICE"), the Tenant shall pay the Fixed Rent as set forth in the Increase
Notice. Additionally, within ten (10) days of the date of the Increase Notice,
the Tenant shall pay any retroactive increases in Fixed Rent as set forth in the
Increase Notice.
ARTICLE 9
REQUIREMENTS OF LAW
SECTION 9.1. Tenant shall not do, and shall not permit any act or thing in
or upon the Premises which will invalidate or be in conflict with the
certificate of occupancy for the Premises or violate any Requirements. Tenant
shall, at Tenant's sole cost and expense, immediately take all action, including
but not limited to, making any required Alterations necessary to comply with all
Requirements [including, but not limited to, the Americans With Disabilities Act
of 1990 (the "ADA"), as modified and supplemented from time to time] which shall
or may impose any violation, order or duty upon Landlord or Tenant arising from,
or in connection with, the Premises, Tenant's occupancy, use or manner of use of
the Premises (including, without limitation, any occupancy, use or manner of use
that constitutes a "place of
15
public accommodation" under the ADA), or any installations in the Premises, or
required by reason of a breach of any of Tenant's covenants or agreements under
this Lease, whether or not such Requirements shall now be in effect or hereafter
enacted or issued, and whether or not any work required shall be ordinary or
extraordinary or foreseen or unforeseen as of the date hereof.
SECTION 9.2. (A) Tenant covenants and agrees that Tenant shall, at Tenant's
sole cost and expense, comply at all times with all Requirements governing the
use, generation, storage, treatment and/or disposal of any Hazardous Materials
(as defined below), the presence of which results from or in connection with the
act or omission of Tenant or Persons Within Tenant's Control or the breach of
this Lease by Tenant or Persons Within Tenant's Control. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other toxic or
hazardous wastes, pollutants or substances, including, without limitation,
asbestos, PCBS, petroleum products and by-products, substances defined or listed
as "hazardous substances" or "toxic substances" or similarly identified in or
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 ET SEQ., and as hazardous wastes under the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6010, ET SEQ., any chemical
substance or mixture regulated under the Toxic Substance Control Act of 1976, as
amended, 15 U.S.C. 2601, ET SEQ., any "toxic pollutant" under the Clean Water
Act, 33 U.S.C. ss. 466 ET SEQ., as amended, any hazardous air pollutant under
the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ., hazardous materials identified in
or pursuant to the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802,
ET SEQ., and any hazardous or toxic substances or pollutant regulated under any
other Requirements including, without limitation, ECRA (as such term is
hereinafter defined). Tenant agrees to execute, from time to time, at Landlord's
request, affidavits, representations and the like concerning Tenant's best
knowledge and belief regarding the presence of Hazardous Materials in, on, under
or about the Premises. Tenant shall indemnify and hold harmless all Indemnitees
from and against any loss, claim, cost, damage, liability or expense (including
attorneys' fees and disbursements) arising by reason of any clean up, removal,
remediation, detoxification action or any other activity required or recommended
of any Indemnitees by any Governmental Authority by reason of the presence in,
on, under or about the Premises of any Hazardous Materials, as a result of or in
connection with the act or omission of Tenant or Persons Within Tenant's Control
or the breach of this Lease by Tenant or Persons Within Tenant's Control. The
foregoing covenants and indemnity shall survive the expiration or any
termination of this Lease.
(B) In addition to the foregoing, Tenant shall, at its sole cost
and expense, comply with any and all environmental monitoring requirements of
the New Jersey
16
Department of Environmental Protection and the Environmental Cleanup
Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 ET. SEQ. In order to comply with
ECRA, the Tenant shall undertake, at its sole cost and expense, all sampling
required by the Landlord or the New Jersey Department of Environmental
protection ("NJDEP") and shall execute and deliver, upon request, all documents
and pay all fees necessary or desirable for such compliance, which execution,
delivery and/or payment may be requested by either the Landlord and/or NJDEP. It
is understood that this provision shall apply with regard to any action which
may or might require compliance with ECRA, including without limitation, the
termination of this Lease, the change of use of the Premises, an assignment or
sublease of all or part of the Premises, bankruptcy, or the conveyance of title
to the Premises. It is understood that the provisions of this Section 9.2(B)
shall survive the expiration or earlier termination of this Lease.
SECTION 9.3. If Tenant shall receive notice of any violation of, or
defaults under, any Requirements, liens or other encumbrances applicable to the
Premises, Tenant shall give immediate written notice thereof to Landlord.
SECTION 9.4. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business and if the failure to secure
such license or permit would, in any way, affect Landlord or the Premises, then
Tenant, at Tenant's expense, shall promptly procure and thereafter maintain,
submit for inspection by Landlord, and at all times comply with the terms and
conditions of, each such license or permit.
ARTICLE 10
SUBORDINATION
SECTION 10.1. This Lease shall at all times, now and hereafter, be subject
and subordinate to each and every Mortgage, whether made prior to or after the
execution of this Lease, and to all extensions, supplements, amendments,
modifications, consolidations and replacements thereof or thereto, substitutions
therefor, and advances made thereunder. This clause shall be self-operative and
no further agreement of subordination shall be required to make the interest of
any Mortgagee superior to the interest of Tenant hereunder. In confirmation of
such subordination, Tenant shall promptly execute and deliver, at its own cost
and expense, any document, in recordable form if requested, that Landlord or any
Mortgagee may request to evidence such subordination; and if Tenant fails to
execute, acknowledge or deliver any such document within five (5) days after
request therefor, Tenant hereby irrevocably constitutes and appoints
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Landlord as Tenant's attorney-in-fact, coupled with an interest, to execute,
acknowledge and deliver any such document for and on behalf of Tenant. Tenant
shall not do anything that would constitute a default under any Mortgage, or
omit to do anything that Tenant is obligated to do under the terms of this Lease
so as to cause Landlord to be in default thereunder.
SECTION 10.2. If, at any time prior to the expiration of the Term, any
Mortgagee comes into possession of the Premises, by receiver or otherwise,
Tenant agrees, at the election and upon demand of any owner of the Premises, or
of any Mortgagee in possession of the Premises, to attorn, from time to time, to
any such owner or Mortgagee or any person acquiring the interest of Landlord as
a result of any such termination or as a result of a foreclosure of the Mortgage
or the granting of a deed in lieu of foreclosure, upon the then executory terms
and conditions of this Lease (except as provided below), for the remainder of
the Term, provided that such owner or Mortgagee, as the case may be, or receiver
caused to be appointed by any of the foregoing, is then entitled to possession
of the Premises. Any such attornment shall be made upon the condition that no
such owner or Mortgagee shall be:
(1) liable for any act or omission of any prior landlord
(including, without limitation, the then defaulting landlord); or
(2) subject to any defense or offsets (except as expressly set
forth in this Lease) which Tenant may have against any prior landlord
(including, without limitation, the then defaulting landlord); or
(3) bound by any payment of Rental which Tenant might have paid
for more than the current month to any prior landlord (including, without
limitation, the then defaulting landlord); or
(4) bound by any obligation to make any payment to Tenant which
was required to be made prior to the time such owner or Mortgagee succeeded to
any prior landlord's interest; or
(5) bound by any obligation to perform any work or to make
improvements to the Premises except for (i) repairs to the Premises or any part
thereof as a result of damage by fire or other casualty pursuant to Article 12,
but only to the extent that such repairs can be reasonably made from the net
proceeds of any insurance actually made available to such owner or Mortgagee and
(ii) repairs to the Premises as a result of a partial condemnation pursuant to
Article 13, but only to the extent that such repairs can be reasonably made from
the net proceeds of any award made available to such owner or Mortgagee. Tenant,
upon
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demand of any such owner or Mortgagee, shall execute, from time to time,
agreements in confirmation of the foregoing provisions of this Section 10.2,
satisfactory to any such owner or Mortgagee, and acknowledging such attornment
and setting forth the terms and conditions of its tenancy. Nothing contained in
this Section 10.2 shall be construed to impair any right otherwise exercisable
by any such owner or Mortgagee.
SECTION 10.3. If requested by any Mortgagee or Landlord, Tenant shall
promptly execute and deliver, at Tenant's own cost and expense, any document in
accordance with the terms of this Article 10, in recordable form, to evidence
such subordination.
SECTION 10.4. At any time and from time to time upon not less than ten (10)
days' prior notice to Tenant or Landlord given by the other, or to Tenant given
by a Mortgagee, Tenant or Landlord, as the case may be, shall, without charge,
execute, acknowledge and deliver a statement in writing addressed to such party
as Tenant, Landlord or Mortgagee, as the case may be, may designate, in form
satisfactory to Tenant, Landlord or Mortgagee, as the case may be, certifying
all or any of the following: (i) that this Lease is unmodified and in full force
and effect (or if there have been modifications, that this Lease is in full
force and effect as modified and stating the modifications); (ii) the date that
the Term commenced and the date(s) that Fixed Rent and Additional Rent became
payable hereunder and the dates to which they have been paid; (iii) whether or
not, to the best knowledge of the signer of such certificate, Landlord is in
default in performance of any of the terms of this Lease and, if so, specifying
each such event of default of which the signer may have knowledge; (iv) whether
or not, to the best knowledge of the signer of such certificate, Tenant has
accepted possession of the Premises; (v) whether Tenant has made any claim
against Landlord under this Lease and, if so, the nature thereof and the dollar
amount, if any, of such claim; (vi) either that Tenant does not know of any
default in the performance of any provision of this Lease or specifying the
details of any default of which Tenant may have knowledge and stating what
action Tenant is taking or proposes to take with respect thereto; (vii) that, to
the best knowledge of Tenant, there are no proceedings pending or threatened
against Tenant before or by any court or administrative agency which, if
adversely decided, would materially or adversely affect the financial condition
or operations of Tenant or, if any such proceedings are pending or threatened to
the best knowledge of Tenant, specifying and describing the same; and (viii)
such further information with respect to the Lease or the Premises as Landlord
may reasonably request or Mortgagee may require; it being intended that any such
statement delivered pursuant hereto may be relied upon by any prospective
purchaser of the Premises or any part thereof or of
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the interest of Landlord in any part thereof, by any Mortgagee or prospective
Mortgagee or by any prospective assignee of any Mortgage or by any assignee of
Tenant.
The failure of either Tenant or Landlord to execute, acknowledge and
deliver a statement in accordance with the provisions of this Section 10.4
within said ten (10) day period shall constitute an acknowledgment by Tenant or
Landlord, as the case may be, which may be relied on by any person or entity of
any nature whatsoever who would be entitled to rely upon any such statement,
that such statement as submitted by Landlord or Tenant, as the case may be, is
true and correct.
SECTION 10.5. As long as any Mortgage exists, Tenant shall not seek to
terminate this Lease by reason of any act or omission of Landlord until Tenant
has given not less than thirty (30) days prior written notice of such act or
omission to all Mortgagees, and if any such Mortgagee notifies Tenant within
thirty (30) days following receipt of such notice of its intention to remedy
such act or omission, until a reasonable period of time shall have elapsed
following the giving of such notice, during which period such Mortgagee shall
have the right, but not the obligation, to remedy such act or omission.
ARTICLE 11
INSURANCE; PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
SECTION 11.1.
(A) Neither Landlord nor Landlord's agents shall be liable for
any injury or damage to persons or property, or interruption of Tenant's
business, resulting from fire or other casualty; nor shall Landlord or
Landlord's agents be liable for any such damage caused by Persons other than the
Landlord or the Landlord's agents or by construction of any private, public or
quasi-public work; nor shall Landlord be liable for any latent defect in the
Premises.
(B) Tenant shall give written notice to Landlord, immediately after
Tenant learns thereof, of any accident, emergency, occurrence for which Landlord
might be liable, fire or other casualty and all damages to or defects in the
Premises for the repair of which Landlord might be responsible or which
constitutes Landlord's property. Such notice shall be given by telecopy or
personal delivery to the address(es) of Landlord in effect for notice.
SECTION 11.2. Tenant shall not do or permit to be done
any act or thing in or upon the Premises which will invalidate
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or be in conflict with the terms of the State of New Jersey standard form of
fire insurance with extended coverage, or with rental, liability, boiler,
sprinkler, water damage, war risk or other insurance policies covering the
Premises and the fixtures and property therein (hereinafter referred to as
"BUILDING INSURANCE"); and Tenant, at Tenant's own expense, shall comply with
all rules, orders, regulations and requirements of all insurance boards, and
shall not do or permit anything to be done in or upon the Premises or bring or
keep anything therein or use the Premises in a manner which increases the rate
of premium for any of the Building Insurance or any property or equipment
located therein over the rate in effect at the commencement of the Term of this
Lease.
SECTION 11.3.
(A) If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the rate of premium for Building Insurance or other
insurance on the property and equipment of Landlord shall be higher than it
otherwise would be, Tenant shall reimburse Landlord for that part of the
insurance premiums thereafter paid by Landlord which shall have been charged
because of such failure by Tenant. Tenant shall make said reimbursement on the
first day of the month following such payment by Landlord.
(B) In any action or proceeding wherein Landlord and Tenant are
parties, a schedule of any insurance rate for the Premises issued by any
insurance board establishing insurance premium rates for the Premises shall be
prima facie evidence of the facts therein stated and of the several items and
charges in the insurance premium rates then applicable to the Premises.
SECTION 11.4.
(A) Tenant shall, at Tenant's own cost and expense, obtain, maintain
and keep in full force and effect during the Term, for the benefit of Landlord,
any Mortgagees and Tenant, commercial general liability insurance (including
premises operation, bodily injury, personal injury, death, independent
contractors, products and completed operations, broad form contractual liability
and broad form property damage coverages) in a combined single limit amount of
not less than Five Million and 00/100 ($5,000,000.00) Dollars, against all
claims, demands or actions with respect to damage, injury or death made by or on
behalf of any person or entity, arising from or relating to the conduct and
operation of Tenant's business in, on or about the Premises (which shall include
Tenant's signs, if any), or arising from or related to any act or omission of
Tenant or of Persons Within Tenant's Control. If Tenant shall install or
maintain one or more pressure vessels to serve Tenant's operations at the
Premises, Tenant shall, at Tenant's own cost and expense, obtain,
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maintain and keep in full force and effect, for the benefit of Landlord, any
Mortgagees and Tenant, appropriate boiler or other insurance coverage therefor
in an amount not less than Three Million and 00/100 ($3,000,000.00) Dollars (it
being understood and agreed, however, that the foregoing shall not be deemed a
consent by Landlord to the installation and/or maintenance of any such pressure
vessels in the Premises, which installation and/or maintenance shall at all
times be subject to the prior written consent of Landlord). Whenever, in
Landlord's reasonable judgment, good business practice and changing conditions
indicate a need for additional amounts or different types of insurance coverage,
Tenant shall, within ten (10) days after Landlord's request, obtain such
insurance coverage, at Tenant's expense.
(B) Tenant, at Tenant's sole cost and expense, shall maintain
insurance protecting and indemnifying Tenant against any and all damage to or
loss of any Alterations and leasehold improvements, including any made by
Landlord to prepare the Premises for Tenant's occupancy, and Tenant's Property,
and all claims and liabilities relating thereto.
(C) Landlord and any Mortgagees shall be named as insureds in said
policies and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be: (i) written
as "occurrence" policies; (ii) written as primary policy coverage and not
contributing with or in excess of any coverage which Landlord may carry; and
(iii) issued by reputable and independent insurance companies rated in Best's
Insurance Guide, or any successor thereto (or if there be none, an organization
having a national reputation) as having a general policyholder rating of "A+"
and a financial rating of at least "13", and which are licensed to do business
in the State of New Jersey. Tenant shall, not later than ten (10) Business Days
prior to the Commencement Date, deliver to Landlord the policies of insurance or
certificates thereof, together with evidence of payment of premiums thereon, and
shall thereafter furnish to Landlord, at least thirty (30) days prior to the
expiration of any such policies and any renewal thereof, a new policy or
certificate in lieu thereof, with evidence of the payment of premiums thereon.
Each of said policies shall also contain a provision whereby the insurer agrees
not to cancel, fail to renew, diminish or materially modify said insurance
policy(ies) without having given Landlord and any Mortgagees at least thirty
(30) days prior written notice thereof.
(D) Tenant shall pay all premiums and charges for all of said
policies, and, if Tenant shall fail to make any payment when due or carry any
such policy, Landlord may, but shall not be obligated to, make such payment or
carry such policy, and the amount paid by Landlord, with interest thereon (at
the Applicable Rate), shall be repaid to Landlord by Tenant on demand, and all
such amounts so repayable, together with such interest,
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shall be deemed to constitute Additional Rent hereunder. Payment by Landlord of
any such premium, or the carrying by Landlord of any such policy, shall not be
deemed to waive or release the default of Tenant with respect thereto.
SECTION 11.5.
(A) Tenant shall cause each insurance policy carried by Tenant and
insuring the Premises and Tenant's Alterations, leasehold improvements, space
equipment, furnishings, furniture, contents and fixtures against loss, damage or
destruction by fire or other casualty, to be written in a manner so as to
provide that the insurance company waives all rights of recovery by way of
subrogation against Landlord or Tenant in connection with any loss or damage
covered by any such policy. If the release of either Landlord or Tenant shall
contravene any law with respect to exculpatory agreements, the liability of the
party in question shall be deemed not released, but no action or rights shall be
sought or enforced against such party unless and until all rights and remedies
against the insurer are exhausted and such party shall be unable to collect such
insurance proceeds.
(B) The waiver of subrogation referred to in Section 11.5(A) above
shall extend to the agents and employees of each party, but only if and to the
extent that such waiver can be obtained without additional charge (unless such
party shall pay such charge). Nothing contained in this Section 11.5 shall be
deemed to relieve the Tenant from any duty imposed elsewhere in this Lease to
repair, restore and rebuild the Premises, in whole or in part.
ARTICLE 12
DESTRUCTION BY FIRE OR OTHER CAUSE
SECTION 12.1. If the Premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate written notice thereof to
Landlord. Landlord shall, subject to the provisions of Sections 12.2 and 12.3
below, proceed with reasonable diligence, after receipt of the net proceeds of
insurance, to repair or cause to be repaired such damage at its expense, but in
no event shall such repair or restoration be greater in scope than the quantity
quality of construction of the Premises as of the Commencement Date; and, if the
Premises, or any part thereof, shall be rendered untenantable by reason of such
damage and such damage shall not be due to the fault of Tenant or Persons Within
Tenant's Control, then the Fixed Rent hereunder, or an amount thereof
apportioned according to the area of the Premises so rendered untenantable (if
less than the entire Premises shall be so rendered untenantable), shall be
abated for
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the period from the date of such damage to the date when the repair of such
damage shall have been substantially completed. If Landlord or any Mortgagee
shall be unable to collect the insurance proceeds (including rent insurance
proceeds) applicable to such damage because of some action or inaction on the
part of Tenant or Persons Within Tenant's Control, then the cost of repairing
such damage shall be paid by Tenant and there shall be no abatement of Fixed
Rent. Tenant covenants and agrees to cooperate with Landlord and any Mortgagee
in their efforts to collect insurance proceeds (including rent insurance
proceeds) payable to such parties. Landlord shall not be liable for any delay
which may arise by reason of adjustment of insurance on the part of Landlord
and/or Tenant, or any cause beyond the control of Landlord or contractors
employed by Landlord.
It is expressly understood that if Landlord is prevented from substantially
completing the repairs by reason of any acts of Tenant or Persons Within
Tenant's Control, including, without limitation, by reason of the performance of
any Alterations, or by reason of Tenant's failure or refusal to comply or to
cause its architects, engineers, designers and contractors to comply with any of
Tenant's obligations described or referred to in this Lease, then such work
shall be deemed substantially completed on the date when the work would have
been substantially completed but for such delay, and the expiration of the
abatement of Tenant's obligations to pay Fixed Rent shall not be postponed by
reason of such delay. Any additional costs to Landlord to complete any work
occasioned by such delay shall be paid by Tenant to Landlord, as Additional
Rent, within ten (10) days after demand therefor by Landlord.
SECTION 12.2. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from damage from fire or other casualty or the repair thereof. Tenant
understands that Landlord, in reliance upon Section 11.4 hereof, will not carry
insurance of any kind on Tenant's furnishings, furniture, contents, fixtures,
space equipment and leasehold improvements, and that Landlord shall not be
obligated to repair any damage thereto or replace the same.
SECTION 12.3. (A) Notwithstanding anything to the contrary contained in
Sections 12.1 and 12.2 above, in the event that:
(I) at least fifty (50%) percent of the rentable
square feet of the Premises shall be damaged by a fire or other casualty so that
substantial alteration or reconstruction of the Premises shall, in Landlord's
sole opinion, be required (whether or not the Premises shall have been damaged
by such fire or other casualty and without regard to the structural integrity of
the Premises); or
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(II) the Premises shall be totally or substantially damaged or
shall be rendered wholly or substantially untenantable; or
(III) there shall be any damage to the Premises within the last
two (2) years of the Term wherein the cost of repair exceeds an amount equal to
three (3) monthly installments of Fixed Rent, then, as a result of any
circumstances described in subparagraphs (i), (ii) or (iii) hereof, the Landlord
may, in Landlord's sole and absolute discretion, terminate this Lease and the
term and estate hereby granted, by notifying Tenant in writing of such
termination within one hundred twenty (120) days after the date of such damage.
In the event that such a notice of termination shall be given, then this Lease
and the term and estate hereby granted shall expire as of the date of
termination stated in said notice with the same effect as if that were the Fixed
Expiration Date, and the Fixed Rent and Additional Rent hereunder shall be
apportioned as of such date.
SECTION 12.4. Except as may be provided in Section 11.5, nothing herein
contained shall relieve Tenant from any liability to Landlord or to Landlord's
insurers in connection with any damage to the Premises by fire or other casualty
if Tenant shall be legally liable in such respect.
ARTICLE 13
EMINENT DOMAIN
SECTION 13.1. If the whole of the Premises is acquired or condemned for any
public or quasi-public use or purpose, this Lease and the Term shall end as of
the date of the vesting of title with the same effect as if said date were the
Fixed Expiration Date. If only a part of the Premises is so acquired or
condemned then, (1) except as hereinafter provided in this Section 13.1, this
Lease and the Term shall continue in effect but, if a part of the Premises is so
acquired or condemned, from and after the date of the vesting of title, the
Fixed Rent and Additional Rent, if any, shall be reduced in the proportion which
the area of the part of the Premises so acquired or condemned bears to the total
area of the Premises immediately prior to such acquisition or condemnation; (2)
whether or not the Premises are affected thereby, Landlord, at Landlord's
option, may give to Tenant, within sixty (60) days next following the date upon
which Landlord receives notice of vesting of title, a thirty (30) day notice of
termination of this Lease; and (3) if the part of the Premises so acquired or
condemned contains more than seventy-five (75%) percent of the total area of the
Premises immediately prior to such acquisition or condemnation, or if, by reason
of such acquisition or condemnation, Tenant no longer has access to the
25
Premises, Tenant, at Tenant's option, may give to Landlord, within thirty (30)
days next following the date upon which Tenant receives notice of vesting of
title, a thirty (30) day notice of termination of this Lease. If any such thirty
(30) day notice of termination is given, by Landlord or Tenant, this Lease and
the Term shall come to an end and expire upon the expiration of said thirty (30)
days with the same effect as if the date of expiration of said thirty (30) days
were the Fixed Expiration Date. In the event of any termination of this Lease
and the Term pursuant to the provisions of this Section 13.1, the Fixed Rent or
Additional Rent shall be apportioned as of the date of sooner termination and
any prepaid portion of the Fixed Rent for any period after such date shall be
refunded by Landlord to Tenant.
SECTION 13.2. In the event of any such acquisition or condemnation of all
or any part of the Premises, Landlord shall be entitled to receive the entire
award for any such acquisition or condemnation. Tenant shall have no claim
against Landlord or the condemning authority for the value of any unexpired
portion of the Term and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this Section 13.2 shall be
deemed to prevent Tenant from making a separate claim in any condemnation
proceedings for the value of any Tenant's Property included in such taking, and
for any moving expenses, so long as Landlord's award is not reduced thereby.
ARTICLE 14
ASSIGNMENT; SUBLETTING; MORTGAGE; ETC.
SECTION 14.1. (A) The Tenant shall not (a) assign this Lease (whether by
operation of law, transfers of interests in Tenant or otherwise); or (b)
mortgage or encumber Tenant's interest in this Lease, in whole or in part; or
(c) sublet, or permit the subletting of, the Premises or any part thereof.
Notwithstanding the provisions of this Section 14.1, the use of the Premises by
any Person AFFILIATED (as such term is hereinafter defined) with the Tenant or
under the COMMON CONTROL (as such term is hereinafter defined) of Coach USA,
Inc., as the case may be, shall not be deemed an assignment of this Lease or a
sublet of the Premises; PROVIDED, HOWEVER, that such use of the Premises as
aforesaid shall not violate or be prohibited by any of the provisions of any
Mortgage then encumbering the Premises, if any. For purposes of this Article 14,
a Person shall be deemed to be an "AFFILIATE" of the Tenant or under the "COMMON
CONTROL" of Coach USA if such Person is a member of a "parent-subsidiary
controlled group" [as such term is defined by Section 1563(a)(1) of the Internal
Revenue Code of 1986, as amended] or a
26
member of a "brother-sister controlled group" [as such term is defined by
Section 1563(a)(2) of the Internal Revenue Code of 1986, as amended] of which
either Coach USA, Inc. or the Tenant, as the case may be, is a member.
(B) Notwithstanding the provisions otherwise set forth in this
Article 14, any reorganization, consolidation and/or restructuring of the Tenant
in which the issued and outstanding stock of the Tenant remains under the COMMON
CONTROL (as such term is defined in Section 14.1 hereinabove) of Coach USA, Inc.
shall not be deemed an assignment of this Lease or a sublet of the Premises;
PROVIDED, HOWEVER, that the same shall not violate or be prohibited by any of
the provisions of any Mortgage then encumbering the Premises, if any.
SECTION 14.2. If Tenant's interest in this Lease shall be assigned in
violation of the provisions of this Article 14, such assignment shall be invalid
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy. If the Premises or any
part thereof are sublet to, or occupied by, or used by, any person other than
Tenant, whether or not in violation of this Article 14, Landlord, after default
by Tenant under this Lease, may collect any item of Rental or other sums paid by
the subtenant, user or occupant as a fee for its use and occupancy, and shall
apply the net amount collected to the Fixed Rent and the items of Rental
reserved in this Lease. No such assignment, subletting, occupancy, or use, nor
any such collection or application of Rental or fee for use and occupancy, shall
be deemed a waiver by Landlord of any term, covenant or condition of this Lease
or the acceptance by Landlord of such assignee, subtenant, occupant or user as
Tenant hereunder, nor shall the same, in any circumstances, relieve Tenant of
any of its obligations under this Lease.
SECTION 14.3.
Except as otherwise set forth in Section 14.1 hereof, for purposes of
this Article 14, (i) any increase in the amount of issued and/or outstanding
capital stock of any corporate tenant and/or the creation of one or more
additional classes of capital stock of any corporate tenant, in a single
transaction or a series of related or unrelated transactions, resulting in a
change in the legal or beneficial ownership of such tenant so that the
shareholders of such tenant existing immediately prior to such transaction or
series of transactions shall no longer own a majority of the issued and
outstanding capital stock of such tenant shall be deemed an assignment of this
Lease and (ii) any Person or legal representative of Tenant, to whom Tenant's
interest under this Lease passes by operation of law, or otherwise, shall be
bound by the provisions of this Article 14.
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Tenant agrees to furnish to Landlord on request at any time such information and
assurances as Landlord may reasonably request that Tenant has not violated the
provisions of this Article 14.
ARTICLE 15
ACCESS TO PREMISES
SECTION 15.1. Tenant shall permit Landlord, Landlord's agents and any
public utilities servicing the Premises to erect, use and maintain, now and
hereafter, concealed ducts, pipes and conduits in and through the Premises.
Landlord or Landlord's agents shall have the right to enter the Premises at all
reasonable times upon (except in case of emergency) reasonable prior notice,
which notice may be oral, to examine the same, to show the same to prospective
purchasers or Mortgagees and to make such repairs, alterations, improvements or
additions (i) as Landlord may deem necessary or desirable to the Premises, or
(ii) which Landlord may elect to perform at least ten (10) days after notice
(except in an emergency when no notice shall be required) following Tenant's
failure to make repairs or perform any work which Tenant is obligated to make or
perform under this Lease, or (iii) for the purpose of complying with
Requirements, and Landlord shall be allowed to take all material into and upon
the Premises that may be required therefor without the same constituting an
eviction or constructive eviction of Tenant in whole or in part and the Fixed
Rent (and any other item of Rental) shall in no respect abate or be reduced by
reason of said repairs, alterations, improvements or additions, wherever
located, or while the same are being made, by reason of loss or interruption of
business of Tenant, or otherwise. Landlord shall promptly repair any damage
caused to the Premises by such work, alterations, improvements or additions.
SECTION 15.2. If Tenant is not present when for any reason entry into the
Premises may be necessary or permissible, Landlord or Landlord's agents may
enter the same without rendering Landlord or such agents liable therefor.
SECTION 15.3. Landlord also shall have the right at any time, without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, stairs, toilets or other
parts of the Premises, provided any such change does not unreasonably interfere
with, or deprive Tenant of access to, the Premises; to put so-called "solar
film" or other energy-saving installations on the inside and outside of the
windows; and to change the name, number or designation by which the Premises is
commonly known.
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ARTICLE 16
CERTIFICATE OF OCCUPANCY
SECTION 16.1. Tenant shall not at any time, now or hereafter, use or occupy
the Premises, directly or indirectly, in violation of the certificate of
occupancy for the Premises and in the event that any Governmental Authority
hereafter contends or declares by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose that is a violation
of such certificate of occupancy, Tenant shall, upon three (3) Business Days'
written notice from Landlord or any Government Authority, immediately
discontinue such use of the Premises.
ARTICLE 17
DEFAULT
SECTION 17.1. Each of the following events shall be an "EVENT OF DEFAULT"
under this Lease:
(A) if Tenant shall on any occasion default in the payment when due of
any installment of Fixed Rent or Additional Rent or in the payment when due of
any other item of Rental and such default shall continue for five (5) business
days from and after the date when the same shall be due; or
(B) if the Premises shall become vacant or abandoned; or
(C) if Tenant's interest in this Lease shall devolve upon or pass to
any person, whether by operation of law or otherwise, except as specifically
permitted by the provisions of Article 14 hereof; or
(D) (1) if Tenant shall not, or shall be unable to, or shall admit in
writing Tenant's inability to, as to any obligation, pay Tenant's debts as they
become due; or
(2) if Tenant shall commence or institute any case, proceeding or
other action (a) seeking relief on Tenant's behalf as debtor, or to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to Tenant or Tenant's debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to
29
bankruptcy, insolvency, reorganization or relief of debtors, or (b) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property; or
(3) if Tenant shall make a general assignment for the benefit of
creditors; or
(4) if any case, proceeding or other action shall be commenced or
instituted against Tenant (a) seeking to have an order for relief entered
against Tenant as debtor or to adjudicate Tenant a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to Tenant or Tenant's
debts under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, or (b)
seeking appointment of a receiver, trustee, custodian or other similar official
for Tenant or for all or any substantial part of Tenant's property, which either
(i) results in any such entry of an order for relief, adjudication of bankruptcy
or insolvency or such an appointment or the issuance or entry of any other order
having a similar effect or (ii) remains undismissed for a period of sixty (60)
days; or
(5) if a trustee, receiver or other custodian shall be appointed
for any substantial part of the assets of Tenant which appointment is not
vacated or effectively stayed within thirty (30) days; or
(E) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be observed
or performed including, without limitation, the terms and conditions of Article
27 hereof, and Tenant shall fail to remedy such default within ten (10) days
after written notice by Landlord to Tenant of such default, or if such default
is of such a nature that it cannot with due diligence be completely remedied
within said period of ten (10) days and the continuation of which for the period
required for cure will not subject Landlord to the risk of criminal liability or
foreclosure of any Mortgage, if Tenant shall not, (i) within said ten (10) day
period advise Landlord of Tenant's intention duly to institute all steps
necessary to remedy such situation, (ii) duly institute within said ten (10) day
period, and thereafter diligently and continuously prosecutes to completion all
steps necessary to remedy the same and (iii) completes such remedy within such
time after the date of the giving of said notice by Landlord as shall reasonably
be necessary.
SECTION 17.2. If an Event of Default shall occur, Landlord may,
at any time thereafter, at Landlord's option, give written
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notice to Tenant stating that this Lease and the Term shall expire and terminate
on the date specified in such notice, which date shall not be less than three
(3) days after the giving of such notice, whereupon this Lease and the Term and
all rights of Tenant under this Lease shall automatically expire and terminate
as if the date specified in the notice given pursuant to this Section 17.2 were
the Fixed Expiration Date and Tenant immediately shall quit and surrender the
Premises, but Tenant shall remain liable for damages as provided herein or
pursuant to law. Anything contained herein to the contrary notwithstanding, if
such termination shall be stayed by order of any court having jurisdiction over
any proceeding described in Section 17.1(D), or by federal or state statute,
then, following the expiration of any such stay, or if the trustee appointed in
any such proceeding, Tenant or Tenant as debtor-in-possession fails to assume
Tenant's obligations under this Lease within the period prescribed therefor by
law or within one hundred twenty (120) days after entry of the order for relief
or as may be allowed by the court, or if said trustee, Tenant or Tenant as
debtor-in-possession shall fail to provide adequate protection of Landlord's
right, title and interest in and to the Premises or adequate assurance of the
complete and continuous future performance of Tenant's obligations under this
Lease, Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on three (3) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon the expiration of said three (3)
day period this Lease shall cease and expire as aforesaid and Tenant, Tenant as
debtor-in-possession or said trustee shall immediately quit and surrender the
Premises as aforesaid.
SECTION 17.3. If, at any time, (i) Tenant shall consist of two (2) or more
Persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (iii) Tenant's interest in this
Lease has been assigned, the word "Tenant" as used and referred to in this
Lease, shall be deemed to mean any one or more of the persons primarily or
secondarily liable for Tenant's obligations under this Lease. Any monies
received by Landlord from or on behalf of Tenant during the pendency of any
proceeding of the types referred to in Section 17.1(D) hereof shall be deemed
paid as compensation for the use and occupancy of the Premises and the
acceptance of any such compensation by Landlord shall not be deemed an
acceptance of Rental or a waiver on the part of Landlord of any rights under
Section 17.2 hereof.
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ARTICLE 18
REMEDIES AND DAMAGES
SECTION 18.1.
(A) If any Event of Default shall occur, or this Lease and the Term
shall expire and come to an end as provided in Article 17 hereof:
(1) Tenant shall quit and peacefully surrender the Premises to
Landlord, and Landlord and its agents may immediately, or at any time after such
Event of Default or after the date upon which this Lease and the Term shall
expire and come to an end, re-enter the Premises or any part thereof, without
notice, either by summary proceedings, or by any other applicable action or
proceeding or otherwise (without being liable to indictment, prosecution or
damages therefor), and may repossess the Premises and dispossess Tenant and any
other persons from the Premises by summary proceedings or otherwise and remove
any and all of their property and effects from the Premises (and Tenant shall
remain liable for damages as provided herein or pursuant to law); and
(2) Landlord, at Landlord's option, may relet the whole or any
part or parts of the Premises from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Fixed Expiration Date, at such rent or rentals and upon such
other conditions, which may include concessions and free rent periods, as
Landlord, in Landlord's sole discretion, may determine; provided, however, that
Landlord shall have no obligation to relet the Premises or any part thereof and
shall in no event be liable for refusal or failure to relet the Premises or any
part thereof, or, in the event of any such reletting, for refusal or failure to
collect any rent due upon any such reletting, and no such refusal or failure
shall operate to relieve Tenant of any liability under this Lease or otherwise
affect any such liability, and Landlord, at Landlord's option, may make such
Alterations, in and to the Premises as Landlord, in Landlord's sole discretion,
shall consider advisable or necessary in connection with any such reletting or
proposed reletting, without relieving Tenant of any liability under this Lease
or otherwise affecting any such liability.
(B) Tenant hereby waives the service of any notice of intention to
re-enter or to institute legal proceedings to that end that may otherwise be
required to be given under any present or future law. Tenant, on its own behalf
and on behalf of all persons claiming through or under Tenant, including all
creditors of Tenant, does further hereby waive any and all rights that
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Tenant and all such persons might otherwise have under any present or future law
to redeem the Premises, or to re-enter or repossess the Premises, or to restore
the operation of this Lease, after (a) Tenant shall have been dispossessed by a
judgment or by warrant of any court, or (b) any re-entry by Landlord, or (c) any
expiration or termination of this Lease and the Term, whether such dispossess,
re-entry, expiration or termination is by operation of law or pursuant to the
provisions of this Lease. The words "re-entry", "re-enter" and "re-entered" as
used in this Lease shall not be deemed to be restricted to their technical legal
meanings. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any term, covenant or condition of
this Lease, Landlord shall have the right to enjoin such breach and the right to
invoke any other remedy allowed by law or in equity as if re-entry, summary
proceedings and other special remedies were not provided in this Lease for such
breach. The right to invoke the remedies hereinbefore set forth are cumulative
and shall not preclude Landlord from invoking any other remedy allowed at law or
in equity.
SECTION 18.2.
(A) If this Lease and the Term shall expire and come to an end as
provided in Article 17 hereof, or by or under any summary proceeding or any
other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 18.1 hereof, or by or under any summary proceeding or any
other action or proceeding, then, in any of said events:
(1) Tenant shall pay to Landlord all Fixed Rent, Additional Rent
and other items of Rental payable under this Lease by Tenant to Landlord to the
date upon which this Lease and the Term shall have expired and come to an end or
to the date of re-entry upon the Premises by Landlord, as the case may be;
(2) Tenant also shall be liable for and shall pay to Landlord, as
damages, any deficiency ("DEFICIENCY") between the Rental for the period which
otherwise would have constituted the unexpired portion of the Term and the net
amount, if any, of rents collected under any reletting effected pursuant to the
provisions of Section 18.1(A)(2) for any part of such period (after first
deducting from the rents collected under any such reletting all of Landlord's
expenses in connection with the termination of this Lease, Landlord's re-entry
upon the Premises and such reletting including, but not limited to, all
repossession costs, brokerage commissions, attorneys' fees and disbursements,
alteration costs and other expenses of preparing the Premises for such
reletting); any such Deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for payment of installments of Fixed Rent;
Landlord shall be entitled to recover from Tenant each monthly Deficiency
33
as the same shall arise, and no suit to collect the amount of the Deficiency for
any month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any Deficiency
as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant
shall pay to Landlord, on demand, in lieu of any further Deficiency as and for
liquidated and agreed final damages, a sum equal to the amount by which the
unpaid Rental for the period which otherwise would have constituted the
unexpired portion of the Term exceeds the then fair and reasonable rental value
of the Premises for the same period; if, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the Premises, or any
part thereof, are relet by Landlord for the period which otherwise would have
constituted the unexpired portion of the Term, or any part thereof, the amount
of rent reserved upon such reletting shall be deemed, prima facie, to be the
fair and reasonable rental value for the part or the whole of the Premises so
relet during the term of the reletting.
(B) Tenant shall in no event be entitled to any rents collected or
payable under any reletting, whether or not such rents exceed the Fixed Rent
reserved in this Lease. Nothing contained in Article 17 hereof or this Article
18 shall be deemed to limit or preclude the recovery by Landlord from Tenant of
the maximum amount allowed to be obtained as damages by any statute or rule of
law, or of any sums or damages to which Landlord may be entitled in addition to
the damages set forth in this Section 18.2.
ARTICLE 19
FEES AND EXPENSES
SECTION 19.1. If an Event of Default shall have occurred, Landlord may (1)
perform the same for the account of Tenant, or (2) make any expenditure or incur
any obligation for the payment of money in connection with any obligation owed
to Landlord, including, but not limited to, reasonable attorneys' fees and
disbursements in instituting, prosecuting or defending any action or proceeding,
and in either case the cost thereof, with interest thereon at the Applicable
Rate, shall be deemed to be Additional Rent hereunder and shall be paid by
Tenant to Landlord within ten (10) days after rendition of any bill or statement
to Tenant therefor. In addition, Tenant shall pay Landlord any reasonable
attorneys' fees and disbursements incurred by Landlord in connection with any
proceeding in which the value for the use and occupancy of the Premises by
Tenant is being
34
determined (whether or not any such proceeding results from a default by Tenant
under this Lease).
SECTION 19.2. If Tenant shall fail to pay any installment of Fixed Rent,
Additional Rent or any other item of Rental for a period longer than five (5)
days after the same shall have become due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent, Additional Rent or other item of
Rental, as the case may be, as a late charge and as Additional Rent, a sum equal
to interest at the Applicable Rate on the amount unpaid, computed from the date
such payment was due, without regard to any such grace period, to and including
the date of payment.
ARTICLE 20
NO REPRESENTATIONS BY LANDLORD
SECTION 20.1. Landlord and Landlord's agents have made no representations
or promises with respect to the Premises except as herein expressly set forth,
and no rights, easements or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth herein. Tenant shall accept possession
of the Premises in its "as is" condition on the Commencement Date, and Landlord
shall have no obligation to perform any work or make any installations in order
to prepare the Premises for Tenant's occupancy. The taking of occupancy of the
whole or any part of the Premises by Tenant shall be conclusive evidence, as
against Tenant, that Tenant accepts possession of the same and that the Premises
were in good and satisfactory condition at the time such occupancy was so taken.
All references in this Lease to the consent or approval of Landlord shall be
deemed to mean the written consent or approval executed by Landlord and no other
consent or approval of Landlord shall be effective for any purpose whatsoever.
ARTICLE 21
END OF TERM
SECTION 21.1. Upon the expiration or other termination of this Lease,
Tenant shall quit and surrender to Landlord the Premises, vacant, broom clean,
in good order and condition, ordinary wear and tear excepted, and Tenant shall
remove all of Tenant's Alterations as may be required pursuant to Article 6.
Tenant shall also remove all of Tenant's Property and all other personal
property and personal effects of all persons claiming through or under Tenant,
and shall pay the cost of repairing
35
all damage to the Premises occasioned by such removal. Any Tenant's Property or
other personal property that remains in, on or at the Premises after the
termination of this Lease shall be deemed to have been abandoned and either may
be retained by Landlord as its property or may be disposed of in such manner as
Landlord may see fit. If Tenant's Property or other personal property or any
part thereof is sold, Landlord may receive and retain the proceeds of such sale
as the property of Landlord. Any expense incurred by Landlord in removing or
disposing of Tenant's Property or other personal property or Alterations
required to be removed as provided in Article 6, as well as the cost of
repairing all damage to the Premises caused by such removal, shall be reimbursed
to Landlord by Tenant, as Additional Rent, on demand.
SECTION 21.2. If the Expiration Date falls on a day which is not a Business
Day, then Tenant's obligations under Section 21.1 shall be performed on or prior
to such Business Day.
SECTION 21.3. If the Premises are not surrendered upon the expiration or
other termination of this Lease, Tenant hereby indemnifies Landlord against
liability resulting from delay by Tenant in so surrendering the Premises,
including any claims made by any succeeding tenant or prospective tenant founded
upon such delay and agrees to be liable to Landlord for (i) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the Premises in order to induce such tenant not
to terminate its lease by reason of the holding-over by Tenant and (ii) the loss
of the benefit of the bargain if any such tenant shall terminate its lease by
reason of the holding-over by Tenant.
SECTION 21.4. Tenant's obligations under this Article 21 shall survive the
expiration or termination of this Lease.
ARTICLE 22
POSSESSION
SECTION 22.1. If Landlord shall be unable to deliver possession of the
Premises on the Commencement Date for any reason whatsoever, Landlord shall not
be subject to any liability therefor and the validity of this Lease shall not be
impaired thereby nor the Expiration Date extended, but the Commencement Date
shall be postponed until five (5) Business Days following notice from Landlord
that the Premises are available for occupancy by Tenant. Tenant expressly waives
any right to rescind
36
this Lease under any present or future statute and further expressly waives the
right to recover any damages that may result from Landlord's failure to deliver
possession of the Premises on the Commencement Date.
ARTICLE 23
NO WAIVER
SECTION 23.1. No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys to the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises.
SECTION 23.2. The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease shall not prevent a subsequent act, which would have originally
constituted a violation, from having all of the force and effect of an original
violation. The receipt by Landlord of Fixed Rent, Additional Rent or any other
item of Rental with knowledge of the breach of any covenant of this Lease shall
not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord, unless such waiver shall be in writing
and shall be signed by Landlord. No payment by Tenant or receipt by Landlord of
a lesser amount than the Rental then due and payable shall be deemed to be other
than on account of the earliest item(s) of Rental, or as Landlord may elect to
apply the same, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance due of the Rental or to otherwise pursue any other
remedy in this Lease provided. This Lease contains the entire agreement between
the parties and all prior negotiations and agreements are merged herein. Any
executory agreement hereafter made shall be ineffective to change, discharge or
effect an abandonment of this Lease in whole or in part unless such executory
agreement is in writing and signed by the party against whom enforcement of the
change, discharge or abandonment is sought.
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ARTICLE 24
WAIVER OF TRIAL BY JURY
SECTION 24.1. Tenant hereby waives trial by jury in any action or
proceeding brought by or against Tenant with respect to any matters whatsoever
arising out of or in any way connected with this Lease, the relationship of
Landlord and Tenant, Tenant's use or occupancy of the Premises, whether during
or after the Term, or for the enforcement of any remedy under any statute,
emergency or otherwise. If Landlord shall commence any summary proceeding
against Tenant, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding, and will not seek to consolidate such
proceeding with any other action which may have been or will be brought in any
other court by Tenant or Landlord.
ARTICLE 25
INABILITY TO PERFORM
SECTION 25.1. This Lease and the obligation of Tenant to pay Rental
hereunder and to perform all of the other covenants and agreements hereunder on
the part of Tenant to be performed shall in no way be affected, impaired or
excused because Landlord is unable to fulfill any of Landlord's obligations
under this Lease, expressly or implicitly to be performed by Landlord, or
because Landlord is unable to make or is delayed in making any repairs, or is
unable to supply or is delayed in supplying any services, if Landlord is
prevented from or delayed in so doing by reason of acts of God, casualty,
strikes or labor troubles, accident, governmental preemption in connection with
an emergency, Requirements, conditions of supply and demand which have been or
are affected by war or other emergency, or any other cause whatsoever, whether
similar or dissimilar to the foregoing, beyond Landlord's reasonable control
("UNAVOIDABLE DELAYS").
ARTICLE 26
NOTICES
SECTION 26.1.
(A) Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease ("NOTICE(S)") shall be in writing and
shall be deemed sufficiently given or rendered if delivered by hand
38
(against a signed receipt) or if deposited with a nationally recognized
overnight courier and in either case addressed:
IF TO TENANT:
(a) at Tenant's address first set forth in this Lease or (b)
at any place where Tenant or any agent or employee of Tenant
may be found if given subsequent to Tenant's vacating,
deserting, abandoning or surrendering the Premises, and
IF TO LANDLORD:
at Landlord's address first set forth in this
Lease, Attn: Mr. Frank Gallagher, with a copy
to Todtman, Young, Tunick, Nachamie, Hendler
& Spizz, P.C., 425 Park Avenue, New York, New
York 10022 Attention: Martin Todtman, Esq.
and (y) any Mortgagee who may have requested
the same, by Notice given in accordance with
the provisions of this Article 26, at the
address designated by such Mortgagee,
or to such other address(es) as either Landlord or Tenant may
designate as its new address(es) for such purpose by notice
given to the other in accordance with the provisions of this
Article 26.
(B) Notices shall be deemed to have been rendered or given (a) on the
date delivered, if delivered by hand, or (b) on the day after being deposited
with a nationally recognized overnight courier as provided in Section 26.1(A)
hereof.
ARTICLE 27
LANDLORD'S RIGHT TO TERMINATE
SECTION 27.1 Notwithstanding anything contained herein to the contrary,
the Landlord shall have the sole and exclusive option to terminate this Lease
upon ninety (90) days prior written notice ("TERMINATION NOTICE PERIOD") to the
Tenant in the event that the Landlord shall have received an offer to purchase
the Premises, or any part thereof. Time shall be of the essence with respect to
the Tenant's obligation to vacate the Premises in accordance with the provisions
of Article 21 hereof on or before the expiration of the Termination Notice
Period. In the event that the Tenant shall fail to vacate the Premises as
aforesaid, then in such event, the Landlord shall be entitled to avail
39
itself of any and all rights and remedies against the Tenant, whether at law,
equity or under and pursuant to the terms and conditions of this Lease
including, without limitation, any rights and/or remedies which may be available
to the Landlord in accordance with the provisions of Article 18 hereof.
ARTICLE 28
BROKER
SECTION 28.1. Landlord represents and warrants to Tenant that Landlord has
not dealt with any broker or Person in connection with this Lease. Tenant
represents and warrants to Landlord that Tenant has not dealt with any broker or
Person in connection with this Lease. The execution and delivery of this Lease
by Tenant shall be conclusive evidence that Tenant acknowledges that Landlord
has relied upon the foregoing representation and warranty. Tenant shall
indemnify and hold harmless Landlord from and against any and all claims for
commission, fee or other compensation by any broker or Person who claims to have
dealt with Tenant in connection with this Lease and for any and all costs
incurred by Landlord in connection with such claims, including, without
limitation, attorneys' fees and disbursements. The provisions of this Article 28
shall survive the expiration or earlier termination of this Lease.
ARTICLE 29
INDEMNITY
SECTION 29.1. Tenant shall not do or permit any act or thing to be done in,
at or upon the Premises that may subject any Indemnitee to any liability or
responsibility for injury, damage to persons or property or to any liability by
reason of the existence or application of, compliance with or violation of any
Requirement, but shall exercise such control over the Premises as to protect
each Indemnitee fully against any such liability and responsibility. Tenant
shall indemnify and save harmless the Indemnitees from and against (a) all
claims of whatever nature against the Indemnitees arising from any act, omission
or negligence of Tenant or Persons Within Tenant's Control, (b) all claims
against the Indemnitees arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring in or about
the Premises during the Term or during Tenant's occupancy of the Premises,
unless and to the extent caused by the gross negligence of Landlord or its
shareholders, officers and employees, (c) all claims against the Indemnitees
arising from any accident, injury or damage occurring outside of the Premises
but anywhere within or about the
40
Premises, where such accident, injury or damage results or is claimed to have
resulted from an act, omission or negligence of Tenant or Persons Within
Tenant's Control, and (d) any breach, violation or non-performance of any
covenant, condition or agreement contained in this Lease to be fulfilled, kept,
observed and performed by Tenant. This indemnity and hold harmless agreement
shall include indemnity from and against any and all liability, claims, fines,
suits, demands, costs and expenses of any kind or nature (including, without
limitation, attorneys' fees and disbursements) incurred in or in connection with
any such claim or proceeding brought thereon, and the defense thereof.
SECTION 29.2. If any claim, action or proceeding is made or brought against
any Indemnitee, against which claim, action or proceeding Tenant is obligated to
indemnify such Indemnitee pursuant to the terms of this Lease, then, upon demand
by the Indemnitee, Tenant, at its sole cost and expense, shall resist or defend
such claim, action or proceeding in the Indemnitee's name, if necessary, by such
attorneys as the Indemnitee may select, including, without limitation, attorneys
for the Indemnitee's insurer. The provisions of this Article 29 shall survive
the expiration or earlier termination of this Lease.
ARTICLE 30
ADJACENT EXCAVATION; SHORING
SECTION 30.1. If an excavation shall be made upon land adjacent to the
Premises, or shall be authorized to be made, Tenant shall, upon reasonable
advance notice, afford to the person or entity causing or authorized to cause
such excavation, a limited license to enter upon the Premises for the purpose of
doing such work as said person or entity deems necessary to preserve the walls
of any building located on the Premises from injury or damage and to support the
same by proper foundations without any claim for eviction or constructive
eviction, damages or indemnity against Landlord, or diminution or abatement of
Rental.
ARTICLE 31
RENEWAL OPTIONS
SECTION 31.1. Provided that the Tenant is not in default with respect
to any of its obligations to the Landlord under and pursuant to the terms and
conditions of this Lease at the time each Option (as such term is hereinafter
defined) is to be exercised, the Tenant shall have the option to renew this
Lease
41
for seven (7) additional five (5) year periods [the option with respect to each
additional five (5) year period is referred to herein as an "OPTION" and,
collectively, all of the options granted herein are referred to as the
"OPTIONS"] as follows:
OPTION PERIOD 1 shall commence on May 13, 2001 and shall continue up to
and including May 12, 2006.
OPTION PERIOD 2 shall commence on May 13, 2006 and shall continue up to
and including May 12, 2011.
OPTION PERIOD 3 shall commence on May 13, 2011 and shall continue up to
and including May 12, 2016.
OPTION PERIOD 4 shall commence on May 13, 2016 and shall continue up to
and including May 12, 2021.
OPTION PERIOD 5 shall commence on May 13, 2021 and shall continue up to
and including May 12, 2026.
OPTION PERIOD 6 shall commence on May 13, 2026 and shall continue up to
and including May 12, 2031.
OPTION PERIOD 7 shall commence on May 13, 2031 and shall continue up to
and including May 12, 2036.
(each of the aforementioned option periods is individually referred to
herein as an "OPTION PERIOD" and, collectively, all of the
aforementioned Option Periods are referred to herein as "OPTION
PERIODS")
SECTION 31.2. Each Option granted to the Tenant pursuant to the
provisions of Section 31.1 hereof shall be exercised by the Tenant giving
written notice to the Landlord of the Tenant's intent to exercise the Option not
less than one-hundred eighty (180) days prior to the expiration of the Initial
Term or not less than one-hundred eighty (180) days prior to the expiration of
the Option Period which is then in effect, as the case may be.
SECTION 31.3. In the event that the Tenant exercises the Option with
respect to any Option Period, the Landlord and the Tenant hereby agree that this
Lease shall continue in full force and effect and remain unamended during the
applicable Option Period AND specifically, without limitation, that the Fixed
Rent payable by the Tenant to the Landlord during such Option Period shall be
increased on each anniversary date from and after the Commencement Date in
accordance with the provisions of Article 8 hereof.
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ARTICLE 32
RENT REGULATION
SECTION 32.1. If at any time or times during the Term of this Lease, the
Rental reserved in this Lease is not fully collectible by reason of any
Requirement, Tenant shall enter into such agreements and take such other steps
as Landlord may request and as may be legally permissible to permit Landlord to
collect the maximum rents that may from time to time during the continuance of
such legal rent restriction be legally permissible (and not in excess of the
amounts reserved under this Lease). Upon the termination of such legal rent
restriction (a) the Rental shall become and thereafter be payable hereunder in
accordance with the amounts reserved in this Lease for the remainder of the
Term, and (b) Tenant shall pay to Landlord, if legally permissible, an amount
equal to (i) the items of Rental that would have been paid pursuant to this
Lease but for such legal rent restriction less (ii) the rents paid by Tenant to
Landlord during the period or periods such legal rent restriction was in effect.
This provision shall survive the expiration or earlier termination of this Lease
to the maximum enforceable extent.
ARTICLE 33
COVENANT OF QUIET ENJOYMENT
SECTION 33.1. Landlord covenants that, upon Tenant paying all Fixed Rent
and Additional Rent and observing and performing all the terms, agreements,
covenants, provisions and conditions of this Lease on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Premises,
subject nevertheless to the terms and conditions of this Lease; provided,
however, that no eviction of Tenant by reason of the foreclosure of any Mortgage
now or hereafter affecting the Premises shall be construed as a breach of this
covenant nor shall any action by reason thereof be brought against Landlord, and
provided further that this covenant shall bind and be enforceable against
Landlord or any successor to Landlord's interest, subject to the terms hereof,
only so long as Landlord or any successor to Landlord's interest, is in
possession and is collecting rent from Tenant but not thereafter.
43
ARTICLE 34
MISCELLANEOUS
SECTION 34.1. This Lease is presented for signature by Tenant and it is
understood that this Lease shall not constitute an offer by or be binding upon
Landlord unless and until Landlord shall have executed and delivered a fully
executed copy of this Lease to Tenant.
SECTION 34.2. The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Premises, as the case may be, and in the event of any such sale,
conveyance, assignment or transfer, Landlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord under this Lease
thereafter arising, and the transferee shall be deemed to have assumed, subject
to the remaining provisions of this Section 34.2, all obligations of the
Landlord under this Lease arising after the effective date of the transfer. No
trustee, partner, principal, shareholder, director or officer of Landlord
(collectively, the "PARTIES") shall have any direct or personal liability for
the performance of Landlord's obligations under this Lease, and Tenant shall
look solely to Landlord's interest in the Premises to enforce Landlord's
obligations hereunder and shall not otherwise seek any damages against Landlord
or any of the Parties whatsoever. Tenant shall not look to any other property or
assets of Landlord or any property or assets of any of the Parties in seeking
either to enforce Landlord's obligations under this Lease or to satisfy a
judgment for Landlord's failure to perform such obligations.
SECTION 34.3. Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Additional Rent or
Rental, shall constitute rent for the purposes of Section 502(b)(7) of the
Bankruptcy Code.
SECTION 34.4. Neither this Lease nor any memorandum of this Lease shall be
recorded without the prior written consent of the Landlord, which consent may be
withheld by the Landlord in its sole and absolute discretion.
SECTION 34.5. Except as otherwise expressly stated in this Lease, any
consent or approval required to be obtained from Landlord may be granted by
Landlord in its sole and absolute discretion. In any instance in which Landlord
agrees not to act unreasonably, Tenant hereby waives any claim for damages
against or liability of Landlord that Tenant may have based upon any assertion
that Landlord has unreasonably withheld or unreasonably
44
delayed any consent or approval requested by Tenant, and Tenant agrees that its
sole remedy shall be an action or proceeding to enforce any related provision or
for specific performance, injunction or declaratory judgment. If with respect to
any required consent or approval Landlord is required by the express provisions
of this Lease not to unreasonably withhold or delay its consent or approval, and
if it is determined in any such proceeding referred to in the preceding sentence
that Landlord acted unreasonably, the requested consent or approval shall be
deemed to have been granted; however, Landlord shall have no liability
whatsoever to Tenant for its refusal or failure to give such consent or
approval. Tenant's sole remedy for Landlord's unreasonably withholding or
delaying consent or approval shall be as provided in this Section 34.5.
SECTION 34.6. Landlord shall have the right at any time, and from time to
time, to amend unilaterally the provisions of this Lease if Landlord is advised
by its counsel that all or any portion of the Rental paid by Tenant to Landlord
hereunder is, or may be deemed to be, unrelated business taxable income within
the meaning of the United States Internal Revenue Code or regulations issued
thereunder, and Tenant agrees that it will execute all documents necessary to
effect any such amendment, provided that no such amendment shall increase
Tenant's payment obligations or other liability under this Lease nor reduce
Landlord's obligations hereunder.
SECTION 34.7. If Tenant shall remain in possession of the Premises after
the Expiration Date, without the execution by both Tenant and Landlord of a new
lease, Tenant, at the election of Landlord, shall be deemed to be occupying the
Premises as a Tenant from month-to-month, at a monthly rental equal to three
(3x) times the Rental payable during the last month of the Term, subject to all
the other conditions, provisions and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy.
SECTION 34.8. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted. If any words or phrases in this Lease are stricken out or
otherwise eliminated, whether or not any other words or phrases have been added,
this Lease shall be construed as if the words or phrases so stricken out or
otherwise eliminated were never included in this Lease and no implication or
inference shall be drawn from the fact that such words or phrases were stricken
out or otherwise eliminated.
SECTION 34.9. If any of the provisions of this Lease, or the application
thereof to any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
provisions to persons or circumstances other than those as to whom or which it
is held
45
invalid or unenforceable, shall not be affected thereby and shall remain valid
and enforceable, and every provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
SECTION 34.10. Landlord shall have the right to erect any gate, chain or
other obstruction or to close off any portion of the Premises to the public at
any time to the extent necessary to prevent a dedication thereof for public use.
SECTION 34.11. Tenant hereby represents to Landlord that it is not
entitled, directly or indirectly, to diplomatic or sovereign immunity and Tenant
agrees that in all disputes arising directly or indirectly out of this Lease
Tenant shall be subject to service of process in, and the jurisdiction of the
courts of, the State of New Jersey. The provisions of this Section 34.11 shall
survive the expiration of this Lease.
SECTION 34.12. This Lease contains the entire agreement between the parties
and all prior negotiations and agreements are merged into this Lease. Except as
provided in Section 34.6 this Lease may not be changed, abandoned or discharged,
in whole or in part, nor may any of its provisions be waived except by a written
agreement that (a) expressly refers to this Lease, (b) is executed by the party
against whom enforcement of the change, abandonment, discharge or waiver is
sought and (c) is permissible under the Mortgage(s).
SECTION 34.13. Any apportionment or prorations of Rental to be made under
this Lease shall be computed on the basis of a three hundred sixty (360) day
year, with twelve (12) months of thirty (30) days each.
SECTION 34.14. The laws of the State of Jersey applicable to contracts made
and to be performed wholly within the State of New Jersey shall govern and
control the validity, interpretation, performance and enforcement of this Lease
without regard to principles of conflicts of law.
SECTION 34.15. If Tenant is a corporation, each person executing this Lease
on behalf of Tenant hereby covenants, represents and warrants that Tenant is a
duly incorporated or duly qualified (if foreign) corporation and is authorized
to do business in the State of New Jersey (a copy of evidence thereof to be
supplied to Landlord upon request); and that each person executing this Lease on
behalf of Tenant is an officer of Tenant and that he or she is duly authorized
to execute, acknowledge and deliver this Lease to Landlord (a copy of a
resolution to that effect to be supplied to Landlord upon request).
46
SECTION 34.16. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Lease nor the intent of any provision thereof.
SECTION 34.17. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective legal representatives, heirs, successors, and, except as otherwise
provided in this Lease, their assigns.
SECTION 34.18. For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(A) The words "herein", "hereof", "hereunder" and "hereby"and words of
similar import shall be construed to refer to this Lease as a whole and not to
any particular Article or Section unless expressly so stated.
(B) Tenant's obligations hereunder shall be construed in every instance as
conditions as well as covenants, each separate and independent of any other
terms of this Lease.
(C) Reference to Landlord as having "no liability" or being "without
liability" shall mean that Tenant shall not be entitled to terminate this Lease,
or to claim actual or constructive eviction, partial or total, or to receive any
abatement or diminution of rent, or to be relieved in any manner of any of its
other obligations hereunder, or to be compensated for loss or injury suffered or
to enforce any other right or liability whatsoever against Landlord under or
with respect to this Lease or with respect to Tenant's use or occupancy of the
Premises.
(D) Reference to "termination of this Lease" or "expiration of this Lease"
and words of like import includes expiration or sooner termination of this Lease
and the Term and the estate hereby granted or cancellation of this Lease
pursuant to any of the provisions of this Lease or by law. Upon the termination
of this Lease, the Term and estate granted by this Lease shall end at noon on
the date of termination as if such date were the Fixed Expiration Date, and
neither party shall have any further obligation or liability to the other after
such termination except (i) as shall be expressly provided for in this Lease,
and (ii) for such obligations as by their nature under the circumstances can
only be, or by the provisions of this Lease, may be, performed after such
termination, and, in any event, unless expressly otherwise provided in this
Lease, any liability for a payment (which shall be apportioned as of such
termination) which shall have accrued to or with respect to any period ending at
the time of termination shall survive the termination of this Lease.
47
(E) Words and phrases used in the singular shall be deemed to include the
plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender.
(F) The rule of "ejusdem generis" shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
(G) Transit, Coach, Tours, Bus Lines and Transportation, each hereby
represent, warrant, acknowledge and agree that they shall be JOINTLY AND
SEVERALLY liable for any and all of the obligations of the Tenant hereunder of
any nature whatsoever, and that the failure by any one of Transit, Coach, Tours,
Bus Lines or Transportation to perform any obligation of the Tenant hereunder
shall not affect, in any manner whatsoever, the Tenant's liability with respect
to such obligation.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
as of the day and year first above written.
TRI-COUNTY BUS LINES, INC., LANDLORD
By: ______________________________
COMMUNITY TRANSIT LINES, INC., TENANT
By: ______________________________
COMMUNITY TOURS, INC., TENANT
By: ______________________________
COMMUNITY COACH, INC., TENANT
By: ______________________________
COMMUNITY BUS LINES, INC., TENANT
By: ______________________________
COMMUNITY TRANSPORTATION, INC., TENANT
By: ______________________________
48
<PAGE>
AGREEMENT OF SUBLEASE
BETWEEN
TRI-COUNTY BUS LINES, INC.,
SUBLANDLORD
AND
COMMUNITY TRANSIT LINES, INC.,
COMMUNITY BUS LINES, INC.,
COMMUNITY TOURS, INC.,
COMMUNITY COACH, INC.,
COMMUNITY TRANSPORTATION, INC.,
(COLLECTIVELY, THE SUBTENANT)
=========================================================
DATED: MAY 13, 1996
=========================================================
PREMISES
308-322 HOWE AVENUE
PASSAIC, NEW JERSEY
BLOCK 3273.A, LOT 10 ON THE
OFFICIAL TAX MAP OF THE CITY OF PASSAIC
AGREEMENT OF SUBLEASE, made as of the 13th day of May, 1996, between
TRI-COUNTY BUS LINES, INC., a New Jersey corporation, having an address at 315
Howe Avenue, Passaic, New Jersey 07055, as Sublandlord, and COMMUNITY TRANSIT
LINES, INC., a New Jersey corporation, having an address at 315 Howe Avenue,
Passaic, New Jersey 07055 ("TRANSIT"), COMMUNITY TOURS, INC., a New Jersey
corporation, having an address at 315 Howe Avenue, Passaic, New Jersey 07055
("TOURS"), COMMUNITY COACH, INC., a New Jersey corporation, having an address at
315 Howe Avenue, Passaic, New Jersey 07055 ("COACH"), COMMUNITY BUS LINES, INC.,
a New Jersey corporation, having an address at 315 Howe Avenue, Passaic, New
Jersey 07055 ("BUS"), COMMUNITY TRANSPORTATION, INC., a New Jersey corporation,
having an address at 315 Howe Avenue, Passaic, New Jersey 07055
("TRANSPORTATION")[Transit, Tours, Coach, Bus and Transportation are
collectively referred to herein as the "SUBTENANT"].
WITNESETH:
WHEREAS, the Sublandlord is the owner of certain premises known as and
by the street address of 308-322 Howe Avenue, Passaic, New Jersey and known and
designated on the Official Tax Map of the City of Passaic as Block 3273.A, Lot
10, as more particularly described on Schedule "A", annexed hereto and made a
part hereof; and
WHEREAS, the Sublandlord desires to sublease the aforementioned
premises to the Subtenant and the Subtenant desires to sublease the
aforementioned premises from the Sublandlord.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, for themselves,
as well as their respective legal representatives, heirs, successors and
assigns, hereby agree as follows:
ARTICLE 1
GLOSSARY
For the purposes of this Sublease, the following terms shall have the
meanings indicated below:
"ADA" shall have the meaning set forth in Section 9.1
hereof.
"ADDITIONAL RENT" shall have the meaning set forth in
Section 2.2 hereof.
"ALTERATION" or "ALTERATIONS" shall mean any and all alterations,
decorations, installations, repairs, improvements, additions, replacements or
other physical changes of any nature whatsoever in or about the Premises at any
time, now or hereafter.
"APPLICABLE RATE" shall mean the lesser of (x) three percentage points
above the then current Base Rate, or (y) the maximum rate permitted by
applicable law.
"BANKRUPTCY CODE" shall mean 11 U.S.C. Section 101 ET SEQ., or any statute,
federal or state, of similar nature and purpose, now or hereafter.
"BASE RATE" shall mean the rate of interest publicly announced from time to
time by Citibank, N.A., or its successor, as its "base rate" (or such other term
as may be used by Citibank, N.A., from time to time, for the rate presently
referred to as its "base rate").
"BUILDING SYSTEMS" shall mean the mechanical, electrical, sanitary,
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service or support systems of any nature whatsoever located at or on the
Premises, BUT shall not include installations made by Subtenant or fixtures or
appliances (regardless of whether or not such fixtures or appliances are owned
by the Subtenant or the Sublandlord).
"BUILDING INSURANCE" shall have the meaning set forth in
Section 11.2 hereof.
"BUSINESS DAYS" shall mean all days, excluding Saturdays, Sundays and all
days observed as holidays by the State of New Jersey or the federal government.
"COMMENCEMENT DATE" May 13, 1996.
"DEFICIENCY" shall have the meaning set forth in Section
18.2(A)(2) hereof.
"ECRA" shall have the meaning set forth in Section 9.2(B)
hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in
Section 17.1 hereof.
"EXPIRATION DATE" shall mean the Fixed Expiration Date or such other date
on which the Term ends pursuant to any of the terms, conditions or covenants of
this Sublease or pursuant to law.
"FIXED EXPIRATION DATE" April 30, 2009.
"FIXED RENT" For the period commencing on the date hereof and
continuing up to and including April 30, 2009, such amount as shall be equal to
the amounts set forth on Schedule "B", annexed hereto and made a part hereof.
Commencing on May 1, 2009, if applicable, the Fixed Rent payable to the
Sublandlord by the
3
Subtenant hereunder shall be equal to the rent payable by the Sublessor to the
Overlandlord under and pursuant to the provisions of any amendment, modification
and/or renewal of the Overlease (as such term is hereinafter defined).
"GOVERNMENT AUTHORITY" or "GOVERNMENT AUTHORITIES" shall mean the United
States of America, the State of New Jersey, the City of Passaic, and/or any
political subdivision thereof and any agency, department, commission, board,
bureau or instrumentality of any of the foregoing, now existing or hereafter
created, having jurisdiction over the Premises or any portion thereof.
"HAZARDOUS MATERIALS" shall have the meaning set forth in
Section 9.2(A) hereof.
"INDEMNITEES" shall mean Sublandlord, its shareholders, officers,
directors, employees, agents and contractors (and the partners, shareholders,
officers, directors and employees of any of the Sublandlord's agents or
contractors).
"INITIAL TERM" shall mean the period commencing on the Commencement Date
and continuing up to and including April 30, 2009.
"SUBLANDLORD", on the date as of which this Sublease is made, shall mean
Tri-County Bus Lines, Inc., a New Jersey corporation, but thereafter,
"Sublandlord" shall mean any fee owner of the Premises.
"SUBLEASE YEAR" shall mean each twelve (12) month period commencing on
each anniversary date from and after the Commencement Date.
"MORTGAGE(S)" shall mean any trust indenture or mortgage which may now
or hereafter affect the Premises and all extensions, supplements, amendments,
modifications, consolidations, refinancings and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"MORTGAGEE(S)" shall mean any trustee or mortgagee or holder
of a Mortgage.
"NJDEP" shall have the meaning set forth in Section 9.2(B)
hereof.
"NOTICE(S)" shall have the meaning set forth in Section
27.1(A) hereof.
"OPTION" or "OPTIONS" shall have the meaning set forth in
Section 31.1 hereof.
4
"OPTION PERIOD" or "OPTION PERIODS" shall have the meaning set forth in
Section 31.1 hereof.
"OVERLANDLORD" shall mean Atlas Industrial Manufacturing
Company.
"OVERLEASE" that certain lease dated May 1, 1989 by and between the
Overlandlord, as lessor, and Tri-County Bus Lines, Inc., as lessee, with respect
to the Premises.
"PARTIES" shall have the meaning set forth in Section 34.2
hereof.
"PERMITTED USE" shall mean general, executive and administrative
offices, parking and terminal facilities in connection with Subtenant's business
as a motor vehicle transportation company and uses related thereto including the
evolution of the Subtenant's business consistent with the evolution of the motor
vehicle transportation industry in general.
"PERSON(S) OR PERSON(S)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"PERSONS WITHIN SUBTENANT'S CONTROL" shall mean and include Subtenant, all
of Subtenant's respective shareholders, directors, officers, agents,
contractors, sub-contractors, servants, employees, licensees and invitees as
well as any of the heirs, successors, representatives and assigns of any of the
foregoing.
"PREMISES" shall mean all that certain plot, piece and parcel of land,
together with all buildings and improvements thereon erected, known as and by
the street address of 308-322 Howe Avenue, Passaic, New Jersey and known and
designated on the Official Tax Map of the City of Passaic as Block 3273.A, Lot
10, as more particularly described on Schedule "A", annexed hereto and made a
part hereof.
"RENTAL" shall mean and be deemed to include Fixed Rent, Additional Rent
and any other sums payable, now or hereafter, by Subtenant hereunder.
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, retroactive and prospective, of all
Governmental Authorities, now existing or hereafter created, which affect,
directly or indirectly, the Premises and/or the maintenance, use, operation or
occupation of the Premises, (ii) all requirements, obligations and conditions of
all instruments of record on the date of this Sublease, and (iii) all
requirements, obligations and conditions
5
imposed by any fire rating agency or by the carrier of Sublandlord's hazard
insurance policy for the Premises.
"TAXES" shall have the meaning set forth in Section 3.1
hereof.
"SUBTENANT", on the date as of which this Sublease is made, shall mean the
Subtenant named in this Sublease, but thereafter "Subtenant" shall mean only the
tenant under this Sublease at the time in question; provided, however, that the
Subtenant named in this Sublease and any and all successor tenant(s) hereunder
shall not be released and relieved from any liability hereunder in the event of
any assignment of this Sublease or a sublet, in whole or in part, of the
Premises.
"SUBTENANT'S PROPERTY" shall mean Subtenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings and other
movable items of personal property owned by the Subtenant.
"TERM", on the date as of which this Sublease is made shall mean twelve
(12) years, eleven (11) months and eighteen (18) days, but thereafter shall be
deemed to include any Option Period for which the Subtenant exercises its Option
pursuant to the provisions of Article 31 hereof.
"TERMINATION NOTICE PERIOD" shall have the meaning set forth in Section
27.1 hereof.
"UNAVOIDABLE DELAYS" shall have the meaning set forth in
Article 25 hereof.
ARTICLE 2
DEMISE; PREMISES; TERM; RENT
SECTION 2.1. Sublandlord hereby leases to Subtenant and Subtenant
hereby hires from Sublandlord the Premises for the Term to commence on the
Commencement Date and to end on the Fixed Expiration Date, unless earlier
terminated as provided herein.
SECTION 2.2. Commencing upon the Commencement Date, Subtenant shall pay
to Sublandlord, in lawful money of the United States of America, without notice
or demand, by good and sufficient check at the office of Sublandlord or at such
other place as Sublandlord may designate from time to time, the following:
(A) the Fixed Rent, as such term is defined in Article 1
hereof, which shall be payable in equal monthly installments in
6
advance on the first day of each and every calendar month during the Term,
except that the first monthly installment of Fixed Rent shall be payable by
Subtenant upon execution and delivery of this Sublease; and
(B) additional rent ("ADDITIONAL RENT") consisting of all other sums
of money as shall become due from and be payable by Subtenant hereunder (for
default in the payment of which Sublandlord shall have the same remedies as for
a default in the payment of Fixed Rent).
SECTION 2.3. If the Commencement Date is other than the first day of a
calendar month, or the Fixed Expiration Date is other than the last day of a
calendar month, Fixed Rent for such month shall be prorated on a per diem basis.
SECTION 2.4. Subtenant shall pay the Fixed Rent and Additional Rent
when due without abatement, deduction, counterclaim, setoff or defense of any
nature whatsoever.
ARTICLE 3
REAL ESTATE TAXES; MORTGAGE(S)
SECTION 3.1. The Subtenant represents, warrants, covenants and agrees
that it shall, within five (5) days of written demand by the Sublandlord to the
Subtenant, pay to the Sublandlord, as Additional Rent, any and all Taxes (as
hereinafter defined) of any nature whatsoever assessed or imposed against the
Premises for each and every Sublease Year during the Term of this Sublease. The
Sublandlord hereby agrees that any demand given by the Sublandlord to the
Subtenant pursuant to the provisions of this Section 3.1 shall include an
accurate copy of the invoice, statement, bill or similar document issued by the
relevant Governmental Authority or Governmental Authorities, as the case may be,
with respect to the Taxes for which payment is demanded. For purposes of this
Section 3.1, "TAXES" shall include, without limitation, any and all taxes
assessed against the Premises, all personal property taxes, all ad valorem taxes
and any and all other taxes assessed against the Premises by any Governmental
Authority, now or hereafter.
SECTION 3.2. The Subtenant represents, warrants and covenants and
agrees that it shall, within five (5) days of written demand by the Sublandlord
to the Subtenant, pay to the Sublandlord, as Additional Rent, any and all
amounts which may be due and owing under and pursuant to the terms and
conditions of any Mortgage or Mortgages, as the case may be, encumbering the
Premises, now or hereafter, during the Term of this Sublease
7
including, but not limited to, any extensions, supplements, amendments,
modifications, consolidations, refinancings and replacements of any such
Mortgage or Mortgages provided that:
(A) the principal balance of any Mortgage subsequent to any extension,
supplement, amendment, modification, consolidation, refinancing or
replacement shall not exceed the outstanding principal balance of the
Mortgage which is to be extended, supplemented, amended, modified,
consolidated, refinanced or replaced at the time of such extension,
supplement, amendment, modification, consolidation, refinancing or
replacement, as the case may be; and
(B) the amount of the monthly payments of principal and interest
payable pursuant to the terms and conditions of any Mortgage subsequent
to any extension, supplement, amendment, modification, consolidation,
refinancing or replacement shall not exceed the amount of the monthly
payments with respect to the Mortgage which is to be extended,
supplemented, amended, modified, consolidated, refinanced or replaced
at the time of such extension, supplement, amendment, modification,
consolidation, refinancing or replacement, as the case may be; and
(C) the terms of any extended, supplemented, amended, modified,
consolidated, refinanced or replaced Mortgage shall be no more
financially onerous than the provisions of the such Mortgage prior to
such extension, supplement, amendment, modification, consolidation,
refinancing or replacement, as the case may be; and
(D) the term of any Mortgage extended, supplemented, amended, modified,
consolidated, refinanced or replaced shall be no less than the term of
such Mortgage prior to such extension, supplementation, amendment,
modification, consolidation, refinancing or replacement, as the case
may be.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 shall not apply with respect to any amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage
securing additional indebtedness (above and beyond any Mortgage or Mortgages
existing as of the date hereof) which first becomes a recorded lien on the
Premises subsequent to the date of this Sublease and which is executed and
delivered by the Sublandlord without the consent of the Subtenant. The
Sublandlord hereby agrees that any demand given by the Sublandlord to the
Subtenant for payment of Additional Rent pursuant to the provisions of this
Section 3.2
8
shall include, ONLY to the extent provided to the Sublandlord by the Mortgagee,
an accurate copy of the invoice, statement, bill or similar document issued by
such Mortgagee or Mortgagees, as the case may be, with respect to any amount for
which payment of Additional Rent is demanded by the Sublandlord under and
pursuant to the provisions of this Section 3.2.
ARTICLE 4
UTILITIES
SECTION 4.1. The Subtenant represents, warrants, covenants and agrees
that it shall, within five (5) days of written demand by the Sublandlord to the
Subtenant, pay to the Sublandlord, as Additional Rent, any and all charges
incurred by the Sublandlord for any and all utilities supplied to the Premises
including, without limitation, electricity, water, heating oil and/or natural
gas. The Sublandlord hereby agrees that any demand given by the Sublandlord to
the Subtenant pursuant to the provisions of this Section 4.1 shall include an
accurate copy of the invoice, statement, bill or similar document issued by the
public utility or any private company providing such utility, as the case may
be, with respect to any utility for which payment is demanded.
SECTION 4.2. Sublandlord shall not be liable in any way to Subtenant
for any interruption or failure of or defect in the supply or character of any
utility furnished to the Premises, now or hereafter, or for any loss, damage or
expense Subtenant may sustain if either the quantity or character of any utility
is changed or is no longer suitable for Subtenant's requirements, whether by
reason of any requirement, act or omission of the public utility serving the
Premises or for any other reason whatsoever. Notwithstanding the provisions of
this Section 4.2, the Sublandlord shall be responsible for any and all actual
damages suffered by the Subtenant as a result of any interruption of utility
service caused solely by the Sublandlord's failure to remit (prior to the
expiration of any applicable grace period) to the appropriate public utility or
private company providing such utility, as the case may be, any amount which has
been paid by the Subtenant to the Sublandlord pursuant to the provisions of
Section 4.1 hereof.
SECTION 4.3. Subtenant shall at all times comply with the rules,
regulations, terms and conditions applicable to service, equipment, wiring, as
well as any and all requirements of the public utility supplying electricity to
the Premises. Subtenant shall not, without Sublandlord's prior written consent
in each instance (which consent may be withheld by the Sublandlord in its
reasonable discretion), connect any fixtures, machinery, appliances or equipment
to the Premises electric distribution
9
system or make any alteration or addition to Subtenant's machinery, appliances
or equipment, or the electric system of the Premises, if the effect thereof
would be to increase the electrical load in the Premises. Should Sublandlord
grant such consent, all additional risers or other equipment required therefor
shall be provided by Sublandlord and the cost thereof shall be deemed Additional
Rent due hereunder and shall be forthwith paid by Subtenant upon Sublandlord's
demand.
SECTION 4.4. If any Taxes are imposed upon Sublandlord with respect to any
utility furnished as a service to Subtenant by any Governmental Authority,
Subtenant agrees that such Taxes shall be reimbursed by Subtenant to Sublandlord
upon written demand. The Sublandlord hereby agrees that any demand given by the
Sublandlord to the Subtenant pursuant to the provisions of this Section 4.4
shall include an accurate copy of the invoice, statement, bill or similar
document issued by the relevant Governmental Authority or Governmental
Authorities, as the case may be, with respect to the Taxes for which payment is
demanded.
ARTICLE 5
USE AND OCCUPANCY
SECTION 5.1. Subtenant shall use and occupy the Premises for the Permitted
Use and for no other purpose of any nature whatsoever.
ARTICLE 6
ALTERATIONS
SECTION 6.1.
(A) (1) Prior to making any Alterations, Subtenant shall (i)
submit to Sublandlord detailed plans and specifications for approval by the
Sublandlord (including layout, architectural, electrical, mechanical and
structural drawings) and that comply with all Requirements for each proposed
Alteration, and Subtenant shall not commence any such Alteration without first
obtaining Sublandlord's approval of such plans and specifications, (ii) at
Subtenant's expense, obtain all permits, approvals and certificates required by
any Governmental Authorities, and (iii) furnish to Sublandlord duplicate
original policies or certificates thereof for worker's compensation insurance
(covering all persons to be employed by Subtenant, and Subtenant's contractors
and subcontractors, in connection with such Alteration) and commercial general
liability insurance (including premises operation, bodily injury, personal
injury,
10
death, independent contractors, products and completed operations, broad form
contractual liability and broad form property damage coverages) in such form,
with such companies, for such periods and in such amounts as Sublandlord may
reasonably approve, naming Sublandlord and its agents and any Mortgagee, as
additional insureds. Upon completion of such Alteration, Subtenant, at
Subtenant's expense, shall obtain certificates of final approval of such
Alterations required by any Governmental Authority and shall furnish Sublandlord
with copies thereof, together with the "as-built" plans and specifications for
such Alterations. All Alterations shall be made and performed in accordance with
the plans and specifications therefor as approved by Sublandlord and otherwise
in accordance with all Requirements. All materials and equipment to be
incorporated in the Premises as a result of any Alterations shall be first
quality and no such materials or equipment shall be subject to any lien,
encumbrance, chattel mortgage, title retention or security agreement.
(2) Sublandlord reserves the right to disapprove
any plans and specifications, in whole or in part, to reserve approval of items
shown thereon pending its review and approval of other plans and specifications,
and to condition its approval upon Subtenant making revisions to the plans and
specifications or supplying additional information. Subtenant agrees that any
review or approval by Sublandlord of any plans and/or specifications with
respect to any Alteration is solely for Sublandlord's benefit, and without any
representation or warranty whatsoever to Subtenant or any other Person with
respect to the adequacy, correctness or sufficiency thereof or with respect to
Requirements or otherwise.
(B) All Alterations shall become a part of the Premises and
shall be Sublandlord's property from and after the installation thereof and may
not be removed or changed without Sublandlord's prior written consent.
Notwithstanding the foregoing, Sublandlord, upon notice given at least thirty
(30) days prior to the Expiration Date or upon such shorter notice as is
reasonable under the circumstances upon the earlier expiration of the Term, may
require Subtenant to remove any specified Alterations and to repair and restore
in a good and workmanlike manner any damage to the Premises caused by such
removal. All Subtenant's Property shall remain the property of Subtenant and, on
or before the Expiration Date or earlier end of the Term, may be removed from
the Premises by Subtenant at Subtenant's sole cost and option; provided,
however, that Subtenant shall repair and restore in a good and workmanlike
manner any damage to the Premises caused by such removal. The provisions of this
Section 6.1(B) shall survive the expiration or earlier termination of this
Sublease.
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(C) (1) Any and all Alterations shall be performed, at
Subtenant's sole cost and expense, by contractors, subcontractors or mechanics
previously approved in writing by Sublandlord. Prior to making an Alteration, at
Subtenant's request, Sublandlord shall furnish Subtenant with a list of
contractors who may perform Alterations to the Premises on behalf of Subtenant.
(2) Notwithstanding the terms and conditions of
Section 6.1(C)(1) hereof, with respect to any Alteration affecting any Building
Systems, (i) Subtenant shall only employ Sublandlord's designated contractor,
and (ii) the Alteration shall, at Subtenant's expense, be designed by
Sublandlord's engineer.
(D) (1) Any mechanic's lien filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to,
Subtenant shall be cancelled or discharged by Subtenant, at Subtenant's expense,
within twenty (20) days after such lien shall be filed, by payment or filing of
the bond required by law, and Subtenant shall indemnify and hold Sublandlord
harmless from and against any and all costs, expenses, claims, losses or damages
resulting therefrom by reason thereof.
(2) If Subtenant shall fail to discharge such
mechanic's lien within the aforesaid period, then, in addition to any other
right or remedy of Sublandlord, Sublandlord may, but shall not be obligated to,
discharge the same either by paying the amount claimed to be due or by procuring
the discharge of such lien by deposit in court or bonding, and in any such
event, Sublandlord shall be entitled, if Sublandlord so elects, to compel the
prosecution of an action for the foreclosure of such mechanics lien by the
lienor and to pay the amount of the judgment, if any, in favor of the lienor,
with interest, costs and allowances.
(3) Any amount paid by Sublandlord for any of the aforesaid
charges and for all expenses of Sublandlord (including, but not limited to,
attorneys' fees and disbursements) incurred in defending any such action,
discharging said lien or in procuring the discharge of said lien, with interest
on all such amounts at the maximum legal rate of interest then chargeable to
Subtenant from the date of payment, shall be repaid by Subtenant within ten (10)
days after written demand therefor, and all amounts so repayable, together with
such interest, shall be considered Additional Rent.
SECTION 6.2. Sublandlord, at Subtenant's expense, and upon the request of
Subtenant, shall join in any applications for any permits, approvals or
certificates required to be obtained by Subtenant in connection with any
permitted Alteration (provided
12
that the provisions of the applicable Requirements shall require that
Sublandlord join in such application) and shall otherwise cooperate with
Subtenant in connection therewith; provided, however, that Sublandlord shall not
be obligated to incur any cost or expense or liability in connection therewith.
SECTION 6.3. Subtenant shall furnish to Sublandlord copies of records of
all Alterations and of the cost thereof within fifteen (15) days after the
completion of such Alterations.
SECTION 6.4. Subtenant shall not, at any time prior to or during the Term,
directly or indirectly, employ, or permit the employment of, any contractor,
mechanic or laborer in the Premises, whether in connection with any Alteration
or otherwise, if such employment would interfere or cause any conflict with
other contractors, mechanics or laborers engaged in the construction,
maintenance or operation of the Premises by Sublandlord, Subtenant or others, or
of any other property owned by Sublandlord. In the event of any such
interference or conflict, Subtenant, upon demand of Sublandlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Premises immediately.
ARTICLE 7
REPAIRS; REPLACEMENTS; MAINTENANCE
SECTION 7.1. Subtenant, at Subtenant's sole cost and expense, shall take
good care of the Premises and the fixtures, equipment and appurtenances therein
and make all repairs and replacements thereto, BOTH STRUCTURAL AND
NON-STRUCTURAL, of any nature whatsoever as and when needed to preserve them in
good working order and condition, except for (a) reasonable wear and tear and
(b) obsolescence. If Subtenant shall fail, after five (5) days notice (or such
shorter period as may be required because of an emergency), to proceed with due
diligence to make repairs required to be made by Subtenant, the same may be made
by Sublandlord, at the expense of Subtenant, and the expenses thereof incurred
by Sublandlord, with interest thereon at the Applicable Rate, shall be paid to
Sublandlord, as Additional Rent, within ten (10) days after rendition of a bill
or statement therefor. Subtenant shall give Sublandlord prompt notice of any
defective condition in any Building Systems located in, servicing or passing
through the Premises.
ARTICLE 8
INTENTIONALLY OMITTED
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ARTICLE 9
REQUIREMENTS OF LAW
SECTION 9.1. Subtenant shall not do, and shall not permit any act or thing
in or upon the Premises which will invalidate or be in conflict with the
certificate of occupancy for the Premises or violate any Requirements. Subtenant
shall, at Subtenant's sole cost and expense, immediately take all action,
including but not limited to, making any required Alterations necessary to
comply with all Requirements [including, but not limited to, the Americans With
Disabilities Act of 1990 (the "ADA"), as modified and supplemented from time to
time] which shall or may impose any violation, order or duty upon Sublandlord or
Subtenant arising from, or in connection with, the Premises, Subtenant's
occupancy, use or manner of use of the Premises (including, without limitation,
any occupancy, use or manner of use that constitutes a "place of public
accommodation" under the ADA), or any installations in the Premises, or required
by reason of a breach of any of Subtenant's covenants or agreements under this
Sublease, whether or not such Requirements shall now be in effect or hereafter
enacted or issued, and whether or not any work required shall be ordinary or
extraordinary or foreseen or unforeseen as of the date hereof.
SECTION 9.2. (A) Subtenant covenants and agrees that Subtenant shall, at
Subtenant's sole cost and expense, comply at all times with all Requirements
governing the use, generation, storage, treatment and/or disposal of any
Hazardous Materials (as defined below), the presence of which results from or in
connection with the act or omission of Subtenant or Persons Within Subtenant's
Control or the breach of this Sublease by Subtenant or Persons Within
Subtenant's Control. The term "HAZARDOUS MATERIALS" shall mean any biologically
or chemically active or other toxic or hazardous wastes, pollutants or
substances, including, without limitation, asbestos, PCBS, petroleum products
and by-products, substances defined or listed as "hazardous substances" or
"toxic substances" or similarly identified in or pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 ET
SEQ., and as hazardous wastes under the Resource Conservation and Recovery Act,
42 U.S.C. ss. 6010, ET SEQ., any chemical substance or mixture regulated under
the Toxic Substance Control Act of 1976, as amended, 15 U.S.C. 2601, ET SEQ.,
any "toxic pollutant" under the Clean Water Act, 33 U.S.C. ss. 466 ET SEQ., as
amended, any hazardous air pollutant under the Clean Air Act, 42 U.S.C. ss. 7401
ET SEQ., hazardous materials identified in or pursuant to the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 1802, ET SEQ., and any hazardous or
toxic substances or pollutant regulated under any other Requirements including,
without
14
limitation, ECRA (as such term is hereinafter defined). Subtenant agrees to
execute, from time to time, at Sublandlord's request, affidavits,
representations and the like concerning Subtenant's best knowledge and belief
regarding the presence of Hazardous Materials in, on, under or about the
Premises. Subtenant shall indemnify and hold harmless all Indemnitees from and
against any loss, claim, cost, damage, liability or expense (including
attorneys' fees and disbursements) arising by reason of any clean up, removal,
remediation, detoxification action or any other activity required or recommended
of any Indemnitees by any Governmental Authority by reason of the presence in,
on, under or about the Premises of any Hazardous Materials, as a result of or in
connection with the act or omission of Subtenant or Persons Within Subtenant's
Control or the breach of this Sublease by Subtenant or Persons Within
Subtenant's Control. The foregoing covenants and indemnity shall survive the
expiration or any termination of this Sublease.
(B) In addition to the foregoing, Subtenant
shall, at its sole cost and expense, comply with any and all environmental
monitoring requirements of the New Jersey Department of Environmental Protection
and the Environmental Cleanup Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 ET.
SEQ. In order to comply with ECRA, the Subtenant shall undertake, at its sole
cost and expense, all sampling required by the Sublandlord or the New Jersey
Department of Environmental protection ("NJDEP") and shall execute and deliver,
upon request, all documents and pay all fees necessary or desirable for such
compliance, which execution, delivery and/or payment may be requested by either
the Sublandlord and/or NJDEP. It is understood that this provision shall apply
with regard to any action which may or might require compliance with ECRA,
including without limitation, the termination of this Sublease, the change of
use of the Premises, an assignment or sublease of all or part of the Premises,
bankruptcy, or the conveyance of title to the Premises. It is understood that
the provisions of this Section 9.2(B) shall survive the expiration or earlier
termination of this Sublease.
SECTION 9.3. If Subtenant shall receive notice of any violation of, or
defaults under, any Requirements, liens or other encumbrances applicable to the
Premises, Subtenant shall give immediate written notice thereof to Sublandlord.
SECTION 9.4. If any governmental license or permit shall be required for
the proper and lawful conduct of Subtenant's business and if the failure to
secure such license or permit would, in any way, affect Sublandlord or the
Premises, then Subtenant, at Subtenant's expense, shall promptly procure and
thereafter maintain, submit for inspection by Sublandlord, and at all times
comply with the terms and conditions of, each such license or permit.
15
ARTICLE 10
SUBORDINATION
SECTION 10.1. This Sublease shall at all times, now and hereafter, be
subject and subordinate to the Overlease and to each and every Mortgage, whether
made prior to or after the execution of this Sublease, and to all extensions,
supplements, amendments, modifications, consolidations and replacements thereof
or thereto, substitutions therefor, and advances made thereunder. This clause
shall be self-operative and no further agreement of subordination shall be
required to make the interest of any lessor or Mortgagee superior to the
interest of Subtenant hereunder. In confirmation of such subordination,
Subtenant shall promptly execute and deliver, at its own cost and expense, any
document, in recordable form if requested, that any lessor, the Sublandlord or
any Mortgagee may request to evidence such subordination; and if Subtenant fails
to execute, acknowledge or deliver any such document within five (5) days after
request therefor, Subtenant hereby irrevocably constitutes and appoints
Sublandlord as Subtenant's attorney-in-fact, coupled with an interest, to
execute, acknowledge and deliver any such document for and on behalf of
Subtenant. Subtenant shall not do anything that would constitute a default under
any lease or Mortgage, or omit to do anything that Subtenant is obligated to do
under the terms of this Sublease so as to cause Sublandlord to be in default
thereunder.
SECTION 10.2. If, at any time prior to the expiration of the Term, any
lessor or Mortgagee comes into possession of the Premises, by receiver or
otherwise, Subtenant agrees, at the election and upon demand of any owner of the
Premises, or of any lessor or Mortgagee in possession of the Premises, to
attorn, from time to time, to any such owner, lessor or Mortgagee or any person
acquiring the interest of Sublandlord as a result of any such termination or as
a result of a foreclosure of the Mortgage or the granting of a deed in lieu of
foreclosure, upon the then executory terms and conditions of this Sublease
(except as provided below), for the remainder of the Term, provided that such
owner, lessor or Mortgagee, as the case may be, or receiver caused to be
appointed by any of the foregoing, is then entitled to possession of the
Premises. Any such attornment shall be made upon the condition that no such
owner, lessor or Mortgagee shall be:
(1) liable for any act or omission of any prior
landlord (including, without limitation, the then defaulting
landlord); or
16
(2) subject to any defense or offsets (except as expressly set
forth in this Sublease) which Subtenant may have against any prior landlord
(including, without limitation, the then defaulting landlord); or
(3) bound by any payment of Rental which Subtenant might have
paid for more than the current month to any prior landlord (including, without
limitation, the then defaulting landlord); or
(4) bound by any obligation to make any payment to Subtenant
which was required to be made prior to the time such owner, lessor or Mortgagee
succeeded to any prior landlord's interest; or
(5) bound by any obligation to perform any work
or to make improvements to the Premises except for (i) repairs to the Premises
or any part thereof as a result of damage by fire or other casualty pursuant to
Article 12, but only to the extent that such repairs can be reasonably made from
the net proceeds of any insurance actually made available to such owner, lessor
or Mortgagee and (ii) repairs to the Premises as a result of a partial
condemnation pursuant to Article 13, but only to the extent that such repairs
can be reasonably made from the net proceeds of any award made available to such
owner, lessor or Mortgagee. Subtenant, upon demand of any such owner, lessor or
Mortgagee, shall execute, from time to time, agreements in confirmation of the
foregoing provisions of this Section 10.2, satisfactory to any such owner,
lessor or Mortgagee, and acknowledging such attornment and setting forth the
terms and conditions of its tenancy. Nothing contained in this Section 10.2
shall be construed to impair any right otherwise exercisable by any such owner,
lessor or Mortgagee.
SECTION 10.3. If requested by any Mortgagee or Sublandlord, Subtenant shall
promptly execute and deliver, at Subtenant's own cost and expense, any document
in accordance with the terms of this Article 10, in recordable form, to evidence
such subordination.
SECTION 10.4. At any time and from time to time upon not less than ten (10)
days' prior notice to Subtenant or Sublandlord given by the other, or to
Subtenant given by a Mortgagee, a lessor or Sublandlord, as the case may be,
shall, without charge, execute, acknowledge and deliver a statement in writing
addressed to such party as a lessor, Sublandlord or a Mortgagee, as the case may
be, may designate, in form satisfactory to a lessor, Sublandlord or Mortgagee,
as the case may be, certifying all or any of the following: (i) that this
Sublease is unmodified and in full force and effect (or if there have been
modifications, that this Sublease is in full force and effect as modified
and stating the modifications); (ii) the date that the Term
17
commenced and the date(s) that Fixed Rent and Additional Rent became payable
hereunder and the dates to which they have been paid; (iii) whether or not, to
the best knowledge of the signer of such certificate, Sublandlord is in default
in performance of any of the terms of this Sublease and, if so, specifying each
such event of default of which the signer may have knowledge; (iv) whether or
not, to the best knowledge of the signer of such certificate, Subtenant has
accepted possession of the Premises; (v) whether Subtenant has made any claim
against Sublandlord under this Sublease and, if so, the nature thereof and the
dollar amount, if any, of such claim; (vi) either that Subtenant does not know
of any default in the performance of any provision of this Sublease or
specifying the details of any default of which Subtenant may have knowledge and
stating what action Subtenant is taking or proposes to take with respect
thereto; (vii) that, to the best knowledge of Subtenant, there are no
proceedings pending or threatened against Subtenant before or by any court or
administrative agency which, if adversely decided, would materially or adversely
affect the financial condition or operations of Subtenant or, if any such
proceedings are pending or threatened to the best knowledge of Subtenant,
specifying and describing the same; and (viii) such further information with
respect to the Sublease or the Premises as Sublandlord or a lessor may
reasonably request or Mortgagee may require; it being intended that any such
statement delivered pursuant hereto may be relied upon by any prospective
purchaser of the Premises or any part thereof or of the interest of Sublandlord
in any part thereof, by any lessor, Mortgagee or prospective Mortgagee or by any
prospective assignee of any Mortgage or by any assignee of Subtenant.
The failure of either Subtenant or Sublandlord to execute, acknowledge and
deliver a statement in accordance with the provisions of this Section 10.4
within said ten (10) day period shall constitute an acknowledgment by Subtenant
or Sublandlord, as the case may be, which may be relied on by any person or
entity of any nature whatsoever who would be entitled to rely upon any such
statement, that such statement as submitted by Sublandlord or Subtenant, as the
case may be, is true and correct.
SECTION 10.5. As long as any Mortgage exists, Subtenant shall not seek to
terminate this Sublease by reason of any act or omission of Sublandlord until
Subtenant has given not less than thirty (30) days prior written notice of such
act or omission to all Mortgagees, and if any such Mortgagee notifies Subtenant
within thirty (30) days following receipt of such notice of its intention to
remedy such act or omission, until a reasonable period of time shall have
elapsed following the giving of such notice, during which period such Mortgagee
shall have the right, but not the obligation, to remedy such act or omission.
18
ARTICLE 11
INSURANCE; PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
SECTION 11.1.
(A) Neither Sublandlord nor Sublandlord's agents shall be
liable for any injury or damage to persons or property, or interruption of
Subtenant's business, resulting from fire or other casualty; nor shall
Sublandlord or Sublandlord's agents be liable for any such damage caused by
Persons other than the Sublandlord or the Sublandlord's agents or by
construction of any private, public or quasi-public work; nor shall Sublandlord
be liable for any latent defect in the Premises.
(B) Subtenant shall give written notice to Sublandlord, immediately
after Subtenant learns thereof, of any accident, emergency, occurrence for which
Sublandlord might be liable, fire or other casualty and all damages to or
defects in the Premises for the repair of which Sublandlord might be responsible
or which constitutes Sublandlord's property. Such notice shall be given by
telecopy or personal delivery to the address(es) of Sublandlord in effect for
notice.
SECTION 11.2. Subtenant shall not do or permit to be done any act or thing
in or upon the Premises which will invalidate or be in conflict with the terms
of the State of New Jersey standard form of fire insurance with extended
coverage, or with rental, liability, boiler, sprinkler, water damage, war risk
or other insurance policies covering the Premises and the fixtures and property
therein (hereinafter referred to as "BUILDING INSURANCE"); and Subtenant, at
Subtenant's own expense, shall comply with all rules, orders, regulations and
requirements of all insurance boards, and shall not do or permit anything to be
done in or upon the Premises or bring or keep anything therein or use the
Premises in a manner which increases the rate of premium for any of the Building
Insurance or any property or equipment located therein over the rate in effect
at the commencement of the Term of this Sublease.
SECTION 11.3.
(A) If, by reason of any failure of Subtenant to comply with the
provisions of this Sublease, the rate of premium for Building Insurance or other
insurance on the property and equipment of Sublandlord shall be higher than it
otherwise would be, Subtenant shall reimburse Sublandlord for that part of the
insurance premiums thereafter paid by Sublandlord which shall have been charged
because of such failure by Subtenant. Subtenant shall make said reimbursement on
the first day of the month following such payment by Sublandlord.
19
(B) In any action or proceeding wherein Sublandlord and Subtenant are
parties, a schedule of any insurance rate for the Premises issued by any
insurance board establishing insurance premium rates for the Premises shall be
prima facie evidence of the facts therein stated and of the several items and
charges in the insurance premium rates then applicable to the Premises.
SECTION 11.4.
(A) Subtenant shall, at Subtenant's own cost and expense, obtain,
maintain and keep in full force and effect during the Term, for the benefit of
Sublandlord, any Mortgagees and Subtenant, commercial general liability
insurance (including premises operation, bodily injury, personal injury, death,
independent contractors, products and completed operations, broad form
contractual liability and broad form property damage coverages) in a combined
single limit amount of not less than Five Million and 00/100 ($5,000,000.00)
Dollars, against all claims, demands or actions with respect to damage, injury
or death made by or on behalf of any person or entity, arising from or relating
to the conduct and operation of Subtenant's business in, on or about the
Premises (which shall include Subtenant's signs, if any), or arising from or
related to any act or omission of Subtenant or of Persons Within Subtenant's
Control. If Subtenant shall install or maintain one or more pressure vessels to
serve Subtenant's operations at the Premises, Subtenant shall, at Subtenant's
own cost and expense, obtain, maintain and keep in full force and effect, for
the benefit of Sublandlord, any Mortgagees and Subtenant, appropriate boiler or
other insurance coverage therefor in an amount not less than Three Million and
00/100 ($3,000,000.00) Dollars (it being understood and agreed, however, that
the foregoing shall not be deemed a consent by Sublandlord to the installation
and/or maintenance of any such pressure vessels in the Premises, which
installation and/or maintenance shall at all times be subject to the prior
written consent of Sublandlord). Whenever, in Sublandlord's reasonable judgment,
good business practice and changing conditions indicate a need for additional
amounts or different types of insurance coverage, Subtenant shall, within ten
(10) days after Sublandlord's request, obtain such insurance coverage, at
Subtenant's expense.
(B) Subtenant, at Subtenant's sole cost and expense, shall maintain
insurance protecting and indemnifying Subtenant against any and all damage to or
loss of any Alterations and leasehold improvements, including any made by
Sublandlord to prepare the Premises for Subtenant's occupancy, and Subtenant's
Property, and all claims and liabilities relating thereto.
(C) Sublandlord and any Mortgagees shall be named as
insureds in said policies and shall be protected against all
liability occasioned by an occurrence insured against. All said
20
policies of insurance shall be: (i) written as "occurrence" policies; (ii)
written as primary policy coverage and not contributing with or in excess of any
coverage which Sublandlord may carry; and (iii) issued by reputable and
independent insurance companies rated in Best's Insurance Guide, or any
successor thereto (or if there be none, an organization having a national
reputation) as having a general policyholder rating of "A+" and a financial
rating of at least "13", and which are licensed to do business in the State of
New Jersey. Subtenant shall, not later than ten (10) Business Days prior to the
Commencement Date, deliver to Sublandlord the policies of insurance or
certificates thereof, together with evidence of payment of premiums thereon, and
shall thereafter furnish to Sublandlord, at least thirty (30) days prior to the
expiration of any such policies and any renewal thereof, a new policy or
certificate in lieu thereof, with evidence of the payment of premiums thereon.
Each of said policies shall also contain a provision whereby the insurer agrees
not to cancel, fail to renew, diminish or materially modify said insurance
policy(ies) without having given Sublandlord and any Mortgagees at least thirty
(30) days prior written notice thereof.
(D) Subtenant shall pay all premiums and charges for all of said
policies, and, if Subtenant shall fail to make any payment when due or carry any
such policy, Sublandlord may, but shall not be obligated to, make such payment
or carry such policy, and the amount paid by Sublandlord, with interest thereon
(at the Applicable Rate), shall be repaid to Sublandlord by Subtenant on demand,
and all such amounts so repayable, together with such interest, shall be deemed
to constitute Additional Rent hereunder. Payment by Sublandlord of any such
premium, or the carrying by Sublandlord of any such policy, shall not be deemed
to waive or release the default of Subtenant with respect thereto.
SECTION 11.5.
(A) Subtenant shall cause each insurance policy carried by Subtenant
and insuring the Premises and Subtenant's Alterations, leasehold improvements,
space equipment, furnishings, furniture, contents and fixtures against loss,
damage or destruction by fire or other casualty, to be written in a manner so as
to provide that the insurance company waives all rights of recovery by way of
subrogation against Sublandlord or Subtenant in connection with any loss or
damage covered by any such policy. If the release of either Sublandlord or
Subtenant shall contravene any law with respect to exculpatory agreements, the
liability of the party in question shall be deemed not released, but no action
or rights shall be sought or enforced against such party unless and until all
rights and remedies against the insurer are exhausted and such party shall be
unable to collect such insurance proceeds.
21
(B) The waiver of subrogation referred to in Section 11.5(A) above
shall extend to the agents and employees of each party, but only if and to the
extent that such waiver can be obtained without additional charge (unless such
party shall pay such charge). Nothing contained in this Section 11.5 shall be
deemed to relieve the Subtenant from any duty imposed elsewhere in this Sublease
to repair, restore and rebuild the Premises, in whole or in part.
ARTICLE 12
DESTRUCTION BY FIRE OR OTHER CAUSE
SECTION 12.1. If the Premises or any part thereof shall be damaged by fire
or other casualty, Subtenant shall give immediate written notice thereof to
Sublandlord. Sublandlord shall, subject to the provisions of Sections 12.2 and
12.3 below, proceed with reasonable diligence, after receipt of the net proceeds
of insurance, to repair or cause to be repaired such damage at its expense, but
in no event shall such repair or restoration be greater in scope than the
quantity quality of construction of the Premises as of the Commencement Date;
and, if the Premises, or any part thereof, shall be rendered untenantable by
reason of such damage and such damage shall not be due to the fault of Subtenant
or Persons Within Subtenant's Control, then the Fixed Rent hereunder, or an
amount thereof apportioned according to the area of the Premises so rendered
untenantable (if less than the entire Premises shall be so rendered
untenantable), shall be abated for the period from the date of such damage to
the date when the repair of such damage shall have been substantially completed.
If Sublandlord or any Mortgagee shall be unable to collect the insurance
proceeds (including rent insurance proceeds) applicable to such damage because
of some action or inaction on the part of Subtenant or Persons Within
Subtenant's Control, then the cost of repairing such damage shall be paid by
Subtenant and there shall be no abatement of Fixed Rent. Subtenant covenants and
agrees to cooperate with Sublandlord and any Mortgagee in their efforts to
collect insurance proceeds (including rent insurance proceeds) payable to such
parties. Sublandlord shall not be liable for any delay which may arise by reason
of adjustment of insurance on the part of Sublandlord and/or Subtenant, or any
cause beyond the control of Sublandlord or contractors employed by Sublandlord.
It is expressly understood that if Sublandlord is prevented from
substantially completing the repairs by reason of any acts of Subtenant or
Persons Within Subtenant's Control, including, without limitation, by reason of
the performance of any Alterations, or by reason of Subtenant's failure or
refusal to comply or to cause its architects, engineers, designers and
22
contractors to comply with any of Subtenant's obligations described or referred
to in this Sublease, then such work shall be deemed substantially completed on
the date when the work would have been substantially completed but for such
delay, and the expiration of the abatement of Subtenant's obligations to pay
Fixed Rent shall not be postponed by reason of such delay. Any additional costs
to Sublandlord to complete any work occasioned by such delay shall be paid by
Subtenant to Sublandlord, as Additional Rent, within ten (10) days after demand
therefor by Sublandlord.
SECTION 12.2. Sublandlord shall not be liable for any inconvenience or
annoyance to Subtenant or injury to the business of Subtenant resulting in any
way from damage from fire or other casualty or the repair thereof. Subtenant
understands that Sublandlord, in reliance upon Section 11.4 hereof, will not
carry insurance of any kind on Subtenant's furnishings, furniture, contents,
fixtures, space equipment and leasehold improvements, and that Sublandlord shall
not be obligated to repair any damage thereto or replace the same.
SECTION 12.3. (A) Notwithstanding anything to the contrary contained in
Sections 12.1 and 12.2 above, in the event that:
(I) at least fifty (50%) percent of the rentable square
feet of the Premises shall be damaged by a fire or other casualty so that
substantial alteration or reconstruction of the Premises shall, in Sublandlord's
sole opinion, be required (whether or not the Premises shall have been damaged
by such fire or other casualty and without regard to the structural integrity of
the Premises); or
(II) the Premises shall be totally or substantially
damaged or shall be rendered wholly or substantially untenantable; or
(III) there shall be any damage to the Premises within the last
two (2) years of the Term wherein the cost of repair exceeds an amount equal to
three (3) monthly installments of Fixed Rent, then, as a result of any
circumstances described in subparagraphs (i), (ii) or (iii) hereof, the
Sublandlord may, in Sublandlord's sole and absolute discretion, terminate this
Sublease and the term and estate hereby granted, by notifying Subtenant in
writing of such termination within one hundred twenty (120) days after the date
of such damage. In the event that such a notice of termination shall be given,
then this Sublease and the term and estate hereby granted shall expire as of the
date of termination stated in said notice with the same effect as if that were
the Fixed Expiration Date, and the Fixed Rent and Additional Rent hereunder
shall be apportioned as of such date.
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SECTION 12.4. Except as may be provided in Section 11.5, nothing herein
contained shall relieve Subtenant from any liability to Sublandlord or to
Sublandlord's insurers in connection with any damage to the Premises by fire or
other casualty if Subtenant shall be legally liable in such respect.
ARTICLE 13
EMINENT DOMAIN
SECTION 13.1. If the whole of the Premises is acquired or condemned for any
public or quasi-public use or purpose, this Sublease and the Term shall end as
of the date of the vesting of title with the same effect as if said date were
the Fixed Expiration Date. If only a part of the Premises is so acquired or
condemned then, (1) except as hereinafter provided in this Section 13.1, this
Sublease and the Term shall continue in effect but, if a part of the Premises is
so acquired or condemned, from and after the date of the vesting of title, the
Fixed Rent and Additional Rent, if any, shall be reduced in the proportion which
the area of the part of the Premises so acquired or condemned bears to the total
area of the Premises immediately prior to such acquisition or condemnation; (2)
whether or not the Premises are affected thereby, Sublandlord, at Sublandlord's
option, may give to Subtenant, within sixty (60) days next following the date
upon which Sublandlord receives notice of vesting of title, a thirty (30) day
notice of termination of this Sublease; and (3) if the part of the Premises so
acquired or condemned contains more than seventy-five (75%) percent of the total
area of the Premises immediately prior to such acquisition or condemnation, or
if, by reason of such acquisition or condemnation, Subtenant no longer has
access to the Premises, Subtenant, at Subtenant's option, may give to
Sublandlord, within thirty (30) days next following the date upon which
Subtenant receives notice of vesting of title, a thirty (30) day notice of
termination of this Sublease. If any such thirty (30) day notice of termination
is given, by Sublandlord or Subtenant, this Sublease and the Term shall come to
an end and expire upon the expiration of said thirty (30) days with the same
effect as if the date of expiration of said thirty (30) days were the Fixed
Expiration Date. In the event of any termination of this Sublease and the Term
pursuant to the provisions of this Section 13.1, the Fixed Rent or Additional
Rent shall be apportioned as of the date of sooner termination and any prepaid
portion of the Fixed Rent for any period after such date shall be refunded by
Sublandlord to Subtenant.
SECTION 13.2. In the event of any such acquisition or condemnation of all
or any part of the Premises, Sublandlord shall be entitled to receive the entire
award for any such acquisition or condemnation. Subtenant shall have no claim
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against Sublandlord or the condemning authority for the value of any unexpired
portion of the Term and Subtenant hereby expressly assigns to Sublandlord all of
its right in and to any such award. Nothing contained in this Section 13.2 shall
be deemed to prevent Subtenant from making a separate claim in any condemnation
proceedings for the value of any Subtenant's Property included in such taking,
and for any moving expenses, so long as Sublandlord's award is not reduced
thereby.
ARTICLE 14
ASSIGNMENT; SUBLETTING; MORTGAGE; ETC.
SECTION 14.1. (A) The Subtenant shall not (a) assign this Sublease (whether
by operation of law, transfers of interests in Subtenant or otherwise); or (b)
mortgage or encumber Subtenant's interest in this Sublease, in whole or in part;
or (c) sublet, or permit the subletting of, the Premises or any part thereof.
Notwithstanding the provisions of this Section 14.1, the use of the Premises by
any Person AFFILIATED (as such term is hereinafter defined) with the Subtenant
or under the COMMON CONTROL (as such term is hereinafter defined) of Coach USA,
Inc., as the case may be, shall not be deemed an assignment of this Sublease or
a sublet of the Premises; PROVIDED, HOWEVER, that such use of the Premises as
aforesaid shall not violate or be prohibited by any of the provisions of any
Mortgage then encumbering the Premises, if any. For purposes of this Article 14,
a Person shall be deemed to be an "AFFILIATE" of the Subtenant or under the
"COMMON CONTROL" of Coach USA if such Person is a member of a "parent-subsidiary
controlled group" [as such term is defined by Section 1563(a)(1) of the Internal
Revenue Code of 1986, as amended] or a member of a "brother-sister controlled
group" [as such term is defined by Section 1563(a)(2) of the Internal Revenue
Code of 1986, as amended] of which either Coach USA, Inc. or the Subtenant, as
the case may be, is a member.
(B) Notwithstanding the provisions otherwise set forth in this
Article 14, any reorganization, consolidation and/or restructuring of the
Subtenant in which the issued and outstanding stock of the Subtenant remains
under the COMMON CONTROL (as such term is defined in Section 14.1 hereinabove)
of Coach USA, Inc. shall not be deemed an assignment of this Sublease or a
sublet of the Premises; PROVIDED, HOWEVER, that the same shall not violate or be
prohibited by any of the provisions of any Mortgage then encumbering the
Premises, if any.
SECTION 14.2. If Subtenant's interest in this Sublease shall be assigned in
violation of the provisions of this Article 14, such assignment shall be invalid
and of no force and effect
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against Sublandlord; provided, however, that Sublandlord may collect an amount
equal to the then Fixed Rent plus any other item of Rental from the assignee as
a fee for its use and occupancy. If the Premises or any part thereof are sublet
to, or occupied by, or used by, any person other than Subtenant, whether or not
in violation of this Article 14, Sublandlord, after default by Subtenant under
this Sublease, may collect any item of Rental or other sums paid by the
subtenant, user or occupant as a fee for its use and occupancy, and shall apply
the net amount collected to the Fixed Rent and the items of Rental reserved in
this Sublease. No such assignment, subletting, occupancy, or use, nor any such
collection or application of Rental or fee for use and occupancy, shall be
deemed a waiver by Sublandlord of any term, covenant or condition of this
Sublease or the acceptance by Sublandlord of such assignee, subtenant, occupant
or user as Subtenant hereunder, nor shall the same, in any circumstances,
relieve Subtenant of any of its obligations under this Sublease.
SECTION 14.3.
Except as otherwise set forth in Section 14.1 hereof, for purposes of
this Article 14, (i) any increase in the amount of issued and/or outstanding
capital stock of any corporate tenant and/or the creation of one or more
additional classes of capital stock of any corporate tenant, in a single
transaction or a series of related or unrelated transactions, resulting in a
change in the legal or beneficial ownership of such tenant so that the
shareholders of such tenant existing immediately prior to such transaction or
series of transactions shall no longer own a majority of the issued and
outstanding capital stock of such tenant shall be deemed an assignment of this
Sublease and (ii) any Person or legal representative of Subtenant, to whom
Subtenant's interest under this Sublease passes by operation of law, or
otherwise, shall be bound by the provisions of this Article 14. Subtenant agrees
to furnish to Sublandlord on request at any time such information and assurances
as Sublandlord may reasonably request that Subtenant has not violated the
provisions of this Article 14.
ARTICLE 15
ACCESS TO PREMISES
SECTION 15.1. Subtenant shall permit Sublandlord, Sublandlord's agents and
any public utilities servicing the Premises to erect, use and maintain, now and
hereafter, concealed ducts, pipes and conduits in and through the Premises.
Sublandlord or Sublandlord's agents shall have the right to enter the Premises
at all reasonable times upon (except in case of emergency) reasonable prior
notice, which notice may be oral, to
26
examine the same, to show the same to prospective purchasers or Mortgagees and
to make such repairs, alterations, improvements or additions (i) as Sublandlord
may deem necessary or desirable to the Premises, or (ii) which Sublandlord may
elect to perform at least ten (10) days after notice (except in an emergency
when no notice shall be required) following Subtenant's failure to make repairs
or perform any work which Subtenant is obligated to make or perform under this
Sublease, or (iii) for the purpose of complying with Requirements, and
Sublandlord shall be allowed to take all material into and upon the Premises
that may be required therefor without the same constituting an eviction or
constructive eviction of Subtenant in whole or in part and the Fixed Rent (and
any other item of Rental) shall in no respect abate or be reduced by reason of
said repairs, alterations, improvements or additions, wherever located, or while
the same are being made, by reason of loss or interruption of business of
Subtenant, or otherwise. Sublandlord shall promptly repair any damage caused to
the Premises by such work, alterations, improvements or additions.
SECTION 15.2. If Subtenant is not present when for any reason entry into
the Premises may be necessary or permissible, Sublandlord or Sublandlord's
agents may enter the same without rendering Sublandlord or such agents liable
therefor.
SECTION 15.3. Sublandlord also shall have the right at any time, without
the same constituting an actual or constructive eviction and without incurring
any liability to Subtenant therefor, to change the arrangement or location of
entrances or passageways, doors and doorways, and corridors, stairs, toilets or
other parts of the Premises, provided any such change does not unreasonably
interfere with, or deprive Subtenant of access to, the Premises; to put
so-called "solar film" or other energy-saving installations on the inside and
outside of the windows; and to change the name, number or designation by which
the Premises is commonly known.
ARTICLE 16
CERTIFICATE OF OCCUPANCY
SECTION 16.1. Subtenant shall not at any time, now or hereafter, use or
occupy the Premises, directly or indirectly, in violation of the certificate of
occupancy for the Premises and in the event that any Governmental Authority
hereafter contends or declares by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose that is a
27
violation of such certificate of occupancy, Subtenant shall, upon three (3)
Business Days' written notice from Sublandlord or any Government Authority,
immediately discontinue such use of the Premises.
ARTICLE 17
DEFAULT
SECTION 17.1. Each of the following events shall be an "EVENT OF DEFAULT"
under this Sublease:
(A) if Subtenant shall on any occasion default in the payment when due
of any installment of Fixed Rent or Additional Rent or in the payment when due
of any other item of Rental and such default shall continue for five (5)
business days from and after the date when the same shall be due; or
(B) if the Premises shall become vacant or abandoned; or
(C) if Subtenant's interest in this Sublease shall devolve upon or
pass to any person, whether by operation of law or otherwise, except as
specifically permitted by the provisions of Article 14 hereof; or
(D) (1) if Subtenant shall not, or shall be unable to, or shall admit
in writing Subtenant's inability to, as to any obligation, pay Subtenant's debts
as they become due; or
(2) if Subtenant shall commence or institute any case, proceeding
or other action (a) seeking relief on Subtenant's behalf as debtor, or to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to Subtenant or Subtenant's debts under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (b) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property; or
(3) if Subtenant shall make a general assignment
for the benefit of creditors; or
(4) if any case, proceeding or other action shall be commenced or
instituted against Subtenant (a) seeking to have an order for relief entered
against Subtenant as debtor or to adjudicate Subtenant a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
28
dissolution, composition or other relief with respect to Subtenant or
Subtenant's debts under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, or (b) seeking appointment of a receiver, trustee, custodian or other
similar official for Subtenant or for all or any substantial part of Subtenant's
property, which either (i) results in any such entry of an order for relief,
adjudication of bankruptcy or insolvency or such an appointment or the issuance
or entry of any other order having a similar effect or (ii) remains undismissed
for a period of sixty (60) days; or
(5) if a trustee, receiver or other custodian shall be appointed
for any substantial part of the assets of Subtenant which appointment is not
vacated or effectively stayed within thirty (30) days; or
(E) if Subtenant shall default in the observance or performance of any
other term, covenant or condition of this Sublease on Subtenant's part to be
observed or performed including, without limitation, the terms and conditions of
Article 27 hereof, and Subtenant shall fail to remedy such default within ten
(10) days after written notice by Sublandlord to Subtenant of such default, or
if such default is of such a nature that it cannot with due diligence be
completely remedied within said period of ten (10) days and the continuation of
which for the period required for cure will not subject Sublandlord to the risk
of criminal liability or foreclosure of any Mortgage, if Subtenant shall not,
(i) within said ten (10) day period advise Sublandlord of Subtenant's intention
duly to institute all steps necessary to remedy such situation, (ii) duly
institute within said ten (10) day period, and thereafter diligently and
continuously prosecutes to completion all steps necessary to remedy the same and
(iii) completes such remedy within such time after the date of the giving of
said notice by Sublandlord as shall reasonably be necessary.
SECTION 17.2. If an Event of Default shall occur, Sublandlord may, at any
time thereafter, at Sublandlord's option, give written notice to Subtenant
stating that this Sublease and the Term shall expire and terminate on the date
specified in such notice, which date shall not be less than three (3) days after
the giving of such notice, whereupon this Sublease and the Term and all rights
of Subtenant under this Sublease shall automatically expire and terminate as if
the date specified in the notice given pursuant to this Section 17.2 were the
Fixed Expiration Date and Subtenant immediately shall quit and surrender the
Premises, but Subtenant shall remain liable for damages as provided herein or
pursuant to law. Anything contained herein to the contrary notwithstanding, if
such termination shall be stayed by order of any court having jurisdiction over
any proceeding described in Section 17.1(D), or by federal or state
29
statute, then, following the expiration of any such stay, or if the trustee
appointed in any such proceeding, Subtenant or Subtenant as debtor-in-possession
fails to assume Subtenant's obligations under this Sublease within the period
prescribed therefor by law or within one hundred twenty (120) days after entry
of the order for relief or as may be allowed by the court, or if said trustee,
Subtenant or Subtenant as debtor-in-possession shall fail to provide adequate
protection of Sublandlord's right, title and interest in and to the Premises or
adequate assurance of the complete and continuous future performance of
Subtenant's obligations under this Sublease, Sublandlord, to the extent
permitted by law or by leave of the court having jurisdiction over such
proceeding, shall have the right, at its election, to terminate this Sublease on
three (3) days' notice to Subtenant, Subtenant as debtor-in-possession or said
trustee and upon the expiration of said three (3) day period this Sublease shall
cease and expire as aforesaid and Subtenant, Subtenant as debtor-in-possession
or said trustee shall immediately quit and surrender the Premises as aforesaid.
SECTION 17.3. If, at any time, (i) Subtenant shall consist of two (2) or
more Persons, or (ii) Subtenant's obligations under this Sublease shall have
been guaranteed by any Person other than Subtenant, or (iii) Subtenant's
interest in this Sublease has been assigned, the word "Subtenant" as used and
referred to in this Sublease, shall be deemed to mean any one or more of the
persons primarily or secondarily liable for Subtenant's obligations under this
Sublease. Any monies received by Sublandlord from or on behalf of Subtenant
during the pendency of any proceeding of the types referred to in Section
17.1(D) hereof shall be deemed paid as compensation for the use and occupancy of
the Premises and the acceptance of any such compensation by Sublandlord shall
not be deemed an acceptance of Rental or a waiver on the part of Sublandlord of
any rights under Section 17.2 hereof.
ARTICLE 18
REMEDIES AND DAMAGES
SECTION 18.1.
(A) If any Event of Default shall occur, or this Sublease and the Term
shall expire and come to an end as provided in Article 17 hereof:
(1) Subtenant shall quit and peacefully surrender the Premises to
Sublandlord, and Sublandlord and its agents may immediately, or at any time
after such Event of Default or after the date upon which this Sublease and the
Term shall expire and
30
come to an end, re-enter the Premises or any part thereof, without notice,
either by summary proceedings, or by any other applicable action or proceeding
or otherwise (without being liable to indictment, prosecution or damages
therefor), and may repossess the Premises and dispossess Subtenant and any other
persons from the Premises by summary proceedings or otherwise and remove any and
all of their property and effects from the Premises (and Subtenant shall remain
liable for damages as provided herein or pursuant to law); and
(2) Sublandlord, at Sublandlord's option, may relet the whole or
any part or parts of the Premises from time to time, either in the name of
Sublandlord or otherwise, to such tenant or tenants, for such term or terms
ending before, on or after the Fixed Expiration Date, at such rent or rentals
and upon such other conditions, which may include concessions and free rent
periods, as Sublandlord, in Sublandlord's sole discretion, may determine;
provided, however, that Sublandlord shall have no obligation to relet the
Premises or any part thereof and shall in no event be liable for refusal or
failure to relet the Premises or any part thereof, or, in the event of any such
reletting, for refusal or failure to collect any rent due upon any such
reletting, and no such refusal or failure shall operate to relieve Subtenant of
any liability under this Sublease or otherwise affect any such liability, and
Sublandlord, at Sublandlord's option, may make such Alterations, in and to the
Premises as Sublandlord, in Sublandlord's sole discretion, shall consider
advisable or necessary in connection with any such reletting or proposed
reletting, without relieving Subtenant of any liability under this Sublease or
otherwise affecting any such liability.
(B) Subtenant hereby waives the service of any notice of intention to
re-enter or to institute legal proceedings to that end that may otherwise be
required to be given under any present or future law. Subtenant, on its own
behalf and on behalf of all persons claiming through or under Subtenant,
including all creditors of Subtenant, does further hereby waive any and all
rights that Subtenant and all such persons might otherwise have under any
present or future law to redeem the Premises, or to re-enter or repossess the
Premises, or to restore the operation of this Sublease, after (a) Subtenant
shall have been dispossessed by a judgment or by warrant of any court, or (b)
any re-entry by Sublandlord, or (c) any expiration or termination of this
Sublease and the Term, whether such dispossess, re-entry, expiration or
termination is by operation of law or pursuant to the provisions of this
Sublease. The words "re-entry", "re-enter" and "re-entered" as used in this
Sublease shall not be deemed to be restricted to their technical legal meanings.
In the event of a breach or threatened breach by Subtenant, or any persons
claiming through or under Subtenant, of any term, covenant or condition of this
Sublease, Sublandlord shall have the right to
31
enjoin such breach and the right to invoke any other remedy allowed by law or in
equity as if re-entry, summary proceedings and other special remedies were not
provided in this Sublease for such breach. The right to invoke the remedies
hereinbefore set forth are cumulative and shall not preclude Sublandlord from
invoking any other remedy allowed at law or in equity.
SECTION 18.2.
(A) If this Sublease and the Term shall expire and come to an end as
provided in Article 17 hereof, or by or under any summary proceeding or any
other action or proceeding, or if Sublandlord shall re-enter the Premises as
provided in Section 18.1 hereof, or by or under any summary proceeding or any
other action or proceeding, then, in any of said events:
(1) Subtenant shall pay to Sublandlord all Fixed Rent, Additional
Rent and other items of Rental payable under this Sublease by Subtenant to
Sublandlord to the date upon which this Sublease and the Term shall have expired
and come to an end or to the date of re-entry upon the Premises by Sublandlord,
as the case may be;
(2) Subtenant also shall be liable for and shall pay to
Sublandlord, as damages, any deficiency ("DEFICIENCY") between the Rental for
the period which otherwise would have constituted the unexpired portion of the
Term and the net amount, if any, of rents collected under any reletting effected
pursuant to the provisions of Section 18.1(A)(2) for any part of such period
(after first deducting from the rents collected under any such reletting all of
Sublandlord's expenses in connection with the termination of this Sublease,
Sublandlord's re-entry upon the Premises and such reletting including, but not
limited to, all repossession costs, brokerage commissions, attorneys' fees and
disbursements, alteration costs and other expenses of preparing the Premises for
such reletting); any such Deficiency shall be paid in monthly installments by
Subtenant on the days specified in this Sublease for payment of installments of
Fixed Rent; Sublandlord shall be entitled to recover from Subtenant each monthly
Deficiency as the same shall arise, and no suit to collect the amount of the
Deficiency for any month shall prejudice Sublandlord's right to collect the
Deficiency for any subsequent month by a similar proceeding; and
(3) whether or not Sublandlord shall have collected any
Deficiency as aforesaid, Sublandlord shall be entitled to recover from
Subtenant, and Subtenant shall pay to Sublandlord, on demand, in lieu of any
further Deficiency as and for liquidated and agreed final damages, a sum equal
to the amount by which the unpaid Rental for the period which otherwise would
have constituted the unexpired portion of the Term exceeds the then fair and
reasonable rental value of the Premises for the
32
same period; if, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the Premises, or any part thereof, are relet by
Sublandlord for the period which otherwise would have constituted the unexpired
portion of the Term, or any part thereof, the amount of rent reserved upon such
reletting shall be deemed, prima facie, to be the fair and reasonable rental
value for the part or the whole of the Premises so relet during the term of the
reletting.
(B) Subtenant shall in no event be entitled to any rents collected or
payable under any reletting, whether or not such rents exceed the Fixed Rent
reserved in this Sublease. Nothing contained in Article 17 hereof or this
Article 18 shall be deemed to limit or preclude the recovery by Sublandlord from
Subtenant of the maximum amount allowed to be obtained as damages by any statute
or rule of law, or of any sums or damages to which Sublandlord may be entitled
in addition to the damages set forth in this Section 18.2.
ARTICLE 19
FEES AND EXPENSES
SECTION 19.1. If an Event of Default shall have occurred, Sublandlord may
(1) perform the same for the account of Subtenant, or (2) make any expenditure
or incur any obligation for the payment of money in connection with any
obligation owed to Sublandlord, including, but not limited to, reasonable
attorneys' fees and disbursements in instituting, prosecuting or defending any
action or proceeding, and in either case the cost thereof, with interest thereon
at the Applicable Rate, shall be deemed to be Additional Rent hereunder and
shall be paid by Subtenant to Sublandlord within ten (10) days after rendition
of any bill or statement to Subtenant therefor. In addition, Subtenant shall pay
Sublandlord any reasonable attorneys' fees and disbursements incurred by
Sublandlord in connection with any proceeding in which the value for the use and
occupancy of the Premises by Subtenant is being determined (whether or not any
such proceeding results from a default by Subtenant under this Sublease).
SECTION 19.2. If Subtenant shall fail to pay any installment of Fixed Rent,
Additional Rent or any other item of Rental for a period longer than five (5)
days after the same shall have become due, Subtenant shall pay to Sublandlord,
in addition to such installment of Fixed Rent, Additional Rent or other item of
Rental, as the case may be, as a late charge and as
33
Additional Rent, a sum equal to interest at the Applicable Rate on the amount
unpaid, computed from the date such payment was due, without regard to any such
grace period, to and including the date of payment.
ARTICLE 20
NO REPRESENTATIONS BY SUBLANDLORD
SECTION 20.1. Sublandlord and Sublandlord's agents have made no
representations or promises with respect to the Premises except as herein
expressly set forth, and no rights, easements or licenses are acquired by
Subtenant by implication or otherwise except as expressly set forth herein.
Subtenant shall accept possession of the Premises in its "as is" condition on
the Commencement Date, and Sublandlord shall have no obligation to perform any
work or make any installations in order to prepare the Premises for Subtenant's
occupancy. The taking of occupancy of the whole or any part of the Premises by
Subtenant shall be conclusive evidence, as against Subtenant, that Subtenant
accepts possession of the same and that the Premises were in good and
satisfactory condition at the time such occupancy was so taken. All references
in this Sublease to the consent or approval of Sublandlord shall be deemed to
mean the written consent or approval executed by Sublandlord and no other
consent or approval of Sublandlord shall be effective for any purpose
whatsoever.
ARTICLE 21
END OF TERM
SECTION 21.1. Upon the expiration or other termination of this Sublease,
Subtenant shall quit and surrender to Sublandlord the Premises, vacant, broom
clean, in good order and condition, ordinary wear and tear excepted, and
Subtenant shall remove all of Subtenant's Alterations as may be required
pursuant to Article 6. Subtenant shall also remove all of Subtenant's Property
and all other personal property and personal effects of all persons claiming
through or under Subtenant, and shall pay the cost of repairing all damage to
the Premises occasioned by such removal. Any Subtenant's Property or other
personal property that remains in, on or at the Premises after the termination
of this Sublease shall be deemed to have been abandoned and either may be
retained by Sublandlord as its property or may be disposed of in such manner as
Sublandlord may see fit. If Subtenant's Property or other personal property or
any part thereof is sold, Sublandlord may receive and retain the proceeds of
such sale as the property of Sublandlord. Any expense
34
incurred by Sublandlord in removing or disposing of Subtenant's Property or
other personal property or Alterations required to be removed as provided in
Article 6, as well as the cost of repairing all damage to the Premises caused by
such removal, shall be reimbursed to Sublandlord by Subtenant, as Additional
Rent, on demand.
SECTION 21.2. If the Expiration Date falls on a day which is not a Business
Day, then Subtenant's obligations under Section 21.1 shall be performed on or
prior to such Business Day.
SECTION 21.3. If the Premises are not surrendered upon the expiration or
other termination of this Sublease, Subtenant hereby indemnifies Sublandlord
against liability resulting from delay by Subtenant in so surrendering the
Premises, including any claims made by any succeeding tenant or prospective
tenant founded upon such delay and agrees to be liable to Sublandlord for (i)
any payment or rent concession which Sublandlord may be required to make to any
tenant obtained by Sublandlord for all or any part of the Premises in order to
induce such tenant not to terminate its lease by reason of the holding-over by
Subtenant and (ii) the loss of the benefit of the bargain if any such tenant
shall terminate its lease by reason of the holding-over by Subtenant.
SECTION 21.4. Subtenant's obligations under this Article 21 shall survive
the expiration or termination of this Sublease.
ARTICLE 22
POSSESSION
SECTION 22.1. If Sublandlord shall be unable to deliver possession of the
Premises on the Commencement Date for any reason whatsoever, Sublandlord shall
not be subject to any liability therefor and the validity of this Sublease shall
not be impaired thereby nor the Expiration Date extended, but the Commencement
Date shall be postponed until five (5) Business Days following notice from
Sublandlord that the Premises are available for occupancy by Subtenant.
Subtenant expressly waives any right to rescind this Sublease under any present
or future statute and further expressly waives the right to recover any damages
that may result from Sublandlord's failure to deliver possession of the Premises
on the Commencement Date.
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ARTICLE 23
NO WAIVER
SECTION 23.1. No act or thing done by Sublandlord or Sublandlord's agents
during the Term shall be deemed an acceptance of a surrender of the Premises,
and no agreement to accept such surrender shall be valid unless in writing
signed by Sublandlord. No employee of Sublandlord or of Sublandlord's agents
shall have any power to accept the keys to the Premises prior to the termination
of this Sublease. The delivery of keys to any employee of Sublandlord or of
Sublandlord's agents shall not operate as a termination of this Sublease or a
surrender of the Premises.
SECTION 23.2. The failure of Sublandlord to seek redress for violation of,
or to insist upon the strict performance of, any covenant or condition of this
Sublease shall not prevent a subsequent act, which would have originally
constituted a violation, from having all of the force and effect of an original
violation. The receipt by Sublandlord of Fixed Rent, Additional Rent or any
other item of Rental with knowledge of the breach of any covenant of this
Sublease shall not be deemed a waiver of such breach. No provision of this
Sublease shall be deemed to have been waived by Sublandlord, unless such waiver
shall be in writing and shall be signed by Sublandlord. No payment by Subtenant
or receipt by Sublandlord of a lesser amount than the Rental then due and
payable shall be deemed to be other than on account of the earliest item(s) of
Rental, or as Sublandlord may elect to apply the same, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment be
deemed an accord and satisfaction, and Sublandlord may accept such check or
payment without prejudice to Sublandlord's right to recover the balance due of
the Rental or to otherwise pursue any other remedy in this Sublease provided.
This Sublease contains the entire agreement between the parties and all prior
negotiations and agreements are merged herein. Any executory agreement hereafter
made shall be ineffective to change, discharge or effect an abandonment of this
Sublease in whole or in part unless such executory agreement is in writing and
signed by the party against whom enforcement of the change, discharge or
abandonment is sought.
ARTICLE 24
WAIVER OF TRIAL BY JURY
SECTION 24.1. Subtenant hereby waives trial by jury in any action or
proceeding brought by or against Subtenant with respect to any matters
whatsoever arising out of or in any way connected
36
with this Sublease, the relationship of Sublandlord and Subtenant, Subtenant's
use or occupancy of the Premises, whether during or after the Term, or for the
enforcement of any remedy under any statute, emergency or otherwise. If
Sublandlord shall commence any summary proceeding against Subtenant, Subtenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding, and will not seek to consolidate such proceeding with any other
action which may have been or will be brought in any other court by Subtenant or
Sublandlord.
ARTICLE 25
INABILITY TO PERFORM
SECTION 25.1. This Sublease and the obligation of Subtenant to pay Rental
hereunder and to perform all of the other covenants and agreements hereunder on
the part of Subtenant to be performed shall in no way be affected, impaired or
excused because Sublandlord is unable to fulfill any of Sublandlord's
obligations under this Sublease, expressly or implicitly to be performed by
Sublandlord, or because Sublandlord is unable to make or is delayed in making
any repairs, or is unable to supply or is delayed in supplying any services, if
Sublandlord is prevented from or delayed in so doing by reason of acts of God,
casualty, strikes or labor troubles, accident, governmental preemption in
connection with an emergency, Requirements, conditions of supply and demand
which have been or are affected by war or other emergency, or any other cause
whatsoever, whether similar or dissimilar to the foregoing, beyond Sublandlord's
reasonable control ("UNAVOIDABLE DELAYS").
ARTICLE 26
NOTICES
SECTION 26.1.
(A) Except as otherwise expressly provided in this Sublease, any
bills, statements, consents, notices, demands, requests or other communications
given or required to be given under this Sublease ("NOTICE(S)") shall be in
writing and shall be deemed sufficiently given or rendered if delivered by hand
(against a signed receipt) or if deposited with a nationally recognized
overnight courier and in either case addressed:
IF TO SUBTENANT:
(a) at Subtenant's address first set forth in
this Sublease or (b) at any place where
37
Subtenant or any agent or employee of Subtenant may be found
if given subsequent to Subtenant's vacating, deserting,
abandoning or surrendering the Premises, and
IF TO SUBLANDLORD:
at Sublandlord's address first set forth in
this Sublease, Attn: Mr. Frank Gallagher,
with a copy to Todtman, Young, Tunick,
Nachamie, Hendler & Spizz, P.C., 425 Park
Avenue, New York, New York 10022 Attention:
Martin Todtman, Esq. and (y) any Mortgagee
who may have requested the same, by Notice
given in accordance with the provisions of
this Article 26, at the address designated by
such Mortgagee,
or to such other address(es) as either Sublandlord or
Subtenant may designate as its new address(es) for such
purpose by notice given to the other in accordance with the
provisions of this Article 26.
(B) Notices shall be deemed to have been rendered or given (a) on the
date delivered, if delivered by hand, or (b) on the day after being deposited
with a nationally recognized overnight courier as provided in Section 26.1(A)
hereof.
ARTICLE 27
INTENTIONALLY OMITTED
ARTICLE 28
BROKER
SECTION 28.1. Sublandlord represents and warrants to Subtenant that
Sublandlord has not dealt with any broker or Person in connection with this
Sublease. Subtenant represents and warrants to Sublandlord that Subtenant has
not dealt with any broker or Person in connection with this Sublease. The
execution and delivery of this Sublease by Subtenant shall be conclusive
evidence that Subtenant acknowledges that Sublandlord has relied upon the
foregoing representation and warranty. Subtenant shall indemnify and hold
harmless Sublandlord from and against any and all claims for commission, fee or
other compensation by any broker or Person who claims to have dealt with
Subtenant in connection with this Sublease and for any and all costs incurred
38
by Sublandlord in connection with such claims, including, without limitation,
attorneys' fees and disbursements. The provisions of this Article 28 shall
survive the expiration or earlier termination of this Sublease.
ARTICLE 29
INDEMNITY
SECTION 29.1. Subtenant shall not do or permit any act or thing to be done
in, at or upon the Premises that may subject any Indemnitee to any liability or
responsibility for injury, damage to persons or property or to any liability by
reason of the existence or application of, compliance with or violation of any
Requirement, but shall exercise such control over the Premises as to protect
each Indemnitee fully against any such liability and responsibility. Subtenant
shall indemnify and save harmless the Indemnitees from and against (a) all
claims of whatever nature against the Indemnitees arising from any act, omission
or negligence of Subtenant or Persons Within Subtenant's Control, (b) all claims
against the Indemnitees arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring in or about
the Premises during the Term or during Subtenant's occupancy of the Premises,
unless and to the extent caused by the gross negligence of Sublandlord or its
shareholders, officers and employees, (c) all claims against the Indemnitees
arising from any accident, injury or damage occurring outside of the Premises
but anywhere within or about the Premises, where such accident, injury or damage
results or is claimed to have resulted from an act, omission or negligence of
Subtenant or Persons Within Subtenant's Control, and (d) any breach, violation
or non-performance of any covenant, condition or agreement contained in this
Sublease to be fulfilled, kept, observed and performed by Subtenant. This
indemnity and hold harmless agreement shall include indemnity from and against
any and all liability, claims, fines, suits, demands, costs and expenses of any
kind or nature (including, without limitation, attorneys' fees and
disbursements) incurred in or in connection with any such claim or proceeding
brought thereon, and the defense thereof.
SECTION 29.2. If any claim, action or proceeding is made or brought against
any Indemnitee, against which claim, action or proceeding Subtenant is obligated
to indemnify such Indemnitee pursuant to the terms of this Sublease, then, upon
demand by the Indemnitee, Subtenant, at its sole cost and expense, shall resist
or defend such claim, action or proceeding in the Indemnitee's name, if
necessary, by such attorneys as the Indemnitee may
39
select, including, without limitation, attorneys for the Indemnitee's insurer.
The provisions of this Article 29 shall survive the expiration or earlier
termination of this Sublease.
ARTICLE 30
ADJACENT EXCAVATION; SHORING
SECTION 30.1. If an excavation shall be made upon land adjacent to the
Premises, or shall be authorized to be made, Subtenant shall, upon reasonable
advance notice, afford to the person or entity causing or authorized to cause
such excavation, a limited license to enter upon the Premises for the purpose of
doing such work as said person or entity deems necessary to preserve the walls
of any building located on the Premises from injury or damage and to support the
same by proper foundations without any claim for eviction or constructive
eviction, damages or indemnity against Sublandlord, or diminution or abatement
of Rental.
ARTICLE 31
RENEWAL OPTIONS
SECTION 31.1. Provided that the Subtenant is not in default with
respect to any of its obligations to the Sublandlord under and pursuant to the
terms and conditions of this Sublease at the time each Option is to be exercised
(as hereinbelow described) and, subject to the provisions of Article 31.4
hereof, the Subtenant shall have the option to renew this Sublease for five (5)
additional five (5) year periods and one (1) additional two (2) year period [the
option with respect to each additional five (5) year period and the option with
respect to the one (1) additional two (2) year period is individually referred
to herein as an "OPTION" and, collectively, all of the options granted herein
are referred to as the "OPTIONS"] as follows:
OPTION PERIOD 1 shall commence on May 1, 2009 and shall continue up to
and including April 30, 2014. Notwithstanding the foregoing, in the
event that the Overlease is not renewed by the Sublandlord and the
Overlandlord, then in such event, the Option with respect to Option
Period 1 shall be deemed null and void without any further right, title
or interest of the Subtenant with respect thereto or with respect to
the Premises.
OPTION PERIOD 2 shall commence on May 1, 2014 and shall continue up to
and including April 30, 2019.
40
Notwithstanding the foregoing, in the event that the Overlease is not
renewed by the Sublandlord and the Overlandlord, then in such event,
the Option with respect to Option Period 2 shall be deemed null and
void without any further right, title or interest of the Subtenant with
respect thereto or with respect to the Premises.
OPTION PERIOD 3 shall commence on May 1, 2019 and shall continue up to
and including April 30, 2024. Notwithstanding the foregoing, in the
event that the Overlease is not renewed by the Sublandlord and the
Overlandlord, then in such event, the Option with respect to Option
Period 3 shall be deemed null and void without any further right, title
or interest of the Subtenant with respect thereto or with respect to
the Premises.
OPTION PERIOD 4 shall commence on May 1, 2024 and shall continue up to
and including April 30, 2029. Notwithstanding the foregoing, in the
event that the Overlease is not renewed by the Sublandlord and the
Overlandlord, then in such event, the Option with respect to Option
Period 4 shall be deemed null and void without any further right, title
or interest of the Subtenant with respect thereto or with respect to
the Premises.
OPTION PERIOD 5 shall commence on May 1, 2029 and shall continue up to
and including April 30, 2034. Notwithstanding the foregoing, in the
event that the Overlease is not renewed by the Sublandlord and the
Overlandlord, then in such event, the Option with respect to Option
Period 5 shall be deemed null and void without any further right, title
or interest of the Subtenant with respect thereto or with respect to
the Premises.
OPTION PERIOD 6 shall commence on May 1, 2024 and shall continue up to
and including April 30, 2036. Notwithstanding the foregoing, in the
event that the Overlease is not renewed by the Sublandlord and the
Overlandlord, then in such event, the Option with respect to Option
Period 6 shall be deemed null and void without any further right, title
or interest of the Subtenant with respect thereto or with respect to
the Premises.
(each of the aforementioned option periods is individually referred to
herein as an "OPTION PERIOD" and, collectively, all of the
aforementioned Option Periods are referred to herein as "OPTION
PERIODS")
41
SECTION 31.2. Each Option granted to the Subtenant pursuant to the
provisions of Section 31.1 hereof shall be exercised by the Subtenant giving
written notice to the Sublandlord of the Subtenant's intent to exercise the
Option not less than one-hundred eighty (180) days prior to the expiration of
the Initial Term or not less than one-hundred eighty (180) days prior to the
expiration of the Option Period which is then in effect, as the case may be.
SECTION 31.3. In the event that the Subtenant exercises the Option with
respect to any Option Period, the Sublandlord and the Subtenant hereby agree
that this Sublease shall continue in full force and effect and remain unamended
during the applicable Option Period EXCEPT THAT the Fixed Rent payable by the
Subtenant to the Sublandlord during any such Option Period shall be increased in
accordance with the amount of any rent increase payable by the Sublandlord to
the Overlandlord pursuant to the Overlease and/or any amendment, modification or
renewal thereof.
SECTION 31.4. Notwithstanding anything contained in this Sublease
Agreement to the contrary, the Sublessee hereby acknowledges and agrees that any
right, title and/or interest of the Sublessee in and to any of the Options
and/or the use or possession of the Premises during any Option Period is
expressly subject to and contingent upon the renewal of the Overlease by the
Sublessor and the Overlandlord. In the event that the Overlease is not renewed,
as aforesaid, then in such event, all right, title and interest of the Sublessee
in and to this Sublease Agreement and the Premises shall terminate on April 29,
2009 as if such date was the original Expiration Date of this Sublease and, upon
the surrender of the Premises to the Sublessor in accordance with the terms and
conditions of Article 21 of this Sublease, this Sublease shall be deemed null
and void and of no further force and/or effect without any further liability of
the parties with respect hereto.
ARTICLE 32
RENT REGULATION
SECTION 32.1. If at any time or times during the Term of this Sublease, the
Rental reserved in this Sublease is not fully collectible by reason of any
Requirement, Subtenant shall enter into such agreements and take such other
steps as Sublandlord may request and as may be legally permissible to permit
Sublandlord to collect the maximum rents that may from time to time during the
continuance of such legal rent restriction be legally permissible (and not in
excess of the amounts reserved under this Sublease). Upon the termination of
such legal rent restriction (a) the Rental shall become and thereafter be
payable hereunder
42
in accordance with the amounts reserved in this Sublease for the remainder of
the Term, and (b) Subtenant shall pay to Sublandlord, if legally permissible, an
amount equal to (i) the items of Rental that would have been paid pursuant to
this Sublease but for such legal rent restriction less (ii) the rents paid by
Subtenant to Sublandlord during the period or periods such legal rent
restriction was in effect. This provision shall survive the expiration or
earlier termination of this Sublease to the maximum enforceable extent.
ARTICLE 33
COVENANT OF QUIET ENJOYMENT
SECTION 33.1. Sublandlord covenants that, upon Subtenant paying all Fixed
Rent and Additional Rent and observing and performing all the terms, agreements,
covenants, provisions and conditions of this Sublease on Subtenant's part to be
observed and performed, Subtenant may peaceably and quietly enjoy the Premises,
subject nevertheless to the terms and conditions of this Sublease; provided,
however, that no eviction of Subtenant by reason of the foreclosure of any
Mortgage now or hereafter affecting the Premises shall be construed as a breach
of this covenant nor shall any action by reason thereof be brought against
Sublandlord, and provided further that this covenant shall bind and be
enforceable against Sublandlord or any successor to Sublandlord's interest,
subject to the terms hereof, only so long as Sublandlord or any successor to
Sublandlord's interest, is in possession and is collecting rent from Subtenant
but not thereafter.
ARTICLE 34
MISCELLANEOUS
SECTION 34.1. This Sublease is presented for signature by Subtenant and it
is understood that this Sublease shall not constitute an offer by or be binding
upon Sublandlord unless and until Sublandlord shall have executed and delivered
a fully executed copy of this Sublease to Subtenant.
SECTION 34.2. The obligations of Sublandlord under this Sublease shall not
be binding upon Sublandlord named herein after the sale, conveyance, assignment
or transfer by such Sublandlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Premises, as the case may be, and in the event of any such sale,
conveyance, assignment or transfer, Sublandlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Sublandlord under this
Sublease thereafter arising, and the transferee shall be deemed to have
43
assumed, subject to the remaining provisions of this Section 34.2, all
obligations of the Sublandlord under this Sublease arising after the effective
date of the transfer. No trustee, partner, principal, shareholder, director or
officer of Sublandlord (collectively, the "PARTIES") shall have any direct or
personal liability for the performance of Sublandlord's obligations under this
Sublease, and Subtenant shall look solely to Sublandlord's interest in the
Premises to enforce Sublandlord's obligations hereunder and shall not otherwise
seek any damages against Sublandlord or any of the Parties whatsoever. Subtenant
shall not look to any other property or assets of Sublandlord or any property or
assets of any of the Parties in seeking either to enforce Sublandlord's
obligations under this Sublease or to satisfy a judgment for Sublandlord's
failure to perform such obligations.
SECTION 34.3. Notwithstanding anything contained in this Sublease to the
contrary, all amounts payable by Subtenant to or on behalf of Sublandlord under
this Sublease, whether or not expressly denominated Fixed Rent, Additional Rent
or Rental, shall constitute rent for the purposes of Section 502(b)(7) of the
Bankruptcy Code.
SECTION 34.4. Neither this Sublease nor any memorandum of this Sublease
shall be recorded without the prior written consent of the Sublandlord, which
consent may be withheld by the Sublandlord in its sole and absolute discretion.
SECTION 34.5. Except as otherwise expressly stated in this Sublease, any
consent or approval required to be obtained from Sublandlord may be granted by
Sublandlord in its sole and absolute discretion. In any instance in which
Sublandlord agrees not to act unreasonably, Subtenant hereby waives any claim
for damages against or liability of Sublandlord that Subtenant may have based
upon any assertion that Sublandlord has unreasonably withheld or unreasonably
delayed any consent or approval requested by Subtenant, and Subtenant agrees
that its sole remedy shall be an action or proceeding to enforce any related
provision or for specific performance, injunction or declaratory judgment. If
with respect to any required consent or approval Sublandlord is required by the
express provisions of this Sublease not to unreasonably withhold or delay its
consent or approval, and if it is determined in any such proceeding referred to
in the preceding sentence that Sublandlord acted unreasonably, the requested
consent or approval shall be deemed to have been granted; however, Sublandlord
shall have no liability whatsoever to Subtenant for its refusal or failure to
give such consent or approval. Subtenant's sole remedy for Sublandlord's
unreasonably withholding or delaying consent or approval shall be as provided in
this Section 34.5.
SECTION 34.6. Sublandlord shall have the right at any time,
and from time to time, to amend unilaterally the provisions of
44
this Sublease if Sublandlord is advised by its counsel that all or any portion
of the Rental paid by Subtenant to Sublandlord hereunder is, or may be deemed to
be, unrelated business taxable income within the meaning of the United States
Internal Revenue Code or regulations issued thereunder, and Subtenant agrees
that it will execute all documents necessary to effect any such amendment,
provided that no such amendment shall increase Subtenant's payment obligations
or other liability under this Sublease nor reduce Sublandlord's obligations
hereunder.
SECTION 34.7. If Subtenant shall remain in possession of the Premises after
the Expiration Date, without the execution by both Subtenant and Sublandlord of
a new lease, Subtenant, at the election of Sublandlord, shall be deemed to be
occupying the Premises as a Subtenant from month-to-month, at a monthly rental
equal to three (3x) times the Rental payable during the last month of the Term,
subject to all the other conditions, provisions and obligations of this Sublease
insofar as the same are applicable to a month-to-month tenancy.
SECTION 34.8. This Sublease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Sublease to be drafted. If any words or phrases in this Sublease are stricken
out or otherwise eliminated, whether or not any other words or phrases have been
added, this Sublease shall be construed as if the words or phrases so stricken
out or otherwise eliminated were never included in this Sublease and no
implication or inference shall be drawn from the fact that such words or phrases
were stricken out or otherwise eliminated.
SECTION 34.9. If any of the provisions of this Sublease, or the application
thereof to any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Sublease, or the application of such
provisions to persons or circumstances other than those as to whom or which it
is held invalid or unenforceable, shall not be affected thereby and shall remain
valid and enforceable, and every provision of this Sublease shall be valid and
enforceable to the fullest extent permitted by law.
SECTION 34.10. Sublandlord shall have the right to erect any gate, chain or
other obstruction or to close off any portion of the Premises to the public at
any time to the extent necessary to prevent a dedication thereof for public use.
SECTION 34.11. Subtenant hereby represents to Sublandlord that it is not
entitled, directly or indirectly, to diplomatic or sovereign immunity and
Subtenant agrees that in all disputes arising directly or indirectly out of this
Sublease Subtenant shall be subject to service of process in, and the
jurisdiction of the courts of, the State of New Jersey. The provisions of this
Section 34.11 shall survive the expiration of this Sublease.
45
SECTION 34.12. This Sublease contains the entire agreement between the
parties and all prior negotiations and agreements are merged into this Sublease.
Except as provided in Section 34.6 this Sublease may not be changed, abandoned
or discharged, in whole or in part, nor may any of its provisions be waived
except by a written agreement that (a) expressly refers to this Sublease, (b) is
executed by the party against whom enforcement of the change, abandonment,
discharge or waiver is sought and (c) is permissible under the Mortgage(s).
SECTION 34.13. Any apportionment or prorations of Rental to be made under
this Sublease shall be computed on the basis of a three hundred sixty (360) day
year, with twelve (12) months of thirty (30) days each.
SECTION 34.14. The laws of the State of Jersey applicable to contracts made
and to be performed wholly within the State of New Jersey shall govern and
control the validity, interpretation, performance and enforcement of this
Sublease without regard to principles of conflicts of law.
SECTION 34.15. If Subtenant is a corporation, each person executing this
Sublease on behalf of Subtenant hereby covenants, represents and warrants that
Subtenant is a duly incorporated or duly qualified (if foreign) corporation and
is authorized to do business in the State of New Jersey (a copy of evidence
thereof to be supplied to Sublandlord upon request); and that each person
executing this Sublease on behalf of Subtenant is an officer of Subtenant and
that he or she is duly authorized to execute, acknowledge and deliver this
Sublease to Sublandlord (a copy of a resolution to that effect to be supplied to
Sublandlord upon request).
SECTION 34.16. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Sublease nor the intent of any provision thereof.
SECTION 34.17. The covenants, conditions and agreements contained in this
Sublease shall bind and inure to the benefit of Sublandlord and Subtenant and
their respective legal representatives, heirs, successors, and, except as
otherwise provided in this Sublease, their assigns.
SECTION 34.18. For the purposes of this Sublease and all agreements
supplemental to this Sublease, unless the context otherwise requires:
(A) The words "herein", "hereof", "hereunder" and "hereby"and words of
similar import shall be construed to refer to this Sublease as a whole and not
to any particular Article or Section unless expressly so stated.
46
(B) Subtenant's obligations hereunder shall be construed in every instance
as conditions as well as covenants, each separate and independent of any other
terms of this Sublease.
(C) Reference to Sublandlord as having "no liability" or being "without
liability" shall mean that Subtenant shall not be entitled to terminate this
Sublease, or to claim actual or constructive eviction, partial or total, or to
receive any abatement or diminution of rent, or to be relieved in any manner of
any of its other obligations hereunder, or to be compensated for loss or injury
suffered or to enforce any other right or liability whatsoever against
Sublandlord under or with respect to this Sublease or with respect to
Subtenant's use or occupancy of the Premises.
(D) Reference to "termination of this Sublease" or "expiration of this
Sublease" and words of like import includes expiration or sooner termination of
this Sublease and the Term and the estate hereby granted or cancellation of this
Sublease pursuant to any of the provisions of this Sublease or by law. Upon the
termination of this Sublease, the Term and estate granted by this Sublease shall
end at noon on the date of termination as if such date were the Fixed Expiration
Date, and neither party shall have any further obligation or liability to the
other after such termination except (i) as shall be expressly provided for in
this Sublease, and (ii) for such obligations as by their nature under the
circumstances can only be, or by the provisions of this Sublease, may be,
performed after such termination, and, in any event, unless expressly otherwise
provided in this Sublease, any liability for a payment (which shall be
apportioned as of such termination) which shall have accrued to or with respect
to any period ending at the time of termination shall survive the termination of
this Sublease.
(E) Words and phrases used in the singular shall be deemed to include the
plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender.
(F) The rule of "ejusdem generis" shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
(G) Transit, Coach, Tours, Bus Lines and Transportation, each hereby
represent, warrant, acknowledge and agree that they shall be JOINTLY AND
SEVERALLY liable for any and all of the obligations of the Subtenant hereunder
of any nature whatsoever, and that the failure by any one of Transit, Coach,
Tours, Bus Lines or Transportation to perform any obligation of the Subtenant
hereunder shall not affect, in any manner whatsoever, the Subtenant's liability
with respect to such obligation.
47
SECTION 34.19 Except as may be expressly modified or amended by the
terms and conditions of this Sublease, this Sublease is expressly subject to all
of the terms and conditions of the Overlease. The Sublessee hereby represents,
warrants and agrees that it shall be bound by all of the terms, covenants and
conditions of the Overlease (as well as any amendments, modifications or
renewals thereof) and shall pay any and all charges required to be paid by the
Sublandlord to the Overlandlord pursuant to the terms and conditions of the
Overlease (as well as any amendments, modifications or renewals thereof), except
as may be specifically limited by or set forth in this Sublease to the contrary.
IN WITNESS WHEREOF, Sublandlord and Subtenant have duly executed this
Sublease as of the day and year first above written.
TRI-COUNTY BUS LINES, INC., SUBLANDLORD
By: ______________________________
COMMUNITY TRANSIT LINES, INC., SUBTENANT
By: ______________________________
COMMUNITY TOURS, INC., SUBTENANT
By: ______________________________
COMMUNITY COACH, INC., SUBTENANT
By: ______________________________
COMMUNITY BUS LINES, INC., SUBTENANT
By: ______________________________
COMMUNITY TRANSPORTATION, INC., SUBTENANT
By: ______________________________
48
SCHEDULE "B"
RENT SCHEDULE
(Each year begins on May 1 and ends on April 30 of the
following year)
YEAR ANNUAL RENT MONTHLY INSTALLMENTS
- ---- ----------- --------------------
1996-1997 $28,142.00 $2,345.17
1997-1998 $29,549.11 $2,462.43
1998-1999 $31,026.56 $2,585.55
1999-2000 $32,577.89 $2,714.82
2000-2001 $34,206.78 $2,850.57
2001-2002 $35,917.12 $2,993.09
2002-2003 $37,712.98 $3,142.75
2003-2004 $39,598.63 $3,299.89
2004-2005 $41,578.56 $3,464.88
2005-2006 $43,657.49 $3,638.12
2006-2007 $45,840.36 $3,820.03
2007-2008 $48,132.38 $4,011.03
2008-2009 $50,538.99 $4,211.58
49
EXHIBIT 10.18
RIDER TO LEASE DATED DECEMBER , 1990
BETWEEN SIDNEY KUCHIN, AS LANDLORD AND
SBURUBAN TRAILS, INC. CORP., AS TENANT
28TH: In the event of any conflict in the terms, conditions and
provisions set forth in this Rider to the Lease and the terms, conditions and
provisions of the printed portion of this Lease, the terms, conditions and
provisions of this Rider shall control.
29th: Tenant shall, at its sole cost and expense, comply with the
Environmental Cleanup Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 et.seq. In
order to comply with ECRA, the Tenant shall undertake all sampling and cleanup
required by the Landlord or the New Jersey Department of Environmental
protection ("NJDEP") and shall execute all documents and pay all fees necessary
or desirable for such compliance, which execution and/or payment may be
requested by either the Landlord and/or NJDEP. It is understood that this
provision shall apply with regard to any action which the termination of this
Lease, the change of use of the premises, an assignment or sublease of all or
part of the Premises, bankruptcy or the conveyance of title to the Premises. It
is understood that this provision shall survive the expiration or earlier
termination of this Lease.
30th: The Tenant herein shall have the option to purchase, upon notice
as hereinafter provided, the Premises herein leased at any time before the
expiration of the term of this Lease, provided this Lease has not been sooner
terminated as provided herein or otherwise, and provided the Tenant is not in
default in the payment of rent or other charges or in the performance of or
compliance with all other covenants, terms and conditions of this Lease, for the
base purchase price of $2,200,000.00 ("Total Purchase Price") which Total
Purchase Price shall be paid as hereinafter set forth.
(a) As a condition precedent to the exercise of this option,
the Tenant shall give irrevocable notice of its election to purchase the
Premises, on the terms provided herein, in writing and signed by the Tenant,
which shall be accompanied by a sum equal to 10% of the Total Purchase Price, in
lawful money of the United States of America. This notice shall be served
personally on the Landlord, or by registered or certified mail, postage prepaid,
addressed to the Landlord at the above stated address or such other address as
the Landlord, may in writing, designate. The balance of the Total Purchase
Price, subject to any applicable adjustments, shall be paid, in lawful money of
the United States of America, simultaneously with the delivery of a bargain and
sale deed with covenants against grantors acts within 30 days after the service
of the above referenced notice.
(b) The base purchase price shall be increased by a sum equal
to the lesser of: I) 2% of the base purchase price for every twelve month
period, or part thereof, starting with the commencement date of the Lease and
ending with the date the notice is received by the Landlord; or ii) 1/2 of the
percentage increase in the Consumer Price Index between October, 1990 and the
month in which the notice is received, multiplied by the base purchase price.
For purposes of this paragraph, the Consumer Price Index shall mean the
"Consumer Price Index for All Urban Consumers" published by the Bureau of Labor
Statistics of the United States Department of Labor, for New York - Northeastern
N. J., All Items, (1967 = 100) or any renamed local index covering the
metropolitan New York area or any other successor or substitute index
appropriately adjusted.
(c) The Premises shall be conveyed free of all mortgage liens
and all other liens or other encumbrances of any type which result or have
resulted from an act, contract or agreement of Landlord, subject to such
easements and restrictions of record as may be in effect as of the date of this
Lease and such other easements and/or restrictions of record as shall not affect
the marketability of title or the use of the Premises for the purpose which it
is being used as of the commencement date of this Lease.
The New Jersey Realty Transfer Fee or any similar replacement
therefore shall be the obligation of the Landlord and adjustments and prorations
for rents and any other appropriate adjustments, shall be made as of the date of
closing of title.
(e) Tenant, at least 15 days prior to the date set for closing
of title, shall furnish landlord's attorneys with a written notice of any
exceptions to title. In the event that there are title exceptions which must be
cured by Landlord, the closing of title shall be extended for a period of up to
60 days in order to enable Landlord to cure such exceptions. Tenant shall accept
the Premises in their "as is" condition as of the closing of title. Unless
otherwise agreed between the Landlord and Tenant, the closing shall take place
at the offices of the Landlord at 10:00 A.M. at a date to be mutually agreed
upon between the parties or, in the absence of any agreement, thirty days after
service of the notice exercising the option.
(f) The parties shall continue as Landlord and Tenant under
the terms, covenants, conditions and agreements of this Lease until the closing
of title.
31st: Landlord and Tenant agree, at the option or request of either
party, to prepare, execute and record a memorandum of this Lease in the county
in which the Premises is located.
WITNESS:
- ---------------------------------- ------------------------------
SIDNEY KUCHIN
ATTEST: SUBURBAN TRAILS, INC.
_____________________________ By:____________________________
AMENDMENT TO LEASE AGREEMENT
=================================================================
LANDLORD: SIDNEY KUCHIN
TENANT: SUBURBAN TRAILS, INC.
=================================================================
DATED: AS OF NOVEMBER 1, 1995
=================================================================
PREMISES:CERTAIN LAND, BUILDINGS AND
IMPROVEMENTS LOCATED ON ROUTE 33
IN MONROE TOWNSHIP, NEW JERSEY
AMENDMENT TO LEASE AGREEMENT
AMENDMENT TO LEASE AGREEMENT ("AMENDMENT") dated as of the 1st day of
November, 1995, by and between SIDNEY KUCHIN, having an address at 750 Somerset
Street, New Brunswick, New Jersey ______________ ("LANDLORD") and SUBURBAN
TRAILS, INC., a ________ corporation, having an address at 750 Somerset Street,
New Brunswick, New Jersey _______ ("TENANT").
W I T N E S E T H:
WHEREAS, the Landlord and the Tenant previously entered into a certain
lease agreement dated December, 1990 ("LEASE") as and for certain land,
buildings and improvements located on Route 33 in Monroe Township and known and
designated on the Official Tax Map of the Township of Monroe, Middlesex County,
New Jersey as Block 4, Lot 14.01, being the same property as described in that
certain deed dated February 2, 1989 and recorded on February 8, 1989 in the
Office of the Clerk of Middlesex County in Deed Book 3762, Page 848 as further
identified and described on Schedule "A", annexed hereto and made a part hereof
(collectively, the "PREMISES"); and
WHEREAS, the Landlord and the Tenant are desirous of amending certain
terms and conditions of the Lease in accordance with the terms and conditions
set forth in this Amendment.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, it is mutually covenanted and agreed as follows:
1. Notwithstanding any terms and conditions of the Lease to the
contrary and/or the terms and conditions of any other agreement or
understanding, oral or written, by and between the Landlord and the Tenant with
respect to the Lease and/or the Premises, the Lease is hereby amended in
accordance with the terms and conditions of this Amendment.
2. The paragraph beginning with the word "Witnesseth" on the first page
of the Lease is hereby deleted in its entirety and the following shall be
inserted in its place and stead to read in its entirety as follows:
Witnesseth that, the Landlord does hereby lease to the Tenant, and the
Tenant does hereby rent from the Landlord the following described
premises: A portion of that certain property located on Route 33 in
Monroe Township, New Jersey and known and designated on the Official
Tax Map of the Township of Monroe, Middlesex County, New Jersey as
Block 4, Lot 14.01 being the same property as described in that certain
deed dated February 2, 1989 and recorded on February 8, 1989 in
the Office of the Clerk of Middlesex County in Deed Book 3762, Page
848, for a term of forty (40) years commencing on November 1, 1990 and
ending on October 31, 2030 to be used and occupied by the Tenant for
any legally permitted use. The leased property is more fully identified
in the cross-hatched diagram, annexed hereto and made a part hereof as
Schedule "A".
3. The Landlord hereby waives any right and/or entitlement to the
increase in rent to which the Landlord would have otherwise been entitled on
November 1, 1995 in accordance with the provisions of Paragraph 1 of the Lease.
Notwithstanding the foregoing, nothing contained in this Paragraph 3 shall be
deemed to affect or limit, in any manner whatsoever, the Landlord's right and/or
entitlement to collect and receive any future increases in rent, as provided in
Paragraph 4 of this Amendment.
4. Paragraph 1 of the Lease is hereby deleted in its entirety and the
following shall be inserted in its place and stead to read in its entirety as
follows:
1st: The Tenant covenants and agrees to pay to the Landlord, as rent
for and during the term hereof, (i) the sum of Twelve Thousand
($12,000.00) Dollars per month for each month during the lease term up
to and including October 31, 1998, (ii) commencing on November 1, 1998,
a monthly rental for the next five (5) year period during the lease
term equal to the monthly rental for the immediately preceding eight
(8) year period plus ten (10%) percent and (iii) a monthly rental for
each five (5) year period during the lease term thereafter equal to the
monthly rental for the immediately preceding five (5) year period plus
ten (10%) percent. The rent shall be payable on the first day of each
and every month during the lease term.
5. The following new paragraph 32 is hereby added to the Lease to read
in its entirety as follows:
32nd: In furtherance of the provisions of paragraph 29 hereof, Tenant
covenants and agrees that Tenant shall, at Tenant's sole cost and
expense, comply at all times with all Requirements (as hereinafter
defined) governing the use, generation, storage, treatment and/or
disposal of any Hazardous Materials (as hereinafter defined), the
presence of which results from or in connection with the act or
omission of Tenant, or any of the Tenant's principals, shareholders,
officers, directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns or the breach of this Lease
by Tenant, or any of the Tenant's principals, shareholders, officers,
directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns. The term
2
"HAZARDOUS MATERIALS" shall mean any biologically or chemically active
or other toxic or hazardous wastes, pollutants or substances,
including, without limitation, asbestos, PCBS, petroleum products and
by-products, substances defined or listed as "hazardous substances" or
"toxic substances" or similarly identified in or pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. ss. 9601 et seq., and as hazardous wastes under the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6010, et seq., any
chemical substance or mixture regulated under the Toxic Substance
Control Act of 1976, as amended, 15 U.S.C. 2601, et seq., any "toxic
pollutant" under the Clean Water Act, 33 U.S.C. ss. 466 et seq., as
amended, any hazardous air pollutant under the Clean Air Act, 42 U.S.C.
ss. 7401 et seq., hazardous materials identified in or pursuant to the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802, et seq.,
and any hazardous or toxic substances or pollutant regulated under any
other Requirements including, without limitation, ECRA. The term
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive
orders, extraordinary as well as ordinary, retroactive and prospective,
of the United States of America, the State of New Jersey, the Township
of Monroe, and/or any political subdivision thereof and any agency,
department, commission, board, bureau or instrumentality of any of the
foregoing, now existing or hereafter created, which have jurisdiction
over or affect, directly or indirectly, the Premises or any portion
thereof or the maintenance, operation or occupation of the Premises,
(ii) all requirements, obligations and conditions of all instruments of
record on the date of this Lease, and (iii) all requirements,
obligations and conditions imposed by any fire rating agency or by the
carrier of Landlord's hazard insurance policy for the Premises.
Tenant agrees to execute, from time to time, at Landlord's
request, affidavits, representations and the like concerning Tenant's
best knowledge and belief regarding the presence of Hazardous Materials
in, on, under or about the Premises. Tenant shall indemnify and hold
harmless the Landlord, and all of its shareholders, principals,
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns from and against
any loss, claim, cost, damage, liability or expense (including
attorneys' fees and disbursements) arising by reason of any clean up,
removal, remediation, detoxification action or any other activity
required or recommended of the Landlord, or any of its principals,
shareholders, officers,
3
directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns by any Governmental Authority
by reason of the presence in, on, under or about the Premises of any
Hazardous Materials, as a result of or in connection with the act or
omission of Tenant or any of Tenant's principals, shareholders,
officers, directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns or the breach of this Lease
by Tenant or any of the Tenant's principals, shareholders, officers,
directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns. The foregoing covenants and
indemnity shall survive the expiration or any termination of this
Lease.
6. Tenant, from and after the date of this Amendment To Lease
Agreement, shall be deemed to mean and refer to Suburban Trails, Inc., Suburban
Transit Corp., Central Jersey Transit, Inc. f/k/a Plainfield Transit, Inc. and
H.A.M.L. Corp., collectively, jointly and severally, for any and all purposes
under the Lease, as amended hereby, and each of the foregoing entities shall
have all of the rights, privileges, obligations and liabilities under the Lease
as if they were the original tenant named in the Lease.
7. All terms and conditions of the Lease not specifically modified or
amended hereby shall remain unamended and in full force and effect.
8. Except as may be otherwise set forth in this Amendment, all
capitalized terms as used herein shall have the same meaning as ascribed to them
in the Lease.
9. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, as well as their respective heirs, successors, administrators,
executors, representatives and assigns.
10. In the event of any inconsistencies between the terms and
conditions of the Lease and the terms and conditions of this Amendment, then in
such event, the terms and conditions set forth in this Amendment shall supersede
and shall be deemed paramount in all respects to the terms and conditions of the
Lease and/or any other agreement or understanding, oral or written, by and
between the Landlord and Tenant with respect to the Lease and/or the Premises at
any time, now or hereafter.
4
11. This Amendment shall be governed by and construed in accordance
with the laws of the State of New Jersey without regard to any principles of
conflicts of law.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this
Amendment as of the date and year first written above.
LANDLORD:
SIDNEY KUCHIN
TENANT:
SUBURBAN TRAILS, INC.
BY:
AGREED, ACKNOWLEDGED
AND ACCEPTED:
SUBURBAN TRANSIT CORP.
BY:
CENTRAL JERSEY TRANSIT, INC.
F/K/A PLAINFIELD TRANSIT, INC.
BY:
H.A.M.L. CORP.
BY:
5
STATE OF )
) SS.:
COUNTY OF )
On this ______ day of ______________, 1996, before me personally came
_____________________, to me known, who being by me duly sworn, did depose and
say that he resides at ________________________________________________,; that
he is the President of SUBURBAN TRAILS, INC., the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this ______ day of ______________, 1996, before me personally came
_____________________, to me known, who being by me duly sworn, did depose and
say that he resides at _____________________________________________________,;
that he is the President of SUBURBAN TRANSIT CORP., the corporation described in
and which executed the foregoing instrument; and that he signed his name thereto
by order of the Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this ______ day of ______________, 1996, before me personally came
_____________________, to me known, who being by me duly sworn, did depose and
say that he resides at ___________________________________________________,;
that he is the President of CENTRAL JERSEY TRANSIT, INC. f/k/a PLAINFIELD
TRANSIT, INC., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of the said corporation.
NOTARY PUBLIC
6
STATE OF )
) SS.:
COUNTY OF )
On this ______ day of ______________, 1996, before me personally came
_____________________, to me known, who being by me duly sworn, did depose and
say that he resides at ____________________________________________________,;
that he is the President of H.A.M.L. Corp., the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On the _______ day of _____________ , 1996, before me personally came
SIDNEY KUCHIN to me known to be the individual named in and who executed the
foregoing instrument and acknowledged that they signed his name thereto.
NOTARY PUBLIC
7
AMENDMENT TO LEASE AGREEMENT
=================================================================
LANDLORD: SIDNEY KUCHIN
TENANT: CENTRAL JERSEY TRANSIT, INC.
F/K/A PLAINFIELD TRANSIT, INC.
=================================================================
DATED: AS OF NOVEMBER 1, 1995
=================================================================
PREMISES:CERTAIN LAND, BUILDINGS AND
IMPROVEMENTS LOCATED AT 601 NEW
MARKET AVENUE, SOUTH PLAINFIELD,
NEW JERSEY
AMENDMENT TO LEASE AGREEMENT
AMENDMENT TO LEASE AGREEMENT ("AMENDMENT") dated as of the 1st day of
November, 1995, by and between SIDNEY KUCHIN, having an address at 750 Somerset
Street, New Brunswick, New Jersey ("LANDLORD") and CENTRAL JERSEY TRANSIT, INC.
f/k/a PLAINFIELD TRANSIT, INC., a ____________ corporation, having an address at
750 Somerset Street, New Brunswick, New Jersey ___________ ("TENANT").
W I T N E S E T H:
WHEREAS, the Tenant is the successor, by way of name change, to
Plainfield Transit, Inc., the original named tenant in that certain lease
agreement dated December, 1990 ("LEASE") by and between the Landlord, as
landlord, and Plainfield Transit, Inc., as tenant, as and for certain land,
buildings and improvements known as and by the street address of 601 New Market
Avenue, South Plainfield, New Jersey and known and designated on the Official
Tax Map of the City of South Plainfield, Middlesex County, New Jersey as Block
315, Lots 34,42 and 43 and Block 316, Lot 1 (collectively, the "PREMISES"); and
WHEREAS, the Landlord and the Tenant are desirous of amending certain
terms and conditions of the Lease in accordance with the terms and conditions
set forth in this Amendment.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, it is mutually covenanted and agreed as follows:
1. Notwithstanding any terms and conditions of the Lease to the
contrary and/or the terms and conditions of any other agreement or
understanding, oral or written, by and between the Landlord and the Tenant with
respect to the Lease and/or the Premises, the Lease is hereby amended in
accordance with the terms and conditions of this Amendment.
2. The paragraph beginning with the word "Witnesseth" on the first page
of the Lease is hereby deleted in its entirety and the following shall be
inserted in its place and stead to read in its entirety as follows:
Witnesseth that, the Landlord does hereby lease to the Tenant, and the
Tenant does hereby rent from the Landlord, the following described
premises: 601 New Market Avenue, South Plainfield, New Jersey and known
and designated on the Official Tax Map of the City of South Plainfield,
Middlesex County, New Jersey as Block 315, Lots 34,42 and 43 and Block
316, Lot 1 for a term of forty (40) years commencing on November 1,
1990 and ending on October 31, 2030 to be used and occupied by the
Tenant for any legally permitted use. The Landlord and the Tenant
hereby acknowledge that the Tenant's use of the Premises shall be
non-exclusive in nature and shall be at all times, now and hereafter,
subject to and in conjunction with the use of the Premises by Suburban
Transit Corp. and H.A.M.L. Corp. pursuant to the provisions of those
certain leases dated December, 1990 and as of November 1, 1995,
respectively.
3. The Landlord hereby waives any right and/or entitlement, now or
hereafter, to the increase in rent to which the Landlord would have otherwise
been entitled on November 1, 1995 in accordance with the provisions of Paragraph
1 of the Lease. Notwithstanding the foregoing, nothing contained in this
Paragraph 3 shall be deemed to affect or limit, in any manner whatsoever, the
Landlord's right and/or entitlement to collect and receive any future increases
in rent, as provided in Paragraph 4 of this Amendment.
4. Paragraph 1 of the Lease is hereby deleted in its entirety and the
following shall be inserted in its place and stead to read in its entirety as
follows:
1st: The Tenant covenants and agrees to pay to the Landlord, as rent
for and during the term hereof, (i) the sum of One Thousand ($1,000.00)
Dollars per month for each month during the first eight (8) years of
the lease term, (ii) a monthly rental for the next five (5) year period
during the lease term equal to the monthly rental for the immediately
preceding eight (8) year period plus ten (10%) percent and (iii) a
monthly rental for each five (5) year period during the lease term
thereafter equal to the monthly rental for the immediately preceding
five (5) year period plus ten (10%) percent. The rent shall be payable
on the first day of each and every month during the lease term.
5. The Landlord and the Tenant hereby acknowledge that, prior to the
date of this Amendment, the Tenant effectuated a change of its corporate name
(the "Name Change") from Plainfield Transit, Inc. to Central Jersey Transit,
Inc. Accordingly, by execution hereof, the Landlord and the Tenant agree that
the Lease shall be deemed to have been amended so that all references in the
Lease to Plainfield Transit, Inc. shall be deemed to mean and include Central
Jersey Transit, Inc. at all times from and after the effective date of the Name
Change up to and including the expiration date or termination date of the Lease
2
6. The following new paragraph 32 is hereby added to the Lease to read
in its entirety as follows:
32nd: In furtherance of the provisions of paragraph 29 hereof, Tenant
covenants and agrees that Tenant shall, at Tenant's sole cost and
expense, comply at all times with all Requirements (as hereinafter
defined) governing the use, generation, storage, treatment and/or
disposal of any Hazardous Materials (as hereinafter defined), the
presence of which results from or in connection with the act or
omission of Tenant, or any of the Tenant's principals, shareholders,
officers, directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns or the breach of this Lease
by Tenant, or any of the Tenant's principals, shareholders, officers,
directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other
toxic or hazardous wastes, pollutants or substances, including, without
limitation, asbestos, PCBS, petroleum products and by-products,
substances defined or listed as "hazardous substances" or "toxic
substances" or similarly identified in or pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.
9601 et seq., and as hazardous wastes under the Resource Conservation
and Recovery Act, 42 U.S.C. ss. 6010, et seq., any chemical substance
or mixture regulated under the Toxic Substance Control Act of 1976, as
amended, 15 U.S.C. 2601, et seq., any "toxic pollutant" under the Clean
Water Act, 33 U.S.C. ss. 466 et seq., as amended, any hazardous air
pollutant under the Clean Air Act, 42 U.S.C. ss. 7401 et seq.,
hazardous materials identified in or pursuant to the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 1802, et seq., and any
hazardous or toxic substances or pollutant regulated under any other
Requirements including, without limitation, ECRA. The term
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive
orders, extraordinary as well as ordinary, retroactive and prospective,
of the United States of America, the State of New Jersey, the Borough
of South Plainfield, and/or any political subdivision thereof and any
agency, department, commission, board, bureau or instrumentality of any
of the foregoing, now existing or hereafter created, which have
jurisdiction over or affect, directly or indirectly, the Premises or
any portion thereof or the maintenance, operation or occupation of the
Premises, (ii) all requirements, obligations and conditions of all
instruments of record on the date of this Lease, and (iii) all
requirements, obligations and conditions
3
imposed by any fire rating agency or by the carrier of Landlord's
hazard insurance policy for the Premises.
Tenant agrees to execute, from time to time, at Landlord's
request, affidavits, representations and the like concerning Tenant's
best knowledge and belief regarding the presence of Hazardous Materials
in, on, under or about the Premises. Tenant shall indemnify and hold
harmless the Landlord, and all of its shareholders, principals,
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns from and against
any loss, claim, cost, damage, liability or expense (including
attorneys' fees and disbursements) arising by reason of any clean up,
removal, remediation, detoxification action or any other activity
required or recommended of the Landlord, or any of its principals,
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns by any
Governmental Authority by reason of the presence in, on, under or about
the Premises of any Hazardous Materials, as a result of or in
connection with the act or omission of Tenant or any of Tenant's
principals, shareholders, officers, directors, agents, representatives,
employees, contractors, subcontractors, successors and/or assigns or
the breach of this Lease by Tenant or any of the Tenant's principals,
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns. The foregoing
covenants and indemnity shall survive the expiration or any termination
of this Lease.
7. Tenant, from and after the date of this Amendment To Lease
Agreement, shall be deemed to mean and refer to Central Jersey Transit, Inc.
f/k/a Plainfield Transit, Inc., Suburban Trails, Inc., Suburban Transit Corp.
and H.A.M.L. Corp., collectively, jointly and severally, for any all purposes
under the Lease, as amended hereby, and each of the foregoing entities shall
have all of the rights, privileges, obligations and liabilities under the Lease
as if they were the original tenant named in the Lease.
8. All terms and conditions of the Lease not specifically modified or
amended hereby shall remain unamended and in full force and effect.
9. Except as may be otherwise set forth in this Amendment, all
capitalized terms as used herein shall have the same meaning as ascribed to them
in the Lease.
4
10. This Amendment shall be binding upon and inure to the benefit of
the parties hereto, as well as their respective heirs, successors,
administrators, executors, representatives and assigns.
11. In the event of any inconsistencies between the terms and
conditions of the Lease and the terms and conditions of this Amendment, then in
such event, the terms and conditions set forth in this Amendment shall supersede
and shall be deemed paramount in all respects to the terms and conditions of the
Lease and/or any other agreement or understanding, oral or written, by and
between the Landlord and Tenant with respect to the Lease and/or the Premises at
any time, now or hereafter.
12. This Amendment shall be governed by and construed in accordance
with the laws of the State of New Jersey without regard to any principles of
conflicts of law.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this
Amendment as of the date and year first written above.
LANDLORD:
SIDNEY KUCHIN
TENANT:
CENTRAL JERSEY TRANSIT F/K/A
PLAINFIELD TRANSIT, INC.
BY:
AGREED, ACKNOWLEDGED
AND ACCEPTED:
SUBURBAN TRAILS, INC.
BY:
SUBURBAN TRANSIT CORP.
BY:
H.A.M.L. CORP.
BY:
5
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
CENTRAL JERSEY TRANSIT, INC. f/k/a PLAINFIELD TRANSIT, INC., the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
SUBURBAN TRAILS, INC., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
SUBURBAN TRANSIT CORP., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of the said corporation.
NOTARY PUBLIC
6
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
H.A.M.L. CORP., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On the day of ___________________ , 1996, before me personally came
SIDNEY KUCHIN to me known to be the individual named in and who executed the
foregoing instrument and acknowledged that they signed his name thereto.
NOTARY PUBLIC
RIDER TO LEASE DATED DECEMBER , 1990
BETWEEN SIDNEY KUCHIN, AS LANDLORD AND
SBURUBAN TRANSIT CORP., AS TENANT
28TH: In the event of any conflict in the terms, conditions and
provisions set forth in this Rider to the Lease and the terms, conditions and
provisions of the printed portion of this Lease, the terms, conditions and
provisions of this Rider shall control.
29th: Tenant shall, at its sole cost and expense, comply with the
Environmental Cleanup Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 et.seq. In
order to comply with ECRA, the Tenant shall undertake all sampling and cleanup
required by the Landlord or the New Jersey Department of Environmental
protection ("NJDEP") and shall execute all documents and pay all fees necessary
or desirable for such compliance, which execution and/or payment may be
requested by either the Landlord and/or NJDEP. It is understood that this
provision shall apply with regard to any action which the termination of this
Lease, the change of use of the premises, an assignment or sublease of all or
part of the Premises, bankruptcy or the conveyance of title to the Premises. It
is understood that this provision shall survive the expiration or earlier
termination of this Lease.
30th: The Tenant herein shall have the option to purchase, upon notice
as hereinafter provided, the Premises herein leased at any time before the
expiration of the term of this Lease, provided this Lease has not been sooner
terminated as provided herein or otherwise, and provided the Tenant is not in
default in the payment of rent or other charges or in the performance of or
compliance with all other covenants, terms and conditions of this Lease, for the
base purchase price of $1,200,000.00 ("Total Purchase Price") which Total
Purchase Price shall be paid as hereinafter set forth.
(a) As a condition precedent to the exercise of this option,
the Tenant shall give irrevocable notice of its election to purchase the
Premises, on the terms provided herein, in writing and signed by the Tenant,
which shall be accompanied by a sum equal to 10% of the Total Purchase Price, in
lawful money of the United States of America. This notice shall be served
personally on the Landlord, or by registered or certified mail, postage prepaid,
addressed to the Landlord at the above stated address or such other address as
the Landlord, may in writing, designate. The balance of the Total Purchase
Price, subject to any applicable adjustments, shall be paid, in lawful money of
the United States of America, simultaneously with the delivery of a bargain and
sale deed with covenants against grantors acts within 30 days after the service
of the above referenced notice.
(b) The base purchase price shall be increased by a sum equal
to the lesser of: i) 2% of the base purchase price for every twelve month
period, or part thereof, starting with the commencement date of the Lease and
ending with the date the notice is received by the Landlord; or ii) 1/2 of the
percentage increase in the Consumer Price Index between October, 1990 and the
month in which the notice is received, multiplied by the base purchase price.
For purposes of this paragraph, the Consumer Price Index shall mean the
"Consumer Price Index for All Urban Consumers" published by the Bureau of Labor
Statistics of the United States Department of Labor, for New York - Northeastern
N. J., All Items, (1967 = 100) or any renamed local index covering the
metropolitan New York area or any other successor or substitute index
appropriately adjusted.
(c) The Premises shall be conveyed free of all mortgage liens
and all other liens or other encumbrances of any type which result or have
resulted from an act, contract or agreement of Landlord, subject to such
easements and restrictions of record as may be in effect as of the date of this
Lease and such other easements and/or restrictions of record as shall not affect
the marketability of title or the use of the Premises for the purpose which it
is being used as of the commencement date of this Lease.
The New Jersey Realty Transfer Fee or any similar replacement
therefore shall be the obligation of the Landlord and adjustments and prorations
for rents and any other appropriate adjustments, shall be made as of the date of
closing of title.
(e) Tenant, at least 15 days prior to the date set for closing
of title, shall furnish landlord's attorneys with a written notice of any
exceptions to title. In the event that there are title exceptions which must be
cured by Landlord, the closing of title shall be extended for a period of up to
60 days in order to enable Landlord to cure such exceptions. Tenant shall accept
the Premises in their "as is" condition as of the closing of title. Unless
otherwise agreed between the Landlord and Tenant, the closing shall take place
at the offices of the Landlord at 10:00 A.M. at a date to be mutually agreed
upon between the parties or, in the absence of any agreement, thirty days after
service of the notice exercising the option.
(f) The parties shall continue as Landlord and Tenant under
the terms, covenants, conditions and agreements of this Lease until the closing
of title.
31st: Landlord and Tenant agree, at the option or request of either
party, to prepare, execute and record a memorandum of this Lease in the county
in which the Premises is located.
WITNESS:
- ---------------------------------- ------------------------------
SIDNEY KUCHIN
ATTEST: SUBURBAN TRANSIT CORP.
__________________________________ By:____________________________
AMENDMENT TO LEASE AGREEMENT
=================================================================
LANDLORD: SIDNEY KUCHIN
TENANT: SUBURBAN TRANSIT CORP.
=================================================================
DATED: AS OF NOVEMBER 1, 1995
=================================================================
PREMISES:CERTAIN LAND, BUILDINGS AND
IMPROVEMENTS LOCATED AT 710
SOMERSET STREET, NEW BRUNSWICK,
NEW JERSEY
AMENDMENT TO LEASE AGREEMENT
AMENDMENT TO LEASE AGREEMENT ("AMENDMENT") dated as of the 1st day of
November, 1995, by and between SIDNEY KUCHIN, having an address at 750 Somerset
Street, New Brunswick, New Jersey ___________ ("LANDLORD") and SUBURBAN TRANSIT
CORP., a ________________ corporation, having an address at 750 Somerset Street,
New Brunswick, New Jersey _______________ ("TENANT").
W I T N E S E T H:
WHEREAS, the Landlord and the Tenant previously entered into a certain
lease agreement dated December, 1990 ("LEASE") as and for certain land,
buildings and improvements known as and by the street address of 710 Somerset
Street, New Brunswick, New Jersey and known and designated on the Official Tax
Map of the City of New Brunswick, Middlesex County, New Jersey as Block 596.02,
Lots 5.02 and 6 (collectively, the "PREMISES"); and
WHEREAS, the Landlord and the Tenant are desirous of amending certain
terms and conditions of the Lease in accordance with the terms and conditions
set forth in this Amendment.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, it is mutually covenanted and agreed as follows:
1. Notwithstanding any terms and conditions of the Lease to the
contrary and/or the terms and conditions of any other agreement or
understanding, oral or written, by and between the Landlord and the Tenant with
respect to the Lease and/or the Premises, the Lease is hereby amended in
accordance with the terms and conditions of this Amendment.
2. The Landlord hereby waives any right and/or entitlement, now or
hereafter, to the increase in rent to which the Landlord would have otherwise
been entitled on November 1, 1995 in accordance with the provisions of Paragraph
1 of the Lease. Notwithstanding the foregoing, nothing contained in this
Paragraph 2 shall be deemed to affect or limit, in any manner whatsoever, the
Landlord's right and/or entitlement to collect and receive any future increases
in rent, as provided in Paragraph 3 of this Amendment.
3. Paragraph 1 of the Lease is hereby deleted in its
entirety and the following shall be inserted in its place and
stead to read in its entirety as follows:
1st: The Tenant covenants and agrees to pay to the Landlord, as rent
for and during the term hereof, (i) the sum of Two Thousand Five
Hundred ($2,500.00) Dollars per month for each month during the term of
the Lease up to and including October 31, 1998, (ii) commencing on
November 1, 1998, a monthly rental for the next five (5) year period
during the lease term equal to the monthly rental for the immediately
preceding eight (8) year period plus ten (10%) percent and (iii) a
monthly rental for each five (5) year period during the lease term
thereafter equal to the monthly rental for the immediately preceding
five (5) year period plus ten (10%) percent. The rent shall be payable
on the first day of each and every month during the lease term.
4. The following new paragraph 32 is hereby added to the Lease to read
in its entirety as follows:
32nd: In furtherance of the provisions of paragraph 29 hereof, Tenant
covenants and agrees that Tenant shall, at Tenant's sole cost and
expense, comply at all times with all Requirements (as hereinafter
defined) governing the use, generation, storage, treatment and/or
disposal of any Hazardous Materials (as hereinafter defined), the
presence of which results from or in connection with the act or
omission of Tenant, or any of the Tenant's principals, shareholders,
officers, directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns or the breach of this Lease
by Tenant, or any of the Tenant's principals, shareholders, officers,
directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other
toxic or hazardous wastes, pollutants or substances, including, without
limitation, asbestos, PCBS, petroleum products and by-products,
substances defined or listed as "hazardous substances" or "toxic
substances" or similarly identified in or pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.
9601 et seq., and as hazardous wastes under the Resource Conservation
and Recovery Act, 42 U.S.C. ss. 6010, et seq., any chemical substance
or mixture regulated under the Toxic Substance Control Act of 1976, as
amended, 15 U.S.C. 2601, et seq., any "toxic pollutant" under the Clean
Water Act, 33 U.S.C. ss. 466
2
et seq., as amended, any hazardous air pollutant under the Clean Air
Act, 42 U.S.C. ss. 7401 et seq., hazardous materials identified in or
pursuant to the Hazardous Materials Transportation Act, 49 U.S.C. ss.
1802, et seq., and any hazardous or toxic substances or pollutant
regulated under any other Requirements including, without limitation,
ECRA. The term "REQUIREMENTS" shall mean (i) all present and future
laws, rules, ordinances, regulations, statutes, requirements, codes and
executive orders, extraordinary as well as ordinary, retroactive and
prospective, of the United States of America, the State of New Jersey,
the City of New Brunswick, and/or any political subdivision thereof and
any agency, department, commission, board, bureau or instrumentality of
any of the foregoing, now existing or hereafter created, which have
jurisdiction over or affect, directly or indirectly, the Premises or
any portion thereof or the maintenance, operation or occupation of the
Premises, (ii) all requirements, obligations and conditions of all
instruments of record on the date of this Lease, and (iii) all
requirements, obligations and conditions imposed by any fire rating
agency or by the carrier of Landlord's hazard insurance policy for the
Premises.
Tenant agrees to execute, from time to time, at Landlord's
request, affidavits, representations and the like concerning Tenant's
best knowledge and belief regarding the presence of Hazardous Materials
in, on, under or about the Premises. Tenant shall indemnify and hold
harmless the Landlord, and all of its shareholders, principals,
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns from and against
any loss, claim, cost, damage, liability or expense (including
attorneys' fees and disbursements) arising by reason of any clean up,
removal, remediation, detoxification action or any other activity
required or recommended of the Landlord, or any of its principals,
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns by any
Governmental Authority by reason of the presence in, on, under or about
the Premises of any Hazardous Materials, as a result of or in
connection with the act or omission of Tenant or any of Tenant's
principals, shareholders, officers, directors, agents, representatives,
employees, contractors,
3
subcontractors, successors and/or assigns or the breach of this Lease
by Tenant or any of the Tenant's principals, shareholders, officers,
directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns. The foregoing covenants and
indemnity shall survive the expiration or any termination of this
Lease.
5. Tenant, from and after the date of this Amendment To Lease
Agreement, shall be deemed to mean and refer to Suburban Transit Corp., Central
Jersey Transit, Inc. f/k/a Plainfield Transit, Inc., Suburban Trails, Inc. and
H.A.M.L. Corp., collectively, jointly and severally, for any all purposes under
the Lease, as amended hereby, and each of the foregoing entities shall have all
of the rights, privileges, obligations and liabilities under the Lease as if
they were the original tenant named in the Lease.
6. All terms and conditions of the Lease not specifically modified or
amended hereby shall remain unamended and in full force and effect.
7. Except as may be otherwise set forth in this Amendment, all
capitalized terms as used herein shall have the same meaning as ascribed to them
in the Lease.
8. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, as well as their respective heirs, successors, administrators,
executors, representatives and assigns.
9. In the event of any inconsistencies between the terms and conditions
of the Lease and the terms and conditions of this Amendment, then in such event,
the terms and conditions set forth in this Amendment shall supersede and shall
be deemed paramount in all respects to the terms and conditions of the Lease
and/or any other agreement or understanding, oral or written, by and between the
Landlord and Tenant with respect to the Lease and/or the Premises at any time,
now or hereafter.
4
10. This Amendment shall be governed by and construed in accordance
with the laws of the State of New Jersey without regard to any principles of
conflicts of law.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this
Amendment as of the date and year first written above.
LANDLORD:
SIDNEY KUCHIN
TENANT:
SUBURBAN TRANSIT CORP.
BY:
AGREED, ACKNOWLEDGED
AND ACCEPTED:
SUBURBAN TRAILS, INC.
BY:
CENTRAL JERSEY TRANSIT, INC.
F/K/A PLAINFIELD TRANSIT, INC.
BY:
H.A.M.L. CORP.
BY:
5
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
SUBURBAN TRANSIT CORP., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
CENTRAL JERSEY TRANSIT, INC. f/k/a PLAINFIELD TRANSIT, INC., the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
SUBURBAN TRAILS, INC., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of the said corporation.
NOTARY PUBLIC
6
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
H.A.M.L. CORP., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On the day of ___________________ , 1996, before me personally came
SIDNEY KUCHIN to me known to be the individual named in and who executed the
foregoing instrument and acknowledged that they signed his name thereto.
NOTARY PUBLIC
7
RIDER TO LEASE DATED DECEMBER , 1990
BETWEEN SIDNEY KUCHIN, AS LANDLORD AND
SBURUBAN TRANSIT CORP., AS TENANT
28TH: In the event of any conflict in the terms, conditions and
provisions set forth in this Rider to the Lease and the terms, conditions and
provisions of the printed portion of this Lease, the terms, conditions and
provisions of this Rider shall control.
29th: Tenant shall, at its sole cost and expense, comply with the
Environmental Cleanup Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 et.seq. In
order to comply with ECRA, the Tenant shall undertake all sampling and cleanup
required by the Landlord or the New Jersey Department of Environmental
protection ("NJDEP") and shall execute all documents and pay all fees necessary
or desirable for such compliance, which execution and/or payment may be
requested by either the Landlord and/or NJDEP. It is understood that this
provision shall apply with regard to any action which the termination of this
Lease, the change of use of the premises, an assignment or sublease of all or
part of the Premises, bankruptcy or the conveyance of title to the Premises. It
is understood that this provision shall survive the expiration or earlier
termination of this Lease.
30th: The Tenant herein shall have the option to purchase, upon notice
as hereinafter provided, the Premises herein leased at any time before the
expiration of the term of this Lease, provided this Lease has not been sooner
terminated as provided herein or otherwise, and provided the Tenant is not in
default in the payment of rent or other charges or in the performance of or
compliance with all other covenants, terms and conditions of this Lease, for the
base purchase price of $1,800,000.00 ("Total Purchase Price") which Total
Purchase Price shall be paid as hereinafter set forth.
(a) As a condition precedent to the exercise of this option,
the Tenant shall give irrevocable notice of its election to purchase the
Premises, on the terms provided herein, in writing and signed by the Tenant,
which shall be accompanied by a sum equal to 10% of the Total Purchase Price, in
lawful money of the United States of America. This notice shall be served
personally on the Landlord, or by registered or certified mail, postage prepaid,
addressed to the Landlord at the above stated address or such other address as
the Landlord, may in writing, designate. The balance of the Total Purchase
Price, subject to any applicable adjustments, shall be paid, in lawful money of
the United States of America, simultaneously with the delivery of a bargain and
sale deed with covenants against grantors acts within 30 days after the service
of the above referenced notice.
(b) The base purchase price shall be increased by a sum equal
to the lesser of: I) 2% of the base purchase price for every twelve month
period, or part thereof, starting with the commencement date of the Lease and
ending with the date the notice is received by the Landlord; or ii) 1/2 of the
percentage increase in the Consumer Price Index between October, 1990 and the
month in which the notice is received, multiplied by the base purchase price.
For purposes of this paragraph, the Consumer Price Index shall mean the
"Consumer Price Index for All Urban Consumers" published by the Bureau of Labor
Statistics of the United States Department of Labor, for New York - Northeastern
N. J., All Items, (1967 = 100) or any renamed local index covering the
metropolitan New York area or any other successor or substitute index
appropriately adjusted.
(c) The Premises shall be conveyed free of all mortgage liens
and all other liens or other encumbrances of any type which result or have
resulted from an act, contract or agreement of Landlord, subject to such
easements and restrictions of record as may be in effect as of the date of this
Lease and such other easements and/or restrictions of record as shall not affect
the marketability of title or the use of the Premises for the purpose which it
is being used as of the commencement date of this Lease.
The New Jersey Realty Transfer Fee or any similar replacement
therefore shall be the obligation of the Landlord and adjustments and prorations
for rents and any other appropriate adjustments, shall be made as of the date of
closing of title.
(e) Tenant, at least 15 days prior to the date set for closing
of title, shall furnish landlord's attorneys with a written notice of any
exceptions to title. In the event that there are title exceptions which must be
cured by Landlord, the closing of title shall be extended for a period of up to
60 days in order to enable Landlord to cure such exceptions. Tenant shall accept
the Premises in their "as is" condition as of the closing of title. Unless
otherwise agreed between the Landlord and Tenant, the closing shall take place
at the offices of the Landlord at 10:00 A.M. at a date to be mutually agreed
upon between the parties or, in the absence of any agreement, thirty days after
service of the notice exercising the option.
(f) The parties shall continue as Landlord and Tenant under
the terms, covenants, conditions and agreements of this Lease until the closing
of title.
31st: Landlord and Tenant agree, at the option or request of either
party, to prepare, execute and record a memorandum of this Lease in the county
in which the Premises is located.
WITNESS:
- ---------------------------------- ------------------------------
SIDNEY KUCHIN
ATTEST: SUBURBAN TRANSIT CORP.
__________________________________ By:____________________________
AMENDMENT TO LEASE AGREEMENT
=================================================================
LANDLORD: SIDNEY KUCHIN
TENANT: SUBURBAN TRANSIT CORP.
=================================================================
DATED: AS OF NOVEMBER 1, 1995
=================================================================
PREMISES:CERTAIN LAND, BUILDINGS AND
IMPROVEMENTS LOCATED AT 750
SOMERSET STREET, NEW BRUNSWICK,
NEW JERSEY
AMENDMENT TO LEASE AGREEMENT
AMENDMENT TO LEASE AGREEMENT ("AMENDMENT") dated as of the 1st day of
November, 1995, by and between SIDNEY KUCHIN, having an address at 750 Somerset
Street, New Brunswick, New Jersey ____________ ("LANDLORD") and SUBURBAN TRANSIT
CORP., a ________________ corporation, having an address at 750 Somerset Street,
New Brunswick, New Jersey __________ ("TENANT").
W I T N E S E T H:
WHEREAS, the Landlord and the Tenant previously entered into a certain
lease agreement dated December, 1990 ("LEASE") as and for certain land,
buildings and improvements known as and by the street address of 750 Somerset
Street, New Brunswick, New Jersey and known and designated on the Official Tax
Map of the City of New Brunswick, Middlesex County, New Jersey as Block 596.02,
Lots 5.04, 5.05, 5.06, 5.07 and 5.08 (collectively, the "PREMISES"); and
WHEREAS, the Landlord and the Tenant are desirous of amending certain
terms and conditions of the Lease in accordance with the terms and conditions
set forth in this Amendment.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, it is mutually covenanted and agreed as follows:
1. Notwithstanding any terms and conditions of the Lease to the
contrary and/or the terms and conditions of any other agreement or
understanding, oral or written, by and between the Landlord and the Tenant with
respect to the Lease and/or the Premises, the Lease is hereby amended in
accordance with the terms and conditions of this Amendment.
2. The Landlord hereby waives any right and/or entitlement, now or
hereafter, to the increase in rent to which the Landlord would have otherwise
been entitled on November 1, 1995 in accordance with the provisions of Paragraph
1 of the Lease. Notwithstanding the foregoing, nothing contained in this
Paragraph 2 shall be deemed to affect or limit, in any manner whatsoever, the
Landlord's right and/or entitlement to collect and receive any future increases
in rent, as provided in Paragraph 3 of this Amendment.
3. Paragraph 1 of the Lease is hereby deleted in its entirety and the
following shall be inserted in its place and stead to read in its entirety as
follows:
1st: The Tenant covenants and agrees to pay to the Landlord, as rent
for and during the term hereof, (i) the sum of Five Thousand Five
Hundred ($5,500.00) Dollars per month for each month during the lease
term up to and including October 31, 1998, (ii) commencing on November
1, 1998, a monthly rental for the next five (5) year period during the
lease term equal to the monthly rental for the immediately preceding
eight (8) year period plus ten (10%) percent and (iii) a monthly rental
for each five (5) year period during the lease term thereafter equal to
the monthly rental for the immediately preceding five (5) year period
plus ten (10%) percent. The rent shall be payable on the first day of
each and every month during the lease term.
4. The following new paragraph 32 is hereby added to the Lease to read
in its entirety as follows:
32nd: In furtherance of the provisions of paragraph 29 hereof, Tenant
covenants and agrees that Tenant shall, at Tenant's sole cost and
expense, comply at all times with all Requirements (as hereinafter
defined) governing the use, generation, storage, treatment and/or
disposal of any Hazardous Materials (as hereinafter defined), the
presence of which results from or in connection with the act or
omission of Tenant, or any of the Tenant's principals, shareholders,
officers, directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns or the breach of this Lease
by Tenant, or any of the Tenant's principals, shareholders, officers,
directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other
toxic or hazardous wastes, pollutants or substances, including, without
limitation, asbestos, PCBS, petroleum products and by-products,
substances defined or listed as "hazardous substances" or "toxic
substances" or similarly identified in or pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.
9601 et seq., and as hazardous wastes under the Resource Conservation
and Recovery Act, 42 U.S.C. ss. 6010, et seq., any chemical substance
or mixture regulated under the Toxic Substance Control Act of 1976, as
amended, 15 U.S.C. 2601, et seq., any "toxic
2
pollutant" under the Clean Water Act, 33 U.S.C. ss. 466 et seq., as
amended, any hazardous air pollutant under the Clean Air Act, 42 U.S.C.
ss. 7401 et seq., hazardous materials identified in or pursuant to the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802, et seq.,
and any hazardous or toxic substances or pollutant regulated under any
other Requirements including, without limitation, ECRA. The term
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive
orders, extraordinary as well as ordinary, retroactive and prospective,
of the United States of America, the State of New Jersey, the City of
New Brunswick, and/or any political subdivision thereof and any agency,
department, commission, board, bureau or instrumentality of any of the
foregoing, now existing or hereafter created, which have jurisdiction
over or affect, directly or indirectly, the Premises or any portion
thereof or the maintenance, operation or occupation of the Premises,
(ii) all requirements, obligations and conditions of all instruments of
record on the date of this Lease, and (iii) all requirements,
obligations and conditions imposed by any fire rating agency or by the
carrier of Landlord's hazard insurance policy for the Premises.
Tenant agrees to execute, from time to time, at Landlord's
request, affidavits, representations and the like concerning Tenant's
best knowledge and belief regarding the presence of Hazardous Materials
in, on, under or about the Premises. Tenant shall indemnify and hold
harmless the Landlord, and all of its shareholders, principals,
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns from and against
any loss, claim, cost, damage, liability or expense (including
attorneys' fees and disbursements) arising by reason of any clean up,
removal, remediation, detoxification action or any other activity
required or recommended of the Landlord, or any of its principals,
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns by any
Governmental Authority by reason of the presence in, on, under or about
the Premises of any Hazardous Materials, as a result of or in
connection with the act or omission of Tenant or any of Tenant's
principals,
3
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns or the breach of
this Lease by Tenant or any of the Tenant's principals, shareholders,
officers, directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns. The foregoing covenants and
indemnity shall survive the expiration or any termination of this
Lease.
5. Tenant, from and after the date of this Amendment To Lease
Agreement, shall be deemed to mean and refer to Suburban Transit Corp., Central
Jersey Transit, Inc. f/k/a Plainfield Transit, Inc., Suburban Trails, Inc. and
H.A.M.L. Corp., collectively, jointly and severally, for any all purposes under
the Lease, as amended hereby, and each of the foregoing entities shall have all
of the rights, privileges, obligations and liabilities under the Lease as if
they were the original tenant named in the Lease.
6. All terms and conditions of the Lease not specifically modified or
amended hereby shall remain unamended and in full force and effect.
7. Except as may be otherwise set forth in this Amendment, all
capitalized terms as used herein shall have the same meaning as ascribed to them
in the Lease.
8. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, as well as their respective heirs, successors, administrators,
executors, representatives and assigns.
9. In the event of any inconsistencies between the terms and conditions
of the Lease and the terms and conditions of this Amendment, then in such event,
the terms and conditions set forth in this Amendment shall supersede and shall
be deemed paramount in all respects to the terms and conditions of the Lease
and/or any other agreement or understanding, oral or written, by and between the
Landlord and Tenant with respect to the Lease and/or the Premises at any time,
now or hereafter.
4
10. This Amendment shall be governed by and construed in accordance
with the laws of the State of New Jersey without regard to any principles of
conflicts of law.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this
Amendment as of the date and year first written above.
LANDLORD:
SIDNEY KUCHIN
TENANT:
SUBURBAN TRANSIT CORP.
BY:
AGREED, ACKNOWLEDGED
AND ACCEPTED:
SUBURBAN TRAILS, INC.
BY:
CENTRAL JERSEY TRANSIT, INC.
F/K/A PLAINFIELD TRANSIT, INC.
BY:
H.A.M.L. CORP.
BY:
5
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
SUBURBAN TRANSIT CORP., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
CENTRAL JERSEY TRANSIT, INC. f/k/a PLAINFIELD TRANSIT, INC., the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
SUBURBAN TRAILS, INC., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of the said corporation.
NOTARY PUBLIC
6
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
H.A.M.L. CORP., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On the __________ day of ___________________ , 1996, before me
personally came SIDNEY KUCHIN to me known to be the individual named in and who
executed the foregoing instrument and acknowledged that they signed his name
thereto.
NOTARY PUBLIC
7
RIDER TO LEASE DATED DECEMBER , 1990
BETWEEN SIDNEY KUCHIN, AS LANDLORD AND
SBURUBAN TRANSIT CORP., AS TENANT
28TH: In the event of any conflict in the terms, conditions and
provisions set forth in this Rider to the Lease and the terms, conditions and
provisions of the printed portion of this Lease, the terms, conditions and
provisions of this Rider shall control.
29th: Tenant shall, at its sole cost and expense, comply with the
Environmental Cleanup Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 et.seq. In
order to comply with ECRA, the Tenant shall undertake all sampling and cleanup
required by the Landlord or the New Jersey Department of Environmental
protection ("NJDEP") and shall execute all documents and pay all fees necessary
or desirable for such compliance, which execution and/or payment may be
requested by either the Landlord and/or NJDEP. It is understood that this
provision shall apply with regard to any action which the termination of this
Lease, the change of use of the premises, an assignment or sublease of all or
part of the Premises, bankruptcy or the conveyance of title to the Premises. It
is understood that this provision shall survive the expiration or earlier
termination of this Lease.
30th: The Tenant herein shall have the option to purchase, upon notice
as hereinafter provided, the Premises herein leased at any time before the
expiration of the term of this Lease, provided this Lease has not been sooner
terminated as provided herein or otherwise, and provided the Tenant is not in
default in the payment of rent or other charges or in the performance of or
compliance with all other covenants, terms and conditions of this Lease, for the
purchase price of $250,000.00 ("Total Purchase Price") which Total Purchase
Price shall be paid as hereinafter set forth.
(a) As a condition precedent to the exercise of this option,
the Tenant shall give irrevocable notice of its election to purchase the
Premises, on the terms provided herein, in writing and signed by the Tenant,
which shall be accompanied by a sum equal to 10% of the Total Purchase Price, in
lawful money of the United States of America. This notice shall be served
personally on the Landlord, or by registered or certified mail, postage prepaid,
addressed to the Landlord at the above stated address or such other address as
the Landlord, may in writing, designate. The balance of the Total Purchase
Price, subject to any applicable adjustments, shall be paid, in lawful money of
the United States of America, simultaneously with the delivery of a bargain and
sale deed with covenants against grantors acts within 30 days after the service
of the above referenced notice.
(b) The Premises shall be conveyed free of all mortgage liens
and all other liens or other encumbrances of any type which result or have
resulted from an act, contract or agreement of Landlord, (except for the Lease
to H.A.M.L. Corp. for use of the premises in common with the Tenant herein),
subject to such easements and restrictions of record as may be in effect as of
the date of this Lease and such other easements and/or restrictions of record as
shall not affect the marketability of title or the use of the Premises for the
purpose which it is being used as of the commencement date of this Lease.
The New Jersey Realty Transfer Fee or any similar replacement
therefore shall be the obligation of the Landlord and adjustments and prorations
for rents and any other appropriate adjustments, shall be made as of the date of
closing of title.
(d) Tenant, at least 15 days prior to the date set for closing
of title, shall furnish landlord's attorneys with a written notice of any
exceptions to title. In the event that there are title exceptions which must be
cured by Landlord, the closing of title shall be extended for a period of up to
60 days in order to enable Landlord to cure such exceptions. Tenant shall accept
the Premises in their "as is" condition as of the closing of title. Unless
otherwise agreed between the Landlord and Tenant, the closing shall take place
at the offices of the Landlord at 10:00 A.M. at a date to be mutually agreed
upon between the parties or, in the absence of any agreement, thirty days after
service of the notice exercising the option.
(e) The parties shall continue as Landlord and Tenant under
the terms, covenants, conditions and agreements of this Lease until the closing
of title.
31st: Landlord and Tenant agree, at the option or request of either
party, to prepare, execute and record a memorandum of this Lease in the county
in which the Premises is located.
32nd: Notwithstanding anything else set forth in the Lease or this
Rider, except for such costs as may be directly applicable to a particular
tenant, such as repairs to the Premises required as a result of the actions of a
particular tenant, all such additional costs and expenses which are the
responsibility of the tenants at the Premises, including by way of example, and
not by way of limitation, repairs, real estate taxes and assessments, utilities
and insurance, shall be paid proportionately by the Tenant and the other tenant
on the Premises, with the portion payable by the Tenants equal to the monthly
rent payable by the Tenants to the Landlord divided by the total monthly rent
payable to the Landlord by the Tenants and the other tenants on the Premises.
WITNESS:
- ---------------------------------- ------------------------------
SIDNEY KUCHIN
ATTEST: SUBURBAN TRANSIT CORP.
__________________________________ By:____________________________
AMENDMENT TO LEASE AGREEMENT
=================================================================
LANDLORD: SIDNEY KUCHIN
TENANT: SUBURBAN TRANSIT CORP.
=================================================================
DATED: AS OF NOVEMBER 1, 1995
=================================================================
PREMISES:CERTAIN LAND, BUILDINGS AND
IMPROVEMENTS LOCATED AT 601 NEW
MARKET AVENUE, SOUTH PLAINFIELD,
NEW JERSEY
AMENDMENT TO LEASE AGREEMENT
AMENDMENT TO LEASE AGREEMENT ("AMENDMENT") dated as of the 1st day of
November, 1995, by and between SIDNEY KUCHIN, having an address at 750 Somerset
Street, New Brunswick, New Jersey __________ ("LANDLORD") and SUBURBAN TRANSIT
CORP., a ___________________ corporation, having an address at 750 Somerset
Street, New Brunswick, New Jersey _________ ("TENANT").
W I T N E S E T H:
WHEREAS, the Landlord and the Tenant previously entered into a certain
lease agreement dated December, 1990 ("LEASE") as and for certain land,
buildings and improvements known as and by the street address of 601 New Market
Avenue, South Plainfield, New Jersey and known and designated on the Official
Tax Map of the City of South Plainfield, Middlesex County, New Jersey as Block
315, Lots 34,42 and 43 and Block 316, Lot 1 (collectively, the "PREMISES"); and
WHEREAS, the Landlord and the Tenant are desirous of amending certain
terms and conditions of the Lease in accordance with the terms and conditions
set forth in this Amendment.
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, it is mutually covenanted and agreed as follows:
1. Notwithstanding any terms and conditions of the Lease to the
contrary and/or the terms and conditions of any other agreement or
understanding, oral or written, by and between the Landlord and the Tenant with
respect to the Lease and/or the Premises, the Lease is hereby amended in
accordance with the terms and conditions of this Amendment.
2. The paragraph beginning with the word "Witnesseth" on the first page
of the Lease is hereby deleted in its entirety and the following shall be
inserted in its place and stead to read in its entirety as follows:
Witnesseth that, the Landlord does hereby lease to the Tenant, and the
Tenant does hereby rent from the Landlord the following described
premises: 601 New Market Avenue, South Plainfield, New Jersey and known
and designated on the Official Tax Map of the City of South Plainfield,
Middlesex County, New Jersey as Block 315, Lots 34,42 and 43 and Block
316, Lot 1 for a term of forty (40) years commencing on November 1,
1990 and ending on October 31, 2030 to be used and occupied by the
Tenant for any legally permitted use. The Landlord and the Tenant
hereby acknowledge that the Tenant's use of the Premises shall be
non-exclusive in nature and shall be at all times, now and hereafter,
subject to and in conjunction with the use of the Premises by Central
Jersey Transit, Inc. and H.A.M.L. Corp. pursuant to the provisions of
those certain leases dated December, 1990 and as of November 1, 1995,
respectively.
3. The Landlord hereby waives any right and/or entitlement to the
increase in rent to which the Landlord would have otherwise been entitled on
November 1, 1995 in accordance with the provisions of Paragraph 1 of the Lease.
Notwithstanding the foregoing, nothing contained in this Paragraph 3 shall be
deemed to affect or limit, in any manner whatsoever, the Landlord's right and/or
entitlement to collect and receive any future increases in rent including, but
not limited to, the entire increased rent due and owing pursuant to the
provisions of the Lease commencing on November 1, 1995, as provided in Paragraph
4 of this Amendment.
4. Paragraph 1 of the Lease is hereby deleted in its entirety and the
following shall be inserted in its place and stead to read in its entirety as
follows:
1st: The Tenant covenants and agrees to pay to the Landlord, as rent
for and during the term hereof, (i) the sum of Two Thousand ($2,000.00)
Dollars per month for each and every month during the lease term up to
and including October 31, 1995, (ii) commencing on November 1, 1995,
the sum of Six Thousand ($6,000.00) Dollars per month for each and
every month during the lease term up to and including October 31, 1998,
(iii) commencing on November 1, 1998, a monthly rental for the next
five (5) year period during the lease term equal to the monthly rental
for the immediately preceding three (3) year period plus ten (10%)
percent and (iii) a monthly rental for each five (5) year period during
the lease term thereafter equal to the monthly rental for the
immediately preceding five (5) year period plus ten (10%) percent. The
rent shall be payable on the first day of each and every month during
the lease term.
5. The following new paragraph 33 is hereby added to the Lease to read
in its entirety as follows:
33rd: In furtherance of the provisions of paragraph 29 hereof, Tenant
covenants and agrees that Tenant shall, at Tenant's sole cost and
expense, comply at all times with all Requirements (as hereinafter
defined)
2
governing the use, generation, storage, treatment and/or disposal of
any Hazardous Materials (as hereinafter defined), the presence of which
results from or in connection with the act or omission of Tenant, or
any of the Tenant's principals, shareholders, officers, directors,
agents, representatives, employees, contractors, subcontractors,
successors and/or assigns or the breach of this Lease by Tenant, or any
of the Tenant's principals, shareholders, officers, directors, agents,
representatives, employees, contractors, subcontractors, successors
and/or assigns. The term "HAZARDOUS MATERIALS" shall mean any
biologically or chemically active or other toxic or hazardous wastes,
pollutants or substances, including, without limitation, asbestos,
PCBS, petroleum products and by-products, substances defined or listed
as "hazardous substances" or "toxic substances" or similarly identified
in or pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq., and as
hazardous wastes under the Resource Conservation and Recovery Act, 42
U.S.C. ss. 6010, et seq., any chemical substance or mixture regulated
under the Toxic Substance Control Act of 1976, as amended, 15 U.S.C.
2601, et seq., any "toxic pollutant" under the Clean Water Act, 33
U.S.C. ss. 466 et seq., as amended, any hazardous air pollutant under
the Clean Air Act, 42 U.S.C. ss. 7401 et seq., hazardous materials
identified in or pursuant to the Hazardous Materials Transportation
Act, 49 U.S.C. ss. 1802, et seq., and any hazardous or toxic substances
or pollutant regulated under any other Requirements including, without
limitation, ECRA. The term "REQUIREMENTS" shall mean (i) all present
and future laws, rules, ordinances, regulations, statutes,
requirements, codes and executive orders, extraordinary as well as
ordinary, retroactive and prospective, of the United States of America,
the State of New Jersey, the Borough of South Plainfield, and/or any
political subdivision thereof and any agency, department, commission,
board, bureau or instrumentality of any of the foregoing, now existing
or hereafter created, which have jurisdiction over or affect, directly
or indirectly, the Premises or any portion thereof or the maintenance,
operation or occupation of the Premises, (ii) all requirements,
obligations and conditions of all instruments of record on the date of
this Lease, and (iii) all requirements, obligations and conditions
imposed by any fire rating agency or by the carrier of Landlord's
hazard insurance policy for the Premises.
Tenant agrees to execute, from time to time, at Landlord's
request, affidavits, representations and the like concerning Tenant's
best knowledge and belief regarding the presence of Hazardous Materials
in, on,
3
under or about the Premises. Tenant shall indemnify and hold harmless
the Landlord, and all of its shareholders, principals, shareholders,
officers, directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns from and against any loss,
claim, cost, damage, liability or expense (including attorneys' fees
and disbursements) arising by reason of any clean up, removal,
remediation, detoxification action or any other activity required or
recommended of the Landlord, or any of its principals, shareholders,
officers, directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns by any Governmental Authority
by reason of the presence in, on, under or about the Premises of any
Hazardous Materials, as a result of or in connection with the act or
omission of Tenant or any of Tenant's principals, shareholders,
officers, directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns or the breach of this Lease
by Tenant or any of the Tenant's principals, shareholders, officers,
directors, agents, representatives, employees, contractors,
subcontractors, successors and/or assigns. The foregoing covenants and
indemnity shall survive the expiration or any termination of this
Lease.
6. Tenant, from and after the date of this Amendment To Lease
Agreement, shall be deemed to mean and refer to Suburban Transit Corp., Central
Jersey Transit, Inc. f/k/a Plainfield Transit, Inc., Suburban Trails, Inc. and
H.A.M.L. Corp., collectively, jointly and severally, for any all purposes under
the Lease, as amended hereby, and each of the foregoing entities shall have all
of the rights, privileges, obligations and liabilities under the Lease as if
they were the original tenant named in the Lease.
7. All terms and conditions of the Lease not specifically modified or
amended hereby shall remain unamended and in full force and effect.
8. Except as may be otherwise set forth in this Amendment, all
capitalized terms as used herein shall have the same meaning as ascribed to them
in the Lease.
9. This Amendment shall be binding upon and inure to the benefit of the
parties hereto, as well as their respective heirs, successors, administrators,
executors, representatives and assigns.
4
10. In the event of any inconsistencies between the terms and
conditions of the Lease and the terms and conditions of this Amendment, then in
such event, the terms and conditions set forth in this Amendment shall supersede
and shall be deemed paramount in all respects to the terms and conditions of the
Lease and/or any other agreement or understanding, oral or written, by and
between the Landlord and Tenant with respect to the Lease and/or the Premises at
any time, now or hereafter.
11. This Amendment shall be governed by and construed in accordance
with the laws of the State of New Jersey without regard to any principles of
conflicts of law.
IN WITNESS WHEREOF, the Landlord and Tenant have executed this
Amendment as of the date and year first written above.
LANDLORD:
SIDNEY KUCHIN
TENANT:
SUBURBAN TRANSIT CORP.
BY:
AGREED, ACKNOWLEDGED
AND ACCEPTED:
SUBURBAN TRAILS, INC.
BY:
CENTRAL JERSEY TRANSIT, INC.
F/K/A PLAINFIELD TRANSIT, INC.
BY:
H.A.M.L. CORP.
BY:
5
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
SUBURBAN TRANSIT CORP., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
CENTRAL JERSEY TRANSIT, INC. f/k/a PLAINFIELD TRANSIT, INC., the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
SUBURBAN TRAILS, INC., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of the said corporation.
NOTARY PUBLIC
6
STATE OF )
) SS.:
COUNTY OF )
On this day of , 1996, before me
personally came , to me known, who being by
me duly sworn, did depose and say that he resides at
,; that he is the President of
H.A.M.L. CORP., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of the said corporation.
NOTARY PUBLIC
STATE OF )
) SS.:
COUNTY OF )
On the _________ day of ___________________ , 1996, before me
personally came SIDNEY KUCHIN to me known to be the individual named in and who
executed the foregoing instrument and acknowledged that they signed his name
thereto.
NOTARY PUBLIC
7
RIDER TO LEASE AGREEMENT DATED AS OF NOVEMBER 1, 1995
BY AND BETWEEN SIDNEY KUCHIN, AS LANDLORD AND
H.A.M.L. CORP., AS TENANT, FOR CERTAIN PREMISES
KNOWN AS AND BY THE STREET ADDRESS
601 NEW MARKET AVENUE, SOUTH PLAINFIELD, NEW JERSEY
32. The Tenant covenants and agrees to pay to the Landlord, as rent for
and during the term hereof, (i) the sum of One Thousand Five Hundred ($1,500.00)
Dollars per month for each month during the lease term up to and including
October 31, 1998, (ii) commencing on November 1, 1998, a monthly rental for the
next five (5) year period during the lease term equal to the monthly rental for
the immediately preceding three (3) year period plus ten (10%) percent and (iii)
a monthly rental for each five (5) year period during the lease term thereafter
equal to the monthly rental for the immediately preceding five (5) year period
plus ten (10%) percent. The rent shall be payable on the first day of each and
every month during the lease term.
33. Notwithstanding anything contained in the printed portion of this
Lease or elsewhere herein to the contrary, it is the intention of the parties
that, and this Lease shall be deemed and construed to be, a "triple net lease"
and the Landlord shall receive all rents, additional rents and all other
payments hereunder to be made by the Tenant, if any, free from any charges,
assessments, impositions, expenses or deductions of any and every kind or nature
whatsoever. By way of example, and not by way of limitation, Tenant shall pay
and be responsible for all repairs, both structural and non-structural, all real
estate taxes and assessments, all utilities, all insurance (in such amount and
form as may be required by Landlord), etc. Nothing herein contained shall be
construed to require the Tenant to pay any inheritance, franchise, corporation,
income or excess profits taxes, or surtax, imposed upon the Landlord named
herein or its predecessors in title, or upon the legal representatives,
successors or assigns or any of them, nor shall the Tenant have any obligation
to pay any interest or amortization under any mortgage or mortgages placed upon
the demised premises by the Landlord.
34. In the event of any conflict in the terms, conditions and
provisions set forth in this Rider to the Lease and the terms, conditions and
provisions of the printed portion of this Lease, the terms, conditions and
provisions of this Rider shall control.
35. Tenant shall, at it sole cost and expense, comply with the
Environmental Cleanup Responsibility Act ("ECRA") N.J.S.A. 13:1K-6 et. seq. In
order to comply with ECRA, the Tenant shall undertake all sampling and cleanup
required by the landlord or the New Jersey Department of Environmental
protection ("NJDEP") and shall execute all documents and pay all fees necessary
or desirable for such compliance, which execution and/or payment may be
requested by either the Landlord and/or NJDEP. It is understood that this
provision shall apply with regard to any action which might require compliance
with ECRA, including without limitation, the termination of this Lease, the
change of use of the Premises, an assignment or sublease of all or part of the
Premises, bankruptcy, or the conveyance of title to the Premises. It is
understood that this provision shall survive the expiration or earlier
termination of this Lease.
36. Landlord and Tenant agree, at the option or request of either
party, to prepare, execute and record a memorandum of this Lease in the county
in which the Premises is located.
37. Notwithstanding anything else set forth in the Lease or this Rider,
except for such costs as may be directly applicable to a particular tenant, such
as repairs to the Premises required as a result of the actions of a particular
tenant, all such additional costs and expenses which are the responsibility of
the tenants at the Premises, including by way of example, and not by way of
limitation, repairs, real estate taxes and assessments, utilities and insurance,
shall be paid proportionately by the Tenant and the other tenant on the
Premises, with the portion payable by the Tenant equal to the monthly rent
payable by the Tenant to the Landlord divided by the total monthly rent payable
to the Landlord by the Tenant and the other tenant on the Premises.
38. In furtherance of the provisions of paragraph 35 hereof, Tenant
covenants and agrees that Tenant shall, at Tenant's sole cost and expense,
comply at all times with all Requirements (as hereinafter defined) governing the
use, generation, storage, treatment and/or disposal of any Hazardous Materials
(as hereinafter defined), the presence of which results from or in connection
with the act or omission of Tenant, or any of the Tenant's principals,
shareholders, officers, directors, agents, representatives, employees,
contractors, subcontractors, successors and/or assigns or the breach of this
Lease by Tenant, or any of the Tenant's principals, shareholders, officers,
directors, agents, representatives, employees, contractors, subcontractors,
successors and/or assigns. The term "HAZARDOUS MATERIALS" shall mean any
biologically or chemically active or other toxic or hazardous wastes, pollutants
or substances, including, without limitation, asbestos, PCBS, petroleum products
and by-products, substances defined or listed as "hazardous substances" or
"toxic substances"
2
or similarly identified in or pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq., and as
hazardous wastes under the Resource Conservation and Recovery Act, 42 U.S.C. ss.
6010, et seq., any chemical substance or mixture regulated under the Toxic
Substance Control Act of 1976, as amended, 15 U.S.C. 2601, et seq., any "toxic
pollutant" under the Clean Water Act, 33 U.S.C. ss. 466 et seq., as amended, any
hazardous air pollutant under the Clean Air Act, 42 U.S.C. ss. 7401 et seq.,
hazardous materials identified in or pursuant to the Hazardous Materials
Transportation Act, 49 U.S.C. ss. 1802, et seq., and any hazardous or toxic
substances or pollutant regulated under any other Requirements including,
without limitation, ECRA. The term "REQUIREMENTS" shall mean (i) all present and
future laws, rules, ordinances, regulations, statutes, requirements, codes and
executive orders, extraordinary as well as ordinary, retroactive and
prospective, of the United States of America, the State of New Jersey, the
Borough of South Plainfield, and/or any political subdivision thereof and any
agency, department, commission, board, bureau or instrumentality of any of the
foregoing, now existing or hereafter created, which have jurisdiction over or
affect, directly or indirectly, the Premises or any portion thereof or the
maintenance, operation or occupation of the Premises, (ii) all requirements,
obligations and conditions of all instruments of record on the date of this
Lease, and (iii) all requirements, obligations and conditions imposed by any
fire rating agency or by the carrier of Landlord's hazard insurance policy for
the Premises.
Tenant agrees to execute, from time to time, at Landlord's request,
affidavits, representations and the like concerning Tenant's best knowledge and
belief regarding the presence of Hazardous Materials in, on, under or about the
Premises. Tenant shall indemnify and hold harmless the Landlord, and all of its
shareholders, principals, shareholders, officers, directors, agents,
representatives, employees, contractors, subcontractors, successors and/or
assigns from and against any loss, claim, cost, damage, liability or expense
(including attorneys' fees and disbursements) arising by reason of any clean up,
removal, remediation, detoxification action or any other activity required or
recommended of the Landlord, or any of its principals, shareholders, officers,
directors, agents, representatives, employees, contractors, subcontractors,
successors and/or assigns by any Governmental Authority by reason of the
presence in, on, under or about the Premises of any Hazardous Materials, as a
result of or in connection with the act or omission of Tenant or any of Tenant's
principals, shareholders, officers, directors, agents, representatives,
employees, contractors, subcontractors, successors and/or assigns or the breach
of this Lease by Tenant or any of the
3
Tenant's principals, shareholders, officers, directors, agents, representatives,
employees, contractors, subcontractors, successors and/or assigns. The foregoing
covenants and indemnity shall survive the expiration or any termination of this
Lease.
LANDLORD:
SIDNEY KUCHIN
TENANT:
H.A.M.L. CORP.
BY:
SUBURBAN TRANSIT CORP.
BY:
SUBURBAN TRAILS, INC.
BY:
CENTRAL JERSEY TRANSIT, INC. F/K/A
PLAINFIELD TRANSIT, INC.
BY:
4
EXHIBIT 10.19
AGREEMENT OF LEASE
BETWEEN
BUSSKOHL REALTY, L.L.C.
LANDLORD
AND
ARROW STAGE LINES, INC.
TENANT
------------------------------------------
DATED: MAY 13, 1996
------------------------------------------
PREMISES
4001 SOUTH 34TH STREET
PHOENIX, AZ 85040
AGREEMENT OF LEASE, made as of the 13th day of May, 1996, between Busskohl
Realty, L.L.C., an Arizona limited-liability company, as Landlord, and Arrow
Stage Lines, Inc., a Nebraska corporation.
WITNESSETH:
WHEREAS, the Landlord is the owner of certain premises known as and by the
street address of 4001 South 34th Street, Phoenix, Arizona 85040, as more
particularly described on Schedule "A", annexed hereto and made a part hereof;
and
WHEREAS, the Landlord desires to rent the aforementioned premises to the
Tenant and the Tenant desires to rent the aforementioned premises from the
Landlord.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, for themselves,
as well as their respective legal representatives, heirs, successors and
assigns, hereby agree as follows:
ARTICLE 1
GLOSSARY
For the purposes of this Lease, the following terms shall have the meanings
indicated below:
"ADA" shall have the meaning set forth in Section 9.1
hereof.
"ADDITIONAL RENT" shall have the meaning set forth in
Section 2.2 hereof.
"ALTERATION" or "ALTERATIONS" shall mean any and all alterations,
decorations, installations, repairs, improvements, additions, replacements or
other physical changes of any nature whatsoever in or about the Premises at any
time, now or hereafter.
"APPLICABLE PRICE INDEX" shall have the meaning set forth in Section
8.1(iv) hereof.
"APPLICABLE RATE" shall mean the lesser of (x) three percentage points
above the then current Base Rate, or (y) the maximum rate permitted by
applicable law.
"BANKRUPTCY CODE" shall mean 11 U.S.C. Section 101 ET SEQ., or any statute,
federal or state, of similar nature and purpose, now or hereafter.
"BASE INDEX" shall have the meaning set forth in
Section 8.1(iii) hereof.
"BASE RATE" shall mean the rate of interest publicly announced from time to
time by Citibank, N.A., or its successor, as its "base rate" (or such other term
as may be used by Citibank, N.A., from time to time, for the rate presently
referred to as its "base rate").
"BUILDING SYSTEMS" shall mean the mechanical, electrical, sanitary,
heating, air conditioning, ventilating, elevator, plumbing, life-safety and
other service or support systems of any nature whatsoever located at or on the
Premises, BUT shall not include installations made by Tenant or fixtures or
appliances (regardless of whether or not such fixtures or appliances are owned
by the Tenant or the Landlord).
"BUILDING INSURANCE" shall have the meaning set forth in
Section 11.2 hereof.
"BUREAU" shall have the meaning set forth in
Section 8.1(i) hereof.
"BUSINESS DAYS" shall mean all days, excluding Saturdays, Sundays and all
days observed as holidays by the State of New Jersey or the federal government.
"COMMENCEMENT DATE" May 13, 1996.
"DEFICIENCY" shall have the meaning set forth in Section
18.2(A)(2) hereof.
"ECRA" shall have the meaning set forth in Section 9.2(B)
hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in
Section 17.1 hereof.
"EXPIRATION DATE" shall mean the Fixed Expiration Date or such other date
on which the Term ends pursuant to any of the terms, conditions or covenants of
this Lease or pursuant to law.
"FIXED EXPIRATION DATE" May 12, 2001.
"FIXED RENT" $76,500.00 per annum ($6,300.00 per month) for the first
Lease Year (as such term is hereinafter defined) to be adjusted thereafter on
each anniversary date from and after the Commencement Date in accordance with
the provisions of Article 8 of this Lease.
"GOVERNMENT AUTHORITY" or "GOVERNMENT AUTHORITIES" shall mean the United
States of America, the State of Arizona, the
3
City of Phoenix, and/or any political subdivision thereof and any agency,
department, commission, board, bureau or instrumentality of any of the
foregoing, now existing or hereafter created, having jurisdiction over the
Premises or any portion thereof.
"HAZARDOUS MATERIALS" shall have the meaning set forth in
Section 9.2(A) hereof.
"INCREASE NOTICE" shall have the meaning set forth in
Section 8.3 hereof.
"INDEMNITEES" shall mean Landlord, its shareholders, officers, directors,
employees, agents and contractors (and the partners, shareholders, officers,
directors and employees of any of the Landlord's agents or contractors).
"INITIAL TERM" shall mean five (5) years.
"LANDLORD", on the date as of which this Lease is made, shall mean
Gerdaneu, Inc., a New Jersey corporation, but thereafter, "Landlord" shall mean
any fee owner of the Premises.
"LEASE YEAR" shall mean each twelve (12) month period commencing on each
anniversary date from and after the Commencement Date.
"MORTGAGE(S)" shall mean any trust indenture or mortgage which may now or
hereafter affect the Premises and all extensions, supplements, amendments,
modifications, consolidations, refinancings and replacements thereof or thereto,
substitutions therefor, and advances made thereunder.
"MORTGAGEE(S)" shall mean any trustee or mortgagee or holder
of a Mortgage.
"NOTICE(S)" shall have the meaning set forth in Section
27.1(A) hereof.
"OPTION" or "OPTIONS" shall have the meaning set forth in
Section 31.1 hereof.
"OPTION PERIOD" or "OPTION PERIODS" shall have the meaning set forth in
Section 31.1 hereof.
"PARTIES" shall have the meaning set forth in Section 34.2
hereof.
4
"PERMITTED USE" shall mean general, executive and administrative offices,
parking and terminal facilities in connection with Tenant's business as a motor
vehicle transportation company and uses related thereto including the evolution
of the Tenant's business consistent with the evolution of the motor vehicle
transportation industry in general.
"PERSON(S) OR PERSON(S)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"PERSONS WITHIN TENANT'S CONTROL" shall mean and include Tenant, all of
Tenant's respective shareholders, directors, officers, agents, contractors,
sub-contractors, servants, employees, licensees and invitees as well as any of
the heirs, successors, representatives and assigns of any of the foregoing.
"PREMISES" shall mean all that certain plot, piece and parcel of land,
together with all buildings and improvements thereon erected, known as and by
the street address of 4001 South 34th Street, Phoenix, Arizona 85040, as more
particularly described on Schedule "A", annexed hereto and made a part hereof.
"PRICE INDEX" shall have the meaning set forth in
Section 8.1(ii) hereof.
"RENTAL" shall mean and be deemed to include Fixed Rent, Additional Rent
and any other sums payable, now or hereafter, by Tenant hereunder.
"REQUIREMENTS" shall mean (i) all present and future laws, rules,
ordinances, regulations, statutes, requirements, codes and executive orders,
extraordinary as well as ordinary, retroactive and prospective, of all
Governmental Authorities, now existing or hereafter created, which affect,
directly or indirectly, the Premises and/or the maintenance, use, operation or
occupation of the Premises, (ii) all requirements, obligations and conditions of
all instruments of record on the date of this Lease, and (iii) all requirements,
obligations and conditions imposed by any fire rating agency or by the carrier
of Landlord's hazard insurance policy for the Premises.
"TAXES" shall have the meaning set forth in Section 3.1
hereof.
"TENANT", on the date as of which this Lease is made, shall mean the Tenant
named in this Lease, but thereafter "Tenant" shall mean only the tenant under
this Lease at the time in question; provided, however, that the Tenant named in
this Lease and any and all successor tenant(s) hereunder shall not be
5
released and relieved from any liability hereunder in the event of any
assignment of this Lease or a sublet, in whole or in part, of the Premises.
"TENANT'S PROPERTY" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings and other
movable items of personal property owned by the Tenant.
"TERM", on the date as of which this Lease is made shall mean ten (10)
years, but thereafter shall be deemed to include any Option Period for which the
Tenant exercises its Option pursuant to the provisions of Article 31 hereof.
"TERMINATION NOTICE PERIOD" shall have the meaning set forth in Section
27.1 hereof.
"UNAVOIDABLE DELAYS" shall have the meaning set forth in
Article 25 hereof.
ARTICLE 2
DEMISE; PREMISES; TERM; RENT
SECTION 2.1. Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the Premises for the Term to commence on the Commencement Date and to
end on the Fixed Expiration Date, unless earlier terminated as provided herein.
SECTION 2.2. Commencing upon the Commencement Date, Tenant shall pay to
Landlord, in lawful money of the United States of America, without notice or
demand, by good and sufficient check at the office of Landlord or at such other
place as Landlord may designate from time to time, the following:
(A) the Fixed Rent, as such term is defined in Article 1 hereof,
which shall be payable in equal monthly installments in advance on the first day
of each and every calendar month during the Term, except that the first monthly
installment of Fixed Rent shall be payable by Tenant upon execution and delivery
of this Lease; and
(B) additional rent ("ADDITIONAL RENT") consisting of all other sums
of money as shall become due from and be payable by Tenant hereunder (for
default in the payment of which Landlord shall have the same remedies as for a
default in the payment of Fixed Rent).
SECTION 2.3. If the Commencement Date is other than the first day of a
calendar month, or the Fixed Expiration Date is
6
other than the last day of a calendar month, Fixed Rent for such month shall be
prorated on a per diem basis.
SECTION 2.4. Tenant shall pay the Fixed Rent and Additional Rent when due
without abatement, deduction, counterclaim, setoff or defense of any nature
whatsoever.
ARTICLE 3
REAL ESTATE TAXES; MORTGAGE(S)
SECTION 3.1. The Tenant represents, warrants, covenants and agrees that it
shall, within five (5) days of written demand by the Landlord to the Tenant, pay
to the Landlord, as Additional Rent, any and all Taxes (as hereinafter defined)
of any nature whatsoever assessed or imposed against the Premises for each and
every Lease Year during the Term of this Lease. The Landlord hereby agrees that
any demand given by the Landlord to the Tenant pursuant to the provisions of
this Section 3.1 shall include an accurate copy of the invoice, statement, bill
or similar document issued by the relevant Governmental Authority or
Governmental Authorities, as the case may be, with respect to the Taxes for
which payment is demanded. For purposes of this Section 3.1, "TAXES" shall
include, without limitation, any and all taxes assessed against the Premises,
all personal property taxes, all ad valorem taxes and any and all other taxes
assessed against the Premises by any Governmental Authority, now or hereafter.
SECTION 3.2. The Tenant represents, warrants and covenants and agrees that
it shall, within five (5) days of written demand by the Landlord to the Tenant,
pay to the Landlord, as Additional Rent, any and all amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage or
Mortgages, as the case may be, encumbering the Premises, now or hereafter,
during the Term of this Lease including, but not limited to, any extensions,
supplements, amendments, modifications, consolidations, refinancings and
replacements of any such Mortgage or Mortgages provided that:
(A) the principal balance of any Mortgage subsequent to any extension,
supplement, amendment, modification, consolidation, refinancing or
replacement shall not exceed the outstanding principal balance of the
Mortgage which is to be extended, supplemented, amended, modified,
consolidated, refinanced or replaced at the time of such extension,
supplement, amendment, modification, consolidation, refinancing or
replacement, as the case may be; and
7
(B) the amount of the monthly payments of principal and interest payable
pursuant to the terms and conditions of any Mortgage subsequent to any
extension, supplement, amendment, modification, consolidation, refinancing
or replacement shall not exceed the amount of the monthly payments with
respect to the Mortgage which is to be extended, supplemented, amended,
modified, consolidated, refinanced or replaced at the time of such
extension, supplement, amendment, modification, consolidation, refinancing
or replacement, as the case may be; and
(C) the terms of any extended, supplemented, amended, modified,
consolidated, refinanced or replaced Mortgage shall be no more financially
onerous than the provisions of the such Mortgage prior to such extension,
supplement, amendment, modification, consolidation, refinancing or
replacement, as the case may be; and
(D) the term of any Mortgage extended, supplemented, amended, modified,
consolidated, refinanced or replaced shall be no less than the term of
such Mortgage prior to such extension, supplementation, amendment,
modification, consolidation, refinancing or replacement, as the case may
be.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 shall not apply with respect to any amounts which may be due
and owing under and pursuant to the terms and conditions of any Mortgage
securing additional indebtedness (above and beyond any Mortgage or Mortgages
existing as of the date hereof) which first becomes a recorded lien on the
Premises subsequent to the date of this Lease and which is executed and
delivered by the Landlord without the consent of the Tenant. The Landlord hereby
agrees that any demand given by the Landlord to the Tenant for payment of
Additional Rent pursuant to the provisions of this Section 3.2 shall include,
ONLY to the extent provided to the Landlord by the Mortgagee, an accurate copy
of the invoice, statement, bill or similar document issued by such Mortgagee or
Mortgagees, as the case may be, with respect to any amount for which payment of
Additional Rent is demanded by the Landlord under and pursuant to the provisions
of this Section 3.2.
8
ARTICLE 4
UTILITIES
SECTION 4.1. The Tenant represents, warrants, covenants and agrees that it
shall, within five (5) days of written demand by the Landlord to the Tenant, pay
to the Landlord, as Additional Rent, any and all charges incurred by the
Landlord for any and all utilities supplied to the Premises including, without
limitation, electricity, water, heating oil and/or natural gas. The Landlord
hereby agrees that any demand given by the Landlord to the Tenant pursuant to
the provisions of this Section 4.1 shall include an accurate copy of the
invoice, statement, bill or similar document issued by the public utility or any
private company providing such utility, as the case may be, with respect to any
utility for which payment is demanded.
SECTION 4.2. Landlord shall not be liable in any way to Tenant for any
interruption or failure of or defect in the supply or character of any utility
furnished to the Premises, now or hereafter, or for any loss, damage or expense
Tenant may sustain if either the quantity or character of any utility is changed
or is no longer suitable for Tenant's requirements, whether by reason of any
requirement, act or omission of the public utility serving the Premises or for
any other reason whatsoever. Notwithstanding the provisions of this Section 4.2,
the Landlord shall be responsible for any and all actual damages suffered by the
Tenant as a result of any interruption of utility service caused solely by the
Landlord's failure to remit (prior to the expiration of any applicable grace
period) to the appropriate public utility or private company providing such
utility, as the case may be, any amount which has been paid by the Tenant to the
Landlord pursuant to the provisions of Section 4.1 hereof.
SECTION 4.3. Tenant shall at all times comply with the rules, regulations,
terms and conditions applicable to service, equipment, wiring, as well as any
and all requirements of the public utility supplying electricity to the
Premises. Tenant shall not, without Landlord's prior written consent in each
instance (which consent may be withheld by the Landlord in its reasonable
discretion), connect any fixtures, machinery, appliances or equipment to the
Premises electric distribution system or make any alteration or addition to
Tenant's machinery, appliances or equipment, or the electric system of the
Premises, if the effect thereof would be to increase the electrical load in the
Premises. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall be provided by Landlord and the cost thereof
shall be deemed Additional Rent due hereunder and shall be forthwith paid by
Tenant upon Landlord's demand.
9
SECTION 4.4. If any Taxes are imposed upon Landlord with respect to any
utility furnished as a service to Tenant by any Governmental Authority, Tenant
agrees that such Taxes shall be reimbursed by Tenant to Landlord upon written
demand. The Landlord hereby agrees that any demand given by the Landlord to the
Tenant pursuant to the provisions of this Section 4.4 shall include an accurate
copy of the invoice, statement, bill or similar document issued by the relevant
Governmental Authority or Governmental Authorities, as the case may be, with
respect to the Taxes for which payment is demanded.
ARTICLE 5
USE AND OCCUPANCY
SECTION 5.1. Tenant shall use and occupy the Premises for the Permitted Use
and for no other purpose of any nature whatsoever.
ARTICLE 6
ALTERATIONS
SECTION 6.1.
(A) (1) Prior to making any Alterations, Tenant shall (i) submit to
Landlord detailed plans and specifications for approval by the Landlord
(including layout, architectural, electrical, mechanical and structural
drawings) and that comply with all Requirements for each proposed Alteration,
and Tenant shall not commence any such Alteration without first obtaining
Landlord's approval of such plans and specifications, (ii) at Tenant's expense,
obtain all permits, approvals and certificates required by any Governmental
Authorities, and (iii) furnish to Landlord duplicate original policies or
certificates thereof for worker's compensation insurance (covering all persons
to be employed by Tenant, and Tenant's contractors and subcontractors, in
connection with such Alteration) and commercial general liability insurance
(including premises operation, bodily injury, personal injury, death,
independent contractors, products and completed operations, broad form
contractual liability and broad form property damage coverages) in such form,
with such companies, for such periods and in such amounts as Landlord may
reasonably approve, naming Landlord and its agents and any Mortgagee, as
additional insureds. Upon completion of such Alteration, Tenant, at Tenant's
expense, shall obtain certificates of final approval of such Alterations
required by any Governmental Authority and shall furnish Landlord with copies
thereof, together with the "as-built" plans and specifications
10
for such Alterations. All Alterations shall be made and performed in accordance
with the plans and specifications therefor as approved by Landlord and otherwise
in accordance with all Requirements. All materials and equipment to be
incorporated in the Premises as a result of any Alterations shall be first
quality and no such materials or equipment shall be subject to any lien,
encumbrance, chattel mortgage, title retention or security agreement.
(2) Landlord reserves the right to disapprove any plans and
specifications, in whole or in part, to reserve approval of items shown thereon
pending its review and approval of other plans and specifications, and to
condition its approval upon Tenant making revisions to the plans and
specifications or supplying additional information. Tenant agrees that any
review or approval by Landlord of any plans and/or specifications with respect
to any Alteration is solely for Landlord's benefit, and without any
representation or warranty whatsoever to Tenant or any other Person with respect
to the adequacy, correctness or sufficiency thereof or with respect to
Requirements or otherwise.
(B) All Alterations shall become a part of the Premises and shall be
Landlord's property from and after the installation thereof and may not be
removed or changed without Landlord's prior written consent. Notwithstanding the
foregoing, Landlord, upon notice given at least thirty (30) days prior to the
Expiration Date or upon such shorter notice as is reasonable under the
circumstances upon the earlier expiration of the Term, may require Tenant to
remove any specified Alterations and to repair and restore in a good and
workmanlike manner any damage to the Premises caused by such removal. All
Tenant's Property shall remain the property of Tenant and, on or before the
Expiration Date or earlier end of the Term, may be removed from the Premises by
Tenant at Tenant's sole cost and option; provided, however, that Tenant shall
repair and restore in a good and workmanlike manner any damage to the Premises
caused by such removal. The provisions of this Section 6.1(B) shall survive the
expiration or earlier termination of this Lease.
(C) (1) Any and all Alterations shall be performed, at Tenant's sole
cost and expense, by contractors, subcontractors or mechanics previously
approved in writing by Landlord. Prior to making an Alteration, at Tenant's
request, Landlord shall furnish Tenant with a list of contractors who may
perform Alterations to the Premises on behalf of Tenant.
(2) Notwithstanding the terms and conditions of Section
6.1(C)(1) hereof, with respect to any Alteration affecting any Building Systems,
(i) Tenant shall only employ Landlord's designated contractor, and (ii) the
Alteration shall, at Tenant's expense, be designed by Landlord's engineer.
11
(D) (1) Any mechanic's lien filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant shall be cancelled or discharged by Tenant, at Tenant's expense, within
twenty (20) days after such lien shall be filed, by payment or filing of the
bond required by law, and Tenant shall indemnify and hold Landlord harmless from
and against any and all costs, expenses, claims, losses or damages resulting
therefrom by reason thereof.
(2) If Tenant shall fail to discharge such mechanic's lien
within the aforesaid period, then, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated to, discharge the same either
by paying the amount claimed to be due or by procuring the discharge of such
lien by deposit in court or bonding, and in any such event, Landlord shall be
entitled, if Landlord so elects, to compel the prosecution of an action for the
foreclosure of such mechanics lien by the lienor and to pay the amount of the
judgment, if any, in favor of the lienor, with interest, costs and allowances.
(3) Any amount paid by Landlord for any of the aforesaid charges
and for all expenses of Landlord (including, but not limited to, attorneys' fees
and disbursements) incurred in defending any such action, discharging said lien
or in procuring the discharge of said lien, with interest on all such amounts at
the maximum legal rate of interest then chargeable to Tenant from the date of
payment, shall be repaid by Tenant within ten (10) days after written demand
therefor, and all amounts so repayable, together with such interest, shall be
considered Additional Rent.
SECTION 6.2. Landlord, at Tenant's expense, and upon the request of Tenant,
shall join in any applications for any permits, approvals or certificates
required to be obtained by Tenant in connection with any permitted Alteration
(provided that the provisions of the applicable Requirements shall require that
Landlord join in such application) and shall otherwise cooperate with Tenant in
connection therewith; provided, however, that Landlord shall not be obligated to
incur any cost or expense or liability in connection therewith.
SECTION 6.3. Tenant shall furnish to Landlord copies of records of all
Alterations and of the cost thereof within fifteen (15) days after the
completion of such Alterations.
SECTION 6.4. Tenant shall not, at any time prior to or during the Term,
directly or indirectly, employ, or permit the employment of, any contractor,
mechanic or laborer in the Premises, whether in connection with any Alteration
or otherwise, if such employment would interfere or cause any conflict with
other contractors, mechanics or laborers engaged in the
12
construction, maintenance or operation of the Premises by Landlord, Tenant or
others, or of any other property owned by Landlord. In the event of any such
interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Premises immediately.
ARTICLE 7
REPAIRS; REPLACEMENTS; MAINTENANCE
SECTION 7.1. Tenant, at Tenant's sole cost and expense, shall take good
care of the Premises and the fixtures, equipment and appurtenances therein and
make all repairs and replacements thereto, BOTH STRUCTURAL AND NON-STRUCTURAL,
of any nature whatsoever as and when needed to preserve them in good working
order and condition, except for (a) reasonable wear and tear and (b)
obsolescence. If Tenant shall fail, after five (5) days notice (or such shorter
period as may be required because of an emergency), to proceed with due
diligence to make repairs required to be made by Tenant, the same may be made by
Landlord, at the expense of Tenant, and the expenses thereof incurred by
Landlord, with interest thereon at the Applicable Rate, shall be paid to
Landlord, as Additional Rent, within ten (10) days after rendition of a bill or
statement therefor. Tenant shall give Landlord prompt notice of any defective
condition in any Building Systems located in, servicing or passing through the
Premises.
ARTICLE 8
INCREASES IN FIXED RENT
SECTION 8.1. For purposes of this Lease:
(i) "BUREAU" means the Federal Bureau of Labor Statistics or any
successor agency that shall issue the indices or data referred to in
subparagraph (ii) below.
(ii) "PRICE INDEX" means the Consumer Price Index for All Urban
Consumers for the Phoenix, Arizona geographic area, 1982-1984=100, issued from
time to time by the Bureau or any other successor measure hereafter employed by
the Bureau in lieu of such price index that measures the cost of living for such
geographic area, failing such successor, the most nearly comparable index
(reflecting changes in costs of housing including rental housing, energy and
services), published by a Governmental Authority, appropriately adjusted.
Furthermore, if hereafter the Price Index is converted to a different standard
reference base or a substantial change is made in the terms or
13
number of items contained therein, the Price Index shall be adjusted (with the
use of such conversion factor, formula or table as is published by the Bureau,
or if it shall not publish same, the conversion factor published by Prentice
Hall, Inc., or, failing such publication, by any other nationally recognized
publisher of similar statistical information) to the figure that would have
resulted if not for such conversion or change.
(iii)"BASE INDEX" means the Price Index issued for April, 1996.
(iv) "APPLICABLE PRICE INDEX" for a Lease Year means the Price
Index issued for April of the year in which such Lease Year commences.
SECTION 8.2. (A) Tenant shall pay to Landlord Fixed Rent in the amount set
forth in Article 1 of this Lease for the first Lease Year.
(B) For each Lease Year subsequent to the first Lease Year
(and for each and every Lease Year thereafter during the Term hereof), the
Tenant shall pay to the Landlord, as Fixed Rent, an amount equal to the GREATER
of:
(I) an amount equal to the sum of (x)
the percentage by which the Applicable Price Index for such Lease Year exceeds
the Applicable Price Index for the immediately preceding Lease Year, multiplied
by the Fixed Rent payable for such immediately preceding Lease Year and (y) such
Fixed Rent payable for the immediately preceding Lease Year (e.g., if the Base
Index is 200, the Applicable Price Index for the second Lease Year is 203, the
Applicable Price Index for the third Lease Year is 215, and the Fixed Rent
payable for the second Lease Year is $50,000.00, then the Applicable Price Index
for the third Lease Year exceeds the Applicable Price Index for the second Year
by 5.91% (i.e., the difference between 203 and 215), and the Fixed Rent derived
from the aforesaid calculation shall be $52,955.75 (5.91% of $50,000.00,
$2,955.00, plus $50,000.00); or
(II) an amount equal to the sum of (x)
five (5%) percent of the Fixed Rent for the immediately preceding Lease Year and
(y) such Fixed Rent for the immediately preceding Lease Year (e.g. if the Fixed
Rent for the second Lease Year is $50,000.00, the Fixed Rent derived from the
aforesaid calculation for the third Lease Year shall be 5% of $50,000.00, i.e.,
$2,500.00, plus $50,000.00 or $52,500.00).
The Landlord and the Tenant hereby acknowledge that it is the mutual intention
of the parties that for each and every Lease Year subsequent to the first Lease
Year during the Term hereof, the Fixed Rent payable by the Tenant to the
Landlord hereunder shall be increased by no less than five (5%) percent for each
and
14
every Lease Year during the Term hereof subsequent to the first Lease Year.
SECTION 8.3. Upon notice by the Landlord to the Tenant of an increase in
the Fixed Rent pursuant to the provisions of this Article 8 ("INCREASE NOTICE"),
the Tenant shall pay the Fixed Rent as set forth in the Increase Notice.
Additionally, within ten (10) days of the date of the Increase Notice, the
Tenant shall pay any retroactive increases in Fixed Rent as set forth in the
Increase Notice.
ARTICLE 9
REQUIREMENTS OF LAW
SECTION 9.1. Tenant shall not do, and shall not permit any act or thing in
or upon the Premises which will invalidate or be in conflict with the
certificate of occupancy for the Premises or violate any Requirements. Tenant
shall, at Tenant's sole cost and expense, immediately take all action, including
but not limited to, making any required Alterations necessary to comply with all
Requirements [including, but not limited to, the Americans With Disabilities Act
of 1990 (the "ADA"), as modified and supplemented from time to time] which shall
or may impose any violation, order or duty upon Landlord or Tenant arising from,
or in connection with, the Premises, Tenant's occupancy, use or manner of use of
the Premises (including, without limitation, any occupancy, use or manner of use
that constitutes a "place of public accommodation" under the ADA), or any
installations in the Premises, or required by reason of a breach of any of
Tenant's covenants or agreements under this Lease, whether or not such
Requirements shall now be in effect or hereafter enacted or issued, and whether
or not any work required shall be ordinary or extraordinary or foreseen or
unforeseen as of the date hereof.
SECTION 9.2. Tenant covenants and agrees that Tenant shall, at Tenant's
sole cost and expense, comply at all times with all Requirements governing the
use, generation, storage, treatment and/or disposal of any Hazardous Materials
(as defined below), the presence of which results from or in connection with the
act or omission of Tenant or Persons Within Tenant's Control or the breach of
this Lease by Tenant or Persons Within Tenant's Control. The term "HAZARDOUS
MATERIALS" shall mean any biologically or chemically active or other toxic or
hazardous wastes, pollutants or substances, including, without limitation,
asbestos, PCBS, petroleum products and by-products, substances defined or listed
as "hazardous substances" or "toxic substances" or similarly identified in or
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 ET SEQ., and as hazardous wastes under
15
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6010, ET SEQ., any
chemical substance or mixture regulated under the Toxic Substance Control Act of
1976, as amended, 15 U.S.C. 2601, ET SEQ., any "toxic pollutant" under the Clean
Water Act, 33 U.S.C. ss. 466 ET SEQ., as amended, any hazardous air pollutant
under the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ., hazardous materials
identified in or pursuant to the Hazardous Materials Transportation Act, 49
U.S.C. ss. 1802, ET SEQ., and any hazardous or toxic substances or pollutant
regulated under any other Requirements including, without limitation, ECRA (as
such term is hereinafter defined). Tenant agrees to execute, from time to time,
at Landlord's request, affidavits, representations and the like concerning
Tenant's best knowledge and belief regarding the presence of Hazardous Materials
in, on, under or about the Premises. Tenant shall indemnify and hold harmless
all Indemnitees from and against any loss, claim, cost, damage, liability or
expense (including attorneys' fees and disbursements) arising by reason of any
clean up, removal, remediation, detoxification action or any other activity
required or recommended of any Indemnitees by any Governmental Authority by
reason of the presence in, on, under or about the Premises of any Hazardous
Materials, as a result of or in connection with the act or omission of Tenant or
Persons Within Tenant's Control or the breach of this Lease by Tenant or Persons
Within Tenant's Control. The foregoing covenants and indemnity shall survive the
expiration or any termination of this Lease.
SECTION 9.3. If Tenant shall receive notice of any violation of, or
defaults under, any Requirements, liens or other encumbrances applicable to the
Premises, Tenant shall give immediate written notice thereof to Landlord.
16
SECTION 9.4. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business and if the failure to secure
such license or permit would, in any way, affect Landlord or the Premises, then
Tenant, at Tenant's expense, shall promptly procure and thereafter maintain,
submit for inspection by Landlord, and at all times comply with the terms and
conditions of, each such license or permit.
ARTICLE 10
SUBORDINATION
SECTION 10.1. This Lease shall at all times, now and hereafter, be subject
and subordinate to each and every Mortgage, whether made prior to or after the
execution of this Lease, and to all extensions, supplements, amendments,
modifications, consolidations and replacements thereof or thereto, substitutions
therefor, and advances made thereunder. This clause shall be self-operative and
no further agreement of subordination shall be required to make the interest of
any Mortgagee superior to the interest of Tenant hereunder. In confirmation of
such subordination, Tenant shall promptly execute and deliver, at its own cost
and expense, any document, in recordable form if requested, that Landlord or any
Mortgagee may request to evidence such subordination; and if Tenant fails to
execute, acknowledge or deliver any such document within five (5) days after
request therefor, Tenant hereby irrevocably constitutes and appoints Landlord as
Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge and
deliver any such document for and on behalf of Tenant. Tenant shall not do
anything that would constitute a default under any Mortgage, or omit to do
anything that Tenant is obligated to do under the terms of this Lease so as to
cause Landlord to be in default thereunder.
SECTION 10.2. If, at any time prior to the expiration of the Term, any
Mortgagee comes into possession of the Premises, by receiver or otherwise,
Tenant agrees, at the election and upon demand of any owner of the Premises, or
of any Mortgagee in possession of the Premises, to attorn, from time to time, to
any such owner or Mortgagee or any person acquiring the interest of Landlord as
a result of any such termination or as a result of a foreclosure of the Mortgage
or the granting of a deed in lieu of foreclosure, upon the then executory terms
and conditions of this Lease (except as provided below), for the remainder of
the Term, provided that such owner or Mortgagee, as the case may be, or receiver
caused to be appointed by any of the foregoing, is then entitled to possession
of the Premises. Any such attornment shall be made upon the condition that no
such owner or Mortgagee shall be:
17
(1) liable for any act or omission of any prior landlord
(including, without limitation, the then defaulting landlord); or
(2) subject to any defense or offsets (except as expressly set
forth in this Lease) which Tenant may have against any prior landlord
(including, without limitation, the then defaulting landlord); or
(3) bound by any payment of Rental which Tenant might have paid
for more than the current month to any prior landlord (including, without
limitation, the then defaulting landlord); or
(4) bound by any obligation to make any payment to Tenant which
was required to be made prior to the time such owner or Mortgagee succeeded to
any prior landlord's interest; or
(5) bound by any obligation to perform any work or to make
improvements to the Premises except for (i) repairs to the Premises or any part
thereof as a result of damage by fire or other casualty pursuant to Article 12,
but only to the extent that such repairs can be reasonably made from the net
proceeds of any insurance actually made available to such owner or Mortgagee and
(ii) repairs to the Premises as a result of a partial condemnation pursuant to
Article 13, but only to the extent that such repairs can be reasonably made from
the net proceeds of any award made available to such owner or Mortgagee. Tenant,
upon demand of any such owner or Mortgagee, shall execute, from time to time,
agreements in confirmation of the foregoing provisions of this Section 10.2,
satisfactory to any such owner or Mortgagee, and acknowledging such attornment
and setting forth the terms and conditions of its tenancy. Nothing contained in
this Section 10.2 shall be construed to impair any right otherwise exercisable
by any such owner or Mortgagee.
SECTION 10.3. If requested by any Mortgagee or Landlord, Tenant shall
promptly execute and deliver, at Tenant's own cost and expense, any document in
accordance with the terms of this Article 10, in recordable form, to evidence
such subordination.
SECTION 10.4. At any time and from time to time upon not less than ten (10)
days' prior notice to Tenant or Landlord given by the other, or to Tenant given
by a Mortgagee, Tenant or Landlord, as the case may be, shall, without charge,
execute, acknowledge and deliver a statement in writing addressed to such party
as Tenant, Landlord or Mortgagee, as the case may be, may designate, in form
satisfactory to Tenant, Landlord or Mortgagee, as the case may be, certifying
all or any of the following: (i) that this Lease is unmodified and in full force
and effect (or if there have been modifications, that this Lease is in full
force
18
and effect as modified and stating the modifications); (ii) the date that the
Term commenced and the date(s) that Fixed Rent and Additional Rent became
payable hereunder and the dates to which they have been paid; (iii) whether or
not, to the best knowledge of the signer of such certificate, Landlord is in
default in performance of any of the terms of this Lease and, if so, specifying
each such event of default of which the signer may have knowledge; (iv) whether
or not, to the best knowledge of the signer of such certificate, Tenant has
accepted possession of the Premises; (v) whether Tenant has made any claim
against Landlord under this Lease and, if so, the nature thereof and the dollar
amount, if any, of such claim; (vi) either that Tenant does not know of any
default in the performance of any provision of this Lease or specifying the
details of any default of which Tenant may have knowledge and stating what
action Tenant is taking or proposes to take with respect thereto; (vii) that, to
the best knowledge of Tenant, there are no proceedings pending or threatened
against Tenant before or by any court or administrative agency which, if
adversely decided, would materially or adversely affect the financial condition
or operations of Tenant or, if any such proceedings are pending or threatened to
the best knowledge of Tenant, specifying and describing the same; and (viii)
such further information with respect to the Lease or the Premises as Landlord
may reasonably request or Mortgagee may require; it being intended that any such
statement delivered pursuant hereto may be relied upon by any prospective
purchaser of the Premises or any part thereof or of the interest of Landlord in
any part thereof, by any Mortgagee or prospective Mortgagee or by any
prospective assignee of any Mortgage or by any assignee of Tenant.
The failure of either Tenant or Landlord to execute, acknowledge and
deliver a statement in accordance with the provisions of this Section 10.4
within said ten (10) day period shall constitute an acknowledgment by Tenant or
Landlord, as the case may be, which may be relied on by any person or entity of
any nature whatsoever who would be entitled to rely upon any such statement,
that such statement as submitted by Landlord or Tenant, as the case may be, is
true and correct.
SECTION 10.5. As long as any Mortgage exists, Tenant shall not seek to
terminate this Lease by reason of any act or omission of Landlord until Tenant
has given not less than thirty (30) days prior written notice of such act or
omission to all Mortgagees, and if any such Mortgagee notifies Tenant within
thirty (30) days following receipt of such notice of its intention to remedy
such act or omission, until a reasonable period of time shall have elapsed
following the giving of such notice, during which period such Mortgagee shall
have the right, but not the obligation, to remedy such act or omission.
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ARTICLE 11
INSURANCE; PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
SECTION 11.1.
(A) Neither Landlord nor Landlord's agents shall be liable for any
injury or damage to persons or property, or interruption of Tenant's business,
resulting from fire or other casualty; nor shall Landlord or Landlord's agents
be liable for any such damage caused by Persons other than the Landlord or the
Landlord's agents or by construction of any private, public or quasi-public
work; nor shall Landlord be liable for any latent defect in the Premises.
(B) Tenant shall give written notice to Landlord, immediately after
Tenant learns thereof, of any accident, emergency, occurrence for which Landlord
might be liable, fire or other casualty and all damages to or defects in the
Premises for the repair of which Landlord might be responsible or which
constitutes Landlord's property. Such notice shall be given by telecopy or
personal delivery to the address(es) of Landlord in effect for notice.
SECTION 11.2. Tenant shall not do or permit to be done any act or thing in
or upon the Premises which will invalidate or be in conflict with the terms of
the State of New Jersey standard form of fire insurance with extended coverage,
or with rental, liability, boiler, sprinkler, water damage, war risk or other
insurance policies covering the Premises and the fixtures and property therein
(hereinafter referred to as "BUILDING INSURANCE"); and Tenant, at Tenant's own
expense, shall comply with all rules, orders, regulations and requirements of
all insurance boards, and shall not do or permit anything to be done in or upon
the Premises or bring or keep anything therein or use the Premises in a manner
which increases the rate of premium for any of the Building Insurance or any
property or equipment located therein over the rate in effect at the
commencement of the Term of this Lease.
SECTION 11.3.
(A) If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the rate of premium for Building Insurance or other
insurance on the property and equipment of Landlord shall be higher than it
otherwise would be, Tenant shall reimburse Landlord for that part of the
insurance premiums thereafter paid by Landlord which shall have been charged
because of such failure by Tenant. Tenant shall make said reimbursement on the
first day of the month following such payment by Landlord.
20
(B) In any action or proceeding wherein Landlord and Tenant are
parties, a schedule of any insurance rate for the Premises issued by any
insurance board establishing insurance premium rates for the Premises shall be
prima facie evidence of the facts therein stated and of the several items and
charges in the insurance premium rates then applicable to the Premises.
SECTION 11.4.
(A) Tenant shall, at Tenant's own cost and expense, obtain, maintain
and keep in full force and effect during the Term, for the benefit of Landlord,
any Mortgagees and Tenant, commercial general liability insurance (including
premises operation, bodily injury, personal injury, death, independent
contractors, products and completed operations, broad form contractual liability
and broad form property damage coverages) in a combined single limit amount of
not less than Five Million and 00/100 ($5,000,000.00) Dollars, against all
claims, demands or actions with respect to damage, injury or death made by or on
behalf of any person or entity, arising from or relating to the conduct and
operation of Tenant's business in, on or about the Premises (which shall include
Tenant's signs, if any), or arising from or related to any act or omission of
Tenant or of Persons Within Tenant's Control. If Tenant shall install or
maintain one or more pressure vessels to serve Tenant's operations at the
Premises, Tenant shall, at Tenant's own cost and expense, obtain, maintain and
keep in full force and effect, for the benefit of Landlord, any Mortgagees and
Tenant, appropriate boiler or other insurance coverage therefor in an amount not
less than Three Million and 00/100 ($3,000,000.00) Dollars (it being understood
and agreed, however, that the foregoing shall not be deemed a consent by
Landlord to the installation and/or maintenance of any such pressure vessels in
the Premises, which installation and/or maintenance shall at all times be
subject to the prior written consent of Landlord). Whenever, in Landlord's
reasonable judgment, good business practice and changing conditions indicate a
need for additional amounts or different types of insurance coverage, Tenant
shall, within ten (10) days after Landlord's request, obtain such insurance
coverage, at Tenant's expense.
(B) Tenant, at Tenant's sole cost and expense, shall maintain
insurance protecting and indemnifying Tenant against any and all damage to or
loss of any Alterations and leasehold improvements, including any made by
Landlord to prepare the Premises for Tenant's occupancy, and Tenant's Property,
and all claims and liabilities relating thereto.
(C) Landlord and any Mortgagees shall be named as insureds in said
policies and shall be protected against all liability occasioned by an
occurrence insured against. All said policies of insurance shall be: (i) written
as "occurrence" policies; (ii) written as primary policy coverage and not
21
contributing with or in excess of any coverage which Landlord may carry; and
(iii) issued by reputable and independent insurance companies rated in Best's
Insurance Guide, or any successor thereto (or if there be none, an organization
having a national reputation) as having a general policyholder rating of "A+"
and a financial rating of at least "13", and which are licensed to do business
in the State of Arizona. Tenant shall, not later than ten (10) Business Days
prior to the Commencement Date, deliver to Landlord the policies of insurance or
certificates thereof, together with evidence of payment of premiums thereon, and
shall thereafter furnish to Landlord, at least thirty (30) days prior to the
expiration of any such policies and any renewal thereof, a new policy or
certificate in lieu thereof, with evidence of the payment of premiums thereon.
Each of said policies shall also contain a provision whereby the insurer agrees
not to cancel, fail to renew, diminish or materially modify said insurance
policy(ies) without having given Landlord and any Mortgagees at least thirty
(30) days prior written notice thereof.
(D) Tenant shall pay all premiums and charges for all of said
policies, and, if Tenant shall fail to make any payment when due or carry any
such policy, Landlord may, but shall not be obligated to, make such payment or
carry such policy, and the amount paid by Landlord, with interest thereon (at
the Applicable Rate), shall be repaid to Landlord by Tenant on demand, and all
such amounts so repayable, together with such interest, shall be deemed to
constitute Additional Rent hereunder. Payment by Landlord of any such premium,
or the carrying by Landlord of any such policy, shall not be deemed to waive or
release the default of Tenant with respect thereto.
SECTION 11.5.
(A) Tenant shall cause each insurance policy carried by Tenant and
insuring the Premises and Tenant's Alterations, leasehold improvements, space
equipment, furnishings, furniture, contents and fixtures against loss, damage or
destruction by fire or other casualty, to be written in a manner so as to
provide that the insurance company waives all rights of recovery by way of
subrogation against Landlord or Tenant in connection with any loss or damage
covered by any such policy. If the release of either Landlord or Tenant shall
contravene any law with respect to exculpatory agreements, the liability of the
party in question shall be deemed not released, but no action or rights shall be
sought or enforced against such party unless and until all rights and remedies
against the insurer are exhausted and such party shall be unable to collect such
insurance proceeds.
(B) The waiver of subrogation referred to in Section 11.5(A) above
shall extend to the agents and employees of each party, but only if and to the
extent that such waiver can be obtained without additional charge (unless such
party shall pay
22
such charge). Nothing contained in this Section 11.5 shall be deemed to relieve
the Tenant from any duty imposed elsewhere in this Lease to repair, restore and
rebuild the Premises, in whole or in part.
ARTICLE 12
DESTRUCTION BY FIRE OR OTHER CAUSE
SECTION 12.1. If the Premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate written notice thereof to
Landlord. Landlord shall, subject to the provisions of Sections 12.2 and 12.3
below, proceed with reasonable diligence, after receipt of the net proceeds of
insurance, to repair or cause to be repaired such damage at its expense, but in
no event shall such repair or restoration be greater in scope than the quantity
or quality of construction of the Premises as of the Commencement Date; and, if
the Premises, or any part thereof, shall be rendered untenantable by reason of
such damage and such damage shall not be due to the fault of Tenant or Persons
Within Tenant's Control, then the Fixed Rent hereunder, or an amount thereof
apportioned according to the area of the Premises so rendered untenantable (if
less than the entire Premises shall be so rendered untenantable), shall be
abated for the period from the date of such damage to the date when the repair
of such damage shall have been substantially completed. If Landlord or any
Mortgagee shall be unable to collect the insurance proceeds (including rent
insurance proceeds) applicable to such damage because of some action or inaction
on the part of Tenant or Persons Within Tenant's Control, then the cost of
repairing such damage shall be paid by Tenant and there shall be no abatement of
Fixed Rent. Tenant covenants and agrees to cooperate with Landlord and any
Mortgagee in their efforts to collect insurance proceeds (including rent
insurance proceeds) payable to such parties. Landlord shall not be liable for
any delay which may arise by reason of adjustment of insurance on the part of
Landlord and/or Tenant, or any cause beyond the control of Landlord or
contractors employed by Landlord.
It is expressly understood that if Landlord is prevented from substantially
completing the repairs by reason of any acts of Tenant or Persons Within
Tenant's Control, including, without limitation, by reason of the performance of
any Alterations, or by reason of Tenant's failure or refusal to comply or to
cause its architects, engineers, designers and contractors to comply with any of
Tenant's obligations described or referred to in this Lease, then such work
shall be deemed substantially completed on the date when the work would have
been substantially completed but for such delay, and the expiration of the
abatement of Tenant's obligations to pay Fixed Rent shall not be postponed
23
by reason of such delay. Any additional costs to Landlord to complete any work
occasioned by such delay shall be paid by Tenant to Landlord, as Additional
Rent, within ten (10) days after demand therefor by Landlord.
SECTION 12.2. Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from damage from fire or other casualty or the repair thereof. Tenant
understands that Landlord, in reliance upon Section 11.4 hereof, will not carry
insurance of any kind on Tenant's furnishings, furniture, contents, fixtures,
space equipment and leasehold improvements, and that Landlord shall not be
obligated to repair any damage thereto or replace the same.
SECTION 12.3. (A) Notwithstanding anything to the contrary contained in
Sections 12.1 and 12.2 above, in the event that:
(I) at least fifty (50%) percent of the rentable square feet of
the Premises shall be damaged by a fire or other casualty so that substantial
alteration or reconstruction of the Premises shall, in Landlord's sole opinion,
be required (whether or not the Premises shall have been damaged by such fire or
other casualty and without regard to the structural integrity of the Premises);
or
(II) the Premises shall be totally or substantially damaged or
shall be rendered wholly or substantially untenantable; or
(III) there shall be any damage to the Premises within the last
two (2) years of the Term wherein the cost of repair exceeds an amount equal to
three (3) monthly installments of Fixed Rent, then, as a result of any
circumstances described in subparagraphs (i), (ii) or (iii) hereof, the Landlord
may, in Landlord's sole and absolute discretion, terminate this Lease and the
term and estate hereby granted, by notifying Tenant in writing of such
termination within one hundred twenty (120) days after the date of such damage.
In the event that such a notice of termination shall be given, then this Lease
and the term and estate hereby granted shall expire as of the date of
termination stated in said notice with the same effect as if that were the Fixed
Expiration Date, and the Fixed Rent and Additional Rent hereunder shall be
apportioned as of such date.
SECTION 12.4. Except as may be provided in Section 11.5, nothing herein
contained shall relieve Tenant from any liability to Landlord or to Landlord's
insurers in connection with any damage to the Premises by fire or other casualty
if Tenant shall be legally liable in such respect.
24
ARTICLE 13
EMINENT DOMAIN
SECTION 13.1. If the whole of the Premises is acquired or condemned for any
public or quasi-public use or purpose, this Lease and the Term shall end as of
the date of the vesting of title with the same effect as if said date were the
Fixed Expiration Date. If only a part of the Premises is so acquired or
condemned then, (1) except as hereinafter provided in this Section 13.1, this
Lease and the Term shall continue in effect but, if a part of the Premises is so
acquired or condemned, from and after the date of the vesting of title, the
Fixed Rent and Additional Rent, if any, shall be reduced in the proportion which
the area of the part of the Premises so acquired or condemned bears to the total
area of the Premises immediately prior to such acquisition or condemnation; (2)
whether or not the Premises are affected thereby, Landlord, at Landlord's
option, may give to Tenant, within sixty (60) days next following the date upon
which Landlord receives notice of vesting of title, a thirty (30) day notice of
termination of this Lease; and (3) if the part of the Premises so acquired or
condemned contains more than seventy-five (75%) percent of the total area of the
Premises immediately prior to such acquisition or condemnation, or if, by reason
of such acquisition or condemnation, Tenant no longer has access to the
Premises, Tenant, at Tenant's option, may give to Landlord, within thirty (30)
days next following the date upon which Tenant receives notice of vesting of
title, a thirty (30) day notice of termination of this Lease. If any such thirty
(30) day notice of termination is given, by Landlord or Tenant, this Lease and
the Term shall come to an end and expire upon the expiration of said thirty (30)
days with the same effect as if the date of expiration of said thirty (30) days
were the Fixed Expiration Date. In the event of any termination of this Lease
and the Term pursuant to the provisions of this Section 13.1, the Fixed Rent or
Additional Rent shall be apportioned as of the date of sooner termination and
any prepaid portion of the Fixed Rent for any period after such date shall be
refunded by Landlord to Tenant.
SECTION 13.2. In the event of any such acquisition or condemnation of all
or any part of the Premises, Landlord shall be entitled to receive the entire
award for any such acquisition or condemnation. Tenant shall have no claim
against Landlord or the condemning authority for the value of any unexpired
portion of the Term and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this Section 13.2 shall be
deemed to prevent Tenant from making a separate claim in any condemnation
proceedings for the value of any Tenant's Property included in such taking, and
for any moving expenses, so long as Landlord's award is not reduced thereby.
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ARTICLE 14
ASSIGNMENT; SUBLETTING; MORTGAGE; ETC.
SECTION 14.1. (A) The Tenant shall not (a) assign this Lease (whether by
operation of law, transfers of interests in Tenant or otherwise); or (b)
mortgage or encumber Tenant's interest in this Lease, in whole or in part; or
(c) sublet, or permit the subletting of, the Premises or any part thereof.
Notwithstanding the provisions of this Section 14.1, the use of the Premises by
any Person AFFILIATED (as such term is hereinafter defined) with the Tenant or
under the COMMON CONTROL (as such term is hereinafter defined) of Coach USA,
Inc., as the case may be, shall not be deemed an assignment of this Lease or a
sublet of the Premises; PROVIDED, HOWEVER, that such use of the Premises as
aforesaid shall not violate or be prohibited by any of the provisions of any
Mortgage then encumbering the Premises, if any. For purposes of this Article 14,
a Person shall be deemed to be an "AFFILIATE" of the Tenant or under the "COMMON
CONTROL" of Coach USA if such Person is a member of a "parentsubsidiary
controlled group" [as such term is defined by Section 1563(a)(1) of the Internal
Revenue Code of 1986, as amended] or a member of a "brother-sister controlled
group" [as such term is defined by Section 1563(a)(2) of the Internal Revenue
Code of 1986, as amended] of which either Coach USA, Inc. or the Tenant, as the
case may be, is a member.
(B) Notwithstanding the provisions otherwise set forth in this
Article 14, any reorganization, consolidation and/or restructuring of the Tenant
in which the issued and outstanding stock of the Tenant remains under the COMMON
CONTROL (as such term is defined in Section 14.1 hereinabove) of Coach USA, Inc.
shall not be deemed an assignment of this Lease or a sublet of the Premises;
PROVIDED, HOWEVER, that the same shall not violate or be prohibited by any of
the provisions of any Mortgage then encumbering the Premises, if any.
SECTION 14.2. If Tenant's interest in this Lease shall be assigned in
violation of the provisions of this Article 14, such assignment shall be invalid
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy. If the Premises or any
part thereof are sublet to, or occupied by, or used by, any person other than
Tenant, whether or not in violation of this Article 14, Landlord, after default
by Tenant under this Lease, may collect any item of Rental or other sums paid by
the subtenant, user or occupant as a fee for its use and occupancy, and shall
apply the net amount collected to the Fixed Rent and the items of Rental
reserved in this Lease. No such assignment,
26
subletting, occupancy, or use, nor any such collection or application of Rental
or fee for use and occupancy, shall be deemed a waiver by Landlord of any term,
covenant or condition of this Lease or the acceptance by Landlord of such
assignee, subtenant, occupant or user as Tenant hereunder, nor shall the same,
in any circumstances, relieve Tenant of any of its obligations under this Lease.
SECTION 14.3.
Except as otherwise set forth in Section 14.1 hereof, for purposes of
this Article 14, (i) any increase in the amount of issued and/or outstanding
capital stock of any corporate tenant and/or the creation of one or more
additional classes of capital stock of any corporate tenant, in a single
transaction or a series of related or unrelated transactions, resulting in a
change in the legal or beneficial ownership of such tenant so that the
shareholders of such tenant existing immediately prior to such transaction or
series of transactions shall no longer own a majority of the issued and
outstanding capital stock of such tenant shall be deemed an assignment of this
Lease and (ii) any Person or legal representative of Tenant, to whom Tenant's
interest under this Lease passes by operation of law, or otherwise, shall be
bound by the provisions of this Article 14. Tenant agrees to furnish to Landlord
on request at any time such information and assurances as Landlord may
reasonably request that Tenant has not violated the provisions of this Article
14.
ARTICLE 15
ACCESS TO PREMISES
SECTION 15.1. Tenant shall permit Landlord, Landlord's agents and any
public utilities servicing the Premises to erect, use and maintain, now and
hereafter, concealed ducts, pipes and conduits in and through the Premises.
Landlord or Landlord's agents shall have the right to enter the Premises at all
reasonable times upon (except in case of emergency) reasonable prior notice,
which notice may be oral, to examine the same, to show the same to prospective
purchasers or Mortgagees and to make such repairs, alterations, improvements or
additions (i) as Landlord may deem necessary or desirable to the Premises, or
(ii) which Landlord may elect to perform at least ten (10) days after notice
(except in an emergency when no notice shall be required) following Tenant's
failure to make repairs or perform any work which Tenant is obligated to make or
perform under this Lease, or (iii) for the purpose of complying with
Requirements, and Landlord shall be allowed to take all material into and upon
the Premises that may be required therefor without the same constituting an
eviction or constructive eviction of Tenant in
27
whole or in part and the Fixed Rent (and any other item of Rental) shall in no
respect abate or be reduced by reason of said repairs, alterations, improvements
or additions, wherever located, or while the same are being made, by reason of
loss or interruption of business of Tenant, or otherwise. Landlord shall
promptly repair any damage caused to the Premises by such work, alterations,
improvements or additions.
SECTION 15.2. If Tenant is not present when for any reason entry into the
Premises may be necessary or permissible, Landlord or Landlord's agents may
enter the same without rendering Landlord or such agents liable therefor.
SECTION 15.3. Landlord also shall have the right at any time, without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, stairs, toilets or other
parts of the Premises, provided any such change does not unreasonably interfere
with, or deprive Tenant of access to, the Premises; to put so-called "solar
film" or other energy-saving installations on the inside and outside of the
windows; and to change the name, number or designation by which the Premises is
commonly known.
ARTICLE 16
CERTIFICATE OF OCCUPANCY
SECTION 16.1. Tenant shall not at any time, now or hereafter, use or occupy
the Premises, directly or indirectly, in violation of the certificate of
occupancy for the Premises and in the event that any Governmental Authority
hereafter contends or declares by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose that is a violation
of such certificate of occupancy, Tenant shall, upon three (3) Business Days'
written notice from Landlord or any Government Authority, immediately
discontinue such use of the Premises.
ARTICLE 17
DEFAULT
SECTION 17.1. Each of the following events shall be an "EVENT OF DEFAULT"
under this Lease:
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(A) if Tenant shall on any occasion default in the payment when due of
any installment of Fixed Rent or Additional Rent or in the payment when due of
any other item of Rental and such default shall continue for five (5) business
days from and after the date when the same shall be due; or
(B) if the Premises shall become vacant or abandoned; or
(C) if Tenant's interest in this Lease shall devolve upon or pass to
any person, whether by operation of law or otherwise, except as specifically
permitted by the provisions of Article 14 hereof; or
(D) (1) if Tenant shall not, or shall be unable to, or shall admit in
writing Tenant's inability to, as to any obligation, pay Tenant's debts as they
become due; or
(2) if Tenant shall commence or institute any case, proceeding or
other action (a) seeking relief on Tenant's behalf as debtor, or to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to Tenant or Tenant's debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (b) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property; or
(3) if Tenant shall make a general assignment for the benefit of
creditors; or
(4) if any case, proceeding or other action shall be commenced or
instituted against Tenant (a) seeking to have an order for relief entered
against Tenant as debtor or to adjudicate Tenant a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to Tenant or Tenant's
debts under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, or (b)
seeking appointment of a receiver, trustee, custodian or other similar official
for Tenant or for all or any substantial part of Tenant's property, which either
(i) results in any such entry of an order for relief, adjudication of bankruptcy
or insolvency or such an appointment or the issuance or entry of any other order
having a similar effect or (ii) remains undismissed for a period of sixty (60)
days; or
(5) if a trustee, receiver or other custodian shall be appointed
for any substantial part of the assets of
29
Tenant which appointment is not vacated or effectively stayed
within thirty (30) days; or
(E) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenant's part to be observed
or performed including, without limitation, the terms and conditions of Article
27 hereof, and Tenant shall fail to remedy such default within ten (10) days
after written notice by Landlord to Tenant of such default, or if such default
is of such a nature that it cannot with due diligence be completely remedied
within said period of ten (10) days and the continuation of which for the period
required for cure will not subject Landlord to the risk of criminal liability or
foreclosure of any Mortgage, if Tenant shall not, (i) within said ten (10) day
period advise Landlord of Tenant's intention duly to institute all steps
necessary to remedy such situation, (ii) duly institute within said ten (10) day
period, and thereafter diligently and continuously prosecutes to completion all
steps necessary to remedy the same and (iii) completes such remedy within such
time after the date of the giving of said notice by Landlord as shall reasonably
be necessary.
SECTION 17.2. If an Event of Default shall occur, Landlord may, at any time
thereafter, at Landlord's option, give written notice to Tenant stating that
this Lease and the Term shall expire and terminate on the date specified in such
notice, which date shall not be less than three (3) days after the giving of
such notice, whereupon this Lease and the Term and all rights of Tenant under
this Lease shall automatically expire and terminate as if the date specified in
the notice given pursuant to this Section 17.2 were the Fixed Expiration Date
and Tenant immediately shall quit and surrender the Premises, but Tenant shall
remain liable for damages as provided herein or pursuant to law. Anything
contained herein to the contrary notwithstanding, if such termination shall be
stayed by order of any court having jurisdiction over any proceeding described
in Section 17.1(D), or by federal or state statute, then, following the
expiration of any such stay, or if the trustee appointed in any such proceeding,
Tenant or Tenant as debtor-in-possession fails to assume Tenant's obligations
under this Lease within the period prescribed therefor by law or within one
hundred twenty (120) days after entry of the order for relief or as may be
allowed by the court, or if said trustee, Tenant or Tenant as debtor-in-
possession shall fail to provide adequate protection of Landlord's right, title
and interest in and to the Premises or adequate assurance of the complete and
continuous future performance of Tenant's obligations under this Lease,
Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on three (3) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon
30
the expiration of said three (3) day period this Lease shall cease and expire as
aforesaid and Tenant, Tenant as debtor-inpossession or said trustee shall
immediately quit and surrender the Premises as aforesaid.
SECTION 17.3. If, at any time, (i) Tenant shall consist of two (2) or more
Persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (iii) Tenant's interest in this
Lease has been assigned, the word "Tenant" as used and referred to in this
Lease, shall be deemed to mean any one or more of the persons primarily or
secondarily liable for Tenant's obligations under this Lease. Any monies
received by Landlord from or on behalf of Tenant during the pendency of any
proceeding of the types referred to in Section 17.1(D) hereof shall be deemed
paid as compensation for the use and occupancy of the Premises and the
acceptance of any such compensation by Landlord shall not be deemed an
acceptance of Rental or a waiver on the part of Landlord of any rights under
Section 17.2 hereof.
ARTICLE 18
REMEDIES AND DAMAGES
SECTION 18.1.
(A) If any Event of Default shall occur, or this Lease and the Term
shall expire and come to an end as provided in Article 17 hereof:
(1) Tenant shall quit and peacefully surrender the Premises to
Landlord, and Landlord and its agents may immediately, or at any time after such
Event of Default or after the date upon which this Lease and the Term shall
expire and come to an end, re-enter the Premises or any part thereof, without
notice, either by summary proceedings, or by any other applicable action or
proceeding or otherwise (without being liable to indictment, prosecution or
damages therefor), and may repossess the Premises and dispossess Tenant and any
other persons from the Premises by summary proceedings or otherwise and remove
any and all of their property and effects from the Premises (and Tenant shall
remain liable for damages as provided herein or pursuant to law); and
(2) Landlord, at Landlord's option, may relet the whole or any
part or parts of the Premises from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Fixed Expiration Date, at such rent or rentals and upon such
other conditions, which may include concessions and
31
free rent periods, as Landlord, in Landlord's sole discretion, may determine;
provided, however, that Landlord shall have no obligation to relet the Premises
or any part thereof and shall in no event be liable for refusal or failure to
relet the Premises or any part thereof, or, in the event of any such reletting,
for refusal or failure to collect any rent due upon any such reletting, and no
such refusal or failure shall operate to relieve Tenant of any liability under
this Lease or otherwise affect any such liability, and Landlord, at Landlord's
option, may make such Alterations, in and to the Premises as Landlord, in
Landlord's sole discretion, shall consider advisable or necessary in connection
with any such reletting or proposed reletting, without relieving Tenant of any
liability under this Lease or otherwise affecting any such liability.
(B) Tenant hereby waives the service of any notice of intention to
re-enter or to institute legal proceedings to that end that may otherwise be
required to be given under any present or future law. Tenant, on its own behalf
and on behalf of all persons claiming through or under Tenant, including all
creditors of Tenant, does further hereby waive any and all rights that Tenant
and all such persons might otherwise have under any present or future law to
redeem the Premises, or to re-enter or repossess the Premises, or to restore the
operation of this Lease, after (a) Tenant shall have been dispossessed by a
judgment or by warrant of any court, or (b) any re-entry by Landlord, or (c) any
expiration or termination of this Lease and the Term, whether such dispossess,
re-entry, expiration or termination is by operation of law or pursuant to the
provisions of this Lease. The words "re-entry", "re-enter" and "re-entered" as
used in this Lease shall not be deemed to be restricted to their technical legal
meanings. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any term, covenant or condition of
this Lease, Landlord shall have the right to enjoin such breach and the right to
invoke any other remedy allowed by law or in equity as if re-entry, summary
proceedings and other special remedies were not provided in this Lease for such
breach. The right to invoke the remedies hereinbefore set forth are cumulative
and shall not preclude Landlord from invoking any other remedy allowed at law or
in equity.
SECTION 18.2.
(A) If this Lease and the Term shall expire and come to an end as
provided in Article 17 hereof, or by or under any summary proceeding or any
other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 18.1 hereof, or by or under any summary proceeding or any
other action or proceeding, then, in any of said events:
32
(1) Tenant shall pay to Landlord all Fixed Rent, Additional Rent
and other items of Rental payable under this Lease by Tenant to Landlord to the
date upon which this Lease and the Term shall have expired and come to an end or
to the date of re-entry upon the Premises by Landlord, as the case may be;
(2) Tenant also shall be liable for and shall pay to Landlord, as
damages, any deficiency ("DEFICIENCY") between the Rental for the period which
otherwise would have constituted the unexpired portion of the Term and the net
amount, if any, of rents collected under any reletting effected pursuant to the
provisions of Section 18.1(A)(2) for any part of such period (after first
deducting from the rents collected under any such reletting all of Landlord's
expenses in connection with the termination of this Lease, Landlord's re-entry
upon the Premises and such reletting including, but not limited to, all
repossession costs, brokerage commissions, attorneys' fees and disbursements,
alteration costs and other expenses of preparing the Premises for such
reletting); any such Deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for payment of installments of Fixed Rent;
Landlord shall be entitled to recover from Tenant each monthly Deficiency as the
same shall arise, and no suit to collect the amount of the Deficiency for any
month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any Deficiency
as aforesaid, Landlord shall be entitled to recover from Tenant, and Tenant
shall pay to Landlord, on demand, in lieu of any further Deficiency as and for
liquidated and agreed final damages, a sum equal to the amount by which the
unpaid Rental for the period which otherwise would have constituted the
unexpired portion of the Term exceeds the then fair and reasonable rental value
of the Premises for the same period; if, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the Premises, or any
part thereof, are relet by Landlord for the period which otherwise would have
constituted the unexpired portion of the Term, or any part thereof, the amount
of rent reserved upon such reletting shall be deemed, prima facie, to be the
fair and reasonable rental value for the part or the whole of the Premises so
relet during the term of the reletting.
(B) Tenant shall in no event be entitled to any rents collected or
payable under any reletting, whether or not such rents exceed the Fixed Rent
reserved in this Lease. Nothing contained in Article 17 hereof or this Article
18 shall be deemed to limit or preclude the recovery by Landlord from Tenant of
the maximum amount allowed to be obtained as damages by any statute
33
or rule of law, or of any sums or damages to which Landlord may be entitled in
addition to the damages set forth in this Section 18.2.
ARTICLE 19
FEES AND EXPENSES
SECTION 19.1. If an Event of Default shall have occurred, Landlord may (1)
perform the same for the account of Tenant, or (2) make any expenditure or incur
any obligation for the payment of money in connection with any obligation owed
to Landlord, including, but not limited to, reasonable attorneys' fees and
disbursements in instituting, prosecuting or defending any action or proceeding,
and in either case the cost thereof, with interest thereon at the Applicable
Rate, shall be deemed to be Additional Rent hereunder and shall be paid by
Tenant to Landlord within ten (10) days after rendition of any bill or statement
to Tenant therefor. In addition, Tenant shall pay Landlord any reasonable
attorneys' fees and disbursements incurred by Landlord in connection with any
proceeding in which the value for the use and occupancy of the Premises by
Tenant is being determined (whether or not any such proceeding results from a
default by Tenant under this Lease).
SECTION 19.2. If Tenant shall fail to pay any installment of Fixed Rent,
Additional Rent or any other item of Rental for a period longer than five (5)
days after the same shall have become due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent, Additional Rent or other item of
Rental, as the case may be, as a late charge and as Additional Rent, a sum equal
to interest at the Applicable Rate on the amount unpaid, computed from the date
such payment was due, without regard to any such grace period, to and including
the date of payment.
ARTICLE 20
NO REPRESENTATIONS BY LANDLORD
SECTION 20.1. Landlord and Landlord's agents have made no representations
or promises with respect to the Premises except as herein expressly set forth,
and no rights, easements or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth herein. Tenant shall accept possession
of the Premises in its "as is" condition on the Commencement Date, and Landlord
shall have no obligation to perform any work or make any installations in order
to prepare the Premises for Tenant's occupancy. The taking of occupancy of
34
the whole or any part of the Premises by Tenant shall be conclusive evidence, as
against Tenant, that Tenant accepts possession of the same and that the Premises
were in good and satisfactory condition at the time such occupancy was so taken.
All references in this Lease to the consent or approval of Landlord shall be
deemed to mean the written consent or approval executed by Landlord and no other
consent or approval of Landlord shall be effective for any purpose whatsoever.
ARTICLE 21
END OF TERM
SECTION 21.1. Upon the expiration or other termination of this Lease,
Tenant shall quit and surrender to Landlord the Premises, vacant, broom clean,
in good order and condition, ordinary wear and tear excepted, and Tenant shall
remove all of Tenant's Alterations as may be required pursuant to Article 6.
Tenant shall also remove all of Tenant's Property and all other personal
property and personal effects of all persons claiming through or under Tenant,
and shall pay the cost of repairing all damage to the Premises occasioned by
such removal. Any Tenant's Property or other personal property that remains in,
on or at the Premises after the termination of this Lease shall be deemed to
have been abandoned and either may be retained by Landlord as its property or
may be disposed of in such manner as Landlord may see fit. If Tenant's Property
or other personal property or any part thereof is sold, Landlord may receive and
retain the proceeds of such sale as the property of Landlord. Any expense
incurred by Landlord in removing or disposing of Tenant's Property or other
personal property or Alterations required to be removed as provided in Article
6, as well as the cost of repairing all damage to the Premises caused by such
removal, shall be reimbursed to Landlord by Tenant, as Additional Rent, on
demand.
SECTION 21.2. If the Expiration Date falls on a day which is not a Business
Day, then Tenant's obligations under Section 21.1 shall be performed on or prior
to such Business Day.
SECTION 21.3. If the Premises are not surrendered upon the expiration or
other termination of this Lease, Tenant hereby indemnifies Landlord against
liability resulting from delay by Tenant in so surrendering the Premises,
including any claims made by any succeeding tenant or prospective tenant founded
upon such delay and agrees to be liable to Landlord for (i) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the Premises in order to induce such tenant not
to terminate its
35
lease by reason of the holding-over by Tenant and (ii) the loss of the benefit
of the bargain if any such tenant shall terminate its lease by reason of the
holding-over by Tenant.
SECTION 21.4. Tenant's obligations under this Article 21 shall survive the
expiration or termination of this Lease.
ARTICLE 22
POSSESSION
SECTION 22.1. If Landlord shall be unable to deliver possession of the
Premises on the Commencement Date for any reason whatsoever, Landlord shall not
be subject to any liability therefor and the validity of this Lease shall not be
impaired thereby nor the Expiration Date extended, but the Commencement Date
shall be postponed until five (5) Business Days following notice from Landlord
that the Premises are available for occupancy by Tenant. Tenant expressly waives
any right to rescind this Lease under any present or future statute and further
expressly waives the right to recover any damages that may result from
Landlord's failure to deliver possession of the Premises on the Commencement
Date.
ARTICLE 23
NO WAIVER
SECTION 23.1. No act or thing done by Landlord or Landlord's agents during
the Term shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Landlord. No employee of Landlord or of Landlord's agents shall have any power
to accept the keys to the Premises prior to the termination of this Lease. The
delivery of keys to any employee of Landlord or of Landlord's agents shall not
operate as a termination of this Lease or a surrender of the Premises.
SECTION 23.2. The failure of Landlord to seek redress for violation of, or
to insist upon the strict performance of, any covenant or condition of this
Lease shall not prevent a subsequent act, which would have originally
constituted a violation, from having all of the force and effect of an original
violation. The receipt by Landlord of Fixed Rent, Additional Rent or any other
item of Rental with knowledge of the breach of any covenant of this Lease shall
not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord, unless such waiver shall be in writing
and shall be signed by Landlord. No payment by Tenant or receipt by
36
Landlord of a lesser amount than the Rental then due and payable shall be deemed
to be other than on account of the earliest item(s) of Rental, or as Landlord
may elect to apply the same, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance due of the Rental or to otherwise pursue
any other remedy in this Lease provided. This Lease contains the entire
agreement between the parties and all prior negotiations and agreements are
merged herein. Any executory agreement hereafter made shall be ineffective to
change, discharge or effect an abandonment of this Lease in whole or in part
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, discharge or abandonment is sought.
ARTICLE 24
WAIVER OF TRIAL BY JURY
SECTION 24.1. Tenant hereby waives trial by jury in any action or
proceeding brought by or against the Tenant with respect to any matters
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
whether during or after the Term, or for the enforcement of any remedy under any
statute, emergency or otherwise. If Landlord shall commence any summary
proceeding against Tenant, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding, and will not seek to
consolidate such proceeding with any other action which may have been or will be
brought in any other court by Tenant or Landlord.
ARTICLE 25
INABILITY TO PERFORM
SECTION 25.1. This Lease and the obligation of Tenant to pay Rental
hereunder and to perform all of the other covenants and agreements hereunder on
the part of Tenant to be performed shall in no way be affected, impaired or
excused because Landlord is unable to fulfill any of Landlord's obligations
under this Lease, expressly or implicitly to be performed by Landlord, or
because Landlord is unable to make or is delayed in making any repairs, or is
unable to supply or is delayed in supplying any services, if Landlord is
prevented from or delayed in so doing by reason of acts of God, casualty,
strikes or labor troubles, accident, governmental preemption in connection with
an emergency, Requirements, conditions of supply and demand which
37
have been or are affected by war or other emergency, or any other cause
whatsoever, whether similar or dissimilar to the foregoing, beyond Landlord's
reasonable control ("UNAVOIDABLE DELAYS").
ARTICLE 26
NOTICES
SECTION 26.1.
(A) Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease ("NOTICE(S)") shall be in writing and
shall be deemed sufficiently given or rendered if delivered by hand (against a
signed receipt) or if deposited with a nationally recognized overnight courier
and in either case addressed:
IF TO TENANT:
Arrow Stage Lines, Inc.
4801 Woodway, Suite 300E
Houston, TX 77056
Attn: Corporate Secretary
IF TO LANDLORD:
(B) Notices shall be deemed to have been rendered or given (a) on the
date delivered, if delivered by hand, or (b) on
38
the day after being deposited with a nationally recognized overnight courier as
provided in Section 26.1(A) hereof.
ARTICLE 27
LANDLORD'S RIGHT TO TERMINATE
SECTION 27.1 Notwithstanding anything contained herein to the contrary,
the Landlord shall have the sole and exclusive option to terminate this Lease
upon ninety (90) days prior written notice ("TERMINATION NOTICE PERIOD") to the
Tenant in the event that the Landlord shall have received an offer to purchase
the Premises, or any part thereof. Time shall be of the essence with respect to
the Tenant's obligation to vacate the Premises in accordance with the provisions
of Article 21 hereof on or before the expiration of the Termination Notice
Period. In the event that the Tenant shall fail to vacate the Premises as
aforesaid, then in such event, the Landlord shall be entitled to avail itself of
any and all rights and remedies against the Tenant, whether at law, equity or
under and pursuant to the terms and conditions of this Lease including, without
limitation, any rights and/or remedies which may be available to the Landlord in
accordance with the provisions of Article 18 hereof.
ARTICLE 28
BROKER
SECTION 28.1. Landlord represents and warrants to Tenant that Landlord has
not dealt with any broker or Person in connection with this Lease. Tenant
represents and warrants to Landlord that Tenant has not dealt with any broker or
Person in connection with this Lease. The execution and delivery of this Lease
by Tenant shall be conclusive evidence that Tenant acknowledges that Landlord
has relied upon the foregoing representation and warranty. Tenant shall
indemnify and hold harmless Landlord from and against any and all claims for
commission, fee or other compensation by any broker or Person who claims to have
dealt with Tenant in connection with this Lease and for any and all costs
incurred by Landlord in connection with such claims, including, without
limitation, attorneys' fees and disbursements. The provisions of this Article 28
shall survive the expiration or earlier termination of this Lease.
39
ARTICLE 29
INDEMNITY
SECTION 29.1. Tenant shall not do or permit any act or thing to be done in,
at or upon the Premises that may subject any Indemnitee to any liability or
responsibility for injury, damage to persons or property or to any liability by
reason of the existence or application of, compliance with or violation of any
Requirement, but shall exercise such control over the Premises as to protect
each Indemnitee fully against any such liability and responsibility. Tenant
shall indemnify and save harmless the Indemnitees from and against (a) all
claims of whatever nature against the Indemnitees arising from any act, omission
or negligence of Tenant or Persons Within Tenant's Control, (b) all claims
against the Indemnitees arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring in or about
the Premises during the Term or during Tenant's occupancy of the Premises,
unless and to the extent caused by the gross negligence of Landlord or its
shareholders, officers and employees, (c) all claims against the Indemnitees
arising from any accident, injury or damage occurring outside of the Premises
but anywhere within or about the Premises, where such accident, injury or damage
results or is claimed to have resulted from an act, omission or negligence of
Tenant or Persons Within Tenant's Control, and (d) any breach, violation or
non-performance of any covenant, condition or agreement contained in this Lease
to be fulfilled, kept, observed and performed by Tenant. This indemnity and hold
harmless agreement shall include indemnity from and against any and all
liability, claims, fines, suits, demands, costs and expenses of any kind or
nature (including, without limitation, attorneys' fees and disbursements)
incurred in or in connection with any such claim or proceeding brought thereon,
and the defense thereof.
SECTION 29.2. If any claim, action or proceeding is made or brought against
any Indemnitee, against which claim, action or proceeding Tenant is obligated to
indemnify such Indemnitee pursuant to the terms of this Lease, then, upon demand
by the Indemnitee, Tenant, at its sole cost and expense, shall resist or defend
such claim, action or proceeding in the Indemnitee's name, if necessary, by such
attorneys as the Indemnitee may select, including, without limitation, attorneys
for the Indemnitee's insurer. The provisions of this Article 29 shall survive
the expiration or earlier termination of this Lease.
40
ARTICLE 30
ADJACENT EXCAVATION; SHORING
SECTION 30.1. If an excavation shall be made upon land adjacent to the
Premises, or shall be authorized to be made, Tenant shall, upon reasonable
advance notice, afford to the person or entity causing or authorized to cause
such excavation, a limited license to enter upon the Premises for the purpose of
doing such work as said person or entity deems necessary to preserve the walls
of any building located on the Premises from injury or damage and to support the
same by proper foundations without any claim for eviction or constructive
eviction, damages or indemnity against Landlord, or diminution or abatement of
Rental.
ARTICLE 31
RENEWAL OPTIONS
SECTION 31.1. Provided that the Tenant is not in default with respect to
any of its obligations to the Landlord under and pursuant to the terms and
conditions of this Lease at the time each Option (as such term is hereinafter
defined) is to be exercised, the Tenant shall have the option to renew this
Lease for three (3) additional five (5) year periods [the option with respect to
each additional five (5) year period is referred to herein as an "OPTION" and,
collectively, all of the options granted herein are referred to as the
"OPTIONS"] as follows:
OPTION PERIOD 1 shall commence on May 13, 2001 and shall continue up to
and including May 12, 2006.
OPTION PERIOD 2 shall commence on May 13, 2006 and shall continue up to
and including May 12, 2011.
OPTION PERIOD 3 shall commence on May 13, 2011 and shall continue up to
and including May 12, 2016.
(each of the aforementioned option periods individually referred to herein
as an "OPTION PERIOD" and, collectively, all of the aforementioned Option
Periods are referred to herein as "OPTION PERIODS")
SECTION 31.2. Each Option granted to the Tenant pursuant to the provisions
of Section 31.1 hereof shall be exercised by the Tenant giving written notice to
the Landlord of the Tenant's intent to exercise the Option not less than
one-hundred eighty (180) days prior to the expiration of the Initial Term or not
41
less than one-hundred eighty (180) days prior to the expiration of the Option
Period which is then in effect, as the case may be.
SECTION 31.3. In the event that the Tenant exercises the Option with
respect to any Option Period, the Landlord and the Tenant hereby agree that this
Lease shall continue in full force and effect and remain unamended during the
applicable Option Period AND specifically, without limitation, that the Fixed
Rent payable by the Tenant to the Landlord during such Option Period shall be
increased on each anniversary date from and after the Commencement Date in
accordance with the provisions of Article 8 hereof.
ARTICLE 32
RENT REGULATION
SECTION 32.1. If at any time or times during the Term of this Lease, the
Rental reserved in this Lease is not fully collectible by reason of any
Requirement, Tenant shall enter into such agreements and take such other steps
as Landlord may request and as may be legally permissible to permit Landlord to
collect the maximum rents that may from time to time during the continuance of
such legal rent restriction be legally permissible (and not in excess of the
amounts reserved under this Lease). Upon the termination of such legal rent
restriction (a) the Rental shall become and thereafter be payable hereunder in
accordance with the amounts reserved in this Lease for the remainder of the
Term, and (b) Tenant shall pay to Landlord, if legally permissible, an amount
equal to (i) the items of Rental that would have been paid pursuant to this
Lease but for such legal rent restriction less (ii) the rents paid by Tenant to
Landlord during the period or periods such legal rent restriction was in effect.
This provision shall survive the expiration or earlier termination of this Lease
to the maximum enforceable extent.
ARTICLE 33
COVENANT OF QUIET ENJOYMENT
SECTION 33.1 Landlord covenants that, upon Tenant paying all Fixed Rent
and Additional Rent and observing and performing all the terms, agreements,
covenants, provisions and conditions of this Lease on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Premises,
subject nevertheless to the terms and conditions of this Lease; provided,
however, that no eviction of Tenant by reason of the
42
foreclosure of any Mortgage now or hereafter affecting the Premises shall be
construed as a breach of this covenant nor shall any action by reason thereof be
brought against Landlord, and provided further that this covenant shall bind and
be enforceable against Landlord or any successor to Landlord's interest, subject
to the terms hereof, only so long as Landlord or any successor to Landlord's
interest, is in possession and is collecting rent from Tenant but not
thereafter.
ARTICLE 34
MISCELLANEOUS
SECTION 34.1. This Lease is presented for signature by Tenant and it is
understood that this Lease shall not constitute an offer by or be binding upon
Landlord unless and until Landlord shall have executed and delivered a fully
executed copy of this Lease to Tenant.
SECTION 34.2. The obligations of Landlord under this Lease shall not be
binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Premises, as the case may be, and in the event of any such sale,
conveyance, assignment or transfer, Landlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord under this Lease
thereafter arising, and the transferee shall be deemed to have assumed, subject
to the remaining provisions of this Section 34.2, all obligations of the
Landlord under this Lease arising after the effective date of the transfer. No
trustee, partner, principal, shareholder, director or officer of Landlord
(collectively, the "PARTIES") shall have any direct or personal liability for
the performance of Landlord's obligations under this Lease, and Tenant shall
look solely to Landlord's interest in the Premises to enforce Landlord's
obligations hereunder and shall not otherwise seek any damages against Landlord
or any of the Parties whatsoever. Tenant shall not look to any other property or
assets of Landlord or any property or assets of any of the Parties in seeking
either to enforce Landlord's obligations under this Lease or to satisfy a
judgment for Landlord's failure to perform such obligations.
SECTION 34.3. Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Additional Rent or
Rental, shall constitute rent for the purposes of Section 502(b)(7) of the
Bankruptcy Code.
43
SECTION 34.4. Neither this Lease nor any memorandum of this Lease shall be
recorded without the prior written consent of the Landlord, which consent may be
withheld by the Landlord in its sole and absolute discretion.
SECTION 34.5. Except as otherwise expressly stated in this Lease, any
consent or approval required to be obtained from Landlord may be granted by
Landlord in its sole and absolute discretion. In any instance in which Landlord
agrees not to act unreasonably, Tenant hereby waives any claim for damages
against or liability of Landlord that Tenant may have based upon any assertion
that Landlord has unreasonably withheld or unreasonably delayed any consent or
approval requested by Tenant, and Tenant agrees that its sole remedy shall be an
action or proceeding to enforce any related provision or for specific
performance, injunction or declaratory judgment. If with respect to any required
consent or approval Landlord is required by the express provisions of this Lease
not to unreasonably withhold or delay its consent or approval, and if it is
determined in any such proceeding referred to in the preceding sentence that
Landlord acted unreasonably, the requested consent or approval shall be deemed
to have been granted; however, Landlord shall have no liability whatsoever to
Tenant for its refusal or failure to give such consent or approval. Tenant's
sole remedy for Landlord's unreasonably withholding or delaying consent or
approval shall be as provided in this Section 34.5.
SECTION 34.6. Landlord shall have the right at any time, and from time to
time, to amend unilaterally the provisions of this Lease if Landlord is advised
by its counsel that all or any portion of the Rental paid by Tenant to Landlord
hereunder is, or may be deemed to be, unrelated business taxable income within
the meaning of the United States Internal Revenue Code or regulations issued
thereunder, and Tenant agrees that it will execute all documents necessary to
effect any such amendment, provided that no such amendment shall increase
Tenant's payment obligations or other liability under this Lease nor reduce
Landlord's obligations hereunder.
SECTION 34.7. If Tenant shall remain in possession of the Premises after
the Expiration Date, without the execution by both Tenant and Landlord of a new
lease, Tenant, at the election of Landlord, shall be deemed to be occupying the
Premises as a Tenant from month-to-month, at a monthly rental equal to three
(3x) times the Rental payable during the last month of the Term, subject to all
the other conditions, provisions and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy.
SECTION 34.8. This Lease shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Lease to be drafted. If any words or
44
phrases in this Lease are stricken out or otherwise eliminated, whether or not
any other words or phrases have been added, this Lease shall be construed as if
the words or phrases so stricken out or otherwise eliminated were never included
in this Lease and no implication or inference shall be drawn from the fact that
such words or phrases were stricken out or otherwise eliminated.
SECTION 34.9. If any of the provisions of this Lease, or the application
thereof to any person or circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
provisions to persons or circumstances other than those as to whom or which it
is held invalid or unenforceable, shall not be affected thereby and shall remain
valid and enforceable, and every provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
SECTION 34.10. Landlord shall have the right to erect any gate, chain or
other obstruction or to close off any portion of the Premises to the public at
any time to the extent necessary to prevent a dedication thereof for public use.
SECTION 34.11. Tenant hereby represents to Landlord that it is not
entitled, directly or indirectly, to diplomatic or sovereign immunity and Tenant
agrees that in all disputes arising directly or indirectly out of this Lease
Tenant shall be subject to service of process in, and the jurisdiction of the
courts of, the State of Arizona. The provisions of this Section 34.11 shall
survive the expiration of this Lease.
SECTION 34.12. This Lease contains the entire agreement between the parties
and all prior negotiations and agreements are merged into this Lease. Except as
provided in Section 34.6 this Lease may not be changed, abandoned or discharged,
in whole or in part, nor may any of its provisions be waived except by a written
agreement that (a) expressly refers to this Lease, (b) is executed by the party
against whom enforcement of the change, abandonment, discharge or waiver is
sought and (c) is permissible under the Mortgage(s).
SECTION 34.13. Any apportionment or prorations of Rental to be made under
this Lease shall be computed on the basis of a three hundred sixty (360) day
year, with twelve (12) months of thirty (30) days each.
SECTION 34.14. The laws of the State of Arizona applicable to contracts
made and to be performed wholly within the State of Arizona shall govern and
control the validity, interpretation, performance and enforcement of this Lease
without regard to principles of conflicts of law.
45
SECTION 34.15. If Tenant is a corporation, each person executing this Lease
on behalf of Tenant hereby covenants, represents and warrants that Tenant is a
duly incorporated or duly qualified (if foreign) corporation and is authorized
to do business in the State of Arizona (a copy of evidence thereof to be
supplied to Landlord upon request); and that each person executing this Lease on
behalf of Tenant is an officer of Tenant and that he or she is duly authorized
to execute, acknowledge and deliver this Lease to Landlord (a copy of a
resolution to that effect to be supplied to Landlord upon request).
SECTION 34.16. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Lease nor the intent of any provision thereof.
SECTION 34.17. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective legal representatives, heirs, successors, and, except as otherwise
provided in this Lease, their assigns.
SECTION 34.18. For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(A) The words "herein", "hereof", "hereunder" and "hereby"and words of
similar import shall be construed to refer to this Lease as a whole and not to
any particular Article or Section unless expressly so stated.
(B) Tenant's obligations hereunder shall be construed in every instance as
conditions as well as covenants, each separate and independent of any other
terms of this Lease.
(C) Reference to Landlord as having "no liability" or being "without
liability" shall mean that Tenant shall not be entitled to terminate this Lease,
or to claim actual or constructive eviction, partial or total, or to receive any
abatement or diminution of rent, or to be relieved in any manner of any of its
other obligations hereunder, or to be compensated for loss or injury suffered or
to enforce any other right or liability whatsoever against Landlord under or
with respect to this Lease or with respect to Tenant's use or occupancy of the
Premises.
(D) Reference to "termination of this Lease" or "expiration of this Lease"
and words of like import includes expiration or sooner termination of this Lease
and the Term and the estate hereby granted or cancellation of this Lease
pursuant to any of the provisions of this Lease or by law. Upon the termination
of this Lease, the Term
46
and estate granted by this Lease shall end at noon on the date of termination as
if such date were the Fixed Expiration Date, and neither party shall have any
further obligation or liability to the other after such termination except (i)
as shall be expressly provided for in this Lease, and (ii) for such obligations
as by their nature under the circumstances can only be, or by the provisions of
this Lease, may be, performed after such termination, and, in any event, unless
expressly otherwise provided in this Lease, any liability for a payment (which
shall be apportioned as of such termination) which shall have accrued to or with
respect to any period ending at the time of termination shall survive the
termination of this Lease.
(E) Words and phrases used in the singular shall be deemed to include the
plural and vice versa, and nouns and pronouns used in any particular gender
shall be deemed to include any other gender.
(F) The rule of "ejusdem generis" shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as
of the day and year first above written.
BUSSKOHL REALTY, L.L.C., LANDLORD
By: ____________________________
ARROW STAGE LINES, INC. TENANT
By: ____________________________
47
Exhibit 10.20
[Execution Version]
CREDIT AGREEMENT
Among
COACH USA, INC.
as Borrower,
THE FINANCIAL INSTITUTIONS
NAMED IN THIS CREDIT AGREEMENT
as Banks,
and
NATIONSBANK OF TEXAS, N.A.,
as Agent for the Banks
$30,000,000
May 17, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS.............................1
1.1 Certain Defined Terms........................................1
1.2 Computation of Time Periods.................................17
1.3 Accounting Terms; Preparation of Financials.................17
1.4 Types.......................................................17
1.5 Interpretation..............................................18
ARTICLE 2. CREDIT FACILITIES...........................................18
2.1 Revolving Loan Facility.....................................18
2.2 Letter of Credit Facility...................................21
2.3 Fees........................................................24
2.4 Interest....................................................25
2.5 Breakage Costs..............................................28
2.6 Increased Costs.............................................28
2.7 Illegality..................................................29
2.8 Market Failure..............................................29
2.9 Payment Procedures and Computations.........................30
2.10 Taxes.......................................................31
ARTICLE 3. CONDITIONS PRECEDENT........................................33
3.1 Conditions Precedent to Initial Extensions of Credit........33
3.2 Conditions Precedent to Each Extension of Credit............33
ARTICLE 4. REPRESENTATIONS AND WARRANTIES..............................34
4.1 Organization................................................34
4.2 Authorization...............................................34
4.3 Enforceability..............................................34
4.4 Absence of Conflicts and Approvals..........................35
4.5 Investment Companies........................................35
4.6 Public Utilities............................................35
4.7 Financial Condition.........................................35
4.8 Condition of Assets.........................................35
4.9 Litigation..................................................36
4.10 Subsidiaries................................................36
4.11 Laws and Regulations........................................36
4.12 Environmental Compliance....................................36
4.13 ERISA.......................................................37
4.14 Taxes.......................................................37
4.15 True and Complete Disclosure................................37
-i-
ARTICLE 5. COVENANTS...................................................37
5.1 Organization................................................37
5.2 Reporting...................................................38
5.3 Inspection..................................................39
5.4 Use of Proceeds.............................................40
5.5 Financial Covenants.........................................40
5.6 Debt........................................................40
5.7 Liens.......................................................40
5.8 Other Obligations...........................................41
5.9 Corporate Transactions......................................41
5.10 Distributions...............................................42
5.11 Transactions with Affiliates................................42
5.12 Insurance...................................................42
5.13 Investments.................................................43
5.14 Lines of Business; Distribution.............................43
5.15 Compliance with Laws........................................44
5.16 Environmental Compliance....................................44
5.17 ERISA Compliance............................................44
5.18 Payment of Certain Claims...................................44
5.19 Subsidiaries................................................45
ARTICLE 6. DEFAULT AND REMEDIES........................................45
6.1 Events of Default...........................................45
6.2 Termination of Commitments..................................47
6.3 Acceleration of Credit Obligations..........................47
6.4 Cash Collateralization of Letters of Credit.................47
6.5 Default Interest............................................47
6.6 Right of Setoff.............................................47
6.7 Actions Under Credit Documents..............................48
6.8 Remedies Cumulative.........................................48
6.9 Application of Payments.....................................48
ARTICLE 7. THE AGENT AND THE ISSUING BANK....................................48
7.1 Authorization and Action....................................48
7.2 Reliance, Etc...............................................49
7.3 Affiliates..................................................49
7.4 Bank Credit Decision........................................49
7.5 Expenses....................................................50
7.6 Indemnification.............................................50
7.7 Successor Agent and Issuing Bank............................50
-ii-
ARTICLE 8. MISCELLANEOUS...............................................51
8.1 Expenses....................................................51
8.2 Indemnification.............................................51
8.3 Modifications, Waivers, and Consents........................52
8.4 Survival of Agreements......................................52
8.5 Assignment and Participation................................52
8.6 Notice......................................................55
8.7 Choice of Law...............................................55
8.8 Forum Selection.............................................55
8.9 Service of Process..........................................55
8.10 Waiver of Jury Trial........................................56
8.11 Counterparts................................................56
8.12 No Further Agreements.......................................56
-iii-
EXHIBITS
Exhibit A - Form of Compliance Certificate
Exhibit B - Form of Borrowing Request
Exhibit C - Form of Continuation/Conversion Request
Exhibit D - Form of Revolving Loan Note
Exhibit E - Form of Assignment and Acceptance
Exhibit F - Closing Documents List
Exhibit G - Joinder Agreement
SCHEDULES
Schedule I - Administrative Information
Schedule II - Disclosures
-iv-
CREDIT AGREEMENT
This Credit Agreement dated as of May 17, 1996, is among Coach USA,
Inc., a Delaware corporation, as Borrower, the financial institutions named
herein, as Banks, and NationsBank of Texas, N.A., as Agent for the Banks.
The parties hereto agree as follows:
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS.
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (unless otherwise indicated, such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"ADVANCE" means any Revolving Loan Advance.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person or any Subsidiary of such Person. The
term "control" (including the terms "controlled by" or "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership, by contract, or otherwise.
"AGENT" means NationsBank in its capacity as an agent pursuant to
Article 7 and any successor agent pursuant to Section 7.7.
"AGREEMENT" means this Credit Agreement.
"APPLICABLE COMMITMENT FEE MARGIN" means, on any date of its
determination, an amount equal to the percentage amount set forth in the table
below opposite the applicable ratio of (i) the consolidated Funded Debt of the
Borrower as of the end of the fiscal quarter then most recently ended to (ii)
the consolidated EBITDA of the Borrower for the four fiscal quarters then most
recently ended:
FUNDED DEBT TO Applicable Commitment
EBITDA FEE MARGIN
(less than)1.00 0.250%
(greater than or equal to)1.00 but (less than)1.50 0.250%
(greater than or equal to)1.50 but (less than)2.00 0.300%
(greater than or equal to)2.00 but (less than)2.50 0.375%
(greater than or equal to)2.50 0.500%
-1-
The Agent shall determine the Applicable Commitment Fee Margin based upon the
most recent financial statements dated as of the end of a fiscal quarter
delivered to the Agent pursuant to Section 5.2(b). Any adjustments to the
Applicable Commitment Fee Margin shall become effective on the 45th day
following the last day of each fiscal quarter; provided, however, that if such
financial statements are not delivered when required hereunder, the Applicable
Commitment Fee Margin shall increase to the maximum percentage amount set forth
in the table above from such 45th day following the last day of the applicable
quarter until received by the Agent. Upon any change in the Applicable
Commitment Fee Margin, the Agent shall promptly notify the Borrower and the
Banks of the new Applicable Commitment Fee Margin.
"APPLICABLE INTEREST MARGIN" means, for any LIBOR Tranche or Prime Rate
Tranche and as of any date of its determination, an amount equal to the
percentage amount set forth in the table below opposite the applicable ratio of
(i) the consolidated Funded Debt of the Borrower as of the end of the fiscal
quarter then most recently ended to (ii) the consolidated EBITDA of the Borrower
for the four fiscal quarters then most recently ended:
<TABLE>
<CAPTION>
FUNDED DEBT TO Applicable Interest Margin Applicable Interest Margin
EBITDA LIBOR TRANCHES PRIME RATE TRANCHES
<S> <C> <C> <C>
(less than)1.00 1.00% 0.00%
(greater than or equal to)1.00 but (less than)1.50 1.25% 0.00%
(greater than or equal to)1.50 but (less than)2.00% 1.50% 0.25%
(greater than or equal to)2.00 but (less than)2.50% 1.75% 0.50%
(greater than or equal to)2.50 2.25% 1.00%
</TABLE>
The Agent shall determine the Applicable Interest Margin based upon the most
recent financial statements dated as of the end of a fiscal quarter delivered to
the Agent pursuant to Section 5.2(b). Any adjustments to the Applicable Interest
Margin shall become effective on the 45th day following the last day of each
fiscal quarter; provided, however, that if such financial statements are not
delivered when required hereunder, the Applicable Interest Margin shall increase
to the maximum percentage amount set forth in the table above from such 45th day
following the last day of the applicable quarter until received by the Agent.
Upon any change in the Applicable Interest Margin, the Agent shall promptly
notify the Borrower and the Banks of the new Applicable Interest Margin.
"APPLICABLE L/C FEE MARGIN" means an amount equal to the percentage
amount set forth in the table below opposite the applicable ratio of (i) the
consolidated Funded Debt of the Borrower as of the end of the fiscal quarter
then most recently ended (ii) the consolidated EBITDA of the Borrower for the
four fiscal quarters then most recently ended:
-2-
FUNDED DEBT TO Applicable L/C
EBITDA FEE MARGIN
(less than)1.00 1.00%
(greater than or equal to)1.00 but (less than)1.50 1.25%
(greater than or equal to)1.50 but (less than)2.00 1.50%
(greater than or equal to)2.00 but (less than)2.50 1.75%
(greater than or equal to)2.50 2.25%
The Agent shall determine the Applicable L/C Fee Margin based upon the most
recent financial statements dated as of the end of a fiscal quarter delivered to
the Agent pursuant to Section 5.2(b). Any adjustments to the Applicable L/C Fee
Margin shall become effective on the 45th day following the last day of each
fiscal quarter; provided, however, that if such financial statements are not
delivered when required hereunder, the Applicable L/C Fee Margin shall increase
to the maximum percentage amount set forth in the table above from such 45th day
following the last day of the applicable quarter until received by the Agent.
Upon any change in the Applicable L/C Fee Margin, the Agent shall promptly
notify the Borrower and the Banks of the new Applicable L/C Fee Margin.
"APPLICABLE LENDING OFFICE" means, with respect to each Bank and for
any particular type of transaction, the office of such Bank set forth in
SCHEDULE I to this Agreement (or in the applicable Assignment and Acceptance by
which such Bank joined this Agreement) as its applicable lending office for such
type of transaction or such other office of such Bank as such Bank may from time
to time specify in writing to the Borrower and the Agent for such particular
type of transaction.
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance in
substantially the form of EXHIBIT E executed by an assignor Bank, an assignee
Bank, and the Agent, in accordance with Section 8.5.
"BANKS" means the lenders listed as Banks on the signature pages of
this Agreement and each Eligible Assignee that shall become a party to this
Agreement pursuant to Section 8.5(b).
"BORROWER" means Coach USA, Inc., a Delaware corporation.
"BORROWER ACCOUNT" means the principal operating account of Borrower
with the Agent or any other account of Borrower with the Agent which is
designated as Borrower's "Borrower Account" in writing by the Borrower to the
Agent.
"BORROWING" means any Revolving Loan Borrowing.
-3-
"BORROWING BASE" means, at any date of its determination by the Agent,
the sum of (a) 80% of the book value of the consolidated Eligible Accounts of
the Borrower plus (b) 80% of the book value of the consolidated Eligible
Transportation Equipment of the Borrower. The Agent shall determine the book
value of the assets included in the Borrowing Base net of depreciation and based
upon the most recent consolidated balance sheet of the Borrower and its
Subsidiaries as of the date of determination, subject to interim revisions based
upon additional information regarding the Borrowing Base components which
becomes available to the Agent, including casualty reports.
"BORROWING REQUEST" means a Borrowing Request in substantially the form
of EXHIBIT B executed by a Responsible Officer of the Borrower and delivered to
the Agent.
"BUSINESS DAY" means any Monday through Friday during which commercial
banks are open for business in Houston, Texas, Dallas, Texas, and, if the
applicable Business Day relates to any LIBOR Tranche, on which dealings are
carried on in the London interbank market.
"CAPITAL LEASES" means, with respect to any Person, any lease of any
property by such Person which would, in accordance with generally accepted
accounting principles, be required to be classified and accounted for as a
capital lease on the balance sheet of such Person.
"CHANGE OF CONTROL" means, with respect to the Borrower, the direct or
indirect acquisition after the date hereof by any Person or related Persons
constituting a group of (a) beneficial ownership of issued and outstanding
shares of Voting Securities of the Borrower, the result of which acquisition is
that such Person or such group possesses in excess of 50% of the combined voting
power of all then-issued and outstanding Voting Securities of the Borrower, or
(b) the power to elect, appoint, or cause the election or appointment of at
least a majority of the members of the board of directors of the Borrower.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"COMMITMENTS" means the Revolving Loan Commitments.
"COMMONLY CONTROLLED ENTITY" means, with respect to any Person, any
other Person which is under common control with such Person within the meaning
of Section 414 of the Code.
"COMPLIANCE CERTIFICATE" means a compliance certificate executed by a
Responsible Officer of the Borrower in substantially the form of EXHIBIT A.
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"CONTINUATION/CONVERSION REQUEST" means a Continuation/Conversion
Request in substantially the form of EXHIBIT C executed by a Responsible Officer
of the Borrower and delivered to the Agent.
"CREDIT DOCUMENTS" means this Agreement, the Notes, the Letter of
Credit Documents, the Guaranty, the Security Documents, the Interest Hedge
Agreements, and each other agreement, instrument, or document executed at any
time in connection with this Agreement.
"CREDIT OBLIGATIONS" means all principal, interest, fees,
reimbursements, indemnifications, and other amounts now or hereafter owed by the
Borrower to the Agent and the Banks (or with respect to the Interest Hedge
Agreements, any Affiliates of the Banks) under this Agreement, the Notes, the
Letter of Credit Documents, and the other Credit Documents and any increases,
extensions, and rearrangements of those obligations under any amendments,
supplements, and other modifications of the documents and agreements creating
those obligations.
"CREDIT PARTIES" means the Borrower and the Guarantors.
"DEBT" means, with respect to any Person, without duplication, (a)
indebtedness of such Person for borrowed money, (b) obligations of such Person
evidenced by bonds, debentures, notes, or other similar instruments, (c)
obligations of such Person to pay the deferred purchase price of property or
services, (d) obligations of such Person as lessee under Capital Leases, (e)
obligations of such Person under or relating to letters of credit, guaranties,
purchase agreements, or other creditor assurances assuring a creditor against
loss in respect of indebtedness or obligations of others of the kinds referred
to in clauses (a) through (d) of this definition, and (f) indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e) of
this definition secured by any Lien on or in respect of any property of such
Person. For the purposes of determining the amount of any Debt, the amount of
any Debt described in clause (e) of the definition of Debt shall be valued at
the maximum amount of the contingent liability thereunder and the amount of any
Debt described in clause (f) shall be valued at the lesser of the amount of the
Debt secured or the book value of the property securing such Debt.
"DEFAULT" means (a) an Event of Default or (b) any event or condition
which with notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
"DEFAULT RATE" means, with respect to any amount due hereunder, a per
annum interest rate equal to (a) if such amount is either outstanding principal
accruing interest based upon a rate established elsewhere in this Agreement or
accrued but unpaid interest thereon, the sum of (i) the interest rate
established elsewhere in this Agreement from time to time for such principal
amount, including any applicable margin, plus (ii) 3.00% per annum or (b) in
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all other cases, the Prime Rate in effect from time to time plus the Applicable
Interest Margin for Prime Rate Tranches in effect from time to time plus 3.00%
per annum.
"DERIVATIVES" means any swap, hedge, cap, collar, or similar
arrangement providing for the exchange of risks related to price changes in any
commodity, including money.
"DOLLARS OR $" means lawful money of the United States of America.
"EBIT" means, with respect to any Person and for any period of its
determination, the consolidated net income of such Person for such period, plus
the consolidated interest expense and income taxes of such Person for such
period; provided, however, that for the purposes of calculating the consolidated
EBIT of the Borrower, the Borrower shall be deemed to have had the consolidated
EBIT set forth below for each of the corresponding calendar quarters set forth
below:
Calendar Quarter Deemed Consolidated EBIT
ENDED OF THE BORROWER
June 30, 1995 $ 7,123,000
September 30, 1995 $ 7,206,000
December 31, 1995 ($ 341,000)
March 31, 1996 ($ 61,000)
"EBITDA" means, with respect to any Person and for any period of its
determination, the consolidated net income of such Person for such period, plus
the consolidated interest expense, income taxes, and depreciation and
amortization of such Person for such period; provided, however, that for the
purposes of calculating the consolidated EBITDA of the Borrower, the Borrower
shall be deemed to have had the consolidated EBITDA set forth below for each of
the corresponding calendar quarters set forth below:
Calendar Quarter Deemed Consolidated EBITDA
ENDED OF THE BORROWER
June 30, 1995 $ 695,000
September 30, 1995 $8,352,000
December 31, 1995 $8,472,000
March 31, 1996 $ 964,000
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ELIGIBLE ASSIGNEE" means, with respect to any assignment hereunder at
the time of such assignment, any commercial bank organized under the laws of the
United States or any of the countries parties to the Organization for Economic
Cooperation and Development or any political subdivision of any thereof which
has primary capital (or its equivalent) of not
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less than $500,000,000, is approved by the Agent, and, so long as no Event of
Default exists, is approved by the Borrower.
"ELIGIBLE ACCOUNTS" means, with respect to any Person and as of any
date of its determination by the Agent, the accounts receivable of such Person
reflected on the applicable balance sheet of such Person, excluding, however:
(a) accounts receivable in which the Bank does not
have a first priority perfected security interest (including accounts
receivable governed by the Federal Assignment of Claims Act for which
the requirements of such act have not been met) and accounts receivable
which are not "accounts" as such term is defined in the Texas Uniform
Commercial Code (including those represented by any promissory note,
trade acceptance, chattel paper, draft, or other instrument);
(b) accounts receivable which did not arise from an
enforceable order or contract for the absolute and final sale of the
inventory or services of the Borrower and accounts receivable for which
the sales or services have not been fully performed in the ordinary
course of business of the Borrower;
(c) accounts receivable from any account debtor that
has any accounts receivable to the Restricted Entities which are older
than 90 days after the date of the invoice that generated such account
receivable;
(d) accounts receivable which are subject to any
contest or offset, including contra accounts, or which have been
disputed (but only to the extent of the contest, offset, or dispute);
(e) accounts receivable from any account debtor in
excess of 25% of the aggregate outstanding accounts receivable of the
Restricted Entities (but only to the extent of the excess);
(f) accounts receivable which were not generated in
an arm's length transaction or are accounts receivable from any
Affiliate of the Borrower; and
(g) accounts receivable from a Person whose principal
place of business is not located within the United States unless such
accounts are backed by a letter of credit issued or confirmed by a bank
acceptable to the Agent.
"ELIGIBLE TRANSPORTATION EQUIPMENT" means, with respect to any Person
and as of any date of its determination by the Agent, the transportation
equipment of such Person reflected on the applicable balance sheet of such
Person, excluding, however:
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(a) 90 days after the occurrence of any Vehicle Perfection
Event and the Agent's request that the Restricted Entities perfect the
security interests of the Agent on the certificates of title applicable
to the transportation equipment of the Restricted Entities in
accordance with the Security Agreement, transportation equipment in
which the Agent does not have a first priority perfected security
interest securing the Credit Obligations;
(b) transportation equipment that is leased, financed (by
third parties), or otherwise not fully owned by such Person (except
that with respect to certificated vehicles, the tires may be leased by
such Person without excluding the vehicle); and
(c) transportation equipment other than the motor coaches,
trucks, tractors, trailers, and other certificated vehicles of such
Person.
"ENVIRONMENTAL LAW" means all federal, state, and local laws, rules,
regulations, ordinances, orders, decisions, agreements, and other requirements
now or hereafter in effect relating to the pollution, destruction, loss, or
injury of the environment, the presence of any contaminant in the environment,
the protection, cleanup, remediation, or restoration of the environment, the
creation, handling, transportation, use, or disposal of any waste product in the
environment, exposure of persons to any contaminant, waste, or hazardous
substance in the environment, and the health and safety of employees in relation
to their environment.
"EVENT OF DEFAULT" has the meaning specified in Section 6.1.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating per annum
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for any such day on
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any of its successors.
"FUNDED DEBT" means, with respect to any Person, without duplication,
(a) indebtedness of such Person for borrowed money, (b) obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments, (c)
obligations of such Person to pay the deferred purchase price of property or
services (other than accounts payable to trade creditors and current operating
liabilities incurred in the ordinary course of business), and (d) obligations of
such Person as lessee under Capital Leases; provided, however, that for the
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purposes of calculating the consolidated Funded Debt of the Borrower for any
date prior to the date of this Agreement, the Funded Debt of the Borrower shall
be deemed to have been $25,000,000.
"GUARANTY" means the Guaranty dated as of May 17, 1996, made by the
Subsidiaries of the Borrower in favor of the Agent guaranteeing the Credit
Obligations.
"GUARANTORS" means (a) the Subsidiaries of the Borrower listed in
SCHEDULE II that have executed the Guaranty dated as of May 17, 1996, and (b)
any future Subsidiaries of the Borrower that have executed the Guaranty pursuant
to Section 5.19.
"HAZARDOUS MATERIALS" means any substance or material identified as a
hazardous substance pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended and as now or hereafter in
effect; any substance or material regulated as a hazardous waste pursuant to the
Resource Conservation and Recovery Act of 1976, as amended and as now or
hereafter in effect; and any substance or material designated as a hazardous
substance or hazardous waste pursuant to any Environmental Law.
"HIGHEST LAWFUL RATE" means the maximum lawful interest rate, if any,
that at any time or from time to time may be contracted for, charged, or
received under the laws applicable to the relevant Bank which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow. The maximum lawful rate under this
Agreement shall be the weekly indicated rate ceiling under Article 5069-1.04 of
the Texas Revised Civil Statutes, unless any other lawful rate ceiling exceeds
the rate ceiling so determined, and then the higher rate ceiling shall apply.
"INTANGIBLE ASSETS" means, with respect to any Person and as of any
date of its determination, the goodwill, patents, trade names, trade marks,
copyrights, franchises, experimental expense, organization expense, unamortized
debt discount and expense, deferred assets (other than prepaid insurance and
prepaid taxes), the excess of cost of shares acquired over book value of related
assets, and such other assets of such Person as are properly classified as
"intangible assets" in accordance with generally accepted accounting principles.
"INTEREST EXPENSE" means, with respect to any Person and for any period
of its determination, the consolidated interest expense of such Person for such
period, including the interest component of all payments on Capital Leases;
provided, however, that for the
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purposes of calculating the consolidated Interest Expense of the Borrower, the
Borrower shall be deemed to have had the consolidated Interest Expense set forth
below for each of the corresponding calendar quarters set forth below:
Calendar Quarter Deemed Consolidated Interest Expense
ENDED OF THE BORROWER
June 30, 1995 $ 756,000
September 30, 1995 $ 839,000
December 31, 1995 $ 934,000
March 31, 1996 $1,037,000
"INTEREST HEDGE AGREEMENTS" means any swap, hedge, cap, collar, or
similar arrangement between the Borrower and any Bank (or any Affiliate of any
Bank) providing for the exchange of risks related to price changes in the
interest rate on the Advances under this Agreement.
"INTEREST PERIOD" means, with respect to each LIBOR Tranche, the period
commencing on the date of such LIBOR Tranche and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The duration
of each such Interest Period shall be one, two, three, or six months, in each
case as the Borrower may select in the applicable Borrowing Request or
Continuation/Conversion Request (unless there shall exist any Default or Event
of Default, in which case the Borrower may only select one month Interest
Periods); provided, however, that:
(a) whenever the last day of any Interest Period would otherwise occur
on a day other than a Business Day, the last day of such Interest Period shall
be extended to occur on the next succeeding Business Day; provided that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day;
(b) any Interest Period which begins on the last Business Day of the
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month; and
(c) the Borrower may not select an Interest Period for any LIBOR
Tranche under any Loan which ends after any date when outstanding principal
amounts of such Loan must be repaid unless, after giving effect to such
selection, the aggregate outstanding principal amount of Prime Rate Tranches
under such Loan and LIBOR Tranches under such Loan having Interest Periods which
end on or before such repayment date shall be at least equal to or greater than
the principal amount of such Loan due and payable on or before such date
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(and therefore in no event shall any Interest Period for any LIBOR Tranche
extend beyond the applicable Maturity Date).
"ISSUING BANK" means NationsBank and any successor issuing bank
pursuant to Section 7.7.
"LIBOR" means, with respect to any LIBOR Tranche, the per annum
interest rate quoted to the Agent by the funding affiliate of the Agent in
London, England, at which deposits in an amount substantially equal to the
amount of the LIBOR Advance of the Agent comprising part of such Tranche, and
for a duration substantially equal to the Interest Period for such Tranche, are
offered to the principal office of such funding affiliate of the Agent in
London, England, by such funding affiliate's correspondent banks in the London
interbank market three Business Days before the date of such Tranche.
"LIBOR TRANCHE" shall mean any Tranche which bears interest based upon
the LIBOR, as determined in accordance with Section 2.4.
"LETTER OF CREDIT" means any commercial or standby letter of credit
issued by the Issuing Bank for the account of a Borrower pursuant to the terms
of this Agreement.
"LETTER OF CREDIT APPLICATION" means the Issuing Bank's standard form
letter of credit application for either a commercial or standby letter of
credit, as the case may be, which has been executed by a Borrower and accepted
by the Issuing Bank in connection with the issuance of a Letter of Credit.
"LETTER OF CREDIT APPLICATION AMENDMENT" means the Issuing Bank's
standard form application to amend a letter of credit for either a commercial or
standby letter of credit, as the case may be, which has been executed by a
Borrower and accepted by the Issuing Bank in connection with the increase or
extension of a Letter of Credit.
"LETTER OF CREDIT COLLATERAL ACCOUNT" means a special cash collateral
account pledged to the Agent containing cash deposited pursuant to Section 6.4
to be maintained with the Agent in accordance with Section 2.2(f).
"LETTER OF CREDIT DOCUMENTS" means all Letters of Credit, Letter of
Credit Applications, Letter of Credit Application Amendments, and agreements,
documents, and instruments entered into in connection with or relating thereto.
"LETTER OF CREDIT EXPOSURE" means, as of any date of its determination,
the aggregate outstanding undrawn amount of Letters of Credit plus the aggregate
of the reimbursement obligations of the Borrower under the Letter of Credit
Applications and this Agreement.
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"LETTER OF CREDIT SUBLIMIT" means $15,000,000.
"LIEN" means any mortgage, lien, pledge, charge, deed of trust,
security interest, encumbrance, or other type of preferential arrangement to
secure or provide for the payment of any obligation of any Person, whether
arising by contract, operation of law, or otherwise (including any title
retention for such purposes under any conditional sale agreement, any Capital
Lease, or any other title transfer or retention agreement).
"LOAN" means the Revolving Loan.
"MAJORITY BANKS" means, at any time, Banks holding at least 66-2/3% of
the then aggregate unpaid principal amount of the Notes held by the Banks and
the Letter of Credit Exposure of the Banks at such time; provided that if no
such principal amount or Letter of Credit Exposure is then outstanding,
"Majority Banks" shall mean Banks having at least 66- 2/3% of the aggregate
amount of the Commitments at such time.
"MATERIAL ADVERSE CHANGE" means any material adverse change in the
business, operations, or financial condition of the Borrower on a consolidated
basis, or of any of the Borrower's Material Subsidiaries on a consolidated
basis.
"MATERIAL SUBSIDIARY" means any of Suburban Transit Corp., Grosvenor
Bus Lines, Inc., Leisure Time Tours, Community Bus Lines, Inc., Cape Transit
Corp., and Arrow Stage Lines, Inc.
"MATURITY DATE" means the Revolving Loan Maturity Date.
"MINIMUM BORROWING AMOUNT" means, with respect to any Revolving Loan
Borrowing, $1,000,000.
"MINIMUM BORROWING MULTIPLE" means $500,000.
"MINIMUM TRANCHE AMOUNT" means, with respect to any Tranche,
$1,000,000.
"MINIMUM TRANCHE MULTIPLE" means $500,000.
"NATIONSBANK" means NationsBank of Texas, N.A., in its individual
capacity.
"NET WORTH" means, with respect to any Person and as of any date of its
determination, the excess of (a) the assets of such Person over (b) the sum of
the liabilities of such Person.
"NOTE" means any Revolving Loan Note.
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"PBGC" means Pension Benefit Guaranty Corporation or its successor.
"PERMITTED DEBT" means all of the following Debt:
(a) Debt in the form of the Credit Obligations;
(b) Debt in the form of Capital Leases and purchase money
indebtedness (i) existing on the date of this Agreement and listed in
SCHEDULE II or (ii) incurred after the date of this Agreement, provided
that the aggregate outstanding amount of Debt described in clause (i)
and (ii) does not to exceed $10,000,000;
(c) Debt in the form of accounts payable to trade creditors
and current operating liabilities incurred in the ordinary course of
business; and
(d) Debt in the form of obligations owed by Subsidiaries of
the Borrower to the Borrower for advances made by the Borrower to the
Subsidiaries of the Borrower.
"PERMITTED INVESTMENTS" means all of the following
investments:
(a) investments in Subsidiaries of the Borrower;
(b) investments in the form of loans, guaranties, open
accounts, and other extensions of trade credit in the ordinary course
of business;
(c) investments in commercial paper and bankers' acceptances
maturing in twelve months or less from the date of issuance and which,
at the time of acquisition are rated A-2 or better by Standard & Poor's
Corporation and P-2 or better by Moody's Investors Services, Inc;
(d) investments in direct obligations of the United States, or
investments in any Person which investments are guaranteed by the full
faith and credit of the United States, in either case maturing in
twelve months or less from the date of acquisition thereof and
repurchase agreements having a term of less than one year and fully
collateralized by such obligations which are entered into with banks or
trust companies described in clause (e) below or brokerage companies
having net worth in excess of $250,000,000;
(e) investments in time deposits or certificates of deposit
maturing within one year from the date such investment is made, issued
by a bank or trust company organized under the laws of the United
States or any state thereof having capital, surplus, and undivided
profits aggregating at least $250,000,000 or a foreign branch
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thereof and whose long-term certificates of deposit are, at the time of
acquisition thereof, rated A-2 by Standard & Poor's Corporation or
Prime-2 by Moody's Investors Services, Inc.; and
(f) investments in money market funds which invest solely in
the types of investments described in paragraphs (c) through (e) above.
In valuing any investments for the purpose of applying the limitations set forth
in this Agreement, such investments shall be taken at the original cost thereof
(but without reduction for any subsequent appreciation or depreciation thereof)
less any amount actually repaid or recovered on account of capital or principal
(but without reduction for any offsetting investments made by the investee in
the investor). For purposes of this Agreement, at any time when a corporation
becomes a Subsidiary of the Borrower, all investments of such corporation at
such time shall be deemed to have been made by such corporation at such time.
"PERMITTED LIENS" means all of the following Liens:
(a) Liens securing the Credit Obligations;
(b) Liens securing purchase money debt or Capital Leases
permitted under clause (b) of the definition of Permitted Debt,
provided that no such Lien is spread to cover any property not
purchased or leased in connection with the incurrence of such Debt and
that the amount of Debt secured thereby is not increased; and
(c) Liens arising in the ordinary course of business which are
not incurred in connection with the borrowing of money or the obtaining
of advances or credit and which do not materially detract from the
value of any Restricted Entity's assets or materially interfere with
any Restricted Entity's business, including (i) Liens for taxes,
assessments, or other governmental charges or levies; (ii) Liens in
connection with worker's compensation, unemployment insurance, or other
social security, old age pension, or public liability obligations;
(iii) Liens in the form of legal or equitable encumbrances deemed to
exist by reason of negative pledge covenants and other covenants or
undertakings of like nature; (iv) Liens in the form of vendors',
carriers', warehousemen's, repairmen's, mechanics', workmen's,
materialmen's, construction, or other like Liens arising by operation
of law in the ordinary course of business or incident to the
construction or improvement of any property; and (v) Liens in the form
of zoning restrictions, easements, licenses, and other restrictions on
the use of real property or minor irregularities in title thereto which
do not materially impair the use of such property in the operation of
the business of the applicable Restricted Entity or the value of such
property.
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"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, or other entity, or a government or any political subdivision or agency
thereof, or any trustee, receiver, custodian, or similar official.
"PLAN" means any (a) employee medical benefit plan under Section 3(1)
of ERISA, (b) employee pension benefit plan under Section 3(2) of ERISA, (c)
multiemployer plan under Section 4001(a)(3) of ERISA, and (d) employee account
benefit plan under Section 3(2) of ERISA.
"PRIME RATE" means, for any day, the fluctuating per annum interest
rate in effect on such day equal to the rate of interest publicly announced by
the Agent as its prime rate, whether or not the Borrower has notice thereof.
"PRIME RATE TRANCHE" shall mean any Tranche which bears interest based
upon the Prime Rate, as determined in accordance with Section 2.4
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"RATABLE SHARE" OR "PRO RATA SHARE" means, with respect to any Bank and
as of any date of its determination, either (a) the ratio of such Bank's
Commitment at such time to the aggregate Commitments at such time or (b) if the
Commitments have been terminated, the ratio of such Bank's aggregate outstanding
Advances and share of the Letter of Credit Exposure at such time to the
aggregate outstanding Advances and Letter of Credit Exposure at such time.
"REGISTRATION STATEMENT" means the public offering registration
statement of the Borrower referred to in Section 4.7(a).
"RELATED PARTIES" means, with respect to any Person, such Person's
stockholders, directors, officers, employees, agents, Affiliates, successors,
and assigns, and their respective stockholders, directors, officers, employees,
and agents, and, with respect to any Person that is an individual, such Person's
family relations and heirs.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
"RESPONSIBLE OFFICER" means, with respect to any Person, such Person's
Chief Executive Officer, President, Chief Financial Officer, Vice Presidents,
Secretary, Treasurer, or any other officer of such Person designated by any of
the foregoing in writing from time to time.
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"RESTRICTED ENTITIES" means the Borrower and each Subsidiary of the
Borrower.
"REVOLVING LOAN" means the aggregate outstanding principal amount of
the Revolving Loan Borrowings.
"REVOLVING LOAN ADVANCE" means the outstanding principal from a Bank
which represents such Bank's ratable share of a Revolving Loan Borrowing.
"REVOLVING LOAN BORROWING" means any aggregate amount of principal
advanced on the same day and pursuant to the same Borrowing Request under the
revolving loan facility created in Section 2.1.
"REVOLVING LOAN COMMITMENT" means, for any Bank, the amount set forth
below such Bank's name on the signature pages hereof as its Revolving Loan
Commitment, or if such Bank has entered into any Assignment and Acceptance, as
set forth for such Bank as its Revolving Loan Commitment in the Register
maintained by the Agent pursuant to Section 8.5(c), in each case as such amount
may be terminated Section 6.2.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means April 29, 1997.
"REVOLVING LOAN MATURITY DATE" means April 30, 1997.
"REVOLVING LOAN NOTE" means a promissory note of the Borrower payable
to the order of a Bank, in substantially the form as the attached EXHIBIT D,
evidencing the indebtedness of the Borrower to such Bank resulting from
Revolving Loan Advances made by such Bank to the Borrower.
"SECURITY AGREEMENT" means the Security Agreement dated as of May 17,
1996, made by the Borrower and the Subsidiaries of the Borrower in favor of the
Agent granting the Agent a first priority security interest in the accounts
receivable, equipment, and inventory of each such Credit Party to secure Credit
Obligations.
"SECURITY DOCUMENTS" means the Security Agreement and any other
document creating or consenting to Liens in favor of the Agent securing Credit
Obligations.
"SUBSIDIARY" means, with respect to any Person, any other Person, a
majority of whose outstanding Voting Securities (other than directors'
qualifying shares) shall at any time be owned by such Person or one or more
Subsidiaries of such person.
"TANGIBLE ASSETS" means, with respect to any Person and as of any date
of its determination, the assets of such Person less the Intangible Assets of
such Person.
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"TANGIBLE NET WORTH" means, with respect to any Person and as of any
date of its determination, the Net Worth of such Person less the Intangible
Assets of such Person.
"TRANCHE" means any tranche of principal outstanding under the same
Loan accruing interest on the same basis whether created in connection with new
advances of principal under such Loan pursuant to Section 2.4(a)(i) or by the
continuation or conversion of existing tranches of principal under such Loan
pursuant to Section 2.4(a)(ii) and shall include any Prime Rate Tranche or LIBOR
Tranche.
"TYPE" has the meaning set forth in Section 1.4.
"VEHICLE PERFECTION EVENT" means the occurrence of any of the
following: (a) any Default or (b) as of the last day of any fiscal quarter, the
ratio of (i) the consolidated EBIT of the Borrower for the preceding four fiscal
quarters then ended to (ii) the consolidated Interest Expense of the Borrower
for the preceding four fiscal quarters then ended, is less than 3.00 to 1.00.
"VOTING SECURITIES" means (a) with respect to any corporation, any
capital stock of the corporation having general voting power under ordinary
circumstances to elect directors of such corporation, (b) with respect to any
partnership, any partnership interest having general voting power under ordinary
circumstances to elect the general partner or other management of the
partnership, and (c) with respect to any other Person, such ownership interests
in such Person having general voting power under ordinary circumstances to elect
the management of such Person, in each case irrespective of whether at the time
any other class of stock, partnership interests, or other ownership interest
might have special voting power or rights by reason of the happening of any
contingency.
1.2 COMPUTATION OF TIME PERIODS. In this Agreement in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each means "to
but excluding."
1.3 ACCOUNTING TERMS; PREPARATION OF FINANCIALS. All accounting terms,
definitions, ratios, and other tests described herein shall be construed in
accordance with United States generally accepted accounting principles applied
on a consistent basis with those applied in the preparation of the Registration
Statement, except as expressly set forth in this Agreement. The Restricted
Entities shall prepare their financial statements in accordance with United
States generally accepted accounting principles applied on a consistent basis
with those applied in the preparation of the Registration Statement, unless
otherwise approved in writing by the Agent.
1.4 TYPES. The "Type" of a Tranche refers to the determination whether
such tranche is a LIBOR Tranche or a Prime Rate Tranche.
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1.5 INTERPRETATION. Article, Section, Schedule, and Exhibit references
are to this Agreement, unless otherwise specified. All references to
instruments, documents, contracts, and agreements are references to such
instruments, documents, contracts, and agreements as the same may be amended,
supplemented, and otherwise modified from time to time, unless otherwise
specified. The word "including" shall mean "including but not limited to." The
word "or" shall mean "and/or" wherever necessary to prevent interpretation of
any provision against the Agent or the Banks. Whenever the Borrower has an
obligation under this Agreement and the Credit Documents the expense of
complying with that obligation shall be an expense of the Borrower unless
otherwise specified. Whenever any determination is to be made by the Agent or
any Bank, such determination shall be in such Person's sole discretion unless
otherwise specified in this Agreement. If any provision in this Agreement and
the Credit Documents is held to be illegal, invalid, not binding, or
unenforceable, such provision shall be fully severable and this Agreement and
the Credit Documents shall be construed and enforced as if such illegal,
invalid, not binding, or unenforceable provision had never comprised a part of
this Agreement and the Credit Documents, and the remaining provisions shall
remain in full force and effect. This Agreement and the Credit Documents have
been reviewed and negotiated by sophisticated parties with access to legal
counsel and shall not be construed against the drafter. In the event of a
conflict between this Agreement and the Credit Documents, this Agreement shall
control.
ARTICLE 2. CREDIT FACILITIES.
2.1 REVOLVING LOAN FACILITY.
(a) COMMITMENT. Each Bank severally agrees, on the terms and
conditions set forth in this Agreement and for the purposes set forth in Section
5.4, to make Revolving Loan Advances to the Borrower as such Bank's ratable
share of Revolving Loan Borrowings requested by the Borrower from time to time
on any Business Day during the period from the date of this Agreement until the
Revolving Loan Commitment Termination Date provided that the aggregate
outstanding principal amount of Revolving Loan Advances made by such Bank plus
such Bank's ratable share of the Letter of Credit Exposure shall not exceed the
lesser of (i) such Bank's Revolving Loan Commitment or (ii) such Bank's ratable
share of the Borrowing Base. Revolving Loan Borrowings must be made in an amount
equal to or greater than the Minimum Borrowing Amount and be made in multiples
of the Minimum Borrowing Multiple. Within the limits expressed in this
Agreement, the Borrower may from time to time borrow, prepay, and reborrow
Revolving Loan Borrowings. The indebtedness of the Borrower to the Banks
resulting from the Revolving Loan Advances made by the Banks shall be evidenced
by Revolving Loan Notes made by the Borrower.
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(b) METHOD OF ADVANCING
(i) Each Revolving Loan Borrowing shall be made
pursuant to a Borrowing Request given by the Borrower to the Agent in writing or
by telecopy not later than the time required pursuant to Section 2.4(a)(i) to
select the interest rate basis for the Revolving Loan Borrowing. Each Borrowing
Request shall be fully completed and shall specify the information required
therein, and shall be irrevocable and binding on the Borrower unless such
Borrowing Request is rejected by the Agent as incomplete or improper. If the
Borrowing Request is accepted by the Agent, the Agent shall promptly forward
notice of the Revolving Loan Borrowing to the Banks. Each Bank shall, before
2:00 p.m. (local time at the Applicable Lending Office of the Agent) on the date
of the requested Revolving Loan Borrowing, make available from its Applicable
Lending Office to the Agent at the Agent's Applicable Lending Office, in
immediately available funds, such Bank's ratable share of such Revolving Loan
Borrowing. Subject to the satisfaction of all applicable conditions precedent,
after receipt by the Agent of such funds, the Agent shall before close of
business on the date requested for such Revolving Loan Borrowing make such
Revolving Loan Borrowing available to the Borrower in immediately available
funds at the Borrower Account.
(ii) Unless the Agent shall have received notice from
a Bank before the date of any Revolving Loan Borrowing that such Bank shall not
make available to the Agent such Bank's ratable share of such Revolving Loan
Borrowing, the Agent may assume that such Bank has made its ratable share of
such Revolving Loan Borrowing available to the Agent on the date of such
Revolving Loan Borrowing in accordance with paragraph (i) above and the Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Bank shall not have
so made its ratable share of such Revolving Loan Borrowing available to the
Agent, such Bank agrees that it shall pay interest on such amount for each day
from the date such amount is made available to the Borrower by the Agent until
the date such amount is paid to the Agent by such Bank at the Federal Funds Rate
in effect from time to time, provided that with respect to such Bank if such
amount is not paid by such Bank by the end of the second day after the Agent
makes such amount available to the Borrower, the interest rates specified above
shall be increased by a per annum amount equal to 2.00% on the third day and
shall remain at such increased rate thereafter. Interest on such amount shall be
due and payable by such Bank upon demand by the Agent. If such Bank shall pay to
the Agent such amount and interest as provided above, such amount so paid shall
constitute such Bank's Revolving Loan Advance as part of such Revolving Loan
Borrowing for all purposes of this Agreement even though not made on the same
day as the other Advances comprising such Revolving Loan Borrowing. In the event
that such Bank has not repaid such amount by the end of the fifth day after such
amount was made available to the Borrower, the Borrower agrees to repay to the
Agent on demand such amount, together with interest on such amount for each day
from the date such amount was made available to the Borrower
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until the date such amount is repaid to the Agent at the interest rate charged
to the Borrower for such Revolving Loan Borrowing under the terms of this
Agreement.
(iii) The failure of any Bank to make available its
ratable share of any Revolving Loan Borrowing shall not relieve any other Bank
of its obligation, if any, to make available its ratable share of such Revolving
Loan Borrowing. No Bank shall be responsible for the failure of any other Bank
to honor such other Bank's obligations hereunder, including any failure to make
available any funds as part of any Revolving Loan Borrowing.
(c) PREPAYMENT.
(i) The Borrower may prepay the outstanding principal
amount of Revolving Loan pursuant to written notice given by the Borrower to the
Agent in writing or by telecopy not later than (A) 2:00 p.m. (local time at the
Applicable Lending Office of the Agent) on the third Business Day before the
date of the proposed prepayment, in the case of the prepayment of any portion of
the Revolving Loan which is comprised of LIBOR Tranches, or (B) 12:00 noon
(local time at the Applicable Lending Office of the Agent) on the same Business
Day of the proposed prepayment, in the case of the prepayment of any portion of
the Revolving Loan comprised solely of Prime Rate Tranches. Each such notice
shall specify the principal amount and the Tranches of the Revolving Loan which
shall be prepaid, the date of the prepayment, and shall be irrevocable and
binding on the Borrower. Prepayments of the Revolving Loan shall be made in
integral multiples of the Minimum Borrowing Multiple. If the prepayment would
cause the aggregate outstanding principal amount of any LIBOR Tranche comprising
the Revolving Loan or the aggregate outstanding principal amount of all Prime
Rate Tranches comprising the Revolving Loan, to be less than the Minimum Tranche
Amount, the prepayment must be in an amount equal to the entire outstanding
principal amount of such LIBOR Tranche under the Revolving Loan or the entire
outstanding principal amount of all such Prime Rate Tranches under the Revolving
Loan, as the case may be. Upon receipt of any notice of prepayment, the Agent
shall give prompt notice of the intended prepayment to the Banks. For each such
notice given by the Borrower, the Borrower shall prepay the Revolving Loan in
the specified amount on the specified date as set forth in such notice. The
Borrower shall have no right to prepay any principal amount of the Revolving
Loan except as provided in this Section 2.1(c)(i).
(ii) If the aggregate outstanding principal amount of
the Revolving Loan plus the Letter of Credit Exposure ever exceeds the Borrowing
Base or the Commitments, the Borrower shall, upon receipt of written notice of
such condition from the Agent and to the extent of such excess, prepay to the
Agent for the ratable benefit of the Banks outstanding principal of the
Revolving Loan, and, if the Revolving Loan has been repaid in full, make
deposits into the Letter of Credit Collateral Account to provide cash collateral
for the Letter of Credit Exposure, such that such excess is eliminated.
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(iii) Each prepayment of principal of any LIBOR
Tranche under the Revolving Loan pursuant to this Section 2.1(c) shall be
accompanied by payment of all accrued but unpaid interest on the principal
amount prepaid and any amounts required to be paid pursuant to Section 2.5 as a
result of such prepayment.
(d) REPAYMENT. The Borrower shall pay to the Agent for the
ratable benefit of the Banks the aggregate outstanding principal amount of the
Revolving Loan on the Revolving Loan Maturity Date.
2.2 LETTER OF CREDIT FACILITY.
(a) COMMITMENT FOR LETTERS OF CREDIT. The Issuing Bank shall,
on the terms and conditions set forth in this Agreement and for the purposes set
forth in Section 5.4, issue, increase, and extend Letters of Credit at the
request of the Borrower from time to time on any Business Day during the period
from the date of this Agreement until the Revolving Loan Commitment Termination
Date provided that (i) the Letter of Credit Exposure shall not exceed the Letter
of Credit Sublimit and (ii) the aggregate outstanding principal amount of
Revolving Loan Borrowings plus the Letter of Credit Exposure shall not exceed
the lesser of (A) the aggregate amount of the Revolving Loan Commitments or (B)
the Borrowing Base. No Letter of Credit may have an expiration date later than
12 months after its issuance date, and each Letter of Credit which is
self-extending beyond its expiration date must be cancelable upon at least 30
days notice given by the Issuing Bank to the beneficiary of such Letter of
Credit. No Letter of Credit may have an expiration date later than 12 months
after the Revolving Loan Commitment Termination Date unless approved by the
Issuing Bank, the Agent, and the Banks. Each Letter of Credit must be in form
and substance acceptable to the Issuing Bank. The indebtedness of the Borrower
to the Issuing Bank resulting from Letters of Credit requested by the Borrower
shall be evidenced by the Letter of Credit Applications made by the Borrower.
(b) REQUESTING LETTERS OF CREDIT. Each Letter of Credit shall
be issued, increased, or extended pursuant to a Letter of Credit Application or
Letter of Credit Application Amendment, as applicable, given by the Borrower to
the Issuing Bank in writing or by telecopy promptly confirmed in writing, such
Letter of Credit Application or Letter of Credit Application Amendment being
given not later than 2:00 p.m. (local time at the Applicable Lending Office of
the Agent) on the third Business Day before the date of the proposed issuance,
increase, or extension of the Letter of Credit. Each Letter of Credit
Application or Letter of Credit Application Amendment shall be fully completed
and shall specify the information required therein (including the proposed form
of the Letter of Credit or change thereto), and shall be irrevocable and binding
on the Borrower unless such Letter of Credit Application or Letter of Credit
Application Amendment is rejected by the Issuing Bank as incomplete or improper.
If the Issuing Bank accepts the Letter of Credit Application or Letter of Credit
Application Amendment, the Issuing Bank shall give prompt notice
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thereof to the Agent, and the Agent shall promptly inform the Banks of the
proposed Letter of Credit or change thereto. Subject to the satisfaction of all
applicable conditions precedent, the Issuing Bank shall before close of business
on the date requested by the Borrower for the issuance, increase, or extension
of such Letter of Credit issue, increase, or extend such Letter of Credit to the
specified beneficiary. Upon the date of the issuance, increase, or extension of
a Letter of Credit, the Issuing Bank shall be deemed to have sold to each other
Bank and each other Bank shall be deemed to have purchased from the Issuing Bank
a ratable participation in the related Letter of Credit. The Issuing Bank shall
notify the Agent of each Letter of Credit issued, increased, or extended and the
date and amount of each Bank's participation in such Letter of Credit, and the
Agent shall in turn notify the Banks.
(c) REIMBURSEMENTS FOR LETTERS OF CREDIT. With respect to any
Letter of Credit and in accordance with the related Letter of Credit
Application, the Borrower agrees to pay to the Issuing Bank on demand of the
Issuing Bank any amount due to the Issuing Bank under such Letter of Credit
Application (provided that fees due with respect to such Letter of Credit shall
be payable as specified in Section 2.3(c)). If the Borrower does not pay upon
demand of the Issuing Bank any amount due to the Issuing Bank under any Letter
of Credit Application, in addition to any rights the Issuing Bank may have under
such Letter of Credit Application, the Issuing Bank may upon written notice to
the Agent request the satisfaction of such obligation by the making of a
Revolving Loan Borrowing. Upon such request, the Borrower shall be deemed to
have requested the making of a Revolving Loan Borrowing in the amount of such
obligation and the transfer of the proceeds thereof to the Issuing Bank. Such
Revolving Loan Borrowing shall be comprised of a Prime Rate Tranche. The Agent
shall promptly forward notice of such Revolving Loan Borrowing to the Borrower
and the Banks, and each Bank shall, in accordance with the procedures of Section
2.1(b), other than limitations on the size of Revolving Loan Borrowings, and
notwithstanding the failure of any conditions precedent, make available such
Bank's ratable share of such Revolving Loan Borrowing to the Agent, and the
Agent shall promptly deliver the proceeds thereof to the Issuing Bank for
application to such Bank's share of the obligations under such Letter of Credit.
The Borrower hereby unconditionally and irrevocably authorizes, empowers, and
directs the Issuing Bank to make such requests for Revolving Loan Borrowings on
behalf of the Borrower, and the Banks to make Revolving Loan Advances to the
Agent for the benefit of the Issuing Bank in satisfaction of such obligations.
The Agent and each Bank may record and otherwise treat the making of such
Revolving Loan Borrowings as the making of a Revolving Loan Borrowing to the
Borrower under this Agreement as if requested by the Borrower. Nothing herein is
intended to release the Borrower's obligations under any Letter of Credit
Application, but only to provide an additional method of payment therefor. The
making of any Borrowing under this Section 2.2(c) shall not constitute a cure or
waiver of any Default or Event of Default caused by the Borrower's failure to
comply with the provisions of this Agreement or any Letter of Credit
Application.
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(d) OBLIGATIONS UNCONDITIONAL. The obligations of the Borrower
and each Bank under this Agreement and the Letter of Credit Applications to
reimburse the Issuing Bank for draws under Letters of Credit and to make other
payments due in respect of Letters of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and the Letter of Credit Applications under all circumstances,
including: (i) any lack of validity or enforceability of any Letter of Credit
Document; (ii) any amendment, waiver, or consent to departure from any Letter of
Credit Document; (iii) the existence of any claim, set-off, defense, or other
right which the Borrower or any Bank may have at any time against any
beneficiary or transferee of any Letter of Credit (or any Persons for whom any
such beneficiary or any such transferee may be acting), the Issuing Bank, or any
other person or entity, whether in connection with the transactions contemplated
in this Agreement or any unrelated transaction; (iv) any statement or any other
document presented under such Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or (v) payment by the Issuing Bank under any Letter
of Credit against presentation of a draft or certificate which does not comply
with the terms of such Letter of Credit; provided, however, that nothing
contained in this paragraph (d) shall be deemed to constitute a waiver of any
remedies of the Borrower or any Bank in connection with the Letters of Credit or
the Borrower's or such Bank's rights under paragraph (e) below.
(e) LIABILITY OF ISSUING BANK. The Issuing Bank shall not be
liable or responsible for: (i) the use which may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (ii) the validity, sufficiency, or genuineness of documents related
to Letters of Credit, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient, fraudulent, or
forged; (iii) payment by the Issuing Bank against presentation of documents
which do not strictly comply with the terms of a Letter of Credit, including
failure of any documents to bear any reference or adequate reference to the
relevant Letter of Credit; or (iv) any other circumstances whatsoever in making
or failing to make payment under any Letter of Credit (INCLUDING THE ISSUING
BANK'S OWN NEGLIGENCE); except that the Issuing Bank shall be liable to the
Borrower or any Bank to the extent of any direct, as opposed to consequential,
damages suffered by the Borrower or such Bank which the Borrower or such Bank
proves were caused by (A) the Issuing Bank's gross negligence or willful
misconduct in determining whether documents presented under a Letter of Credit
comply with the terms of such Letter of Credit or (B) the Issuing Bank's willful
failure to make or delay in making lawful payment under any Letter of Credit
after the presentation to it of documentation strictly complying with the terms
and conditions of such Letter of Credit.
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(f) LETTER OF CREDIT COLLATERAL ACCOUNT.
(i) If the Borrower is required to deposit funds in
the Letter of Credit Collateral Account pursuant to Section 6.4, then the
Borrower and the Agent shall establish the Letter of Credit Collateral Account
and the Borrower shall execute any documents and agreements, including the
Agent's standard form assignment of deposit accounts, that the Agent requests in
connection therewith to establish the Letter of Credit Collateral Account and
grant the Agent a first priority security interest in such account and the funds
therein. The Borrower hereby pledges to the Agent and grants the Agent a
security interest in the Letter of Credit Collateral Account, whenever
established, all funds held in the Letter of Credit Collateral Account from time
to time, and all proceeds thereof as security for the payment of the
Obligations.
(ii) During the existence of any Event of Default,
funds held in the Letter of Credit Collateral Account shall be held as cash
collateral for obligations with respect to Letters of Credit and promptly
applied by the Agent to any reimbursement or other obligations under Letters of
Credit that exist or occur. To the extent that any surplus funds are held in the
Letter of Credit Collateral Account above the Letter of Credit Exposure, the
Agent may (A) hold such surplus funds in the Letter of Credit Collateral Account
as cash collateral for the Credit Obligations or (B) apply such surplus funds to
any Credit Obligations in accordance with Section 6.9. Upon cure of all Events
of Default, the Agent shall release to the Borrower at the Borrower's written
request any funds held in the Letter of Credit Collateral Account.
(iii) Funds held in the Letter of Credit Collateral
Account shall be invested in money market funds of the Agent or in another
investment if mutually agreed upon by the Borrower with funds held in the Letter
of Credit Collateral Account and the Agent, but the Agent shall have no other
obligation to make any other investment of the funds therein. The Agent shall
exercise reasonable care in the custody and preservation of any funds held in
the Letter of Credit Collateral Account and shall be deemed to have exercised
such care if such funds are accorded treatment substantially equivalent to that
which the Agent accords its own property, it being understood that the Agent
shall not have any responsibility for taking any necessary steps to preserve
rights against any parties with respect to any such funds.
2.3 FEES.
(a) COMMITMENT FEES. The Borrower shall pay to the Agent for
the ratable benefit of the Banks a commitment fee in an amount equal to the
product of the Applicable Commitment Fee Margin in effect from time to time
multiplied by the average daily amount by which (i) the aggregate amount of the
Revolving Loan Commitments exceeds (ii) the aggregate outstanding principal
amount of the Revolving Loan plus the
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Letter of Credit Exposure. The commitment fee shall be due and payable in
arrears on the last day of each calendar quarter and the Revolving Loan
Commitment Termination Date.
(b) UPFRONT FEE. The Borrower shall pay to the Agent for the
ratable benefit of the Banks an upfront fee equal to 0.25% of the amount of the
Revolving Loan Commitments. Such fee shall be due and payable at closing.
(c) FEES FOR LETTERS OF CREDIT.
(i) For each Letter of Credit issued by the Issuing
Bank, the Borrower shall pay to the Agent for the benefit of the Banks a letter
of credit fee equal to the Applicable L/C Fee Margin per annum on the face
amount of such Letter of Credit for the stated term of such Letter of Credit,
with a minimum fee of $500. The Borrower shall pay such letter of credit fee for
the Issuing Bank for each Letter of Credit upon issuance or within ten days
after when billed therefor by the Issuing Bank.
(ii) The Borrower shall have no right to any refund
of letter of credit fees previously paid by the Borrower, including any refund
claimed because the Borrower reduces the amount of any Letter of Credit or
cancels any Letter of Credit prior to its expiration date.
2.4 INTEREST.
(a) ELECTION OF INTEREST RATE BASIS. The Borrower may select
the interest rate basis for each Loan to the Borrower in accordance with the
terms of this Section 2.4(a):
(i) Under the Borrowing Request provided to the Agent
in connection with the making of each Borrowing under any Loan, the Borrower
shall select the amount and the Type of the Tranches, and for each LIBOR Tranche
selected, any permitted Interest Period for each such LIBOR Tranche, which will
comprise such Borrowing, provided that (A) at no time shall there be more than
six separate LIBOR Tranches outstanding under any Loan and (B) each Tranche must
be in a principal amount equal to or greater than the Minimum Tranche Amount and
be made in multiples of the Minimum Tranche Multiple. Such interest rate
elections must be provided to the Agent in writing or by telecopy not later than
2:00 p.m. (local time at the Applicable Lending Office of the Agent) on the
third Business Day before the date of any proposed Borrowing comprised of a
LIBOR Tranche or 12:00 noon (local time at the Applicable Lending Office of the
Agent) on the same day of any proposed Borrowing comprised solely of a Prime
Rate Tranche. In the case of any Borrowing comprised of a LIBOR Tranche, upon
determination by the Agent, the Agent shall promptly notify the Borrower and the
Banks of the applicable interest rate to such Tranche.
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(ii) With respect to any Tranche under any Loan, the
Borrower may continue or convert any portion of any LIBOR Tranche or Prime Rate
Tranche to form new LIBOR Tranches or Prime Rate Tranches under the same Loan in
accordance with this paragraph. Each such continuation or conversion shall be
deemed to create a new Tranche for all purposes of this Agreement. Each such
continuation or conversion shall be made pursuant to a Continuation/Conversion
Request given by the Borrower to the Agent in writing or by telecopy not later
than 2:00 p.m. (local time at the Applicable Lending Office of the Agent) on the
third Business Day before the date of the proposed continuation or conversion.
Each Continuation/Conversion Request shall be fully completed and shall specify
the information required therein, and shall be irrevocable and binding on the
Borrower. If the Continuation/Conversion Request is accepted by the Agent, the
Agent shall promptly forward notice of the continuation or conversion to the
Banks. In the case of any continuation or conversion into LIBOR Tranches, upon
determination by the Agent, the Agent shall notify the Borrower and the Banks of
the applicable interest rate. Continuations and conversions of Tranches shall be
made in integral multiples of the Minimum Tranche Multiple. No continuation or
conversion shall be permitted if such continuation or conversion would cause the
aggregate outstanding principal amount of any LIBOR Tranche which would remain
outstanding or the aggregate outstanding principal amount of all Prime Rate
Tranches which would remain outstanding to be less than the Minimum Tranche
Amount. At no time shall there be more than six separate LIBOR Tranches
outstanding under any Loan. Any conversion of an existing LIBOR Tranche is
subject to Section 2.5. Subject to the satisfaction of all applicable conditions
precedent, the Agent and the Banks shall before close of business on the date
requested by the Borrower for the continuation or conversion, make such
continuation or conversion.
(iii) At the end of the Interest Period for any LIBOR
Tranche if the Borrower has not continued or converted such LIBOR Tranche into
new Tranches as provided for in paragraph (ii) above, the Borrower shall be
deemed to have continued such LIBOR Tranche as a new LIBOR Tranche under the
same Loan with an Interest Period of one month. Each Prime Rate Tranche shall
continue as a Prime Rate Tranche under the same Loan unless the Borrower
converts such Prime Rate Tranche as provided for in paragraph (ii) above.
(b) LIBOR TRANCHES. Each LIBOR Tranche shall bear interest
during its Interest Period at a per annum interest rate equal to the sum of the
LIBOR for such Tranche plus the Applicable Interest Margin for LIBOR Tranches in
effect from time to time. The Borrower shall pay to the Agent for the ratable
benefit of the Banks all accrued but unpaid interest on each LIBOR Tranche on
the last day of the applicable Interest Period for such LIBOR Tranche (and with
respect to LIBOR Tranches with Interest Periods of greater than three months, on
the date which is three months after the first date of the Interest Period for
such LIBOR Tranche), when required upon prepayment as specified elsewhere in
this Agreement, on any date when any portion of any LIBOR Tranche is prepaid in
full (but only
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to the extent of the portion of any such LIBOR Tranche is prepaid), and on the
applicable Maturity Date for each such LIBOR Tranche.
(c) PRIME RATE TRANCHES. Each Prime Rate Tranche shall bear
interest at a per annum interest rate equal to the Prime Rate in effect from
time to time plus the Applicable Interest Margin for Prime Rate Tranches in
effect from time to time. The Borrower shall pay to the Agent for the ratable
benefit of the Banks all accrued but unpaid interest on outstanding Prime Rate
Tranches on the last day of each calendar quarter, when required upon prepayment
as specified elsewhere in this Agreement, on any date all Prime Rate Tranches
are prepaid in full, and on the applicable Maturity Date for each such Prime
Rate Tranche.
(d) USURY PROTECTION.
(i) If, with respect to any Bank and the Borrower,
the effective rate of interest contracted for by such Bank with the Borrower
under the Credit Documents, including the stated rates of interest contracted
for hereunder and any other amounts contracted for under the Credit Documents
which are deemed to be interest, at any time exceeds the Highest Lawful Rate,
then the outstanding principal amount of the loans made by such Bank to the
Borrower hereunder shall bear interest at a rate which would make the effective
rate of interest on the loans made by such Bank to the Borrower under the Credit
Documents equal the Highest Lawful Rate until the difference between the amounts
which would have been due by the Borrower to such Bank at the stated rates and
the amounts which were due by the Borrower to such Bank at the Highest Lawful
Rate (the "Lost Interest") has been recaptured by such Bank. If, when the loans
made hereunder are repaid in full, the Lost Interest has not been fully
recaptured by such Bank pursuant to the preceding paragraph, then, to the extent
permitted by law, the interest rates charged by such Bank to the Borrower
hereunder shall be retroactively increased such that the effective rate of
interest on the loans made by such Bank to the Borrower under the Credit
Documents was at the Highest Lawful Rate since the effectiveness of this
Agreement to the extent necessary to recapture the Lost Interest not recaptured
pursuant to the preceding sentence and, to the extent allowed by law, the
Borrower shall pay to such Bank the amount of the Lost Interest remaining to be
recaptured by such Bank.
(ii) In calculating all sums paid or agreed to be
paid to any Bank by the Borrower for the use, forbearance, or detention of money
under the Credit Documents, such amounts shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread in equal parts
throughout the term of the Credit Documents.
(iii) NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM
IN THIS AGREEMENT AND THE CREDIT DOCUMENTS TO THE CONTRARY, it is the intention
of each Bank and the Borrower to conform strictly to any
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applicable usury laws. Accordingly, if any Bank contracts for, charges, or
receives any consideration from the Borrower which constitutes interest in
excess of the Highest Lawful Rate, then any such excess shall be canceled
automatically and, if previously paid, shall at such Bank's option be applied to
the outstanding amount of the loans made hereunder by such Bank to the Borrower
or be refunded to the Borrower.
2.5 BREAKAGE COSTS. If (i) any payment of principal on or any
conversion of any LIBOR Tranche is made on any date other than the last day of
the Interest Period for such LIBOR Tranche, whether as a result of any voluntary
or mandatory prepayment, any acceleration of maturity, or any other cause, (ii)
any payment of principal on any LIBOR Tranche is not made when due, or (iii) any
LIBOR Tranche is not borrowed, converted, or prepaid in accordance with the
respective notice thereof provided by the Borrower to the Agent, whether as a
result of any failure to meet any applicable conditions precedent for borrowing,
conversion, or prepayment, the permitted cancellation of any request for
borrowing, conversion, or prepayment, the failure of the Borrower to provide the
respective notice of borrowing, conversion, or prepayment, or any other cause
not specified above which is created by the Borrower, then the Borrower shall
pay to each Bank upon demand any amounts required to compensate such Bank for
any losses, costs, or expenses, including lost profits and administrative
expenses, which are reasonably allocable to such action, including losses,
costs, and expenses related to the liquidation or redeployment of funds acquired
or designated by such Bank to fund or maintain such Bank's ratable share of such
LIBOR Tranche or related to the reacquisition or redesignation of funds by such
Bank to fund or maintain such Bank's ratable share of such LIBOR Tranche
following any liquidation or redeployment of such funds caused by such action. A
certificate as to the amount of such loss, cost, or expense detailing the
calculation thereof and certifying that such Bank customarily charges such
amounts to its other customers in similar circumstances submitted by such Bank
to the Borrower shall be conclusive and binding for all purposes, absent
manifest error.
2.6 INCREASED COSTS.
(a) COST OF FUNDS. If due to either (i) any introduction of,
change in, or change in the interpretation of any law or regulation after the
date of this Agreement or (ii) compliance with any guideline or request from any
central bank or other governmental authority having appropriate jurisdiction
(whether or not having the force of law) given after the date of this Agreement,
there shall be any increase in the costs of any Bank allocable to (x) committing
to make any Advance or obtaining funds for the making, funding, or maintaining
of such Bank's ratable share of any LIBOR Tranche in the relevant interbank
market or (y) committing to make Letters of Credit or issuing, funding, or
maintaining Letters of Credit (including any increase in any applicable reserve
requirement specified by the Federal Reserve Board, including those for
emergency, marginal, supplemental, or other reserves), then the Borrower shall
pay to such Bank upon demand any amounts required to
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compensate such Bank for such increased costs, such amounts being due and
payable upon demand by such Bank. A certificate as to the cause and amount of
such increased cost detailing the calculation of such cost and certifying that
such Bank customarily charges such amounts to its other customers in similar
circumstances submitted by such Bank to the Borrower shall be conclusive and
binding for all purposes, absent manifest error. No Bank may make any claim for
compensation under this Section 2.6(a) for increased costs incurred before 90
days prior to the delivery of any such certificate.
(b) CAPITAL ADEQUACY. If, due to either (i) any introduction
of, change in, or change in the interpretation of any law or regulation after
the date of this Agreement or (ii) compliance with any guideline or request from
any central bank or other governmental authority having appropriate jurisdiction
(whether or not having the force of law) given after the date of this Agreement,
there shall be any increase in the capital requirements of any Bank or its
parent or holding company allocable to (x) committing to make Advances or
making, funding, or maintaining Advances or (y) committing to make Letters of
Credit or issuing, funding, or maintaining Letters of Credit, as such capital
requirements are allocated by such Bank, then the Borrower shall pay to such
Bank upon demand any amounts required to compensate such Bank or its parent or
holding company for such increase in costs (including an amount equal to any
reduction in the rate of return on assets or equity of such Bank or its parent
or holding company), such amounts being due and payable upon demand by such
Bank. A certificate as to the cause and amounts detailing the calculation of
such amounts and certifying that such Bank customarily charges such amounts to
its other customers in similar circumstances submitted by such Bank to the
Borrower shall be conclusive and binding for all purposes, absent manifest
error. No Bank may make any claim for compensation under this Section 2.6(b) for
increased costs incurred before 90 days prior to the delivery of any such
certificate.
2.7 ILLEGALITY. Notwithstanding any other provision in this Agreement,
if it becomes unlawful for any Bank to obtain deposits or other funds for making
or funding such Bank's ratable share of any LIBOR Tranche in the relevant
interbank market, such Bank shall so notify the Borrower and the Agent and such
Bank's commitment to create LIBOR Tranches shall be suspended until such
condition has passed, all LIBOR Tranches applicable to such Bank shall be
converted to Prime Rate Tranches as of the end of each applicable Interest
Period or earlier if necessary, and all subsequent requests for LIBOR Tranches
shall be deemed to be requests for Prime Rate Tranches with respect to such
Bank.
2.8 MARKET FAILURE. Notwithstanding any other provision in this
Agreement, if the Agent determines that: (a) quotations of interest rates for
the relevant deposits referred to in the definition of "LIBOR" are not being
provided in the relevant amounts, or maturities for purposes of determining the
rate of interest referred to in the definition of "LIBOR" or (b) the relevant
rates of interest referred to in the definition of "LIBOR" which are used as the
basis to determine the rate of interest for LIBOR Tranches are not likely to
adequately
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cover the cost to any Bank of making or maintaining such Bank's ratable share of
any LIBOR Tranche, then if the Agent so notifies the Borrower, the Agent and the
Banks' commitment to create LIBOR Tranches shall be suspended until such
condition has passed, all LIBOR Tranches shall be converted to Prime Rate
Tranches as of the end of each applicable Interest Period or earlier if
necessary, and all subsequent requests for LIBOR Tranches shall be deemed to be
requests for Prime Rate Tranches.
2.9 PAYMENT PROCEDURES AND COMPUTATIONS.
(a) PAYMENT PROCEDURES. Time is of the essence in this
Agreement and the Credit Documents. All payment hereunder shall be made in
Dollars. The Borrower shall make each payment under this Agreement and under the
Notes not later than 12:00 noon (local time at the Applicable Lending Office of
the Agent) on the day when due to the Agent at the Agent's Applicable Lending
Office in immediately available funds. All payments by the Borrower hereunder
shall be made without any offset, abatement, withholding, or reduction. Upon
receipt of payment from the Borrower of any principal, interest, or fees due to
the Banks, the Agent shall promptly after receipt thereof distribute to the
Banks their ratable share of such payments for the account of their respective
Applicable Lending Offices. Upon receipt of other amounts due solely to the
Agent, the Issuing Bank, or a specific Bank, the Agent shall distribute such
amounts to the appropriate party to be applied in accordance with the terms of
this Agreement.
(b) AGENT RELIANCE. Unless the Agent shall have received
written notice from the Borrower prior to any date on which any payment is due
to the Banks that the Borrower shall not make such payment in full, the Agent
may assume that the Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such date an amount equal to the amount then due
such Bank. If and to the extent the Borrower shall not have so made such payment
in full to the Agent, each Bank shall repay to the Agent forthwith on demand
such amount distributed to such Bank, together with interest thereon from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Agent, at an interest rate equal to, the Federal Funds Rate
in effect from time to time, provided that with respect to such Bank, if such
amount is not repaid by such Bank by the end of the second day after the date of
the Agent's demand, the interest rates specified above shall be increased by a
per annum amount equal to 2.00% on the third day after the date of the Agent's
demand and shall remain at such increased rate thereafter.
(c) SHARING OF PAYMENTS. Each Bank agrees that if it should
receive any payment (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise) in respect of any obligation of the Borrower to pay principal,
interest, fees, or any other obligation incurred under the Credit Documents
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in a proportion greater than the total amount of such principal, interest, fees,
or other obligation then owed and due by the Borrower to such Bank bears to the
total amount of principal, interest, fees, or other obligation then owed and due
by the Borrower to all of the Banks immediately prior to such receipt, then such
Bank receiving such excess payment shall purchase for cash without recourse from
the other Banks an interest in the obligations of the Borrower to such Banks in
such amount as shall result in a proportional participation by all of the Banks
in the aggregate unpaid amount of principal, interest, fees, or any such other
obligation, as the case may be, owed by the Borrower to all of the Banks;
provided that if all or any portion of such excess payment is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
(d) AUTHORITY TO CHARGE ACCOUNTS. The Agent, if and to the
extent payment owed to the Agent or any Bank is not made when due, may charge
from time to time against any account of the Borrower with the Agent any amount
so due. The Agent agrees promptly to notify the Borrower after any such charge
and application made by the Agent provided that the failure to give such notice
shall not affect the validity of such charge and application.
(e) INTEREST AND FEES. Unless expressly provided for in this
Agreement, (i) all computations of interest based on the Prime Rate shall be
made on the basis of a 365/366 day year, as the case may be, (ii) all
computations of interest based on the Federal Funds Rate shall be made on the
basis of a 360 day year, (iii) all computations of interest based upon the LIBOR
shall be made on the basis of a 360 day year, and (iv) all computations of fees
shall be made on the basis of a 360 day year, in each case for the actual number
of days (including the first day, but excluding the last day) occurring in the
period for which such interest or fees are payable. Each determination by the
Agent of an interest rate or fee shall be conclusive and binding for all
purposes, absent manifest error.
(f) PAYMENT DATES. Whenever any payment shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be.
If the time for payment for an amount payable is not specified in this Agreement
or in any other Credit Document, the payment shall be due and payable on demand
by the Agent or the applicable Bank.
2.10 TAXES.
(a) NO DEDUCTION FOR CERTAIN TAXES. Any and all payments by
the Borrower shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges, or
withholdings, and all liabilities with respect thereto, other than taxes imposed
on the income and franchise taxes imposed on the
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Agent, any Bank, or the Applicable Lending Office thereof by any jurisdiction in
which any such entity is a citizen or resident or any political subdivision of
such jurisdiction (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable to the Agent, any Bank, or the Applicable Lending
Office thereof, (i) the sum payable shall be increased as may be necessary so
that, after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.10), such Person receives an amount
equal to the sum it would have received had no such deductions been made; (ii)
the Borrower shall make such deductions; and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) OTHER TAXES. The Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies which arise from any payment made or from the
execution, delivery, or registration of, or otherwise with respect to, this
Agreement or the other Credit Documents (other than those which become due as a
result of any Bank joining this Agreement as a result of any Assignment and
Acceptance, which shall be paid by the Bank which becomes a Bank hereunder as a
result of such Assignment and Acceptance).
(c) FOREIGN BANK WITHHOLDING EXEMPTION. Each Bank and Issuing
Bank that is not incorporated under the laws of the United States of America or
a state thereof agrees that it shall deliver to the Borrower and the Agent (i)
two duly completed copies of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be, certifying in each case
that such Bank is entitled to receive payments under this Agreement and the
Notes payable to it, without deduction or withholding of any United States
federal income taxes, (ii) if applicable, an Internal Revenue Service Form W-8
or W-9 or successor applicable form, as the case may be, to establish an
exemption from United States backup withholding tax, and (iii) any other
governmental forms which are necessary or required under an applicable tax
treaty or otherwise by law to reduce or eliminate any withholding tax, which
have been reasonably requested by the Borrower. Each Bank which delivers to the
Borrower and the Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the
next preceding sentence further undertakes to deliver to the Borrower and the
Agent two further copies of the said letter and Form 1001 or 4224 and Form W-8
or W-9, or successor applicable forms, or other manner of certification, as the
case may be, on or before the date that any such letter or form expires or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent letter and form previously delivered by it to the Borrower and the
Agent, and such extensions or renewals thereof as may reasonably be requested by
the Borrower and the Agent certifying in the case of a Form 1001 or 4224 that
such Bank is entitled to receive payments under this Agreement without deduction
or withholding of any United States federal income taxes. If an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any
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delivery required by the preceding sentence would otherwise be required which
renders all such forms inapplicable or which would prevent any Bank from duly
completing and delivering any such letter or form with respect to it and such
Bank advises the Borrower and the Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal income
tax, and in the case of a Form W-8 or W-9, establishing an exemption from United
States backup withholding tax, such Bank shall not be required to deliver such
letter or forms. The Borrower shall withhold tax at the rate and in the manner
required by the laws of the United States with respect to payments made to a
Bank failing to provide the requisite Internal Revenue Service forms in a timely
manner. Each Bank which fails to provide to the Borrower in a timely manner such
forms shall reimburse the Borrower upon demand for any penalties paid by the
Borrower as a result of any failure of the Borrower to withhold the required
amounts that are caused by such Bank's failure to provide the required forms in
a timely manner.
ARTICLE 3. CONDITIONS PRECEDENT.
3.1 CONDITIONS PRECEDENT TO INITIAL EXTENSIONS OF CREDIT. The
obligation of each Bank to make the initial extension of credit under this
Agreement, including the making of any Advances and the issuance of any Letters
of Credit, shall be subject to the conditions precedent that:
(a) DOCUMENTS. The Borrower shall have delivered or shall have
caused to be delivered the documents and other items listed on EXHIBIT F,
together with any other documents requested by the Agent to document the
agreements and intent of the Credit Documents, each in form and with substance
satisfactory to the Agent;
(b) INITIAL PUBLIC OFFERING. The Agent shall have received
evidence satisfactory to the Agent that the Borrower's proposed initial public
offering shall have been completed to the satisfaction of the Agent in
conformity with laws and on conditions and terms satisfactory to the Agent,
including the Borrower's receipt of not less than $30,000.00 of net proceeds in
immediately available funds, from such an offering; and
(c) MERGERS. The Agent shall have received evidence
satisfactory to the Agent that the mergers and other transactions described in
the Registration Statement shall have been completed to the satisfaction of the
Agent in conformity with laws and on conditions and terms satisfactory to the
Agent.
3.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. The obligation of
each Bank to make any extension of credit under this Agreement, including the
making of any Advances and the issuance, increase, or extension of any Letters
of Credit, shall be subject to the further conditions precedent that on the date
of such extension of credit:
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(a) REPRESENTATIONS AND WARRANTIES. As of the date of the
making of any extension of credit hereunder, the representations and warranties
contained in each Credit Document shall be true and correct in all material
respects as of such date (and the Borrower's request for the making of any
extension of credit hereunder shall be deemed to be a restatement,
representation, and additional warranty of the representations and warranties
contained in each Credit Document as of such date);
(b) DEFAULT. As of the date of the making of any extension of
credit hereunder, there shall exist no Default or Event of Default, and the
making of the extension of credit would not cause or be reasonably expected to
cause a Default or Event of Default; and
(c) MATERIAL ADVERSE CHANGE. There shall not have occurred any
Material Adverse Change.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Agent and each Bank, and with each request for any extension of credit
hereunder, including the making of any Advances and the issuance, increase, or
extension of any Letters of Credit, again represents and warrants to the Agent
and each Bank, as follows:
4.1 ORGANIZATION. As of the date of this Agreement, each Restricted
Entity (a) is duly organized, validly existing, and in good standing under the
laws of such Person's respective jurisdiction of organization and (b) is duly
licensed, qualified to do business, and in good standing in each jurisdiction in
which such Person is organized, owns property, or conducts operations to the
extent that any failure to be so licensed, qualified, or in good standing could
reasonably be expected to cause a Material Adverse Change.
4.2 AUTHORIZATION. The execution, delivery, and performance by each
Credit Party of the Credit Documents to which such Credit Party is a party and
the consummation of the transactions contemplated thereby (a) do not contravene
the organizational documents of such Credit Party, (b) have been duly authorized
by all necessary corporate action of each Credit Party, and (c) are within each
Credit Party's corporate powers.
4.3 ENFORCEABILITY. Each Credit Document to which any Credit Party is a
party has been duly executed and delivered by each Credit Party which is a party
to such Credit Document and constitutes the legal, valid, and binding obligation
of each such Credit Party, enforceable against each such Credit Party in
accordance with such Credit Document's terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws at the time
in effect affecting the rights of creditors generally and subject to the
availability of equitable remedies.
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4.4 ABSENCE OF CONFLICTS AND APPROVALS. The execution, delivery, and
performance by each Credit Party of the Credit Documents to which such Credit
Party is a party and the consummation of the transactions contemplated thereby,
(a) do not result in any violation or breach of any provisions of, or constitute
a default under, any note, indenture, credit agreement, security agreement,
credit support agreement, or other similar agreement to which such Credit Party
is a party or any other material contract or agreement to which such Credit
Party is a party, (b) do not violate any law or regulation binding on or
affecting such Credit Party, (c) do not require any authorization, approval, or
other action by, or any notice to or filing with, any governmental authority,
and (d) do not result in or require the creation or imposition of any Lien
prohibited by this Agreement.
4.5 INVESTMENT COMPANIES. No Restricted Entity or Affiliate thereof is
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
4.6 PUBLIC UTILITIES. No Restricted Entity or Affiliate thereof is a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended. No Restricted Entity or Affiliate thereof is a regulated public
utility.
4.7 FINANCIAL CONDITION.
(a) The Borrower has delivered to the Agent the Registration
Statement for the Borrower dated as of May 14, 1996, including therein the
proforma combined balance sheet of the Borrower following the public offering of
securities contemplated therein and proforma combined statement of income for
the periods shown therein. Each of these financial statements are accurate and
complete in all material respects and present fairly the financial condition of
Borrower, as of such date in accordance with generally accepted accounting
principles.
(b) As of the date of the Registration Statement, there were
no material contingent obligations, liabilities for taxes, unusual forward or
long-term commitments, or unrealized or anticipated losses of the Borrower or
any of the Borrower's Subsidiaries, except as disclosed in the Registration
Statement and adequate reserves for such items have been made in accordance with
generally accepted accounting principles. No Material Adverse Change has
occurred since the date of the Registration Statement. No Default exists.
4.8 CONDITION OF ASSETS. Each Restricted Entity has good and
indefeasible title to substantially all of its owned property and valid
leasehold rights in all of its leased property, as reflected in the financial
statements most recently provided to the Agent free and
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clear of all Liens except Permitted Liens. Each Restricted Entity possesses all
permits, licenses, patents, patent rights or licenses, trademarks, trademark
rights, trade names rights, and copyrights which are useful in the conduct of
its business and which the failure to possess could reasonably be expected to
cause a Material Adverse Change. The material properties used or to be used in
the continuing operations of each Restricted Entity are in good repair, working
order, and condition, normal wear and tear excepted. The properties of each
Restricted Entity have not been adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of property or cancellation of
contracts, permits, or concessions by a governmental authority, riot, activities
of armed forces, or acts of God or of any public enemy in any manner which
(after giving effect to any insurance proceeds) could reasonably be expected to
cause a Material Adverse Change.
4.9 LITIGATION. There are no actions, suits, or proceedings pending or,
to the knowledge of any Restricted Entity, threatened against any Restricted
Entity at law, in equity, or in admiralty, or by or before any governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, or any arbitrator which could reasonably be expected to cause a
Material Adverse Change.
4.10 SUBSIDIARIES. As of the date of this Agreement, the Borrower has
no Subsidiaries except as disclosed in SCHEDULE II. The Borrower has no
Subsidiaries which have not been disclosed in writing to the Agent.
4.11 LAWS AND REGULATIONS. Each Restricted Entity has been and is in
compliance with all federal, state, and local laws and regulations which are
applicable to the operations and property of such Person and which the failure
to comply with could reasonably be expected to cause a Material Adverse Change.
4.12 ENVIRONMENTAL COMPLIANCE. Each Restricted Entity has been and is
in compliance with all Environmental Laws and has obtained and is in compliance
with all related permits necessary for the ownership and operation of any such
Person's properties which the failure to be in compliance with could reasonably
be expected to cause a Material Adverse Change. Each Restricted Entity has never
received notice of and has never been investigated for any violation or alleged
violation of any Environmental Law in connection with any such Person's
presently or previously owned properties which threaten action or suggest
liabilities which could reasonably be expected to cause a Material Adverse
Change. Each Restricted Entity does not and has not created, handled,
transported, used, or disposed of any Hazardous Materials on or about any such
Person's properties (nor has any such Person's properties been used for those
purposes), except in compliance with all Environmental Laws and related permits;
has never been responsible for the release of any Hazardous Materials into the
environment in connection with any such Person's operations and have not
contaminated any properties with Hazardous Materials; and does not and has
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not owned any properties contaminated by any Hazardous Materials, in each case
in any manner which could reasonably be expected to cause a Material Adverse
Change. For the purposes of this Section 4.12, any losses covered by the
Borrower's reserve for environmental losses set forth on its balance sheet as
reflected in the Registration Statement shall be excluded in determining whether
any Material Adverse Change has occurred.
4.13 ERISA. Each Restricted Entity and each of their respective
Commonly Controlled Entities are in compliance in all material respects with all
provisions of ERISA. No Restricted Entity nor any of their respective Commonly
Controlled Entities participates in or during the past five years has
participated in any employee pension benefit plan covered by Title IV of ERISA
or any multiemployer plan under Section 4001(a)(3) of ERISA. With respect to the
Plans of the Restricted Entities, no Material Reportable Event or Prohibited
Transaction has occurred and exists.
4.14 TAXES. Each Restricted Entity has filed all United States federal,
state, and local income tax returns and all other domestic and foreign tax
returns which are required to be filed by such Person and has paid, or provided
for the payment before the same became delinquent of, all taxes due pursuant to
such returns or pursuant to any assessment received by the such Person except
for tax payments being contested in good faith for which adequate reserves have
been made and reported in accordance with general accepted accounting principals
and which could not reasonably be expected to cause a Material Adverse Change.
The charges, accruals, and reserves on the books of the Restricted Entities in
respect of taxes are adequate in accordance with generally accepted accounting
principles.
4.15 TRUE AND COMPLETE DISCLOSURE. All factual information furnished by
or on behalf of any Credit Party in writing to the Agent or any Bank in
connection with the Credit Documents and the transactions contemplated thereby
is true and accurate in all material respects on the date as of which such
information was dated or certified and does not contain any untrue statement of
material fact or omit to state any material fact necessary to make the
statements contained therein not misleading. All projections, estimates, and pro
forma financial information furnished by any Credit Party were prepared on the
basis of assumptions, data, information, tests, or conditions believed to be
reasonable at the time such projections, estimates, and pro forma financial
information were furnished.
ARTICLE 5. COVENANTS. Until the Agent and the Banks receive irrevocable payment
of the Credit Obligations and have terminated this Agreement and each other
Credit Document, the Borrower shall comply with and cause compliance with the
following covenants:
5.1 ORGANIZATION. The Borrower shall cause each Restricted Entity to
(a) maintain itself as an entity duly organized, validly existing, and in good
standing under the laws of each such Person's respective jurisdiction of
organization and (b) duly licensed, qualified to
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do business, and in good standing in each jurisdiction in which such Person is
organized, owns property, or conducts operations and which requires such
licensing or qualification and where failure to be so licensed, qualified, or in
good standing could reasonably be expected to cause a Material Adverse Change.
5.2 REPORTING. The Borrower shall furnish to the Agent all of the
following:
(a) ANNUAL FINANCIAL REPORTS. As soon as available and in any
event not later than 120 days after the end of each fiscal year of the Borrower,
(i) a copy of the annual audit report for such fiscal year for the Borrower,
including therein the consolidated balance sheets of the Borrower as of the end
of such fiscal year and the consolidated statements of income, stockholders'
equity, and cash flows for the Borrower for such fiscal year, setting forth the
consolidated financial position and results of the Borrower for such fiscal year
and certified, without any qualification or limit of the scope of the
examination of matters relevant to the financial statements, by a nationally
recognized certified public accounting firm; (ii) the consolidating schedules
used to prepare the financial statements described in clause (i) above; and
(iii) a completed Compliance Certificate duly certified by a Responsible Officer
of the Borrower;
(b) QUARTERLY FINANCIAL REPORTS. As soon as available and in
any event not later than 45 days after the end of each fiscal quarter, (i) a
copy of the internally prepared consolidated financial statements of the
Borrower for such fiscal quarter and for the fiscal year to date period ending
on the last day of such fiscal quarter, including therein the consolidated
balance sheets of the Borrower as of the end of such fiscal quarter and the
consolidated statements of income, and cash flows for such fiscal quarter and
for such fiscal year to date period, setting forth the consolidated financial
position and results of the Borrower for such fiscal quarter and fiscal year to
date period, all in reasonable detail and duly certified by a Responsible
Officer of the Borrower as having been prepared in accordance with generally
accepted accounting principles, including those applicable to interim financial
reports which permit normal year end adjustments and do not require complete
financial notes and (ii) a completed Compliance Certificate duly certified by a
Responsible Officer of the Borrower;
(c) BORROWING BASE CALCULATION; ACCOUNTS RECEIVABLE AGING. As
soon as available and in any event not later than 45 days after the end of each
fiscal quarter other than the last fiscal quarter or 90 days after the end of
the last fiscal quarter, (i) a calculation of the Borrowing Base, and (ii) a
summary aging of the Borrower's accounts receivable, both in reasonable detail
and duly certified by a Responsible Officer of the Borrower; PROVIDED that upon
the Agent's request, the Borrower shall furnish to the Agent a full aging of the
Borrower's accounts receivable and supporting information duly certified by a
Responsible Officer of the Borrower.
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(d) SEC FILINGS. As soon as available and in any event not
later than thirty days after the filing or delivery thereof, copies of all
financial statements, reports, and proxy statements which the Borrower shall
have sent to its stockholders generally and copies of all regular and periodic
reports, if any, which any Restricted Entity shall have filed with the
Securities and Exchange Commission;
(e) DEFAULTS. Promptly, but in any event within five Business
Days after the discovery thereof, a notice of any facts known to any Restricted
Entity which constitute a Default, together with a statement of a Responsible
Officer of the Borrower setting forth the details of such facts and the actions
which the Borrower has taken and proposes to take with respect thereto;
(f) LITIGATION; MATERIAL CONTINGENT LIABILITIES; MATERIAL
AGREEMENT DEFAULT. The Borrower shall provide to the Agent:
(i) promptly after the commencement thereof, notice
of all actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting any Restricted Entity which, if determined adversely, could
reasonably be expected to cause a Material Adverse Change;
(ii) promptly after acquiring knowledge thereof,
notice of any material contingent liabilities; and
(iii) promptly after obtaining knowledge thereof,
notice of any breach by any Restricted Entity of any contract or agreement which
breach could reasonably be expected to cause a Material Adverse Change;
(g) MATERIAL CHANGES. Prompt written notice of any condition
or event of which any Restricted Entity has knowledge, which condition or event
has resulted or could reasonably be expected to cause a Material Adverse Change;
and
(h) OTHER INFORMATION. Such other information respecting the
business operations or property of any Restricted Entity, financial or
otherwise, as the Agent or the Majority Banks may from time to time reasonably
request.
5.3 INSPECTION. The Borrower shall cause each Restricted Entity to
permit the Agent and the Banks to visit and inspect any of the properties of
such Restricted Entity, to examine all of such Person's books of account,
records, reports, and other papers, to make copies and extracts therefrom, and
to discuss their respective affairs, finances, and accounts with their
respective officers, employees, and independent public accountants all at such
reasonable times and as often as may be reasonably requested provided that the
Borrower is
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given at least one Business Day advance notice thereof and reasonable
opportunity to be present when independent public accountants or other third
parties are contacted.
5.4 USE OF PROCEEDS. The proceeds of the Revolving Loan Borrowings
shall be used by the Borrower only for general corporate and working capital
purposes, including refinancing existing indebtedness of the Borrower and its
Subsidiaries and making Capital Expenditures for transportation equipment, and
for financing acquisitions of motor coach companies in accordance with Section
5.10. The Borrower shall not, directly or indirectly, use any part of such
proceeds for any purpose which violates, or is inconsistent with, Regulations G,
T, U, or X of the Board of Governors of the Federal Reserve System.
5.5 FINANCIAL COVENANTS.
(a) FUNDED DEBT TO EBITDA RATIO. As of the last day of each
fiscal quarter of the Borrower, the Borrower shall not permit the ratio of (i)
the consolidated Funded Debt of the Borrower as of end of the fiscal quarter
then ended to (ii) the consolidated EBITDA of the Borrower for the preceding
four fiscal quarters then ended, to be greater than 3.00 to 1.00.
(b) INTEREST COVERAGE RATIO. As of the last day of each fiscal
quarter, the Borrower shall not permit the ratio of (i) the consolidated EBIT of
the Borrower for the preceding four fiscal quarters then ended to (ii) the
consolidated Interest Expense of the Borrower for the preceding four fiscal
quarters then ended, to be less than 1.25 to 1.00.
(c) TANGIBLE NET WORTH. The Borrower shall not permit the
consolidated Tangible Net Worth of the Borrower as of the last day of each
fiscal quarter to be less than the sum of (i) $30,000,000, plus (ii) 75% of the
cumulative annual consolidated net earnings of the Borrower for each fiscal year
during which the Borrower has positive consolidated net earnings (and therefore
without reduction for any annual consolidated net losses), plus (iii) the net
proceeds or net increase in equity resulting from any sale or issuance of any
stock of the Borrower or its Subsidiaries since the date of this Agreement;
provided that earnings, proceeds, and other financial results from any
Subsidiary of the Borrower prior to the date such Subsidiary became a Subsidiary
of the Borrower shall be excluded in such calculations.
5.6 DEBT. The Borrower shall not permit any Restricted Entity to
create, assume, incur, suffer to exist, or in any manner become liable,
directly, indirectly, or contingently in respect of, any Debt other than
Permitted Debt.
5.7 LIENS. The Borrower shall not permit any Restricted Entity to
create, assume, incur, or suffer to exist any Lien on any of its real or
personal property whether now owned or hereafter acquired, or assign any right
to receive its income, except for Permitted Liens.
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<PAGE>
5.8 OTHER OBLIGATIONS.
(a) The Borrower shall not permit any Restricted Entity to
create, incur, assume, or suffer to exist any obligations in respect of unfunded
vested benefits under any pension Plan or deferred compensation agreement.
(b) The Borrower shall not permit any Restricted Entity to
create, incur, assume, or suffer to exist any obligations in respect of
Derivatives, other than Derivatives used by any Restricted Entity in such
Restricted Entity's respective business operations in aggregate notional
quantities not to exceed the reasonably anticipated consumption of such
Restricted Entity of the underlying commodity for the relevant period, but no
Derivatives which are speculative in nature.
5.9 CORPORATE TRANSACTIONS. No Restricted Entity shall (a) merge,
consolidate, or amalgamate with another Person, or liquidate, wind up, or
dissolve itself (or take any action towards any of the foregoing), (b) directly
or indirectly purchase or acquire, whether in one or more related transactions
any Person or any related group of assets, liabilities, or securities of any
Person, or (c) convey, sell, lease, assign, transfer, or otherwise dispose of
any of its property, businesses, or other assets except that:
(i) Any Subsidiary of the Borrower may merge, consolidate, or
amalgamate into any wholly owned Subsidiary of the Borrower or convey,
sell, lease, assign, transfer, or otherwise dispose of any of its
assets to any wholly-owned Subsidiary of the Borrower (and if such
disposition transfers all or substantially all of the assets of
transferring Subsidiary, such subsidiary may then liquidate, wind up,
or dissolve itself); provided that the wholly-owned Subsidiary is the
surviving or acquiring Subsidiary;
(ii) Any Subsidiary of the Borrower may merge, consolidate, or
amalgamate with another Person or purchase or acquire any related group
of assets, liabilities, or securities of another Person provided that
(A) the Subsidiary of the Borrower is the surviving or acquiring
entity, (B) the aggregate consideration paid or incurred by the
Restricted Entities in connection with all such mergers and
acquisitions by the Restricted Entities during any fiscal year of the
Borrower, including cash, indebtedness, assumed indebtedness, and stock
of Subsidiaries, but excluding common stock of the Borrower, does not
exceed $20,000,000, (C) the Agent is given advance written notice of
the transaction and reasonable opportunity to determine compliance with
this Agreement, (D) no Default or Event of Default exists and the
making the purchase or acquisition would not be reasonably expected to
cause a Default or Event of Default, (E) the purchased or acquired
Person or assets are in the same business as the Borrower, and (F) the
purchase or acquisition is not hostile, as reasonably determined by the
Agent;
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(iii) Any Subsidiary of the Borrower may sell inventory in the
ordinary course of business; and
(iv) Any Subsidiary of the Borrower may merge, consolidate, or
amalgamate with another Person with the other Person as the surviving
entity or convey, sell, lease, assign, transfer, or otherwise dispose
of any of its assets to another Person (and if such disposition
transfers all or substantially all of the assets of transferring
Subsidiary, such Subsidiary may then liquidate, wind up, or dissolve
itself) provided that the result of such transaction would not cause
the book value of the assets of the Restricted Entities so merged out
of the Subsidiaries of the Borrower or disposed of during any fiscal
year of the Borrower to exceed 10% of the consolidated book value, net
of depreciation, of the transportation equipment of the Borrower as of
the end of the prior fiscal year of the Borrower.
In connection with any mergers or dispositions described in paragraph (iv)
above, and provided that no Default or Event of Default exists or would be cause
thereby, upon 30 days' advance written notice from the Borrower of the intent of
such Subsidiary to so merge or dispose of assets, the Agent shall release at the
Borrower's expense the Lien of the Agent in such assets and shall execute and
deliver in favor of such Subsidiary any release of liens reasonably requested by
the Borrower to evidence such release.
5.10 DISTRIBUTIONS. The Borrower shall not (a) declare or pay any
dividends; (b) purchase, redeem, retire, or otherwise acquire for value any of
its capital stock now or hereafter outstanding; or make any distribution of
assets to its stockholders as such, whether in cash, assets, or in obligations
of it; (c) allocate or otherwise set apart any sum for the payment of any
dividend or distribution on, or for the purchase, redemption, or retirement of,
any shares of its capital stock; or (d) make any other distribution by reduction
of capital or otherwise in respect of any shares of its capital stock.
5.11 TRANSACTIONS WITH AFFILIATES. The Borrower shall not permit any
Restricted Entity to enter into any transaction directly or indirectly with or
for the benefit of an Affiliate except transactions with an Affiliate for the
leasing of property, the rendering or receipt of services, or the purchase or
sale of inventory or other assets in the ordinary course of business if the
monetary or business consideration arising from such a transaction would be
substantially as advantageous to such Person as the monetary or business
consideration which such Person would obtain in a comparable arm's length
transaction.
5.12 INSURANCE.
(a) The Borrower shall cause each Restricted Entity to
maintain insurance with responsible and reputable insurance companies or
associations reasonably acceptable
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to the Agent in such amounts and covering such risks as are usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which such Persons operate. Without limiting the
foregoing, the Borrower shall maintain insurance coverage for the Restricted
Entities equal to or better than, on an item by item basis for each item, the
coverage for the Restricted Entities existing on the date of this Agreement. The
Borrower shall deliver to the Agent certificates evidencing such policies or
copies of such policies at the Agent's request following a reasonable period to
obtain such certificates taking into account the jurisdiction where the
insurance is maintained.
(b) All policies of the Restricted Entities representing
property insurance shall name the Agent as mortgagee in a form satisfactory to
the Agent. All policies representing liability insurance of the Restricted
Entities shall name the Agent and the Banks as additional named insureds in a
form satisfactory to the Agent. All proceeds of any such property insurance
shall be paid directly to the Agent. If no payments are due under Section
2.1(c)(ii) and no Default exists, the Agent shall dispose of such proceeds in
accordance with the instructions of the Borrower, otherwise such proceeds shall
be applied to the Credit Obligations in accordance with Section 6.9. All
proceeds of such liability insurance coverage for the Agent and the Banks shall
be paid as directed by the Agent to indemnify the Agent or the applicable Bank
for the liability covered. In the event that the proceeds are paid to any
Restricted Entity in violation of the foregoing, the Restricted Entity shall
hold the proceeds in trust for the Agent, segregate the proceeds from the other
funds of such Restricted Entity, and promptly pay the proceeds to the Agent with
any necessary endorsement. The Agent shall have the right, but not the
obligation, during the existence of an Event of Default, to make proof of loss
under, settle and adjust any claim under, and receive the proceeds under the
insurance, and the reasonable expenses incurred by the Agent in the adjustment
and collection of such proceeds shall be paid by the Borrower. The Borrower
irrevocably appoints the Agent as its attorney in fact to take such actions in
its name. If the Agent does not take such actions, the Borrower may take such
actions subject to the approval of any final action by the Agent. The Agent
shall not be liable or responsible for failure to collect or exercise diligence
in the collection of any proceeds.
5.13 INVESTMENTS. The Borrower shall not permit any Restricted Entity
to make or hold any direct or indirect investment in any Person, including
capital contributions to the Person, investments in the debt or equity
securities of the Person, and loans, guaranties, trade credit, or other
extensions of credit to the Person, except for Permitted Investments and normal
and reasonable advances in the ordinary course of business to officers and
employees.
5.14 LINES OF BUSINESS; DISTRIBUTION. The Borrower shall not permit the
Restricted Entities to change the character of their business as conducted on
the date of this Agreement, or engage in any type of business not reasonably
related to such business as presently and normally conducted; provided, that
nothing contained in the foregoing shall prohibit any
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Restricted Entity from expanding its business into any of the other types of
businesses of any of the other Restricted Entities as of the date of this
Agreement.
5.15 COMPLIANCE WITH LAWS. The Borrower shall cause each Restricted
Entity to comply with all federal, state, and local laws and regulations which
are applicable to the operations and property of such Persons and which the
failure to comply with could reasonably be expected to cause a Material Adverse
Change.
5.16 ENVIRONMENTAL COMPLIANCE. The Borrower shall cause each Restricted
Entity to comply with all Environmental Laws and obtain and comply with all
related permits necessary for the ownership and operation of any such Person's
properties which the failure to comply with could reasonably be expected to
cause a Material Adverse Change. The Borrower shall cause each Restricted Entity
to promptly disclose to the Agent any notice to or investigation of such Persons
for any violation or alleged violation of any Environmental Law in connection
with any such Person's presently or previously owned properties which represent
liabilities which could reasonably be expected to cause a Material Adverse
Change. The Borrower shall not permit any Restricted Entity to create, handle,
transport, use, or dispose of any Hazardous Materials on or about any such
Person's properties except in compliance with all Environmental Laws and related
permits; release any Hazardous Materials into the environment in connection with
any such Person's operations or contaminate any properties with Hazardous
Materials; or own properties contaminated by any Hazardous Materials, in each
case if such action could reasonably be expected to cause a Material Adverse
Change. For the purposes of this Section 5.16, any losses covered by the
Borrower's reserve for environmental losses set forth on its balance sheet as
reflected in the Registration Statement shall be excluded in determining whether
any Material Adverse Change has occurred.
5.17 ERISA COMPLIANCE. The Borrower shall cause each Restricted Entity
to (i) comply in all material respects with all applicable provisions of ERISA
and prevent the occurrence of any Reportable Event or Prohibited Transaction
with respect to, or the termination of, any of their respective Plans where the
failure to do so could reasonably be expected to cause a Material Adverse Change
and (ii) not create or participate in any employee pension benefit plan covered
by Title IV of ERISA or any multiemployer plan under Section 4001(a)(3) of
ERISA.
5.18 PAYMENT OF CERTAIN CLAIMS. The Borrower shall cause each
Restricted Entity to pay and discharge, before the same shall become delinquent,
(a) all taxes, assessments, levies, and like charges imposed upon any such
Person or upon any such Person's income, profits, or property by authorities
having competent jurisdiction prior to the date on which penalties attach
thereto except for tax payments being contested in good faith for which adequate
reserves have been made and reported in accordance with general accepted
accounting principals and which could not reasonably be expected to cause a
Material
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Adverse Change, (b) all lawful claims which are secured by or which, if unpaid,
would by law become secured by a Lien upon any such Person's property, and (c)
all trade payables and current operating liabilities, unless the same are less
than 90 days past due or are being contested in good faith, have adequate
reserves established and reported in accordance with general accepted accounting
principals, and could not reasonably be expected to cause a Material Adverse
Change.
5.19 SUBSIDIARIES. Upon the formation or acquisition of any new
Subsidiary, the Borrower shall cause such Subsidiary to promptly execute and
deliver to the Agent a Joinder Agreement in substantially the form of EXHIBIT G
with such modifications thereto as the Agent may reasonably request for the
purpose of joining such Subsidiary as a party to the Guaranty and the Security
Agreement and providing to the Agent the rights of the Agent intended to be
provided thereunder. In connection therewith, the Borrower shall provide
corporate documentation and opinion letters reasonably satisfactory to the Agent
reflecting the corporate status of such new Subsidiary of the Borrower and the
enforceability of such agreements.
ARTICLE 6. DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. Each of the following shall be an "Event of
Default" for the purposes of this Agreement and for each of the Credit
Documents:
(a) PAYMENT FAILURE. The Borrower (i) fails to pay when due
any principal amounts due under this Agreement or any other Credit Document or
(ii) fails to pay when due any interest, fees, reimbursements, indemnifications,
or other amounts due under this Agreement or any other Credit Document and such
failure has not been cured within five Business Days;
(b) FALSE REPRESENTATION. Any written representation or
warranty made by any Credit Party or any Responsible Officer thereof in this
Agreement or in any other Credit Document proves to have been false or erroneous
at the time it was made or deemed made;
(c) BREACH OF COVENANT. (i) Any breach by the Borrower of any
of the covenants contained in Sections 5.1(a), 5.2, 5.3, 5.4, 5.5, 5.6, 5.7,
5.8, 5.9, 5.10, 5.13, or 5.19 or (ii) any breach by the Borrower of any other
covenants contained in this Agreement, or any other Credit Document and such
breach is not cured within 10 days following the earlier of knowledge of such
breach by the Borrower or the receipt of written notice thereof from the Agent;
(d) SECURITY DOCUMENTS. Any Security Document shall at any
time and for any reason cease to create the Lien on the property purported to be
subject to such
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agreement in accordance with the terms of such agreement, or cease to be in full
force and effect, or shall be contested by any party thereto;
(e) GUARANTY. (i) the Guaranty shall at any time and for any
reason cease to be in full force and effect or shall be contested by any
Guarantor, or any Guarantor shall deny it has any further liability or
obligation thereunder, (ii) any breach by any Guarantor of any of the covenants
contained in Sections 1.1 or 1.2 of the Guaranty, or (iii) or any breach by any
Guarantor of any other covenants contained in the Guaranty or any other Credit
Document and such breach is not cured within 10 days following the earlier of
knowledge of such breach by such Guarantor or the receipt of written notice
thereof from the Agent;
(f) MATERIAL DEBT DEFAULT. (i) Any principal, interest, fees,
or other amounts due on any Debt of any Restricted Entity is not paid when due,
whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise, and such failure is not cured within the applicable grace period, if
any, and the aggregate amount of all Debt of such Persons so in default exceeds
$250,000; (ii) any other event shall occur or condition shall exist under any
agreement or instrument relating to any Debt of any such Person the effect of
which is to accelerate or to permit the acceleration of the maturity of any such
Debt, whether or not any such Debt is actually accelerated, and such event or
condition shall not be cured within the applicable grace period, if any, and the
aggregate amount of all Debt of such Persons so in default exceeds $250,000; or
(iii) any Debt of any such Person shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled prepayment) prior to
the stated maturity thereof, and the aggregate amount of all Debt of such
Persons so accelerated exceeds $250,000;
(g) BANKRUPTCY AND INSOLVENCY. (i) there shall have been filed
against any Restricted Entity or any such Person's properties, without such
Person's consent, any petition or other request for relief seeking an
arrangement, receivership, reorganization, liquidation, or similar relief under
bankruptcy or other laws for the relief of debtors and such request for relief
(A) remains in effect for 60 or more days, whether or not consecutive, or (B) is
approved by a final nonappealable order, or (ii) any such Person consents to or
files any petition or other request for relief of the type described in clause
(i) above seeking relief from creditors, makes any assignment for the benefit of
creditors or other arrangement with creditors, or admits in writing such
Person's inability to pay such Person's debts as they become due;
(h) ADVERSE JUDGMENT. The aggregate outstanding amount of
judgments against the Restricted Parties not discharged or stayed pending appeal
or other court action within 30 days following entry is greater than $250,000;
or
(i) CHANGE OF CONTROL. There shall occur any Change of
Control.
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6.2 TERMINATION OF COMMITMENTS. Upon the occurrence of any Event of
Default under Section 6.1(g), all of the commitments of the Agent and the Banks
hereunder shall terminate. During the existence of any Event of Default other
than an Event of Default under Section 6.1(g), the Agent shall at the request of
the Majority Banks declare by written notice to the Borrower all of the
commitments of the Agent and the Banks hereunder terminated, whereupon the same
shall immediately terminate.
6.3 ACCELERATION OF CREDIT OBLIGATIONS. Upon the occurrence of any
Event of Default under Section 6.1(g), the aggregate outstanding principal
amount of all loans made hereunder, all accrued interest thereon, and all other
Credit Obligations shall immediately and automatically become due and payable.
During the existence of any Event of Default other than an Event of Default
under Section 6.1(g), the Agent shall at the request of the Majority Banks
declare by written notice to the Borrower the aggregate outstanding principal
amount of all loans made hereunder, all accrued interest thereon, and all other
Credit Obligations to be immediately due and payable. In connection with the
foregoing, except for the notice provided for above, the Borrower waives notice
of intent to demand, demand, presentment for payment, notice of nonpayment,
protest, notice of protest, grace, notice of dishonor, notice of intent to
accelerate, notice of acceleration, and all other notices.
6.4 CASH COLLATERALIZATION OF LETTERS OF CREDIT. Upon the occurrence of
any Event of Default under Section 6.1(h), the Borrower shall pay to the Agent
an amount equal to the Letter of Credit Exposure allocable to the Letters of
Credit requested by the Borrower to be held in the Letter of Credit Collateral
Account for disposition in accordance with Section 2.2(f). During the existence
of any Event of Default other than an Event of Default under Section 6.1(h), the
Agent shall at the request of the Majority Banks require by written notice to
the Borrower that the Borrower pay to the Agent an amount equal to the Letter of
Credit Exposure allocable to the Letters of Credit requested by the Borrower to
be held in the Letter of Credit Collateral Account for disposition in accordance
with Section 2.2(f).
6.5 DEFAULT INTEREST. If any Event of Default exists, the Agent shall
at the request of the Majority Banks declare by written notice to the Borrower
that the Credit Obligations specified in such notice shall bear interest
beginning on the date specified in such notice until paid in full at the
applicable Default Rate for such Credit Obligations, and the Borrower shall pay
such interest to the Agent for the benefit of the Agent and the Banks, as
applicable, upon demand.
6.6 RIGHT OF SETOFF. During the existence of an Event of Default, the
Agent and each Bank is hereby authorized at any time, to the fullest extent
permitted by law, to set off and apply any indebtedness owed by the Agent or
such Bank to the Borrower against any and all of the obligations of the Borrower
under this Agreement and the Credit Documents, irrespective of whether or not
the Agent or such Bank shall have made any demand under this Agreement or the
Credit Documents and although such obligations may be contingent
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and unmatured. The Agent and each Bank, as the case may be, agrees promptly to
notify the Borrower after any such setoff and application made by such party
provided that the failure to give such notice shall not affect the validity of
such setoff and application.
6.7 ACTIONS UNDER CREDIT DOCUMENTS. Following an Event of Default, the
Agent shall at the request of the Majority Banks take any and all actions
permitted under the other Credit Documents, including the Guaranty and the
Security Documents.
6.8 REMEDIES CUMULATIVE. No right, power, or remedy conferred to the
Agent or the Banks in this Agreement and the Credit Documents, or now or
hereafter existing at law, in equity, by statute, or otherwise, shall be
exclusive, and each such right, power, or remedy shall to the full extent
permitted by law be cumulative and in addition to every other such right, power,
or remedy. No course of dealing and no delay in exercising any right, power, or
remedy conferred to the Agent or the Banks in this Agreement and the Credit
Documents, or now or hereafter existing at law, in equity, by statute, or
otherwise, shall operate as a waiver of or otherwise prejudice any such right,
power, or remedy.
6.9 APPLICATION OF PAYMENTS. Prior to an Event of Default, all payments
made hereunder shall be applied to the Credit Obligations as directed by the
Borrower, subject to the rules regarding the application of payments to certain
Credit Obligations provided for hereunder and in the Credit Documents. During
the existence of an Event of Default, all payments and collections shall be
applied to the Credit Obligations in the order determined by the Agent.
ARTICLE 7. THE AGENT AND THE ISSUING BANK
7.1 AUTHORIZATION AND ACTION. Each Bank hereby appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms hereof and of
the other Credit Documents, together with such powers as are reasonably
incidental thereto. Statements under the Credit Documents that the Agent may
take certain actions, without further qualification, means that the Agent may
take such actions with or without the consent of the Majority Banks. The Agent
shall not take any action that would require the approval of all of the Banks as
an amendment under Section 8.3 without the prior written consent of the Banks.
As to any matters not expressly provided for by this Agreement or any other
Credit Document (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the written
instructions of the Majority Banks, and such instructions shall be binding upon
all Banks and all holders of Notes; provided, however, that the Agent shall not
be required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement, any other Credit Document, or applicable
law.
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7.2 RELIANCE, ETC. Neither the Agent, the Issuing Bank, nor any of
their respective Related Parties (for the purposes of this Section 7.2,
collectively, the "Indemnified Parties") shall be liable for any action taken or
omitted to be taken by any Indemnified Party under or in connection with this
Agreement or the other Credit Documents, INCLUDING ANY INDEMNIFIED PARTY'S OWN
NEGLIGENCE, except for any Indemnified Party's gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent and
the Issuing Bank: (a) may treat the payee of any Note as the holder thereof
until the Agent receives written notice of the assignment or transfer thereof
signed by such payee and in form satisfactory to the Agent; (b) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants, or experts; (c) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties, or representations made in or in connection with this
Agreement or the other Credit Documents; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants, or conditions of this Agreement or any other Credit Document on the
part of the Credit Parties or to inspect the property (including the books and
records) of the Credit Parties; (e) shall not be responsible to any Bank for the
due execution, legality, validity, enforceability, genuineness, sufficiency, or
value of this Agreement or any other Credit Document; and (f) shall incur no
liability under or in respect of this Agreement or any other Credit Document by
acting upon any notice, consent, certificate, or other instrument or writing
(which may be by telecopier or telex) reasonably believed by it to be genuine
and signed or sent by the proper party or parties.
7.3 AFFILIATES. With respect to its Commitments, the Advances made by
it, its interests in the Letters of Credit, and the Notes issued to it, the
Agent and the Issuing Bank shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though it were not the
Agent. The term "Bank" or "Banks" shall, unless otherwise expressly indicated,
include the Agent and the Issuing Bank in their individual capacity. The Agent,
the Issuing Bank, and their respective Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, any Credit Party, and any Person who may do business with or
own securities of any Credit Party, all as if the Agent were not an agent
hereunder and the Issuing Bank were not the issuer of Letters of Credit
hereunder and without any duty to account therefor to the Banks.
7.4 BANK CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the Registration Statement and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it shall, independently and without
reliance upon the Agent or any other Bank and based
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on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
7.5 EXPENSES. To the extent not paid by the Borrower, each Bank
severally agrees to pay to the Agent and the Issuing Bank on demand such Bank's
ratable share of the following: (a) all reasonable out-of-pocket costs and
expenses of the Agent and the Issuing Bank in connection with the preparation,
execution, delivery, administration, modification, and amendment of this
Agreement and the other Credit Documents, including the reasonable fees and
expenses of outside counsel for the Agent and the Issuing Bank with respect to
advising the Agent and the Issuing Bank as to their respective rights and
responsibilities under this Agreement and the Credit Documents, and (b) all
out-of-pocket costs and expenses of the Agent and the Issuing Bank in connection
with the preservation or enforcement of the rights of the Agent, the Issuing
Bank, and the Banks under this Agreement and the other Credit Documents, whether
through negotiations, legal proceedings, or otherwise, including fees and
expenses of counsel for the Agent and the Issuing Bank. The provisions of this
paragraph shall survive the repayment and termination of the credit provided for
under this Agreement and any purported termination of this Agreement which does
not expressly refer to this paragraph.
7.6 INDEMNIFICATION. To the extent not reimbursed by the Borrower, each
Bank severally agrees to protect, defend, indemnify, and hold harmless the
Agent, the Issuing Bank, and each of their respective Related Parties (for the
purposes of this Section 7.6, collectively, the "Indemnified Parties"), from and
against all demands, claims, actions, suits, damages, judgments, fines,
penalties, liabilities, and out-of-pocket costs and expenses, including
reasonable costs of attorneys and related costs of experts such as accountants
(collectively, the "Indemnified Liabilities"), actually incurred by any
Indemnified Party which are related to any litigation or proceeding relating to
this Agreement, the Credit Documents, or the transactions contemplated
thereunder, INCLUDING ANY INDEMNIFIED LIABILITIES CAUSED BY ANY INDEMNIFIED
PARTY'S OWN NEGLIGENCE, but not Indemnified Liabilities which are a result of
any Indemnified Party's gross negligence or willful misconduct. The provisions
of this paragraph shall survive the repayment and termination of the credit
provided for under this Agreement and any purported termination of this
Agreement which does not expressly refer to this paragraph.
7.7 SUCCESSOR AGENT AND ISSUING BANK. The Agent or the Issuing Bank may
resign at any time by giving written notice thereof to the Banks and the
Borrower and may be removed at any time with or without cause by the Majority
Banks upon receipt of written notice from the Majority Banks to such effect.
Upon receipt of notice of any such resignation or removal, the Majority Banks
shall have the right to appoint a successor Agent or Issuing Bank with the
consent of the Borrower, which consent shall not be unreasonably withheld. If no
successor Agent or Issuing Bank shall have been so appointed by the
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Majority Banks with the consent of the Borrower, and shall have accepted such
appointment, within 30 days after the retiring Agent's or Issuing Bank's giving
of notice of resignation or the Majority Banks' removal of the retiring Agent or
Issuing Bank, then the retiring Agent or Issuing Bank may, on behalf of the
Banks and the Borrower, appoint a successor Agent or Issuing Bank, which shall
be, in the case of a successor agent, a commercial bank organized under the laws
of the United States of America or of any State thereof and having a combined
capital and surplus of at least $500,000,000 and, in the case of the Issuing
Bank, a Bank. Upon the acceptance of any appointment as Agent or Issuing Bank by
a successor Agent or Issuing Bank, such successor Agent or Issuing Bank shall
thereupon succeed to and become vested with all the rights, powers, privileges,
and duties of the retiring Agent or Issuing Bank, and the retiring Agent or
Issuing Bank shall be discharged from any duties and obligations under this
Agreement and the other Credit Documents after such acceptance, except that the
retiring Issuing Bank shall remain the Issuing Bank with respect to any Letters
of Credit outstanding on the effective date of its resignation or removal and
the provisions affecting the Issuing Bank with respect to such Letters of Credit
shall inure to the benefit of the retiring Issuing Bank until the termination of
all such Letters of Credit. After any Agent's or Issuing Bank's resignation or
removal hereunder as Agent or Issuing Bank, the provisions of this Article 7
shall inure to such Person's benefit as to any actions taken or omitted to be
taken by such Person while such Person was Agent or Issuing Bank under this
Agreement and the other Credit Documents.
ARTICLE 8. MISCELLANEOUS.
8.1 EXPENSES. The Borrower shall pay on demand of the applicable party
specified herein (a) all reasonable out-of-pocket costs and expenses of the
Agent and the Issuing Bank in connection with the preparation, execution,
delivery, administration, modification, and amendment of this Agreement and the
other Credit Documents, including the reasonable fees and expenses of outside
counsel for the Agent and the Issuing Bank, and (b) all out-of-pocket costs and
expenses of the Agent, the Issuing Bank, and each Bank in connection with the
preservation or enforcement of their respective rights under this Agreement and
the other Credit Documents, whether through negotiations, legal proceedings, or
otherwise, including fees and expenses of counsel for the Agent, the Issuing
Bank, and each Bank. The provisions of this paragraph shall survive the
repayment and termination of the credit provided for under this Agreement and
any purported termination of this Agreement which does not expressly refer to
this paragraph.
8.2 INDEMNIFICATION. The Borrower agrees to protect, defend, indemnify,
and hold harmless the Agent, the Issuing Bank, each Bank, and each of their
respective Related Parties (for the purposes of this Section 8.2, collectively,
the "Indemnified Parties"), from and against all demands, claims, actions,
suits, damages, judgments, fines, penalties, liabilities, and out-of-pocket
costs and expenses, including reasonable costs of attorneys and related costs of
experts such as accountants (collectively, the "Indemnified Liabilities"),
actually
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incurred by any Indemnified Party which are related to any litigation or
proceeding relating to this Agreement, the Credit Documents, or the transactions
contemplated thereunder, INCLUDING ANY INDEMNIFIED LIABILITIES CAUSED BY ANY
INDEMNIFIED PARTY'S OWN NEGLIGENCE, but not Indemnified Liabilities which are a
result of any Indemnified Party's gross negligence or willful misconduct. The
provisions of this paragraph shall survive the repayment and termination of the
credit provided for under this Agreement and any purported termination of this
Agreement which does not expressly refer to this paragraph.
8.3 MODIFICATIONS, WAIVERS, AND CONSENTS. No modification or waiver of
any provision of this Agreement or the Notes, nor any consent required under
this Agreement or the Notes, shall be effective unless the same shall be in
writing and signed by the Agent and Majority Banks and the Borrower, and then
such modification, waiver, or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no modification, waiver, or consent shall, unless in writing and signed by the
Agent, all the Banks, and the Borrower do any of the following: (a) waive any of
the conditions specified in Section 3.1 or 3.2, (b) increase the Commitments of
the Banks, (c) change the definition of Borrowing Base or the limitation on
credit availability created thereby, (d) forgive or reduce the amount or rate of
any principal, interest, or fees payable under the Credit Documents, or postpone
the payment thereof, (e) release any Guaranty or any material collateral
securing the Credit Obligations (except as otherwise permitted or required
herein), or (e) change the percentage of Banks required to take any action under
this Agreement or the Notes, including any amendment of the definition of
"Majority Banks" or this Section 8.3. No modification, waiver, or consent shall,
unless in writing and signed by the Agent or the Issuing Bank affect the rights
or obligations of the Agent or the Issuing Bank, as the case may be, under the
Credit Documents. The Agent shall not modify or waive or grant any consent under
any other Credit Document of such action would be prohibited under this Section
8.3 with respect to the Credit Agreement or the Notes.
8.4 SURVIVAL OF AGREEMENTS. All representations, warranties, and
covenants of the Borrower in this Agreement and the Credit Documents shall
survive the execution of this Agreement and the Credit Documents and any other
document or agreement.
8.5 ASSIGNMENT AND PARTICIPATION. This Agreement and the Credit
Documents shall bind and inure to the benefit of the Borrower and their
respective successors and assigns and the Agent and the Banks and their
respective successors and assigns. The Borrower may not assign its rights or
delegate its duties under this Agreement or any Credit Document.
(a) ASSIGNMENTS. Any Bank may assign to one or more banks or
other entities all or any portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitments,
the Advances owing to it, the Notes held by it, and the participation interest
in the Letters of Credit owned by it); provided,
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however, that (i) each such assignment shall be of a constant, and not a
varying, percentage of all of such Bank's rights and obligations under this
Agreement, (ii) assignments of Commitments shall be made in minimum amounts of
$1,000,000 and be made in integral multiples of $1,000,000 and the assigning
Bank, if it retains any Commitments, shall maintain at least $5,000,000 in
Commitments, (iii) each such assignment shall be to an Eligible Assignee, (iv)
the parties to each such assignment shall execute and deliver to the Agent, for
its acceptance and recording in the Register, an Assignment and Acceptance,
together with the Notes subject to such assignment, and (v) each Eligible
Assignee (other than the Eligible Assignee of the Agent) shall pay to the Agent
a $2,500 administrative fee. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least three Business Days after the
execution thereof, (A) the assignee thereunder shall be a party hereto for all
purposes and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and (B) such Bank thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of such Bank's rights and
obligations under this Agreement, such Bank shall cease to be a party hereto).
(b) TERM OF ASSIGNMENTS. By executing and delivering an
Assignment and Acceptance, the Bank thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, such Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency of value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Credit Party or the performance or observance by any Credit Party of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the Registration Statement and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee shall, independently and without reliance upon the Agent, such
Bank or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and (vi)
such assignee agrees that it shall perform in accordance with their
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terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Bank.
(c) THE REGISTER. The Agent shall maintain at its address
referred to in Section 8.6 a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and addresses
of the Banks and the Commitments of each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agent, the Issuing Bank,
and the Banks may treat each Person whose name is recorded in the Register as a
Bank hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Bank at any reasonable time and
from time to time upon reasonable prior notice.
(d) PROCEDURES. Upon its receipt of an Assignment and
Acceptance executed by a Bank and an Eligible Assignee, together with the Notes
subject to such assignment, the Agent shall, if such Assignment and Acceptance
has been completed in the appropriate form, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register, and
(iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, the Borrower shall execute and deliver to the
Agent in exchange for the surrendered Notes a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if such Bank has retained any Commitment
hereunder, a new Note to the order of such Bank in an amount equal to the
Commitment retained by it hereunder. Such new Notes shall be dated the effective
date of such Assignment and Acceptance and shall be in the appropriate form.
(e) PARTICIPATION. Each Bank may sell participation to one or
more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitments, the Advances owing to it, its participation interest
in the Letters of Credit, and the Notes held by it); provided, however, that (i)
such Bank's obligations under this Agreement (including, without limitation, its
Commitments to the Borrower hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Bank shall remain the holder of any such Notes
for all purposes of this Agreement, (iv) the Borrower, the Agent, and the
Issuing Bank and the other Banks shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement, and (v) such Bank shall not require the participant's consent to any
matter under this Agreement, except for change in the principal amount of the
Notes, reductions in fees or interest, or extending the applicable maturity
date. The Borrower hereby agrees that participants shall have the same rights
under Sections 2.5, 2.6, 2.7, 2.8, 2.10, and 8.2 as a Bank to the extent of
their respective participation.
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8.6 NOTICE. All notices and other communications under this Agreement
and the Notes shall be in writing and mailed by certified mail (return receipt
requested), telecopied, telexed, hand delivered, or delivered by a nationally
recognized overnight courier, to the address for the appropriate party specified
in SCHEDULE I or at such other address as shall be designated by such party in a
written notice to the other parties. Mailed notices shall be effective when
received. Telecopied or telexed notices shall be effective when transmission is
completed or confirmed by telex answerback. Delivered notices shall be effective
when delivered by messenger or courier. Notwithstanding the foregoing, notices
and communications to the Agent pursuant to Article 2 or 7 shall not be
effective until received by the Agent.
8.7 CHOICE OF LAW. This Agreement and the Notes have been prepared, are
being executed and delivered, and are intended to be performed in the State of
Texas, and the substantive laws of the State of Texas and the applicable federal
laws of the United States shall govern the validity, construction, enforcement,
and interpretation of this Agreement and the Notes; provided however, Chapter 15
of the Texas Credit Code does not apply to this Agreement or the Notes. Each
Letter of Credit shall be governed by the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce Publication No.
500 (1993 version).
8.8 FORUM SELECTION. THE BORROWER IRREVOCABLY CONSENTS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF ANY FEDERAL COURT
LOCATED IN SUCH STATE IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE CREDIT DOCUMENTS OR ANY TRANSACTIONS RELATED THERETO. THE
BORROWER AGREES AND SHALL NOT CONTEST THAT PROPER FORUM AND VENUE FOR ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THE CREDIT DOCUMENTS OR ANY
TRANSACTIONS RELATING THERETO ARE IN THE COURTS OF THE STATE OF TEXAS IN HARRIS
COUNTY, TEXAS, AND THE FEDERAL COURTS LOCATED IN HARRIS COUNTY, TEXAS. THE
BORROWER IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE FOREGOING BASED UPON CLAIMS THAT THE FOREGOING COURTS ARE AN INCONVENIENT
FORUM.
8.9 SERVICE OF PROCESS. IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THE CREDIT DOCUMENTS OR ANY TRANSACTIONS RELATING THERETO, THE
BORROWER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT, OR OTHER PROCESS OR
NOTICE AND AGREES THAT SERVICE BY FIRST CLASS MAIL, RETURN RECEIPT REQUESTED, TO
THE BORROWER AT ITS ADDRESS FOR NOTICES HEREUNDER, OR ANY OTHER FORM OF SERVICE
PROVIDED FOR IN THE TEXAS CIVIL PRACTICE LAW AND
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RULES THEN IN EFFECT SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE UPON THE
BORROWER.
8.10 WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE CREDIT
DOCUMENTS OR ANY TRANSACTIONS RELATING THERETO.
8.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts which together shall constitute one and the same instrument.
8.12 NO FURTHER AGREEMENTS. THIS WRITTEN AGREEMENT AND THE CREDIT
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date first above written.
BORROWER:
COACH USA, INC.
By:
Name:
Title:
AGENT:
NATIONSBANK OF TEXAS, N.A., as Agent
By:
James D. Recer
Vice President
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BANKS:
NATIONSBANK OF TEXAS, N.A.
By:
James D. Recer
Vice President
Revolving Loan Commitment:
$ 30,000,000
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Exhibit 21.1
LIST OF SUBSIDIARIES OF COACH USA, INC.
NAME STATE OF INCORPORATION
- ---- ----------------------
Arrow Stage Lines, Inc. Nebraska
Barclay Airport Services, Inc. New Jersey
Cape Transit Corp. New Jersey
Central Jersey Transit, Inc. New Jersey
Coach USA Administration, Inc. Nevada
Community Bus Lines, Inc. New Jersey
Community Coach, Inc. New Jersey
Community Tours, Inc. New Jersey
Community Transit Lines New Jersey
Community Transportation, Inc. New Jersey
Grosvenor Bus Lines, Inc. California
H.A.M.L. Corporation New Jersey
L.E.R. Transportation Company New Jersey
Leisure Time Tours New Jersey
Mister Sparkle, Inc. New Jersey
New Delaware Coach, Inc. Delaware
Suburban Management Corp. New Jersey
Suburban Transit Corp. New Jersey
Suburban Trails, Inc. New Jersey
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
June 18, 1996
