-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LWTkm7sGk7ChfSKOGDx3I7r1XcqNuEW0xfT5s0R2mN8tJAuLdLMtHswxoCzkmeYd ar1lWG7xE4k8FEaEC2rnQw== 0000912057-96-028758.txt : 19961210 0000912057-96-028758.hdr.sgml : 19961210 ACCESSION NUMBER: 0000912057-96-028758 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19961209 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE BIRD BODY CO CENTRAL INDEX KEY: 0000889468 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK & BUS BODIES [3713] IRS NUMBER: 580813156 STATE OF INCORPORATION: GA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-17515 FILM NUMBER: 96677920 BUSINESS ADDRESS: STREET 1: 3920 ARKWRIGHT ROAD STREET 2: SUITE 275 CITY: MACON STATE: GA ZIP: 31210 BUSINESS PHONE: 9127577100 MAIL ADDRESS: STREET 1: 3920 ARKWRIGHT ROAD STREET 2: SUITE 275 CITY: MACON STATE: GA ZIP: 31210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE BIRD CORP CENTRAL INDEX KEY: 0000889469 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 133638126 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-17515-01 FILM NUMBER: 96677921 BUSINESS ADDRESS: STREET 1: 3920 ARKWRIGHT ROAD CITY: MACON STATE: GA ZIP: 31210 BUSINESS PHONE: 9127577100 MAIL ADDRESS: STREET 2: 3920 ARKWRIGHT RD STE 275 CITY: MACON STATE: GA ZIP: 31210 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1996 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- BLUE BIRD BODY COMPANY (Exact name of Registrant as specified in its charter) GEORGIA 3713 58-0813156 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
-------------------------- 3920 ARKWRIGHT ROAD MACON, GEORGIA 31210 (912) 757-7100 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) -------------------------- BLUE BIRD CORPORATION (Exact name of Co-Registrant as specified in its charter) DELAWARE NOT APPLICABLE 13-3638126 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
3920 ARKWRIGHT ROAD MACON, GEORGIA 31210 (912) 757-7100 (Address, including zip code, and telephone number, including area code, of Co-Registrant's principal executive offices) -------------------------- BOBBY G. WALLACE VICE PRESIDENT, TREASURER AND SECRETARY BLUE BIRD CORPORATION 3920 ARKWRIGHT ROAD MACON, GEORGIA 31210 (912) 757-7100 (Address, including zip code, and telephone number, including area code, of agents for service of process) -------------------------- COPIES OF ALL COMMUNICATIONS TO: ANDREW R. BROWNSTEIN, ESQ. WACHTELL, LIPTON, ROSEN & KATZ 51 WEST 52ND STREET NEW YORK, NEW YORK 10019 (212) 403-1000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after this Registration Statement is declared effective. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / -------------------------- CALCULATION OF REGISTRATION FEE
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE 10 3/4% Senior Subordinated Notes Due 2006, Series B (1).................................................... $100,000,000 99.695% $99,695,000 Guarantee of the 10 3/4% Senior Subordinated Notes Due 2006, Series B (3)(4).................................. $0 0% $0(2) TITLE OF EACH AMOUNT OF CLASS OF SECURITIES REGISTRATION TO BE REGISTERED FEE 10 3/4% Senior Subordinated Notes Due 2006, Series B (1).................................................... $30,210.58 Guarantee of the 10 3/4% Senior Subordinated Notes Due 2006, Series B (3)(4).................................. $0
(1) This Registration Statement covers both the prospectus filed hereby in connection with the exchange offer for the Exchange Notes and the prospectus filed hereby in connection with certain market-making activities by affiliates of the Registrant. (2) Estimated solely for the purpose of determining the registration fee. (3) Calculated pursuant to Rule 457. (4) Pursuant to Rule 457(n), no registration fee is required with respect to the guarantee. -------------------------- THE REGISTRANT AND THE CO-REGISTRANT (THE "REGISTRANTS") HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXPLANATORY NOTE This Registration Statement contains a Prospectus relating to the offer (the "Exchange Offer") to exchange an aggregate of up to $100,000,000 principal amount of 10 3/4% Senior Subordinated Notes due 2006, Series B (the "Exchange Notes") of Blue Bird Body Company, for an identical face amount of the issued and outstanding 10 3/4% Senior Subordinated Notes due 2006 (the "144A Notes" and, together with the Exchange Notes, the "Notes") together with separate Prospectus pages relating to certain market-making transactions with respect to the Exchange Notes which may be carried out by Merrill, Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). The complete Prospectus for the Exchange Offer follows immediately after this Explanatory Note. Following such Prospectus are certain pages of the Prospectus relating to the market-making transactions, which include an alternate cover page, an alternate "AVAILABLE INFORMATION" section, an alternate "USE OF PROCEEDS" section (which is also to be included in the "PROSPECTUS SUMMARY"), a new paragraph captioned "Trading Market for the Notes" to be inserted in the section captioned "RISK FACTORS" in lieu of the paragraph captioned "Absence of Public Market for the Notes", an alternate "PLAN OF DISTRIBUTION" section, an alternate "LEGAL MATTERS" section and an alternate back cover page. All other pages of the Prospectus for the Exchange Offer are to be used in the Prospectus relating to the market-making transactions. 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. SUBJECT TO COMPLETION, DATED DECEMBER 9, 1996 PRELIMINART PROSPECTUS OFFER TO EXCHANGE ALL OUTSTANDING 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B [LOGO] FOR ANY AND ALL OF THE OUTSTANDING 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006 OF BLUE BIRD BODY COMPANY THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. Blue Bird Body Company, a Georgia corporation (the "Company"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying letter of transmittal (the "Letter of Transmittal" and, together with this Prospectus, the "Exchange Offer"), to exchange an aggregate of up to $100,000,000 principal amount of 10 3/4% Senior Subordinated Notes due 2006, Series B (the "Exchange Notes") which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a registration statement of which this Prospectus forms a part, for an identical face amount of the issued and outstanding 10 3/4% Senior Subordinated Notes due 2006 (the "144A Notes" and, together with the Exchange Notes, the "Notes") of the Company from the Holders (as defined herein) thereof in integral multiples of $1,000. As of the date of this Prospectus, there are $100,000,000 aggregate principal amount of the 144A Notes outstanding. The terms of the Exchange Notes are identical in all material respects to the 144A Notes, except that the Exchange Notes have been registered under the Securities Act, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for an increase in the interest rate payable on the 144A Notes under certain circumstances relating to the Registration Rights Agreement (as defined herein), which provisions will terminate as to all of the Notes upon the consummation of the Exchange Offer. The Exchange Notes will be obligations of the Company evidencing the same indebtedness as the 144A Notes, and will be entitled to the benefits of the same indenture. See "The Exchange Offer." Interest on the Exchange Notes will be payable semi-annually in arrears on May 15 and November 15 of each year, commencing May 15, 1997. The Exchange Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after November 15, 2001, at the redemption prices set forth herein, together with accrued and unpaid interest to the date of redemption. In addition, on or prior to November 15, 1999, the Company may redeem up to 25% of the originally issued Exchange Notes, at a price of 110.75% of the principal amount thereof, together with accrued and unpaid interest to the redemption date, with the net proceeds of a Public Equity Offering (as defined herein), PROVIDED that not less than $75 million in principal amount of Exchange Notes is outstanding immediately after giving effect to such redemption. Upon the occurrence of a Change of Control Triggering Event (as defined herein), each holder of Exchange Notes will, subject to the limitations described herein, have the right to require the Company to purchase all or a portion of such holder's Exchange Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Exchange Notes." The Exchange Notes will represent unsecured senior subordinated obligations of the Company and will be subordinated in right of payment to all existing and future Senior Indebtedness (as defined herein) of the Company. The Exchange Notes will be guaranteed (the "BBC Guarantee") on an unsecured senior subordinated basis by Blue Bird Corporation ("BBC"), which owns all of the capital stock of the Company. As of September 28, 1996, on a PRO FORMA basis after giving effect to the Recapitalization (as defined herein), the Company would have had approximately $181.3 million of Senior Indebtedness outstanding. In addition, at September 28, 1996, after giving effect to the Recapitalization, the aggregate amount of indebtedness and other liabilities of subsidiaries of the Company to which holders of Notes are structurally subordinated would have been approximately $63 million (which were composed principally of liabilities of the Company's special purpose lease financing subsidiary). (COVER TEXT CONTINUED ON NEXT PAGE) SEE "RISK FACTORS," BEGINNING ON PAGE 13, FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER. ------------------------ 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. ------------------------------ THE DATE OF THIS PROSPECTUS IS DECEMBER , 1996. UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. The Company will accept for exchange any and all validly tendered 144A Notes on or prior to the Expiration Date (as defined herein). Tenders of 144A Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date; otherwise such tenders are irrevocable. The Exchange Offer is not conditioned upon any minimum principal amount of 144A Notes being tendered for exchange. For certain conditions to the Exchange Offer, see "The Exchange Offer--Conditions." The 144A Notes were issued and sold on November 19, 1996 in a transaction not registered under the Securities Act in reliance upon the exemption provided in Section 4(2) of the Securities Act. In general, the 144A Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act. The Exchange Notes are being offered hereby in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement. The Company has agreed to pay the expenses of the Exchange Offer. Based on interpretations by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for 144A Notes may be offered for resale, resold or otherwise transferred by any Holder thereof (other than any such Holder that is an "affiliate" of the Company within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, PROVIDED that such Exchange Notes are acquired in the ordinary course of such Holder's business and such Holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. In some cases, certain broker-dealers may be required to deliver a prospectus in connection with the resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of Exchange Notes received in exchange for such 144A Notes where such 144A Notes were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities (other than 144A Notes acquired directly from the Company). The Company has agreed that, for a period of 180 days after the date of this Prospectus, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. Prior to this Exchange Offer, there has been no public market for the 144A Notes or Exchange Notes. If a market for the Exchange Notes should develop, the Exchange Notes could trade at a discount from their principal amount. The Company does not intend to list the Exchange Notes on any securities exchange nor does the Company intend to apply for quotation of the Exchange Notes through the NASDAQ System. Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") has indicated to the Company that it intends to make a market in the Notes, but is not obligated to do so and such market-making activities may be discontinued at any time. As a result, no assurance can be given that an active trading market for the Exchange Notes will develop. If Merrill Lynch conducts any market-making activities, it may be required to deliver a "market-making prospectus" when effecting offers and sales in the Exchange Notes. The Exchange Notes issued pursuant to this Exchange Offer will be issued in the form of Global Exchange Notes (as defined herein), which will be deposited with, or on behalf of, The Depository Trust Company (the "Depository" or "DTC") and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the Global Exchange Notes representing the Exchange Notes will be shown on, and transfers thereof will be effected through, records maintained by the DTC and its participants. Notwithstanding the foregoing, 144A Notes held in certificated form will be exchanged solely for Certificated Exchange Notes (as defined herein). After the initial issuance of the Global Exchange Notes, Certificated Exchange Notes will be issued in exchange for the Global Exchange Notes only on the terms set forth in the Indenture (as defined herein). See "Description of the Exchange Notes" and "Book-Entry, Delivery and Form." 2 AVAILABLE INFORMATION The Company and BBC have jointly filed with the Commission a Registration Statement on Form S-4 (together with all amendments, exhibits, schedules and supplements thereto, the "Registration Statement" or "Exchange Offer Registration Statement") under the Securities Act with respect to the Exchange Notes being offered hereby and the related BBC Guarantee. This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement. For further information with respect to the Company, BBC, the Exchange Notes and the related BBC Guarantee offered hereby, reference is made to the Registration Statement. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete, and, where such contract or other document is an exhibit to the Registration Statement, each such statement is qualified in all respects by the provisions in such exhibit, to which reference is hereby made. Copies of the Registration Statement may be examined without charge at the Public Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the web site maintained by the Commission (http://www.sec.gov.) and at the Commission's Regional Offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of the Registration Statement can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Pursuant to a contractual obligation to the purchasers of the Old Notes (as defined herein), the Company was, prior to November 19, 1996, subject to certain of the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, filed periodic reports and other information with the Commission. The Company is not currently subject to the informational requirements of the Exchange Act. Upon completion of the Exchange Offer, the Company will be subject to the informational requirements of the Exchange Act, and, in accordance therewith, will file periodic reports and other information with the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of any material so filed, in addition to periodic reports and other information previously filed with the Commission pursuant to the above-described contractual obligation of the Company, can be obtained from the Public Reference Section of the Commission, upon payment of certain fees prescribed by the Commission. In addition, pursuant to the Indenture covering the Notes, the Company has agreed to file with the Commission, and provide to the Holders, the annual reports and the information, documents and other reports otherwise required pursuant to Section 13 of the Exchange Act. Such requirements may be satisfied through the filing and provision of such documents and reports which would otherwise be required pursuant to Section 13 of the Exchange Act in respect of the Company. UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 3 FORWARD-LOOKING STATEMENTS CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS UNDER "PROSPECTUS SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," IN ADDITION TO CERTAIN STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS, ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND ARE THUS PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH RISKS, UNCERTAINTIES AND OTHER FACTORS ARE DISCUSSED UNDER THE HEADING "RISK FACTORS," BEGINNING ON PAGE 13 OF THIS PROSPECTUS, AND HOLDERS OF 144A NOTES ARE URGED TO CAREFULLY CONSIDER SUCH FACTORS. 4 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" OR "BLUE BIRD" REFER TO BLUE BIRD BODY COMPANY AND ITS SUBSIDIARIES AND REFERENCES TO "BBC" REFER TO BLUE BIRD CORPORATION, WHICH OWNS ALL OF THE COMMON STOCK OF THE COMPANY. AS USED HEREIN, THE "FISCAL YEAR" OF THE COMPANY IS THE 52- OR 53-WEEK PERIOD ENDING ON THE SATURDAY NEAREST OCTOBER 31 OF SUCH YEAR. UNLESS OTHERWISE INDICATED, ANNUAL MARKET SHARE AND OTHER DATA INCLUDED HEREIN REFER TO THE APPLICABLE FISCAL YEAR OF THE COMPANY. THE COMPANY The Company is the leading manufacturer of school buses in North America. Approximately 79% of the Company's net sales in fiscal 1995 were derived from sales of school bus products. The Company also manufactures the Q-Bus and Commercial Shuttle ("CS"), which target purchasers of medium-sized buses for commercial uses, and two luxury recreational vehicle ("RV") models, the Wanderlodge and the Blue Bird Motor Coach ("BMC"). Commercial and recreational vehicles accounted for approximately 14% and 7%, respectively, of the Company's fiscal 1995 net sales. The Company manufactures both quality steel bus bodies for mounting on chassis manufactured by third parties and complete bus units (body and chassis). Chassis generally consist of frames with engines, transmissions, drive trains, axles, wheels, power steering, brakes and fuel cells. The Company markets its products primarily through a network of approximately 63 independent distributors, which resell the products to customers, including municipalities, states, transportation contracting companies, churches and other independent organizations. Through its special purpose lease financing subsidiary, Blue Bird Capital Corporation ("Blue Bird Capital"), the Company provides lease financing alternatives, principally to tax-exempt customers of its school bus products. Management believes that providing a variety of alternative leasing packages to its customers creates a significant competitive advantage for the Company. For the 12-month period ended July 27, 1996, the Company had $544.1 million in net sales and $61.1 million in EBITDA (as defined herein). Purchasers of school buses are categorized into two ownership groups: (i) public (consisting of states and school districts); and (ii) private (consisting of independent transportation contracting companies and other private entities). In the United States, approximately 78% of the estimated 410,000 school buses currently in operation are publicly owned, with the remainder being privately owned. Management estimates that deliveries of school buses in North America in fiscal 1995 totaled approximately 30,600 units. In addition, management estimates that the market demand for the types of school bus and commercial bus products that the Company manufactures and sells to countries outside of North America totaled approximately 3,500 units in fiscal 1995. In fiscal 1995, the Company sold 12,250 school bus units and estimates that it had approximately 40% market share in the $1.3 billion North American market for school buses. The Company's business strategy is to continue to utilize its leading market position in the school bus market as a platform from which to expand its product offerings. The Company will continue to focus on its core school bus business, while seeking to expand its commercial bus product offerings to various markets, including the shuttle bus market, the smaller urban bus market and the "line haul" or inter-city coach market. Within the school bus market, the Company will continue to emphasize sales to distributors, as opposed to states and large transportation contracting companies, reflecting its belief that the former market provides greater growth and profit opportunities. The Company will also seek to expand its international bus sales, particularly in developing countries. THE RECAPITALIZATION On November 19, 1996, the Company completed an overall recapitalization pursuant to which the Company refinanced approximately $90 million (as of September 28, 1996) of its indebtedness and paid a 5 special cash dividend to BBC of $201.4 million (the "Blue Bird Dividend") on all shares of its common stock, $.10 par value per share ("Blue Bird Common Stock"). Immediately after the declaration of the Blue Bird Dividend, the Board of Directors of BBC declared a special cash dividend and made payments in the aggregate amount of $201.4 million on all shares of its common stock, $.01 par value per share ("BBC Common Stock") and in respect of options to purchase BBC Common Stock (collectively, the "BBC Distribution" and, together with the Blue Bird Dividend, the "Distribution"). Holders of BBC options received cash payments and were not required to exercise their options to receive their PRO RATA portion of the BBC Distribution, nor were they entitled to any antidilution adjustment to the exercise price for their options. As part of the Recapitalization, holders of $50 million aggregate principal amount (or 100%) of the Company's then outstanding 11 3/4% Senior Subordinated Notes due 2002, Series B (the "Old Notes") ("Selling Holders") sold their Old Notes to the Company for aggregate payments (including accrued interest) of approximately $56.1 million. The Company's then-existing bank credit agreement (the "Old Credit Agreement"), under which $40 million of indebtedness was outstanding at September 28, 1996, was replaced and refinanced by an amended and restated credit agreement (the "New Credit Agreement"), which provides for, among other things, aggregate availability of $255 million, including $175 million of Term Facilities (as defined herein) and an $80 million of Revolving Facility (as defined herein). In addition, the Company offered and sold $100,000,000 aggregate principal amount of 144A Notes (the "144A Note Offering"). Proceeds from the 144A Note Offering, borrowings under the New Credit Agreement and cash on hand were used to fund the retirement of the Old Notes, the refinancing of the Old Credit Agreement and the Distribution, and to pay related fees and expenses. The 144A Notes Offering, the retirement of the Old Notes, the replacement of the Old Credit Agreement with the New Credit Agreement and the Distribution are collectively referred to herein as the "Recapitalization." See "The Recapitalization." The Company's principal executive offices are located at 3920 Arkwright Road, Macon, Georgia 31210 and its telephone number is (912) 757-7100. THE 144A NOTE OFFERING The 144A Notes............... The 144A Notes were sold by the Company in the 144A Note Offering on November 19, 1996, and were subsequently resold to Qualified Institutional Buyers (as defined herein) pursuant to Rule 144A under the Securities Act and to institutional investors that are Accredited Investors (as defined herein) in a manner exempt from registration under the Securities Act. Registration Rights Agreement.................. In connection with the 144A Note Offering, the Company entered into the Registration Rights Agreement, which grants Holders of the 144A Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange and registration rights, which generally terminate upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER Securities Offered........... $100,000,000 aggregate principal amount of its 10 3/4% Senior Subordinated Notes due 2006, Series B. The Exchange Offer........... $1,000 principal amount of the Exchange Notes in exchange for each $1,000 principal amount of 144A Notes. As of the date hereof,
6 $100,000,000 aggregate principal amount of 144A Notes are outstanding. The Company will issue the Exchange Notes to Holders on or promptly after the Expiration Date. The terms of the Exchange Notes are substantially identical in all material respects (including principal amount, interest rate and maturity) to the terms of the 144A Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferrable by holders thereof (other than as provided herein), and are not subject to any covenant regarding registration under the Securities Act. See "The Exchange Offer." Other than compliance with applicable federal and state securities laws, including the requirement that the Registration Statement be declared effective by the Commission, there are no material federal or state regulatory requirements to be complied with in connection with the Exchange Offer. Interest Payments............ The Exchange Notes will bear interest from November 19, 1996, the date of issuance of the 144A Notes that are tendered in exchange for the Exchange Notes (or the most recent Interest Payment Date (as defined herein) to which interest on such 144A Notes has been paid. Accordingly, Holders of 144A Notes that are accepted for exchange will not receive interest on the 144A Notes that is accrued but unpaid at the time of tender, but such interest will be payable on the first Interest Payment Date after the Expiration Date. Minimum Condition............ The Exchange Offer is not conditioned upon any minimum aggregate principal amount of 144A Notes being tendered for exchange. Expiration Date.............. 5:00 p.m., New York City time, on , 1997 unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Exchange Date................ The date of acceptance for exchange of the 144A Notes will be the first business day following the Expiration Date. Withdrawal Rights............ Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer-- Withdrawal of Tenders." Acceptance of 144A Notes and Delivery of Exchange Notes...................... The Company will accept for exchange any and all 144A Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Conditions to the Exchange Offer...................... The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer-- Conditions." Procedures for Tendering 144A Notes...................... To tender in the Exchange Offer, a Holder must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof,
7 have the signatures therein guaranteed if required by instruction 4 of the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the 144A Notes and any other required documentation to the Exchange Agent (as defined herein) at the address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer-- Procedures for Tendering" and "Plan of Distribution." By executing the Letter of Transmittal, each Holder will represent to the Company that, among other things, the Holder or the person receiving such Exchange Notes, whether or not such person is the Holder, is acquiring the Exchange Notes in the ordinary course of business and that neither the Holder nor any such other person intends to participate or has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes. In lieu of physical delivery of the certificates representing 144A Notes, tendering Holders may transfer 144A Notes pursuant to the procedure for book-entry transfer as set forth under "The Exchange Offer--Procedures for Tendering." Special Procedures for Beneficial Owners.......... Any beneficial owner whose 144A Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such beneficial owner's own behalf, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering the 144A Notes, either make appropriate arrangements to register ownership of the 144A Notes in such beneficial owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. See "The Exchange Offer--Procedures for Tendering." Guaranteed Delivery Procedures................. Holders of 144A Notes who wish to tender their 144A Notes and whose 144A Notes are not immediately available or who cannot deliver their 144A Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the requirements for book-entry transfer) prior to the Expiration Date must tender their 144A Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer-- Guaranteed Delivery Procedures." Federal Income Tax Consequences............... The issuance of the Exchange Notes to Holders pursuant to the terms set forth in this Prospectus will not constitute an exchange for federal income tax purposes. Consequently, no gain or loss would be recognized by Holders upon receipt of the Exchange Notes. See "Certain U.S. Federal Income Tax Consequences." Use of Proceeds.............. There will be no proceeds to the Company from the exchange of 144A Notes pursuant to the Exchange Offer.
8 Exchange Agent............... The Chase Manhattan Bank is serving as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. See "The Exchange Offer--Exchange Agent."
SUMMARY OF TERMS OF EXCHANGE NOTES The form and terms of the Exchange Notes are the same as the form and terms of the 144A Notes (which they replace) except that (i) the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (ii) the holders of Exchange Notes generally will not be entitled to further registration rights under the Registration Rights Agreement, which rights generally will be satisfied when the Exchange Offer is consummated. The Exchange Notes will evidence the same debt as the 144A Notes and will be entitled to the benefits of the Indenture. See "Description of the Exchange Notes." Securities Offered........... $100,000,000 aggregate principal amount of 10 3/4% Senior Subordinated Notes due 2006, Series B. Maturity Date................ November 15, 2006. Interest Payment Dates....... Interest on the Exchange Notes will be payable semi-annually in arrears on May 15 and November 15 of each year, commencing May 15, 1997. Optional Redemption.......... The Exchange Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after November 15, 2001, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption. See "Description of the Exchange Notes--Optional Redemption." In addition, on or prior to November 15, 1999, the Company may redeem up to 25% of the originally issued Notes, at a price of 110.75% of the principal amount thereof, together with accrued and unpaid interest to the redemption date, with the net proceeds of a Public Equity Offering; PROVIDED that not less than $75 million in principal amount of Notes is outstanding immediately after giving effect to such redemption. Change of Control Triggering Event...................... Upon the occurrence of a Change of Control Triggering Event, each holder of Exchange Notes will have the right to require the Company to purchase all or a portion of such holder's Exchange Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of purchase. See "Description of the Exchange Notes--Change of Control Triggering Event." Ranking...................... The Exchange Notes will represent unsecured senior subordinated obligations of the Company and will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company. As of September 28, 1996, on a PRO FORMA basis, after giving effect to the Recapitalization, the Company would have had approximately $181.3 million of Senior Indebtedness. In addition, at September 28, 1996 after giving effect to the Recapitalization, the aggregate amount of indebtedness and other liabilities of subsidiaries of the Company to
9 which Holders of Notes are structurally subordinated would have been approximately $63 million (which was composed principally of liabilities of the Company's special purpose lease financing subsidiary). Exchange Note Guarantee...... The Exchange Notes will be guaranteed on an unsecured senior subordinated basis by BBC, which owns all of the outstanding capital stock of the Company. Certain Covenants............ The Indenture pursuant to which the 144A Notes were issued and the Exchange Notes will be issued contains certain covenants, including, among others, covenants with respect to the following matters: (i) limitation on indebtedness; (ii) limitation on restricted payments; (iii) limitation on certain transactions with affiliates; (iv) disposition of proceeds of asset sales; (v) limitation on liens; (vi) limitation on other senior subordinated indebtedness; (vii) limitation of guarantees by subsidiaries; and (ix) limitation on dividends and other payment restrictions affecting subsidiaries. See "Description of the Exchange Notes--Certain Covenants." Exchange Offer; Registration Rights..................... In the event that applicable law or interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if certain Holders of the 144A Notes are not permitted to participate in, or do not receive the benefit of, the Exchange Offer, the Registration Rights Agreement provides that the Company and the Guarantor (as defined herein) will use all reasonable efforts to cause to become effective a shelf registration statement (the "Shelf Registration Statement") with respect to the resale of the 144A Notes and to keep such Shelf Registration Statement effective until three years after the Issue Date (as defined herein) or such shorter period ending when all the 144A Notes have been sold thereunder. The interest rate on the 144A Notes is subject to increase under certain circumstances if the Company and the Guarantor are not in compliance with their obligations under the Registration Rights Agreement. See "Exchange Offer; Registration Rights." Absence of a Public Market for the Notes.............. The Exchange Notes will be new securities for which there is currently no established trading market. Although Merrill Lynch has informed the Company that they currently intend to make a market in the Exchange Notes, they are not obligated to do so and any such market-making may be discontinued at any time without notice, at their sole discretion. Accordingly, there can be no assurance as to the development or the liquidity of any market for the Exchange Notes. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation through the NASDAQ National Market or any other quotation system.
RISK FACTORS See "Risk Factors" beginning on page 13 for a discussion of certain factors which should be considered by participants in the Exchange Offer. 10 SUMMARY FINANCIAL DATA Set forth below is certain summary historical consolidated financial information for BBC as of and for the fiscal years 1995, 1994 and 1993 and as of and for the nine months ended July 27, 1996 and July 29, 1995. The summary historical consolidated financial information of BBC and subsidiaries as of and for the full fiscal years indicated were derived from the financial statements of BBC and its subsidiaries which were audited by Arthur Andersen LLP, independent accountants ("Arthur Andersen"). The data for the nine months ended July 27, 1996 and July 29, 1995 and the historical balance sheet data as of September 28, 1996 are unaudited but, in the opinion of BBC's management, reflect all adjustments necessary for a fair presentation of the results of operations for such periods. The PRO FORMA information is unaudited. The results for the nine months ended July 27, 1996 may not be indicative of the results to be expected for the year ending November 2, 1996 because, among other things, Blue Bird's business is seasonal, with the majority of sales occurring in the third and fourth quarters. The PRO FORMA other financial data and ratios are based on the summary historical consolidated financial information for BBC, adjusted to give effect to the Recapitalization as if it occurred on October 29, 1994. The PRO FORMA balance sheet data is based on the summary historical consolidated financial information for BBC, adjusted to give effect to the Recapitalization as if it occurred on September 28, 1996. The summary historical financial information set forth below should be read in conjunction with the consolidated financial statements of BBC and the notes thereto included elsewhere in this Prospectus, see "Index to Consolidated Financial Statements," as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations."
NINE MONTHS ENDED FISCAL YEAR ENDED ------------------------ ------------------------------------- JULY 27, JULY 29, OCTOBER 28, OCTOBER 29, OCTOBER 30, 1996 1995 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- (DOLLARS IN MILLIONS) INCOME STATEMENT DATA: Net sales..................................... $ 346.1 $ 319.5 $ 517.4 $ 476.2 $ 413.5 Cost of goods sold............................ 287.4 264.1 430.6 392.9 340.5 ----------- ----------- ----------- ----------- ----------- Gross profit.................................. 58.7 55.4 86.8 83.3 73.0 Selling, general and administrative expenses.. 31.5 29.5 39.8 39.0 36.3 Amortization of goodwill and noncompete agreements.................................. 2.8 3.7 4.7 5.6 5.6 ----------- ----------- ----------- ----------- ----------- Operating income.............................. 24.4 22.2 42.3 38.7 31.1 Interest income............................... 5.3 3.0 4.6 4.1 2.9 Interest expense.............................. (12.8) (14.0) (18.5) (17.4) (18.2) Other income, net............................. .5 .4 .1 .2 .7 ----------- ----------- ----------- ----------- ----------- Income before income taxes.................... 17.4 11.6 28.5 25.6 16.5 Provision for income taxes.................... 6.8 4.9 11.6 10.2 6.9 ----------- ----------- ----------- ----------- ----------- Net income before extraordinary item.......... $ 10.6 $ 6.7 $ 16.9 $ 15.4 $ 9.6 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- OTHER FINANCIAL DATA AND RATIOS: EBITDA(a)..................................... $ 37.1 $ 33.3 $ 57.3 $ 54.2 $ 46.4 Adjusted EBITDA (b)........................... 33.4 31.4 54.4 51.5 44.6 Capital expenditures.......................... 2.6 2.8 3.6 8.6 1.1 Ratio of Adjusted EBITDA to Adjusted Cash Interest Expense (b)........................ 4.2x 3.1x 4.1x 3.9x 3.1x Pro forma ratio of Adjusted EBITDA to Adjusted Cash Interest Expense (b)(c)................ 1.5x 1.9x Ratio of earnings to fixed charges(d)......... 2.2x 1.6x 2.5x 2.4x 1.9x Pro forma deficiency of earnings to fixed charges(c)(d)(e)............................ -- --
AS OF SEPTEMBER 28, 1996 ------------------------ HISTORICAL PRO FORMA ----------- ----------- (DOLLARS IN MILLIONS) BALANCE SHEET DATA: Working capital.......................................... $ 65.8 $ 59.6(f) Total assets............................................. 395.4 385.3(g) Total long-term debt, excluding current maturities....... 119.9 308.8(h) Redeemable common stock, net............................. 20.4 11.5(i) Stockholders' equity (deficit)........................... 123.1 (56.0)(j)
(FOOTNOTES ON FOLLOWING PAGE) 11 - -------------------------- (a) Earnings before interest, taxes, depreciation and amortization ("EBITDA") represents the sum of income before income taxes plus interest expense (including amortization of debt issue costs), depreciation and amortization. EBITDA is presented here to provide additional information about the Company's ability to meet its future debt service, capital expenditure and working capital requirements. EBITDA is not a measure of financial performance under generally accepted accounting principles ("GAAP") and should not be considered as an alternative either to net income as an indicator of the Company's operating performance, or to cash flows as a measure of the Company's liquidity. (b) Adjusted EBITDA and Adjusted Cash Interest Expense exclude interest income and interest expense (which includes amortization of debt issue costs), respectively, associated with the Company's lease financing activities. These activities have been conducted principally by Blue Bird Capital since October 1995. The associated interest expense of Blue Bird Capital is incurred under the LaSalle Credit Facility (as defined herein), which is recourse only against Blue Bird Capital. Blue Bird Capital will be treated as an "Unrestricted Subsidiary" under the Indenture. Adjusted Cash Interest Expense also excludes the amortization of debt issue costs which is included in interest expense. (c) Presented on a PRO FORMA basis as though the Recapitalization had occurred at the beginning of the periods presented. In making the PRO FORMA calculation of Adjusted EBITDA to Adjusted Cash Interest Expense, the following additional adjustments have been made: (i) Adjusted EBITDA excludes the impact of the one-time compensation charge of $16.1 million related to that portion of the Distribution paid to management optionholders and is therefore deemed compensation expense and (ii) PRO FORMA Adjusted Cash Interest Expense excludes the interest expense of $2.9 million related to the $25 million of Old Notes repaid for the fiscal year ended October 28, 1995. On a PRO FORMA basis, Adjusted Cash Interest Expense would have been $22.5 million and $28.9 million for the nine months ended July 27, 1996 and the fiscal year ended October 28, 1995, respectively. (d) For the purpose of computing the ratios of earnings to fixed charges, "earnings" consists of operating income before income taxes and fixed charges, and "fixed charges" consists of interest expense and the portion of rental expense deemed representative of the interest factor. (e) On a PRO FORMA basis after giving effect to the Recapitalization for the nine months ended July 27, 1996 and fiscal year ended October 28, 1995, the deficiency of the earnings to fixed charges was $12.7 million and $4.8 million, respectively. (f) Reflects (i) the receipt of gross proceeds from the 144A Note Offering of ($99.7 million), borrowings under the Term Facility of the New Credit Agreement ($175 million) and borrowings under the Revolving Facility of the New Credit Agreement ($3.6 million); (ii) the retirement of indebtedness (including accrued interest) under the Old Credit Agreement ($40 million) and the Old Notes ($52.7 million); (iii) the payment of fees and expenses associated with the Recapitalization ($9.1 million) and the costs (including premium) associated with the retirement and amendment of the Old Notes ($3.4 million); (iv) the payment of the Distribution ($201.4 million); (v) the proceeds from the repayment of the Management Notes (as defined herein) from the BBC Distribution to the management shareholders ($3.8 million); and (vi) the tax benefits associated with the Recapitalization ($14.9 million). At July 27, 1996, the Company's cash balance was $5.3 million. The cash balance at September 28, 1996 was $24.5 million and was $43 million immediately prior to the Recapitalization. See "Capitalization." (g) Reflects all of the items discussed in footnote (f) above; the write off of the debt issue costs related to the indebtedness being retired ($1.9 million) and the capitalization of debt issue costs for the 144A Note Offering and the New Credit Agreement ($9.1 million). (h) Reflects the incremental borrowings necessary to effect the Recapitalization. (i) Redeemable common stock represents 720,000 issued and outstanding shares of BBC Common Stock purchased by members of management (the "Management Investors"), primarily in conjunction with the 1992 Acquisition (as defined herein). The Management Investors have the right, prior to the earlier of an initial public offering of equity securities of BBC or the tenth anniversary of the Stockholders' Agreement (as defined herein), to put these shares to BBC in the event of their disability, involuntary termination not for cause, retirement (as such terms are defined in the Stockholders' Agreement), or death for a fair value price (as defined in the Stockholders' Agreement). The redeemable stock of BBC was recorded at fair value on the date of issuance. The excess of the fair value price over the original fair value is being accreted by periodic charges to retained earnings. The amounts recorded in the balance sheets represent the estimated maximum amount payable if all Management Investors met the specified criteria and exercised their put rights. (j) Reflects (i) the Distribution, net of tax benefit ($188.6 million); (ii) the adjustment to the fair value of the redeemable common stock ($12.7 million); (iii) the costs associated with the retirement and amendment of the Old Notes, net of tax benefit ($2 million); and (iv) the write-off of the debt issue costs related to the indebtedness being retired, net of tax benefit ($1.2 million). 12 RISK FACTORS HOLDERS OF 144A NOTES SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS BEFORE DECIDING TO TENDER 144A NOTES IN THE EXCHANGE OFFER. THE RISK FACTORS SET FORTH BELOW ARE GENERALLY APPLICABLE TO THE 144A NOTES AS WELL AS THE EXCHANGE NOTES. LEVERAGE AND DEBT SERVICE As a result of the Recapitalization, the Company is highly leveraged. At September 28, 1996, on a PRO FORMA basis, after giving effect to the Recapitalization, the aggregate total outstanding indebtedness of the Company would have been approximately $336.5 million and the stockholders' deficit would have been $56 million. See "Capitalization." On a PRO FORMA basis after giving effect to the Recapitalization, for fiscal 1995 and the nine-month period ended July 27, 1996, the deficiency of the earnings to fixed charges was $4.8 million and $12.7 million, respectively. Furthermore, at September 28, 1996, after giving effect to the Recapitalization, the Company had the ability to borrow an additional $120.9 million under credit facilities to which it or Blue Bird Capital are parties. The New Credit Agreement provides, among other things, that the Company is obligated to prepay the lenders thereunder out of its free cash flow after satisfying certain mutually agreed upon fixed charge obligations. See "Description of Debt Facilities--Senior Bank Financing." The Company's ability to make scheduled payments of principal of or interest on, or to refinance, its indebtedness (including the Notes) depends on its future operating performance, which to a certain extent is subject to economic, financial, competitive and other factors beyond its control. The degree to which the Company is leveraged could have important consequences to the holders of the Notes, including: (i) the Company's increased vulnerability to adverse general economic and industry conditions; (ii) the Company's ability to obtain additional financing for future working capital, capital expenditures, acquisitions, general corporate purposes or other purposes may be limited; (iii) the dedication of a substantial portion of the Company's cash flow from operations to the payment of principal of and interest on indebtedness, thereby reducing the funds available for operations and future business opportunities; and (iv) the Company's increased vulnerability to higher interest rates as a result of the fact that its borrowings under the New Credit Agreement are at variable rates of interest. In addition, all of the indebtedness incurred in connection with the New Credit Agreement matures prior to the maturity of the Notes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources." SUBORDINATION The payment of principal, premium, if any, and interest on the Exchange Notes will be subordinated in right of payment to the prior payment in full to all existing and future Senior Indebtedness of the Company, including indebtedness incurred under the New Credit Agreement. As of September 28, 1996, after giving effect to the Recapitalization, the Company would have had approximately $181.3 million of Senior Indebtedness and the ability (subject to applicable conditions) to borrow up to an additional $76.4 million of Senior Indebtedness under the New Credit Agreement. In addition, the claims of holders of Exchange Notes will be effectively subordinated to the claims of creditors (including trade creditors) of the Company's subsidiaries. The foreign and lease finance operations of the Company are conducted primarily through subsidiaries of the Company. The claims of creditors of such subsidiaries effectively will have priority with respect to the assets and earnings of such subsidiaries over the claims of the Company and its creditors, including holders of the Exchange Notes. At September 28, 1996, after giving effect to the Recapitalization, the aggregate amount of indebtedness and other liabilities of the Company's subsidiaries would have been approximately $63 million (which were composed principally of liabilities of the Company's special purpose lease financing subsidiary), and the Company's subsidiaries had the ability to borrow an additional $44.5 million. See "Description of Debt Facilities." In addition, the Company's Canadian subsidiary, Canadian Blue Bird Coach Ltd. ("Canadian Blue Bird"), may borrow funds from the Company and issue a senior promissory note secured by the real and personal property of Canadian Blue 13 Bird, which would be pledged to the lenders under the New Credit Agreement as security. In effect, holders of Exchange Notes will also be structurally subordinated to any claims by the lenders under the New Credit Agreement in respect of such secured note. Subject to certain restrictions, exceptions and financial tests set forth in its debt instruments, the Company and its subsidiaries may also incur additional indebtedness in the future which ranks prior to claims of holders of the Exchange Notes. The subordination provisions of the Indenture provide that, upon any payment or distribution of the Company's assets to creditors upon any dissolution, winding-up, liquidation, reorganization, bankruptcy, insolvency, receivership or other proceedings relating to the Company, whether voluntary or involuntary, holders of the Senior Indebtedness will be entitled first to receive payment in full of all amounts due thereon before the holders of Exchange Notes will be entitled to receive any payment with respect to the Exchange Notes. In the event of any default in the payment in respect of any Senior Indebtedness, no payment with respect to the Exchange Notes may be made by the Company unless and until such default has been cured or waived. In addition, upon the occurrence of any other default entitling the holders of Designated Senior Indebtedness (as defined herein) to accelerate the maturity thereof and receipt by the trustee under the Indenture of written notice of such occurrence from such holders, no payment in respect of the Exchange Notes may be made by the Company for a maximum of 179 days. See "Description of the Exchange Notes--Subordination." BBC will guarantee the Exchange Notes on an unsecured senior subordinated basis. Currently, BBC conducts no business other than holding the capital stock of the Company and has no significant assets other than the capital stock of the Company. The BBC Guarantee will be subordinated in right of payment to the guarantee provided by BBC under the New Credit Agreement. The Indenture contains no restrictions on the activities of BBC. See "Description of the Exchange Notes--Note Guarantees." Therefore, there are not expected to be any resources to support the BBC Guarantee that would be incremental to those to which holders of the Exchange Notes will already have access as direct creditors of the Company. Under certain circumstances, subsidiaries of the Company may be required to guarantee the Exchange Notes, in which case, claims in respect of such guarantee would be subordinated in right of payment to Guarantor Senior Indebtedness (as defined in the BBC Guarantee) in the same manner as the Exchange Notes are subordinated to Senior Indebtedness. RESTRICTIVE COVENANTS AND ASSET ENCUMBRANCES The New Credit Agreement contains certain financial and other covenants, including covenants requiring the Company to maintain certain financial ratios and restricting the ability of BBC and its subsidiaries to incur indebtedness or to create or suffer to exist certain liens. The amortization schedule and mandatory prepayment provisions under the New Credit Agreement also require that significant portions of indebtedness thereunder be repaid prior to maturity in 2003. The ability of the Company to comply with such provisions may be affected by events beyond its control. Should the Company be unable to comply with the financial or other restrictive covenants under the New Credit Agreement at any time in the future there can be no assurance that the lenders would agree to any necessary amendments or waivers. In such a case, the failure to obtain amendments or waivers could have a material adverse effect upon the Company and its ability to meet its obligations in respect of the Exchange Notes. A failure to make any required payment under the New Credit Agreement or to comply with any of the financial and operating covenants included in the New Credit Agreement could result in an event of default thereunder, permitting the lenders to accelerate the maturity of the indebtedness under the New Credit Agreement and to foreclose upon their collateral, and, depending upon the action taken by such lenders, delaying or precluding payment of principal of, premium, if any, or interest on the Exchange Notes. Such an acceleration could also result in the acceleration of the other indebtedness of the Company and its subsidiaries which contain cross-acceleration or cross-default provisions. See "Description of Debt Facilities." The Indenture also has certain covenants which, if not complied with, would result in an Event of 14 Default (as defined herein) thereunder permitting holders of the Exchange Notes, under certain circumstances, to accelerate the Exchange Notes. Any such Event of Default or acceleration could also result in an event of default or acceleration of other indebtedness of the Company. In addition, the obligations of the Company under the New Credit Agreement will be secured by substantially all of the Company's assets. In the event of an event of default under the New Credit Agreement, the lenders under the New Credit Agreement would be entitled to exercise the remedies available to a secured lender under applicable law. Therefore, in addition to being entitled to the benefits of the subordination provisions contained in the Indenture, the secured lenders will have a prior claim on the assets of BBC and its subsidiaries securing their indebtedness. If the lenders under the New Credit Agreement accelerate the maturity of the Senior Indebtedness thereunder there can be no assurance that the Company will have sufficient assets to satisfy its obligations under the Exchange Notes. In addition, other indebtedness of the Company and its subsidiaries that may be incurred in the future may contain financial or other covenants more restrictive than those applicable to the New Credit Agreement or the Exchange Notes. See "-- Subordination." Blue Bird Capital entered into a Loan Agreement, dated October 18, 1995, as amended and restated on March 29, 1996 (as so amended and restated, the "LaSalle Credit Agreement") with LaSalle National Bank, as agent for itself and other lenders ("LaSalle"). Revolving loans under the LaSalle Credit Agreement (the "LaSalle Credit Facility") are used to finance the lease financing operations of Blue Bird Capital. The LaSalle Credit Agreement contains financial and other covenants, including covenants requiring Blue Bird Capital to maintain certain financial ratios and restricting the ability of Blue Bird Capital to incur indebtedness or to create or suffer to exist certain liens. The LaSalle Credit Agreement also requires that certain amounts of indebtedness thereunder be repaid by specified dates. A failure to make any required payment under the LaSalle Credit Agreement or to comply with any of the financial and operating covenants included therein could have a material adverse effect on the Company and its ability to meet its obligations in respect of the Exchange Notes. See "Description of Debt Facilities-- LaSalle Credit Agreement," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business--Leasing." The Company's indebtedness under the New Credit Agreement will bear interest at rates that will fluctuate with changes in certain prevailing interest rates (although such rates may be fixed for limited periods of time). The New Credit Agreement may require the Company to enter into interest rate protection arrangements with respect to a portion of the lenders' commitments under each of the term loan facilities thereunder. The indebtedness of Blue Bird Capital under the LaSalle Credit Facility also bears interest at rates that will fluctuate with changes in certain prevailing interest rates (although such rates may be fixed for limited periods of time). See "Description of Debt Facilities." PRODUCT LIABILITY CLAIMS AND INSURANCE COVERAGE The Company is subject to various product liability claims for personal injuries and other matters allegedly relating to the use of products manufactured or sold by it. The Company is also subject to recalls of its bus products from customers to cure manufacturing defects or in the event of a failure to comply with applicable regulatory standards. In August 1996, the National Highway Traffic Safety Administration (the "NHTSA") announced its determination that approximately 11,500 school buses were not in compliance with federal requirements for fuel systems. Of the affected buses, 11,300 were Blue Bird Type D (as defined herein) models in which the chassis were manufactured by the Company, which failed crash tests when fuel tanks were punctured upon impact. The Company is currently evaluating the scope of the proposed product recall with the NHTSA as a result of the NHTSA's non-compliance determination. If all 11,300 buses were to be recalled, management estimates that the cost of repairs required to be paid by the Company to bring the vehicles into compliance would not be material. However, manufacturing defects or the failure to comply with applicable regulatory standards can also serve as the basis for a variety of claims 15 from customers of the Company and bus passengers who use the Company's products. As such, there can be no assurance as to the ultimate outcome of this matter. Management considers product liability litigation to be in the ordinary course of its business. The ultimate outcome of the claims, or potential future claims, against it cannot presently be determined and the amount of the Company's product liability insurance coverage with respect to such claims varies from year to year. While the Company believes that any losses and expenses (including defense costs) resulting from such claims will be within the applicable insurance coverage and financial statement reserves established to cover retention liability and defense costs and other related expenses, there can be no assurance that this will be true or that the amount of losses and expenses relating to any claim or claims will not have a material adverse effect on the Company and thereby on the ability of the Company to meet its obligations in respect of the Notes. While the Company expects to continue to be able to obtain adequate insurance coverage at acceptable rates, there can be no certainty that such coverage will ultimately be available to the Company at acceptable rates or at all, that future rate increases might not make such insurance uneconomical for the Company to maintain, that current levels of deductibles will continue to be available, or that the Company's insurers will be financially viable if and when payment of a claim is required. The inability of the Company to obtain adequate insurance coverage at acceptable rates is likely to have a material adverse effect on the Company. In addition, the running of statutes of limitations for personal injuries to minor children typically is suspended during the children's legal minority. Therefore, it is possible that accidents causing injuries to minor children on school buses may not give rise to lawsuits until a number of years later. See "Business--Legal Proceedings." For a discussion of other contingent liabilities, including potential environmental liabilities, see "Business--Environmental Matters" and note 11 to the Notes to Audited Consolidated Financial Statements included elsewhere in this Prospectus. GOVERNMENTAL REGULATION The Company's products must satisfy certain standards applicable to vehicles established by the NHTSA. Certain of its products must also satisfy specifications established by other federal, state and local regulatory agencies, primarily dealing with safety standards applicable to school buses. The cost of compliance with existing regulations results in an incremental cost of doing business to the Company and the cost of compliance with future regulations cannot be predicted with any degree of certainty and may significantly affect the Company's operations. Further, a substantial change in any such regulation could have a significant impact on the business of the Company. In addition, the scheduled effectiveness in 1998 of more restrictive United States Environmental Protection Agency ("EPA") emissions standards may impact upon the Company's operations. See "--Product Liability Claims and Insurance Coverage" and "Business--Government Regulation." LIMITED NUMBER OF CHASSIS SUPPLIERS In general, buses consist of a body mounted on a chassis, which includes the bus engine. A substantial portion of the units sold by the Company are Type C (as defined herein) buses for which the Company does not manufacture a chassis. The Company offers an "integrated" Type C bus by purchasing a chassis pursuant to the GM Chassis Agreement (as defined herein) and assembling it with the Company's Type C bus body. In addition, the Company sells Type C bus bodies for assembly on non-GM chassis. Because of the importance of the Type C bus to the Company, obtaining an adequate supply of chassis could thus become critical to the Company's ability to compete in the school bus market. There are only three major chassis manufacturers in the United States: General Motors Corporation ("GM"), Ford Motor Company ("Ford") and Navistar International Corporation ("Navistar"). Navistar, which accounts for approximately 60% of the chassis market, recently purchased AmTran of Illinois, Inc. ("AmTran"), a bus manufacturer that is one of the Company's major competitors. Since its acquisition of 16 AmTran, Navistar has continued to make its chassis available to AmTran's competitors as well as to school districts and other purchasers who wish to combine Navistar chassis with other bus bodies, such as those made by the Company. There can be no assurance that Navistar will continue to make its chassis available to purchasers other than AmTran. On May 6, 1991, the Company entered into a chassis supply agreement (the "GM Chassis Agreement") with GM to secure a steady supply of chassis. This agreement may be terminated by GM or by the Company upon two years' notice to the other party. There can be no assurance that GM will not terminate the GM Chassis Agreement. If the GM Chassis Agreement were to be terminated or if, for any reason, GM were to (i) cease manufacturing chassis or (ii) cease selling them to the Company and/or school districts and other customers who combine GM chassis with Blue Bird bodies, there also can be no assurances that (i) Blue Bird would be able to purchase sufficient quantities of chassis from Navistar and the remaining suppliers to fill orders or (ii) school districts or other customers would continue to order bodies from Blue Bird if such customers cannot be assured of being able to obtain chassis. If the Company were required to manufacture more chassis for its own use, it would likely materially effect its future results of operations and, potentially, its profitability. FRAUDULENT CONVEYANCE RISKS The incurrence by the Company of indebtedness, including indebtedness incurred under the New Credit Agreement and the Notes, the proceeds of which will be used, in part, to pay the Blue Bird Dividend to fund the BBC Dividend, is subject to review under relevant federal and state fraudulent conveyance statutes in a bankruptcy, reorganization or rehabilitation case or similar proceeding or a lawsuit by or on behalf of unpaid creditors of the Company. Under these fraudulent conveyance statutes, if a court were to find that, at the time the Notes were issued, (i) the Company issued the Notes with the intent of hindering, delaying or defrauding current or future creditors or (ii) (a) the Company received less than reasonably equivalent value or fair consideration for issuing the Notes and (b) the Company (1) was insolvent or was rendered insolvent by reason of the Recapitalization and related transactions, including the incurrence of the indebtedness related thereto, (2) was engaged in a business or transaction for which its assets constituted unreasonably small capital, (3) intended to incur, or believed that it would incur, obligations beyond its ability to pay as such obligations matured (as the foregoing terms are defined in or interpreted under the fraudulent conveyance statutes) or (4) was a defendant in an action for money damages, or had a judgment for money damages docketed against it (if, in either case, after final judgment the judgment is unsatisfied), such court could subordinate the Notes to presently existing and future indebtedness of the Company (in addition to the Senior Indebtedness to which the Notes are expressly subordinated) or take other action detrimental to the holders of the Notes, including invalidating the Notes. In addition, the BBC Guarantee which applies to the Notes, is subject to review under relevant federal and state fraudulent conveyance statutes. Under these fraudulent conveyance statutes, if a court were to find that, at the time the BBC Guarantee was given, (i) BBC guaranteed the Notes with the intent of hindering, delaying or defrauding current or future creditors or (ii) (a) BBC received less than reasonably equivalent value or fair consideration for guaranteeing the Notes, and (b) BBC (1) was insolvent or was rendered insolvent by reason of such guarantee, (2) was engaged in a business or transaction for which its assets constituted unreasonably small capital, (3) intended to incur, or believed that it would incur, obligations beyond its ability to pay as such obligations matured (as the foregoing terms are defined in or interpreted under the fraudulent conveyance statutes), or (4) was a defendant in an action for money damages, or had a judgment for money damages docketed against it (if in either case, after final judgment the judgment is unsatisfied), such court could subordinate the claim under the BBC Guarantee to presently existing and future indebtedness of BBC (in addition to the Guarantor Senior Indebtedness to which the BBC Guarantee is expressly subordinated) or take other action detrimental to the holders of the Notes, including invalidating the BBC Guarantee. 17 The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law that is being applied in any such proceeding. Generally, however, Blue Bird or BBC would be considered insolvent if (i) the sum of their debts, including contingent liabilities, were greater than the fair saleable value of all of their assets at a fair valuation or if the present fair market value (or fair saleable value) of their assets were less than the amount that would be required to pay their probable liability on their existing debts, including contingent liabilities, as they become absolute or mature or (ii) they were incurring obligations beyond their ability to pay as such obligations mature or become due. BBC believes that at the time of the issuance of the BBC Guarantee and upon consummation of the Recapitalization, BBC was (i) neither insolvent nor rendered insolvent thereby, (ii) in possession of sufficient capital to meet its obligations as the same mature or become due and to operate its business effectively, and (iii) incurring debts within its ability to pay as the same mature or become due. Blue Bird believes that upon consummation of the Recapitalization and upon the issuance of the Notes, Blue Bird will (i) be (a) neither insolvent nor rendered insolvent thereby, (b) in possession of sufficient capital to run its business effectively, and (c) incurring debts within its ability to pay as the same mature or become due and (ii) will have sufficient assets to satisfy any probable money judgment against it in any pending action. In reaching these conclusions, BBC and Blue Bird relied upon various valuations and cash flow estimates which necessarily involve a number of assumptions, including choices of methodology and assumptions based on economic, market, financial and other conditions. No assurance can be given, however, that the assumptions and methodologies chosen by BBC and Blue Bird would be adopted by a court or that a court would concur with such conclusions as to their solvency. CONTROL BY MLCP; CHANGE OF CONTROL BBC holds all of the capital stock of the Company and, in turn, is owned by affiliates (the "ML Entities") of Merrill Lynch Capital Partners, Inc. ("MLCP"), certain directors of BBC and the Company and certain members of management of the Company, who together acquired the Company in a leveraged buyout transaction in 1992 (the "1992 Acquisition"). The ML Entities own approximately 91% of the BBC Common Stock, with certain directors of BBC and the Company and management of the Company owning the balance. The interests of MLCP as equity holders of BBC may differ from the interests of holders of Exchange Notes and, as such, conflicts of interests between the ML Entities and holders of Exchange Notes may arise. See "Ownership of Capital Stock." There can also be no assurance that the ML Entities will continue to control BBC. A "change of control," as defined in various agreements, including the New Credit Agreement, would impose substantial financial obligations on the Company and would require the Company to refinance substantial amounts of its indebtedness. A change of control would be an Event of Default under the New Credit Agreement, permitting the lenders under the New Credit Agreement to exercise remedies, and would, under certain additional circumstances, require the Company to make an offer to purchase all of the outstanding Exchange Notes under the Indenture. The inability to repay indebtedness under the New Credit Agreement, if accelerated, or to purchase all of the Exchange Notes, would also constitute an Event of Default under the Indenture. See "Description of Debt Facilities" and "Description of the Exchange Notes-- Change of Control Triggering Event." In addition, a number of the Company's compensation arrangements may require it to make cash payments following a change of control. See "Certain Relationships and Related Transactions" and "Management--Executive Compensation." No assurance can be given that the Company will be able to comply with all of its obligations under its various agreements in the event of a change of control or to refinance any of these or other obligations that might become due by the reason of these provisions. Thus, in the event the Company was unable to meet its obligations, there may not be any resources available to meet claims for payment on the Exchange Notes. 18 LACK OF PRIOR MARKET FOR THE EXCHANGE NOTES The Exchange Notes are being offered to the Holders of the 144A Notes. The 144A Notes were offered and sold in November 1996 to a small number of "Qualified Institutional Buyers" and "Accredited Investors" (as defined in Rule 144A and Rule 501(a) (1), (2), (3) or (7) under the Securities Act, respectively) and are eligible for trading in the Private Offerings, Resale and Trading through Automatic Linkages ("PORTAL") Market. The Exchange Notes will constitute a new class of securities with no established trading market. Although the Exchange Notes will generally be permitted to be resold or otherwise transferred by nonaffiliates of the Company without compliance with the registration requirements under the Securities Act, the Company does not intend to apply for a listing of the Exchange Notes on any securities exchange or to arrange for the Exchange Notes to be quoted on the NASDAQ National Market or other quotation system. As a result, there can be no assurance as to the liquidity of markets that may develop for the Exchange Notes, the ability of the holders of the Exchange Notes to sell their Exchange Notes or the price at which such holders would be able to sell their Exchange Notes. If such markets were to exist, the Exchange Notes could trade at prices that may be lower than the initial market values thereof depending on many factors, including prevailing interest rates and the markets for similar securities. Although there is currently no market for the Exchange Notes, Merrill Lynch has advised the Company that it currently intends to make a market in the Exchange Notes. However, Merrill Lynch is not obligated to do so, and any market-making with respect to the Exchange Notes may be discontinued at any time without notice. In addition, if Merrill Lynch conducts any market-making activities in respect of the Exchange Notes, it may be required to deliver a "market-making prospectus" when effecting offers and sales in the Exchange Notes, because of the equity ownership of affiliates of Merrill Lynch. The ML Entities in the aggregate hold approximately 91% of the BBC Common Stock. For so long as a market-making prospectus is required to be delivered, the ability of Merrill Lynch to make a market in the Exchange Notes may, in part, be dependent on the ability of the Company to maintain a current market-making prospectus. EXCHANGE OFFER PROCEDURES Issuance of the Exchange Notes for 144A Notes pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of such 144A Notes, a properly completed, duly executed Letter of Transmittal and all other required documents. Therefore, Holders desiring to tender their 144A Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respects to the tenders of 144A Notes for exchange. Any 144A Notes that are not tendered or are tendered but not accepted will, following the consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof and, upon consummation of the Exchange Offer, the registration rights under the Registration Rights Agreement generally will terminate. In addition, any Holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale. Each broker-dealer that receives Exchange Notes for its own account in exchange for 144A Notes, where such 144A Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "The Exchange Offer." RESTRICTIONS ON TRANSFER The 144A Notes were offered and sold by the Company in a private offering exempt from registration pursuant to the Securities Act and have been resold pursuant to Rule 144A under the Securities Act and to a limited number of other institutional Accredited Investors. As a result, the 144A Notes may not be reoffered or resold by purchasers except pursuant to an effective registration statement under the 19 Securities Act, or pursuant to an applicable exemption from such registration, and the 144A Notes are legended to restrict transfer as aforesaid. Each Holder (other than any Holder who is an affiliate or promoter of the Company) who duly exchanges 144A Notes for Exchange Notes in the Exchange Offer will receive Exchange Notes that are freely transferable under the Securities Act. Holders who participate in the Exchange Offer should be aware, however, that if they accept the Exchange Offer for the purpose of engaging in a distribution, the Exchange Notes may not be publicly reoffered or resold without complying with the registration and prospectus delivery requirements of the Securities Act. As a result, each Holder accepting the Exchange Offer will be deemed to have represented, by its acceptance of the Exchange Offer, that it acquired the Exchange Notes in the ordinary course of business and that it is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. If existing Commission interpretations permitting free transferability of the Exchange Notes following the Exchange Offer are changed prior to consummation of the Exchange Offer, the Company will use its best efforts to register the 144A Notes for resale under the Securities Act. See "Prospectus Summary--The Exchange Offer" and "Exchange Offer; Registration Rights." The 144A Notes currently may be sold pursuant to the restrictions set forth in Rule 144A under the Securities Act or pursuant to another available exemption under the Securities Act without registration under the Securities Act. To the extent that 144A Notes are tendered and accepted in the Exchange Offer, the trading market for the untendered and tendered but unaccepted 144A Notes could be adversely affected. 20 THE EXCHANGE OFFER THE FOLLOWING DISCUSSION SETS FORTH OR SUMMARIZES WHAT THE COMPANY BELIEVES ARE THE MATERIAL TERMS OF THE EXCHANGE OFFER, INCLUDING THOSE SET FORTH IN THE LETTERS OF TRANSMITTAL DISTRIBUTED WITH THIS PROSPECTUS. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE DOCUMENTS UNDERLYING THE EXCHANGE OFFER, COPIES OF WHICH ARE FILED AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART, AND ARE INCORPORATED BY REFERENCE HEREIN. PURPOSE AND EFFECT OF THE EXCHANGE OFFER In connection with the sale of 144A Notes pursuant to the Purchase Agreement dated November 13, 1996 (the "Purchase Agreement"), between the Company, BBC, and the purchasers of 144A Notes (the "Buyers"), the Buyers became entitled to the benefits of a Registration Rights Agreement dated as of November 19, 1996 (the "Registration Rights Agreement"). Under the Registration Rights Agreement, the Company and BBC must use their best efforts to (a) file a registration statement in connection with a registered exchange offer within 60 days after November 19, 1996, the date the 144A Notes were issued (the "Issue Date"), (b) cause such registration statement to become effective under the Securities Act within 120 days of the Issue Date and (c) cause such registered exchange offer to be consummated within 150 days after the Issue Date. Within the applicable time periods, the Company and BBC will endeavor to register under the Securities Act all of the Exchange Notes pursuant to a registration statement under which the Company will offer each Holder of 144A Notes the opportunity to exchange any and all of the outstanding 144A Notes held by such Holder for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of 144A Notes tendered for exchange by such Holder. Subject to limited exceptions, the Exchange Offer being made hereby, if commenced and consummated within such applicable time periods, will satisfy those requirements under the Registration Rights Agreement. In such event, the 144A Notes would remain outstanding and would continue to accrue interest, but would not retain any rights under the Registration Rights Agreement. Holders of 144A Notes seeking liquidity in their investment would have to rely on exemptions to registration requirements under the securities laws, including the Securities Act. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The term "Holder" with respect to the Exchange Offer means any person in whose name the 144A Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. Because the Exchange Offer is for any and all 144A Notes, the number of 144A Notes tendered and exchanged in the Exchange Offer will reduce the principal amount of 144A Notes outstanding. Following the consummation of the Exchange Offer, Holders who did not tender their 144A Notes generally will not have any further registration rights under the Registration Rights Agreement, and such 144A Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such 144A Notes could be adversely affect. The 144A Notes are currently eligible for sale pursuant to Rule 144A through the PORTAL System. Because the Company anticipates that most Holders of 144A Notes will elect to exchange such 144A Notes for Exchange Notes due to the absence of restrictions on the resale of Exchange Notes under the Securities Act, the Company anticipates that the liquidity of the market for any 144A Notes remaining after the consummation of the Exchange Offer may be substantially limited. See "Description of the Exchange Notes--Registration Rights." TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, the Company will accept all 144A Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue $1,000 principal amount 21 of Exchange Notes in exchange for each $1,000 principal amount of outstanding 144A Notes accepted in the Exchange Offer. Holders may tender some or all of their 144A Notes pursuant to the Exchange Offer. The form and terms of the Exchange Notes are the same as the form and terms of the 144A Notes except that (i) the Exchange Notes have been registered under the Securities Act and hence will not bear legends restricting the transfer thereof and (ii) the holders of the Exchange Notes generally will not be entitled to certain rights under the Registration Rights Agreement, which rights generally will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the 144A Notes and will be entitled to the benefits of the Indenture. Holders of 144A Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. The Company shall be deemed to have accepted validly tendered 144A Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering Holders of 144A Notes for the purposes of receiving the Exchange Notes from the Company and delivering Exchange Notes to such Holders. If any tendered 144A Notes are not accepted for exchange because of an invalid tender or the occurrence of certain other events set forth herein, certificates for any such unaccepted 144A Notes will be returned, without expense, to the tendering Holder thereof as promptly as practicable after the Expiration Date. Holders of 144A Notes who tender in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of 144A Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the Exchange Offer. See "--Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The Exchange Offer shall remain open for acceptance for a period of not less than 30 days after notice is mailed to Holders (the "Exchange Period"). The Expiration Date will be 5:00 p.m., New York City time, on , 1997, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the Expiration Date will be the latest business day to which the Exchange Offer is extended. In order to extend the Expiration Date, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the record Holders an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Such announcement may state that the Company is extending the Exchange Offer for a specified period of time. The Company reserves the right (i) to delay accepting any 144A Notes, to extend the Exchange Offer or to terminate the Exchange Offer and not accept 144A Notes not previously accepted if any of the conditions set forth under "--Conditions" shall have occurred and shall not have been waived by the Company, by giving oral or written notice of such delay, extension or termination to the Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment in a manner reasonably calculated to inform the Holders of such amendment and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to Holders, if the Exchange Offer would otherwise expire during such five to ten business day period. Without limiting the manner in which the Company may choose to make public announcement of any extension, amendment or termination of the Exchange Offer, the Company shall have no obligation to 22 publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones News Service. INTEREST ON THE EXCHANGE NOTES The Exchange Notes will bear interest from November 19, 1996, payable semiannually on May 15 and November 15 of each year at the rate of 10 3/4% PER ANNUM. Accordingly, Holders of 144A Notes that are accepted for exchange will not receive interest that is accrued but unpaid on the 144A Notes at the time of tender, but such interest will be payable in respect of the Exchange Notes delivered in exchange for such 144A Notes on the first Interest Payment Date after the Expiration Date. PROCEDURES FOR TENDERING Only a Holder of 144A Notes may tender such 144A Notes in the Exchange Offer. To tender in the Exchange Offer, a Holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by instruction 4 of the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the 144A Notes and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the 144A Notes may be made by book-entry transfer in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date. The tender by a Holder of 144A Notes and the acceptance thereof by the Company will constitute an agreement between such Holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF 144A NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR 144A NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT SUCH TENDER FOR SUCH HOLDERS. Any beneficial holder whose 144A Notes are registered in the name of his broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on his behalf. If such beneficial holder wishes to tender on his own behalf, such beneficial holder must, prior to completing and executing the Letter of Transmittal and delivering his 144A Notes, either make appropriate arrangements to register ownership of the 144A Notes in such holder's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution") unless the 144A Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by an Eligible Institution. 23 If the Letter of Transmittal is signed by a person other than the registered holder of any 144A Notes listed therein, such 144A Notes must be endorsed or accompanied by appropriate bond powers and a proxy which authorizes such person to tender the 144A Notes on behalf of the registered holder, in each case signed as the name of the registered holder or holders appears on the 144A Notes with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any 144A Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the 144A Notes at the DTC for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the DTC may make book-entry delivery of the 144A Notes by causing the DTC to transfer such 144A Notes into the Exchange Agent's account with respect to the 144A Notes in accordance with the DTC's procedures for such transfer. Although delivery of the 144A Notes may be effected through book-entry transfer into the Exchange Agent's account at the DTC, a Letter of Transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to the DTC does not constitute delivery to the Exchange Agent. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered 144A Notes and withdrawal of the tendered 144A Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all 144A Notes not properly tendered or any 144A Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any irregularities or conditions of tender as to particular 144A Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including, the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of 144A Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of 144A Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of 144A Notes will not be deemed to have been made until such irregularities have been cured or waived. Any 144A Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such Holder by the Exchange Agent to the tendering Holders of 144A Notes, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their 144A Notes and (i) whose 144A Notes are not immediately available, or (ii) who cannot deliver their 144A Notes, the Letter of Transmittal or any other required documents to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date, may effect a tender if: a. the tender is made through an Eligible Institution; b. prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail 24 or hand delivery) setting forth the name and address of the holder of the 144A Notes, the certificate or registration number or numbers of such 144A Notes and the principal amount of 144A Notes tendered, stating that the tender is being made thereby, and guaranteeing that, within five business days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the 144A Notes to be tendered in proper form for transfer (or a confirmation of book-entry transfer of such 144A Notes into the Exchange Agent's account at the Depository) and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and c. such properly completed and executed Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing all tendered 144A Notes in proper form for transfer (or a confirmation of book-entry transfer of such 144A Notes into the Exchange Agent's account at the Depository) and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five business days after the Expiration Date. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of 144A Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of 144A Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at the address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the 144A Notes to be withdrawn (the "Depositor"), (ii) identify the 144A Notes to be withdrawn (including the certificate or registration number(s) and principal amount of such 144A Notes, or, in the case of notes transferred by book-entry transfer, the name and number of the account at the DTC to be credited), (iii) be signed by the Depositor in the same manner as the original signature on the Letter of Transmittal by which such 144A Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee (as defined herein) with respect to the 144A Notes register the transfer of such 144A Notes into the name of the Depositor withdrawing the tender and (iv) specify the name in which any such 144A Notes are to be registered, if different from that of the Depositor, (v) include a statement that such Holder is withdrawing his election to have such 144A Notes exchanged. All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, whose determination shall be final and binding on all parties. Any 144A Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the 144A Notes so withdrawn are validly retendered. Any 144A Notes which have been tendered but which are not accepted for payment will be returned to the Holder thereof without cost to such Holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn 144A Notes may be retendered by following one of the procedures described under "--Procedures for Tendering" at any time prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or to exchange Exchange Notes for, any 144A Notes, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such 144A Notes, if: (i) any law, statute, rule, regulation or interpretation by the staff of the Commission is proposed, adopted or enacted, which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or 25 (ii) any governmental approval has not been obtained, which approval the Company shall, in its reasonable judgment, deem necessary for the consummation of the Exchange Offer as contemplated hereby. If the Company determines in its reasonable judgment that any of the conditions are not satisfied, the Company may (i) refuse to accept any 144A Notes and return all tendered 144A Notes to the tendering Holders, (ii) extend the Exchange Offer and retain all 144A Notes tendered prior to the expiration of the Exchange Offer subject, however, to the rights of Holders to withdraw such 144A Notes (see "--Withdrawals of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered 144A Notes which have not been withdrawn. If such waiver constitutes a material change to the Exchange Offer, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered Holders, and, depending upon the significance of the waiver and the manner of disclosure to the registered Holders, the Company will extend the Exchange Offer for a period of five to ten business days if the Exchange Offer would otherwise expire during such five to ten business-day period. EXCHANGE AGENT The Chase Manhattan Bank has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance and requests for additional copies of this Prospectus or of the Letter of Transmittal should be directed to the Exchange Agent addressed as follows:
BY MAIL, HAND OR OVERNIGHT DELIVERY: The Chase Manhattan Bank 55 Water Street Room 234 North Building New York, New York 10041 Attention: Carlos Esteves FACSIMILE TRANSMISSION: (212) 638-7375 (212) 344-9367 CONFIRM BY TELEPHONE: (212) 638-0828 Carlos Esteves
FEES AND EXPENSES The expenses of soliciting tenders pursuant to the Exchange Offer will be borne by the Company. The principal solicitation for tenders pursuant to the Exchange Offer is being made by mail; however, additional solicitations may be made by telegraph, telephone or in person by officers and regular employees of the Company, BBC and their affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse the Exchange Agent for its reasonable out-of-pocket expenses in connection therewith and pay other registration expenses, including fees and expenses of the Trustee, filing fees, blue sky fees and printing and distribution expenses. The Company will pay all transfer taxes, if any, applicable to the exchange of 144A Notes pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes or 144A Notes for principal 26 amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the 144A Notes tendered, or if tendered 144A Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of 144A Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. ACCOUNTING TREATMENT The Exchange Notes will be recorded at the same carrying value as the 144A Notes, which is the aggregate principal amount of the 144A Notes, as reflected in the Company's accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized in connection with the Exchange Offer. The expense of the Exchange Offer will be amortized over the term of the Exchange Notes. RESALE OF THE EXCHANGE NOTES Under existing Commission interpretations, the Exchange Notes would, in general, be freely transferable after the Exchange Offer by any holder of such Exchange Notes (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 of the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, PROVIDED that such Exchange Notes acquired pursuant to the Exchange Offer are obtained in the ordinary course of such holder's business, and such holder does not intend to participate, and has no arrangement or understanding to participate in the distribution of such Exchange Notes. Any holder who tenders into the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the Exchange Notes may not rely on the position of the staff of the SEC enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988) or MORGAN STANLEY & CO., INCORPORATED (available June 5, 1991) or similar interpretive letters, but rather must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. In addition, any such resale transaction should be covered by an effective registration statement containing the selling security holders information required by Item 507 of Regulation S-K of the Securities Act. Each broker-dealer that receives Exchange Notes for its own account in exchange for 144A Notes, where such 144A Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, may be a statutory underwriter and must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Company has agreed, for period for 180 days after consummation of the Exchange Offer, to make available a prospectus meeting the requirements of the Securities Act to any such broker-dealer for use in connection with any resale of any Exchange Notes acquired in the Exchange Offer. A broker-dealer which delivers such a prospectus to purchasers in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Registration Rights Agreement (including certain indemnification rights and obligations). By tendering in the Exchange Offer, each Holder will represent to the Company, among other things, (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of its business, (ii) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of the Exchange Notes and (iii) the holder and any such other person acknowledge that if they participate in the Exchange Offer for the purpose of distributing the Exchange Notes (a) they must, in the absence of an exemption therefrom, comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes and cannot rely on the no-action letters referenced above and (b) failure to comply with such requirements 27 in such instance could result in such holder incurring liability under the Securities Act for which such holder is not indemnified by the Company. Further, by tendering in the Exchange Offer, each holder that may be deemed an "affiliate" (as defined in Rule 405 of the Securities Act), of the Company will represent to the Company that such holder understands and acknowledges that the Exchange Notes may not be offered for resale, resold, or otherwise transferred by that Holder without registration under the Securities Act or an exemption therefrom. As set forth above, affiliates of the Company are not entitled to rely on the foregoing interpretations of the staff of the Commission with respect to resales of the Exchange Notes without compliance with the registration and prospectus delivery requirements of the Securities Act. Merrill Lynch has indicated to the Company that it intends to effect offers and sales of the Exchange Notes, acting as principal or agent, in market-making transactions at negotiated prices related to prevailing market prices at the time of sale. If Merrill Lynch conducts any market making activities, it may be required to deliver a "market-making prospectus" when effecting offers and sales in the Exchange Notes because of the equity ownership of MLCP and its affiliates of the Company. MLCP is an affiliate of Merrill Lynch. MLCP and its affiliates in the aggregate hold approximately 90% of the Blue Bird Common Stock. CONSEQUENCES OF FAILURE TO EXCHANGE As a result of the making of this Exchange Offer, the Company will have fulfilled one of its obligations under the Registration Rights Agreement, and Holders of 144A Notes who do not tender their 144A Notes generally will not have any further registration rights under the Registration Rights Agreement or otherwise. Accordingly, any Holder that does not exchange such Holder's 144A Notes for Exchange Notes will continue to hold the untendered 144A Notes and will be entitled to all the rights and limitations applicable thereto under the Indenture, except to the extent that such rights or limitations, by their terms, terminate or cease to have further effectiveness as a result of the Exchange Offer. The 144A Notes that are not exchanged for Exchange Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such 144A Notes may be resold only (i) to the Company (upon redemption thereof or otherwise), (ii) pursuant to an effective registration statement under the Securities Act, (iii) so long as the 144A Notes are eligible for resale pursuant to Rule 144A under the Securities Act, to a Qualified Institutional Buyer in a transaction meeting the requirements of Rule 144A, (iv) outside the United States to a foreign person pursuant to the exemption from the registration requirements of the Securities Act provided by Regulation S thereunder, (v) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available) or (vi) to an Accredited Investor in a transaction exempt from the registration requirements of the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States or other applicable jurisdiction. See "Risk Factors--Restrictions on Transfer." OTHER Participation in the Exchange Offer is voluntary and Holders should carefully consider whether to accept. Holders are urged to consult their financial and tax advisors in making their own decision on what action to take. The Company may in the future seek to acquire untendered 144A Notes, to the extent permitted by applicable law, in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. The Company has no present plans to acquire any 144A Notes that are not tendered in the Exchange Offer or to file a registration statement to permit resales of any untendered 144A Notes. In any state where the Exchange Offer does not fall under a statutory exemption to the blue sky rules, the Company has filed the appropriate registrations and notices, and has made the appropriate requests, to permit the Exchange Offer to be made in such state. 28 CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER The following discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, judicial authority and administrative rulings and practice. There can be no assurance that the Internal Revenue Service (the "IRS") will not take a contrary view, and no ruling from the IRS has been or will be sought. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conditions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to Holders. Certain Holders of the 144A Notes (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. Each Holder of a 144A Note should consult his, her or its own tax advisor as to the particular tax consequences of exchanging such Holder's 144A Notes for Exchange Notes, including the applicability and effect of any state, local or foreign tax laws. The issuance of the Exchange Notes to Holders of the 144A Notes pursuant to the terms set forth in this Prospectus will not constitute an exchange for United States federal income tax purposes. Consequently, no gain or loss would be recognized by Holders of the 144A Notes upon receipt of the Exchange Notes, and ownership of the Exchange Notes will be considered a continuation of ownership of the 144A Notes. For purposes of determining gain or loss upon the subsequent sale or exchange of the Exchange Notes, a Holder's basis in the Exchange Notes should be the same as such Holder's basis in the 144A Notes exchanged therefor. A Holder's holding period for the Exchange Notes should include the Holder's holding period for the 144A Notes exchanged therefor. The issue price, original issue discount inclusion and other tax characteristics of the Exchange Notes should be identical to the issue price, original issue discount inclusion and other tax characteristics of the 144A Notes exchanged therefor. See also "Description of Certain Federal Income Tax Consequences of an Investment in the Exchange Notes." 29 THE RECAPITALIZATION On November 19, 1996, the Company consummated the Recapitalization which included the 144A Note Offering, the retirement of the Old Notes, the replacement and refinancing of the Old Credit Agreement with the New Credit Agreement and the Distribution. As part of the Recapitalization, the Board of Directors of the Company declared the Blue Bird Dividend and the Board of Directors of BBC declared the BBC Distribution. Holders of BBC options received cash payments on an as-exercised basis and were not required to exercise their options to receive their PRO RATA portion of the BBC Distribution, nor were they entitled to any antidilution adjustment to the exercise price for their options. Selling Holders of approximately $50 million principal amount (or 100%) of the outstanding Old Notes sold their Old Notes to the Company, subject to certain conditions, and consented to certain amendments to the indenture governing the Old Notes for aggregate payments (including repayment of principal) of approximately $56.1 million, which included accrued and unpaid interest (as of September 28, 1996). The Old Credit Agreement was replaced and refinanced by the New Credit Agreement, which provided for aggregate availability of $255 million, including $175 million of Term Facility and an $80 million Revolving Facility. See "Use of Proceeds." The following table sets forth the cash sources and uses of funds for the Recapitalization.
AMOUNT ------------------- (DOLLARS IN MILLIONS) SOURCES OF FUNDS: Cash on hand............................................................ $ 24.5 Revolving loans under New Credit Agreement.............................. 3.6 Term loans under New Credit Agreement................................... 175.0 Notes offered hereby.................................................... 99.7 Proceeds from repayment of Management Notes(a).......................... 3.8 ------- Total............................................................... $ 306.6 ------- ------- USES OF FUNDS: Distribution............................................................ $ 201.4 Repayment of Old Credit Agreement....................................... 40.0 Retirement of Old Notes(b).............................................. 56.1 Estimated fees and expenses............................................. 9.1 Total............................................................... $ 306.6 ------- -------
- ------------------------ (a) The Management Notes (as defined herein) will be repaid by management shareholders out of the proceeds of the Distribution. See "Certain Relationships and Related Transactions." (b) Includes costs associated with the retirement of the Old Notes and the amendment of the indenture relating thereto, including payment of accrued interest. The LaSalle Credit Facility to which Blue Bird Capital is a party remains outstanding following the Recapitalization. The Selling Holders sold their Old Notes at a price based upon a premium over the applicable U.S. Treasury rate and, in connection with their agreement to sell their Old Notes to the Company, the Selling Holders consented to amendments to the indenture governing the Old Notes that would have eliminated substantially all of the material restrictive covenants contained therein had such indenture remained in effect. See "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Description of Debt Facilities." 30 USE OF PROCEEDS There will be no proceeds to the Company from the Exchange of Notes pursuant to the Exchange Offer. The net proceeds to the Company from the sale of the 144A Notes were approximately $96.7 million. All of such proceeds, together with the proceeds of borrowings under the New Credit Agreement and cash held by the Company, were used to effect the Recapitalization and to pay fees and expenses incurred in connection with the Recapitalization. See "The Recapitalization." 31 CAPITALIZATION The following table sets forth the cash and cash equivalents, short-term debt and capitalization of BBC as of September 28, 1996 (i) on an historical basis and (ii) on a PRO FORMA basis to give effect to the Recapitalization as if it had occurred on September 28, 1996. There are no material differences between the capitalization of the Company and BBC, except as set forth in footnotes (c) and (d). This information should be read in conjunction with the information set forth under "Selected Financial Data" and in the audited financial statements of BBC appearing elsewhere in this Prospectus.
AS OF SEPTEMBER 28, 1996 ------------------------ HISTORICAL PRO FORMA ----------- ----------- (DOLLARS IN MILLIONS) Cash and cash equivalents.............................................................. $ 24.5 $ --(a) ----------- ----------- ----------- ----------- Short-term debt (including current portion of long-term debt).......................... $ 28.4 $ 27.7(b) ----------- ----------- ----------- ----------- Long-term debt: Old Credit Agreement (excluding current portion)..................................... 27.0 -- New Credit Agreement (excluding current portion)..................................... -- 166.2 Old Notes............................................................................ 50.0 -- 144A Notes (c)....................................................................... -- 99.7 LaSalle Credit Facility.............................................................. 40.2 40.2 Industrial development bonds......................................................... 2.7 2.7 ----------- ----------- Total long-term debt................................................................... 119.9 308.8 Redeemable common stock(d)............................................................. 24.2 11.5 Stock subscriptions receivable(e)...................................................... (3.8) -- Stockholders' equity: Common stock; $.01 par value; 25,000,000 shares authorized; 8,424,778 shares issued and outstanding.................................................................... .1 .1 Additional paid-in capital............................................................. 77.0 77.0 Retained earnings...................................................................... 48.5 (130.6)(f) Cumulative translation adjustments (g)................................................. (2.5) (2.5) ----------- ----------- Total stockholders' equity (deficit)................................................... 123.1 (56.0) ----------- ----------- Total capitalization........................................................... $ 263.4 $ 264.3 ----------- ----------- ----------- -----------
- -------------------------- (a) Reflects (i) the receipt of gross proceeds from the 144A Note Offering ($99.7 million), borrowings under the Term Facility of the New Credit Agreement ($175 million) and borrowings under the Revolving Facility of the New Credit Agreement ($3.6 million); (ii) the retirement of indebtedness (including accrued interest) under the Old Credit Agreement ($40 million) and the Old Notes ($52.7 million); (iii) the payment of fees and expenses associated with the Recapitalization ($9.1 million) and the costs (including premium) associated with the retirement and amendment of the Old Notes ($3.4 million); (iv) the payment of the Distribution ($201.4 million); and (v) the proceeds from the repayment of the Management Notes from the BBC Distribution to the management shareholders ($3.8 million). Cash was approximately $43 million immediately prior to the Recapitalization. (b) Reflects (i) the retirement of the current portion of indebtedness under the Old Credit Agreement ($13 million); and (ii) the current portion of long-term debt and revolving credit borrowings under the New Credit Agreement ($12.4 million). Includes $15.3 million of indebtedness under the LaSalle Credit Agreement. (c) Represents the $100 million principal amount of the Notes less unamortized discount of $.3 million. (d) Redeemable common stock represents 720,000 issued and outstanding shares of BBC Common Stock purchased by the Management Investors, primarily in connection with the 1992 Acquisition. The Management Investors have (FOOTNOTES CONTINUED ON FOLLOWING PAGE) 32 the right, prior to the earlier of an initial public offering of equity securities of BBC or the tenth anniversary of the Stockholders' Agreement, to put these shares to BBC in the event of their disability, involuntary termination not for cause, retirement, or death for a fair value price. The redeemable common stock of BBC was recorded at fair value on the date of issuance. The excess of the fair value price over the original fair value is being accreted by periodic charges to retained earnings. The amounts recorded in the balance sheets represent the estimated maximum amount payable if all Management Investors met the specified criteria and exercised their put rights. See "Certain Relationships and Related Transactions." (e) Stock subscriptions receivable represent notes due from Management Investors to BBC for stock issued in April 1992 in connection with the 1992 Acquisition. The Management Notes bear interest at an 8% interest rate. Interest is payable annually. The Management Notes were repaid by management optionholders out of the proceeds of the Distribution. (f) Reflects (i) the Distribution, net of tax benefit ($188.6 million); (ii) the adjustment to the fair value of the redeemable common stock ($12.7 million); (iii) the costs associated with the retirement and amendment of the Old Notes, net of tax benefit ($2 million); and (iv) the write-off of the debt issue costs related to the indebtedness being retired, net of tax benefit ($1.2 million). (g) Reflects the effects of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars for the foreign subsidiaries and branches of the Company. 33 SELECTED FINANCIAL DATA Set forth below is certain selected historical consolidated financial data for BBC as of and for the nine months ended July 27, 1996 and July 29, 1995, fiscal years 1995, 1994 and 1993, and for the six months ended October 31, 1992, as well as selected historical consolidated financial information for BBC prior to the 1992 Acquisition (the "Predecessor") as of and for the six months ended April 30, 1992 and the year ended November 2, 1991. The selected historical consolidated financial data as of and for the full fiscal years indicated were derived from the financial statements of BBC and subsidiaries which were audited by Arthur Andersen. The data for the nine months ended July 27, 1996 and July 29, 1995 are unaudited but, in the opinion of BBC's management, reflect all adjustments necessary for a fair presentation of the results of operations for such periods. Currently, BBC conducts no independent operations and has no significant assets other than the capital stock of Blue Bird. The results for the nine months ended July 27, 1996 may not be indicative of the results to be expected for the year ending November 2, 1996 because, among other things, Blue Bird's business is seasonal, with a majority of sales occurring in the third and fourth quarters. The selected historical financial data set forth below should be read in conjunction with the consolidated financial statements of BBC and the notes thereto included elsewhere in this Prospectus. Separate historical financial data for the Predecessor are not included in this Prospectus. Subsequent consolidated financial data of BBC reflect the purchase accounting treatment of the 1992 Acquisition. Accordingly, the financial data of the Predecessor and BBC are not comparable in all material respects, since such data reflect financial positions and results of operations of these two separate entities.
BBC ---------------------------------------------------------------------------- NINE MONTHS ENDED FISCAL YEAR ENDED SIX MONTHS ------------------------ ------------------------------------- ENDED JULY 27, JULY 29, OCTOBER 28, OCTOBER 29, OCTOBER 30, OCTOBER 31, 1996 1995 1995 1994 1993 1992 ----------- ----------- ----------- ----------- ----------- ----------- (DOLLARS IN MILLIONS) INCOME STATEMENT DATA: Net sales................................. $ 346.1 319.5 $ 517.4 $ 476.2 $ 413.5 $ 244.4 Cost of goods sold........................ 287.4 264.1 430.6 392.9 340.5 198.4 ----------- ----------- ----------- ----------- ----------- ----------- Gross profit.............................. 58.7 55.4 86.8 83.3 73.0 46.0 Selling, general and administrative expenses(a)............................. 31.5 29.5 39.8 39.0 36.3 20.1 Amortization of goodwill and non-compete agreements.................. 2.8 3.7 4.7 5.6 5.6 9.3 ----------- ----------- ----------- ----------- ----------- ----------- Operating income (loss)................... 24.4 22.2 42.3 38.7 31.1 16.6 Interest income........................... 5.3 3.0 4.6 4.1 2.9 1.4 Interest expense.......................... (12.8) (14.0) (18.5) (17.4) (18.2) (9.5) Other income (expense)(b)................. 0.5 0.4 0.1 0.2 0.7 (0.5) ----------- ----------- ----------- ----------- ----------- ----------- Income (loss) before income taxes......... 17.4 11.6 28.5 25.6 16.5 8.0 Provision (benefit) for income taxes...... 6.8 4.9 11.6 10.2 6.9 4.3 ----------- ----------- ----------- ----------- ----------- ----------- Net income (loss)......................... $ 10.6 $ 6.7 $ 16.9 $ 15.4 $ 9.6 $ 3.7 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- BALANCE SHEET DATA (AS OF END OF PERIOD): Working capital........................... $ 57.7 $ 67.3 $ 61.7 $ 65.3 $ 52.7 $ 31.9 Total assets.............................. 439.5 412.3 379.8 332.8 342.1 337.3 Long-term debt, excluding current maturities.............................. 118.4 115.0 113.8 125.8 135.8 143.8 Redeemable common stock, net.............. 20.4 14.2 20.9 17.5 11.0 8.0 Stockholders' equity...................... 112.1 98.8 102.6 88.8 80.7 83.8 PREDECESSOR -------------------------- SIX MONTHS FISCAL YEAR ENDED ENDED APRIL 30, NOVEMBER 2 1992 1991 ----------- ------------- INCOME STATEMENT DATA: Net sales................................. $ 120.8 $ 428.0 Cost of goods sold........................ 98.7 345.6 ----------- ------ Gross profit.............................. 22.1 82.4 Selling, general and administrative expenses(a)............................. 34.2 48.6 Amortization of goodwill and non-compete agreements.................. -- -- ----------- ------ Operating income (loss)................... (12.1) 33.8 Interest income........................... 5.7 11.5 Interest expense.......................... (1.7) (4.3) Other income (expense)(b)................. 1.7 (2.3) ----------- ------ Income (loss) before income taxes......... (6.4) 38.7 Provision (benefit) for income taxes...... (3.0) 12.1 ----------- ------ Net income (loss)......................... $ (3.4) $ 26.6 ----------- ------ ----------- ------ BALANCE SHEET DATA (AS OF END OF PERIOD): Working capital........................... $ 69.4 $ 64.9 Total assets.............................. 253.8 235.8 Long-term debt, excluding current maturities.............................. 39.4 30.8 Redeemable common stock, net.............. -- -- Stockholders' equity...................... 137.0 143.6
- ------------------------ (a) Includes expenses of the Predecessor incurred prior to the 1992 Acquisition which the Company no longer incurs, including salaries of the Predecessor's principal stockholders prior to the 1992 Acquisition, commission paid relating to a Domestic International Sales Corporation (DISC) owned by such principal stockholders, the amortization of contracts in process, and severance and restructuring costs. Such amounts totaled $6.6 million and $1.1 million for the six month periods ended October 31, 1992 and April 30, 1992, respectively, and $5.9 million, for fiscal year 1991. (b) Includes charitable contributions made prior to the 1992 Acquisition which BBC has reduced following the 1992 Acquisition. Such contributions totaled $.6 million for the six-month period ended April 30, 1992 and $.8 million for fiscal year 1991. 34 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Approximately 79% of the Company's fiscal 1995 net sales are derived from school bus sales and approximately 14% and 7% of the Company's fiscal 1995 net sales are derived from the sale of commercial and recreational vehicles, respectively. Between fiscal 1993 and fiscal 1995, the Company's operating income has risen primarily due to increased sales volume. Over the same period, gross profit margins have decreased slightly, principally due to an increase in the number of Type C buses sold with GM chassis. The Company's operations are affected by trends in the number of students enrolled in grades kindergarten through 12 and overall educational spending by local and state governments as well as by the federal government. In addition to incremental needs due to pupil population growth and replacement requirements based on changes in safety standards, factors which influence the need to purchase school buses include the age of the existing school bus fleet, changes in school bus travel routes, regulatory changes such as compliance with new emissions standards, extracurricular activity usage and changes in the education structure in the United States such as the development of preschool "head start" programs, special education programs and magnet schools. The Company's experience has been that during periods of stable or increasing student enrollment, demand for its core school bus products has also remained stable or increased. On a PRO FORMA basis, assuming the Recapitalization had been effected on September 28, 1996, the Company's total consolidated indebtedness was increased by approximately $188.2 million, to $336.5 million. The primary effects of the Recapitalization on the Company's future operating results include reduced reported profitability to the extent interest expense is above historical amounts resulting from higher debt levels. The Company expects to generate sufficient cash from operations to fund its working capital and capital expenditure needs and make required interest and principal payments on its indebtedness. See "Risk Factors--Leverage and Debt Service" and "--Restrictive Covenants and Asset Encumbrances," and "--Liquidity and Capital Resources." RESULTS OF OPERATIONS The discussion of results of operations that follows is based upon and should be read in conjunction with the financial statements, including the notes thereto, included elsewhere in this Prospectus. Although the financial statements are consolidated financial statements of BBC, the Company's parent, BBC is a holding company and, as such, there would be no material differences in the operating results of BBC, as compared with the Company. The following table sets forth certain operating results as a percentage of net sales for the historical periods indicated:
NINE MONTHS ENDED FISCAL YEAR ENDED ------------------------ ------------------------------------------- JULY 27, JULY 29, OCTOBER 28, OCTOBER 29, OCTOBER 30, 1996 1995 1995 1994 1993 ----------- ----------- ------------- ------------- ------------- Net sales.......................... 100.0% 100.0% 100.0% 100.0% 100.0% Cost of goods sold................. (83.0) (82.6) (83.2) (82.5) (82.3) Gross profit....................... 17.0 17.4 16.8 17.5 17.7 Selling, general and administrative expense.......................... (9.9) (9.2) (7.7) (8.1) (8.8) Operating income................... 7.0% 6.9% 8.2% 8.1% 7.5%
NINE MONTHS ENDED JULY 27, 1996 COMPARED TO NINE MONTHS ENDED JULY 29, 1995. Net sales for the nine months ended July 27, 1996, were $346.1 million, an increase of $26.7 million or 8.4% compared to the same period in 1995. This increase was due primarily to the delivery of more Type C units during the 1996 period as compared to the 1995 period. 35 Gross profit increased to $58.7 million for the nine months ended July 27, 1996 as compared to $55.4 million in the same period in 1995, an increase of $3.3 million or 6.0%. The increased gross profit was due primarily to the higher sales volume offset in part by the higher cost of goods sold associated with the shift in the Company's product mix. Selling, general and administrative expenses increased to $31.5 million for the nine months ended July 27, 1996 from $29.5 million in the 1995 period, an increase of $2 million or 6.8%. This increase was due primarily to budgeted increases in engineering and marketing costs, as well as to higher selling expenses. Interest income increased to $5.3 million for the nine months ended July 27, 1996, compared to $3 million for the same period in 1995. The increase was due mainly to a higher average dollar amount of leases held in the lease portfolio for the first nine months of 1996 as compared to the same period in 1995. Interest and debt issue expenses decreased to $12.8 million for the nine months ended July 27, 1996 from $14 million in the prior year's similar period due to lower interest rates on bank debt as well as lower debt levels due to the repurchase of $25 million of the Old Notes in December, 1995. The resulting lower interest expense was partially offset by interest expense associated with the LaSalle Credit Facility. The LaSalle Credit Facility for Blue Bird Capital was not in place during the 1995 period. The provision for income taxes was $6.8 million for the nine months ended July 27, 1996 compared to $4.9 million for the same period in 1995. The effective tax rate for the current period was 39.1% compared to 42.4% during the prior year period. The effective tax rate for both periods is higher than the statutory rate primarily due to the effect of certain nondeductible amortization charges, principally goodwill. On December 14, 1995, the Company repurchased, for cash on the open market, $25 million in principal amount of outstanding Old Notes for the purchase price (expressed as a percentage of principal amount) of 106.500% plus accrued interest to the purchase date. An extraordinary loss of $1.4 million net of a tax benefit of $.8 million occurred during the 1996 period due to the early extinguishment of such Old Notes. FISCAL 1995 COMPARED TO FISCAL 1994. Net sales increased to $517.4 million in fiscal 1995 from $476.2 million in fiscal 1994, an increase of $41.2 million, or 8.7%. This increase was due to increased sales of Type D, Q-Bus and CS units, as well as increased sales of Type C units. Gross profit increased to $86.8 million in fiscal 1995 compared to $83.3 million in fiscal 1994, an increase of $3.5 million, or 4.2%. The increase was due to increased sales volume. Gross margin decreased to 16.8% in fiscal 1995 from 17.5% in fiscal 1994. The reduced margin was due primarily to increased sales of Type C units, on which the Company generally realizes lower margins due to the inclusion of GM chassis. Selling, general and administrative expenses were $39.8 million in fiscal 1995 compared to $39 million in fiscal 1994, an increase of 2.0%. The increase was due primarily to higher expenses related to engineering and product development. Amortization expense decreased to $4.7 million in fiscal 1995 compared to $5.6 million in fiscal 1994. The amortization of certain non-compete agreements was completed during the first half of fiscal 1995. Interest income increased to $4.6 million in fiscal 1995 compared to $4.1 million in fiscal 1994. The increase was due to a higher average dollar amount of leases held in the lease portfolio in fiscal 1995 compared to fiscal 1994. Interest expense increased to $18.5 million in fiscal 1995 from $17.4 million fiscal 1994, an increase of $1.1 million. The increase was due to a higher interest rate on credit facility borrowings as compared to fiscal 1994. 36 The provision for income taxes increased to $11.6 million in fiscal 1995 from $10.2 million in fiscal 1994. The increase was due to increased taxable income resulting from higher net sales and operating income. FISCAL 1994 COMPARED TO FISCAL 1993. Net sales increased to $476.2 million in fiscal 1994 from $413.5 million in fiscal 1993, an increase of $62.7 million, or 15.2%. This increase was due to increased sales of Type D units, increased sales of chassis as part of the sale of an integrated Type C bus, as well as to sales of the new BMC and CS units. The Type D unit has a higher average selling price than the Type C unit. Gross profit increased to $83.3 million in fiscal 1994 compared to $73 million in fiscal 1993, an increase of $10.3 million, or 14.1%. The increase was due to increased sales volume. Gross margin decreased to 17.5% from 17.7% in fiscal 1993. The reduced margin was due primarily to increased sales of Type C units, on which the Company generally realizes lower margins due to the inclusion of GM chassis. Selling, general and administrative expenses increased to $39 million in fiscal 1994 compared to $36.3 million in fiscal 1993, an increase of 7.4%. The increase was due to expenses related to the development, introduction and advertising of new products. Interest income (which is primarily associated with income earned on the Company's lease portfolio) increased to $4.1 million in fiscal 1994 from $2.9 million in fiscal 1993, an increase of $1.2 million, or 41.4%. During fiscal 1994, the average dollar amount of leases held in the lease portfolio was higher as compared to the average fiscal 1993 portfolio amounts. In addition, the average rate earned by the portfolio was higher in fiscal 1994 as compared to fiscal 1993. Interest expense decreased to $17.4 million in fiscal 1994 from $18.2 million in fiscal 1993, a decrease of $.8 million. The decrease was due to a combination of lower average outstanding balances on credit facilities as well as a lower average interest rate as compared to fiscal 1993. Other income decreased to $.2 million in fiscal 1994 from $.7 million in fiscal 1993. The decrease was due primarily to reduced gains on sales of lease paper to LaSalle compared to the prior year. The provision for income taxes decreased as a percentage of income before income taxes in fiscal 1994 compared to fiscal 1993. The amortization of certain costs related to the 1992 Acquisition was essentially unchanged from fiscal 1993 to fiscal 1994. Due to the increase in taxable income, the relative effect of the non-deductibility of the amortization items on the effective tax rate was smaller, thereby reducing the effective tax rate in fiscal 1994. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements arise primarily from funding working capital needs, which consist primarily of inventory and accounts receivable, and principal and interest payments on indebtedness. The Company also requires funds for capital expenditures, for which the Company anticipates approximately $7.3 million for fiscal 1996, and approximately $6 million for fiscal 1997. BBC is a holding company that conducts all of its business operations through the Company, which is a wholly-owned subsidiary. In connection with any liquidity needs, including needs arising out of the BBC Guarantee, BBC is dependent entirely upon cash generated by the Company. Historically, the Company has funded its working capital needs through cash generated from operations and borrowings under the Old Credit Agreement. In addition, the LaSalle Credit Facility provides Blue Bird Capital with a revolving credit facility to finance school bus leases of up to a maximum aggregate principal amount of $100 million, of which $58.2 million was outstanding as of July 27, 1996. Following the Recapitalization, the Company's liquidity needs will arise primarily from debt service on the substantial indebtedness incurred in connection with the Recapitalization, as well as from the funding of inventory and accounts receivable. Assuming the Recapitalization was completed as of September 28, 37 1996, the Company would have had total consolidated indebtedness at such date of approximately $336.5 million, consisting primarily of $99.7 million principal amount of the 744A Notes, borrowings of $175 million under the New Credit Agreement and $55.5 million of borrowings under the LaSalle Credit Facility. The Company would also have had the ability to borrow an additional $44.5 million under the LaSalle Credit Facility to finance school bus leases and $76.4 million under the New Credit Agreement (assuming all of such funds would have been available under the borrowing base calculation under the Revolving Facility of the New Credit Agreement). Such Revolving Facility will be available to meet future working capital and other business needs of the Company. The maximum amount available to be borrowed under such facility is based on the sum of 85% of Eligible Accounts Receivable (as defined in the New Credit Agreement) and 60% of Eligible Inventory (as defined in the New Credit Agreement) of the Company (the "Borrowing Base"). These provisions have the effect of limiting the ability of the Company to utilize in operations or satisfy other debt obligations with free cash flow and will limit the amount of cash the Company has on hand at any given time. See "Description of Debt Facilities." and "Risk Factors--Leverage and Debt Service." The Company's interest expense as a result of the Recapitalization is substantially higher than immediately prior to such transactions. Loans under the New Credit Agreement bear interest at floating rates based upon the interest rate option selected by the Company. With respect to the term loan borrowings under the New Credit Agreement, the Company will be required to make scheduled principal payments of approximately $8.8 million in fiscal 1997, $12.8 million in fiscal 1998 and $16.8 million in fiscal 1999. See "Risk Factors--Restrictive Covenants and Asset Encumbrances." For a schedule of payments due under the New Credit Agreement, see "Description of Debt Facilities--Senior Bank Financing." Under the New Credit Agreement, the Company is permitted to accumulate up to $40 million in its lease portfolio of leases for its own account in addition to leases held by Blue Bird Capital. As of July 27, 1996, the Company had approximately $11.6 million of such leases in its lease portfolio. In addition, as of such date, Blue Bird Capital had approximately $60.2 million in its lease portfolio. Blue Bird Capital is required to maintain certain financial ratios, including a ratio of Total Liabilities to Tangible Net Worth (as such terms are defined in the LaSalle Credit Facility) that cannot exceed 10 to 1. See "Business--Leasing" and "Description of Debt Facilities--LaSalle Credit Agreement." Net cash used in operating activities during the nine-month period ended July 27, 1996 was $18.6 million compared to $38.6 million in the corresponding nine-month period in fiscal 1995. This difference was primarily the result of reduced accounts receivable and increased accounts payable. Net borrowings under the Company's working capital facilities, including the LaSalle Credit Facility were $49.5 million during the current nine-month period compared to $49.9 million in the corresponding nine-month period in fiscal 1995. The early extinguishment of $25 million of outstanding Old Notes (see "--Results of Operations-- Nine Months Ended July 27, 1996 compared to Nine Months Ended July 29, 1995") was funded primarily from internally generated cash and partially from an increase in the working capital revolver. Cash and cash equivalents were $5.3 million at July 27, 1996, compared to $21.5 million at the end of fiscal 1995 and $2 million at the end of the corresponding nine-month period in fiscal 1995. Net working capital decreased $9.6 million during the nine-month period compared to the corresponding nine-month period in fiscal 1995. Significant factors affecting working capital were a $22.9 million decrease in indebtedness under the revolving portion of the Old Credit Agreement, offset in part by a $19.5 million increase in the LaSalle Credit Facility, a $6.9 million decrease in leases receivable, and increases in cash, inventory and accounts payable of $3.3 million, $6.8 million and $9.1 million, respectively. As a result of the Recapitalization, the Company's future operating performance and ability to service or refinance the Notes and to repay, extend or refinance the New Credit Agreement are subject to future economic conditions and to financial, business and other factors, many of which are beyond the Company's control. The Company's liquidity may also be impacted by product liability claims and environmental matters. See "Risk Factors." 38 The Company's business is seasonal in nature. A majority of the Company's sales occur in the third and fourth quarters of the fiscal year, a pattern typical for the industry. The Company's working capital needs increase during the second and third quarters as production activity increases in response to the higher seasonal sales volume. Working capital needs decrease toward the end of this period, although beginning in December or January, working capital and related bank borrowings begin to increase as parts for assembly into buses are manufactured and distributed to the assembly plants. Inventory is at its highest during July and August prior to heavy seasonal school deliveries. The following table shows the percentages of the Company's net sales per quarter for the last three fiscal years and estimated data for fiscal 1996.
1996(A) 1995 1994 1993 ----------- --------- --------- --------- First Quarter.......................................... 16.8% 14.8% 18.5% 16.0% Second Quarter......................................... 19.3 20.4 17.0 15.7 Third Quarter.......................................... 26.6 26.5 30.0 30.4 Fourth Quarter......................................... 37.3 38.3 34.5 37.9 ----- --------- --------- --------- 100.0% 100.0% 100.0% 100.0% ----- --------- --------- --------- ----- --------- --------- ---------
- ------------------------ (a) Estimated due to the unavailability of information for the fourth quarter of fiscal 1996. 39 BUSINESS GENERAL Blue Bird is the leading manufacturer of school buses in North America. Approximately 79% of the Company's net sales in fiscal 1995 were derived from sales of school bus products. The Company also manufactures the Q-Bus and CS, which target purchasers of medium-sized buses for commercial uses, and two upscale RV models, the Wanderlodge and the BMC. Commercial and recreational vehicles accounted for approximately 14% and 7%, respectively, of the Company's fiscal 1995 net sales. The Company manufactures both quality steel bus bodies for mounting on chassis manufactured by third parties and complete bus units (body and chassis). Chassis generally consist of frames with engines, transmissions, drive trains, axles, wheels, power steering, brakes and fuel cells. The Company markets its products primarily through a network of approximately 63 independent distributors, which resell the products to customers, including municipalities, states, transportation contracting companies, churches and other independent organizations. Management believes that this distribution network results in an important competitive advantage as it allows the Company to maintain, through its distributors, strong sales relationships with the ultimate end-users of its products, which provide the Company with an important source of localized market knowledge. Through its subsidiary, Blue Bird Capital, which was formed in October 1995, the Company provides a variety of lease financing alternatives principally to tax-exempt customers of its school bus products. The Company also continues to provide taxable lease financing through its Blue Bird Credit division. The Company's business strategy is to continue to utilize its leading market position in the school bus market as a platform from which to expand its product offerings. The Company will continue to focus on its core school bus business, while seeking to expand its commercial bus product offerings to various markets, including the shuttle bus market, the smaller urban bus market and the "line haul" or inter-city coach market. Within the school bus market, the Company will continue to emphasize sales to distributors, as opposed to states and large transportation contracting companies, reflecting its belief that the former market provides greater growth and profit opportunities. The Company will also seek to expand its international bus sales, particularly in developing countries. The Company's principal executive offices are located at 3920 Arkwright Road, Macon, Georgia 31210. The Company is organized under the laws of the state of Georgia and BBC is organized under the laws of the state of Delaware. INDUSTRY OVERVIEW SCHOOL BUSES. The two principal components of a school bus are the body and chassis. Bodies and chassis are sold either as integrated units, provided by a single supplier, or separately, in which case end-users purchase bodies and chassis from different suppliers and have the two components assembled by the bus body manufacturer. Approximately 57% of the Company's school bus sales in 1995, on a unit basis, were of integrated units. The ability to provide integrated units enables manufacturers to submit bids on completed school bus units to school bus end-users. The Company believes that integrated sales permit school bus body manufacturers to offer end-users a lower cost complete school bus while increasing their share of the profits realized on any sale of a unit. Many end-users, particularly those that participate in a state bid process for school bus purchases, however, may prefer to purchase the body and chassis separately. School bus purchasing is typically a centralized process involving orders of multiple units. Purchasers of school buses are categorized into two ownership groups: public (I.E., states and school districts); and private (I.E., independent transportation contracting companies and other private entities). It has been management's experience that the transportation director of a state or school district, or the chief procurement officer of a transportation contracting company, as the case may be, will typically determine transportation needs on an annual basis. In addition to replacement requirements based on changes in 40 safety standards and incremental needs due to pupil population growth, factors which influence the need to purchase school buses include the age of the existing school bus fleet, changes in school bus travel routes, regulatory changes such as compliance with new emissions standards, extracurricular activity usage and changes in the education structure in the United States such as the development of preschool "head start" programs, special education programs and magnet schools. In the case of public purchasers, the transportation director may also be affected by certain budgetary constraints, and will consider the availability of financing in making the purchasing decision. Once the decision relating to the purchase of replacement or new school buses is finalized, the transportation director or the chief procurement officer will decide on the type and brand of product to be purchased. Product performance, manufacturer reputation, the manufacturer's ability to accommodate specifications regarding bus design, relationships with distributors, price, the availability of financing alternatives (E.G., leasing options), fleet standardization and post-sale support and service are all key factors influencing the decision to purchase a particular product. While price is an important factor, it is not the sole determinant of the purchase decision, and the lowest bid is not necessarily awarded the contract. As a result, manufacturer and distributor relationships are critical to the sale of school bus products. Florida, Kentucky, North Carolina, South Carolina and West Virginia award contracts for school buses based on a state bid process, with the state generally serving as the aggregate purchaser on behalf of all of its school districts. State officials compile the total number of buses their districts require and then solicit bids from bus body and chassis manufacturers. This process is much more competitive and price sensitive than the local bidding process, and manufacturers generally must be the low bidder to win the contract. Bus body and chassis manufacturers typically bid these purchases on a direct basis, rather than through distributors, and view these contracts as low margin, incremental volume. The Company estimates that approximately 15% of annual U.S. public school bus purchases are awarded through these bids. In the United States, approximately 78% of the estimated 410,000 school buses currently in operation are publicly owned, with the remainder privately owned. The Company estimates that approximately 50% of the privately owned school buses in operation in the U.S. are owned by the five largest national contractors. These contracting companies are fleet buyers and, therefore, pricing in this segment of the market is highly competitive. In addition to these large national transportation contractors, local contracting companies are also classified as private purchasers of school buses. As is the case with individual school districts, these smaller institutions typically purchase buses through distributors. Management estimates that deliveries of school buses in North America in fiscal 1995 totaled approximately 30,600 units. In addition, management estimates that the market demand for school bus and commercial products that the Company manufactures and sells to countries outside of North America totaled approximately 3,500 units in fiscal 1995. COMMERCIAL VEHICLES. Management divides the commercial bus transportation market into three segments, consisting of (i) public transportation, (ii) shuttle transportation and (iii) tour, charter and commuter uses. The public transportation sector consists of several vehicle markets, including vans, medium-duty buses under 35 feet in length, heavy-duty buses up to 40 feet, articulated buses up to 60 feet, and inter-city coaches designed to transport passengers from suburbs to cities. The shuttle market is broader with users such as airports, car rental agencies, "park-and-ride" operators, hotels, educational and religious institutions, and providers of employee and health care-related transportation. The tour, charter and commuter segment of the market typically requires large over-the-road coaches ranging from 40 feet to 45 feet in length. The Company's participation in the broad commercial bus market is limited, as the Company produces only medium-sized commercial buses as well as shuttle products. See "--Products." Medium-sized buses are purchased by public transportation authorities and by tour, charter and commuter operators to supplement a fleet of large vehicles or to facilitate smaller scale charter and contract 41 transportation needs. Management believes that rural and urban public transit authorities are beginning to reevaluate their traditional preference, especially in urban areas, for fleets consisting primarily of large buses. Management further believes a trend is developing toward purchases of the medium-sized buses similar to those built by the Company, in part because medium-sized buses are more economical and easier to operate. The Company believes it is well positioned to benefit from this trend. The shuttle market is served by a variety of products which include a variety of vans, "cutaway" vans (a fiberglass body on a van chassis), small and medium-sized coaches and some hybrid van and bus products. Management believes that the shuttle segment will grow as airports grow larger and move further away from cities and the number of elderly citizens requiring shuttle transportation increases. RECREATIONAL VEHICLES. The Company participates in the luxury niche of the recreational motor home vehicle market. This segment of the market is small, relatively stable, and consists of a limited number of competitors. Although this segment of the market is profitable for the Company, it is not expected to grow significantly. Management estimates that in a given year, there are likely to be approximately 400 luxury motor home products similar to those manufactured by the Company sold in the United States and believes that in order for the Company to increase sales, it will need to increase its market share relative to its competitors. PRODUCTS SCHOOL BUS PRODUCTS GENERAL. Blue Bird produces a full range of school bus models and it is the largest manufacturer of both conventional and transit school bus bodies in the industry. In addition, Blue Bird sells complete Type D buses by integrating its Type D bodies with chassis manufactured by the Company. In 1995 Blue Bird derived approximately 13% of its net sales from the sale of its various school bus body models and 62% of its net sales from the sale of its integrated school buses. For classification purposes, the school bus industry has categorized these different models into the following four general product designations: TYPE A. A "Type A" school bus is a conversion of a van or a body constructed on a van-type compact truck chassis, with a gross vehicle weight ("GVW") rating of 10,000 pounds or less, designed to carry up to 21 passengers. The engine is located in front of the windshield and the entrance door is located behind the front wheels. The Company offers one model in this category, the Micro-Bird, which can be ordered in several configurations. The Company does not manufacture chassis for the Micro-Bird. Chassis are purchased by the customer and delivered to the Company, which in turn installs the bus body. Wholesale selling prices for Type A vehicle bus bodies typically range from approximately $10,000 to $15,000. TYPE B. A "Type B" school bus is a body constructed and installed on a van-type or stripped chassis, with a GVW rating of more than 10,000 pounds, designed to carry up to 38 passengers. Part of the engine is located beneath and/or behind the windshield and next to the driver's seat and the entrance door on a Type B bus is located behind the front wheels. The Company offers one model in this category, the Mini-Bird, which can be ordered in several configurations. The Company does not manufacture a Type B chassis. Chassis are purchased by the customer and delivered to the Company, which in turn installs the bus body. Wholesale selling prices for Type B vehicle bus bodies typically range from approximately $12,000 to $20,000. TYPE C. "Type C" school buses are the Company's largest-selling product, accounting for more than half of the vehicles sold by Blue Bird in 1995. The Type C bus, which is a "traditional" full-size school bus, is a body installed on a flat back "cowl" chassis, with a GVW rating of more than 10,000 pounds, designed to carry up to 77 passengers. The engine is located in front of the windshield and the entrance door is located behind the front wheels. The Company offers two models in this category, the Conventional and an 42 integrated unit sold with a GM chassis, each of which can be ordered in several configurations. Wholesale selling prices for Type C vehicle bus bodies typically range from approximately $12,000 to $25,000, while prices for integrated products range from approximately $40,000 to $55,000. TYPE D. "Type D" school buses accounted for approximately one third of the vehicles sold by the Company in 1995. A Type D school bus is a transit-type (flat front) body installed on a chassis, with a GVW rating of more than 10,000 pounds, designed to carry up to 90 passengers. Type D buses are sold only on an integrated basis with a chassis manufactured by the Company. The engine is located behind the windshield and may be mounted next to the driver's seat, at the rear of the bus, or midship between the front and rear axles. The entrance door on a Type D bus is located ahead of the front wheels. The Company's models in this category include the TC/2000 and the All American, each of which can be ordered in several configurations. Wholesale selling prices for Type D vehicle buses (including chassis) typically range from approximately $50,000 to $95,000. COMMERCIAL VEHICLE PRODUCTS Q-BUS. The "Q-Bus," a 37 foot long coach introduced in 1992, enables the Company to compete in the medium-duty tour, charter and commuter markets. The unit offers bus operators a medium-duty bus with many of the "big bus" features, including seating capacities for up to 45 passengers, restroom, audio and visual systems, luggage capacity of up to 240 cubic feet and engine options up to 300 horsepower. In 1996 the Company introduced a larger version of the Q-Bus with seating capacity for up to 47 passengers, additional luggage capacity and a 400-horsepower diesel engine. This unit is designed to compete with more expensive over-the-road coaches such as those used by operators to carry commuters from suburban locations to urban work offices. Management believes the Company's medium-sized bus products to be a viable alternative to larger vehicles for a variety of reasons, including the fact that the medium-sized buses offer lower operating costs and flexibility in terms of matching bus size to passenger load demands. Wholesale selling prices for the Q-Bus typically range from approximately $113,000 to $210,000. CS. The CS series coach is designed primarily for the shuttle market. It is offered in ten models ranging from 24 feet to 39 feet in length. In 1995, to address a growing market segment for the airport to city/hotels commutes, the Company introduced a CS coach known as the EZLoader. The EZLoader is designed with a low-floor rear-end luggage compartment to allow the operator fast and easy access for luggage handling. The unit seats up to 30 passengers. In 1996, to meet the growing "demand response" market in the public transportation sector, in which riders such as disabled and elderly persons call a shuttle service for door-to-door pick-up and drop-off services (such as from home to the hospital), the Company introduced the TranShuttle CS, a 25-foot coach with a flat floor for multiple wheelchair accessibility. This product has been designed to compete with the lightweight bus and cutaway van while providing greater durability than is typical of those products. Wholesale selling prices for CS series coaches typically range from approximately $51,000 to $89,000. MODIFIED SCHOOL BUS PRODUCTS. The Company has taken advantage of its high volume purchases for school bus components, and its rapid assembly-line efficiencies, to produce and market an adaptation of the Type C and Type D school bus in commercial form. The bus, known as the "Activity Bus," offers basic "no-frills" transportation for commuter, shuttle, churches, colleges, and universities. The product offers basic paint schemes, diesel and natural gas engine options, and very functional interiors for passenger comfort. Wholesale selling prices for the Activity Bus typically range from approximately $12,000 for non-integrated products to $70,000 for integrated products. WORK STATION Q AND QMC. The Company's Work Station Q unit and the QMC are designed to service the executive and corporate transport markets, and can include features such as luxury seating, a small galley, and a restroom. Both products are designed to carry a limited number of passengers in comfort and style. Wholesale selling prices for the Work Station Q and the QMC typically range from approximately $150,000 to $250,000. 43 RECREATIONAL VEHICLE PRODUCTS GENERAL. The Company manufactures complete motor homes by integrating the motor home shell with Blue Bird-manufactured chassis. The Company offers two luxury motor home products, both of which are targeted for the premium and mid- to high-end markets. WANDERLODGE. The Wanderlodge is a premium motor home manufactured by the Company. The Wanderlodge is available in two models, 41 and 43 feet in length, with a capacity of up to six passengers and sleeping accommodations for four. Key features of the unit include (i) the ultra-premium design of the product, (ii) steel body construction and a body-on-chassis design, (iii) a wide selection of optional equipment available to the purchaser, and (iv) the extensive product support capability provided by Blue Bird's two RV distributors. During fiscal year 1995, 57% of recreational vehicles delivered by the Company were Wanderlodge units. Suggested retail prices for the Wanderlodge range from approximately $550,000 to $650,000. BLUE BIRD MOTOR COACH. The BMC is offered as a 37- or 40-foot long motorcoach designed to meet product demand for the expanding middle-to-high-end segment of the luxury recreational vehicle market. Like the Wanderlodge, it features steel body construction and a body-on-chassis design. During fiscal year 1995, 43% of RVs delivered by the Company were BMC units. The BMC has a suggested retail price ranging from approximately $350,000 to $465,000. SERVICE PARTS All of Blue Bird's distributors maintain parts inventories to service owners of Blue Bird products. Many of such distributors purchase parts from Blue Bird's Service Parts Group (the "Parts Group"). In addition to these sales to distributors, the Parts Group sells parts to fleet accounts on a direct basis. These direct sales accounts include the U.S. General Services Administration (the "GSA"), the national transportation contracting companies and other accounts in southern Georgia, South Carolina and Kentucky. The Company currently operates an 80,000-square foot facility in Fort Valley, Georgia to house the Parts Group. MARKETING AND DISTRIBUTION The Company sells its bus products through distributors (87% of 1995 net sales) and directly to end-users (13% of 1995 net sales). During 1995, no customer accounted for as much as 10% of Blue Bird's net sales. Direct sales customers include states, transportation contracting companies, the GSA and all export buyers. All other sales are made through the Company's distributors. Direct sales typically involve bids for large contracts, which are highly competitive. Accordingly, direct sales margins are typically lower than distributor sales margins. Blue Bird has approximately 63 independent distributors in the U.S. and Canada, including RV distributors. Approximately 27 of the Company's 28 commercial bus distributors also distribute the Company's school bus products. The Company's two RV distributors together have five locations. One of these distributors, Buddy Gregg Motor Homes, Inc., accounts for approximately 70% of the Company's RV unit volume. Many of Blue Bird's school bus distributors have close and longstanding relationships with transportation directors of states and school districts. The Company believes that its distributors are well situated to understand the needs and specifications of local school districts. In 1995, no single distributor accounted for more than 6% of the Company's sales of school bus products. Blue Bird distributors are bound by the terms of a distributor contract, pursuant to which distributors are granted a non-exclusive right to sell the Company's buses and service parts in a designated territory. Distributors are restricted from selling other products which compete with Blue Bird's products. The 44 Company's distributor contract also requires distributors to service Blue Bird products. Sales to distributors are on a cash-at-delivery basis. Sales by distributors to end-users, such as school boards, are also usually on a cash-at-delivery basis. Blue Bird's sales organization services all of its distributors and direct sales customers. Six regional sales managers work exclusively with distributors in their respective regions and are responsible for coordinating sales and marketing campaigns, pricing policies, strategic market planning and related functions. These regional sales managers regularly visit distributors in order to disseminate product knowledge, supply marketing advice and serve as direct distributor support. The regional managers often accompany distributors' salespeople to meetings with prospective purchasers. The Company sponsors an annual international sales meeting to bring all of its distributors together, and regional sales meetings are also conducted annually to focus on regional strategic planning, advertising and other issues. Additionally, Blue Bird management meets with a Dealer Advisory Council on a regular basis to discuss strategic product and market issues, and to assist in the Company's long-term planning process. The Company's advertisements are run in national and regional trade journals for the transportation and education industries. Representatives of the Company attend national and regional product conventions as well as conventions for educational trade groups such as the National School Board Association, the National Association of Pupil Transportation and the National School Transportation Association. Blue Bird also utilizes its network of independent distributors to promote its products and disseminate product literature. Distributors attend these conventions at the state level and are usually accompanied by a representative of the Company. LEASING The Company has provided lease financing to school bus customers since 1984, principally through its leasing division, Blue Bird Credit ("Blue Bird Credit"). On October 26, 1995, the Company formed a wholly-owned subsidiary, Blue Bird Capital, for the purpose of expanding the availability of lease financing alternatives to customers of its school bus products. Blue Bird Capital has since become the Company's principal provider of leasing alternatives focusing on tax-exempt lessees. Generally, upon receipt of orders for municipal lease customers, the Company provides buses to be delivered by Blue Bird Capital to the appropriate distributor, who in turn delivers the buses to municipal customers pursuant to leases. Upon receipt of lease documents, Blue Bird Capital borrows approximately 90% of the lease amount pursuant to the LaSalle Credit Facility in order to pay the Company. Under the typical Blue Bird Capital lease with a tax exempt lessee, title is held by the lessee with a lien held by Blue Bird Capital. The average lease term is approximately three years and the lessee's down payment is typically 10% of the lease amount. The Company accounts for the lease as a sale and the related borrowings as long-term or short-term debt, as applicable. Under the LaSalle Credit Facility, Blue Bird Capital is required to maintain certain financial ratios, including a ratio of Total Liabilities to Tangible Net Worth, that cannot exceed 10 to 1. See "Description of Debt Facilities--LaSalle Credit Agreement." Blue Bird Capital pays the Company as promptly as possible and generally does not carry unsold inventory. Leases held by Blue Bird Capital are generally tax-exempt and accrue interest at rates ranging from 4.75% to 8.0%. The Company and Blue Bird Capital have entered into an Income Taxes Agreement whereby the Company reimburses Blue Bird Capital for the tax benefit generated by the tax free leases. MANUFACTURING PROCESS The production of Blue Bird's extensive line of bus models involves various assembly processes. The bus body assembly process begins with the assembly of floor panels on a carriage that will carry the body assembly along the production line. Roof bows, internal and external metal panels are rivited in place and front and rear sections are added prior to painting. Windows, seats, flooring and other finishing items are added prior to attaching the bus body to the chassis. Each Blue Bird chassis is manufactured for a specific body, and a copy of the production order travels through the production process with the chassis. All of the 45 chassis built by Blue Bird are for use with a Type D bus body. Some of these transit-type buses require the engine to be mounted in the front of the chassis, and others specify mounting in the rear. All Blue Bird chassis are tested to check the gauges, speedometer, fluid systems and electrical connections for the bus body components. The construction of both bodies and chassis must conform to various state and federal regulations. The most significant and comprehensive of these regulations is set forth in the Federal Motor Vehicle Safety Standards ("FMVSS"), which apply to all school buses built during and after 1977. The FMVSS specify requirements for a variety of vehicle components including controls and displays, automatic transmission, defrost/defog systems, windshield wipers, braking systems, reflectors and lights, mirrors, vehicle identification numbers, tires and wheels, accelerator controls, warning devices, occupant protection systems, steering systems, glazing materials, seats, windshields and windows, rollover protection, body joints and fuel systems. INTERNATIONAL Other than maintaining a manufacturing facility in Canada, which accounted for sales of approximately 1,200 buses to Canadian customers in 1995 (approximately $32.9 million in net sales), and a new facility (first production units delivered in 1995) in Monterrey, Mexico, the Company's operations are based in the United States. The Company exported approximately 575 bus products in 1995, primarily to developing countries. Since foreign purchases of Blue Bird buses are typically non-school-related, the Company is unable to rely on the perceived strengths and marketability of its traditional school bus products. However, the Company believes that there are opportunities to grow its export business, particularly in developing countries, as these countries begin to demand additional basic transportation products. In general, the Company plans to increase its focus on the export segment of its businesses by developing modified school bus and commercial products which meet the specifications of purchasers in the Middle East, Africa, Europe, Mexico and Central and South America. In Mexico, the easing of import restrictions on new trucks and buses in connection with the North American Free Trade Agreement may present a significant opportunity for Blue Bird to expand its export business in that region; however, Blue Bird's ability to expand its business in Mexico depends largely on the stability of Mexico's economy. The opening of this marketplace could generate opportunities in other Latin American countries as well as enhance the reputation of Blue Bird's products throughout the region. Blue Bird's Mexican plant is currently used to produce vehicles which are imported into the United States, but could be used in the future to service Latin American markets. The Q-Bus and CS bus may also provide opportunities overseas, particularly in Western Europe where conventional North American school bus bodies and chassis are not marketable. In Eastern Europe, the Company's current product line may be salable as the region becomes accessible to exporters. In addition, the Company has developed a prototype right-hand drive chassis which will be used with the Q-Bus body as a product for selected Western European and African countries. Deliveries to these regions were minimal during 1995. NEW PRODUCT DEVELOPMENT Blue Bird's research and development program studies bus sales trends to identify potential growth opportunities for the business and designs products to exploit these growth opportunities. This process includes evaluating potential new materials and components for use in existing products as well as developing new product designs, especially for the Company's commercial and RV product lines. Developmental projects are currently underway for expanded product offerings in the commercial market. Blue Bird's manufacturing processes incorporate sufficient production flexibility to enable Blue Bird to produce new designs with minimum lead time. Current projects are underway to develop alternative fuel buses 46 based on electric and compressed natural gas power. Approximately 20 electrically powered buses were delivered in 1996. COMPETITION SCHOOL BUS MARKET. Four major school bus manufacturers, Blue Bird, Thomas Built Buses, Inc. ("Thomas"), and CBW, Inc., which are privately owned companies, and AmTran, which was acquired by Navistar in the fourth quarter of 1995, account for substantially all dollar sales of school buses. All of these companies manufacture bus bodies which are mounted on a chassis supplied by GM, Ford and Navistar, although GM has agreed to supply chassis for Type C bus bodies exclusively to Blue Bird pursuant to the GM Chassis Agreement. See "--Raw Materials and Components." The Company and Thomas, which together accounted for approximately two-thirds of aggregate domestic school bus sales in 1995, manufacture chassis as well as bodies for certain of their bus models. Competition in the industry is intense, as all four manufacturers typically compete for each significant contract that comes up for bid. The three major school bus chassis manufacturers are GM, Ford and Navistar. Of these, Navistar is the leading manufacturer, accounting for approximately 60% of sales in 1995. The Company does not believe the Navistar's recent acquisition of AmTran will have a material impact on the Company's business. In the conventional chassis market, Navistar currently continues to make its chassis available to all bus body manufacturers. See "Risk Factors--Limited Number of Chassis Suppliers." Since Blue Bird does not manufacture discrete chassis units for sale to third-party purchasers, the Company does not directly compete with other chassis manufacturers. However, the Company has experienced indirect competition with some of these manufacturers, particularly Navistar, in the integrated bidding process. COMMERCIAL MARKET. The Company has different competitors in each of the major commercial market segments. In the medium-duty tour, charter, and commuter market, the Company's principal competitors include Eldorado National, a business of Thor Industries, Inc. ("Eldorado"), and Metrotrans Corporation ("Metrotrans"). Its competitors in the shuttle market are Champion Motor Coach, Inc. ("Champion"), Eldorado, Goshen Coach, Metrotrans, Supreme Corporation and Thomas. In the urban and rural transit market, the Company's principal competitors are Eldorado, Champion and Thomas. RV MARKET. In the motor home market, the Company considers its competition to be those companies building high-end motor homes on over-the-road coaches such as those produced by Prevost Car, Inc., Motor Coach Industries, Inc., Marathon Coach, Inc., Liberty Coach, Inc., Vantare International, Inc., Country Coach, Inc., Mitchell Coach Mfg. Co., and Custom Coach Corp. An additional competitor, Newell Coach, Inc., is the only high-end manufacturer that builds on its own chassis and body similar to the Wanderlodge. There are several other small competitors who periodically enter and exit the market. Although the BMC has a steel body construction like the Wanderlodge, it also competes with motor home products made by Monaco Coach, Inc., Beaver Motor Coach, Inc., Country Coach, Inc., American Eagle by Fleetwood Enterprises, Inc., and Foretravel, Inc. RAW MATERIALS AND COMPONENTS The largest production-related expense incurred by the Company is the cost of purchased materials. In fiscal year 1995, material purchases represented approximately 70% of total production costs. The Company purchases raw materials and components from over 2,500 suppliers. Other than GM, the Company's principal chassis supplier, no one supplier accounts for more than 10% of the Company's aggregate expenditures on raw materials and/or components. Since Blue Bird does not manufacture engines and does not manufacture chassis for its Type A, Type B and Type C bus products, the cost of engines, purchased chassis and components for Company-manufactured chassis constitute the largest components of the Company's material expense. 47 Because Type A and Type B bus purchasers obtain their chassis separately and look to the Company only for a bus body, chassis supply is relevant for these product lines only to the extent that it may impact the number of Type A and Type B bus bodies ultimately sold. The Company manufactures all of its Type D chassis, with the result that chassis components constitute a major portion of Type D production costs. The three major school bus Type C chassis manufacturers are GM, Ford and Navistar. Navistar is the industry leader with a market share estimated by market researchers of in excess of 60% in 1995. In late 1990, management of Blue Bird was concerned about the possibility that Ford and GM might decide to discontinue supplying Type C chassis, resulting in a situation in which Navistar might become the sole supplier of these Type C chassis and thus be in a position to exert increased influence over school bus manufacturers. Type C school buses represent approximately 57% of the total units sold by the Company. In addition, a trend toward integrated bidding (body and chassis) among school bus purchasers caused Blue Bird to consider establishing a formal relationship with a Type C chassis supplier to enhance the Company's competitive position in the Type C bus segment of the market. Blue Bird and GM entered into the GM Chassis Agreement in May 1991. The agreement can be terminated by either party on two years' notice. As of the date of this Prospectus neither party has given notice of termination. In general, management does not believe that termination of the GM Chassis Agreement would have a material adverse effect upon the Company's operations, because management believes that chassis would be available from other suppliers. However, there can be no assurance that, given the limited number of chassis suppliers, the Company will not be materially adversely affected in its manufacturing efforts. See "Risk Factors--Limited Number of Chassis Suppliers." Under the terms of the GM Chassis Agreement, GM supplies its medium-duty chassis for Type C school buses to Blue Bird on an exclusive basis, and Blue Bird purchases the Type C chassis model exclusively from GM. Nothing in the GM Chassis Agreement precludes the Company from mounting its bus bodies on other makes of chassis if the chassis are purchased by Blue Bird's customers or distributors. In addition, the Company is not required to purchase a minimum number of chassis from GM under the GM Chassis Agreement. The Company believes that offering an integrated Type C product permits the Company to offer a competitively priced product while allowing it to realize a profit on the sale of the chassis, thereby increasing the total amount of profit that the Company realizes on the sale of each unit. Blue Bird's arrangements with GM make it the only current supplier of gasoline-powered Type C and Type D school buses in the industry. The Company's distributors and GM's 750 medium-duty truck dealers participate in servicing the end user after the initial sale. This enhanced network provides the Blue Bird/ GM product with broad post-sale servicing and support. GOVERNMENT REGULATION School bus manufacturers must conform to vehicle guidelines imposed by the FMVSS, as well as to state and local specifications. FMVSS regulations have in the past directly affected manufacturers of school bus bodies and chassis, as well as end-users, by altering specifications and, as a result, increasing costs. With respect to environmental regulation, the most immediate issue facing the school bus industry will be the effectiveness in 1998 of more restrictive EPA emissions standards. These regulations will mandate certain engine changes and result in increased costs to both manufacturers and end-users of school buses. Blue Bird management believes that the general public will continue to mandate improved safety standards and ongoing resolution of environmental issues beyond 1998, and thereby will generate continuing demand for new school bus models over the long term. See "--Legal Proceedings" for a discussion of a pending recall of certain of the Company's products. 48 BACKLOG ORDERS As of July 27, 1996, the dollar amount of backlog orders believed by the Company to be firm totaled $348 million. It is expected that approximately two-thirds of such orders will be filled in the fourth quarter of fiscal year 1996. As of July 29, 1995, the dollar amount of backlog orders believed by the Company to be firm was $318 million. Approximately two-thirds of such orders were filled in the fourth quarter of fiscal year 1995. PATENTS, LICENSES AND TRADEMARKS The Company owns and maintains registrations for the Blue Bird trademark and variations thereof in 49 countries, including the United States and Canada and monitors the status of its trademark registrations to maintain them in force and to renew them as required. Management believes that the Blue Bird trademarks are valuable because of the Company's strong presence in the bus market. Accordingly, the Company seeks to eliminate any infringement thereon. The Company is not currently aware of any such infringement. In addition, the Company has obtained patent protection in the United States on two safety- related components used in its buses. One component is related to an auxiliary heat system (which patent protection will expire in 2009) and the second component is related to a window opening mechanism (which patent protection will expire in 2010). The expiration of the patent protection of these two components is not expected to have a material adverse effect on the Company's financial condition or result of operations. The Company also takes steps, including legal action, to protect its patent, trademark and trade name rights and proprietary rights respecting product design and technology when circumstances warrant such action. SEASONALITY The Company's sales show seasonal variation which is typical of the general industry seasonality. A majority of the Company's sales occur in the third and fourth quarters of the fiscal year, a pattern typical for the industry. For additional data on the seasonal nature of the Company's sales, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." EMPLOYEES As of September 28, 1996, the Company had approximately 2,577 employees, of whom approximately 2,112 were hourly workers. Blue Bird's U.S. and Canadian employees are not represented by any collective bargaining group. Blue Bird's Mexican employees are required by local law to be members of a union. The Company historically provided a competitive wage and benefit program and has an active communications program with its employees. Blue Bird has a four-day, 10-hour-per-day work week, which management believes is viewed as a positive feature by its labor force. The Company believes that its relationship with its employees is satisfactory. PROPERTIES Blue Bird owns and operates seven facilities, six of which are manufacturing facilities, in five different locations in the U.S., Canada and Mexico. In the aggregate, these plants have approximately 1.8 million square feet of production area. Blue Bird management considers all of these facilities to be state-of-the-art in the school bus manufacturing industry. 49 The table below provides summary descriptions of each of the plants.
SQUARE PLANT LOCATION PRODUCTS FEET EMPL.(A) - ----------------------------- ----------------------------- ----------------------------- ---------- ----------- Blue Bird Body Company Fort Valley, Georgia TC/2000, Q-Bus All- American, 730,000 1,389 parts fabrication Service Parts Fort Valley, Georgia Parts 80,000 N.A.(b) Wanderlodge Fort Valley, Georgia Wanderlodge, parts 216,000 243 fabrication Blue Bird North Georgia LaFayette, Georgia Conventional, TC/2000 216,000 262 Blue Bird Midwest Mt. Pleasant, Iowa Conventional, Mini-Bird, 227,400 263 TC/2000, Micro-Bird Blue Bird Canada Brantford, ON (Canada) TC/2000, Conventional, 251,395 271 Micro-Bird, parts fabrication Blue Bird de Mexico Monterrey, Mexico Conventional 118,310 149 ---------- ----- Total Company 1,839,105 2,577 ---------- ----- ---------- -----
- ------------------------ (a) As of September 28, 1996. (b) Included in the number of employees for Blue Bird facility in Fort Valley, Georgia. If Blue Bird operated all of its assembly plants at "maximum capacity," defined as two eight-hour shifts per day, five days per week, 250 days per year, the Company could manufacture approximately 27,300 units per year. The Company's capacity to fabricate all of the parts needs to build the buses is a constraint as the Company's present fabrication facilities have the capacity to support the production of approximately 25,000 units per year. With an investment of approximately $2.5 million in additional equipment, Blue Bird's fabrication capacity could support approximately 28,500 units per year. ENVIRONMENTAL MATTERS The Company's operations and properties are subject to numerous federal, state, local and international laws and regulations, including those governing the use, storage, handling, transportation, generation, treatment, emission, release, discharge and disposal of certain materials, substances and wastes (collectively, "Hazardous Materials"), the remediation of contaminated soil and groundwater, and the health and safety of employees (collectively, "Environmental Laws"). Violation of such Environmental Laws, even if inadvertent, could have an adverse impact on the operations, business or financial results of the Company. As such, the nature of the Company's operations exposes it to the risk of claims with respect to such matters and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. The Company maintains an inactive landfill site at its Fort Valley, Georgia, location which is subject to regulation pursuant to the U.S. Resource Conservation and Recovery Act, as amended ("RCRA"). RCRA is administered in Georgia by the Environmental Protection Division of the Georgia Department of Natural Resources ("EPD"). The Company has closed its Fort Valley landfill site pursuant to a permit from the EPD that contains certain conditions, including 30-year post-closure groundwater monitoring. In connection with such permit, the Company maintains a letter of credit to cover the expected cost of monitoring over the life of the monitoring requirement. The Company currently estimates post-closure costs for the site at $434,700. The Company's estimate of post-closure costs is subject to periodic adjustment based on EPD regulations. 50 Monitoring by the Company has detected increased levels of solvents in groundwater near its Fort Valley site, and the Company has so advised the EPD. Continued monitoring and testing is required to ascertain the source of these solvents. If it is determined that the Company's landfill is the source of such solvents, corrective action will be required. The Company believes that the cost of any corrective action that might be required will not be material to its results of operations or financial condition. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), and similar state laws provide for responses to and strict liability for releases of certain Hazardous Materials into the environment. These obligations are imposed on certain potentially responsible parties ("PRPs"), including any person who arranged for the treatment or disposal of Hazardous Materials at a facility. Generally, liability to the government under CERCLA is joint and several. The Company has been named a PRP at the Des Moines barrel and drum site in Des Moines, Iowa and the Seaboard chemical site in Jamestown, North Carolina. In both instances, the Company is considered a DE MINIMIS PRP. In 1993, the Company settled its liability for cleanup costs at the Des Moines barrel and drum site for $5,250. The settlement contains a re-opener provision in the event future cleanup costs are required, but the Company is not aware of any anticipated cleanup costs in addition to those covered in the settlement agreement. In 1995, the Company executed an administrative Order on Consent among the North Carolina Department of Environment, Health and Natural Resources, the Seaboard PRP Group II, and the City of High Point, North Carolina, covering the investigation of cleanup alternatives at the Seaboard chemical site. The Company anticipates that it will have the opportunity to enter into a DE MINIMIS buy-out relating to cleanup costs within the next two years, which buyout is expected to provide a release from any further liability in connection with the Seaboard site. Although the cost of such buyout is not currently known, it is not expected to be material. Based upon its experience to date, the Company believes that the future cost of compliance with existing Environmental Laws, and liability for known environmental claims pursuant to such Environmental Laws, will not have a material effect on the Company's capital expenditures, earnings or competitive position. However, future events, such as new information, changes in existing Environmental Laws or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material. LEGAL PROCEEDINGS Blue Bird currently is a defendant in approximately 17 product liability suits. The Company aggressively defends product liability cases and insists that component manufacturers and chassis manufacturers such as GM and Navistar and smaller parts suppliers stand behind their portions of the product by either asserting a breach of warranty claim against such supplier or manufacturer, or claiming a right of indemnification for such supplier or manufacturer pursuant to the terms of the Company's standard purchase order agreements or the relevant supplier agreement. The Company manufactures certain components itself and assembles the various components into the completed vehicle, which may give rise to independent liabilities. Moreover, the Company's manufacture of chassis for its Type D school buses may expose the Company to liability associated with such chassis. The amount of product liability insurance that the Company has in place has varied significantly from year to year. The Company's policies generally provide that the Company is responsible for the costs of defending product liability claims, although Blue Bird's recent insurance plan has included some participation by insurers in such costs at certain levels. As of the date of this Prospectus, neither the outcome of the Company's pending product liability cases nor the amounts of any company liabilities related to these cases are known. The Company's insurance coverage for occurrences in each of the past several years has been $25 million in excess of a $2.5 million deductible (exclusive of excess liability coverage). There is no certainty that the currently available coverage will remain available to the Company in the future or at all, that future rate increases might not make such insurance economically impractical for the Company to maintain, that current deductible levels 51 will be maintained, or that the Company's insurers will be financially viable if and when payment of a claim is required. In addition, the statute of limitations for injuries to minor children (which varies between one and six years, depending on the state) does not generally begin to run until the child reaches majority; therefore, there may be potential claims of which Blue Bird is not aware (or accidents of which Blue Bird was aware, but which did not produce any lawsuit) involving accidents going back for a number of years. In the ordinary course of events, Blue Bird believes that it receives notice of most potential claims within a reasonable time of the occurrence, but there can be no assurance that Blue Bird is aware of all such potential claims. Management believes that, considering, among other things, the Company's insurance coverage, the ultimate resolution of these matters will not have a material adverse impact on the Company's financial position or results of operations, and that any losses and expenses (including defense costs) resulting from product liability claims will be within the applicable insurance coverage. However, there can be no assurance that this will be true or that the amount of losses and expenses relating to any claim or claims will not have a material adverse effect on the Company. Several owners of motor homes made by Blue Bird have asserted claims under state laws addressing new vehicle defects. Such claims typically seek a refund of the purchase price of the vehicle. Management believes that the resolution of such claims, which are not insured, will not have a material effect on the Company. Blue Bird, like other vehicle manufacturers, is also subject to recalls of its products in the event of manufacturing defects or non-compliance with applicable regulatory standards. Such recalls can engender claims. In August 1996, the NHTSA announced its determination that approximately 11,500 school buses were not in compliance with federal requirements for fuel systems. Of the affected buses, 11,300 were Blue Bird Type D models in which the chassis are manufactured by the Company, which failed crash tests when fuel tanks were punctured upon impact. The Company is currently evaluating the scope of the proposed product recall with the NHTSA as a result of the NHTSA's non-compliance determination. If all 11,300 buses were to be recalled, management estimates that the cost to the Company of the repairs required to bring the vehicles into compliance would not be material to its results of operations or financial condition. 52 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information concerning the persons who are executive officers and directors of the Company and BBC as of December 4, 1996; all information is provided as of such date:
NAME AGE POSITION AND EXPERIENCE - ----------------------------------------------------- --- ----------------------------------------------------- Paul E. Glaske....................................... 63 Chairman of the Board and President of the Company and BBC; director of the Company and BBC. At the time the 1992 Acquisition was consummated (the "Effective Time"), Mr. Glaske was appointed Chairman of the Board and President of the Company and BBC and a director of BBC. Mr. Glaske has served as President of the Company since 1986 and a director of the Company since 1984. He is also a director of Borg-Warner Automotive, Inc. Bobby G. Wallace..................................... 62 Vice President--Finance and Administration, Treasurer and Secretary of the Company; Vice President, Treasurer and Secretary of BBC; director of the Company and BBC. At the Effective Time, Mr. Wallace was appointed to his current positions with the Company and BBC. Mr. Wallace has served as the Vice President-- Finance and Administration of the Company since 1987. In 1986, he was named Vice President--Controller. James H. Grantham.................................... 55 Vice President--Manufacturing of the Company. In 1990, Mr. Grantham was promoted to his current position. In 1988, he was named Vice President--Materials, and, in 1987, became Vice President--Canadian Operations. In 1983, he became General Manager of Blue Bird's plant in Lafayette, Georgia, a promotion from his former position of Production Manager of such plant. Mr. Grantham joined Blue Bird in 1965. Richard E. Maddox.................................... 44 Vice President--Sales of the Company. In 1990, Mr. Maddox was promoted to his current position from his prior position of Director-- U.S. Sales, to which he was appointed in 1988. In 1986, he was named Manager--U.S. Sales, and, in 1982, he was appointed Manager--Field Sales. Mr. Maddox joined Blue Bird in 1974 and has held various positions in sales since that time. Wilbur C. Rumph...................................... 67 Vice President--Engineering, Research & Development of the Company. Mr. Rumph was
53
NAME AGE POSITION AND EXPERIENCE - ----------------------------------------------------- --- ----------------------------------------------------- appointed to his present position in 1968. He joined Blue Bird in 1948, where he has held various positions in the engineering area. William G. Milby..................................... 50 Vice President and General Manager-- Canadian Blue Bird, Mr. Milby assumed his present position in 1989. In 1985, he was named Vice President and General Manager of the Wanderlodge division. Mr. Milby joined the Company in 1971 as an engineer. Mr. Milby is also a director of Canadian Blue Bird. B. Richard Benedict.................................. 53 Vice President and General Manager--Blue Bird Midwest. Mr. Benedict was promoted to his current position in 1988 from General Manager, to which he was appointed in 1984. In 1977, Mr. Benedict was named Production Manager. Mr. Benedict joined the Company in 1962. Gerald S. Armstrong.................................. 53 Director of the Company and BBC. Mr. Armstrong served as Vice President, Treasurer and Secretary of BBC prior to the 1992 Acquisition. Mr. Armstrong is a Partner and a director of Stonington Partners, Inc., a private investment firm, a position that he has held since 1993. He has also been a member of the Board of Directors of MLCP, an affiliate of Merrill Lynch since 1988. He was a Partner of MLCP from 1993 to July 1994 and an Executive Vice President of MLCP from 1988 to 1994. MLCP is the general partner of several limited partnerships which indirectly own shares of BBC Common Stock. Mr. Armstrong was also a Managing Director of the Investment Banking Division of Merrill Lynch from 1988 to 1994. Mr. Armstrong is also a director of AnnTaylor Stores Corporation, Beatrice Foods, Inc., First USA, Inc., Goss Graphic Systems, Inc., Wherehouse Entertainment, Inc. and World Color Press, Inc. Alexis P. Michas..................................... 38 Director of the Company and BBC. Mr. Michas served as Chairman of the Board and President of BBC from its inception until the Effective Time. Mr. Michas is a Managing Partner and a director of Stonington Partners, Inc., a private investment firm, a position that he has held since 1993. He has also been a member of the Board of Directors of MLCP since 1989. He was a Partner of MLCP from 1993 to 1994 and Senior Vice President of MLCP from 1989 to 1993. MLCP is the general partner of several limited partnerships which indirectly own shares of BBC
54
NAME AGE POSITION AND EXPERIENCE - ----------------------------------------------------- --- ----------------------------------------------------- Common Stock. Mr. Michas was also a Managing Director of the Investment Banking Division of Merrill Lynch from 1991 to July 1994 and a director in the Investment Banking Division of Merrill Lynch from 1990 to 1991. Mr. Michas is also a Director of Borg-Warner Automotive, Inc., Borg-Warner Security Corporation, Dictaphone Corporation, Goss Graphic Systems, Inc., Pathmark Stores, Inc. and Supermarkets General Holdings Corporation. Alfred C. Daugherty.................................. 73 Director of the Company and BBC. Mr. Daugherty served as a director of Blue Bird prior to the 1992 Acquisition. Mr. Daugherty was Chairman of Duracell International, Inc., a manufacturer of premium batteries, and Executive Vice President of Dart Industries, Inc., a maker of consumer products and chemical specialties, as well as a director of both companies, until his retirement on January 1, 1995. Mr. Daugherty is also a director of A. Duda and Sons, Inc., Atlantic Acquaculture Technologies, Inc., Goss Graphic Systems, Inc. and GGS Holdings, Inc. Donald C. Trauscht................................... 62 Director of the Company and BBC. Mr. Trauscht was elected to the Board of Directors in December 1993. Since January 1996, Mr. Trauscht has been Chairman of BW Capital Corp., a private investment company. From February 1993 to December 1995, he was Chairman and Chief Executive Officer of Borg-Warner Security Corporation, an electronic and physical security company. From December 1991 to January 1993, he was Chairman and Chief Executive Officer of Borg-Warner Corporation, a diversified corporation. Prior to December 1991, he was President of Borg-Warner Corporation and held various other executive positions since 1967. He is currently a director of Baker Hughes Inc., Thiokol Corp., IMO Industries, Inc., Borg-Warner Automotive, Inc., Borg-Warner Security Corporation, ESCO Electronics Corp. and Hydrac International Corp.
Each director of the Company and BBC is elected annually and serves until the next annual meeting or until his successor is duly elected and qualified. Each executive officer of the Company and BBC serves at the discretion of the Boards of Directors of the Company and BBC, respectively. 55 EXECUTIVE COMPENSATION SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The following table sets forth, for fiscal years 1995, 1994 and 1993, the cash compensation paid by BBC and its subsidiaries, as well as certain other compensation paid or accrued for fiscal years 1995, 1994, and 1993, to each of the five most highly compensated executive officers of BBC (considering Messrs. Grantham, Maddox and Rumph, Vice Presidents of the Company, to be executive officers of BBC) (collectively, the "named executive officers") in all capacities in which they served: SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION AWARDS --------------------------- SECURITIES UNDERLYING ANNUAL COMPENSATION OPTIONS/ALL OTHER FISCAL ------------------------ --------------------------- NAME AND PRINCIPAL POSITION YEAR SALARY (A) BONUS SARS COMPENSATION - ---------------------------------------------- ----------- ------------ ---------- --------- ---------------- Paul E. Glaske................................ 1995 $ 466,898 $ 428,606 -- $ 19,753(b) Chairman of the Board and President and 1994 $ 449,041 $ 282,287 -- $ 19,303(b) Director 1993 $ 424,923 $ 317,500 -- $ 139,573(c) Bobby G. Wallace.............................. 1995(d) $ 265,388 $ 168,175 -- $ 4,050(f) Vice President--Finance and Admin., 1994 $ 203,379 $ 101,369 $ 10,000(e) $ 3,600(g) Treasurer, Secretary and Director 1993 $ 205,738 $ 143,711 -- $ 64,917(h) James H. Grantham............................. 1995 $ 171,006 $ 123,008 -- $ 4,050(f) Vice President--Manufacturing of the Company 1994 $ 161,274 $ 75,830 -- $ 3,696(g) 1993 $ 144,355 $ 84,714 -- $ 19,324(i) Richard E. Maddox............................. 1995 $ 151,996 $ 110,707 -- $ 6,159(f) Vice President--Sales of the Company 1994 $ 144,055 $ 68,522 -- $ 1,609(g) 1993 $ 129,832 $ 84,714 -- $ 22,941(j) Wilbur C. Rumph............................... 1995 $ 119,674 $ 42,176 -- $ 4,074(f) Vice President--Engineering 1994 $ 113,748 $ 29,925 -- $ 3,600(g) 1993 $ 112,725 $ 24,929 -- $ 3,148(k)
- ------------------------------ (a) Includes amounts deferred at the election of the named executive officer pursuant to the Company's 401(k) plan. Employees may contribute up to 15% of their salaries to the 401(k) plan on a pre-tax basis, not to exceed $9,240 in 1995, $9,240 in 1994, and $8,994 in 1993. (b) Represents life and disability insurance premiums of $15,703 paid by the Company on behalf of Mr. Glaske. Under the 401(k) plan, the Company makes matching contributions equal to 40% of the first 6% of each participant's pre-tax contribution for 1994 and 45% of the first 6% of each participant's pre-tax contribution for 1995. (c) Represents $121,169 paid to Mr. Glaske in respect of stock appreciation rights ("SARs") exercised in connection with the 1992 Acquisition (which constituted a change of control under the Company's SAR plan) which were held in escrow in accordance with the terms of an escrow agreement entered into in connection with the 1992 Acquisition, matching contributions of $3,148 to the Company's 401(k) plan made by the Company on behalf of Mr. Glaske and life and disability insurance premiums of $15,256 paid by the Company. Under the 401(k) plan, the Company makes matching contributions equal to 35% of the first 6% of each participant's pre-tax contribution. (d) On April 15, 1993, the Company and BBC entered into an employment agreement with Mr. Wallace (the "Wallace Employment Agreement") pursuant to which Mr. Wallace agreed to reduce the amount of his business time devoted to rendering executive services on behalf of the Company on the Company's premises or while traveling on behalf of the Company from 100% of such time to 50% of such time in exchange for a reduction in annual compensation and investment in BBC. Pursuant to an agreement (FOOTNOTES CONTINUED ON FOLLOWING PAGE) 56 dated October 31, 1994, the Wallace Employment Agreement was amended to provide for a return to 100% time devoted to Company business and full compensation. (e) The number of shares subject to an option to purchase previously awarded to Mr. Wallace were reduced from 100,000 to 50,000 pursuant to the Wallace Employment Agreement. In 1994, Mr. Wallace was granted an option to purchase 10,000 shares of BBC Common Stock. (f) The amounts shown represent matching contributions to the Company's 401(k) plan made by the Company on behalf of the named executive officer. Under the 401(k) plan, the Company makes matching contributions equal to 40% of the first 6% of each participant's pre-tax contribution. (g) The amounts shown represent matching contributions to the Company's 401(k) plan made by the Company on behalf of the named executive officer. Under the 401(k) plan, the Company makes matching contributions equal to 45% of the first 6% of each participant's pre-tax contribution. (h) Represents $61,769 paid to Mr. Wallace in respect of SARs exercised in connection with the 1992 Acquisition (which constituted a change of control under the Company's SAR plan) which were held in escrow in accordance with the terms of an escrow agreement entered into in connection with the 1992 Acquisition and matching contributions of $3,148 to the Company's 401(k) plan made by the Company on behalf of Mr. Wallace. Under the 401(k) plan, the Company makes matching contributions equal to 35% of the first 6% of each participant's pre-tax contribution. (i) Represents $16,176 paid to Mr. Grantham in respect of SARs exercised in connection with the 1992 Acquisition (which constituted a change of control under the Company's SAR plan) which were held in escrow in accordance with the terms of an escrow agreement entered into in connection with the 1992 Acquisition and matching contributions of $3,148 to the Company's 401(k) plan made by the Company on behalf of Mr. Grantham. Under the 401(k) plan, the Company makes matching contributions equal to 35% of the first 6% of each participant's pre-tax contribution. (j) Represents $20,386 paid to Mr. Maddox in respect of SARs exercised in connection with the 1992 Acquisition (which constituted a change of control under the Company's SAR plan) which were held in escrow in accordance with the terms of an escrow agreement entered into in connection with the 1992 Acquisition and matching contributions of $1,645 to the Company's 401(k) plan made by the Company on behalf of Mr. Maddox. Under the 401(k) plan, the Company makes matching contributions equal to 35% of the first 6% of each participant's pre-tax contribution. (k) The amounts shown represent matching contributions to the Company's 401(k) plan made by the Company on behalf of the named executive officer. Under the 401(k) plan, the Company makes matching contributions equal to 35% of the first 6% of each participant's pre-tax contribution. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. No stock options or SARs were granted in fiscal year 1995. OPTION/SAR EXERCISES AND HOLDINGS. None of the named executives exercised any options and/or SARs during the last fiscal year. The following table sets forth information with respect to the named executive officers concerning the value of unexercised options and SARs held as of the end of the last fiscal year: FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS OPTIONS/SARS AT FISCAL YEAR-END (A) -------------------------- -------------------------- NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---------------------------------------------------------- ----------- ------------- ------------ ------------ Paul E. Glaske............................................ 315,000 35,000 $ 7,645,050 $ 849,450 Bobby G. Wallace.......................................... 55,000 5,000 1,334,850 121,350 James H. Grantham......................................... 72,000 8,000 1,747,440 194,160 Richard E. Maddox......................................... 72,000 8,000 1,747,440 194,160 Wilbur C. Rumph........................................... 18,000 2,000 434,860 48,540
- ------------------------------ (a) Computed using net proceeds value of $24.27 per share at October 28, 1995, determined by formula in the Blue Bird Corporation Management Stock Option Plan (the "Management Stock Option Plan"). 57 PENSION PLANS. Blue Bird maintains a qualified defined benefit pension plan (the "Pension Plan") which covers all U.S. salaried employees. Benefits are determined under a formula (which is integrated with Social Security) calculated with reference to an employee's five-year final average earnings and such employee's years of service. The amount of estimated annual benefits payable under the Pension Plan based upon various levels of compensation and years of service, determined before application of the limitations imposed by Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended (the "Code"), is set forth below: PENSION PLAN TABLE
FINAL FIVE YEARS OF SERVICE YEAR ANNUAL -------------------------------------------------------------------- COMPENSATION 15 20 25 30 35 - ------------- ------------ ------------ ------------ ------------ ------------ $ 125,000 $ 29,569 $ 39,425 $ 49,281 $ 59,138 $ 59,138 150,000 35,944 47,925 59,906 71,888 71,888 175,000 42,319 56,425 70,531 84,638 84,638 200,000 48,694 64,925 81,156 97,388 97,388 225,000 55,069 73,425 91,781 110,138 110,138 250,000 61,444* 81,925* 102,406* 122,888* 122,888* 300,000 74,194* 98,925* 123,656* 148,388* 148,388* 400,000 99,694* 132,925* 166,156* 199,388* 199,388* 500,000 125,194* 166,925* 208,656* 250,388* 250,388* 1,000,000 252,694* 336,925* 421,156* 505,388* 505,328* 2,000,000 507,694* 676,925* 846,156* 1,015,388* 1,015,388* 4,000,000 1,017,694* 1,356,925* 1,696,156* 2,035,388* 2,035,388*
- ------------------------ * Determined before application of current limitations of Sections 401(a)(17) and 415 of the Code. Compensation covered by the Pension Plan is limited to gross wages reported on Form W-2. Such covered compensation includes all compensation reported in the Summary Compensation Table (other than amounts representing Company matching contributions to the 401(k) plan) plus the value, if any, realized upon the exercise of SARs in connection with the 1992 Acquisition. The covered compensation for Messrs. Glaske, Wallace, Grantham, Maddox and Rumph does not differ by more than 10% from that set forth in the Summary Compensation Table. The estimated credited years of service for each of the named executive officers is as follows: Mr. Glaske (10 years), Mr. Wallace (10 years), Mr. Grantham (29 years), Mr. Maddox (20 years) and Mr. Rumph (30 years). Benefits from the Pension Plan, which are integrated with Social Security but are not offset by any other amounts, are payable in the form of a straight life annuity or, in the case of married participants, an actuarially equivalent joint and survivor annuity. In addition, Blue Bird adopted a non-qualified supplemental retirement plan (the "SERP") effective January 1, 1991 for selected executive officers to restore the cutback in benefits under the Pension Plan on account of certain limitations imposed by Code Sections 401(a)(17) and 415. The SERP provides a lump sum payout upon retirement. 58 COMPENSATION OF DIRECTORS Two of the four non-employee directors of the Company and BBC receive annual retainers of $24,000 and meeting fees of $1,500 per meeting for up to four meetings per year for services as directors of the Company and BBC. The remaining directors of the Company and BBC do not receive compensation for their services as directors and none of the directors of the Company and BBC receive compensation for their services as members of the committees of the Boards of Directors of the Company and BBC. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS Mr. Glaske's current employment agreement with the Company provides for a three-year term with an annual base salary of $500,000, plus participation in an incentive bonus program, the SERP and other employee benefit plans sponsored by the Company. If Mr. Glaske's employment is terminated by the Company without good cause or by Mr. Glaske for good reason (as such terms are defined in the employment agreement), the Company's obligation for the duration of the employment agreement for salary, employee benefits, supplemental benefits and various perquisites shall continue without mitigation. Under the terms of the employment agreement, Mr. Glaske agrees not to disclose confidential information for so long a such information remains competitively sensitive. During the term of the employment agreement and for three years after its termination, Mr. Glaske agrees not to render services to, or have greater than a 2% equity interest in, any business which is competitive with the Company. Mr. Glaske's employment agreement does not contain any change of control provisions. Mr. Wallace's employment agreement with the Company provides for a one-year term, renewable annually, with an annual base salary of $282,000, plus participation in an incentive bonus program, the SERP and other employee benefit plans sponsored by the Company. The employment agreement may be terminated by either party at the end of any given 12-month period. Under the terms of the employment agreement, Mr. Wallace agrees not to disclose confidential information for so long as such information remains competitively sensitive. During the term of the employment agreement and for three years after its termination, Mr. Wallace agrees not to render services to, or have greater than a 2% equity interest in, any business which is competitive with the Company. Mr. Wallace's employment agreement does not contain any change of control provisions. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the compensation committees of the Company's and BBC's Boards of Directors during fiscal year 1995 were Messrs. Michas, Armstrong and Daugherty. During such time, Mr. Glaske served as the Chairman of the Board and President of the Company and BBC. The Stockholders' Agreement provides that in the event that Messrs. Armstrong, Michas, Glaske and Wallace are unwilling or unable to serve, or otherwise cease to serve, as directors of BBC, the ML Entities shall be entitled to fill the resulting vacancies on the Board of Directors. In addition, the Stockholders' Agreement provides that the ML Entities are entitled to nominate successors for all BBC directors and that the stockholders of BBC will cooperate in any removal of directors proposed by the ML Entities. At the time of the 1992 Acquisition, Messrs. Armstrong and Michas were each executive officers of MLCP and Managing Directors of Merrill Lynch. MLCP is an affiliate of Merrill Lynch. In connection with the 1992 Acquisition, Merrill Lynch served as placement agent for the Old Notes and BBC issued 7,700,000 shares of BBC Common Stock (or approximately 91% of the BBC Common Stock outstanding as of the Effective Time) to the ML Entities. 59 OWNERSHIP OF CAPITAL STOCK The Blue Bird Common Stock is the only class of capital stock that the Company has outstanding. BBC owns 10 shares, which represent 100% of the issued and outstanding shares of the Company's common stock. The BBC Common Stock is the only class of capital stock of BBC outstanding. The issued and outstanding number of shares of BBC Common Stock is 8,424,778. The following table sets forth as of , 1996 the number and percentage of shares of BBC Common Stock beneficially owned by (i) each person known to BBC to be the beneficial owner of more than 5% of the outstanding shares of BBC Common Stock, (ii) each director of BBC, (iii) each named executive officer, and (iv) all directors and executive officers of BBC as a group. Unless otherwise indicated in a footnote, each person listed below possesses sole voting and investment power with respect to the shares indicated as beneficially owned by them. The ML Entities, Management Investors and BBC are parties to a stockholders' agreement described under "Certain Relationships and Related Transactions."
AMOUNT AND NATURE OF PERCENTAGE OF NAME AND ADDRESS OF BENEFICIAL SHARES OF BBC BENEFICIAL OWNER OWNERSHIP COMMON STOCK* - ---------------------------------------------------------------------------------- ----------- ----------------- ML Entities(a).................................................................... 7,665,000 91.0% Paul E. Glaske(b)................................................................. 665,000(c) 7.6% Blue Bird Body Company 3920 Artwright Road Macon, Georgia 31210 Bobby G. Wallace(b)............................................................... 105,000(d) 1.2% Blue Bird Body Company 3920 Artwright Road Macon, Georgia 31210 James H. Grantham(b).............................................................. 152,000(e) 1.8% Blue Bird Body Company 3920 Arkwright Road Macon, Georgia 31210 Richard E. Maddox(b).............................................................. 152,000(f) 1.8% Blue Bird Body Company 3920 Arkwright Road Macon, Georgia 31210 Wilbur C. Rumph................................................................... 38,000(g) 0.5% Blue Bird Body Company 3920 Arkwright Road Macon, Georgia 31210 Donald C. Trauscht(b)............................................................. 4,778 0.1% Borg-Warner Security Corporation 200 South Michigan Avenue Chicago, Illinois 60604 A. Clark Daugherty(b)............................................................. 25,000 0.3% 321 Indian Harbor Road Vero Beach, Florida 32963 Gerald S. Armstrong (h)........................................................... 0 -- Stonington Partners, Inc. 767 Fifth Avenue New York, New York 10153 Alexis P. Michas (h).............................................................. 0 -- Stonington Partners, Inc. 767 Fifth Avenue New York, New York 10153 All directors and executive officers as a group (9 persons)..................................................................... 1,141,778(i) 12.7%
- ------------------------ * Calculated in accordance with Rule 13d-3 under the Exchange Act. (FOOTNOTES ON FOLLOWING PAGE) 60 (a) Shares of BBC Common Stock beneficially owned by the ML Entities are owned of record as follows: 3,740,188 by Merrill Lynch Capital Appreciation Partnership No. B-XV, L.P., 2,370,278 by ML Offshore LBO Partnership No. B-XV, 1,300,619 by ML IBK Positions, Inc., 42,500 by Merrill Lynch KECALP L.P. 1989, 150,000 by Merrill Lynch KECALP L.P. 1991 and 61,415 by MLCP Associates L.P. No. II. The address for the ML Entities other than ML Offshore LBO Partnership No. B-XV is 225 Liberty Street, World Financial Center--South Tower, New York, New York 10080. The address for ML Offshore LBO Partnership No. B-XV is P.O. Box 25, Roseneath, The Grange, St. Peter Port, Guernsey Channel Island, British Isles. Each entity disclaims beneficial ownership of the shares not owned of record by it. (b) Messrs. Glaske and Wallace are directors and executive officers of the Company and BBC. Messrs. Grantham, Maddox and Rumph are executive officers of the Company who perform policy making functions for BBC and are therefore deemed executive officers of BBC. Messrs. Trauscht and Daugherty are directors of the Company and BBC. (c) Includes 175,000 shares subject to vested options and 140,000 shares subject to performance options granted to Mr. Glaske under the Management Stock Option Plan which are currently exercisable. Does not include 35,000 shares subject to performance options granted to Mr. Glaske under the Management Stock Option Plan which are not currently exercisable. (d) Includes 35,000 shares subject to vested options and 20,000 shares subject to performance options granted to Mr. Wallace under the Management Stock Option Plan which are currently exercisable. Does not include 5,000 shares subject to performance options granted to Mr. Wallace under the Management Stock Option Plan which are not currently exercisable. (e) Includes 40,000 shares subject to vested options and 32,000 shares subject to performance options granted to Mr. Grantham under the Management Stock Option Plan which are currently exercisable. Does not include 8,000 shares subject to performance options granted to Mr. Grantham under the Management Stock Option Plan which are not currently exercisable. (f) Includes 40,000 shares subject to vested options and 32,000 shares subject to performance options granted to Mr. Maddox under the Management Stock Option Plan which are currently exercisable. Does not include 8,000 shares subject to performance options granted to Mr. Maddox under the Management Stock Option Plan which are not currently exercisable. (g) Includes 10,000 shares subject to vested options and 8,000 shares subject to performance options granted to Mr. Rumph under the Management Stock Option Plan which are currently exercisable. Does not include 2,000 shares subject to performance options granted to Mr. Rumph under the Management Stock Option Plan which are not currently exercisable. (h) Messrs. Armstrong and Michas are directors of the Company, BBC and MLCP. Messrs. Armstrong and Michas are limited partners of the general partner ("LBO") of Merrill Lynch Capital Appreciation Partnership No. B-XV, L.P. and ML Offshore LBO Partnership No. B-XV. MLCP is the general partner of LBO. Messrs. Armstrong and Michas each disclaim beneficial ownership of shares beneficially owned by the ML Entities. (i) Includes 300,000 shares subject to vested options and 232,000 shares subject to performance options granted to executive officers of BBC as a group under the Management Stock Option Plan which are currently exercisable. Does not include 58,000 shares subject to performance options granted to executive officers of BBC under the Management Stock Option Plan which are not currently exercisable. Does not include any shares beneficially owned by the ML Entities. 61 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Merrill Lynch, one of the Initial Purchasers (as defined herein), is an affiliate of the Company and BBC. Two of the directors of the Company and BBC are partners and directors of Stonington Partners, Inc. and act as consultants to MLCP. The Management Investors' purchase of BBC Common Stock in connection with the 1992 Acquisition was funded through a combination of (i) $200,000 in cash, (ii) the rollover of approximately $3.65 million of SARs on a pre-tax basis, and (iii) nonrecourse promissory notes of the Management Investors (the "Management Notes") in an aggregate principal amount of $4.15 million. Cash distributions received in respect of the shares of BBC Common Stock purchased with the proceeds of borrowings under the Management Notes were required to be applied toward repayment of such notes. The Management Notes were repaid as a result of the Recapitalization. Pursuant to the terms of the Stockholders' Agreement entered into on April 15, 1992 by BBC, the Management Investors and the ML Entities (the "Stockholders' Agreement"), all shares of BBC Common Stock purchased at the closing of the 1992 Acquisition by the Management Investors and issued upon exercise of options are subject to certain restrictions on transfer and certain put and call arrangements in the event that the holder of such shares terminates his employment with BBC or any of its subsidiaries. Management Investors will have the right to require BBC to purchase their shares and options in the event of death, disability, retirement or involuntary termination for a fair value price determined pursuant to a formula based upon a multiple of BBC's earnings before interest and taxes. BBC will have the right to require a Management Investor to sell such Management Investor's shares and options if such Management Investor's employment terminates at prices determined by formulas varying under different circumstances, but in no event will such price be higher than the greater of the initial purchase price and the fair value price. Payments under the puts and calls are subject to certain restrictions under the Existing Credit Agreement and the indenture for the Old Notes, and will be subject to certain restrictions under the New Credit Agreement and the Indenture, as applicable. The Stockholders' Agreement also provides that in the event that Messrs. Armstrong, Michas, Glaske and Wallace are unwilling or unable to serve, or otherwise cease to serve, as directors of BBC, then the ML Entities shall be entitled to fill the resulting vacancies on the Board of Directors of BBC. In addition, the Stockholders' Agreement provides that the ML Entities are entitled to nominate successors to all BBC directors and that the stockholders of BBC will cooperate in any removal of directors proposed by the ML Entities. For certain other information concerning the relationships between the Initial Purchasers and Merrill Lynch and the Company, see "Plan of Distribution." 62 DESCRIPTION OF DEBT FACILITIES SENIOR BANK FINANCING In connection with the Recapitalization, the Company and BBC entered into the New Credit Agreement, which provides senior bank financing in the maximum aggregate principal amount of up to $255 million. The Company is the borrower under the New Credit Agreement. Under the New Credit Agreement, the Agent Banks (as defined herein) have provided senior bank financing of up to $255 million pursuant to three facilities. These facilities, which are described below, are hereinafter referred to as the "Senior Bank Facility." Borrowings under the Senior Bank Facility are hereinafter referred to as "Loans." The New Credit Agreement provides that the Agent Banks may syndicate the Senior Bank Facility to other lenders (the Agent Banks, together with any such lenders, will hereinafter be referred to as the "Banks"). The following is a summary description of certain provisions of the New Credit Agreement: THE SENIOR BANK FACILITY. The New Credit Agreement provides a six-year term loan facility (the "Tranche A Term Facility") in an aggregate principal amount of $100 million and a seven-year term loan facility (the "Tranche B Term Facility" and, together with the Tranche A Term Facility, the "Term Facilities") in an aggregate principal amount of $75 million. As part of the Recapitalization, the Term Facilities were used, among other things, to (i) finance the purchase of the Old Notes, (ii) refinance the Existing Credit Agreement, (iii) make the Distribution and (iv) pay certain fees and expenses in connection with the Recapitalization. The Tranche A Term Facility matures on November 19, 2002 with the first quarterly installment due on May 19, 1997. The Tranche B Term Facility matures on November 19, 2003 with the first installment due on February 19, 1997. The Term Facilities will be repaid in quarterly installments in the following aggregate annual amounts:
FISCAL YEAR - ------------- AMOUNT TO BE REPAID --------------------- (DOLLARS IN MILLIONS) 1997 $ 8.8 1998 12.8 1999 16.8 2000 20.8 2001 22.8 2002 22.8 2003 70.5
The New Credit Agreement also provides for a working capital facility (the "Revolving Facility") of up to $80 million to be used for working capital requirements and other general corporate purposes. The maximum amount available under the Revolving Facility is based on the Borrowing Base. The Revolving Facility includes a subfacility for the issuance of letters of credit in a maximum aggregate of $20,000,000. The New Credit Agreement requires that for 30 consecutive days, at any time, during each 12-month period, borrowings under the Revolving Facility shall not exceed $15,000,000. The Revolving Facility will terminate on November 15, 2002 or upon the repayment of borrowings under the Term Facilities. INTEREST PAYMENTS. Interest on Loans under the Senior Bank Facility is payable at one of the following rates, at the Company's option: (i) with respect to Loans under the Revolving Facility and the Tranche A Term Facility, (a) the Base Rate (as defined in the New Credit Agreement) plus 1.50% PER ANNUM or (b) the Adjusted Eurodollar Rate (as defined in the New Credit Agreement) plus 2.50% PER ANNUM, available for one-, two-, three-, six-, and, if available, in the discretion of Banks, nine-month periods and (ii) with respect to Loans under the Tranche B Term Facility, (a) the Base Rate plus 2.00% PER ANNUM or (b) the Adjusted Eurodollar Rate plus 3.00% PER ANNUM, available for one-, two-, three-, six-, and, if available, in the discretion of Banks, nine-month periods; PROVIDED that the applicable rates may be reduced from time 63 to time upon satisfaction of leverage and interest coverage tests to be set forth in the New Credit Agreement. Interest is payable quarterly with respect to Loans bearing interest based on the Base Rate and on the last day of selected interest periods (and at the end of every three months, in the case of interest periods of longer than three months) with respect to Loans bearing interest based on the Adjusted Eurodollar Rate and, in each case, upon pre-payment. Interest on Loans is payable in arrears and computed on the basis of a 360-day year. PREPAYMENTS. The New Credit Agreement requires prepayment of the Loans in amounts equal to (i) 75% of excess cash flow (as determined under the New Credit Agreement), (ii) the net cash proceeds of certain asset sales with cash proceeds in excess of the amount specified in the New Credit Agreement, (iii) the net cash proceeds from the issuance or sale of equity or debt of the Company or BBC other than the sale of BBC Common Stock to the Company's management in the ordinary course of business, (iv) the value of surplus assets for a pension plan returned to BBC or any of its subsidiaries, net of transaction costs (including taxes payable thereon) incurred in obtaining any such return and (v) the amount necessary to reduce borrowings and letters of credit issued under the Revolving Facility to a level commensurate with the Company's Borrowing Base. Such mandatory prepayments will be applied first to pay interest on the principal amount so prepaid, second to pay down scheduled repayments of principal in reverse order of maturity under the Term Facility and third to permanently prepay and reduce the Revolving Facility commitment. Prepayments of the Term Facilities will be PRO RATA based on the outstanding principal amounts of the Term Facilities; PROVIDED that prepayments allocated to Tranche B Term Facility will be offered to Banks holding such Loans and, to the extent such Banks reject the prepayment, 75% will be applied to the Tranche A Term Facility and 25% will be available for the general corporate purposes of the Company. In the case of a mandatory prepayment resulting from an asset sale, the Company will have the option of permanently prepaying and reducing the Revolving Facility to the extent that such asset sale reduces the Borrowing Base. In addition, the Company may voluntarily prepay amounts outstanding under the Senior Bank Facility in whole or in part at any time without premium or penalty (PROVIDED that Eurodollar Rate Loans are prepayable only on the last day of the related interest period), subject to compliance with certain notice requirements and minimum prepayment amounts. SECURITY INTERESTS. As security for the Senior Bank Facility, the Banks have been granted, among other things, (i) a first priority pledge by BBC of the capital stock of the Company and 66% of the capital stock of Canadian Blue Bird, and (ii) a first priority lien on all or substantially all of BBC's and the Company's assets, including intangibles, machinery, equipment, fixtures, inventory, receivables and mortgages on all of the real property and leaseholds owned, directly or indirectly, by BBC and Blue Bird Body Company as requested by the Agent Banks. GUARANTEES. BBC has guaranteed all payments and performance obligations of Blue Bird Body Company with respect to the Senior Bank Facility. Such guarantee is senior to the BBC Guarantee. COVENANTS. The New Credit Agreement contains certain covenants, including the following: (i) BBC and its subsidiaries will not incur indebtedness in excess of specified amounts set forth in the New Credit Agreement; (ii) BBC and its subsidiaries will not pay any dividend, or make any redemption or sinking fund payments to its shareholders, other than (a) dividends solely in shares of stock to the holders of that class of stock, (b) dividends to BBC to repurchase BBC Common Stock from Management Investors in accordance with certain subscription agreements, not to exceed an amount per fiscal year specified in the New Credit Agreement, or (c) dividends or intercompany loans to BBC to pay operating expenses, not exceeding $300,000 per fiscal year; (iii) in any fiscal year, BBC and its subsidiaries will not make any expenditures to purchase or otherwise acquire property, plant or equipment in excess of an amount specified for each fiscal year in the New Credit Agreement; PROVIDED that, to the extent that any unutilized part of that amount is no greater than 10% of that year's capital expenditure allocation, such unutilized part may be used in the following year to make such purchases; (iv) BBC and its subsidiaries will not incur guarantees or contingent liabilities in an aggregate principal amount exceeding amounts specified in the 64 New Credit Agreement except for guarantees relating to the endorsement of negotiable instruments made in the ordinary course of business; (v) the Company will not make any repayments on the Notes, other than required interest payments; (vi) BBC and its subsidiaries will not grant any security interest, lien, charge of encumbrance, other than pursuant to permitted purchase money obligations incurred in the ordinary course of business, liens on inventory in favor of General Motors Acceptance Corp. to secure the purchase price of such inventory and other specifically permitted liens; and (vii) the Company will not make any investments except (a) investments in cash equivalents, (b) investments existing at closing as set forth in the New Credit Agreement, (c) certain intercompany loans made by the Company to Canadian Blue Bird for working capital purposes, not to exceed an amount to be specified in the New Credit Agreement, (d) investments in lease receivables not to exceed $40 million at any one time, and (e) other investments not to exceed an aggregate of $250,000 at any time. In addition, BBC and its subsidiaries are required to satisfy certain financial covenants including maintenance of consolidated EBITDA and a ratio of EBITDA to cash interest expense at minimum levels to be specified for each fiscal quarter in the New Credit Agreement; and maintenance of a ratio of total debt to consolidated EBITDA at less than or equal to a level to be specified for each fiscal quarter in the New Credit Agreement. Such terms are defined in the New Credit Agreement. EVENTS OF DEFAULT. The New Credit Agreement contains certain events of default, including, without limitation, the following: (i) the failure of the BBC or its subsidiaries to pay principal on the Loans when due or failure to pay any interest or other amounts due under the New Credit Agreement within five days after the due date; (ii) any failure by BBC or its subsidiaries to pay principal or interest on any indebtedness or contingent obligation in an individual or aggregate principal amount in excess of $2.5 million or more, after any applicable grace period, or any breach or default by BBC or its subsidiaries of any term of any indebtedness or contingent obligation in an individual or aggregate principal amount of $2.5 million or more, that gives the holder of such indebtedness or contingent obligation a right to accelerate such indebtedness or obligation; (iii) any default by BBC or its subsidiaries in the performance or observance of certain conditions and covenants of the New Credit Agreement; (iv) any representation or warranty made by BBC or its subsidiaries in any document delivered in connection with the New Credit Agreement proving to be false in any material respect; (v) the rendering of a judgment which remains unvacated, unbonded or unstayed for a period of 60 days against, or a voluntary settlement by, BBC or any of its subsidiaries which exceeds, in any individual amount, $2.5 million; (vi) certain events of bankruptcy or insolvency of BBC or its subsidiaries; (vii) the occurrence of a change of control of BBC or the Company (as determined under the New Credit Agreement); (viii) any default by BBC or its subsidiaries in the performance of or compliance with any term in the New Credit Agreement, other than those specifically referred to in other events of default therein, which has not been cured or waived by the Banks after 30-days notice of such default; (ix) any order decreeing the dissolution of BBC or the Company or any of their respective subsidiaries that remains in full force and effect for over 60 days; (x) an ERISA Event (as determined under the New Credit Agreement) that results in liability to BBC in excess of $100,000, (xi) the existence of unfunded benefit liabilities exceeding $100,000; (xii) any guaranty granted by any party in connection with the New Credit Agreement ceases to be in full force and effect or any guarantor denies that it has liability under a guaranty granted in connection with the New Credit Agreement; (xiii) the security interests or priority thereof granted pursuant to or in connection with the New Credit Agreement are or become impaired; and (xiv) the failure of the Company or any obligee of the Notes to comply with the subordination provisions contained in the documents relating to the issuance of the Notes. FEES. The Company has agreed to pay (i) a commitment fee of .50% PER ANNUM on the unused portion of the Revolving Facility, payable quarterly in arrears, and at maturity, and computed on the basis of a 360-day year and (ii) certain fees, including without limitation a financing fee, an annual administrative fee and a PER ANNUM letter of credit fee equal to the applicable spread on Loans bearing interest based on the Adjusted Eurodollar Rate plus .25% PER ANNUM. 65 OLD CREDIT AGREEMENT. As part of the Recapitalization, the Old Credit Agreement with Bankers Trust Company ("BTCo.") was replaced and refinanced by the New Credit Agreement. LASALLE CREDIT AGREEMENT Blue Bird Capital maintains the LaSalle Credit Facility with LaSalle, as agent for itself and other lenders, pursuant to the LaSalle Credit Agreement. The LaSalle Credit Facility is used to finance the lease financing operations of Blue Bird Capital. Loans from LaSalle to Blue Bird Capital are secured by a limited recourse pledge from the Company to LaSalle of all of the common stock of Blue Bird Capital. Indebtedness of Blue Bird Capital to the Company is subordinated to indebtedness to LaSalle. The LaSalle Credit Facility terminates on March 31, 1999 and may be extended for up to two one-year periods. Blue Bird Capital may borrow up to a maximum aggregate principal amount of $100 million under the LaSalle Credit Facility, subject to certain limitations as set forth in the LaSalle Credit Agreement. The LaSalle Credit Agreement contains financial and other covenants, including covenants requiring Blue Bird Capital to maintain certain financial ratios and restricting the ability of Blue Bird Capital to incur indebtedness or to create or suffer to exist certain liens. The LaSalle Credit Agreement also requires that certain amounts of indebtedness thereunder be repaid by specified dates. The indebtedness of Blue Bird Capital under LaSalle Credit Facility bears interest at rates that will fluctuate with changes in certain prevailing interest rates (although such rates may be fixed for limited period of time). The loans under the LaSalle Credit Facility as of September 26, 1996 bear interest at the rate of 6.5% PER ANNUM. As of September 26, 1996, there was $55.5 million outstanding under the LaSalle Credit Facility. OLD NOTES As a result of the Recapitalization, no Old Notes remain outstanding. 66 DESCRIPTION OF THE EXCHANGE NOTES The 144A Notes were issued and the Exchange Notes will be issued under the Indenture dated as of November 15, 1996, (the "Indenture") among the Company, BBC, as a guarantor, and The Chase Manhattan Bank, as trustee (the "Trustee"). For purposes of this section, the "Company" means Blue Bird Body Company. The following summary of the material provisions of the Indenture does not purport to be complete and is subject to, and qualified by, reference to the provisions of the Indenture, including the definitions of certain terms contained therein and those terms made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, as in effect on the date of the Indenture. The definition of certain terms used in the following summary are set forth under "--Certain Definitions." GENERAL The Exchange Notes will be unsecured senior subordinated obligations of the Company limited to $100,000,000 aggregate principal amount. The Exchange Notes will be issued solely in exchange for an equal principal amount of outstanding 144A Notes pursuant to the Exchange Offer. The terms of the Exchange Notes will be identical to the 144A Notes, but since the Exchange Notes will have been registered under the Securities Act, they will generally be freely tradeable by holders thereof who are not Affiliates of the Company. References in this Section to the "Notes" will be references to the 144A Notes and/or Exchange Notes, depending upon which are outstanding. The Exchange Notes will be issued only in fully registered form without coupons, in denominations of $1,000 and integral multiples thereof. Principal of, premium, if any, and interest on the Notes are payable, and the Notes are exchangeable and transferable, at the office or agency of the Company in the City of New York maintained for such purposes (which initially will be the corporate trust office of the Trustee). See "Book-Entry, Delivery and Form." No service charge will be made for any registration of transfer, exchange or redemption of the Notes, except in certain circumstances for any tax or other governmental charge that may be imposed in connection therewith. BBC has guaranteed, and the Company will cause its Domestic Subsidiaries under certain circumstances (including whenever a Domestic Subsidiary becomes a guarantor or obligor under the New Credit Agreement) to guarantee payment of the Notes on an unsecured senior subordinated basis. See "--Note Guarantees." MATURITY, INTEREST AND PRINCIPAL The Notes will mature on November 15, 2006. Interest on the Notes will accrue at the rate of 10 3/4% PER ANNUM and will be payable semi-annually on each May 15 and November 15, commencing May 15, 1997, to the holders of record of Notes at the close of business on the May 1 and November 1 immediately preceding such interest payment date. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date. Interest will be computed on the basis of a year comprised of twelve 30-day months. OPTIONAL REDEMPTION OPTIONAL REDEMPTION. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after November 15, 2001, at the redemption prices (expressed as percentages of 67 principal amount), set forth below, plus accrued interest to the redemption date, if redeemed during the 12-month period beginning November 15 of the years indicated below:
REDEMPTION YEAR PRICE - ------------------------------------------------------------- ----------- 2001......................................................... 105.375% 2002......................................................... 103.583% 2003......................................................... 101.792% 2004 and thereafter.......................................... 100.000%
In addition, as described below, in the event of a Change of Control Triggering Event, the Company is obligated to make an offer to purchase all outstanding Notes at a redemption price of 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The Company is also obligated to make offers to purchase a portion (calculated as set forth below) of the Notes at a redemption price of 100% of principal amount plus accrued and unpaid interest to the date of purchase with a portion of the net cash proceeds of certain sales or other dispositions of assets. See "--Change of Control Triggering Event" and "--Certain Covenants--Disposition of Proceeds of Asset Sales." OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING. On or prior to November 15, 1999, the Company may, at its option, use the net proceeds of a Public Equity Offering to redeem up to an aggregate of 25% of the principal amount of Notes originally issued from the holders of Notes, on a PRO RATA basis (or as nearly PRO RATA as practicable), at a redemption price equal to 110.75% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption; PROVIDED that not less than $75 million in aggregate principal amount of Notes is outstanding following such redemption. In order to effect the foregoing redemption with the net proceeds of a Public Equity Offering, the Company shall send the redemption notice not later than 60 days after the consummation of the Public Equity Offering. As used herein, a "Public Equity Offering" means an underwritten public offering of Capital Stock (other than Redeemable Capital Stock) of the Company or BBC made on a primary basis by the Company or BBC pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act; PROVIDED that, in the event of an offering by BBC, BBC shall contribute as equity to the Company proceeds from the Public Equity Offering of not less than the amount necessary to redeem the Notes under the provisions described above. SELECTION AND NOTICE. In the event that less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange, on a PRO RATA basis, by lot or by such method as the Trustee will deem fair and appropriate; PROVIDED that no Notes of a principal amount of $1,000 or less will be redeemed in part; PROVIDED, FURTHER, that any such redemption pursuant to the provisions relating to a Public Equity Offering shall be made on a PRO RATA basis or on as nearly a PRO RATA basis as practicable (subject to the procedures of The Depository Trust Company or any other depositary). Notice of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note will state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption. CHANGE OF CONTROL TRIGGERING EVENT The Indenture provides that, upon the occurrence of a Change of Control Triggering Event (the date of such occurrence being the "Change of Control Date"), the Company will be obligated to make an offer 68 to purchase (a "Change of Control Offer"), on a business day (the "Change of Control Purchase Date") not more than 40 nor less than 20 business days following the Change of Control Date, all of the then outstanding Notes at a purchase price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the Change of Control Purchase Date. The Company will be required to purchase all Notes properly tendered into the Change of Control Offer and not withdrawn. Prior to the mailing of the notice to holders provided for below, the Company shall have (i) repaid in full all Indebtedness under the New Credit Agreement, or offered to repay and have repaid the lenders under the New Credit Agreement to the extent such offer has been accepted under the provisions of the New Credit Agreement, or (ii) obtained the requisite consents under the New Credit Agreement to permit the repurchase of the Notes as provided for under this covenant. Failure to mail the notice on the date specified below or to have satisfied the foregoing condition precedent by the date that the notice is required to be mailed shall constitute a covenant Default under clause (iii) of "--Events of Default." The Company shall have no obligation to effect a repurchase of Notes if a notice has been mailed and such condition precedent has not been satisfied. A majority of Holders may waive this condition. It should be noted that the New Credit Agreement may not permit lenders thereunder to accept an offer of repayment other than on a PRO RATA basis, in which case it may not be possible to satisfy such condition precedent absent a repayment of all of the Indebtedness under the New Credit Agreement. See "--Amendments and Waivers." In order to effect such Change of Control Offer, the Company will, not later than the 20th business day after the Change of Control Date, be obligated to mail to each Holder of Notes notice of the Change of Control Offer, which notice will govern the terms of the Change of Control Offer and will state, among other things, the procedures that holders must follow to accept the Change of Control Offer. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the Change of Control Purchase Price for all of the Notes that might be delivered by holders of Notes seeking to accept the Change of Control Offer. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other securities laws or regulations in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such provisions of the Indenture by virtue thereof. SUBORDINATION The payment of the principal of, premium, if any, and interest on, the Notes is subordinated as described below in right of payment to the prior payment in full in cash or cash equivalents of all Senior Indebtedness. The Indenture provides that in the event of any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relating to the Company or its assets, or any liquidation, dissolution or other winding-up of the Company, whether voluntary or involuntary, or any assignment for the benefit of creditors or other marshalling of assets or liabilities of the Company, all Senior Indebtedness must be paid in full before any payment or distribution (excluding certain permitted equity or subordinated securities) is made on account of the principal of, premium, if any, or interest on the Notes. During the continuance of any default in the payment of any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated beyond any applicable grace period and after receipt by the Trustee from representatives of holders of such Designated Senior Indebtedness of written notice of such default, no payment or distribution of any assets of the Company of any kind or character (excluding certain permitted equity or subordinated securities) will be made on account of the principal of, 69 premium, if any, or interest on, or the purchase, redemption or other acquisition of, the Notes unless and until such default has been cured or waived or has ceased to exist or such Designated Senior Indebtedness will have been discharged or paid in full. During the continuance of any non-payment default with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated (a "Non-payment Default") and after the receipt by the Trustee from the representatives of holders of such Designated Senior Indebtedness of a written notice of such Non-payment Default, no payment or distribution of any assets of the Company of any kind or character (excluding certain permitted equity or subordinated securities) may be made by the Company on account of the principal of, premium, if any, or interest on or the purchase, redemption or other acquisition of, the Notes for the period specified below (the "Payment Blockage Period"). The Payment Blockage Period will commence upon the receipt of notice of a Non-payment Default by the Trustee from the representatives of holders of Designated Senior Indebtedness and will end on the earlier to occur of the following events: (i) 179 days will have elapsed since the receipt of such notice (PROVIDED that such Designated Senior Indebtedness will not theretofore have been accelerated), (ii) such default is cured or waived or ceases to exist or such Designated Senior Indebtedness is discharged or (iii) such Payment Blockage Period will have been terminated by written notice to the Company or the Trustee from the representatives of holders of Designated Senior Indebtedness initiating such Payment Blockage Period, after which the Company will promptly resume making any and all required payments in respect of the Notes, including any missed payments. In no event will a Payment Blockage Period extend beyond 179 days from the date of the receipt by the Trustee of the notice initiating such Payment Blockage Period. Only one Payment Blockage Period with respect to the Notes may be commenced within any 365-day period. No Non-payment Default with respect to Designated Senior Indebtedness that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period will be, or can be, made the basis for the commencement of a second Payment Blockage Period, unless such default has been cured or waived for a period of not less than 90 consecutive days. In no event shall a Payment Blockage Period extend beyond 179 days from the date of the receipt of the notice referred to above and there must be a 186-consecutive-day period in any 365-consecutive-day period during which no Payment Blockage Period is in effect. In the event that, notwithstanding the foregoing, the Company makes any payment or distribution to the Trustee or any holder of any Note prohibited by the subordination provision of the Indenture, then such payment or distribution will be required to be paid over and delivered to the holders (or their representative) of Designated Senior Indebtedness. If the Company fails to make any payment on the Notes when due or within any applicable grace period, whether or not on account of the payment blockage provisions referred to above, such failure would constitute an Event of Default under the Indenture and would enable the holders of the Notes to accelerate the maturity thereof. See "--Events of Default." By reason of such subordination, in the event of liquidation or insolvency, creditors of the Company who are holders of Senior Indebtedness may recover more, ratably, than the holders of the Notes and funds which would be otherwise payable to the holders of the Notes will be paid to the holders of the Senior Indebtedness to the extent necessary to pay the Senior Indebtedness in full, and the Company may be unable to meet its obligations fully with respect to the Notes. As of September 28, 1996, on a PRO FORMA basis after giving effect to the Recapitalization, Senior Indebtedness of the Company with respect to the Notes would have been approximately $181.3 million. The Indenture limits, but does not prohibit, the incurrence by the Company of additional Indebtedness which is senior to the Notes, but prohibits the incurrence of any Indebtedness contractually subordinated in right of payment to any other Indebtedness of the Company and senior in right of payment to the Notes. The foreign and lease finance operations of the Company are conducted primarily through subsidiaries of the Company. The claims of creditors of such subsidiaries effectively will have priority with respect to the assets and earnings of such subsidiaries over the claims of the Company and its creditors, including holders 70 of the Notes. See "Risk Factors--Subordination" and "--Restrictive Covenants and Asset Encumbrances." NOTE GUARANTEES BBC has guaranteed the Company's obligations under the Notes. In addition, if any Domestic Subsidiary of the Company becomes a guarantor or obligor in respect of Indebtedness of the Company or any of its Restricted Subsidiaries, the Company's obligations under the Notes will be guaranteed by such Domestic Subsidiary. See "--Certain Covenants--Limitation on Guarantees by Restricted Subsidiaries." Subject to the subordination provisions described above, if the Company defaults in payment of the principal of, premium, if any, or interest on the Notes, BBC and each other Guarantor will be obligated to duly and punctually pay the same. The Indebtedness evidenced by each Note Guarantee (including the payment of principal of, premium, if any, and interest on the Notes) is subordinated on the same basis to Guarantor Senior Indebtedness (defined with respect to the Indebtedness of a Guarantor) as the Notes are subordinated to Senior Indebtedness. See "--Subordination." As of September 28, 1996, on a PRO FORMA basis after giving effect to the Recapitalization, Guarantor Senior Indebtedness with respect to BBC was approximately $178.6 million. CERTAIN COVENANTS The Indenture contains the following covenants, among others: LIMITATION ON INDEBTEDNESS. The Indenture provides that the Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or in any manner become liable, contingently or otherwise (in each case, to "incur"), for the payment of any Indebtedness (including any Acquired Indebtedness); PROVIDED that (i) the Company and any Subsidiary Guarantor will be permitted to incur Indebtedness (including Acquired Indebtedness) and (ii) a Restricted Subsidiary will be permitted to incur Acquired Indebtedness, if immediately after giving PRO FORMA effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to 2.00:1.00. Notwithstanding the foregoing, the Company and, to the extent specifically set forth below, the Restricted Subsidiaries may incur each and all of the following: (i) Indebtedness of the Company or any Subsidiary Guarantor under the New Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the sum of (a) $175,000,000 with respect to Indebtedness under the Term Facilities, less principal payments made by the Company in respect of the Term Facilities, (b) $80,000,000 in the aggregate with respect to Indebtedness under the Revolving Facility and the letter of credit facility, less the amount by which the aggregate commitment under the Revolving Facility has been permanently reduced to the extent that any repayments required to be made in connection with effecting such permanent reduction have been made and (c) any Indebtedness incurred under the New Credit Agreement pursuant to and in compliance with the provisions described under either (1) the proviso of the first paragraph of this covenant or (2) clause (xii) below; (ii) Indebtedness of the Company or any Subsidiary Guarantor under the Indenture, the Notes and any Note Guarantees; (iii) Indebtedness of the Company or any Restricted Subsidiary not otherwise referred to in this paragraph that is outstanding on the Issue Date, except Indebtedness to be repaid as described under "Use of Proceeds;" (iv) Indebtedness of the Company or any Restricted Subsidiary in respect of performance bonds, bankers' acceptances, letters of credit of the Company or any Restricted Subsidiary and surety bonds provided by the Company or any Restricted Subsidiary in the ordinary course of business, not to exceed at any given time $10,000,000 in the aggregate; 71 (v) subject to the covenant described under "--Limitation on Restricted Payments," Indebtedness of any Restricted Subsidiary to the Company or any Restricted Subsidiary which is not subordinated in right of payment to any Indebtedness of such Restricted Subsidiary; (vi) Indebtedness of the Company to any Restricted Subsidiary which is unsecured and subordinated in right of payment from and after such time as the Notes shall become due and payable (whether at Stated Maturity, by acceleration or otherwise) to the payment and performance of the Company's obligations under the Indenture or the Notes; (vii) any guarantees of Indebtedness by a Restricted Subsidiary entered in compliance with the covenant under the Indenture described under "--Limitations on Guarantees by Restricted Subsidiaries;" (viii) Interest Rate Protection Obligations of the Company or any Restricted Subsidiary covering Indebtedness of the Company or any Restricted Subsidiary (which Indebtedness (a) bears interest at fluctuating interest rates and (b) is otherwise permitted to be incurred under this covenant) to the extent the notional principal amount of such Interest Rate Protection Obligations does not exceed the principal amount of the Indebtedness to which such Interest Rate Protection Obligations relate; (ix) Indebtedness of the Company or any Restricted Subsidiary under Currency Agreements relating to (a) Indebtedness of the Company or a Restricted Subsidiary and/or (b) obligations to purchase or sell assets or properties or, in each case, incurred in the ordinary course of business of the Company or any Restricted Subsidiary; PROVIDED that such Currency Agreements do not increase the Indebtedness or other obligations of the Company and the Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (x) Capitalized Lease Obligations of the Company or any Restricted Subsidiary in an aggregate amount not exceeding $7,500,000 outstanding at any time; (xi) (a) Indebtedness of the Company or any Subsidiary Guarantor to the extent the proceeds thereof are used to Refinance Indebtedness of the Company or any Subsidiary Guarantor (including all or a portion of the Notes) or any Restricted Subsidiary and (b) Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor to the extent the proceeds thereof are used to Refinance Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor, in each case, other than the Indebtedness to be Refinanced as described under "Use of Proceeds" and Indebtedness incurred under clauses (i), (ii) or (v) above; PROVIDED that, in the case of either clause (a) or (b), (1) the principal amount of Indebtedness incurred pursuant to this clause (xi) (or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof, the original issue price of such Indebtedness) shall not exceed the sum of the principal amount of Indebtedness so Refinanced (or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof, the original issue price of such Indebtedness plus any accreted value attributable thereto since the original issuance of such Indebtedness) plus the amount of any premium required to be paid in connection with such Refinancing pursuant to the terms of such Indebtedness or the amount of any premium reasonably determined by the Company or a Restricted Subsidiary, as applicable, as necessary to accomplish such Refinancing by means of a tender offer or privately negotiated purchase, plus the amount of expenses in connection therewith; and (2) except in the case of Refinancing or replacement of Senior Indebtedness or Guarantor Senior Indebtedness or of any Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor, does not reduce the Average Life to Stated Maturity of such Indebtedness; and (xii) additional Indebtedness of the Company or any Restricted Subsidiary not described by any other clause of this definition, not to exceed an aggregate principal amount at any time outstanding of $25,000,000 (less the aggregate principal amount of Indebtedness incurred under the New Credit Agreement under subclause (i)(c)(1) above). 72 LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other distribution or payment on or in respect of Capital Stock of the Company or any payment made to the direct or indirect holders (in their capacities as such) of Capital Stock of the Company (other than dividends or distributions payable solely in rights to purchase Capital Stock of the Company (other than Redeemable Capital Stock)); or (ii) purchase, redeem, defease or otherwise acquire or retire for value any Capital Stock of the Company (other than any such Capital Stock owned by a Restricted Subsidiary); or (iii) make any principal payment on, or purchase, defease, repurchase, redeem or otherwise acquire or retire for value, prior to any scheduled maturity, scheduled repayment, scheduled sinking fund payment or other Stated Maturity, any Subordinated Indebtedness (other than any such Subordinated Indebtedness owed to a Restricted Subsidiary); or (iv) make any Investment (other than a Permitted Investment) in any person; (such payments or Investments described in the preceding clauses (i), (ii), (iii) and (iv) are collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than in cash, shall be the Fair Market Value of the asset(s) proposed to be transferred by the Company or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment), (a) no Default shall have occurred and be continuing, (b) the aggregate amount of all Restricted Payments declared or made from and after the Issue Date would not exceed the sum of (1) 50% of the aggregate Consolidated Net Income of the Company accrued on a cumulative basis during the period (treated as one accounting period) beginning on September 29, 1996 and ending on the last day of the fiscal quarter of the Company immediately preceding the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Net Income of the Company for such period shall be a deficit, minus 100% of such deficit) PLUS (2) the aggregate net cash proceeds received by the Company either (x) as capital contributions in the form of common equity to the Company after the Issue Date or (y) from the issuance or sale of Capital Stock (excluding Redeemable Capital Stock but including Capital Stock issued upon the conversion of convertible Indebtedness, in exchange for outstanding Indebtedness or from the exercise of options, warrants or rights to purchase Capital Stock (other than Redeemable Capital Stock)) of the Company to any person (other than to a Restricted Subsidiary of the Company) after the Issue Date plus (3) in the case of the disposition or repayment of any Investment constituting a Restricted Payment made after the Issue Date, an amount equal to the lesser of the return of capital with respect to such Investment and the initial amount of such Investment, in either case, less the cost of the disposition of such Investment and (iii) the Company could incur $1.00 of additional Indebtedness under the first paragraph of "--Limitation on Indebtedness." For purposes of the preceding clause (b)(2), upon the issuance of Capital Stock either from the conversion of convertible Indebtedness or exchange for outstanding Indebtedness or upon the exercise of options, warrants or rights, the amount counted as net cash proceeds received will be the cash amount received by the Company at the original issuance of the Indebtedness that is so converted or exchanged or from the issuance of options, warrants or rights, as the case may be, plus the incremental amount of cash received by the Company, if any, upon the conversion, exchange or exercise thereof. None of the foregoing provisions of this covenant will prohibit (i) the payment of any dividend within 60 days after the date of its declaration, if at the date of declaration such payment would be permitted by the provisions of the Indenture; (ii) so long as no Default shall have occurred and be continuing, the redemption, repurchase or other acquisition or retirement of any shares of any class of Capital Stock of the Company in exchange for, or out of the net proceeds of, a substantially concurrent issue and sale of other shares of Capital Stock (other than Redeemable Capital Stock) of the Company to any person (other than to a Restricted Subsidiary); PROVIDED that such net proceeds are excluded from clause (b)(2) of the preceding paragraph; (iii) so long as no Default shall have occurred and be continuing, any redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness made by exchange for, or out 73 of the net proceeds of, a substantially concurrent issue and sale of (a) Capital Stock (other than Redeemable Capital Stock) of the Company or (b) Indebtedness of the Company or any Guarantor so long as such Indebtedness (1) is subordinated to Senior Indebtedness and the Notes or Guarantor Senior Indebtedness and the Note Guarantees of such Guarantor, as the case may be, at least to the same extent as the Subordinated Indebtedness so purchased, exchanged, redeemed, repurchased, acquired or retired and (2) has no Stated Maturity earlier than the Stated Maturity for the final scheduled principal payment of the Notes; (iv) dividends paid or intercompany loans made by the Company to BBC for the purpose of paying operating expenses of BBC arising in the ordinary course of business, including, without limitation, for the payment of taxes; (v) Investments constituting Restricted Payments made as a result of the receipt of non-cash consideration from any Asset Sale made pursuant to and in compliance with the covenant described under "--Disposition of Proceeds of Asset Sales"; (vi) the making of the Distribution in connection with the Recapitalization or (vii) payment made by the Company under the Income Taxes Agreement. In computing the amount of Restricted Payments previously made for purposes of clause (b) of the preceding paragraph, Restricted Payments under the immediately preceding clauses (i) and (v) shall be included. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture provides that the Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, conduct any business or enter into or suffer to exist any transaction or series of related transactions with, or for the benefit of, any Affiliate of the Company (other than a Restricted Subsidiary so long as no Affiliate of the Company or beneficial holder of 5% or more of any class or series of Capital Stock of the Company shall beneficially own any Capital Stock in such Restricted Subsidiary) or any beneficial holder of 10% or more of any class of Capital Stock of the Company except (i) on terms that are no less favorable to the Company or the Restricted Subsidiary, as the case may be, than those which could have been obtained in a comparable transaction at such time from persons who do not have such a relationship with the Company, and (ii) with respect to any transaction or series of related transactions involving aggregate payments or value equal to or greater than $1,000,000, the Company shall have delivered an officer's certificate to the Trustee certifying that such transaction or series of related transactions comply with the preceding clause (i) and, with respect to any transaction or series of transactions involving aggregate payments or value equal to or greater than $5,000,000, further certifying that such transaction or series of transactions have been approved by a majority of the Board of Directors of the Company, including a majority of the disinterested directors of the Board of Directors of the Company. For the purposes of the foregoing, a director of the Company shall not be considered "interested" with respect to a transaction solely by virtue of being a director of the other party to such transaction. The Company shall be deemed to have complied with the foregoing provisions if it has obtained a written opinion from an Independent Financial Advisor stating that the terms of such transaction or series of transactions are fair to the Company or such Restricted Subsidiary, as the case may be, from a financial point of view. This foregoing covenant shall not apply to (i) the payment of reasonable and customary fees to directors of the Company, (ii) any customary provision for the indemnification of officers or directors of the Company, (iii) any transactions with a Wholly-Owned Unrestricted Subsidiary in connection with a Lease Financing Transaction (including pursuant to the Income Taxes Agreement) and (d) transactions related to the Recapitalization. DISPOSITION OF PROCEEDS OF ASSET SALES. The Indenture provides that the Company will not, and will not permit any of the Restricted Subsidiaries to, make any Asset Sale unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the shares and/or assets subject to such Asset Sale and (ii) at least 75% of the consideration for any such Asset Sale is cash and/or Cash Equivalents (PROVIDED that the following shall be deemed cash for purposes of this provision and be treated as Net Cash Proceeds, subject to application as hereinafter provided: the amount of any liabilities (as shown on the balance sheet or in the notes thereto of the Company or such Restricted Subsidiary) of the Company or such Restricted Subsidiary that are assumed (and from which the Company or such Restricted Subsidiary is unconditionally released) in connection with such Asset Sale by the transferee or purchaser of such assets or on behalf of such transferee or 74 purchaser by a third party). To the extent the Net Cash Proceeds of any Asset Sale are not required to be applied to repay, and permanently reduce the commitments under, any outstanding Indebtedness under the New Credit Agreement as required by the terms thereof or are not so applied, then the Company may, within 12 months of the Asset Sale, invest Net Cash Proceeds in properties and assets which replace the properties and assets that were the subject of the Asset Sale or in properties and assets (including inventory) that will be used in the business of the Company and the Restricted Subsidiaries existing on the Issue Date or in businesses reasonably related thereto. The amount of such Net Cash Proceeds in excess of the amount (i) used to repay Indebtedness under the New Credit Agreement and (ii) permitted to be invested and so invested as set forth above is referred to herein as "Excess Proceeds." When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000, the Company will be obligated to make an offer (an "Asset Sale Offer") to purchase from all holders of the Notes, on a day not more than 40 business days thereafter, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the aggregate Excess Proceeds at a price, payable in cash, equal to 100% of the principal amount of the Notes plus accrued and unpaid interest, if any, to the date of purchase (the "Asset Sale Offer Price"). An Asset Sale Offer will be required to be kept open for a period of at least 20 business days. To the extent that an Asset Sale Offer is not fully subscribed to, the Company will be entitled to retain the unutilized portion of the Excess Proceeds. Whenever Excess Proceeds received by the Company exceed $10,000,000, such Excess Proceeds will, prior to the purchase of Notes, be set aside by the Company in a separate account pending (i) deposit with the depositary of the amount required to purchase the Notes tendered in an Asset Sale Offer or (ii) delivery by the Company of the Asset Sale Offer Price to the holders of the Notes validly tendered and not withdrawn pursuant to an Asset Sale Offer. Such Excess Proceeds may be invested in Cash Equivalents, as directed by the Company, having a maturity date which is not later than the earliest possible date for purchase or redemption of Notes pursuant to the Asset Sale Offer. The Company will be entitled to any interest or dividends accrued, earned or paid on such Cash Equivalents. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other securities laws or regulations in connection with the purchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Disposition of Proceeds of Asset Sales" provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such provisions of the Indenture by virtue thereof. LIMITATION ON LIENS. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien of any kind, upon any of its property or assets, whether now owned or acquired after the Issue Date, or any proceeds therefrom, which secure either (i) Subordinated Indebtedness unless the Notes and the Note Guarantees, as applicable, are secured by a Lien on such property, assets or proceeds that is senior in priority to the Liens securing such Subordinated Indebtedness or (ii) Pari Passu Indebtedness unless the Notes and the Note Guarantees, as applicable, are equally and ratably secured with the Liens securing such Pari Passu Indebtedness. LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS. The Indenture provides that neither the Company nor any Guarantor will create, incur, assume, guarantee or in any other manner become liable with respect to any Indebtedness (other than the Notes and the Note Guarantees) that is subordinate in right of payment to any Indebtedness of the Company or of such Guarantor, as the case may be, unless such Indebtedness is either (i) PARI PASSU in right of payment with the Notes or such Note Guarantee, as the case may be, or (ii) subordinate in right of payment to, the Notes or such Note Guarantee, as the case may be, in the same manner and at least to the same extent as the Notes are subordinated to Senior Indebtedness or as such Note Guarantee is subordinated to Guarantor Senior Indebtedness, as the case may be. 75 LIMITATION ON GUARANTEES BY RESTRICTED SUBSIDIARIES. The Indenture provides that the Company will not permit any of the Domestic Subsidiaries, directly or indirectly, to guarantee the payment of any Indebtedness of BBC, the Company or any Restricted Subsidiary unless such Domestic Subsidiary (i) is a Subsidiary Guarantor or (ii) simultaneously executes and delivers a supplemental indenture to the Indenture pursuant to which it will become a Subsidiary Guarantor under the Indenture. Notwithstanding the foregoing, any Note Guarantee by a Restricted Subsidiary will provide by its terms that it will be automatically and unconditionally released and discharged upon any sale, exchange or transfer, to any person not an Affiliate of the Company, of all of the Capital Stock of such Restricted Subsidiary, or all or substantially all the assets of such Restricted Subsidiary, pursuant to a transaction which is in compliance with the Indenture. The Indenture further provides that the Company may, at any time, cause a Restricted Subsidiary to become a Subsidiary Guarantor by executing and delivering a supplemental indenture providing for the guarantee of payment of the Notes by such Restricted Subsidiary on the basis provided in the Indenture. RESTRICTIONS ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Indenture provides that the Company will not permit any of the Restricted Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly-Owned Restricted Subsidiary) or permit any person (other than the Company or a Wholly- Owned Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist, or enter into any agreement with any person that would cause to become effective, any consensual encumbrance or restriction of any kind, on the ability of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make any other distribution on or in respect of its Capital Stock or any other interest or participation in, or measured by, its profits, (ii) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (iii) make loans or advances to the Company or any other Restricted Subsidiary or (iv) transfer any of its property or assets to the Company or any other Restricted Subsidiary, except (a) any encumbrance or restriction existing under the security documentation for the New Credit Agreement as in effect on the Issue Date relating to assets subject to a Lien created thereby; (b) any encumbrance or restriction, with respect to a Restricted Subsidiary that is not a Restricted Subsidiary on the Issue Date, in existence at the time such person becomes a Restricted Subsidiary (but not created in contemplation thereof); and (c) any encumbrance or restriction existing under any agreement that refinances or replaces the agreements containing the restrictions in the foregoing clauses (a) and (b); PROVIDED that the terms and conditions of any such restrictions permitted under this clause (c) are not materially less favorable to the holders of the Notes than those under or pursuant to the agreement evidencing the Indebtedness being refinanced. LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES. The Indenture provides that the Company may designate any Subsidiary of the Company (other than a Subsidiary Guarantor) as an "Unrestricted Subsidiary" under the Indenture (a "Designation") only if: (i) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (ii) the Company would be permitted under the Indenture to make an Investment at the time of Designation (assuming the effectiveness of such Designation) in an amount (the "Designation Amount") equal to the Fair Market Value of the Capital Stock of such Subsidiary on such date; and (iii) the Company would be permitted under the Indenture to incur $1.00 of additional Indebtedness pursuant to the first paragraph of the covenant described under "--Limitation on Indebtedness" at the time of Designation (assuming the effectiveness of such Designation). In the event of any such Designation, the Company shall be deemed to have made an Investment constituting a Restricted Payment pursuant to the covenant described under "--Limitation on Restricted Payments" for all purposes of the Indenture in the Designation Amount. The Indenture further provides 76 that (i) the Company shall not and shall not permit any Restricted Subsidiary to, at any time (a) provide credit support for, or a guarantee of, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), (b) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (c) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary), except in the case of clause (a) or (b) to the extent permitted under the covenant described under "--Limitation on Restricted Payments" and to the extent set forth in the first parenthetical in the definition of "Lease Financing Transaction" and (ii) no Unrestricted Subsidiary shall at any time guarantee or otherwise provide credit support for any obligation of the Company or any Restricted Subsidiary. The Indenture further provides that the Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if: (i) no Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred for all purposes of the Indenture; All Designations and Revocations must be evidenced by board resolutions of the Company delivered to the Trustee certifying compliance with the foregoing provisions. Blue Bird Capital is treated as an Unrestricted Subsidiary under the Indenture as of the Issue Date. REPORTING REQUIREMENTS. The Indenture requires that the Company file with the Commission the annual reports, quarterly reports and other documents required to be filed with the Commission pursuant to Sections 13 and 15 of the Exchange Act, whether or not the Company has a class of securities registered under the Exchange Act. The Company is required to file with the Trustee within 15 days after it files such reports and documents with the Commission copies of such reports and documents. CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. The Indenture provides that the Company will not, in any transaction or series of related transactions, merge or consolidate with or into, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to, any person or persons, and that the Company will not permit any of the Restricted Subsidiaries to enter into any such transaction or series of related transactions if such transaction or series of related transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company or of the Company and the Restricted Subsidiaries, taken as whole, to any other person or persons, unless (i) either (a)(1) if the transaction or transactions is a merger or consolidation involving the Company, the Company shall be the surviving person of such merger or consolidation or (2) if the transaction or transactions is a merger or consolidation involving a Restricted Subsidiary, such Restricted Subsidiary shall be the surviving person of such merger or consolidation and such surviving person shall be a Restricted Subsidiary, or (b)(1) the person formed by such consolidation or into which the Company or such Restricted Subsidiary is merged or to which the properties and assets of the Company or such Restricted Subsidiary, as the case may be, are transferred (any such surviving person or transferee person being the "Surviving Entity") shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and (2)(A) in the case of a transaction involving the Company, the Surviving Entity shall expressly assume by a supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture, and in each case, the Indenture shall remain in full force and effect, or (B) in 77 the case of a transaction involving a Restricted Subsidiary that is a Subsidiary Guarantor, the Surviving Entity shall expressly assume by a supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Restricted Subsidiary under its Note Guarantee and related supplemental indenture, and in each case, such Note Guarantee and supplemental indenture shall remain in full force and effect; and (ii) immediately after giving effect to such transaction or series of related transactions on a PRO FORMA basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default shall have occurred and be continuing and the Company, or the Surviving Entity, as the case may be, after giving effect to such transaction or series of transactions on a PRO FORMA basis, could incur $1.00 of additional Indebtedness under the first paragraph of "--Limitation on Indebtedness." In connection with any consolidation, merger, transfer, lease or other disposition contemplated hereby, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, transfer, lease or other disposition and the supplemental indenture in respect thereof comply with the requirements under the Indenture. In addition, each Subsidiary Guarantor, unless it is the other party to the transaction or unless its Note Guarantee will be released and discharged in accordance with its terms as a result of the transaction, will be required to confirm, by supplemental indenture, that its Note Guarantee will continue to apply to the obligations of the Company or the Surviving Entity under the Indenture. Upon any consolidation or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, in which the Company or the Restricted Subsidiary, as the case may be, is not the continuing corporation, the successor corporation formed by such a consolidation or into which the Company or such Restricted Subsidiary is merged or to which such transfer is made, will succeed to, and be substituted for, and may exercise every right and power of, the Company or such Restricted Subsidiary, as the case may be, under the Indenture with the same effect as if such successor corporation had been named as the Company or such Restricted Subsidiary therein; and thereafter, except in the case of (i) a lease or (ii) any sale, assignment, conveyance, transfer, lease or other disposition to a Restricted Subsidiary of the Company, the Company or such Guarantor, as the case may be, shall be discharged from all obligations and covenants under the Indenture and the Notes. The Indenture provides that for all purposes of the Indenture and the Notes (including the provision of this covenant and the covenants described under "--Limitation on Indebtedness," "--Limitation on Restricted Payments" and "--Limitation on Liens"), Subsidiaries of any Surviving Entity will, upon such transaction or series of related transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to the covenant described under "--Limitation on Designations of Unrestricted Subsidiaries" and all Indebtedness, and all Liens on property or assets, of the Company and the Restricted Subsidiaries in existence immediately prior to such transaction or series of related transactions will be deemed to have been incurred upon such transaction or series of related transactions. EVENTS OF DEFAULT The following are "Events of Default" under the Indenture: (i) default in the payment of the principal of or premium, if any, when due and payable, on any of the Notes (at its Stated Maturity, upon optional redemption, required purchase, scheduled principal payment or otherwise); or (ii) default in the payment of an installment of interest on any of the Notes, when due and payable, for 30 days; or (iii) the Company or any Guarantor fails to comply with any of its obligations described under "--Consolidation, Merger, Sale of Assets, ETC.," "--Change of Control Triggering Event" or "--Certain Covenants--Disposition of Proceeds of Asset Sales;" or 78 (iv) the Company or any Guarantor fails to perform or observe any other term, covenant or agreement contained in the Notes, the Note Guarantees or the Indenture (other than a default specified in (i), (ii) or (iii) above) for a period of 30 days after written notice of such failure requiring the Company to remedy the same shall have been given (a) to the Company by the Trustee or (b) to the Company and the Trustee by the holders of 25% in aggregate principal amount of the Notes then outstanding; or (v) default or defaults under any agreement, indenture or instrument under which the Company or any Restricted Subsidiary then has outstanding Indebtedness in excess of $5,000,000 in the aggregate and either (a) such Indebtedness is already due and payable in full or (b) such default or defaults results in the acceleration of the maturity of such Indebtedness; or (vi) any Note Guarantee ceases to be in full force and effect or is declared null and void or any Guarantor denies that it has any further liability under any Note Guarantee, or gives notice to such effect (other than by reason of the termination of the Indenture or the release of any such Note Guarantee in accordance with "--Certain Covenants--Limitation on Guarantees by Restricted Subsidiaries") and such condition shall have continued for a period of 30 days after written notice of such condition shall have been given (a) to the Company by the Trustee or (b) to the Company and the Trustee by the holders of 25% in aggregate principal amount of the Notes then outstanding; or (vii) one or more judgments, orders or decrees of any court or regulatory or administrative agency for the payment of money in excess of $5,000,000 either individually or in the aggregate, shall have been entered against the Company or any Restricted Subsidiary or any of their respective properties and shall not have been discharged and either (a) any creditor shall have commenced an enforcement proceeding upon such judgment, order or decree or (b) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment, order or decree, by reason of a pending appeal or otherwise, will not be in effect; or (viii) certain events of bankruptcy, insolvency or reorganization with respect to BBC, the Company or any Material Subsidiary of the Company shall have occurred; or (ix) either (a) the collateral agent under the New Credit Agreement or (b) if the New Credit Agreement shall no longer be in force and effect, any holder of at least $5,000,000 in aggregate principal amount of Indebtedness of the Company or any Restricted Subsidiary shall commence judicial proceedings to foreclose upon assets of the Company or any of its Restricted Subsidiaries having an aggregate Fair Market Value, individually or in the aggregate, in excess of $5,000,000 or shall have exercised any right under applicable law or applicable security documents to take ownership of any such assets in lieu of foreclosure. If an Event of Default (other than as specified in clause (viii) with respect to the Company), shall occur and be continuing, the Trustee, by notice to the Company, or the holders of at least 25% in aggregate principal amount of the Notes then outstanding, by notice to the Trustee and the Company, may declare the principal of, premium, if any, and accrued interest on all of the outstanding Notes due and payable immediately, upon which declaration, all amounts payable in respect of the Notes will be immediately due and payable; PROVIDED, HOWEVER, that so long as the New Credit Agreement shall be in force and effect, if an Event of Default shall have occurred and be continuing (other than an Event of Default under clause (viii) with respect to the Company), any such acceleration shall not be effective until the earlier to occur of (i) five business days following delivery of a notice of such acceleration to the agent under the New Credit Agreement and (ii) the acceleration of any Indebtedness under the New Credit Agreement. If an Event of Default specified in clause (viii) above with respect to the Company occurs and is continuing, then the principal of, premium, if any, and accrued interest on all of the outstanding Notes will IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of Notes. Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Notes because an Event of Default specified in clause (v) shall have occurred and be continuing, such 79 declaration of acceleration will be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or paid (if permitted by the terms thereof and the Indenture) or the requisite holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and written notice of such discharge of rescission, as the case may be, shall have been given to the Trustee by the Company and by the requisite holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 60 days after such declaration of acceleration in respect of the Notes and no other Event of Default has occurred which has not been cured or waived during such 60-day period. After a declaration of acceleration, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration if (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (a) all sums paid or advanced by the Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (b) all overdue interest on all Notes, (c) the principal of and premium, if any, on any Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes, and (d) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes; and (ii) all Events of Default, other than the non-payment of principal of, premium, if any, and interest on the Notes that has become due solely by such declaration of acceleration, have been cured or waived. The holders of not less than a majority in aggregate principal amount of the outstanding Notes may on behalf of the holders of all the Notes waive any past defaults under the Indenture, except a default in the payment of the principal of, premium, if any, or interest on any Note, or in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each Note outstanding. No holder of any of the Notes has any right to institute any proceeding with respect to the Indenture or any remedy thereunder, unless the holders of at least 25% in aggregate principal amount of the outstanding Notes have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as Trustee under the Notes and the Indenture, the Trustee has failed to institute such proceeding within 15 days after receipt of such notice and the Trustee, within such 15-day period, has not received directions inconsistent with such written request by holders of a majority in aggregate principal amount of the outstanding Notes. Such limitations do not apply, however, to a suit instituted by a holder of a Note for the enforcement of the payment of the principal of, premium, if any, or interest on such Note on or after the respective due dates expressed in such Note. During the existence of an Event of Default, the Trustee is required to exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise thereof as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default will occur and be continuing, the Trustee under the Indenture is not under any obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders unless such holders shall have offered to the Trustee reasonable security or indemnity. Subject to certain provisions concerning the rights of the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee under the Indenture. The Company is required to furnish to the Trustee annual and quarterly statements as to the performance by the Company and the Guarantors of their respective obligations under the Indenture and as to any default in such performance. The Company is also required to notify the Trustee within five business days of any event which is, or after notice or lapse of time or both would become, an Event of Default. 80 DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE The Company may, at its option and at any time, terminate the obligations of the Company and the Guarantors with respect to the outstanding Notes ("defeasance"). Such defeasance means that the Company will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, except for (i) the rights of holders of outstanding Notes to receive payment in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (ii) the Company's obligations to issue temporary Notes, register the transfer or exchange of any Notes, replace mutilated, destroyed, lost or stolen Notes and maintain an office or agency for payments in respect of the Notes, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and (iv) the defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to terminate the obligations of the Company and any Guarantor with respect to certain covenants that are set forth in the Indenture, some of which are described under "--Certain Covenants," and any omission to comply with such obligations will not constitute a Default or an Event of Default with respect to the Notes ("covenant defeasance"). In order to exercise either defeasance or covenant defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Notes, cash in United States dollars, U.S. Government Obligations (as defined in the Indenture), or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes to redemption or maturity; (ii) the Company shall have delivered to the Trustee an opinion of counsel to the effect that the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred (in the case of defeasance, such opinion must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable federal income tax laws); (iii) no Default shall have occurred and be continuing on the date of such deposit; (iv) such defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest with respect to any securities of the Company or any Guarantor; (v) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument to which the Company or any Guarantor is a party or by which it is bound; (vi) the Company shall have delivered to the Trustee an opinion of counsel to the effect that (a) the trust funds will not be subject to any rights of holders of Senior Indebtedness, including, without limitation, those arising under the Indenture and (b) after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (vii) the Company shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent under the Indenture to either defeasance or covenant defeasance, as the case may be, have been complied with. SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (i) either (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the 81 date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) the Company or any Guarantor has paid all other sums payable under the Indenture by the Company and the Guarantors; and (iii) the Company and each of the Guarantors have delivered to the Trustee an officers' certificate and an opinion of counsel each stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. AMENDMENTS AND WAIVERS From time to time, the Company and the Guarantors, when authorized by resolutions of their Boards of Directors, and the Trustee may, without the consent of the holders of any outstanding Notes, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, qualifying, or maintaining the qualification of, the Indenture under the Trust Indenture Act of 1939, as amended, or making any change that does not materially adversely affect the legal rights of any holder; PROVIDED, HOWEVER, that the Company has delivered to the Trustee an Opinion of Counsel (as defined in the Indenture) stating that such change does not materially adversely affect the legal rights of any holder. Other amendments and modifications of the Indenture or the Notes may be made by the Company, the Guarantors and the Trustee with the consent of the holders of not less than a majority of the aggregate principal amount of the outstanding Notes; PROVIDED, HOWEVER, that no such modification or amendment may, without the consent of the holder of each outstanding Note affected thereby, (i) reduce the principal amount of, extend the fixed maturity of or alter the redemption provisions of, the Notes, (ii) change the currency in which any Notes or any premium or the interest thereon is payable, (iii) reduce the percentage in principal amount of outstanding Notes that must consent to an amendment, supplement or waiver or consent to take any action under the Indenture or the Notes, (iv) impair the right to institute suit for the enforcement of any payment on or with respect to the Notes, (v) waive a default in payment with respect to the Notes in accordance with the Indenture, (vi) upon the failure to mail or the mailing of the notice required for a Change of Control Offer following, in either case, satisfaction of the condition precedent to the mailing of such notice or upon the occurrence of an Asset Sale, alter the Company's obligation to purchase the Notes in accordance with the Indenture or waive any default in the performance thereof, (vii) reduce or change the rate or time for payment of interest on the Notes, (viii) affect the ranking of the Notes or (ix) except in compliance with the express provisions of the Indenture, release any Guarantor from any of its obligations under its Note Guarantee or the Indenture. THE TRUSTEE The Indenture and the provisions of the TIA contain certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the TIA, the Trustee will be permitted to engage in other transactions, provided that if the Trustee acquires any conflicting interest as described in the TIA, it must eliminate such conflict within 90 days or resign. The holders of a majority in principle amount of the then outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, subject to certain exceptions. The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. The Trustee may require reasonable indemnity against costs, expenses or liabilities likely to be incurred prior to proceeding with any investigation requested by at least a majority of Holders. 82 GOVERNING LAW The Indenture and the Notes are governed by the laws of the State of New York, without regard to the principles of conflicts of law. CERTAIN DEFINITIONS "ACQUIRED INDEBTEDNESS" means Indebtedness of a person (i) assumed in connection with an Asset Acquisition from such person or (ii) existing at the time such person becomes a Restricted Subsidiary of any other person (other than any Indebtedness incurred in connection with, or in contemplation of, such Asset Acquisition or such person becoming such a Restricted Subsidiary). "AFFILIATE" means, with respect to any specified person, (i) any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person or (ii) any other person that owns, directly or indirectly, 5% or more of any class or series of such person's, or the parent of such person's, Capital Stock or any officer, director or Affiliate of any such other person or, with respect to any other natural person, any person having a relationship with such other person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control" when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "ASSET ACQUISITION" means (i) an Investment by the Company or any Restricted Subsidiary in any other person pursuant to which such person will become a Restricted Subsidiary or will be merged with the Company or any Restricted Subsidiary or (ii) the acquisition by the Company or any Restricted Subsidiary of the assets of any person which constitute all or substantially all of the assets of such person, or any division or line of business of such person. "ASSET SALE" means any direct or indirect sale, issuance, conveyance, transfer, lease or other disposition to any person other than the Company or a Restricted Subsidiary, in one or a series of related transactions, of (i) any Capital Stock of any Restricted Subsidiary of the Company; (ii) all or substantially all of the assets of any division or line of business of the Company or any Restricted Subsidiary; or (iii) any other properties or assets of the Company or any Restricted Subsidiary other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" will not include (i) any sale, issuance, conveyance, transfer, lease or other disposition of properties or assets that is governed by the provisions described under "Consolidation, Merger, Sale of Assets, ETC.," (ii) the sale of lease portfolio assets pursuant to the terms of any Lease Portfolio Documents or (iii) sales of property or equipment that have become worn out, obsolete or damaged or otherwise unsuitable for use in connection with the business of the Company or any Restricted Subsidiary, as the case may be. For purposes of the covenant described under "--Certain Covenants--Disposition of Proceeds of Asset Sales," the term "Asset Sale" shall not include any sale, conveyance, transfer, lease or other disposition of any property or asset, whether in one transaction or a series of related transactions, either (I) involving assets with a Fair Market Value not in excess of the equivalent of $250,000 or (II) in connection with a Capitalized Lease Obligation. "AVERAGE LIFE TO STATED MATURITY" means, with respect to any Indebtedness, as at any date of determination, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "CAPITAL STOCK" means, with respect to any person, any and all shares, interests, participation, rights in or other equivalents (however designated) of such person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. 83 "CAPITALIZED LEASE OBLIGATION" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of the Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "CASH EQUIVALENTS" means, at any time, (i) any evidence of Indebtedness with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; (iii) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company (other than Merrill Lynch and its Affiliates) organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by Standard & Poor's Corporation ("Standard & Poor's") or at least P-1 by Moody's Investor Services, Inc. ("Moody's"); and (iv) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the government of the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case, maturing within one year from the date of acquisition. "CHANGE OF CONTROL" means the occurrence of any of the following events: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than Permitted Holders is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of a majority of the total Voting Stock of the Company or BBC, as the case may be; (ii) the Company or BBC, as the case may be, consolidates with, or merges with or into, another person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person, or any person consolidates with, or merges with or into, the Company or BBC, as the case may be, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company or BBC, as the case may be, is converted into or exchanged for cash, securities or other property, other than any such transaction where (a) the outstanding Voting Stock of the Company or BBC, as the case may be, is converted into or exchanged for Voting Stock (other than Redeemable Capital Stock) of the surviving or transferee corporation and (b) the holders of the Voting Stock of the Company or BBC, as the case may be, immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the surviving or transferee corporation immediately after such transaction; (iii) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company or BBC (together with any new directors whose election by such Boards of Directors or whose nomination for election by the stockholders of the Company or BBC was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) or such other directors as have been appointed by MLCP cease for any reason to constitute a majority of the Board of Directors of the Company or BBC, as the case may be, then in office; or (iv) any order, judgment or decree shall be entered against the Company or BBC decreeing the dissolution or split up of the Company or BBC and such order shall remain undischarged or unstayed for a period in excess of 60 days. "CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of both a Change of Control and a Rating Decline. "CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any period, (i) the sum of, without duplication, the amounts for such period, taken as a single accounting period, of (a) Consolidated Net Income, (b) Consolidated Non-cash Charges, (c) to the extent reducing Consolidated Net Income, 84 Consolidated Interest Expense, and (d) to the extent reducing Consolidated Net Income, Consolidated Income Tax Expense less (ii) other non-cash items increasing Consolidated Net Income for such period. "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means the ratio of the aggregate amount of Consolidated Cash Flow Available for Fixed Charges of the Company for the four full fiscal quarters immediately preceding the date of the transaction (the "Transaction Date") giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (such four full fiscal quarter period being referred to herein as the "Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges of the Company for the Four Quarter Period. For purposes of this definition, if the Transaction Date occurs prior to the first anniversary of the Issue Date, "Consolidated Cash Flow Available for Fixed Charges" and "Consolidated Fixed Charges" will be calculated, in the case of the Company, after giving effect on a PRO FORMA basis as if the Recapitalization occurred on the first day of the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated Cash Flow Available for Fixed Charges" and "Consolidated Fixed Charges" will be calculated, without duplication, after giving effect on a PRO FORMA basis for the period of such calculation to (i) the incurrence of any Indebtedness of the Company or any of the Restricted Subsidiaries during the period commencing on the first day of the Four Quarter Period to and including the Transaction Date (the "Reference Period"), including, without limitation, the incurrence of the Indebtedness giving rise to the need to make such calculation, as if such incurrence occurred on the first day of the Reference Period, (ii) an adjustment to eliminate or include, as applicable, the Consolidated Cash Flow Available for Fixed Charges and Consolidated Fixed Charges of the Company directly attributable to assets which are the subject of any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Company or one of the Restricted Subsidiaries (including any person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness) occurring during the Reference Period, as if such Asset Sale or Asset Acquisition occurred on the first day of the Reference Period and (iii) the retirement of Indebtedness during the Reference Period which cannot thereafter be reborrowed occurring as if retired on the first day of the Reference Period. For purposes of calculating Consolidated Fixed Charges for this definition of "Consolidated Fixed Charge Coverage Ratio," interest on Indebtedness incurred during the Four Quarter Period under any revolving credit facility which can be borrowed and repaid without reducing the commitments thereunder shall be the actual interest during the Four Quarter Period. Furthermore, in calculating Consolidated Fixed Charges for purposes of determining the denominator (but not the numerator) of this definition of "Consolidated Fixed Charge Coverage Ratio," (i) interest on Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter will be deemed to accrue at a fixed rate PER ANNUM equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (ii) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Reference Period; and (iii) notwithstanding clause (i) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Rate Protection Obligations, will be deemed to accrue at the rate PER ANNUM resulting after giving effect to the operation of such agreements. If the Company or any Restricted Subsidiary, directly or indirectly, guarantees Indebtedness of a third person, the above definition will give effect to the incurrence of such guaranteed Indebtedness as if the Company or any Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. "CONSOLIDATED FIXED CHARGES" means, for any period, the sum of, without duplication, the amounts for such period of (i) Consolidated Interest Expense; and (ii) the aggregate amount of cash dividends and other distributions paid or accrued during such period in respect of Redeemable Capital Stock. "CONSOLIDATED INCOME TAX EXPENSE" means, for any period, the provision for federal, state, local and foreign income taxes of the Company and the Restricted Subsidiaries for such period as determined on a 85 consolidated basis in accordance with GAAP. To the extent that Blue Bird Capital is an Unrestricted Subsidiary during such period and to the extent payments under the Income Taxes Agreement reduce Consolidated Net Income, Consolidated Income Tax Expense shall include such payments under the Income Taxes Agreement. "CONSOLIDATED INTEREST EXPENSE" means, for any period, without duplication, the sum of (i) the interest expense of the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount attributable to such period, (b) the net cost under Interest Rate Protection Obligations (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (e) all accrued interest, and (ii) all but the principal component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Company and the Restricted Subsidiaries during such period and as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NET INCOME" means, for any period, the consolidated net income (or loss) of the Company and the Restricted Subsidiaries for such period as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income (or loss), by excluding, without duplication, (i) all extraordinary gains or losses (net of fees and expenses relating to the transaction giving rise thereto), (ii) the portion of net income (or loss) of the Company and the Restricted Subsidiaries allocable to minority interests in unconsolidated persons to the extent that cash dividends or distributions have not actually been received by the Company or one of the Restricted Subsidiaries, (iii) net income (or loss) of any person combined with the Company or one of the Restricted Subsidiaries in a "pooling of interests" basis attributable to any period prior to the date of combination, (iv) any gain or loss, net of taxes, realized upon the termination of any employee pension benefit plan, (v) gains or losses in respect of any Asset Sales by the Company or one of the Restricted Subsidiaries (net of fees and expenses relating to the transaction giving rise thereto), and (vi) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to that Restricted Subsidiary or its stockholders. Consolidated Net Income shall not be reduced for any charges arising out of any transaction undertaken as part of the Recapitalization, but shall be reduced by dividends described under clause (iv) of the last paragraph of the covenant described under "--Certain Covenants--Limitation on Restricted Payments." "CONSOLIDATED NON-CASH CHARGES" means, for any period, the aggregate depreciation, amortization and other non-cash expenses of the Company and the Restricted Subsidiaries reducing net income for such period, determined on a consolidated basis in accordance with GAAP. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company against fluctuations in currency values. "DEFAULT" means any event that is, or after notice or passage of time or both would be, an Event of Default. "DESIGNATED SENIOR INDEBTEDNESS" means (i) all Senior Indebtedness under the New Credit Agreement and (ii) any other Senior Indebtedness which, at the time of the incurrence of such Indebtedness, is specifically designated in the instrument evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company. "DESIGNATION" has the meaning set forth under "--Certain Covenants--Limitation on Designations of Unrestricted Subsidiaries." "DESIGNATION AMOUNT" has the meaning set forth under "--Certain Covenants--Limitation on Designations of Unrestricted Subsidiaries." 86 "DOMESTIC SUBSIDIARY" means a Restricted Subsidiary organized under the laws of the United States, any State or territory thereof or the District of Columbia. "EVENT OF DEFAULT" will have the meaning ascribed to such term under "--Events of Default." "FAIR MARKET VALUE" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction. Fair Market Value will be determined by the board of directors of the Company acting in good faith evidenced by a Board Resolution thereof delivered to the Trustee. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are applicable as of the Issue Date and are consistently applied. "GUARANTEE" means, as applied to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. "GUARANTOR" means each issuer of a Note Guarantee. "GUARANTOR SENIOR INDEBTEDNESS" means, with respect to the Indebtedness of any Guarantor, any such Indebtedness represented by a guarantee by such Guarantor of any Senior Indebtedness. "INCOME TAXES AGREEMENT" means the agreement between the Company and Blue Bird Capital, dated October 18, 1995, as in effect on the Issue Date or as modified, amended or supplemented in any respect that is not materially adverse in any respect to the Company. "INDEBTEDNESS" means, with respect to any person, without duplication, (i) all indebtedness of such person for borrowed money or for the deferred purchase price of property or services, excluding any trade payable and other accrued current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such person in connection with any letters of credit, bankers acceptance or other similar credit transaction and in connection with any agreement to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such person, or any warrants, rights or options to acquire such Capital Stock, now or hereafter outstanding, (ii) all obligations of such person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade accounts payable arising in the ordinary course of business, (iv) all Capitalized Lease Obligations of such person, (v) all Indebtedness referred to in the preceding clauses of other persons and all dividends of other persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon property (including, without limitation, accounts and contract rights) owned by such person, even though such person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligation being deemed to be the lesser of the value of such property or asset or the amount of the obligation so secured), (vi) all guarantees of Indebtedness by such person, (vii) all Redeemable Capital Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends, (viii) all obligations under or in respect of currency exchange contracts and Interest Rate Protection Obligations of such person, and (ix) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of 87 the types referred to in clauses (i) through (viii) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price will be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness will be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Redeemable Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and whose directors, officers and employees or Affiliates do not have, a direct or indirect financial interest in the Company and (ii) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "INTEREST RATE PROTECTION OBLIGATIONS" means the obligations of any person pursuant to any arrangement with any other person whereby, directly or indirectly, such person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such person calculated by applying a fixed or a floating rate of interest on the same notional amount or any other arrangement involving payments by or to such person based upon fluctuations in interest rates. "INVESTMENT" means, with respect to any person, any direct or indirect advance, loan or other extension of credit (including by means of a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others or otherwise), or any purchase or acquisition by such person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other person. Investments will exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. In addition to the foregoing, any foreign exchange contract, currency swap, Interest Rate Protection Obligation or similar agreement shall constitute an Investment. "LEASE FINANCING TRANSACTION" means any transaction that may be entered into by the Company or any Restricted Subsidiary on an arm's-length basis and with no recourse to the Company or a Restricted Subsidiary (other than (i) recourse limited to the Capital Stock of an Unrestricted Subsidiary pledged by the Company or a Restricted Subsidiary in connection with a Lease Financing Transaction and (ii) recourse limited to circumstances where a governmental authority fails to allocate funds to a lease in its budget) involving (a) the sale by the Company or a Subsidiary of the Company of lease receivables (including a sale to any Unrestricted Subsidiary and securitization transactions); (b) the sale by any Subsidiary of the Company of lease receivables (including securitization transactions); (c) the sale by the Company of buses and related equipment to any Subsidiary of the Company to facilitate such Subsidiary subsequently selling or otherwise financing the lease receivables arising from such buses and related equipment; (d) the sale or lease by any Subsidiary of the Company of buses and related equipment for which the receivables arising from such sales and leases will be sold or financed by such Subsidiary; or (e) the financing of any of the foregoing. "LEASE PORTFOLIO DOCUMENTS" means (i) the Amended and Restated Loan Agreement dated March 29, 1996 by and between Blue Bird Capital Corporation and LaSalle National Bank and all agreements executed pursuant thereto, as the same may be amended, renewed, extended, substituted, replaced, supplemented or otherwise modified from time to time, or (ii) any documentation relating to any other Lease Financing Transaction. "LIEN" means any mortgage, charge, pledge, lien (statutory or other), privilege, security interest, hypothecation, cessation and transfer, lease of real property, assignment for security, claim, deposit arrangement, or preference or priority or other encumbrance upon or with respect to any property of any kind, whether real, personal or mixed, movable or immovable, now owned or hereafter acquired. A person 88 will be deemed to own subject to a Lien any property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "MATERIAL SUBSIDIARY" means Canadian Blue Bird and each other Restricted Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act and the Exchange Act (as such regulation is in effect on the Issue Date). "NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary) net of (i) brokerage commissions and other reasonable fees and expenses (including fees and expenses of legal counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) amounts required to be paid to any person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in or having a Lien on the assets subject to the Asset Sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP consistently applied against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "NEW CREDIT AGREEMENT" means the First Amended and Restated Credit Agreement among the Company, BBC, BTCo., as Administrative Agent, Merrill Lynch & Co., as Syndication Agent (and BTCo. and Merrill Lynch & Co., together, the "Agent Banks"), and the other financial institutions signatory thereto, as in effect on the Issue Date, and as such agreement may be amended, renewed, extended, substituted, refinanced, replaced, supplemented or otherwise modified from time to time, and includes any agreement (i) extending the maturity of all or any portion of the Indebtedness thereunder, (ii) adding additional borrowers or guarantors thereunder and (iii) increasing the amount to be borrowed thereunder; PROVIDED that in the case of clauses (i), (ii) and (iii), any such agreement is not prohibited by the Indenture. "NOTE GUARANTEE" means the guarantee by BBC and any additional guarantees created pursuant to the provisions of the Indenture of the Company's Indenture Obligations pursuant to the guarantee included in the Indenture. "PARI PASSU INDEBTEDNESS" means any Indebtedness of the Company or any Subsidiary Guarantor ranking PARI PASSU in right of payment with the Notes or the Note Guarantees, as applicable. "PERMITTED HOLDERS" means MLCP or any other person, directly or indirectly, controlling, controlled by or under direct or indirect common control with MLCP. "PERMITTED INVESTMENT" means (i) Investments in any of the Notes; (ii) Investments in Cash Equivalents; (iii) Investments by the Company or any Restricted Subsidiary in a Restricted Subsidiary or another person, if as a result of such Investment (a) such other person becomes a Restricted Subsidiary or (b) such other person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a Restricted Subsidiary; (iv) Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers, in each case arising in the ordinary course of business; (v) Investments in lease receivables, with respect to leases on terms consistent with the Company's prior practices; (vi) Investments in any Subsidiary of the Company pursuant to the terms of any Lease Portfolio Documents on a basis consistent with past practice; PROVIDED that such Subsidiary is engaged solely in the business of financing or carrying lease receivables related to the Company's products; (vii) Investments in Interest Rate Protection Obligations and currency exchange contracts permitted by the covenant described under "--Limitation on Indebtedness;" (viii) loans or advances to officers or employees of the Company and the Restricted Subsidiaries in the ordinary course of business for BONA FIDE business purposes of the 89 Company and the Restricted Subsidiaries (including travel and moving expenses) not in excess of $500,000 in the aggregate at any one time outstanding; and (ix) Investments not otherwise described in this definition in an aggregate amount not exceeding $5,000,000 at any time outstanding. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PREFERRED STOCK" means, with respect to any person, any and all shares, interests, participation or other equivalents (however designated) of such person's preferred or preference stock whether now outstanding, or issued after the date of the Indenture, and including, without limitation, all classes and series of preferred or preference stock. "RATING AGENCIES" means (i) Standard & Poor's, (ii) Moody's and (iii) if Standard & Poor's or Moody's or both shall not make a rating of the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for Standard & Poor's or Moody's or both, as the case may be. "RATING CATEGORY" means (i) with respect to Standard & Poor's, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of Standard & Poor's or Moody's used by another Rating Agency. In determining whether the rating of the Securities has decreased by one or more gradations, gradations within Rating Categories (+ and - for Standard & Poor's; 1, 2 and 3 for Moody is; or the equivalent gradations for another Rating Agency) shall be taken into account (E.G., with respect to Standard & Poor's, a decline in a rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one gradation). "RATING DATE" means the date which is 90 days prior to the earlier of (i) a Change of Control and (ii) public notice of the occurrence of a Change of Control or of the intention by the Company or any Permitted Holder to effect a Change of Control. "RATING DECLINE" means the decrease (as compared with the Rating Date) by one or more gradations (including gradations within Rating Categories as well as between Rating Categories) of the rating of the Notes by either Rating Agency on, or within six months after, the date of public notice of the occurrence of a Change of Control or of the intention by the Company or any Permitted Holder to effect a Change of Control (which period shall be extended for so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies). "REDEEMABLE CAPITAL STOCK" means, with respect to any person, any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, except to the extent exchangeable at the option of such person subject to the terms of any debt instrument to which such person is a party), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Indebtedness (other than at the option of such person), or is redeemable at the option of the holder thereof, in whole or in part, in any such case, on or prior to the final maturity date of the Notes. "REFINANCE" means, with respect to any Indebtedness, any refinancing, redemption, retirement, renewal, extension or refunding of such Indebtedness. "RESTRICTED PAYMENT" has the meaning set forth under "--Certain Covenants--Limitation on Restricted Payments." "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has not been designated by the Board of Directors of the Company, by a board resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with the covenant described under "--Certain Covenants-- 90 Limitation on Designations of Unrestricted Subsidiaries." Any such designation may be revoked by a board resolution of the Company delivered to the Trustee, subject to the provisions of such covenant. "REVOCATION" has the meaning ascribed to that term under "--Certain Covenants--Limitation on Designations of Unrestricted Subsidiaries." "SENIOR INDEBTEDNESS" means the principal of, premium, if any, and interest on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Indebtedness" will include the principal of, premium, if any, and interest (including interest that would accrue but for the filing of a petition initiating any proceeding under any state or federal bankruptcy laws, whether or not such claim is allowable in such proceeding) on all obligations of every nature of the Company from time to time owed to the lenders under the New Credit Agreement, including, without limitation, principal of and interest on, and all fees and expenses payable under the New Credit Agreement. Notwithstanding the foregoing, "Senior Indebtedness" does not include, to the extent constituting Indebtedness, (i) Indebtedness evidenced by the Notes, (ii) Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company, (iii) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company, (iv) Indebtedness which is represented by Redeemable Capital Stock, (v) Indebtedness for goods, materials or services purchased in the ordinary course of business or Indebtedness consisting of trade payable or other current liabilities (other than any current liabilities owing under the New Credit Agreement or the current portion of any long-term Indebtedness which would constitute Senior Indebtedness but for the operation of this clause (v)), (vi) Indebtedness of or amounts owed by the Company for compensation to employees or for services rendered to the Company, (vii) any liability for federal, state, local or other taxes owed or owing by the Company, (viii) Indebtedness of the Company to a Restricted Subsidiary of the Company or any other Affiliate of the Company or any of such Affiliate's Restricted Subsidiaries, other than Indebtedness owed to Merrill Lynch or an Affiliate thereof by reason of its ownership of securities of the Company acquired in the ordinary course of its trading or underwriting activities, whether such securities are held by it for its own account or as nominee, (ix) that portion of any Indebtedness which at the time of issuance is issued in violation of the Indenture and (x) amounts owing under leases (other than Capitalized Lease Obligations). "STATED MATURITY" means, with respect to any Note or any installment of interest thereon, the dates specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable, and when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness or any installment of interest thereon is due and payable. "SUBSIDIARY" means, with respect to any person, any other person of which a majority of the equity ownership or the Voting Stock is, at the time, owned, directly or indirectly, by such person. "SUBSIDIARY GUARANTOR" mean each Subsidiary of the Company that in the future executes a supplemental indenture in which such Subsidiary agrees to be bound by the terms of the Indenture as a Guarantor. "SUBORDINATED INDEBTEDNESS" means, with respect to the Company, Indebtedness of the Company which is expressly subordinated in right of payment to the Notes or, with respect to any Subsidiary Guarantor, Indebtedness of such Subsidiary Guarantor which is expressly subordinated in right of payment to the Note Guarantee of such Subsidiary Guarantor. "UNRESTRICTED SUBSIDIARY" means a Subsidiary of the Company (other than a Subsidiary Guarantor) designated as such pursuant to and in compliance with the covenant described under "--Certain Covenants--Limitation on Designations of Unrestricted Subsidiaries." Any such designation may be revoked by 91 a board resolution of the Company delivered to the Trustee, subject to the provisions of such covenant. Blue Bird Capital will be treated as an Unrestricted Subsidiary under the Indenture as of the Issue Date. "VOTING STOCK" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any persons (irrespective of whether or not, at the time, stock of any other class or classes will have, or might have, voting power by reason of the happening of any contingency). "WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of which 100% of the outstanding Capital Stock is owned by the Company and/or another Wholly-Owned Restricted Subsidiary. For purposes of this definition, any directors' qualifying shares or investments by foreign nationals mandated by applicable law shall be disregarded in determining the ownership of a Restricted Subsidiary. "WHOLLY-OWNED UNRESTRICTED SUBSIDIARY" means any Unrestricted Subsidiary of which 100% of the outstanding Capital Stock is owned by the Company and/or a Wholly-Owned Restricted Subsidiary and/or another Wholly-Owned Unrestricted Subsidiary. For purposes of this definition, any directors' qualifying shares or investments by foreign nationals mandated by applicable law shall be disregarded in determining the ownership of an Unrestricted Subsidiary. EXCHANGE OFFER; REGISTRATION RIGHTS In the event that applicable law or interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if certain Holders of the 144A Notes are not permitted to participate in, or do not receive the benefit of, the Exchange Offer, the Registration Rights Agreement provides that the Company and the Guarantor will use all reasonable efforts to cause to become effective a shelf registration statement with respect to the resale of the 144A Notes and to keep such shelf registration statement effective until three years after the Issue Date or such shorter period ending when all the 144A Notes have been sold thereunder. The interest rate on the 144A Notes is subject to increase under certain circumstances if the Company and the Guarantor are not in compliance with their obligations under the Registration Rights Agreement. See "Exchange Offer; Registration Rights." 92 DESCRIPTION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE EXCHANGE NOTES The following is a summary of the material United States federal income tax consequences of the acquisition, ownership and disposition of the 144A Notes or the Exchange Notes by a United States Holder (as defined below). This summary deals only with United States Holders that will hold the 144A Notes or the Exchange Notes as capital assets. The discussion does not cover all aspects of federal taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of the 144A Notes or the Exchange Notes by particular investors, and does not address state, local, foreign or other tax laws. In particular, this summary does not discuss all of the tax considerations that may be relevant to certain types of investors subject to special treatment under the federal income tax laws (such as banks, insurance companies, investors liable for the alternative minimum tax, individual retirement accounts and other tax-deferred accounts, tax-exempt organizations, dealers in securities or currencies, investors that will hold the 144A Notes or the Exchange Notes as part of straddles, hedging transactions or conversion transactions for federal tax purposes or investors whose functional currency is not United States Dollars). Furthermore, the discussion below is based on provisions of the Code, and regulations, rulings, and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in U.S. federal income tax consequences different from those discussed below. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP, OR DISPOSITION OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR INTERNATIONAL TAXING JURISDICTION. As used herein, the term "United States Holder" means a beneficial owner of the 144A Notes or the Exchange Notes that is (i) a citizen or resident of the United States for United States federal income tax purposes, (ii) a corporation created or organized under the laws of the United States or any State thereof, (iii) a person or entity that is otherwise subject to United States federal income tax on a net income basis in respect of income derived from the 144A Notes of the Exchange Notes, or (iv) a partnership to the extent the interest therein is owned by a person who is described in clause (i), (ii) or (iii) of this paragraph. INTEREST Interest (including any additional interest paid because of failure to satisfy the requirements of the Registration Rights Agreement ("Additional Interest")) paid on a 144A Note or an Exchange Note will be taxable to a United States Holder as ordinary income at the time it is received or accrued, depending on the holder's method of accounting for tax purposes. ACQUISITION PREMIUM If a United States Holder acquires an Exchange Note or has acquired a 144A Note, in each case, for an amount more than its redemption price, the Holder may elect to amortize such bond premium on a yield to maturity basis. PURCHASE, SALE, EXCHANGE, RETIREMENT AND REDEMPTION OF THE EXCHANGE NOTES In general, a United States Holder's tax basis in an Exchange Note will equal the price paid for the 144A Notes for which such Exchange Note was exchanged pursuant to the Exchange Offer. A United States Holder generally will recognize gain or loss on the sale, exchange, retirement, redemption or other disposition of a 144A Note or an Exchange Note (or portion thereof) equal to the difference between the amount realized on such disposition and the United States Holder's tax basis in the 144A Note or the Exchange Note (or portion thereof). Except to the extent attributable to accrued but unpaid interest, gain or loss recognized on such disposition of a 144A Note or an Exchange Note will be capital gain or loss and 93 will be long-term capital gain or loss if such 144A Note or Exchange Note was held for more than one year. Any such gain will generally be United States source gain. The purchase of an Exchange Note or 144A Note in a subsequent resale may be affected by the market discount provisions of the Code. These rules generally provide that, subject to a statutorily defined DE MINIMIS exception, if a United States Holder purchases an Exchange Note (or purchased a 144A Note) at a "market discount," as defined below, and thereafter recognizes gain upon a disposition of the Exchange Note (including dispositions by gift or redemption), the lesser of such gain (or appreciation, in the case of a gift) or the portion of the market discount that has accrued ("accrued market discount") while the Exchange Note (and its predecessor 144A Note, if any) was held by such United States Holder will be treated as ordinary interest income at the time of disposition rather than as capital gain. For an Exchange Note or a 144A Note, "market discount" is the excess of the stated redemption price at maturity over the tax basis immediately after its acquisition by a United States Holder. Market discount generally will accrue ratably during the period from the date of acquisition to the maturity date of the Exchange Note, unless the United States Holder elects to accrue such discount on the basis of the constant yield method. In lieu of including the accrued market discount in income at the time of disposition, a United States Holder of an Exchange Note acquired at a market discount (or acquired in exchange for a 144A Note acquired at a market discount) may elect to include the accrued market discount in income currently either ratably or using the constant yield method. Once made, such an election applies to all other obligations that the United States Holder purchases at a market discount during the taxable year for which the election is made and in all subsequent taxable years of the United States Holder, unless the Internal Revenue Service consents to a revocation of the election. If an election is made to include accrued market discount in income currently, the basis of an Exchange Note in the hands of the United States Holder will be increased by the accrued market discount thereon, as it is includible in income. BACKUP WITHHOLDING AND INFORMATION REPORTING Payments of interest (including any Additional Interest) and principal on, and the proceeds of sale or other disposition of the 144A Notes or the Exchange Notes payable to a United States Holder may be subject to information reporting requirements, and backup withholding at a rate of 31% will apply to such payments if the United States Holder fails to provide an accurate taxpayer identification number or to report all interest and dividends required to be shown on its federal income tax returns. Certain United States Holders (including, among others, corporations) are not subject to backup withholding. United States Holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such an exemption. 94 BOOK-ENTRY, DELIVERY AND FORM The certificates representing the Exchange Notes will be issued in fully registered form, without coupons. Except as described below, the Exchange Notes will be deposited with, or on behalf of, The Depository Trust Company, New York, New York ("DTC"), and registered in the name of Cede & Co. ("Cede") as DTC's nominee, in the form of a global Exchange Note certificate (the "Global Exchange Note") or will remain in the custody of the Trustee pursuant to the FAST Balance Certificate Agreement between DTC and the Trustee. Holders of Exchange Notes who elect to take physical delivery of their certificates instead of holding their interest through the Global Exchange Note (collectively referred to herein as the "Non-Global Holders") will be issued in registered form a certificated Exchange Note ("Certificated Exchange Note"). Upon the transfer of any Certificated Exchange Note initially issued to a Non-Global Holder, such Certificated Exchange Note will, unless the transferee requests otherwise or the Global Exchange Note has previously been exchanged in whole for Certificated Exchange Notes, be exchanged for an interest in the Global Exchange Note. THE GLOBAL EXCHANGE NOTE. The Company expects that, pursuant to procedures established by DTC, (a) upon deposit of the Global Exchange Note, DTC or its custodian will credit on its internal system the principal amount at maturity of Exchange Notes of the individual beneficial interests represented by such Global Exchange Note to the respective accounts of persons who have accounts with DTC and (b) ownership of beneficial interests in the Global Exchange Note will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC or its nominee (with respect to interests of Participants (as defined herein)) and the records of Participants (with respect to interests of persons other than Participants). Ownership of beneficial interests in the Global Exchange Note will be limited to persons who have accounts with DTC ("Participants") or persons who hold interests through Participants. Qualified Institutional Buyers may hold their interests in the Global Note directly through DTC if they are Participants in such system, or indirectly through organizations which are Participants in such system. So long as DTC, or its nominee, is the registered owner or holder of the Exchange Notes, DTC or such nominee, as the case may be, will be considered the sole owner and holder of the Exchange Notes represented by such Global Exchange Note for all purposes under the Indenture. No beneficial owner of an interest in the Global Exchange Note will be able to transfer such interest except in accordance with DTC's procedures, in addition to those provided for under the Indenture with respect to the Exchange Notes. Payments of the principal of or premium and interest on the Global Exchange Note will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of the Company, the Trustee or any paying agent under the Indenture will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Exchange Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company expects that DTC or its nominee, upon receipt of any payment of the principal of or premium and interest on the Global Exchange Note, will credit Participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Exchange Note as shown on the records of DTC or its nominee. The Company also expects that payments by Participants to owners of beneficial interests in the Global Exchange Note held through such Participants will be governed by standing instructions and customary practice as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such Participants. 95 Transfers between Participants in DTC will be effected in the ordinary way through DTC's same-day funds system in accordance with DTC rules and will be settled in federal funds. If a holder requires physical delivery of a Certificated Exchange Note for any reason, including to sell Exchange Notes to persons in states which require physical delivery of the Exchange Notes or to pledge such securities, such holder must transfer its interest in the Global Exchange Note in accordance with the normal procedures of DTC and with the procedures set forth in the Indenture. DTC has advised the Company that DTC will take any action permitted to be taken by a holder of Exchange Notes (including the presentation of Exchange Notes for exchange as described below) only at the direction of one or more Participants to whose account the DTC interests in the Global Exchange Note are credited and only in respect of such portion of the aggregate principal amount of Exchange Notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the Indenture, DTC will exchange the Global Exchange Note for Certificated Exchange Notes, which it will distribute to its Participants. DTC has advised the Company as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its Participants and facilitate the clearance and settlement of securities transactions between Participants through electronic book-entry changes in accounts of its Participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("Indirect Participants"). Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interest in the Global Exchange Notes among Participants of DTC, it is under no obligation to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC or its Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations. CERTIFICATED EXCHANGE NOTES. If DTC is at any time unwilling or unable to continue as a depository for the Global Exchange Note and a successor depository is not appointed by the Company within 90 days, the Company will issue Certificated Exchange Notes in exchange for the Global Exchange Note. 96 EXCHANGE OFFER; REGISTRATION RIGHTS Pursuant to the Registration Rights Agreement with the Initial Purchasers, the Company agreed to file with the Commission the Exchange Offer Registration Statement of which this Prospectus is a part on an appropriate form under the Securities Act with respect to an offer to exchange the Notes for the Exchange Notes. Upon the effectiveness of the Exchange Offer Registration Statement, the Company will offer to the holders of 144A Notes who are able to make certain representations the opportunity to exchange their 144A Notes for Exchange Notes. If (i) the Company is not permitted to file the Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) the Exchange Offer is not for any other reason consummated within 150 days after the Issue Date, (iii) any holder of 144A Notes notifies the Company within a specified time period that (a) due to a change in law or policy it is not entitled to participate in the Exchange Offer, (b) due to a change in law or policy it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such holder or (c) it is a broker-dealer and owns 144A Notes acquired directly from the Company or an affiliate of the Company or (iv) the holders of a majority of the 144A Notes may not resell the Exchange Notes acquired by them in the Exchange Offer to the public without restriction under the Securities Act and without restriction under applicable blue sky or state securities laws, the Company will file with the Commission the Shelf Registration Statement to cover resales of the Transfer Restricted Notes (as defined herein) by the holders thereof. The Company will use its best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. For purposes of the foregoing, "Transfer Restricted Notes" means each 144A Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a 144A Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such 144A Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement, (iv) the date on which such 144A Note is distributed to the public pursuant to Rule 144(k) under the Securities Act (or any similar provision then in force, but not Rule 144A under the Securities Act), (v) such 144A Note shall have been otherwise transferred by the holder thereof and a new Note not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of such Note shall not require registration or qualification under the Securities Act or any similar state law then in force or (vi) such 144A Note ceases to be outstanding. Under existing Commission interpretations, the Exchange Notes would, in general, be freely transferable after the Exchange Offer without further registration under the Securities Act; PROVIDED that in the case of broker-dealers participating in the Exchange Offer, a prospectus meeting the requirements of the Securities Act must be delivered upon resale by such broker-dealers in connection with resales of the Exchange Notes. The Company has agreed, for period of 180 days after consummation of the Exchange Offer, to make available a prospectus meeting the requirements of the Securities Act to any such broker-dealer for use in connection with any resale of any Exchange Notes acquired in the Exchange Offer. A broker-dealer which delivers such a prospectus to purchasers in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Registration Rights Agreement (including certain indemnification rights and obligations). In addition, the Company has agreed separately with Merrill Lynch to use its best efforts to maintain a market-making prospectus to enable Merrill Lynch to make a market in the Notes, although Merrill Lynch is not obligated to do so. Each holder of 144A Notes that wishes to exchange such 144A Notes for Exchange Notes in the Exchange Offer will be required to make certain representations, including representations that (i) any 97 Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it has no arrangement with any person to participate in the distribution of the Exchange Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company, or if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the holder is not a broker-dealer, it will be required to represent that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes. If the holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities, it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Company has agreed to pay all expenses incident to the Exchange Offer and will indemnify the Initial Purchasers against certain liabilities, including liabilities under the Securities Act. The Registration Rights Agreement provides that: (i) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company will use its best efforts to file the Exchange Offer Registration Statement with the Commission on or prior to 60 days after the Issue Date, (ii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company will use its best efforts to have the Exchange Offer Registration Statement declared effective by the Commission on or prior to 120 days after the Issue Date, (iii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company will commence the Exchange Offer and use its best efforts to issue on or prior to 150 days after the Issue Date, Exchange Notes in Exchange for all 144A Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file the Shelf Registration Statement, the Company will use its best efforts to file prior to the later of (a) 90 days after the Issue Date or (b) 30 days after such filing obligation arises and use their best efforts to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 60 days after such obligation arises; PROVIDED that if the Company has not consummated the Exchange Offer within 150 days of the Issue Date, then the Company will file the Shelf Registration Statement with the Commission on or prior to the 151st day after the Issue Date. The Company shall use its best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended until the third anniversary (or such shorter period as required by Rule 144(k) under the Securities Act) of the effective date of the Shelf Registration Statement or such shorter period that will terminate when all the Transfer Restricted Notes covered by the Shelf Registration Statement have been sold pursuant thereto. If (i) the Company fails to file any of the registration statements required by the Registration Rights Agreement on or before the date specified for such filing, (ii) any of such registration statements are not declared effective by the Commission on or prior to the date specified for such effectiveness (the "Effectiveness Target Date"), subject to certain limited exceptions, (iii) the Company fails to consummate the Exchange Offer within 30 days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement, or (iv) the Shelf Registration Statement is declared effective but thereafter, subject to certain limited exceptions, ceases to be effective or usable in connection with resales of Transfer Restricted Notes, as the case may be, during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (i) through (iv) above, a "Registration Default"), then the interest rate on Transfer Restricted Notes will accrue at a rate PER ANNUM equal to an additional one quarter of one percent (0.25%) of the principal amount of the Notes upon the occurrence of each Registration Default, which rate will increase by one quarter of one percent (0.25%) each 90-day period that such additional interest continues to accrue under any such circumstance, with an aggregate maximum increase in the interest rate equal to one percent (1%) PER ANNUM. Following the cure of all Registration Defaults, the accrual of additional interest will cease and the interest rate will revert to the original rate. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of the form of which will be available upon request to the Company. 98 PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account ("Participating Broker-Dealer") pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for 144A Notes where such 144A Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale and Participating Broker-Dealers shall be authorized to deliver this Prospectus for a period not exceeding 180 days after the Expiration Date. In addition, until (90 days after the date of this Prospectus), all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sales of the Exchange Notes by Participating Broker-Dealers. Exchange Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time, in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer that resells the Exchange Notes that were received by it for its own account pursuant to the Exchange Offer. Any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any omissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Participating Broker-Dealer that requests such documents in the Letter of Transmittal. See "The Exchange Offer." MLCP, an affiliate of Merrill Lynch, holds together with its affiliates in the aggregate approximately 91% of the outstanding shares of BBC Common Stock. If Merrill Lynch conducts any market-making activities in the Exchange Notes, it may be required to deliver a "market-making prospectus," registered with the Commission, when effecting offers and sales in the Exchange Notes because of such equity ownership of the Company by MLCP. Merrill Lynch has no obligation to make a market in the 144A Notes or the Exchange Notes, and may discontinue its market-making activities at any time without notice, at its sole discretion. BT Securities Corporation is an affiliate of BTCo., the agent and a lender under both the Existing Credit Agreement and the New Credit Agreement, and BTCo. has received and will receive customary fees in connection therewith. 99 LEGAL MATTERS The validity of the Notes and the Note Guarantees offered hereby will be passed upon for the Company and BBC by Wachtell, Lipton, Rosen & Katz, New York, New York. Wachtell, Lipton, Rosen & Katz will rely upon an opinion provided by Rogers & Hardin, Atlanta, Georgia, as to certain matters of Georgia law. EXPERTS The consolidated financial statements of the Company as of October 28, 1995 and October 29, 1994, and for each of the three years in the period ended October 28, 1995, included in this Prospectus have been audited by Arthur Andersen, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. 100 BLUE BIRD CORPORATION AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE --------- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS................................................................... F-2 AUDITED CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets as of October 28, 1995 and October 29, 1994.................................. F-3 Consolidated Statements of Income for the Years Ended October 28, 1995, October 29, 1994 and October 30, 1993................................................................................................... F-5 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended October 28, 1995, October 29, 1994 and October 30, 1993.......................................................................... F-6 Consolidated Statements of Cash Flows for the Years Ended October 28, 1995, October 29, 1994 and October 30, 1993............................................................................................... F-7 NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS......................................................... F-8 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Unaudited Condensed Consolidated Balance Sheets as of July 27, 1996 and October 28, 1995................. F-20 Unaudited Condensed Consolidated Statements of Income for the three-month and nine-month periods ended July 27, 1996 and July 29, 1995............................... F-21 Unaudited Condensed Consolidated Statements of Cash Flows for the nine-month periods ended July 27, 1996 and July 29, 1995............................................... F-22 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............................................. F-23
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Blue Bird Corporation: We have audited the accompanying consolidated balance sheets of BLUE BIRD CORPORATION (a Delaware corporation) AND SUBSIDIARIES as of October 28, 1995 and October 29, 1994 and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended October 28, 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 Blue Bird Corporation and subsidiaries as of October 28, 1995 and October 29, 1994 and the results of their operations and their cash flows for each of the three years in the period ended October 28, 1995 in conformity with generally accepted accounting principles. Arthur Andersen LLP Atlanta, Georgia December 14, 1995 F-2 BLUE BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 28, 1995 AND OCTOBER 29, 1994
ASSETS 1995 1994 - --------------------------------------------------------------------------------- -------------- -------------- CURRENT ASSETS: Cash and cash equivalents...................................................... $ 21,452,114 $ 10,489,786 Trade receivables.............................................................. 18,865,820 14,263,586 Leases receivable.............................................................. 47,222,024 29,991,634 Inventories.................................................................... 83,346,271 75,784,770 Other current assets........................................................... 6,946,710 7,381,495 -------------- -------------- Total current assets....................................................... 177,832,939 137,911,271 -------------- -------------- LEASES RECEIVABLE, noncurrent.................................................... 15,000,000 0 -------------- -------------- PROPERTY, PLANT, AND EQUIPMENT: Land........................................................................... 4,079,545 2,168,957 Buildings...................................................................... 16,898,812 13,907,637 Machinery and equipment........................................................ 26,782,544 24,109,830 Automobiles, trucks, and airplane.............................................. 4,847,494 4,488,983 Office furniture and equipment................................................. 4,844,284 4,332,150 Construction in progress....................................................... 1,419,916 6,216,205 -------------- -------------- 58,872,595 55,223,762 Less accumulated depreciation.................................................. (21,860,349) (16,308,088) -------------- -------------- Net property, plant, and equipment......................................... 37,012,246 38,915,674 OTHER ASSETS: Deferred debt issuance costs, net of accumulated amortization of $7,764,807 and $5,519,628 in 1995 and 1994, respectively.................................... 4,111,690 5,606,869 Goodwill, net of accumulated amortization of $13,567,500 and $9,707,500 in 1995 and 1994, respectively....................................................... 139,124,106 142,984,106 Noncompete agreement, net of accumulated amortization of $5,000,000 and $4,167,133 in 1995 and 1994, respectively.................................... 0 832,867 Land and idle facilities....................................................... 2,723,347 2,723,347 Other assets................................................................... 3,987,332 3,882,464 -------------- -------------- Total other assets......................................................... 149,946,475 156,029,653 -------------- -------------- Total assets............................................................... $ 379,791,660 $ 332,856,598 -------------- -------------- -------------- --------------
F-3 BLUE BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) OCTOBER 28, 1995 AND OCTOBER 29, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 - --------------------------------------------------------------------------------- -------------- -------------- CURRENT LIABILITIES: Revolving credit facility...................................................... $ 35,661,573 $ 0 Current portion of long-term debt.............................................. 12,000,000 10,000,000 Trade accounts payable......................................................... 25,743,234 25,053,630 Deposits and amounts due customers............................................. 4,021,274 3,893,705 Income taxes payable........................................................... 6,926,161 1,745,520 Accrued warranty............................................................... 5,455,110 6,055,110 Other accrued liabilities...................................................... 16,766,138 17,074,140 Deferred income taxes.......................................................... 9,534,962 8,795,783 -------------- -------------- Total current liabilities.................................................. 116,108,452 72,617,888 -------------- -------------- LONG-TERM LIABILITIES: Long-term debt................................................................. 111,000,000 123,000,000 Bonds payable.................................................................. 2,750,000 2,750,000 Accrued pension expense........................................................ 8,435,662 7,906,453 Deferred compensation.......................................................... 1,157,435 1,244,959 Deferred income taxes.......................................................... 5,898,112 6,632,280 Other long-term liabilities.................................................... 10,942,778 12,342,773 -------------- -------------- Total long-term liabilities................................................ 140,183,987 153,876,465 -------------- -------------- COMMITMENTS AND CONTINGENCIES (Notes 10 and 11) REDEEMABLE COMMON STOCK, $.01 par value; 720,000 shares issued and outstanding in 1995 and 1994 (Note 8)......................................................... 24,672,000 21,348,000 STOCK SUBSCRIPTIONS RECEIVABLE (Note 8).......................................... (3,800,000) (3,800,000) -------------- -------------- 20,872,000 17,548,000 -------------- -------------- STOCKHOLDERS' EQUITY: Common stock, $.01 par value, 25,000,000 shares authorized, 7,704,778 shares issued and outstanding in 1995 and 1994...................................... 77,048 77,048 Additional paid-in capital..................................................... 77,022,956 77,022,956 Retained earnings.............................................................. 27,895,901 14,368,280 Minimum pension liability adjustment........................................... 0 (400,000) Cumulative translation adjustments............................................. (2,368,684) (2,254,039) -------------- -------------- Total stockholders' equity................................................. 102,627,221 88,814,245 -------------- -------------- Total liabilities and stockholders' equity................................. $ 379,791,660 $ 332,856,598 -------------- -------------- -------------- --------------
The accompanying notes are an integral part of these consolidated balance sheets. F-4 BLUE BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
1995 1994 1993 -------------- -------------- -------------- NET SALES....................................................... $ 517,444,172 $ 476,240,848 $ 413,492,427 COST OF GOODS SOLD.............................................. 430,667,432 392,938,251 340,513,350 -------------- -------------- -------------- GROSS PROFIT.................................................... 86,776,740 83,302,597 72,979,077 -------------- -------------- -------------- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................... 39,795,821 39,038,361 36,225,471 AMORTIZATION OF GOODWILL AND NONCOMPETE AGREEMENTS.............. 4,692,867 5,567,000 5,656,802 -------------- -------------- -------------- 44,488,688 44,605,361 41,882,273 -------------- -------------- -------------- OPERATING INCOME................................................ 42,288,052 38,697,236 31,096,804 INTEREST INCOME................................................. 4,618,315 4,056,013 2,944,582 INTEREST EXPENSE................................................ (18,537,244) (17,405,932) (18,183,788) OTHER INCOME, NET............................................... 168,554 217,613 667,142 -------------- -------------- -------------- INCOME BEFORE INCOME TAXES...................................... 28,537,677 25,564,930 16,524,740 PROVISION FOR INCOME TAXES...................................... (11,686,056) (10,157,248) (6,929,861) -------------- -------------- -------------- NET INCOME...................................................... $ 16,851,621 $ 15,407,682 $ 9,594,879 -------------- -------------- -------------- -------------- -------------- --------------
The accompanying notes are an integral part of these consolidated statements. F-5 BLUE BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
MINIMUM ADDITIONAL CUMULATIVE CUMULATIVE PENSION COMMON PAID-IN RETAINED TRANSLATION LIABILITY STOCK CAPITAL EARNINGS ADJUSTMENTS ADJUSTMENT --------- ------------- ------------- ------------- ----------- BALANCE, October 31, 1992................... $ 77,000 $ 76,923,000 $ (518,001) $ (628,192) $ 0 Net income.............................. 0 0 9,594,879 0 0 Purchase of redeemable common stock..... 0 0 150,920 0 0 Accretion of redeemable common stock.... 0 0 (3,700,800) 0 0 Translation adjustments................. 0 0 0 (1,194,152) 0 --------- ------------- ------------- ------------- ----------- BALANCE, October 30, 1993................... 77,000 76,923,000 5,526,998 (1,822,344) 0 Net income.............................. 0 0 15,407,682 0 0 Issuance of common stock................ 48 99,956 0 0 0 Accretion of redeemable common stock.... 0 0 (6,566,400) 0 0 Translation adjustments................. 0 0 0 (431,695) 0 Minimum pension liability adjustment.... 0 0 0 0 (400,000) --------- ------------- ------------- ------------- ----------- BALANCE, October 29, 1994................... 77,048 77,022,956 14,368,280 (2,254,039) (400,000) Net income.............................. 0 0 16,851,621 0 0 Accretion of redeemable common stock.... 0 0 (3,324,000) 0 0 Translation adjustments................. 0 0 0 (114,645) 0 Minimum pension liability adjustment.... 0 0 0 0 400,000 --------- ------------- ------------- ------------- ----------- BALANCE, October 28, 1995................... $ 77,048 $ 77,022,956 $ 27,895,901 $ (2,368,684) $ 0 --------- ------------- ------------- ------------- ----------- --------- ------------- ------------- ------------- -----------
The accompanying notes are an integral part of these consolidated statements. F-6 BLUE BIRD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993
1995 1994 1993 -------------- -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income..................................................... $ 16,851,621 $ 15,407,682 $ 9,594,879 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.............................. 12,558,707 13,521,452 14,038,249 Increase in cash surrender value of life insurance......... (234,103) (116,467) (144,443) Deferred income taxes...................................... 5,011 (1,707,636) 4,715,018 Other...................................................... 0 0 (560,248) Changes in assets and liabilities: Trade receivables........................................ (4,602,234) 3,927,301 3,156,949 Inventories.............................................. (7,561,501) (591,991) (5,545,987) Trade accounts payable................................... 689,604 1,088,116 8,442,150 Income taxes payable..................................... 5,180,641 1,201,942 (6,755,617) Other current liabilities................................ (1,778,792) 3,055,578 (8,393,861) Other.................................................... 185,669 640,166 692,621 Total adjustments...................................... 4,443,002 21,018,461 9,644,831 -------------- -------------- -------------- Net cash provided by operating activities.............. 21,294,623 36,426,143 19,239,710 -------------- -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant, and equipment acquisitions.................... (3,648,833) (8,594,212) (1,127,374) Increases in leases receivable................................. (32,230,390) (1,331,603) (9,070,155) -------------- -------------- -------------- Net cash (used in) investing activities................ (35,879,223) (9,925,815) (10,197,529) -------------- -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under bank credit agreements and revolving credit line........................................ 25,661,573 (26,100,000) 4,100,000 Payment of escrow note payable................................. 0 0 (9,725,163) Stock redemption............................................... 0 0 (522,480) Other.......................................................... 0 100,004 0 -------------- -------------- -------------- Net cash provided by (used in) financing activities.... 25,661,573 (25,999,996) (6,147,643) -------------- -------------- -------------- EFFECT OF EXCHANGE RATE FLUCTUATIONS............................. (114,645) (431,695) (1,194,152) -------------- -------------- -------------- NET INCREASE IN CASH AND CASH EQUIVALENTS........................ 10,962,328 68,637 1,700,386 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................... 10,489,786 10,421,149 8,720,763 -------------- -------------- -------------- CASH AND CASH EQUIVALENTS AT END OF YEAR......................... $ 21,452,114 $ 10,489,786 $ 10,421,149 -------------- -------------- -------------- -------------- -------------- -------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest....................................................... $ 14,959,218 $ 13,856,104 $ 16,517,235 -------------- -------------- -------------- -------------- -------------- -------------- Income taxes................................................... $ 4,038,000 $ 10,224,110 $ 8,830,514 -------------- -------------- -------------- -------------- -------------- --------------
The accompanying notes are an integral part of these consolidated statements. F-7 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 1. NATURE OF BUSINESS Blue Bird Corporation and subsidiaries ("BBC" or the "Company") are engaged in the manufacture and assembly of school buses, commercial buses, and recreational vehicles. BBC has facilities in the United States, Canada, and Mexico. FISCAL YEAR BBC's fiscal year ends on the Saturday nearest October 31 of each year, generally referred to as a "52-/53-week year." Fiscal years 1995, 1994, and 1993 contained 52 weeks. ACQUISITION ACCOUNTING AND VALUATION On April 15, 1992, BBC acquired all of the outstanding capital stock of Blue Bird Body Company and subsidiaries (the "Predecessor") through the merger of BB Acquisition Corp., a wholly owned subsidiary of BBC, with and into the Predecessor, with the Predecessor as the surviving corporation. The acquisition was accounted for as a purchase. The excess purchase price over the fair value of the net assets, as adjusted, of $152,691,606 was allocated to goodwill. The goodwill is being amortized using the straight-line method over 40 years. BBC periodically reviews the value assigned to goodwill to determine whether it has been permanently impaired by adverse conditions affecting BBC. The Company uses an estimate of its undiscounted net income over the remaining life of the goodwill in measuring whether the goodwill is recoverable. Management is of the opinion that there has been no diminution in the value assigned to goodwill. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of BBC and its domestic and foreign subsidiaries (owned 100% by BBC). All significant intercompany transactions and accounts have been eliminated in consolidation. TRANSLATION AND REMEASUREMENT OF FOREIGN CURRENCIES For the purpose of consolidation, the accounts for certain foreign subsidiaries and foreign branches of domestic subsidiaries of the U.S. parent are translated into U.S. dollars. Foreign currency assets and liabilities are translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using the weighted average exchange rates in effect during the period. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are accumulated as part of the cumulative translation adjustments in the stockholders' equity section. One foreign subsidiary (the "Subsidiary") of the U.S. parent transacts sales denominated in U.S. dollars, while the Company provides inventory and financing. Accordingly, the U.S. dollar is deemed to be the functional currency. The Subsidiary does not maintain its books in U.S. dollars but remeasures its monetary assets and liabilities at balance sheet date rates, its nonmonetary items at historical rates, and income and expense amounts at the weighted average rates in effect for the period, except for depreciation and cost of goods sold which use historical rates. The effects of exchange rate fluctuations on the F-8 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 1. NATURE OF BUSINESS (CONTINUED) remeasurement of the Subsidiary's financial statements are recognized as exchange gains or losses on the statement of income. The Company recognizes exchange gains and losses from foreign currency transactions as other income or expense for the period. A loss of approximately $617,000 was recorded in fiscal 1995. A gain of approximately $5,000 and a loss of approximately $499,000 were recorded in fiscal years 1994 and 1993, respectively. FINANCIAL INSTRUMENTS BBC's financial instruments consist primarily of cash and cash equivalents, trade receivables, leases receivable, accounts payable, revolving credit facility, long-term debt, and certain interest rate agreements (Note 4). At October 28, 1995, the estimated fair value of BBC's senior subordinated debt was $79,875,000. The fair value of the senior subordinated debt was based on the discounted values of their related cash flows at current market interest rates. In management's opinion, the carrying amounts of all other financial instruments approximate their fair values at October 28, 1995. REVENUE RECOGNITION BBC recognizes revenue on sales when the related product has been delivered to the customer and title has passed or full payment has been received from the customer and the product is completed and awaiting customer pickup. CASH AND CASH EQUIVALENTS BBC considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost or market, cost being determined on the last-in, first-out ("LIFO") basis. Such costs include raw materials, direct labor, and manufacturing overhead. If the first-in, first-out method had been used, inventories would have been approximately $85,900,000 at October 28, 1995 and approximately $75,100,000 at October 29, 1994. The components of inventory as of October 28, 1995 and October 29, 1994 consist of the following:
1995 1994 ------------- ------------- Raw materials.................................................. $ 32,463,235 $ 28,013,874 Work in process................................................ 22,830,735 25,515,795 Finished goods................................................. 28,052,301 22,255,101 ------------- ------------- Total inventories (LIFO cost).............................. $ 83,346,271 $ 75,784,770 ------------- ------------- ------------- -------------
F-9 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 1. NATURE OF BUSINESS (CONTINUED) PROPERTY, PLANT, AND EQUIPMENT Property, plant and equipment were stated at their fair market values at the date of acquisition. Assets purchased since the acquisition are stated at cost. All assets are being depreciated on a straight-line basis over their estimated useful lives. The following represent the estimated useful lives of the assets: 20-33 Buildings....................................................... years Machinery and equipment......................................... 5-10 years Automobiles, trucks, and airplane............................... 3-5 years Office furniture and equipment.................................. 3-10 years
Expenditures for property and repair costs which substantially increase useful lives are capitalized. Currently, normal maintenance and repair costs are charged to expense as incurred. Gains and losses on disposals of property, plant, and equipment are reflected in current income. Interest costs for the construction of certain long-term assets are capitalized and amortized over the related assets' estimated useful lives. The Company capitalized net interest costs of approximately $208,237 for the year ended October 28, 1995 and $145,000 for the year ended October 29, 1994. Depreciation expense of $5,575,840, $5,608,035, and $5,951,843 was recorded for the years ended October 28, 1995, October 29, 1994, and October 30, 1993, respectively. LAND AND IDLE FACILITIES BBC currently has land and idle facilities held for sale located in Buena Vista, Virginia. The estimated fair value of the land and facilities is included as land and idle facilities in the accompanying balance sheets. PRODUCT WARRANTY COSTS The provision for estimated warranty costs is recorded in the year the unit is sold. Warranty costs totaled $5,313,438, $6,679,409, and $5,247,913 for the years ended October 28, 1995, October 29, 1994, and October 30, 1993, respectively. NONCOMPETE AGREEMENTS BBC assigned $5,000,000 to noncompete agreements with the former owners. The related assets were amortized over three years. Amortization expense totaled $833,000, $1,667,000, and $1,667,000 for the years ended October 28, 1995, October 29, 1994, and October 30, 1993, respectively. ACCOUNTING STANDARDS YET TO BE ADOPTED In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which the Company is required to adopt in fiscal year 1997. SFAS No. 123 requires companies to estimate the value of all F-10 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 1. NATURE OF BUSINESS (CONTINUED) stock-based compensation using a recognized pricing model. Companies have the option to recognize this value as an expense to disclose its pro forma effects on net income. The Company's management has not yet determined its method of adoption or the financial statement impact of adopting SFAS No. 123. Other issued but not yet required FASB standards are not currently applicable to the Company's operations. RECLASSIFICATIONS Certain October 29, 1994 balances have been reclassified to conform with the October 28, 1995 presentation. 2. LEASES RECEIVABLE Under the terms of the Bank Credit Agreement discussed in Note 4, BBC is required to sell leases receivable to a bank once certain levels of lease receivables are exceeded. Under the original agreement, as leases were sold, the purchaser established a holdback reserve. However, during 1994, the agreement was modified such that the holdback reserve has been replaced with a letter of credit. The letter of credit fluctuates based on the amount of sold leases and was $1,000,000 and $1,500,000 at October 28, 1995 and October 29, 1994, respectively. During 1995, BBC amended the Bank Credit Agreement to allow BBC to hold more leases receivable. As part of the amendment, BBC created a new subsidiary, Blue Bird Capital Corporation ("Blue Bird Capital") which acts as the holding agent and administrator of the incremental leases allowed by the amended credit agreement. BBC finances the sale of buses to school districts, other tax-exempt municipalities, and contractors under sales-type leases. Lease terms range from one to seven years and contain a bargain purchase option at the end of the lease term. Under the lease terms, the lessee bears substantially all risks of ownership. BBC retains a lien on the title until all lease payments have been made. The net investment in leases arising from these arrangements as of October 28, 1995 and October 29, 1994 was as follows:
1995 1994 ------------- ------------- Leases......................................................... $ 71,803,080 $ 34,887,109 Unearned interest revenue...................................... (9,581,056) (4,895,475) ------------- ------------- Net leases receivable.......................................... $ 62,222,024 $ 29,991,634 ------------- ------------- ------------- -------------
Interest income recognized on leases receivable was $2,914,928, $2,652,570, and $1,797,073 for the years ended October 28, 1995, October 29, 1994, October 30, 1993, respectively. F-11 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 3. NET CASH SURRENDER VALUE OF LIFE INSURANCE Details of the net cash surrender value of life insurance on the lives of individuals in whom BBC has an insurable interest as of October 28, 1995 and October 29, 1994 are as follows:
1995 1994 ------------- ------------- Cash values..................................................... $ 7,193,239 $ 6,959,136 Less life insurance loans..................................... (4,458,000) (4,458,000) ------------- ------------- Net cash surrender value, included in other assets.............. $ 2,735,239 $ 2,501,136 ------------- ------------- ------------- -------------
4. DEBT Outstanding debt at October 28, 1995 and October 29, 1994 consisted of the following:
1995 1994 -------------- -------------- Bank term loan, principal and interest payable in quarterly installments through October 15, 1998; interest payable at the option of BBC at either the prime rate plus .75% or the Eurodollar rate plus 1.75%; interest rate at 7.625% on October 28, 1995; collateralized by all real, personal, and mixed property, as defined........................................................................ $ 48,000,000 $ 58,000,000 11.75% Series B senior subordinated notes, due April 15, 2002; interest payable semiannually; sinking fund deposits of $18,750,000 due on April 15, 2000 and April 15, 2001; subordinated to senior debt.................................... 75,000,000 75,000,000 Revolving credit facility with final maturity on September 15, 1997; interest payable quarterly at the option of BBC at either the prime rate or the Eurodollar rate plus 1.25%; collateralized by all Blue Bird Capital stock...... 35,661,573 0 Industrial development bonds, due March 2001; interest payable quarterly; interest rate at 3.95% on October 28, 1995; secured by a letter of credit...... 2,750,000 2,750,000 -------------- -------------- 161,411,573 135,750,000 Less: Current portion of debt........................................................ 12,000,000 10,000,000 Revolving credit facility...................................................... 35,661,573 0 -------------- -------------- Long-term debt and bonds payable................................................. $ 113,750,000 $ 125,750,000 -------------- -------------- -------------- --------------
On April 15, 1992, BBC entered into a $170,000,000 bank credit agreement with Bankers Trust Company (the "Bank Credit Agreement"), secured by the capital stock of BBC and 66% of the capital stock of Canadian Blue Bird Coach, Ltd. (a wholly-owned subsidiary of BBC). The Bank Credit Agreement provides for a term loan and a revolving credit facility comprised of working capital loans and swing line loans. The revolving credit facility matures in October 1998 and requires interest payable quarterly at the option of BBC. Interest rates on the working capital loans is the prime rate plus .75% or the Eurodollar rate plus 1.75% and is the prime rate plus .25% on the swing line loans. The weighted average interest rate of the revolving credit facility for the years ended October 28, 1995 and October 29, 1994 was F-12 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 4. DEBT (CONTINUED) 8.65% and 7.03%, respectively. The revolving credit facility is collateralized by all real, personal, and mixed property, as defined. No amounts were outstanding under this revolving credit facility at October 28, 1995 or October 29, 1994. The Bank Credit Agreement contains certain restrictive covenants. The most restrictive covenants include (a) a maximum leverage ratio, as defined, (b) a minimum fixed charge coverage ratio, as defined, (c) a minimum interest coverage ratio, as defined, (d) limitations of capital expenditures, and (e) certain restrictions on dividend distributions, as defined. All of these covenants have been met as of October 28, 1995. The maximum available borrowing amount on the Bank Credit Agreement revolving credit facility, as amended, is $77,000,000. The revolving credit facility requires quarterly payment of a commitment fee equal to .375% per annum of the daily unused portion. In connection with the creation of Blue Bird Capital (Note 2), BBC negotiated a new credit facility (the "New Facility") with LaSalle National Bank. The maximum capacity of the New Facility is $50,000,000 subject to meeting certain covenants, as defined. The New Facility requires quarterly payments of a commitment fee equal to .125% PER ANNUM of the daily unused portion and contains certain restrictive covenants. The most restrictive covenants include net income, tangible net worth, and interest coverage ratio. All of these financial ratios have been met as of October 28, 1995. In connection with the Bank Credit Agreement, BBC purchased interest rate caps with notional principal amounts totaling $76,000,000 in order to reduce the impact of changes in interest rates on its floating rate long-term debt. The interest rate agreements mature at dates ranging from April 1996 to April 1998. The industrial development bonds accrue interest based on a variable weekly interest rate, with interest payments due quarterly. An irrevocable letter of credit backing the bonds has been issued by Wachovia Bank of Georgia, N.A. This letter of credit requires adherence to certain terms and financial ratios which are the same or less restrictive than those under the revolving credit facilities and term loan, all of which have been met as of October 28, 1995. The future minimum principal payments by fiscal year of outstanding debt at October 28, 1995 are as follows: 1996.......................................................... $47,661,573 1997.......................................................... 16,000,000 1998.......................................................... 20,000,000 1999.......................................................... 0 2000.......................................................... 18,750,000 Thereafter.................................................... 59,000,000 ----------- $161,411,573 ----------- -----------
5. INCOME TAXES BBC follows the provisions of SFAS No. 109, "Accounting for Income Taxes," for financial reporting purposes. SFAS No. 109 requires, among other things, the determination of deferred income taxes using F-13 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 5. INCOME TAXES (CONTINUED) the liability method, under which deferred tax assets and liabilities are determined based on the differences between the financial accounting and tax bases of assets and liabilities. Deferred tax assets or liabilities at the end of each period are determined using the currently enacted tax rates to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be settled or realized. The components of the net deferred tax liability are as follows:
1995 1994 -------------- -------------- Total deferred tax liabilities................................ $ 31,759,029 $ 32,025,470 Total deferred tax assets..................................... (16,325,955) (16,597,407) -------------- -------------- Net deferred tax liability.................................... $ 15,433,074 $ 15,428,063 -------------- -------------- -------------- --------------
The sources and differences between the financial accounting and tax basis of BBC's assets and liabilities which give rise to the deferred tax liabilities are as follows:
1995 1994 ------------- ------------- Deferred tax liabilities: Stepped-up basis in net assets............................... $ 20,633,323 $ 20,297,173 Depreciation................................................. 2,520,201 3,149,033 Other........................................................ 8,603,505 8,579,264 ------------- ------------- $ 31,757,029 $ 32,025,470 ------------- ------------- ------------- ------------- Deferred tax assets: Warranty reserves............................................ $ 5,198,629 $ 5,443,466 Pension reserve.............................................. 1,935,666 2,144,950 Deferred compensation reserve................................ 3,053,529 2,617,997 Workers' compensation reserve................................ 1,656,866 1,589,726 Foreign tax credit carryovers................................ 0 575,000 Other........................................................ 4,481,265 4,226,268 ------------- ------------- $ 16,325,955 $ 16,597,407 ------------- ------------- ------------- -------------
F-14 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 5. INCOME TAXES (CONTINUED) The components of the provision (benefit) for income taxes are as follows as of October 28, 1995, October 29, 1994, and October 30, 1993:
1995 1994 1993 ------------- ------------- ------------ Current: Federal............................................................ $ 9,945,714 $ 10,956,249 $ 1,334,417 Foreign............................................................ 542,000 410,894 711,889 State.............................................................. 1,193,331 1,072,741 168,537 ------------- ------------- ------------ Current, total....................................................... 11,681,045 12,439,884 2,214,843 ------------- ------------- ------------ Deferred: Federal and state.................................................. 5,011 (2,278,490) 4,773,018 Foreign............................................................ 0 (4,146) (58,000) ------------- ------------- ------------ Deferred, net........................................................ 5,011 (2,282,636) 4,715,018 ------------- ------------- ------------ Tax provision, net................................................... $ 11,686,056 $ 10,157,248 $ 6,929,861 ------------- ------------- ------------ ------------- ------------- ------------
BBC had available U.S. foreign tax credit carryovers of approximately $0, $575,000 and $1,916,000 at October 28, 1995, October 29, 1994, and October 30, 1993, respectively. Income from foreign operations was approximately $340,000, $1,410,000, and $1,575,000 for the years ended October 28, 1995, October 1994, and October 30, 1993, respectively. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. At the acquisition date, there was significant uncertainty regarding the Company's ability to generate enough foreign source taxable income to enable it to utilize the foreign tax credit carryovers existing at that date. Therefore, at the acquisition date, the Company's management established a valuation allowance equal to the foreign tax credit carryovers. As a result of improved economic conditions in the Company's domestic and international markets during 1994, the Company began generating sufficient foreign source taxable income to allow the utilization of approximately $1,341,000 of the foreign tax credit carryovers. Further, management believed that the remaining foreign tax credit carryovers of $575,000 were more likely than not to be realized. Therefore, during 1994, the Company decreased the valuation allowance by $1,916,000. In accordance with SFAS No. 109, the change in the valuation allowance was recorded as a reduction in goodwill rather than as a reduction in the provision for income taxes. F-15 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 5. INCOME TAXES (CONTINUED) The income tax provision as of October 28, 1995, October 29, 1994, and October 30, 1993 differs from the amount computed by applying the statutory rates for U.S. federal income taxes to income before income taxes because of the following:
1995 1994 1993 ------------- ------------- ------------ Income tax computed at statutory rates..................... $ 9,988,188 $ 8,947,726 $ 5,618,412 Foreign tax impact......................................... (119,078) (86,608) 116,943 Tax-exempt interest income................................. (700,359) (286,294) (276,503) State income taxes, net of federal income tax effect....... 775,665 562,360 612,968 Goodwill amortization...................................... 1,307,024 1,321,381 1,313,880 Other...................................................... 434,616 (301,317) (455,839) ------------- ------------- ------------ $ 11,686,056 $ 10,157,248 $ 6,929,861 ------------- ------------- ------------ ------------- ------------- ------------
6. BENEFIT PLANS PENSION PLANS BBC has several defined benefit pension plans and a defined contribution plan covering substantially all domestic employees and a defined contribution plan for Canadian employees. Total pension expenses amounted to $3,399,151, $2,785,030, and $2,537,613 for the years ended October 28, 1995, October 29, 1994, and October 30, 1993, respectively. The board of directors adopted a supplemental excess retirement plan effective January 1, 1991. This plan is restricted to certain key executives and is not qualified under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and is unfunded. The board of directors adopted a supplemental excess retirement plan in the form of a rabbi trust (a grantor trust set up to fund deferred compensation for certain individuals as allowed under the Internal Revenue Code of 1986, as amended) effective November 1, 1995. This plan is restricted to certain executives and is not qualified under ERISA and is not funded. BBC's funding policy is to contribute the net periodic pension cost accrued each year to the U.S. salaried and hourly defined benefit plans. However, the contribution will not be less than the minimum required contribution under ERISA or greater than the maximum tax-deductible contribution. Net pension cost for the U.S. defined benefit plans includes the following as of October 28, 1995, October 29, 1994 and October 30, 1993:
1995 1994 1993 ------------ ------------ ------------ Service costs/benefits earned during the period............... $ 1,337,279 $ 1,246,107 $ 1,107,207 Interest costs on projected benefit obligations............... 3,320,053 3,025,245 2,877,482 Return on plan assets......................................... (8,189,694) (1,069,849) (2,504,009) Net amortization and deferral................................. 5,453,920 (1,630,964) 0 ------------ ------------ ------------ Net periodic pension costs.................................... $ 1,921,558 $ 1,570,539 $ 1,480,680 ------------ ------------ ------------ ------------ ------------ ------------
F-16 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 6. BENEFIT PLANS (CONTINUED) The following table sets forth these plans' funded status at October 28, 1995:
PLAN PLAN ASSETS ACCUMULATED IN EXCESS OF BENEFITS IN ACCUMULATED EXCESS OF UNQUALIFIED RABBI BENEFITS ASSETS PLAN TRUST -------------- -------------- ------------- ---------- Pension benefit obligation: Vested Benefits........................... $ (26,042,529) $ (12,187,890) $ (1,890,539) $ (55,079) Nonvested benefits........................ (94,224) (765,474) 0 0 -------------- -------------- ------------- ---------- Accumulated benefit obligation.............. $ (26,136,753) $ (12,953,364) $ (1,890,539) $ (55,079) -------------- -------------- ------------- ---------- -------------- -------------- ------------- ---------- Projected benefit obligation................ $ (31,740,630) $ (12,953,364) $ (1,890,539) $ (55,079) Market value of plan assets................. 31,169,464 11,345,581 0 0 -------------- -------------- ------------- ---------- Unfunded projected benefit obligation....... (571,166) (1,607,783) (1,890,539) (55,079) Unrecognized net (gain) loss................ (3,491,025) 873,517 0 0 Unrecognized prior service costs............ (629,471) (1,211,507) 0 0 Other adjustment............................ (12,672) 0 0 0 Adjustment required to recognize minimum liability................................. 0 337,990 0 0 -------------- -------------- ------------- ---------- Pension liability recognized in balance sheets.................................... $ (4,704,334) $ (1,607,783) $ (1,890,539) $ (55,079) -------------- -------------- ------------- ---------- -------------- -------------- ------------- ----------
Assets of the salaried and hourly plans are invested primarily in U.S. government securities, common stock funds, cash management funds, and insurance company group annuity contracts. For 1995 and 1994, the discount rate and expected long-term rate of return on assets were both approximately 8%. The expected average rate of increase in future compensation levels used was 5%. Pursuant to the provisions of SFAS No. 87, "Employers' Accounting for Pensions," the Company recorded in accrued pension expense an additional minimum pension liability adjustment of $337,990 as of October 28, 1995, representing the amount by which the accumulated benefit obligation exceeded the fair value of plan assets plus accrued amounts previously recorded. The additional liability has been offset by an intangible asset to the extent of previously unrecognized prior service cost. During 1994, the amount in excess of previously unrecognized prior service cost was recorded as a reduction of stockholders' equity in the amount of $400,000. As of October 28, 1995, there was no amount in excess of previously unrecognized prior service cost recorded as a reduction of stockholders' equity. The 401(k) plan for domestic employees and the pension plan covering Canadian employees are defined contribution plans. Such actuarial information as presented above is not applicable to these plans. Total expenses under such plans for the years ended October 28, 1995, October 29, 1994, and October 30, 1993 amounted to $1,477,593, $1,214,491, and $1,056,433, respectively. F-17 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 6. BENEFIT PLANS (CONTINUED) POSTRETIREMENT BENEFITS The Predecessor discontinued its postretirement health care and dental benefits in 1991. Coverage was available and will continue only for employees over age 55 who had elected early retirement and are currently entitled to such benefits, which are subject to certain limitations. BBC has recorded a liability of approximately $800,000 at October 28, 1995 and October 29, 1994, which represents management's best estimate of expected future benefits. MEDICAL, DENTAL, AND ACCIDENT AND SICKNESS BENEFITS BBC provides and is partially self-insured for medical, dental, and accident and sickness benefits. BBC maintains a voluntary employee benefit association trust through which all cash used to pay claims is processed. The trust is fully funded at year-end to cover incurred but not reported claims. Therefore, neither the trust's assets nor the liability for claims is reported in the accompanying balance sheets. 7. DEFERRED COMPENSATION AND SUPPLEMENTAL RETIREMENT BENEFITS At October 28, 1995 and October 29, 1994, the accompanying financial statements reflect liabilities for anticipated payment of deferred compensation and supplemental retirement benefits described above in the amounts of $1,157,435 and $1,244,959, respectively. 8. REDEEMABLE COMMON STOCK AND STOCK SUBSCRIPTIONS RECEIVABLE Redeemable common stock represents shares of common stock purchased by members of management ("Management Investors"), primarily in conjunction with the acquisition. The Management Investors have the right, prior to the earlier of an initial public offering of equity securities or the tenth anniversary of the stockholders' agreement, to put these shares to BBC in the event of their disability, involuntary termination, not for cause, retirement (all as defined in the stockholders' agreement), or death for a fair value price, as defined in the stockholders' agreement. The redeemable common stock was recorded at fair value on the date of issuance. The excess of the fair value price over the original fair value is being accreted by periodic charges to retained earnings. The amounts recorded in the balance sheets represent the estimated maximum amount payable if all management investors met the specified criteria and exercised their put rights. Stock subscriptions receivable represent notes due from members of management for stock issued in April 1992 in conjunction with the acquisition. The notes bear interest at an 8% interest rate. Interest is payable annually. 9. DIVIDENDS DECLARED No dividends were declared for the years ended October 28, 1995, October 29, 1994, and October 30, 1993. F-18 BLUE BIRD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993 10. LEASES BBC has no capitalized leases in which it is the lessee. Rental expenses for operating leases were approximately $1,625,000, $1,562,000, and $1,343,000 for the years ended October 28, 1995, October 29, 1994, and October 30, 1993, respectively. Operating leases relate primarily to computer equipment and software, office space, and miscellaneous office equipment. The future minimum lease payments under operating leases by fiscal year as of October 28, 1995 are approximately as follows: 1996............................................................... $ 570,000 1997............................................................... 585,000 1998............................................................... 484,000 1999............................................................... 453,000 2000 and thereafter................................................ 49,000 --------- $2,141,000 --------- ---------
11. CONTINGENCIES As of October 28, 1995, BBC had a number of product liability and other cases pending. At the date of this report, neither the outcome of the cases nor the amounts of any company liabilities related to these cases are known. Management believes that, considering BBC's insurance coverage and its intention to vigorously defend its position, the ultimate resolution of these matters will not have a material adverse impact on BBC's financial position or results of operations. 12. MANAGEMENT STOCK OPTION PLAN Effective April 15, 1992, BBC's board of directors adopted a nonqualified management stock option plan (the "Plan") which provided for the granting of options to key employees of BBC to purchase up to 850,000 shares of common stock. Pursuant to the Plan, on April 15, 1992, key employees were granted options (the "Vested Options") to purchase an aggregate of 400,000 shares of common stock at an exercise price equal to $10 per share (the fair value of the stock at the grant date as determined by the board of directors). The Vested Options were fully vested at the time of grant. Additionally, on April 15, 1992, key employees were granted options (the "Performance Options") to purchase an aggregate of 400,000 shares at an exercise price equal to $10 per share. The Performance Options vest ratably over the next five years based on BBC's achieving certain levels of earnings performance, as defined in the Plan, and in any case ten years from the date of grant. During the year ended October 30, 1993, options for 70,000 shares were canceled and options for 10,000 shares were issued. As of October 28, 1995 and October 29, 1994, 720,000 options to purchase shares were outstanding. 13. SUBSEQUENT EVENT On December 14, 1995, the Company acquired $25,000,000 principal amount of its 11.75% Series B senior subordinated notes (the "Series B Notes"), due April 15, 2002 for a purchase price equal to 106.5% of the principal amount plus accrued interest. The purchase will result in a one-time, after-tax extraordinary charge of approximately $1,415,000 in the first quarter of fiscal year 1996. All of the Series B Notes are included in long-term debt on the accompanying consolidated balance sheets. F-19 BLUE BIRD CORPORATION AND SUBSIDIARIES BLUE BIRD BODY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JULY 27, 1996 AND OCTOBER 28, 1995 ($ IN THOUSANDS) ASSETS
OCTOBER 28, 1995 JULY 27, ----------- 1996 ----------- (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents............................................................. $ 5,260 $ 21,452 Trade receivables..................................................................... 20,067 18,866 Leases receivable..................................................................... 33,125 47,222 Inventories........................................................................... 156,756 83,346 Prepaid expenses...................................................................... 1,579 1,020 Other current assets.................................................................. 2,914 5,927 ----------- ----------- Total current assets................................................................ 219,701 177,833 LEASES RECEIVABLE, NONCURRENT........................................................... 38,654 15,000 PROPERTY, PLANT, AND EQUIPMENT.......................................................... 61,170 58,872 Less accumulated depreciation......................................................... (25,986) (21,860) ----------- ----------- Property, plant, and equipment, net................................................. 35,184 37,012 ----------- ----------- GOODWILL AND OTHER INTANGIBLE ASSETS.................................................... 163,733 165,594 Less accumulated amortization......................................................... (24,714) (21,712) ----------- ----------- Goodwill & other intangible assets, net............................................. 139,019 143,882 ----------- ----------- OTHER ASSETS............................................................................ 6,935 6,065 ----------- ----------- Total assets........................................................................ $ 439,493 $ 379,792 ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Revolving credit facilities........................................................... $ 46,547 $ 35,662 Current portions of long-term debt.................................................... 13,000 12,000 Accounts payable...................................................................... 58,600 25,743 Income taxes payable.................................................................. 1,764 6,926 Deferred income taxes................................................................. 8,442 9,535 Other current liabilities............................................................. 33,644 26,242 ----------- ----------- Total current liabilities........................................................... 161,997 116,108 LONG-TERM DEBT.......................................................................... 118,404 113,750 DEFERRED INCOME TAXES................................................................... 5,550 5,898 OTHER LIABILITIES....................................................................... 21,017 20,536 REDEEMABLE COMMON STOCK, NET............................................................ 20,431 20,872 ----------- ----------- Total liabilities................................................................... 327,399 277,164 STOCKHOLDERS' EQUITY: Common stock, $.01 par value; 25,000,000 shares authorized; 7,704,778 and 7,704,778 outstanding respectively............................................................ 77 77 Additional paid-in capital............................................................ 77,023 77,023 Retained earnings..................................................................... 37,553 27,896 Other stockholders' equity............................................................ (2,559) (2,368) ----------- ----------- Total stockholders' equity.......................................................... 112,094 102,628 ----------- ----------- Total liabilities and stockholders' equity.......................................... $ 439,493 $ 379,792 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these condensed consolidated statements. F-20 BLUE BIRD CORPORATION AND SUBSIDIARIES BLUE BIRD BODY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED JULY 27,1996 AND JULY 29,1995 ($ IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------ ------------------------ JULY 27, JULY 29, JULY 27, JULY 29, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) Net sales................................................... $ 146,788 $ 137,340 $ 346,115 $ 319,445 Cost of goods sold.......................................... 122,141 113,037 287,427 264,085 ----------- ----------- ----------- ----------- Gross profit.......................................... 24,647 24,303 58,688 55,360 Selling, general and administrative expenses................ 10,612 9,499 31,501 29,462 Amortization of goodwill and other intangibles.............. 940 965 2,820 3,728 ----------- ----------- ----------- ----------- Operating income............................................ 13,095 13,839 24,367 22,170 Interest income............................................. 1,845 1,016 5,353 2,993 Interest and debt issue expense............................. (4,425) (5,332) (12,796) (14,005) Other income (expense)...................................... 110 613 543 475 ----------- ----------- ----------- ----------- Income before income taxes.................................. 10,625 10,136 17,467 11,633 Provision for income taxes.................................. 4,049 4,330 6,835 4,929 ----------- ----------- ----------- ----------- Net income before extraordinary items....................... 6,576 5,806 10,632 6,704 Extraordinary item--loss on extinguishment of debt (net of income tax benefit of $838)............................... 0 0 (1,416) 0 ----------- ----------- ----------- ----------- Net income............................................ $ 6,576 $ 5,806 $ 9,216 $ 6,704 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these condensed consolidated statements. F-21 BLUE BIRD CORPORATION AND SUBSIDIARIES BLUE BIRD BODY COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED JULY 27, 1996 AND JULY 29, 1995 ($ IN THOUSANDS)
NINE MONTHS ENDED ------------------------ JULY 27, JULY 29, 1996 1995 ----------- ----------- (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss).................................................................... $ 9,216 $ 6,704 ----------- ----------- Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Extraordinary loss on extinguishment of debt....................................... 2,254 0 Depreciation and amortization...................................................... 8,694 9,452 Increase in cash surrender value of life insurance................................. (47) (71) Deferred income taxes.............................................................. (1,441) (1,971) Changes in operating assets and liabilities: (Increase) decrease in trade receivables........................................... (1,201) (6,597) (Increase) decrease in inventories................................................. (73,410) (74,177) (Increase) decrease in prepaid expenses............................................ (559) (109) Increase (decrease) in accounts payable............................................ 32,857 24,449 Increase (decrease) in income taxes payable........................................ (5,162) 974 Other.............................................................................. 10,220 2,730 ----------- ----------- Total adjustments................................................................ (27,795) (45,320) ----------- ----------- Net cash used in operating activities............................................ (18,579) (38,616) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant, and equipment acquisitions.......................................... (2,587) (2,762) Leases receivable.................................................................... (9,557) (9,991) ----------- ----------- Net cash used in investing activities............................................ (12,144) (12,753) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowing on working capital revolvers........................................... 49,539 49,900 Repayment of long-term debt.......................................................... (33,000) (6,000) Debt prepayment premium.............................................................. (1,625) 0 Other................................................................................ (192) (949) ----------- ----------- Net cash (used in) provided by financing activities.............................. 14,722 42,951 ----------- ----------- EFFECT OF EXCHANGE RATE FLUCTUATION.................................................... (191) (95) ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS.............................................. (16,192) (8,513) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................................... 21,452 10,490 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD............................................. $ 5,260 $ 1,977 ----------- ----------- ----------- ----------- SUPPLEMENTAL INFORMATION: Cash interest paid................................................................... $ 10,790 $ 11,818 ----------- ----------- ----------- ----------- Cash income taxes paid............................................................... $ 8,351 $ 5,928 ----------- ----------- ----------- -----------
F-22 BLUE BIRD CORPORATION AND SUBSIDIARIES BLUE BIRD BODY COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF FINANCIAL STATEMENTS AND FORMATION AND ORGANIZATION The accompanying unaudited condensed consolidated financial statements of Blue Bird Corporation and subsidiaries ("BBC") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the joint annual report of BBC and Blue Bird Body Company (the "Predecessor") (see "Acquisition" below) on Form 10-K for the fiscal year ended October 28, 1995. The accompanying unaudited financial statements include, in the opinion of management, all adjustments, which are of a normal recurring nature, necessary for a fair presentation for the periods presented. Results for the interim periods presented are not necessarily indicative of results that may be expected for a full fiscal year. FISCAL YEAR BBC's fiscal year ends on the Saturday nearest October 31 of each year, generally referred to as a "52-/53-week year." Fiscal year 1996 contains 53 weeks and fiscal year 1995 contains 52 weeks. ACQUISITION On April 15, 1992, BBC (formerly B B Holding Corp.) acquired all of the outstanding capital stock of the Predecessor through the merger of B B Acquisition Corp., a wholly-owned subsidiary of BBC, with and into the Predecessor (the "Acquisition"), with the Predecessor as the surviving corporation. The Acquisition was accounted for as a purchase. 2. INVENTORIES Inventories are valued at the lower of cost or market, cost being determined on the last-in, first-out basis. If the first-in, first-out method had been used, inventories would have been approximately $4,000,000 higher at July 27, 1996 and approximately $2,600,000 higher at October 28, 1995. The components of inventory consist of the following at July 27, 1996 and October 28, 1995 (dollars in thousands):
1996 1995 ---------- --------- Raw materials.......................................................... $ 29,024 $ 32,463 Work in process........................................................ 47,473 22,831 Finished goods......................................................... 80,259 28,052 ---------- --------- $ 156,756 $ 83,346 ---------- --------- ---------- ---------
3. CONTINGENCIES PENDING LITIGATION AND INSURANCE PROGRAM As of July 27, 1996, a number of product liability cases were pending against a subsidiary of BBC. Neither the outcome of certain cases nor the amounts of any liabilities related to these certain cases are known, however, management believes that the ultimate resolution of these matters will not have a material adverse impact on BBC's financial position or results of operations. F-23 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION TO BUY, THE EXCHANGE NOTES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, IN ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE --------- Available Information............................. 3 Prospectus Summary................................ 5 Summary Financial Data............................ 11 Risk Factors...................................... 13 The Exchange Offer................................ 21 Certain Federal Income Tax Consequences of the Exchange Offer.................................. 29 The Recapitalization.............................. 30 Use of Proceeds................................... 31 Capitalization.................................... 32 Selected Financial Data........................... 34 Management's Discussion and Analysis of Financial Condition and Results of Operations............. 35 Business.......................................... 40 Management........................................ 53 Ownership of Capital Stock........................ 60 Certain Relationships and Related Transactions.... 62 Description of Debt Facilities.................... 63 Description of the Exchange Notes................. 67 Description of Certain Federal Income Tax Consequences of an Investment in the Exchange Notes........................................... 93 Book-Entry, Delivery and Form..................... 95 Exchange Offer; Registration Rights............... 97 Plan of Distribution.............................. 99 Legal Matters..................................... 100 Experts........................................... 100 Index to Consolidated Financial Statements........ F-1
[LOGO] BLUE BIRD BODY COMPANY OFFER TO EXCHANGE $100,000,000 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006 FOR 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B ------------- PROSPECTUS ------------- , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [ALTERNATIVE PAGE FOR MARKET-MAKING PROSPECTUS] PRELIMINARY PROSPECTUS [LOGO] 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B BLUE BIRD BODY COMPANY --------------- The 10 3/4% Senior Subordinated Notes due 2006, Series B (the "Exchange Notes") were issued in exchange for the 10 3/4% Senior Subordinated Notes due 2006 (the "144A Notes" and, together with the Exchange Notes, the "Notes") by the Blue Bird Body Company, a Georgia corporation (the "Company"). The Exchange Notes are guaranteed on a senior subordinated basis by Blue Bird Corporation, a Delaware corporation ("BBC" or the "Guarantor") of which the Company is a wholly-owned subsidiary. See "Description of the Exchange Notes." Interest on the Exchange Notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing May 15, 1996. The Exchange Notes are redeemable at the option of the Company, in whole or in part, at any time on or after November 15, 2001, at the redemption prices set forth herein, together with accrued and unpaid interest to the date of redemption. In addition, on or prior to November 15, 1999, the Company may redeem up to 25% of the originally issued Notes, at a price of 110.75% of the principal amount thereof, together with accrued and unpaid interest to the date of redemption, with the net proceeds of a Public Equity Offering (as defined herein); PROVIDED that not less than $75 million in principal amount of Notes is outstanding immediately after giving effect to such redemption. Upon the occurrence of a Change of Control Triggering Event (as defined herein), each holder of Exchange Notes will, subject to the limitations described herein, have the right to require the Company to purchase all or a portion of such holder's Exchange Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. See "Description of the Exchange Notes." The Exchange Notes are unsecured senior subordinated obligations of the Company and are subordinated in right of payment to all existing and future Senior Indebtedness (as defined herein) of the Company. As of September 28, 1996, on a PRO FORMA basis after giving effect to the Recapitalization (as defined herein), the Company would have had approximately $181.3 million of Senior Indebtedness outstanding. In addition, at September 28, 1996, after giving effect to the Recapitalization, the aggregate amount of indebtedness and other liabilities of subsidiaries of the Company to which holders of the Exchange Notes are structurally subordinated would have been approximately $63 million (which is comprised principally of liabilities of the Company's special purpose lease financing subsidiary). SEE "RISK FACTORS," BEGINNING ON PAGE 13, FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER 144A NOTES IN THE EXCHANGE OFFER. ------------------------ 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 is to be used by Merrill Lynch, Pierce, Fenner & Smith ("Merrill Lynch") in connection with offers and sales in market-making transactions at negotiated prices related to prevailing market price at the time of sale. Merrill Lynch may act as principal or agent in such transactions and has no obligation to make a market in the Exchange Notes, and may discontinue its market-making activities any time without notice, at its sole discretion. The Company will receive no portion of the proceeds of the sale of such Exchange Notes and will bear expenses incident to the registration thereof. ------------------------ MERRILL LYNCH & CO. The date of this Prospectus is , 1996. [ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS] No dealer, salesperson, or other person has been authorized to give 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 Merrill Lynch. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any security other than the Exchange Notes offered hereby, nor does it constitute an offer to sell or the solicitation of an offer to buy any of the Exchange Notes to any person in any jurisdiction in which it is unlawful to make such an offer or solicitation to such person. 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 date subsequent to the date hereof. AVAILABLE INFORMATION The Company and BBC have jointly filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-4 (together with all amendments, exhibits, schedules and supplements thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Exchange Notes being offered hereby and the related BBC Guarantee (as defined herein). This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement. For further information with respect to the Company, BBC, the Exchange Notes and the related BBC Guarantee offered hereby, reference is made to the Registration Statement. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete, and, where such contract or other document is an exhibit to the Registration Statement, each such statement is qualified in all respects by the provisions in such exhibit, to which reference is hereby made. Copies of the Registration Statement may be examined without charge at the Public Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the web site (http://www.sec.gov.) maintained by the Commission and at the Commission's Regional Offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of the Registration Statement can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Upon the effectiveness of the Registration Statement, the Company became subject to the informational requirements of the Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, will file periodic reports and other information with the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of any material so filed can be obtained from the Public Reference Section of the Commission, upon payment of certain fees prescribed by the Commission. In addition, pursuant to the Indenture (as defined herein) covering the 144A Notes and the Exchange Notes, the Company has agreed to file with the Commission and provide to the Holders the annual reports and the information, documents and other reports otherwise required pursuant to Section 13 of the Exchange Act. Such requirements may be satisfied through the filing and provision of such documents and reports which would otherwise be required pursuant to Section 13 in respect of the Company. So long as the Company is subject to the periodic reporting requirements of the Exchange Act, it is required to furnish the information required to be filed to the Commission to (i) the Trustee (as defined herein) and (ii) the holders of the 144A Notes and the Exchange Notes. The Company has agreed that, even if it is not required under the Exchange Act to furnish such information to the Commission, it will nonetheless continue to furnish such information that would be required to be furnished by the Company by Section 13 of the Exchange Act to the Trustee and the Holders of the 144A Notes or Exchange Notes as if they were subject to such periodic reporting requirements. A-2 [ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS] USE OF PROCEEDS This Prospectus is delivered in connection with the sale of the Exchange Notes by Merrill Lynch in market-making transactions. The Company will not receive any of the proceeds from such transactions. A-3 [ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS] RISK FACTORS TRADING MARKET FOR THE NOTES There is currently no established market for the Exchange Notes and there can be no assurance as to the liquidity of markets that may develop for the Exchange Notes, the ability of the holders of the Exchange Notes to sell their Exchange Notes or the price at which such holders would be able to sell their Exchange Notes. If such markets were to exist, the Exchange Notes could trade at prices that may be lower than the initial market values thereof depending on many factors, including prevailing interest rates and the markets for similar securities. Although there is currently no market for the Exchange Notes, Merrill Lynch has advised the Company that it currently intends to make a market in the Exchange Notes. However, Merrill Lynch is not obligated to do so, and any market-making with respect to the Exchange Notes may be discontinued at any time, for any reason, without notice at the sole discretion of Merrill Lynch. In addition, if Merrill Lynch conducts any market-making activities in respect of the Exchange Notes, it may be required to deliver a "market-making prospectus" when effecting offers and sales in the Exchange Notes, because of the equity ownership of affiliates of Merrill Lynch. The ML Entities in the aggregate hold approximately 91% of the BBC Common Stock. For so long as a market-making prospectus is required to be delivered, the ability of Merrill Lynch to make a market in the Notes may, in part, be dependent on the ability of the Company to maintain a current market-making prospectus. Therefore, no assurance can be given as to the liquidity of, or the trading market for, the Exchange Notes. A-4 [ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS] PLAN OF DISTRIBUTION This Prospectus is to be used by Merrill Lynch in connection with offers and sales of the Exchange Notes in market-making transactions at negotiated prices related to prevailing market prices at the time of sale. Merrill Lynch may act as principal or agent in such transactions, has no obligation to make a market in the Exchange Notes, and may discontinue its market-making activities at any time without notice, at its sole discretion. Merrill Lynch is an affiliate of entities that beneficially own a majority of the voting power of the capital stock of BBC, the Company's parent company. Merrill Lynch acted as an Initial Purchaser in connection with the original offering of the Exchange Notes and received an Initial Purchasers' discount in the aggregate amount of $3,000,000 in connection therewith. For information regarding the involvement of Merrill Lynch and its affiliates in connection with the Company and the recapitalization and the equity ownership by Merrill Lynch and its affiliates of BBC, see "Certain Relationships and Related Transactions." The Company and BBC have agreed, jointly and severally, to indemnify Merrill Lynch against certain liabilities, including civil liabilities under the Securities Act or to contribute to payments Merrill Lynch may be required to make in respect thereof. Merrill Lynch and the Company have entered into a Registration Rights Agreement with respect to the use by Merrill Lynch of this Prospectus. Pursuant to such agreement, the Company has agreed to bear all registration expenses incurred under such agreement, and the Company has agreed to indemnify Merrill Lynch against certain liabilities, including liabilities under the Securities Act. A-5 [ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS] LEGAL MATTERS Certain legal matters in connection with the sale of the Exchange Notes were passed upon for the Company and BBC by Wachtell, Lipton, Rosen & Katz, New York, New York. A-6 [ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR MERRILL LYNCH. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ----- Available Information............................. 3 Prospectus Summary................................ 5 Summary Financial Data............................ 11 Risk Factors...................................... 13 The Exchange Offer................................ 21 Certain Federal Income Tax Consequences of the Exchange Offer.................................. 29 The Recapitalization.............................. 30 Use of Proceeds................................... 31 Capitalization.................................... 32 Selected Financial Data........................... 34 Management's Discussion and Analysis of Financial Condition and Results of Operations............. 35 Business.......................................... 40 Management........................................ 53 Ownership of Capital Stock........................ 60 Certain Relationships and Related Transactions.... 62 Description of Debt Facilities.................... 63 Description of the Exchange Notes................. 67 Description of Certain Federal Income Tax Consequences of an Investment in the Exchange Notes........................................... 93 Book-Entry, Delivery and Form..................... 95 Exchange Offer; Registration Rights............... 97 Plan of Distribution.............................. 99 Legal Matters..................................... 100 Experts........................................... 100 Index to Consolidated Financial Statements........ F-1
[LOGO] BLUE BIRD BODY COMPANY OFFER TO EXCHANGE $100,000,000 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006 FOR 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B ------------- PROSPECTUS ------------- , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company's Articles of Incorporation and By-Laws provide for indemnification to the full extent permitted by the Georgia Business Corporation Code against and with respect to threatened, pending or completed actions, suits or proceedings to which any individual is made a party by reason of such individual being or having been a director or executive officer of the Company or who, while a director or executive officer of the Company, served or is serving at the Company's request as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, PROVIDED, in general, that such individual acted in good faith and in the best interests of the Company. BBC's Certificate of Incorporation provides for indemnification to the full extent permitted by the General Corporation Law of the State of Delaware against and with respect to actions, suits or proceedings to which any individual is made or threatened to be made a party by reason of such individual being or having been a director or officer of BBC or who served or is serving at BBC's request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, PROVIDED that the basis of such action, suit or proceeding is alleged action occurring while such individual was a director, officer, employee or agent. Generally, under Delaware law, indemnification will only be available where an officer or director can establish that he or she acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the corporation. The Company maintains a directors' and officers' liability insurance policy which insures directors and officers of the Company and its subsidiaries for losses as a result of claims based upon their acts or omissions in the discharge of their duties as directors and officers of the Company and its subsidiaries. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------------- 3.1 Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 3.3 Restated Certificate of Incorporation of BBC (incorporated by reference to Exhibit 3.3 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 3.4 By-laws of BBC (incorporated by reference to Exhibit 3.4 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 4.1 Indenture dated as of November 15, 1996 by and among the Company, BBC and the Chase Manhattan Bank, as Trustee. 4.2 Form of Exchange Note (contained in Exhibit 4.1 as Exhibit A-2 thereto). 4.3 Purchase Agreement dated November 13, 1996 by and among the Company, BBC and Merrill Lynch and BT Securities Corporation.
II-1
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------------- 5.1 Opinion of Wachtell, Lipton, Rosen & Katz.* 10.1 Registration Rights Agreement dated as of November 19, 1996 by and among the Company, BBC and Merrill Lynch, Pierce, Fenner & Smith Incorporated and BT Securities Corporation. 10.2 First Amended and Restated Credit Agreement dated as of November 15, 1996 by and among the Company, BBC, the lenders listed on the signature pages thereto and Bankers Trust Company, as Administrative Agent and Merrill Lynch & Co., as Syndication Agent, including all exhibits thereto. 10.3 Amended and Restated Loan Agreement by and among Blue Bird Capital Corporation and LaSalle National Bank, as agent, and the several financial institutions from time to time parties to the agreement dated as of March 29, 1996 (incorporated by reference to Exhibit 10.22 to the Registrant's Form 10-Q No. 033-49544 filed June 11, 1996). 10.4 Executive Employment Agreement dated April 15, 1992 between Paul E. Glaske and the Company (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.5 Supplemental Retirement Plan of the Company (incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.6 Form of Noncompetition and Nonsolicitation Agreement with Albert L. Luce, Jr. and Joseph P. Luce (incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.7 ML Stock Subscription Agreement dated as of April 15, 1992 (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.8 Management Stock Subscription Agreement dated as of April 15, 1992 (incorporated by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.9 Stockholders' Agreement dated as of April 15, 1992 (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.10 BBC Management Stock Option Plan (incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.11 Form of Vested Option Agreement (incorporated by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.12 Form of Performance Option Agreement (incorporated by reference to Exhibit 10.17 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.13 Chassis Supply Agreement dated as of May 8, 1991 between the Company and General Motors Corporation (incorporated by reference to Exhibit 10.18 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.14 Executive Employment Agreement dated April 15, 1993 between Bobby G. Wallace and the Company (incorporated by reference to Exhibit 10.19 to the Registrant's Report on Form 10-K for the fiscal year ended October 30, 1993 filed January 28, 1994).
II-2
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------------- 10.15 Amendment dated October 15, 1994, amending Executive Employment Agreement dated April 15, 1993 between Bobby G. Wallace and the Company (incorporated by reference to Exhibit 10.20 to the Registrant's Report on Form 10-K for the fiscal year ended October 29, 1994 and filed January 27, 1995). 10.16 Amended and Restated Vested Option Agreement dated September 13, 1994 between Bobby G. Wallace and the Company (incorporated by reference to Exhibit 10.21 to the Registrant's Report on Form 10-K for the fiscal year ended October 29, 1994 filed January 27, 1995). 12.1 Statements re Computation of Ratios. 21.1 Subsidiaries of BBC and the Company. 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1). 24.1 Powers of Attorney of Directors and Officers of Blue Bird Corporation (included in the signature pages in Part II of the Registration Statement). 24.2 Powers of Attorney of Directors and Officers of Blue Bird Body Company (included in the signature pages in Part II of the Registration Statement). 25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of The Chase Manhattan Bank under the Trust Indenture Act of 1939. 99.1 Form of Letter of Transmittal for the 10 3/4% Senior Subordinated Notes due 2006. 99.2 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. 99.3 Form of Notice of Guaranteed Delivery.
- ------------------------ * To be filed by amendment. ITEM 22. UNDERTAKINGS Each of the undersigned registrants hereby undertakes: (a) (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, represent 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 "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. II-3 (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 that 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. (b) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (c) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (d) That, 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 foregoing provisions, or otherwise, the registrants have 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 registrants of expenses incurred or paid by a director, officer or controlling person of the registrants 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 registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each Registrant has duly caused this registration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Macon, State of Georgia, on December , 1996. BLUE BIRD BODY COMPANY BY: /S/ PAUL E. GLASKE ----------------------------------------- Paul E. Glaske CHAIRMAN OF THE BOARD AND PRESIDENT AND DIRECTOR BLUE BIRD CORPORATION BY: /S/ PAUL E. GLASKE ----------------------------------------- Paul E. Glaske CHAIRMAN OF THE BOARD AND PRESIDENT AND DIRECTOR Each person whose signature appears below constitutes and appoints Paul E. Glaske and Bobby G. Wallace, his true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all Amendments (including post-effective Amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. II-5 Pursuant to the requirements of the Securities Act of 1933, this registration statement or amendment thereto has been signed below by the following persons in the capacities and on December , 1996. BLUE BIRD BODY COMPANY SIGNATURE TITLE - ------------------------------ --------------------------- Chairman of the Board and /s/ PAUL E. GLASKE President and Director - ------------------------------ (Principal Executive Paul E. Glaske Officer) Vice President--Finance and Administration, Treasurer /s/ BOBBY G. WALLACE and Secretary and - ------------------------------ Director (Principal Bobby G. Wallace Financial and Accounting Officer) /s/ GERALD S. ARMSTRONG Director - ------------------------------ Gerald S. Armstrong /s/ ALEXIS P. MICHAS Director - ------------------------------ Alexis P. Michas /s/ DONALD C. TRAUSCHT Director - ------------------------------ Donald C. Trauscht /s/ ALFRED C. DAUGHERTY Director - ------------------------------ Alfred C. Daugherty II-6 BLUE BIRD BODY COMPANY SIGNATURE TITLE - ------------------------------ --------------------------- Chairman of the Board and /s/ PAUL E. GLASKE President and Director - ------------------------------ (Principal Executive Paul E. Glaske Officer) Vice President and /s/ BOBBY G. WALLACE Treasurer and Secretary - ------------------------------ and Director (Principal Bobby G. Wallace Financial and Accounting Officer) /s/ GERALD S. ARMSTRONG Director - ------------------------------ Gerald S. Armstrong /s/ ALEXIS P. MICHAS Director - ------------------------------ Alexis P. Michas /s/ DONALD C. TRAUSCHT Director - ------------------------------ Donald C. Trauscht /s/ ALFRED C. DAUGHERTY Director - ------------------------------ Alfred C. Daugherty II-7 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------- 3.1 Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 3.3 Restated Certificate of Incorporation of BBC (incorporated by reference to Exhibit 3.3 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 3.4 By-laws of BBC (incorporated by reference to Exhibit 3.4 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 4.1 Indenture dated as of November 15, 1996 by and among the Company, BBC and the Chase Manhattan Bank, as Trustee. 4.2 Form of Exchange Note (contained in Exhibit 4.1 as Exhibit A-2 thereto). 4.3 Purchase Agreement dated November 13, 1996 by and among the Company, BBC and Merrill Lynch and BT Securities Corporation. 5.1 Opinion of Wachtell, Lipton, Rosen & Katz.* 10.1 Registration Rights Agreement dated as of November 19, 1996 by and among the Company, BBC and Merrill Lynch, Pierce, Fenner & Smith Incorporated and BT Securities Corporation. 10.2 First Amended and Restated Credit Agreement dated as of November 15, 1996 by and among the Company, BBC, the lenders listed on the signature pages thereto and Bankers Trust Company, as Administrative Agent and Merrill Lynch & Co., as Syndication Agent, including all exhibits thereto. 10.3 Amended and Restated Loan Agreement by and among Blue Bird Capital Corporation and LaSalle National Bank, as agent, and the several financial institutions from time to time parties to the agreement dated as of March 29, 1996 (incorporated by reference to Exhibit 10.22 to the Registrant's Form 10-Q No. 033-49544 filed June 11, 1996). 10.4 Executive Employment Agreement dated April 15, 1992 between Paul E. Glaske and the Company (incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.5 Supplemental Retirement Plan of the Company (incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.6 Form of Noncompetition and Nonsolicitation Agreement with Albert L. Luce, Jr. and Joseph P. Luce (incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.7 ML Stock Subscription Agreement dated as of April 15, 1992 (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.8 Management Stock Subscription Agreement dated as of April 15, 1992 (incorporated by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992).
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------- 10.9 Stockholders' Agreement dated as of April 15, 1992 (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.10 BBC Management Stock Option Plan (incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.11 Form of Vested Option Agreement (incorporated by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.12 Form of Performance Option Agreement (incorporated by reference to Exhibit 10.17 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.13 Chassis Supply Agreement dated as of May 8, 1991 between the Company and General Motors Corporation (incorporated by reference to Exhibit 10.18 to the Registrant's Registration Statement on Form S-1 No. 33-49544 filed September 11, 1992). 10.14 Executive Employment Agreement dated April 15, 1993 between Bobby G. Wallace and the Company (incorporated by reference to Exhibit 10.19 to the Registrant's Report on Form 10-K for the fiscal year ended October 30, 1993 filed January 28, 1994). 10.15 Amendment dated October 15, 1994, amending Executive Employment Agreement dated April 15, 1993 between Bobby G. Wallace and the Company (incorporated by reference to Exhibit 10.20 to the Registrant's Report on Form 10-K for the fiscal year ended October 29, 1994 and filed January 27, 1995). 10.16 Amended and Restated Vested Option Agreement dated September 13, 1994 between Bobby G. Wallace and the Company (incorporated by reference to Exhibit 10.21 to the Registrant's Report on Form 10-K for the fiscal year ended October 29, 1994 filed January 27, 1995). 12.1 Statements re Computation of Ratios. 21.1 Subsidiaries of BBC and the Company. 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1). 24.1 Powers of Attorney of Directors and Officers of Blue Bird Corporation (included in the signature pages in Part II of the Registration Statement). 24.2 Powers of Attorney of Directors and Officers of Blue Bird Body Company (included in the signature pages in Part II of the Registration Statement). 25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of The Chase Manhattan Bank under the Trust Indenture Act of 1939. 99.1 Form of Letter of Transmittal for the 10 3/4% Senior Subordinated Notes due 2006. 99.2 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. 99.3 Form of Notice of Guaranteed Delivery.
- ------------------------ * To be filed by amendment. EX-4.1 2 EXHIBIT 4.1 ================================================================================ BLUE BIRD BODY COMPANY, as Issuer BLUE BIRD CORPORATION, as Guarantor and THE CHASE MANHATTAN BANK, as Trustee -------------------- INDENTURE Dated as of November 15, 1996 -------------------- $100,000,000 10 3/4% Senior Subordinated Notes due 2006 10 3/4% Senior Subordinated Notes due 2006, Series B ================================================================================ Reconciliation and tie between Trust Indenture Act of 1939, as amended, and Indenture, dated as of November 15, 1996 Trust Indenture Indenture Act Section Section - --------------- --------- ss. 310(a)(1) ............................................. 6.09 (a)(2) ............................................. 6.09 (a)(3) ............................................. Not Applicable (a)(4) ............................................. Not Applicable (b) ............................................. 6.08, 6.10 ss. 311(a) ............................................. 6.13 (b) ............................................. 6.13 (c) ............................................. Not Applicable ss. 312(a) ............................................ 7.01 (b) ............................................. 7.02 (c) ............................................. 7.02 ss. 313(a) ............................................. 7.03 (b) ............................................. 7.03 (c) ............................................. 7.03 (d) ............................................. 7.03 ss. 314(a) ............................................. 7.04 (a)(4) ............................................. 10.11 (b) ............................................. Not Applicable (c)(1) ............................................. 1.04, 4.04 12.01(c) (c)(2) ............................................. 1.04, 4.04 12.01(c) (c)(3) ............................................. Not Applicable (d) ............................................. Not Applicable (e) ............................................. 1.04 ss. 315(a) ............................................. 6.01(a) (b) ............................................. 6.02 (c) ............................................. 6.01(b) (d) ............................................. 6.01(c) (e) ............................................. 5.14 ss. 316(a) (last sentence) ............................................. 1.01 (a)(1)(A) ............................................. 5.12, 5.13 (a)(1)(B) ............................................. 5.13 (a)(2) ............................................. Not Applicable (b) ............................................. 5.08 ss. 317(a)(1) ............................................. 5.03 (a)(2) ............................................. 5.04 (b) ............................................. 10.03 ss. 318(a) ............................................. 1.08 - ---------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of this Indenture. TABLE OF CONTENTS Page ---- PARTIES................................................................... 1 RECITALS ................................................................. 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01. Definitions............................................... 2 Section 1.02. Other Definitions........................................ 28 Section 1.03. Rules of Construction .................................. 28 Section 1.04. Form of Documents Delivered to Trustee................... 29 Section 1.05. Acts of Holders ......................................... 31 Section 1.06. Notices, etc., to the Trustee, the Company and the Guarantor........................... 30 Section 1.07. Notice to Holders; Waiver ............................... 31 Section 1.08. Conflict with Trust Indenture Act ....................... 32 Section 1.09. Effect of Headings and Table of Contents ................ 32 Section 1.10. Successors and Assigns .................................. 32 Section 1.11. Separability Clause ..................................... 33 Section 1.12. Benefits of Indenture ................................... 33 Section 1.13. Governing Law ........................................... 33 Section 1.14. No Recourse Against Others .............................. 33 Section 1.15. Independence of Covenants ............................... 33 Section 1.16. Exhibits ................................................ 34 Section 1.17. Counterparts ............................................ 34 Section 1.18. Duplicate Originals ..................................... 34 ARTICLE TWO SECURITY AND GUARANTEE FORMS Section 2.01. Form and Dating....................................... 34 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of this Indenture. -i- Page ---- ARTICLE THREE THE SECURITIES Section 3.01. Title and Terms ......................................... 35 Section 3.02. Registrar and Paying Agent .............................. 36 Section 3.03. Execution and Authentication ............................ 37 Section 3.04. Temporary Securities .................................... 39 Section 3.05. Transfer and Exchange ................................... 39 Section 3.06. Mutilated, Destroyed, Lost and Stolen Securities ......................................... 41 Section 3.07. Payment of Interest; Interest Rights Preserved .......................................... 41 Section 3.08. Persons Deemed Owners ................................... 43 Section 3.09. Cancellation ............................................ 43 Section 3.10. Computation of Interest ................................. 44 Section 3.11. Legal Holidays .......................................... 44 Section 3.12. CUSIP Number ............................................ 44 Section 3.13. Paying Agent to Hold Money in Trust ..................... 44 Section 3.14. [Intentionally Omitted] ................................. Section 3.15. [Intentionally Omitted] ................................. Section 3.16. Book Entry Provisions for Global Securities ......................................... 45 Section 3.17. Special Transfer Provisions ............................. 46 ARTICLE FOUR DEFEASANCE AND COVENANT DEFEASANCE Section 4.01. Company's Option To Effect Defeasance or Covenant Defeasance.............................. 49 Section 4.02. Defeasance and Discharge ................................ 50 Section 4.03. Covenant Defeasance ..................................... 50 Section 4.04. Conditions to Defeasance or Covenant Defeasance ......................................... 51 Section 4.05. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous Provisions ..................... 54 Section 4.06. Reinstatement ........................................... 55 -ii- Page ---- ARTICLE FIVE REMEDIES Section 5.01. Events of Default ....................................... 55 Section 5.02. Acceleration of Maturity; Rescission and Annulment ...................................... 58 Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee ............................ 59 Section 5.04. Trustee May File Proofs of Claims ....................... 61 Section 5.05. Trustee May Enforce Claims Without Possession of Securities .............................. 62 Section 5.06. Application of Money Collected .......................... 62 Section 5.07. Limitation on Suits ..................................... 63 Section 5.08. Unconditional Right of Holders To Receive Principal, Premium and Interest .............................................. 64 Section 5.09. Restoration of Rights and Remedies ...................... 64 Section 5.10. Rights and Remedies Cumulative .......................... 64 Section 5.11. Delay or Omission Not Waiver ............................ 65 Section 5.12. Control by Majority ..................................... 65 Section 5.13. Waiver of Past Defaults ................................. 65 Section 5.14. Undertaking for Costs ................................... 66 Section 5.15. Waiver of Stay, Extension or Usury Laws .................................................. 66 Section 5.16. Unconditional Right of Holders to Institute Certain Suits ............................... 67 ARTICLE SIX THE TRUSTEE Section 6.01. Certain Duties and Responsibilities ..................... 67 Section 6.02. Notice of Defaults ...................................... 68 Section 6.03. Certain Rights of Trustee ............................... 68 Section 6.04. Trustee Not Responsible for Recitals, Dispositions of Securities or Application of Proceeds Thereof ....................... 70 Section 6.05. Trustee and Agents May Hold Securities; Collections; Etc. ......................... 70 Section 6.06. Money Held in Trust ..................................... 70 Section 6.07. Compensation and Indemnification of Trustee and Its Prior Claim ........................... 71 Section 6.08. Conflicting Interests ................................... 71 Section 6.09. Corporate Trustee Required; Eligibility ........................................... 72 -iii- Page ---- Section 6.10. Resignation and Removal; Appointment of Successor Trustee .................................. 72 Section 6.11. Acceptance of Appointment by Successor ............................................. 74 Section 6.12. Merger, Conversion, Amalgamation, Consolidation or Succession to Business .............................................. 75 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.01. Preservation and Information; Company To Furnish Trustee Names and Addresses of Holders .................................. 76 Section 7.02. Communications of Holders .............................. 76 Section 7.03. Reports by Trustee ..................................... 77 Section 7.04. Reports by Company ..................................... 77 ARTICLE EIGHT CONSOLIDATION, MERGER, SALE OF ASSETS, ETC., Section 8.01. Company or Guarantor May Consolidate, etc., Only on Certain Terms .......................... 78 Section 8.02. Successor Substituted .................................. 80 ARTICLE NINE SUPPLEMENTAL INDENTURES AND WAIVERS Section 9.01. Supplemental Indentures, Agreements and Waivers Without Consent of Holders .............................................. 81 Section 9.02. Supplemental Indentures, Agreements and Waivers with Consent of Holders................... 81 Section 9.03. Execution of Supplemental Indentures, Agreements and Waivers ............................... 84 Section 9.04. Effect of Supplemental Indentures ...................... 84 Section 9.05. Conformity with Trust Indenture Act .................... 84 Section 9.06. Reference in Securities to Supplemental Indentures .............................. 85 Section 9.07. Effect on Senior Indebtedness .......................... 85 -iv- Page ---- Section 9.08. Record Date ............................................ 85 Section 9.09. Revocation and Effect of Consents ...................... 85 ARTICLE TEN COVENANTS Section 10.01. Payment of Principal, Premium and Interest ............................................. 86 Section 10.02. Maintenance of Office or Agency ........................ 86 Section 10.03. Money for Security Payments To Be Held in Trust ........................................ 87 Section 10.04. Corporate Existence .................................... 88 Section 10.05. Payment of Taxes and Other Claims ...................... 89 Section 10.06. Maintenance of Properties .............................. 89 Section 10.07. Insurance .............................................. 89 Section 10.08. Books and Records ...................................... 90 Section 10.09. Guarantees ............................................. 90 Section 10.10. Provision of Financial Statements ...................... 90 Section 10.11. Change of Control Triggering Event ..................... 90 Section 10.12. Limitation on Indebtedness ............................. 93 Section 10.13. Statement by Officers as to Default .................... 96 Section 10.14. Limitation on Restricted Payments ...................... 97 Section 10.15. Limitation on Transactions with Affiliates ........................................... 100 Section 10.16. Disposition of Proceeds of Asset Sales ............................................... 101 Section 10.17. Limitation on Liens ................................... 104 Section 10.18. Limitation on Other Senior Indebtedness ........................................ 105 Section 10.19. Limitation on Guarantees by Restricted Subsidiaries ............................. 105 Section 10.20. Limitation on Preferred Stock of Subsidiaries ........................................ 106 Section 10.21. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries ............................. 106 Section 10.22. Limitation on Designations of Unrestricted Subsidiaries ........................... 106 Section 10.23. Compliance Certificates and Opinions................... 108 -v- Page ---- ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 11.01. Right of Redemption ................................... 109 Section 11.02. Applicability of Article .............................. 109 Section 11.03. Election To Redeem; Notice to Trustee ............................................. 109 Section 11.04. Selection by Trustee of Securities To Be Redeemed ......................................... 109 Section 11.05. Notice of Redemption .................................. 110 Section 11.06. Deposit of Redemption Price ........................... 111 Section 11.07. Securities Payable on Redemption Date ................................................ 112 Section 11.08. Securities Redeemed or Purchased in Part ................................................ 112 ARTICLE TWELVE SUBORDINATION OF SECURITIES Section 12.01. Securities to Senior Indebtedness ..................... 113 Section 12.02. Payment over Proceeds upon Dissolution, etc. ................................... 114 Section 12.03. Suspension of Payment When Senior Indebtedness in Default.............................. 115 Section 12.04. Trustee's Relation to Senior Indebtedness ........................................ 117 Section 12.05. Subrogation to Rights of Holders of Senior Indebtedness ................................. 117 Section 12.06. Provisions Solely To Define Relative Rights .............................................. 118 Section 12.07. Trustee To Effectuate Subordination.................... 118 Section 12.08. No Waiver of Subordination Provisions.................. 119 Section 12.09. Notice to Trustee ..................................... 120 Section 12.10. Reliance on Judicial Order or Certificate of Liquidating Agent..................... 121 Section 12.11. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights.................................. 121 Section 12.12. Article Applicable to Paying Agents.................... 122 Section 12.13. No Suspension of Remedies ............................. 122 -vi- Page ---- ARTICLE THIRTEEN SATISFACTION AND DISCHARGE Section 13.01. Satisfaction and Discharge of Indenture ........................................... 122 Section 13.02. Application of Trust Money ............................ 123 ARTICLE FOURTEEN GUARANTEE OF SECURITIES Section 14.01. Guarantee ............................................. 124 Section 14.02. Execution and Delivery of Guarantee ................... 125 Section 14.03. Additional Guarantor .................................. 126 Section 14.04. Guarantor Obligations Subordinated to Guarantor Senior Indebtedness........................ 126 Section 14.05. Payment Over Proceeds upon Dissolution, etc. of a Guarantor .................... 127 Section 14.06. Suspension of Guarantee Obligations When Guarantor Senior Indebtedness in Default .......................................... 129 Section 14.07. Release of a Guarantor ................................ 130 Section 14.08. Waiver of Subrogation ................................. 131 Section 14.09. Guarantee Provisions Solely To Define Relative Rights ..................................... 131 Section 14.10. Trustee to Effectuate Subordination of Guarantee Obligations ............................ 132 Section 14.11. No Waiver of Guarantee Subordination Provisions .......................................... 133 Section 14.12. Guarantors To Give Notice To Trustee .................. 134 Section 14.13. Reliance on Judicial Order or Certificate of Liquidating Agent Regarding Dissolution, etc. of Guarantors........................................... 135 Section 14.14. Rights of Trustee as a Holder of Guarantor Senior Indebtedness; Preservation of Trustee's Rights .................... 135 Section 14.15. Article Fourteen Applicable to Paying Agents .............................................. 136 Section 14.16. No Suspension of Remedies ............................. 136 Section 14.17. Trustee's Relation to Guarantor Senior Indebtedness ................................. 136 Section 14.18. Limitation of Subsidiary Guarantor's Liability ........................................... 137 -vii- Page ---- SIGNATURES ............................................................ 138 Exhibit A-1 - Form of Series A Security Exhibit A-2 - Form of Series B Security Exhibit B - Form of Legend for Book-Entry Securities Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit E - Form of Guarantee -viii- INDENTURE, dated as of November 15, 1996, among Blue Bird Body Company, a corporation incorporated under the laws of the State of Georgia (the "Company"), as issuer, Blue Bird Corporation, a corporation incorporated under the laws of the State of Delaware ("BBC" or a "Guarantor"), as guarantor, and The Chase Manhattan Bank, a New York corporation, as trustee (the "Trustee"). RECITALS The Company has duly authorized the creation of an issue of 10 3/4% Senior Subordinated Notes due 2006 (the "Series A Securities"), and an issue of 10 3/4% Senior Subordinated Notes due 2006, Series B (the "Series B Securities," and together with the Series A Securities, the "Securities"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. BBC has duly authorized its senior subordinated guarantee of the Securities and to provide therefor, BBC has duly authorized the execution and delivery of this Indenture and its Guarantee (as hereinafter defined) under the terms set forth herein. All things necessary have been done to make the Securities and the Guarantee, when executed by the Company and BBC, respectively, and authenticated and delivered hereunder and duly issued by the Company and BBC, respectively, the valid obligations of the Company and BBC and to make this Indenture a valid agreement of each of the Company, BBC and the Trustee in accordance with the terms hereof. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined) of the Securities, as follows: -2- ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01. Definitions. "Acquired Indebtedness" means Indebtedness of a person (i) assumed in connection with an Asset Acquisition from such person or (ii) existing at the time such person becomes a Restricted Subsidiary of any other person (other than any Indebtedness incurred in connection with, or in contemplation of, such Asset Acquisition or such person becoming such a Restricted Subsidiary). "Affiliate" means, with respect to any specified person, (i) any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person or (ii) any other person that owns, directly or indirectly, 5% or more of any class or series of such person's, or the parent of such person's, Capital Stock or any officer, director or Affiliate of any such other person or, with respect to any other natural person, any person having a relationship with such other person by blood, marriage or adoption not more remote than first cousin. For the purposes of this definition, "control" when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Member" has the meaning set forth in Section 3.16. "Asset Acquisition" means (i) an Investment by the Company or any Restricted Subsidiary in any other person pursuant to which such person will become a Restricted Subsidiary or will be merged with the Company or any Restricted Subsidiary or (ii) the acquisition by the Company or any Restricted Subsidiary of the assets of any person which constitute all or substantially all of the assets of such person, or any division or line of business of such person. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease or other disposition to any person other than the Company or a Restricted Subsidiary, in one or a series of related transactions, of (i) any Capital -3- Stock of any Restricted Subsidiary of the Company; (ii) all or substantially all of the assets of any division or line of business of the Company or any Restricted Subsidiary; or (iii) any other properties or assets of the Company or any Restricted Subsidiary other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" will not include (i) any sale, issuance, conveyance, transfer, lease or other disposition of properties or assets that is governed by the provisions described in Article Eight hereof, (ii) the sale of lease portfolio assets pursuant to the terms of any Lease Portfolio Documents or (iii) sales of property or equipment that have become worn out, obsolete or damaged or otherwise unsuitable for use in connection with the business of the Company or any Restricted Subsidiary, as the case may be. For purposes of Section 10.16 hereof, the term "Asset Sale" shall not include any sale, conveyance, transfer, lease or other disposition of any property or asset, whether in one transaction or a series of related transactions, either (I) involving assets with a Fair Market Value not in excess of the equivalent of $250,000 or (II) in connection with a Capitalized Lease Obligation. "Average Life to Stated Maturity" means, with respect to any Indebtedness, as at any date of determination, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Bankruptcy Law" means Title 11, United States Code or any similar federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or the law of any other jurisdiction relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law. "Bankruptcy Order" means any court order made in a proceeding pursuant to or within the meaning of any Bankruptcy Law, containing an adjudication of bankruptcy or insolvency, or providing for liquidation, receivership, winding-up, dissolution, "concordate" or reorganization, or appointing a Custodian of a debtor or of all or any substantial part of a debtor's property, or providing for the staying, arrangement, adjustment or composition of indebtedness or other relief of a debtor. -4- "BBC Guarantee" means the senior subordinated guarantee of BBC in respect of the Securities pursuant to the terms of Article Fourteen hereof. "Blue Bird Capital" means Blue Bird Capital Corporation, a corporation incorporated under the laws of the State of Delaware. "Board of Directors" means the board of directors of the Company or any Guarantor, as the case may be, or any duly authorized committee of such board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or any Guarantor, as the case may be, to have been duly adopted by its respective Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York, State of New York are authorized or obligated by law, regulation or executive order to close. "Canadian Blue Bird" means Canadian Blue Bird Coach Ltd., a corporation organized under the laws of the Province of Ontario, Canada. "Capital Stock" means, with respect to any person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such person's capital stock, and any rights, (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Capitalized Lease Obligation" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Cash Equivalents" means at any time, (i) any evidence of Indebtedness with a maturity of one year or less -5- issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or acceptances with a maturity of one year or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; (iii) commercial paper with a maturity of one year or less issued by a corporation that is not an Affiliate of the Company (other than Merrill Lynch and its Affiliates) organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by Standard & Poor's Corporation ("Standard & Poor's") or at least P-1 by Moody's Investor Services, Inc. ("Moody's"); and (iv) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the government of the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case, maturing within one year from the date of acquisition. "Change of Control" means the occurrence of any of the following events: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than the Permitted Holders is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of a majority of the total Voting Stock of the Company or BBC, as the case may be; (ii) the Company or BBC, as the case may be, consolidates with, or merges with or into, another person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person, or any person consolidates with, or merges with or into, the Company or BBC, as the case may be, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company or BBC, as the case may be, is converted into or exchanged for cash, securities or other property, other than any such transaction where (a) the outstanding Voting Stock of the Company or BBC, as the case may be, is converted into or exchanged for Voting Stock (other than Redeemable Capital Stock) of the surviving or transferee corporation and (b) the holders of the Voting Stock of the Company or BBC, as the case may be, immediately prior to such transaction own, directly or -6- indirectly, not less than a majority of the Voting Stock of the surviving or transferee corporation immediately after such transaction; (iii) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company or BBC (together with any new directors whose election by the Boards of Directors or whose nomination for election by the stockholders of the Company or BBC was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) or such other directors as have been appointed by MLCP cease for any reason to constitute a majority of the Board of Directors of the Company or BBC, as the case may be, then in office; or (iv) any order, judgment or decree shall be entered against the Company or BBC decreeing the dissolution or split up of the Company or BBC and such order shall remain undischarged or unstayed for a period in excess of 60 days. "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Rating Decline. "Commission" means the Securities and Exchange Commission, as from time to time constituted, or if at any time after the execution of this Indenture such Commission is not existing and performing the applicable duties now assigned to it, then the body or bodies performing such duties at such time. "Company" means the person named as the "Company" in the first paragraph of this Indenture, until a successor person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by any one of its Chairman of the Board, its Vice-Chairman, its Chief Executive Officer, its President or a Vice President, and by its Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and delivered to the Trustee. "Consolidated Cash Flow Available for Fixed Charges" means, for any period, (i) the sum of, without duplication, the amounts for such period, taken as a single accounting period, of (a) Consolidated Net Income, (b) Consolidated Non-cash Charges, (c) to the extent reducing Consolidated Net Income, -7- Consolidated Interest Expense, and (d) to the extent reducing Consolidated Net Income, Consolidated Income Tax Expense less (ii) other non-cash items increasing Consolidated Net Income for such period. "Consolidated Fixed Charge Coverage Ratio" means the ratio of the aggregate amount of Consolidated Cash Flow Available for Fixed Charges of the Company for the four full fiscal quarters immediately preceding the date of the transaction (the "Transaction Date") giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (such four full fiscal quarter period being referred to herein as the "Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges of the Company for the Four Quarter Period. For purposes of this definition, if the Transaction Date occurs prior to the first anniversary of the Issue Date, "Consolidated Cash Flow Available for Fixed Charges" and "Consolidated Fixed Charges" will be calculated, in the case of the Company, after giving effect on a pro forma basis as if the Recapitalization occurred on the first day of the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated Cash Flow Available for Fixed Charges" and "Consolidated Fixed Charges" will be calculated, without duplication, after giving effect on a pro forma basis for the period of such calculation to (i) the incurrence of any Indebtedness of the Company or any of the Restricted Subsidiaries during the period commencing on the first day of the Four Quarter Period to and including the Transaction Date (the "Reference Period"), including, without limitation, the incurrence of the Indebtedness giving rise to the need to make such calculation, as if such incurrence occurred on the first day of the Reference Period, (ii) an adjustment to eliminate or include, as applicable, the Consolidated Cash Flow Available for Fixed Charges and Consolidated Fixed Charges of the Company directly attributable to assets which are the subject of any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Company or one of the Restricted Subsidiaries (including any person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness) occurring during the Reference Period, as if such Asset Sale or Asset Acquisition occurred on the first day of the Reference Period and (iii) the retirement of Indebtedness during the Reference Period which cannot thereafter be reborrowed occurring as if retired on the first day of the Reference Period. For purposes of calculating Consolidated Fixed Charges for this definition -8- of "Consolidated Fixed Charge Coverage Ratio," interest on Indebtedness incurred during the Four Quarter Period under any revolving credit facility which can be borrowed and repaid without reducing the commitments thereunder shall be the actual interest during the Four Quarter Period. Furthermore, in calculating Consolidated Fixed Charges for purposes of determining the denominator (but not the numerator) of this definition of "Consolidated Fixed Charge Coverage Ratio," (i) interest on Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter will be deemed to accrue at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (ii) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Reference Period; and (iii) notwithstanding clause (i) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Rate Protection Obligations, will be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. If the Company or any Restricted Subsidiary, directly or indirectly, guarantees Indebtedness of a third person, the above definition will give effect to the incurrence of such guaranteed Indebtedness as if the Company or any Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. "Consolidated Fixed Charges" means, for any period, the sum of, without duplication, the amounts for such period of (i) Consolidated Interest Expense and (ii) the aggregate amount of cash dividends and other distributions paid or accrued during such period in respect of Redeemable Capital Stock. "Consolidated Income Tax Expense" means, for any period, the provision for federal, state, local and foreign income taxes of the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. To the extent that Blue Bird Capital is an Unrestricted Subsidiary during such period and to the extent payments under the Income Taxes Agreement reduce Consolidated Net Income, Consolidated Income Tax Expense shall include such payments under the Income Taxes Agreement. -9- "Consolidated Interest Expense" means, for any period, without duplication, the sum of (i) the interest expense of the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount attributable to such period, (b) the net cost under Interest Rate Protection Obligations (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (e) all accrued interest, and (ii) all but the principal component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Company and the Restricted Subsidiaries during such period and as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means, for any period, the consolidated net income (or loss) of the Company and the Restricted Subsidiaries for such period as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income (or loss), by excluding, without duplication, (i) all extraordinary gains or losses (net of fees and expenses relating to the transaction giving rise thereto), (ii) the portion of net income (or loss) of the Company and the Restricted Subsidiaries allocable to minority interests in unconsolidated persons to the extent that cash dividends or distributions have not actually been received by the Company or one of the Restricted Subsidiaries, (iii) net income (or loss) of any person combined with the Company or one of the Restricted Subsidiaries in a "pooling of interests" basis attributable to any period prior to the date of combination, (iv) any gain or loss, net of taxes, realized upon the termination of any employee pension benefit plan, (v) gains or losses in respect of any Asset Sales by the Company or one of the Restricted Subsidiaries (net of fees and expenses relating to the transaction giving rise thereto), and (vi) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to that Restricted Subsidiary or its stockholders. Consolidated Net Income shall not be reduced for any charges arising out of any transaction undertaken as part of the Recapitalization, but shall be -10- reduced by dividends described under clause (iv) of the last paragraph of Section 10.14(b) hereof. "Consolidated Non-cash Charges" means, for any period, the aggregate depreciation, amortization and other non-cash expenses of the Company and the Restricted Subsidiaries reducing net income for such period, determined on a consolidated basis in accordance with GAAP. "control" means, with respect to any specified person, the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attention: Corporate Trustee Administration. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company against fluctuations in currency values. "Custodian" means any receiver, interim receiver, receiver and manager, receiver-manager, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law or any other law respecting secured creditors and the enforcement of their security or any other person with like powers whether appointed judicially or out of court and whether pursuant to an interim or final appointment. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Depository" means The Depository Trust Company, its nominees and successors. "Designated Senior Indebtedness" means (i) all Senior Indebtedness under the New Credit Agreement and (ii) any other Senior Indebtedness which, at the time of the incurrence of such Indebtedness, is specifically designated in the instrument -11- evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company. "Designation" shall have the meaning specified in Section 10.22 hereof. "Designation Amount" has the meaning specified in Section 10.22 hereof. "Distribution" means the special cash dividend of the Company on all shares of its common stock and the special cash dividend of BBC on all shares of its common stock and cash payment in respect of options to purchase its common stock, each paid in connection with the Recapitalization. "Domestic Subsidiary" means a Restricted Subsidiary organized under the laws of the United States, any State or territory thereof or the District of Columbia. "Event of Default" shall have the meaning specified in Section 5.01 hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Securities" means the Series B Securities (the terms of which are identical to the Series A Securities except that the Exchange Securities shall be registered under the Securities Act, and shall not contain the restrictive legend on the face of the form of Series A Securities) issued pursuant to this Indenture. "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction. Fair Market Value will be determined by the Board of Directors of the Company acting in good faith evidenced by a Board Resolution thereof delivered to the Trustee. "Fiscal Year" shall mean the fiscal year of the Company, which ends on the Saturday nearest October 31 of each year. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting -12- Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are applicable as of the Issue Date and are consistently applied. "Global Security" has the meaning provided in Section 3.03 hereof. "guarantee" means, as applied to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. "Guarantee" means the BBC Guarantee and any additional guarantees created pursuant to the provisions of this Indenture of the Company's Indenture Obligations pursuant to the guarantee included in this Indenture. "Guarantor" means BBC and each other issuer of a Guarantee. "Guarantor Senior Indebtedness" means with respect to the Indebtedness of any Guarantor, any such Indebtedness represented by a guarantee by such Guarantor of any Senior Indebtedness. "Holder" or "Securityholder" means a person in whose name a Security is registered in the Security Register. "Income Taxes Agreement" means the agreement between the Company and Blue Bird Capital, dated October 18, 1995, as in effect on the Issue Date or as modified, amended or supplemented in any respect that is not materially adverse in any respect to the Company. "Indebtedness" means, with respect to any person, without duplication, (i) all indebtedness of such person for borrowed money or for the deferred purchase price of property or services, excluding any trade payable and other accrued -13- current liabilities incurred in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such person in connection with any letters of credit, bankers acceptance or other similar credit transaction and in connection with any agreement to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such person, or any warrants, rights or options to acquire such Capital Stock, now or hereafter outstanding, (ii) all obligations of such person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade accounts payable arising in the ordinary course of business, (iv) all Capitalized Lease Obligations of such person, (v) all Indebtedness referred to in the preceding clauses of other persons and all dividends of other persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon property (including, without limitation, accounts and contract rights) owned by such person, even though such person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligation being deemed to be the lesser of the value of such property or asset or the amount of the obligation so secured), (vi) all guarantees of Indebtedness of such person, (vii) all Redeemable Capital Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends, (viii) all obligations under or in respect of currency exchange contracts and Interest Rate Protection Obligations of such person, and (ix) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clauses (i) through (viii) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price will be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness will be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Redeemable Capital Stock, such fair market value to be determined in good faith by the Board of Directors of the issuer of such Redeemable Capital Stock. -14- "Indenture" means this instrument as originally executed (including all exhibits and schedules hereto) and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Indenture Obligations" means the obligations of the Company and any other obligor under this Indenture or under the Securities, including BBC, to pay principal of, premium, if any, and interest on the Securities when due and payable, whether at maturity, by acceleration, call for redemption or repurchase or otherwise, and all other amounts due or to become due under or in connection with this Indenture, the Securities or the Guarantees and the performance of all other obligations to the Trustee (including, but not limited to, payment of all amounts due the Trustee under Section 6.07 hereof) and the Holders of the Securities under this Indenture, the Securities and the Guarantees, according to the terms thereof. "Independent Financial Advisor" means a firm (i) which does not, and whose directors, officers and employees or Affiliates do not have, a direct or indirect financial interest in the Company and (ii) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Initial Purchasers" means Merrill Lynch and BT Securities Corporation. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "interest," when used with respect to any Security, means the amount of all interest accruing on such Security, including all additional interest payable on the Securities pursuant to the Registration Rights Agreement and all interest accruing subsequent to the occurrence of any events specified in Sections 5.01(h), (i) and (j) or which would have accrued but for any such event, whether or not such claims are allowable under applicable law. "Interest Payment Date" means, when used with respect to any Security, the Stated Maturity of an installment of interest on such Security, as set forth in such Security. -15- "Interest Rate Protection Obligations" means the obligations of any person pursuant to any arrangement with any other person whereby, directly or indirectly, such person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such person calculated by applying a fixed or a floating rate of interest on the same notional amount or any other arrangement involving payments by or to such person based upon fluctuations in interest rates. "Investment" means, with respect to any person, any direct or indirect advance, loan or other extension of credit (including by means of a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others or otherwise), or any purchase or acquisition by such person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other person. Investments will exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. In addition to the foregoing, any foreign exchange contract, currency swap, Interest Rate Protection Obligation or similar agreement shall constitute an Investment. "Issue Date" means the original date of issuance of the Securities. "Lease Financing Transaction" means any transaction that may be entered into by the Company or any Restricted Subsidiary on an arm's-length basis and with no recourse to the Company or any Restricted Subsidiary (other than (i) recourse limited to the Capital Stock of an Unrestricted Subsidiary pledged by the Company or a Restricted Subsidiary in connection with a Lease Financing Transaction and (ii) recourse limited to circumstances where a governmental authority fails to allocate funds to a lease in its budget) involving (a) the sale by the Company or a Subsidiary of the Company of lease receivables (including a sale to any Unrestricted Subsidiary and securitization transactions); (b) the sale by any Subsidiary of the Company of lease receivables (including securitization transactions); (c) the sale by the Company of buses and related equipment to any Subsidiary of the Company to facilitate such Subsidiary subsequently selling or otherwise financing the lease receivables arising from such buses and related equipment; (d) the sale or lease by any Subsidiary of the Company of buses and related equipment for which the receivables arising -16- from such sales and leases will be sold or financed by such Subsidiary; or (e) the financing of any of the foregoing. "Lease Portfolio Documents" means (i) the Amended and Restated Loan Agreement dated March 29, 1996 by and between Blue Bird Capital and LaSalle National Bank and all agreements executed pursuant thereto, as the same may be amended, renewed, extended, substituted, replaced, supplemented or otherwise modified from time to time, or (ii) any documentation relating to any other Lease Financing Transaction. "Lien" means any mortgage, charge, pledge, lien (statutory or other), privilege, security interest, hypothecation, cessation and transfer, lease of real property, assignment for security, claim, deposit arrangement, or preference or priority or other encumbrance upon or with respect to any property of any kind, whether real, personal or mixed, moveable or immovable, now owned or hereafter acquired. A person will be deemed to own subject to a Lien any property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Material Subsidiary" means Canadian Blue Bird and each other Restricted Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act and the Exchange Act (as such regulation is in effect on the Issue Date). "Maturity Date" means, with respect to any Security, the date on which any principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise. "Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith Incorporated. "MLCP" means Merrill Lynch Capital Partners, Inc. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary) -17- net of (i) brokerage commissions and other reasonable fees and expenses (including fees and expenses of legal counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) amounts required to be paid to any person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in or having a Lien on the assets subject to the Asset Sale and (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP consistently applied against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "New Credit Agreement" means the Amended and Restated Credit Agreement dated as of November 15, 1996 among the Company, BBC, Bankers Trust & Co., as Administrative Agent, Merrill Lynch & Co., as Syndication Agent, and the other financial institutions signatory thereto, as in effect on the Issue Date, and as such agreement may be amended, renewed, extended, substituted, refinanced, replaced, supplemented or otherwise modified from time to time, and includes any agreement (i) extending the maturity of all or any portion of the Indebtedness thereunder, (ii) adding additional borrowers or guarantors thereunder and (iii) increasing the amount to be borrowed thereunder; provided that in the case of clauses (i), (ii), and (iii), any such agreement is not prohibited by this Indenture. "Non-Global Purchasers" shall have the meaning specified in Section 3.03 hereof. "Non-payment Default" means any event (other than a Payment Default) the occurrence of which entitles one or more persons to act to accelerate the maturity of any Designated Senior Indebtedness. "Offering Memorandum" means the Offering Memorandum dated November 13, 1996 pursuant to which the Series A Securities were offered, and any supplement thereto. "Officer" means, with respect to the Company or BBC, the Chairman of the Board, a Vice Chairman, the President, a Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer. -18- "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman, the President or a Vice President, and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, of the Company or any Guarantor, as the case may be, and delivered to the Trustee. "Offshore Physical Securities" shall have the meaning specified in Section 3.03 hereof. "Opinion of Counsel" means a written opinion of counsel who may be counsel for the Company, a Guarantor, or the Trustee, and who shall be reasonably acceptable to the Trustee. "Outstanding" means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company or any Guarantor or any Affiliate thereof) in trust or set aside and segregated in trust by the Company or any Guarantor or any Affiliate thereof (if the Company or such Guarantor or Affiliate shall act as Paying Agent) for the Holders of such Securities; provided, however, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities with respect to which the Company has effected defeasance or covenant defeasance as provided in Article Four, to the extent provided in Sections 4.02 and 4.03; and (iv) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands the Securities are valid obligations of the Company; -19- provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company, any Guarantor or any other obligor upon the Securities or any Affiliate of the Company, any Guarantor or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee knows to be so owned shall be so disregarded. The Company shall notify the Trustee, in writing, when it repurchases or otherwise acquires Securities, of the aggregate principal amount of such Securities so repurchased or otherwise acquired. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company, any Guarantor or any other obligor upon the Securities or any Affiliate of the Company, any Guarantor or such other obligor. If the Paying Agent holds, in its capacity as such, on any Maturity Date or on any optional redemption date money sufficient to pay all accrued interest and principal with respect to such Securities payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Securities cease to be Outstanding and interest on them ceases to accrue. Securities may also cease to be outstanding to the extent expressly provided in Article Eight. "Pari Passu Indebtedness" means any Indebtedness of the Company or any Subsidiary Guarantor ranking pari passu in right of payment with the Securities or the Guarantee of such Subsidiary Guarantor, as applicable. "Paying Agent" shall have the meaning specified in Section 3.02 hereof. "Payment Default" means any default in the payment of principal, premium, if any, or interest on any Designated Senior Indebtedness beyond any applicable grace period with respect thereto. -20- "Permitted Holders" means MLCP or any other person, directly or indirectly, controlling, controlled by or under direct or indirect common control with MLCP. "Permitted Investment" means (i) Investments in any of the Securities; (ii) Investments in Cash Equivalents; (iii) Investments by the Company or any Restricted Subsidiary in a Restricted Subsidiary or another person, if as a result of such Investment (a) such other person becomes a Restricted Subsidiary or (b) such other person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a Restricted Subsidiary; (iv) Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers, in each case arising in the ordinary course of business; (v) Investments in lease receivables, with respect to leases on terms consistent with the Company's prior practices; (vi) Investments in any Subsidiary of the Company pursuant to the terms of any Lease Portfolio Documents on a basis consistent with past practice; provided such Subsidiary in engaged solely in the business of financing or carrying lease receivables related to the Company's products; (vii) Investments in Interest Rate Protection Obligations and currency exchange contracts permitted by Section 10.12 hereof; (viii) loans or advances to officers or employees of the Company and the Restricted Subsidiaries in the ordinary course of business for bona fide business purposes of the Company and the Restricted Subsidiaries (including travel and moving expenses) not in excess of $500,000 in the aggregate at any one time outstanding; and (ix) Investments not otherwise described in this definition in an aggregate amount not exceeding $5,000,000 at any time outstanding. "Permitted Junior Securities" shall have the meaning specified in Section 12.02 hereof. "person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Physical Security" shall have the meaning specified in Section 3.03 hereof. "Predecessor Security" means, with respect to any particular Security, every previous Security evidencing all or -21- a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.06 hereof in exchange for a mutilated Security or in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Security. "Preferred Stock" means, with respect to any person, any and all shares, interests, participation or other equivalents (however designated) of such person's preferred or preference stock whether now outstanding, or issued after the date of this Indenture, and including, without limitation, all classes and series of preferred or preference stock of such person. "Private Exchange Securities" shall have the meaning specified in Section 3.03 hereof. "Private Placement Legend" shall mean the first paragraph of the legend initially set forth in the Securities in the form set forth on Exhibit A-1. "Public Equity Offering" means an underwritten public offering of Capital Stock (other than Redeemable Capital Stock) of the Company or BBC made on a primary basis by the Company or BBC pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act. "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "Rating Agencies" means (i) Standard & Poor's, (ii) Moody's and (iii) if Standard & Poor's or Moody's or both shall not make a rating of the Securities publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for Standard & Poor's or Moody's or both, as the case may be. "Rating Category" means (i) with respect to Standard & Poor's, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of Standard & Poor's or Moody's used by another Rating Agency. In determining whether the -22- rating of the Securities has decreased by one or more gradations, gradations within Rating Categories (+ and - for Standard & Poor's; 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to Standard & Poor's, a decline in a rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one gradation). "Rating Date" means the date which is 90 days prior to the earlier of (i) a Change of Control and (ii) public notice of the occurrence of a Change of Control or of the intention by the Company or any Permitted Holder to effect a Change of Control. "Rating Decline" means the decrease (as compared with the Rating Date) by one or more gradations (including gradations within Rating Categories as well as between Rating Categories) of the rating of the Securities by either Rating Agency on, or within six months after, the date of public notice of the occurrence of a Change of Control or of the intention by the Company or any Permitted Holder to effect a Change of Control (which period shall be extended for so long as the rating of the Securities is under publicly announced consideration for possible downgrade by any of the Rating Agencies). "Recapitalization" means the Recapitalization of the Company, as defined in the Offering Memorandum. "Redeemable Capital Stock" means, with respect to any person, any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, except to the extent exchangeable at the option of such person subject to the terms of any debt instrument to which such person is a party), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Indebtedness (other than at the option of such person), or is redeemable at the option of the holder thereof, in whole or in part, in any such case, on or prior to the final maturity date of the Securities. "Redemption Date" means, with respect to any Security to be redeemed, any date fixed for such redemption by or pursuant to this Indenture and the terms of the Securities. -23- "Redemption Price" means, with respect to any Security to be redeemed, the price at which it is to be redeemed pursuant to this Indenture and the terms of the Securities. "Refinance" means, with respect to any Indebtedness, any refinancing, redemption, retirement, renewal, extension or refunding of such Indebtedness. "Registered Exchange Offer" means the registration by the Company and the Guarantors under the Securities Act of all Series B Securities and the related Guarantees pursuant to a registration statement under which the Company and the Guarantors offer each Holder of Series A Securities and the related Guarantees the opportunity to exchange all Series A Securities (together with the related Guarantees) held by such Holder for Series B Securities and the related Guarantees in an aggregate principal amount equal to the aggregate principal amount of Series A Securities held by such Holder, all in accordance with the terms and conditions of the Registration Rights Agreement. "Registrable Securities" shall have the meaning specified in the Registration Rights Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated as of November 19, 1996 by and among the Company, BBC and the Initial Purchasers, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "Regular Record Date" means the Regular Record Date specified in the Securities. "Regulation S" means Regulation S under the Securities Act. "Responsible Officer" means, with respect to the Trustee, the chairman or vice chairman of the board of directors, the chairman or vice chairman of the executive committee of the board of directors, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller and any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom any corporate trust matter is -24- referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Payment" has the meaning specified in Section 10.14 hereof. "Restricted Security" shall have the meaning specified in Rule 144(a)(3) under the Securities Act; provided that the Trustee shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether a Security is a Restricted Security. "Restricted Subsidiary" means any Subsidiary of the Company that has not been designated by the Board of Directors of the Company, by a Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with Section 10.22 hereof. Any such Designation may be revoked by a Board Resolution of the Company delivered to the Trustee, subject to the provisions of Section 10.22 hereof. "Revocation" shall have the meaning specified in Section 10.22 hereof. "Revolving Credit Facility" means the credit facility providing working capital loans on a revolving basis in the New Credit Agreement. "Rule 144A" means Rule 144A under the Securities Act. "Securities" shall have the meaning specified in the recitals of this Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Security Register" shall have the respective meanings specified in Section 3.05 hereof. "Security Registrar" or "Registrar" shall have the meaning specified in Section 3.02 hereof. "Senior Indebtedness" means the principal of, premium, if any, and interest on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides -25- that such Indebtedness shall not be senior in right of payment to the Securities. Without limiting the generality of the foregoing, "Senior Indebtedness" will include the principal of, premium, if any, and interest (including interest that would accrue but for the filing of a petition initiating any proceeding under any Bankruptcy Law, whether or not such claim is allowable in such proceeding) on all obligations of every nature of the Company from time to time owed to the lenders under the New Credit Agreement, including, without limitation, principal of and interest on, and all fees and expenses payable under the New Credit Agreement. Notwithstanding the foregoing, "Senior Indebtedness" does not include, to the extent constituting Indebtedness, (i) Indebtedness evidenced by the Securities, (ii) Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company, (iii) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company, (iv) Indebtedness which is represented by Redeemable Capital Stock, (v) Indebtedness for goods, materials or services purchased in the ordinary course of business or Indebtedness consisting of trade payables or other current liabilities (other than any current liabilities owing under the New Credit Agreement or the current portion of any long-term Indebtedness which would constitute Senior Indebtedness but for the operation of this clause (v)), (vi) Indebtedness of or amounts owed by the Company for compensation to employees or for services rendered to the Company, (vii) any liability for federal, state, local or other taxes owed or owing by the Company, (viii) Indebtedness of the Company to a Restricted Subsidiary of the Company or any other Affiliate of the Company or any of such Affiliate's Restricted Subsidiaries, other than Indebtedness owed to Merrill Lynch or an Affiliate thereof by reason of its ownership of securities of the Company acquired in the ordinary course of its trading or underwriting activities, whether such securities are held by it for its own account or as nominee, (ix) that portion of any Indebtedness which at the time of issuance is issued in violation of this Indenture and (x) amounts owing under leases (other than Capitalized Lease Obligations). "Senior Representative" means the agent under the New Credit Agreement or other representatives designated in writing to the Trustee of the holders of any class or issue of Designated Senior Indebtedness. "Series A Securities" has the meaning specified in the first recital of this Indenture. -26- "Series B Securities" has the meaning specified in the first recital of this Indenture. "Special Record Date" means, with respect to the payment of any Defaulted Interest, a date fixed by the Trustee pursuant to Section 3.07 hereof. "Stated Maturity" means, with respect to any Security or any installment of interest thereon, the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable, and when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness, or any installment of interest thereon, is due and payable. "Subordinated Indebtedness" means, with respect to the Company, Indebtedness of the Company which is expressly subordinated in right of payment to the Securities or, with respect to any Subsidiary Guarantor, Indebtedness of such Subsidiary Guarantor which is expressly subordinated in right of payment to the Guarantee of such Subsidiary Guarantor. "Subsidiary" means, with respect to any person, any other person of which a majority of the equity ownership or the Voting Stock is, at the time, owned, directly or indirectly, by such person. "Subsidiary Guarantor" means each of the Company's Subsidiaries that in the future executes a supplemental indenture in which such Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor. "Term Facilities" means, collectively, the facilities providing term loans in the New Credit Agreement. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as amended. "Trustee" means the person named as the "Trustee" in the first paragraph of this Indenture, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Unrestricted Subsidiary" means a Subsidiary of the Company (other than a Subsidiary Guarantor) designated as such -27- pursuant to and in compliance with Section 10.22 hereof. Any such Designation may be revoked by a Board Resolution of the Company delivered to the Trustee, subject to the provisions of Section 10.22 hereof. Blue Bird Capital will be treated as an Unrestricted Subsidiary under this Indenture as of the Issue Date. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any persons (irrespective of whether or not, at the time, stock of any other class or classes will have, or might have, voting power by reason of the happening of any contingency). "Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary of which 100% of the outstanding Capital Stock is owned by the Company and/or another Wholly-Owned Restricted Subsidiary. For purposes of this definition, any directors' qualifying shares or investments by foreign nationals mandated by applicable law shall be disregarded in determining the ownership of a Restricted Subsidiary. "Wholly-Owned Unrestricted Subsidiary" means any Unrestricted Subsidiary of which 100% of the outstanding -28- Capital Stock is owned by the Company and/or a Wholly-Owned Restricted Subsidiary and/or another Wholly-Owned Unrestricted Subsidiary. For purposes of this definition, any directors' qualifying shares or investments by foreign nationals mandated by applicable law shall be disregarded in determining the ownership of an Unrestricted Subsidiary. Section 1.02. Other Definitions. Defined in Term Section ---- ---------- "Act" 1.05 "Asset Sale Offer" 10.16 "Asset Sale Offer Price" 10.16 "Asset Sale Purchase Date" 10.16 "Change of Control Date" 10.11 "Change of Control Offer" 10.11 "Change of Control Payment Date" 10.11 "covenant defeasance" 4.03 "Defaulted Interest" 3.07 "defeasance" 4.02 "Defeased Securities" 4.01 "Excess Proceeds" 10.16 "Guarantor Payment Blockage Period" 14.06 "incur" 10.12 "insolvent person" 4.04 "Payment Blockage Period" 12.03 "Surviving Entity" 8.01 Section 1.03. Rules of Construction. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; -29- (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (e) all references to "$" or "dollars" shall refer to the lawful currency of the United States of America; and (f) the words "include," "included" and "including" as used herein shall be deemed in each case to be followed by the phrase "without limitation." Section 1.04. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such person, or that they be so certified or covered by only one document, but one such person may certify or give an opinion with respect to some matters and one or more other persons as to other matters, and any such person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company or any Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or any Guarantor stating that the information with respect to such factual matters is in the possession of the Company or any Guarantor, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. -30- Where any person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated, with proper identification of each matter covered therein, and form one instrument. Section 1.05. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution (as provided below in subsection (b) of this Section 1.05) of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01 hereof) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security or the Holder of every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof to the same extent as the original Holder, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company or any Guarantor in reliance thereon, whether or not notation of such action is made upon such Security. -31- Section 1.06. Notices, etc., to the Trustee, the Company and the Guarantors. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holder or by the Company or any Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed, in writing, to or with the Trustee at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attention: Corporate Trustee Administration or at any other address previously furnished in writing to the Holders, the Company and the Guarantors by the Trustee; (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose (except as otherwise expressly provided herein) hereunder if in writing and mailed, first-class postage prepaid, to the Company addressed to it at Blue Bird Body Company, 3920 Arkwright Road, Macon, Georgia 31210, Attention: Chief Executive Officer, or at any other address previously furnished in writing to the Trustee by the Company; or (c) a Guarantor by the Trustee or by any Holder shall be sufficient for every purpose (except as otherwise expressly provided herein) hereunder if in writing and mailed, first-class postage prepaid, to such Guarantor addressed to it at Blue Bird Corporation, 3920 Arkwright Road, Macon, Georgia 31210, Attention: Chief Executive Officer, or other address previously furnished in writing to the Trustee by such Guarantor. Section 1.07. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the -32- sufficiency of such notice with respect to other Holders. Any notice when mailed to a Holder in the aforesaid manner shall be conclusively deemed to have been received by such Holder whether or not actually received by such Holder. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event as required by any provision of this Indenture, then any method of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. Section 1.08. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with any provision of the Trust Indenture Act or another provision which is required or deemed to be included in this Indenture by any of the provisions of the Trust Indenture Act, such provision or requirement of the Trust Indenture Act shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. Section 1.09. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.10. Successors and Assigns. All covenants and agreements in this Indenture by the Company, BBC and any other Guarantors, shall bind their respective successors and assigns, whether so expressed or not. -33- Section 1.11. Separability Clause. In case any provision in this Indenture or in the Securities or any Guarantee issued pursuant hereto shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.12. Benefits of Indenture. Nothing in this Indenture or in the Securities or in any Guarantee issued pursuant hereto, express or implied, shall give to any person (other than the parties hereto and their successors hereunder, any Paying Agent and the Holders) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.13. GOVERNING LAW. THIS INDENTURE, THE SECURITIES AND THE GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. Section 1.14. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company or of a Guarantor shall not have any liability for any obligations of the Company or a Guarantor under the Securities, the Guarantee or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Section 1.15. Independence of Covenants. All covenants and agreements in this Indenture shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default if such action is taken or condition exists. -34- Section 1.16. Exhibits. All exhibits attached hereto are by this reference made a part hereof with the same effect as if herein set forth in full. Section 1.17. Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. Section 1.18. Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. ARTICLE TWO SECURITY AND GUARANTEE FORMS Section 2.01. Form and Dating. The Securities and the Trustee's certificate of authentication with respect thereto and the Guarantees shall be in substantially the forms set forth, or referenced, in Exhibit A-1, Exhibit A-2 and Exhibit E, respectively, annexed hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any applicable law or with the rules of the Depository, any clearing agency or any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities and Guarantees, as evidenced by their execution thereof. The definitive Securities and Guarantees shall be printed, typewritten, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities and such Guarantees may be listed, all as determined by the officers executing such Securities and -35- Guarantees, as evidenced by their execution of such Securities and Guarantees. Each Security shall be dated the date of its issuance and shall show the date of its authentication. The terms and provisions contained in the Securities shall constitute, and are expressly made, a part of this Indenture. ARTICLE THREE THE SECURITIES Section 3.01. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $100,000,000 in aggregate principal amount of Series A Securities and Series B Securities, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.03, 3.04, 3.05, 3.06, 9.06, 10.11, 10.16 or 11.08. The Series A Securities shall be known and designated as the "10 3/4% Senior Subordinated Notes due 2006" of the Company. The Series B Securities shall be known and designated as the "10 3/4% Senior Subordinated Notes due 2006, Series B" of the Company. The final Stated Maturity of the Series A Securities and the Series B Securities shall be November 15, 2006, and the Series A Securities and Series B Securities shall each bear interest at the rate of 10 3/4% per annum from the Issue Date or from the most recent Interest Payment Date to which interest has been paid, as the case may be, payable on May 15, 1997 and semi-annually thereafter on November 15 and May 15, in each year, until the principal thereof is paid or duly provided for. Subject to Article Twelve, interest on any overdue principal, interest (to the extent lawful) or premium, if any, shall be payable on demand. Series B Securities may be issued only in exchange for a like principal amount of Series A Securities pursuant to a Registered Exchange Offer. The Securities shall be redeemable as provided in Article Eleven and paragraph 5 of the Series A Securities and paragraph 4 of the Series B Securities. At the election of the Company, the entire Indebtedness on the Securities or certain of the Company's obligations -36- and covenants and certain Events of Default thereunder may be defeased as provided in Article Four. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Twelve. The Guarantee of each Guarantor shall be subordinated in right of payment to Guarantor Senior Indebtedness of such Guarantor as provided in Article Fourteen hereof. Section 3.02. Registrar and Paying Agent. The Company shall maintain an office or agency (which shall be located in the Borough of Manhattan in The City of New York, State of New York) where Securities may be presented for registration of transfer or for exchange (the "Security Registrar" or "Registrar"), an office or agency (which shall be located in the Borough of Manhattan in The City of New York, State of New York) where Securities may be presented for payment (the "Paying Agent" or "Agent") and an office or agency where notices and demands to or upon the Company in respect of the Securities, the Guarantees and this Indenture may be served. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" or "Agent" includes any additional paying agent. The Company may act as its own Paying Agent, except for the purposes of payments on account of principal on the Securities pursuant to Sections 10.11 and 10.16 hereof. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the Trust Indenture Act. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 6.07 hereof. The Company initially appoints the Trustee as the Registrar and Paying Agent and agent for service of notices and demands in connection with the Securities. -37- Section 3.03. Execution and Authentication. Two Officers shall execute the Securities on behalf of the Company by either manual or facsimile signature. Securities bearing the manual or facsimile signature of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices on the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company many deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as provided in this Indenture and not otherwise. A Security shall not be entitled to any benefit under this Indenture or be valid or obligatory for any purpose until the Trustee manually signs the certificate of authentication on the Security. The Trustee's signature on such certificate shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Series A Securities for original issue in an aggregate principal amount at maturity not to exceed $100,000,000, upon receipt of a Company Order. In addition, on or prior to the date of the Registered Exchange Offer, the Trustee or an authenticating agent shall authenticate Exchange Securities (including any Private Exchange Securities which will be in the form of Exhibit A-2 but which shall have the restrictive legend contained in Exhibit A-1) to be issued at the time of the Registered Exchange Offer in the aggregate principal amount at maturity of up to $100,000,000 upon receipt of a Company Order of the Company. In each case, the Company Order shall specify the amount of Securities to be authenticated, the names of the persons in which such Securities shall be registered and the date on which such Securities are to be authenticated and direct the Trustee to authenticate such Securities together with an Officer's Certificate certifying that all conditions precedent to the issuance of such Securities contained herein have been complied with. The aggregate principal amount at maturity of Securities Outstanding at any -38- time may not exceed $100,000,000, except as provided in Section 3.04 hereof. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate Securities on behalf of the Trustee. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. Such authenticating agent shall have the same authenticating rights and duties as the Trustee in any dealings hereunder with the Company or with any Affiliate of the Company. The certificates representing the Securities will be issued in fully registered form, without coupons and only in denominations of $1,000 and any integral multiple thereof. Except as described below, the Series A Securities will be deposited with, or on behalf of, the Depository, and registered in the name of Cede & Co. as the Depository's nominee in the form of a global note certificate substantially in the form of Exhibit A-1 (the "Global Security") or will remain in the custody of the Trustee pursuant to the FAST Balance Certificate Agreement between the Depository and the Trustee. Series A Securities purchased by or transferred to (i) Institutional Accredited Investors who are not Qualified Institutional Buyers, (ii) except as described below, persons outside the United States pursuant to sales in accordance with Regulation S under the Securities Act or (iii) any other persons who are not Qualified Institutional Buyers (collectively, "Non-Global Purchasers") will be issued in registered form without coupons substantially in the form of Exhibit A-1 (the "U.S. Physical Securities"). Upon the transfer to a Qualified Institutional Buyer of U.S. Physical Securities initially issued to a Non-Global Purchaser, such U.S. Physical Security will be exchanged for an interest in the Global Security or in the Securities in the custody of the Trustee representing the principal amount of Securities being transferred. Series A Securities purchased by persons outside the United States pursuant to sales in accordance with Regulation S under the Securities Act will be represented upon issuance by a temporary global note certificate substantially in the form of Exhibit A-1 (the "Offshore Physical Securities" and, together with the U.S. Physical Securities, the "Physical Securities") which will not be exchangeable for U.S. Physical Securities -39- until the expiration of the "40-day restricted period" within the meaning of Rule 903(c)(3) of Regulation S under the Securities Act. The Offshore Physical Securities will be registered in the name of, and be held by, an offshore physical security holder (the "Offshore Physical Security Holder") until the expiration of such 40-day period, at which time the Offshore Physical Securities will be delivered to the Trustee in exchange for Securities registered in the names requested by the Offshore Physical Security Holder. In addition, until the expiration of such 40-day period, transfers of interests in the Offshore Physical Securities can only be effected through the Offshore Physical Security Holder in accordance with the requirements of Section 3.17 hereof. Section 3.04. Temporary Securities. Until definitive Securities are prepared and ready for delivery, the Company may execute and upon a Company Order the Trustee shall authenticate and deliver temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities, in any authorized denominations, but may have variations that the Company reasonably considers appropriate for temporary Securities as conclusively evidenced by the Company's execution of such temporary Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay but in no event later than the date that the Registered Exchange Offer is consummated. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 10.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of like tenor and of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 3.05. Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 10.02 being sometimes referred to herein as -40- the "Securities Register") in which, subject to such reasonable regulations as the Securities Registrar may prescribe, the Company shall provide for the registration of Securities and of transfers and exchanges of Securities. The Trustee is hereby initially appointed Security Registrar for the purpose of registering Securities and transfers of Securities as herein provided. When Securities are presented to the Registrar or a co-Registrar with a request from the Holder of such Securities to register the transfer or exchange for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer or exchange in form satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. Whenever any Securities are so presented for exchange, the Company and any Guarantor shall execute, and the Trustee shall authenticate and deliver, the Securities and Guarantees which the Holder making the exchange is entitled to receive. No service charge shall be made to the Securityholder for any registration of transfer or exchange. The Company may require from the Securityholder payment of a sum sufficient to cover any transfer taxes or other governmental charge that may be imposed in relation to a transfer or exchange, but this provision shall not apply to any exchange pursuant to Section 3.09, 10.11, 10.16 or 9.06 hereof (in which events the Company will be responsible for the payment of all such taxes which arise solely as a result of the transfer or exchange and do not depend on the tax status of the Holder). The Trustee shall not be required to exchange or register the transfer of any Security for a period of 15 days immediately preceding the first mailing of notice of redemption of Securities to be redeemed or of any Security selected, called or being called for redemption except, in the case of any Security where public notice has been given that such Security is to be redeemed in part, the portion thereof not to be redeemed. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same Indebtedness, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. -41- Section 3.06. Mutilated, Destroyed, Lost and Stolen Securities. If a mutilated Security is surrendered to the Trustee or if the Holder of a Security of any series claims that the Security has been lost, destroyed or wrongfully taken, the Company shall execute and upon a Company Order, the Trustee shall authenticate and deliver a replacement Security of like tenor and principal amount, bearing a number not contemporaneously outstanding, if the Holder of such Security furnishes to the Company and to the Trustee evidence reasonably acceptable to them of the ownership and the destruction, loss or theft of such Security and an indemnity bond shall be posted, sufficient in the judgment of the Company or the Trustee, as the case may be, to protect the Company, the Trustee or any Agent from any loss that any of them may suffer if such Security is replaced. The Company may charge such Holder for the Company's expenses in replacing such Security (including expenses of the Trustee charged to the Company) and the Trustee may charge the Company for the Trustee's expenses in replacing such Security. Every replacement Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company and each Guarantor, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 3.07. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date and interest on such defaulted interest at the then -42- applicable interest rate borne by the Securities, to the extent lawful (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the Regular Record Date; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in subsection (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this subsection (a) provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company in writing of such Special Record Date. In the name and at the expense of the Company, the Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at its address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the persons in whose names the Securities (or their respective Predecessor Securities) are registered on such Special Record Date and shall no longer be payable pursuant to the following subsection (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with -43- the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this subsection (b), such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 3.08. Persons Deemed Owners. Prior to and at the time of due presentment for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name any Security is registered in the Security Register as the owner of such Security for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 3.07) interest on such Security and for all other purposes whatsoever, whether or not such Security shall be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 3.09. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange shall be delivered to the Trustee and, if not already cancelled, shall be promptly cancelled by it. The Company and any Guarantor may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company or such Guarantor may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer or exchange, redemption or payment. The Trustee and no one else shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section 3.09, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be destroyed and certification of their destruction delivered to the Company unless by a Company Order the Company shall direct that the -44- cancelled Securities be returned to it. The Trustee shall provide the Company a list of all Securities that have been cancelled from time to time as requested by the Company. Section 3.10. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. Section 3.11. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, date established for the payment of Defaulted Interest or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of principal, premium, if any, or interest need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date, date established for the payment of Defaulted Interest or at the Stated Maturity, as the case may be, and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, Redemption Date, date established for the payment of Defaulted Interest or Stated Maturity, as the case may be, to the next succeeding Business Day. Section 3.12. CUSIP Number. The Company in issuing the Securities may use a "CUSIP" number (if then generally in use), and if so, the Trustee may use the CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. The Company shall promptly notify the Trustee in writing of any change in the CUSIP number of either series of Securities. Section 3.13. Paying Agent To Hold Money in Trust. Each Paying Agent shall hold in trust for the benefit of the Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, or interest on the Securities, and shall notify the Trustee of -45- any default by the Company in making any such payment. Money held in trust by the Paying Agent need not be segregated except as required by law and in no event shall the Paying Agent be liable for any interest on any money received by it hereunder. The Company at any time may require the Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any Event of Default, upon a Company Order to the Paying Agent, require such Paying Agent to pay forthwith all money so held by it to the Trustee and to account for any funds disbursed. Upon making such payment, the Paying Agent shall have no further liability for the money delivered to the Trustee. Section 3.16 Book-Entry Provisions for Global Securities. (a) The Global Securities initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Exhibit B. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security. (b) Transfers of Global Securities shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Securities may be transferred or exchanged for Physical Securities in accordance with the rules and procedures of the Depository and the provisions of Section 3.17. In addition, Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Securities if (i) the Depository notifies the Company that it is unwilling or unable to continue as -46- Depository for any Global Security and a successor Depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository to issue Physical Securities. (c) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Security to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Securities are to be issued) reflect on its books and records the date and a decrease in the principal amount at maturity of the Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Physical Securities of like tenor and principal amount of authorized denominations. (d) In connection with the transfer of Global Securities as an entirety to beneficial owners pursuant to paragraph (b), the Global Securities shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Securities, an equal aggregate principal amount at maturity of Physical Securities of like tenor of authorized denominations. (e) Any Physical Security constituting a Restricted Security delivered in exchange for an interest in a Global Security pursuant to subparagraphs (b) or (c) of this Section 3.16 shall, except as otherwise provided by paragraphs (a)(l)(x) and (c) of Section 3.17, bear the legend regarding transfer restrictions applicable to the Physical Securities set forth in Exhibit A-1. (f) The Holder of any Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. Section 3.17 Special Transfer Provisions. (g) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S. persons. The following provisions shall apply with respect to the registration of any proposed transfer -47- of a Security constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any non-U.S. person: (1) the Registrar shall register the transfer of any Security constituting a Restricted Security, whether or not such Security bears the Private Placement Legend, if (x) the requested transfer is not prior to the date which is three years (or such shorter period as may be prescribed by Rule 144(k) under the Securities Act or any successor provision thereunder) after the later of the original Issue Date of such Security (or of any Predecessor Security) or the last day on which the Company or any Affiliate of the Company or any Guarantor was the owner of such Security or any Predecessor Security or (y) (1) in the case of a transfer to a person purporting to be an Institutional Accredited Investor which is not a QIB (excluding non-U.S. persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto or (2) in the case of a transfer to a person purporting to be a non-U.S. person, the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto; and (2) if the proposed transferor is an Agent Member holding a beneficial interest in a Global Security, upon receipt by the Registrar of (x) the certificate, if any, required by paragraph (1) above and (y) instructions given in accordance with the Depository's and the Registrar's procedures; whereupon (a) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of Outstanding Physical Securities) a decrease in the principal amount at maturity of a Global Security in an amount equal to the principal amount at maturity of the beneficial interest in a Global Security to be transferred, and (b) the Company shall execute and the Trustee shall authenticate and deliver one or more Physical Securities of like tenor and principal amount of authorized denominations. (h) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Security constituting a Restricted Security to a person purporting to be a QIB (excluding transfers to non-U.S. persons): -48- (1) the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Security stating, or has otherwise advised the Company and the Registrar in writing, that the transfer has been made in compliance with the exemption from registration under the Securities Act provided under Rule 144A to a transferee who has signed the certification provided for on the form of Security stating, or has otherwise advised the Company and the Registrar in writing, that such transferee represents and warrants that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (2) if the proposed transferee is an Agent Member, and the Securities to be transferred consist of Physical Securities which after transfer are to be evidenced by an interest in the Global Security, upon receipt by the Registrar of instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on the Security Register the date and an increase in the principal amount at maturity of the Global Security in an amount equal to the principal amount at maturity of the Physical Securities to be transferred, and the Trustee shall cancel the Physical Securities so transferred. (i) Private Placement Legend. Upon the registration of transfer, exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the registration of transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar shall deliver only Securities that bear the Private Placement Legend unless (i) the circumstances contemplated by paragraph (a)(l)(x) of this Section 3.17 exist, (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such -49- legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (iii) such Security has been sold pursuant to an effective registration statement under the Securities Act. (j) Other Transfers. If a Holder proposes to transfer a Security constituting a Restricted Security pursuant to any exemption from the registration requirements of the Securities Act other than as provided for by Section 3.17(a) and (b), the Registrar shall only register such transfer or exchange if such transferor delivers an Opinion of Counsel satisfactory to the Company and the Registrar that such transfer is in compliance with the Securities Act and the terms of this Indenture; provided that the Company may, based upon the opinion of its counsel, instruct the Registrar by a Company Order not to register such transfer in any case where the proposed transferee is not a QIB, non-U.S. person or Institutional Accredited Investor. (k) General. By its acceptance of any Security bearing the Private Placement Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.16 or this Section 3.17 for a period of two years at which time such letters, notices and other written communications shall be delivered to the Company. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable prior written notice to the Registrar. ARTICLE FOUR DEFEASANCE OR COVENANT DEFEASANCE Section 4.01. Company's Option To Effect Defeasance or Covenant Defeasance. The Company may, at its option by Board Resolution, at any time, with respect to the Securities, elect to have either Section 4.02 or Section 4.03 be applied to all of the Outstanding Securities (the "Defeased Securities"), upon -50- compliance with the conditions set forth below in this Article Four. Section 4.02. Defeasance and Discharge. Upon the Company's exercise under Section 4.01 of the option applicable to this Section 4.02, the Company and each Guarantor shall be deemed to have been discharged from its obligations with respect to the Defeased Securities on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Defeased Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 4.05 and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, and, upon Company Request, shall execute proper instruments acknowledging the same), except for the following, which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Defeased Securities to receive, solely from the trust fund described in Section 4.04 and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Securities when such payments are due, (b) the Company's obligations with respect to such Defeased Securities under Sections 3.04, 3.05, 3.06, 10.02 and 10.03, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder, including, without limitation, the Trustee's rights under Section 6.07, and (d) this Article Four. Subject to compliance with this Article Four, the Company may exercise its option under this Section 4.02 notwithstanding the prior exercise of its option under Section 4.03 with respect to the Securities. Section 4.03. Covenant Defeasance. Upon the Company's exercise under Section 4.01 of the option applicable to this Section 4.03, the Company and each Guarantor shall be released from its obligations under any covenant or provision contained in Sections 10.06 through 10.22 and Sections 14.04 through 14.06 and 14.08 through 14.17 and the provisions of Articles Eight, Eleven and Twelve shall not apply, with respect to the Defeased Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Defeased Securities shall -51- thereafter be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the Defeased Securities, the Company and each Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or Article, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or Article or by reason of any reference in any such Section or Article to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 5.01(c) or (d), but, except as specified above, the remainder of this Indenture and such Defeased Securities shall be unaffected thereby. Section 4.04. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 4.02 or Section 4.03 to the Defeased Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 6.09 who shall agree to comply with the provisions of this Article Four applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (a) money in an amount, or (b) U.S. Government Obligations which through the scheduled payment of principal, premium, if any, and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (c) a combination thereof, in any such case, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of, premium, if any, and interest on the Defeased Securities upon redemption or at the Stated Maturity of such principal or installment of principal, premium, if any, or interest; provided, -52- however, that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities; and provided, further, that from and after the time of deposit, the money or U.S. Government Obligations deposited shall not be subject to the rights of the holders of other Senior Indebtedness or Guarantor Senior Indebtedness pursuant to the provisions of Article Twelve or Article Fourteen; (2) No Default shall have occurred and be continuing on the date of such deposit or, insofar as Sections 5.01(h), (i) or (j) are concerned, at any time during the period ending on the ninety-first day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (3) Neither the Company nor any Subsidiary of the Company is an "insolvent person" within the meaning of any applicable Bankruptcy Law on the date of such deposit or at any time during the period ending on the ninety-first day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (4) Such defeasance or covenant defeasance shall not cause the Trustee for the Securities to have a conflicting interest in violation of Section 6.08 and for purposes of the Trust Indenture Act with respect to any securities of the Company or any Guarantor; (5) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company or any Guarantor is a party or by which it is bound; (6) In the case of an election under Section 4.02, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date hereof, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities will not recognize income, gain or loss for -53- Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) In the case of an election under Section 4.03, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (8) The Company shall have delivered to the Trustee, an Opinion of Counsel to the effect that, (x) the trust funds established pursuant to this Article will not be subject to any rights of Holders of Senior Indebtedness or Guarantor Senior Indebtedness, including, without limitation, those arising under Articles Twelve and Fourteen of this Indenture, and (y) immediately following the ninety-first day after the deposit, the trust funds established pursuant to this Article will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally (for the limited purpose of the Opinion of Counsel referred to in this clause (8), such Opinion of Counsel may contain an assumption that the conclusions contained in a customary solvency letter by a nationally recognized appraisal firm, dated as of the date of the deposit and taking into account such deposit, are accurate as of such date, provided, however, that such solvency letter is also delivered to the Trustee); (9) The Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 4.02 or 4.03 was not made by the Company with the intent of preferring the Holders or any Guarantor over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (10) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that (i) all conditions precedent (other than -54- conditions requiring the passage of time) provided for relating to either the defeasance under Section 4.02 or the covenant defeasance under Section 4.03 (as the case may be) have been complied with as contemplated by this Section 4.04 and (ii) if any other Indebtedness of the Company or any Guarantor shall then be outstanding or committed, such defeasance or covenant defeasance will not violate the provisions of the agreements or instruments evidencing such Indebtedness. Opinions required to be delivered under this Section may have such qualifications as are customary for opinions of the type required and acceptable to the Trustee. Section 4.05. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous Provisions. Subject to the proviso of the last paragraph of Section 10.03, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 4.05, the "Trustee") pursuant to Section 4.04 in respect of the Defeased Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (other than the Company) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee and hold it harmless against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 4.04 or the principal, premium, if any, and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Defeased Securities. Anything in this Article Four to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 4.04 which, in the opinion of an internationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the -55- amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 4.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 4.02 or 4.03, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Company and of any Guarantor under this Indenture, the Securities and the Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 4.02 or 4.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money and U.S. Government Obligations in accordance with Section 4.02 or 4.03, as the case may be; provided, however, that if the Company makes any payment of principal, premium, if any, or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money and U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE FIVE REMEDIES Section 5.01. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Twelve or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of the principal of or premium, if any, when due and payable, on any of the Securities (at its Stated Maturity, upon optional redemption, required purchase, scheduled principal payment or otherwise); or (b) default in the payment of an installment of interest on any of the Securities, when due and payable, -56- and continuance of such default for a period of 30 days; or (c) the Company or any Guarantor fails to comply with any of its obligations described under Article Eight or Sections 10.11 or 10.16 hereof; or (d) the Company or any Guarantor fails to perform or observe any other term, covenant or agreement contained in the Securities, any Guarantee or this Indenture (other than a default specified in (a), (b) or (c) above) for a period of 30 days after written notice of such failure requiring the Company to remedy the same and stating that such notice is a "Notice of Default" hereunder shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities then Outstanding; or (e) default or defaults under any agreement, indenture or instrument under which the Company or any Restricted Subsidiary then has outstanding Indebtedness in excess of $5,000,000 in the aggregate and either (i) such Indebtedness is already due and payable in full or (ii) such default or defaults results in the acceleration of the maturity of such Indebtedness; or (f) any Guarantee ceases to be in full force and effect or is declared null and void, or any Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with Sections 10.19 and 14.07 hereof) and such condition shall have continued for a period of 30 days after written notice of such condition requiring the same to be remedied and stating that such notice is a "Notice of Default" hereunder shall have been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities then Outstanding; or (g) one or more judgments, orders or decrees of any court or regulatory or administrative agency for the payment of money in excess of $5,000,000 either individually or in the aggregate shall have been entered against the Company or any Restricted Subsidiary or any of their -57- respective properties and shall not have been discharged and either (a) any creditor shall have commenced an enforcement proceeding upon such judgment, order or decree or (b) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment, order or decree, by reason of pending appeal or otherwise, will not be in effect; or (h) the Company, BBC or any Material Subsidiary of the Company pursuant to or under or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the making of a Bankruptcy Order in an involuntary case or proceeding or the commencement of any case against it; (iii) consents to the appointment of a Custodian of it or for any substantial part of its property; (iv) makes a general assignment for the benefit of its creditors; (v) files an answer or consent seeking reorganization or relief; (vi) shall admit in writing its inability to pay its debts generally; or (vii) consents to the filing of a petition in bankruptcy; or (i) a court of competent jurisdiction in any involuntary case or proceeding enters a Bankruptcy Order against the Company, BBC or any Material Subsidiary, and such Bankruptcy Order remains unstayed and in effect for 60 consecutive days; or (j) a Custodian shall be appointed out of court with respect to the Company, BBC or any Material Subsidiary or with respect to all or any substantial part of the assets or properties of the Company or any Subsidiary; or (k) either (a) the collateral agent under the New Credit Agreement or (b) if the New Credit Agreement shall no longer be in force and effect, any holder of at least -58- $5,000,000 in aggregate principal amount of Indebtedness of the Company or any Restricted Subsidiary shall commence judicial proceedings to foreclose upon assets of the Company or any of its Restricted Subsidiaries having an aggregate Fair Market Value, individually or in the aggregate, in excess of $5,000,000 or shall have exercised any right under applicable law or applicable security documents to take ownership of any such assets in lieu of foreclosure. Section 5.02. Acceleration of Maturity; Rescission and Annulment. If (x) an Event of Default (other than an Event of Default specified in Section 5.01(h), (i) or (j) with respect to the Company) occurs and is continuing then and in every such case the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities then Outstanding may, and the Trustee upon the request of the Holders of not less than 25% in aggregate principal amount of the Securities then Outstanding shall, declare all principal of all the Securities to be due and payable immediately in an amount equal to the principal amount of the Securities, premium, if any, thereon plus accrued and unpaid interest, if any, to the date the Securities become due and payable by a notice in writing to the Company (and to the Trustee, if given by the Holders) and upon any such declaration such principal, premium, if any, and interest, shall become immediately due and payable provided, however, that so long as the New Credit Agreement shall be in force and effect, if an Event of Default shall have occurred and be continuing (other than an Event of Default specified in Section 5.01 (h), (i) or (j) with respect to the Company), any such acceleration shall not be effective until the earlier to occur of (i) five Business Days following delivery of a notice of such acceleration to the Senior Representative under the New Credit Agreement and (ii) the acceleration of any Indebtedness under the New Credit Agreement. If an Event of Default specified in Section 5.01(h), (i) or (j) with respect to the Company occurs and is continuing, then the principal of, premium, if any, and accrued and unpaid interest, if any, on all the Securities then Outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the -59- money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in aggregate principal amount of the Securities then Outstanding, by written notice to the Company and the Trustee, may rescind and annul such declaration of acceleration and its consequences if: (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all amounts due the Trustee under Section 6.07, including the reasonable compensation, fees, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Securities, (iii) the principal of and premium, if any, on any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate then borne by the Securities, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate then borne by the Securities; and (b) all Events of Default, other than the non-payment of principal of, premium, if any, and any accrued and unpaid interest on, the Securities which have become due solely as a result of such declaration of acceleration, have been cured or waived as provided in Section 5.13. No such rescission shall affect any subsequent Default or impair any right consequent thereon. Notwithstanding the foregoing, in the event of a declaration of acceleration in respect of the Securities because an Event of Default specified in Section 5.01(e) shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or paid or the requisite holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and by the requisite holders of such Indebtedness or a trustee, fiduciary or agent for such holders, within 60 days after such declaration of acceleration in respect of the Securities and no other -60- Event of Default has occurred which has not been cured or waived during such 60-day period. Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company and each Guarantor covenant that if: (a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days or more, or (b) default is made in the payment of the principal of or premium, if any, on any Security at the Stated Maturity thereof, the Company and each Guarantor will, jointly and severally, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal, premium, if any, and interest, with interest upon the overdue principal, premium, if any, and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate then borne by the Securities; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company and each Guarantor, fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may, but is not obligated under this paragraph to, institute a judicial proceeding for the collection of the sums so due and unpaid and may, but is not obligated under this paragraph to, prosecute such proceeding to judgment or final decree, and may, but is not obligated under this paragraph to, enforce the same against the Company, any Guarantor or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any Guarantor or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion, but is not obligated under this paragraph to, (i) proceed to protect and enforce its rights and -61- the rights of the Holders under this Indenture or any Guarantee by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted herein, including, without limitation, seeking recourse against any Guarantor or (ii) proceed to protect and enforce any other proper remedy, including, without limitation, seeking recourse against any Guarantor. No recovery of any such judgment upon any property of the Company or any Guarantor shall affect or impair any rights, powers or remedies of the Trustee or the Holders. Section 5.04. Trustee May File Proofs of Claims. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities, including each Guarantor or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, fees, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian, in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, -62- disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07 hereof. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 5.05. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture, the Securities or any Guarantee may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, fees, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 5.06. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium, if any, or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: to the Trustee for amounts due under Section 6.07; Second: Subject to Articles Twelve and Fourteen hereof, to Holders for interest accrued on the Securities, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for interest; -63- Third: Subject to Articles Twelve and Fourteen hereof, to Holders for principal and premium, if any, amounts owing under the Securities, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and premium, if any; and Fourth: Subject to Articles Twelve and Fourteen hereof, the balance, if any, to the Company. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 5.06. Section 5.07. Limitation on Suits. No Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 15 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 15-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture, any Security or -64- any Guarantee to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, any Security or any Guarantee, except in the manner provided in this Indenture and for the equal and ratable benefit of all the Holders. Section 5.08. Unconditional Right of Holders To Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive cash payment of the principal of, premium, if any, and (subject to Section 3.07 hereof) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the respective Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 5.09. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture, any Security or any Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, each of the Guarantor, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.10. Rights and Remedies Cumulative. Except as provided in Section 3.06, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. -65- Section 5.11. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article Five or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12. Control by Majority. The Holders of a majority in aggregate principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided, however, that: (a) such direction shall not be in conflict with any rule of law or with this Indenture, any Security or any Guarantee or expose the Trustee to personal liability; and (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 5.13. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past Default hereunder and its consequences, except a Default (a) in the payment of the principal of, premium, if any, or interest on any Security or (b) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other -66- Default or Event of Default or impair any right consequent thereon. Section 5.14. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of, premium, if any, or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the respective Redemption Dates). Section 5.15. Waiver of Stay, Extension or Usury Laws. Each of the Company and the Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company or any Guarantor from paying all or any portion of the principal of, premium, if any, or interest on the Securities contemplated herein or in the Securities or which may affect the covenants or the performance of this Indenture; and each of the Company and the Guarantor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. -67- Section 5.16. Unconditional Right of Holders To Institute Certain Suits. Nothwithstanding any other provision in this Indenture and any other provision of any Security, the right of any Holder of any Security to receive payment of the principal of, premium, if any, and interest on such Security on or after the respective Stated Maturities (or the respective Redemption Dates, in the case of redemption) expressed in such Security, or after such respective dates, shall not be impaired or affected without the consent of such Holder. ARTICLE SIX THE TRUSTEE Section 6.01. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own -68- willful misconduct, except that no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.01. Section 6.02. Notice of Defaults. Within 60 days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, notice of such Default hereunder known to the Trustee, unless such Default shall have been cured or waived; provided, however, that, except in the case of a Default in the payment of the principal of, premium, if any, or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as a trust committee of Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders. Section 6.03. Certain Rights of Trustee. Subject to Section 6.01 hereof and the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors of the Company or any Guarantor may be sufficiently evidenced by a Board Resolution thereof; -69- (c) the Trustee may consult with counsel and any written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by the Trustee in compliance with such request or direction; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture other than any liabilities arising out of its own negligence; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, appraisal, bond, debenture, note, coupon, security, other evidence of indebtedness or other paper or document unless requested in writing so to do by the Holders of not less than a majority in aggregate principal amount of the Securities then Outstanding; provided, however, that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such investigation shall be paid by the Company or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Company upon demand; provided, further, the Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may deem fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine -70- the books, records and premises of the Company, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 6.04. Trustee Not Responsible for Recitals, Dispositions of Securities or Application of Proceeds Thereof. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company and the Guarantors, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities or of any Guarantee except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-1, if any, to be supplied to the Company are true and accurate subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 6.05. Trustee and Agents May Hold Securities; Collections; Etc. The Trustee, any Paying Agent, Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities, with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent and, subject to Sections 6.08 and 6.13 hereof and Sections 310 and 311 of the Trust Indenture Act, may otherwise deal with the Company and receive, collect, hold and retain collections from the Company with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent. Section 6.06. Money Held in Trust. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the -71- purposes for which they were received, but need not be segregated from other funds except to the extent required herein or by law. The Trustee shall not be under any liability for interest on any moneys received by it hereunder. Section 6.07. Compensation and Indemnification of Trustee and Its Prior Claim. The Company and each Guarantor covenant and agree: (a) to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it hereunder (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, fees, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation, fees, and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ), except any such expense, disbursement or advance as may arise from its negligence or bad faith; and (c) to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including enforcement of this Section 6.07. The obligations of the Company and each Guarantor under this Section to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, fees, disbursements and advances shall constitute an additional obligation hereunder and shall survive the satisfaction and discharge of this Indenture. To secure the obligations of the Company and of each Guarantor to the Trustee under this Section 6.07, the Trustee shall have a prior Lien upon all property and funds held or collected by the Trustee as such, except funds and property paid by the Company or any Guarantor and held in trust for the benefit of the Holders of particular Securities. Section 6.08. Conflicting Interests. The Trustee shall be subject to and comply with the provisions of Section 310(b) of the Trust Indenture Act. -72- Section 6.09. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under Trust Indenture Act Sections 310(a)(1) and (2) and which shall have a combined capital and surplus of at least $100,000,000, and have a Corporate Trust Office in the Borough of Manhattan in The City of New York, State of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of any Federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.10. Resignation and Removal; Appointment of Successor Trustee. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee, or any trustee or trustees hereinafter appointed, may at any time resign by giving written notice thereof to the Company at least 20 Business Days prior to the date of such proposed resignation. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument executed by authority of the Board of Directors of the Company, a copy of which shall be delivered to the resigning Trustee and a copy to the successor Trustee. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 20 Business Days after the giving of such notice of resignation, the resigning Trustee may, or any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper, appoint a successor Trustee. -73- (c) The Trustee may be removed at any time by an Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of Section 310(b) of the Trust Indenture Act in accordance with Section 6.08 hereof after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.09 hereof and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose or rehabilitation, conservation or liquidation, then, in any case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 5.14, the Holder of any Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution of its Board of Directors, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the -74- Holders of the Securities and accepted appointment in the manner hereinafter provided, the Holder of any Security who has been a bona fide Holder for at least six months may, subject to Section 5.14, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 6.11. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee as if originally named as Trustee hereunder; but, nevertheless, on the written request of the Company or the successor Trustee, upon payment of amounts due it pursuant to Section 6.07, such retiring Trustee shall duly assign, transfer and deliver to the successor Trustee all moneys and property at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor Trustee all the rights, powers, duties and obligations of the retiring Trustee. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.07. No successor Trustee with respect to the Securities shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor Trustee shall be eligible to act as Trustee under this Article. -75- Upon acceptance of appointment by any successor Trustee as provided in this Section 6.11, the successor shall give notice thereof to the Holders of the Securities, by mailing such notice to such Holders at their addresses as they shall appear on the Security Register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 6.10. If the Company fails to give such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Company. Section 6.12. Merger, Conversion, Amalgamation, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated or amalgamated, or any corporation resulting from any merger, conversion, amalgamation or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided such corporation shall be eligible under this Article to serve as Trustee hereunder. In case at the time such successor to the Trustee under this Section 6.12 shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and, in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee under this Section 6.12 may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have been authenticated. -76- ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.01. Preservation of Information; Company To Furnish Trustee Names and Addresses of Holders. (a) The Trustee shall preserve the names and addresses of the Securityholders and otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish or cause the Registrar to furnish to the Trustee before each Interest Payment Date, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Securityholders. Neither the Company nor the Trustee shall be under any responsibility with regard to the accuracy of such list. (b) The Company will furnish or cause to be furnished to the Trustee (i) semi-annually, not more than 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and (ii) at such other times as the Trustee may request in writing, within 30 days after receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that if and so long as the Trustee shall be the Security Registrar, no such list need be furnished pursuant to this Subsection 7.01(b). Section 7.02. Communications of Holders. Holders may communicate with other Holders with respect to their rights under this Indenture or under the Securities pursuant to Section 312(b) of the Trust Indenture Act. The Company and the Trustee and any and all other persons benefited by this Indenture shall have the protection afforded by Section 312(c) of the Trust Indenture Act. -77- Section 7.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first May 15 following the date of this Indenture, the Trustee shall mail to all Holders, as their names and addresses appear in the Security Register, a brief report dated as of such May 15, in accordance with, and to the extent required under Section 313 of the Trust Indenture Act. At the time of its mailing to Holders, a copy of each such report shall be filed by the Trustee with the Company, the Commission and with each stock exchange on which the Securities are listed. The Company shall notify the Trustee when the Securities are listed on any stock exchange. Section 7.04. Reports by Company and Each Guarantor. The Company and each Guarantor shall: (a) file with the Commission, the copies of annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) required to be filed with Commission pursuant to Section 13 or Section 15 of the Exchange Act, whether or not the Company or any Guarantor has a class of securities registered under the Exchange Act; (b) file with the Trustee within 15 days after it files or would be required to file the information specified in subsection (a) of this Section 7.04 reports and documents with the Commission copies of such information; (c) file with the Trustee and the Commission in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company and each Guarantor with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (d) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company and each Guarantor pursuant to subsections (a) and (c) of this Section as may be required -78- by rules and regulations prescribed from time to time by the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 8.01. Company May Consolidate, etc., Only on Certain Terms. The Company will not, in a single transaction or through a series of related transactions, consolidate with, merge with or into any other person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any other person or persons, or permit any of the Restricted Subsidiaries to enter into any such transaction or series of related transactions if such transaction or series of related transactions, in the aggregate, would result in the sale, assignment, conveyance, lease, transfer or disposition of all or substantially all of the properties and assets of the Company and the Restricted Subsidiaries, taken as a whole, to any person or persons, unless: (i) either (A)(1) if the transaction or transactions is a merger or consolidation involving the Company, the Company shall be the person surviving such merger or consolidation or (2) if the transaction or transactions is a merger or consolidation involving a Restricted Subsidiary, such Restricted Subsidiary shall be the person surviving such merger or consolidation and such person surviving shall be a Restricted Subsidiary, or (B)(1) the person formed by such consolidation or into which the Company or such Restricted Subsidiary is merged or to which the properties and assets of the Company or such Restricted Subsidiary, as the case may be, are transferred (any such surviving person or transferee person being the "Surviving Entity") shall be a corporation organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia, and (2)(A) in the case of a transaction involving the Company, the Surviving Entity shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations under this Indenture and the Securities, and in each case, -79- the Indenture shall remain in full force and effect, or (B) in the case of a transaction involving a Restricted Subsidiary that is a Subsidiary Guarantor, the Surviving Entity shall expressly assume by a supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Restricted Subsidiary under its Guarantee and related supplemental indenture, and in each case, such Guarantee and supplemental indenture shall remain in full force and effect; (ii) immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default shall have occurred and be continuing and the Company, or the Surviving Entity, as the case may be, after giving effect to such transaction or series of transactions on a pro forma basis, could incur $1.00 of additional Indebtedness under Section 10.12 hereof; (iii) each Guarantor, unless it is the other party to the transaction or transactions described above, shall have by supplemental indenture confirmed that its Guarantee shall apply to the obligations of the Company or the Surviving Entity, as the case may be, under this Indenture and the Securities; and (iv) the Company or the Surviving Entity, as the case may be, shall have delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel each stating that such transaction or series of related transactions and, if a supplemental indenture is required in connection with such transaction or series of related transactions to effectuate such assumption, such supplemental indenture complies with this Indenture and that all conditions precedent provided for in this Indenture relating to such transaction or series of transactions have been satisfied. Section 8.02. Successor Substituted. Upon any consolidation, combination or merger, or any sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets -80- of the Company and the Restricted Subsidiaries in accordance with Section 8.01 hereof in which the Company or such Restricted Subsidiary, as the case may be, is not the Surviving Entity, such Surviving Entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Restricted Subsidiary, as the case may be, under this Indenture and the Securities with the same effect as if such successor had been named as the Company or such Restricted Subsidiary, as the case may be, herein, and in the Securities and, thereafter, except in the case of (a) a lease or (b) any sale, assignment, conveyance, transfer, lease or other disposition to a Restricted Subsidiary of the Company, the Company shall be discharged from all obligations and covenants under this Indenture and the Securities. For all purposes of this Indenture and the Securities (including this Article Eight and Sections 10.12, 10.14 and 10.17 hereof) Subsidiaries of any Surviving Entity will, upon such transaction or series of related transactions described in this Article Eight, become Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to Section 10.22 and all Indebtedness, and all Liens on property or assets, of the Company and the Restricted Subsidiaries in existence immediately prior to such transaction or series of related transactions will be deemed to have been incurred upon such transaction or series of related transactions. ARTICLE NINE SUPPLEMENTAL INDENTURES AND WAIVERS Section 9.01. Supplemental Indentures, Agreements and Waivers Without Consent of Holders. Without the consent of any Holders, the Company and the Guarantors, when authorized by a Board Resolution of the Board of Directors of the Company and each Guarantor, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto or agreements or other instruments with respect to any Guarantee, in form and substance satisfactory to the Trustee, or waiver for any of the following purposes: (a) to evidence the succession of another person to the Company or a Guarantor, and the assumption by any such successor of the covenants of the Company or such -81- Guarantor herein and in the Securities and/or in any Guarantee, as the case may be; (b) to add to the covenants of the Company or any Guarantor for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company or any Guarantor, as applicable, herein, in the Securities or in any Guarantee, as the case may be; (c) to cure any ambiguity, to correct or supplement any provision herein, in the Securities or in any Guarantee which may be defective or inconsistent with any other provision herein or to make any other provisions with respect to matters or questions arising under this Indenture, the Securities or any Guarantee; provided, however, that, in each case, such provisions shall not materially adversely affect the interests of the Holders; (d) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by Section 9.05 hereof or otherwise; (e) to add a Guarantor pursuant to the requirements of Section 10.19 hereof; (f) to evidence and provide the acceptance of the appointment of a successor Trustee hereunder; or (g) to mortgage, pledge, hypothecate or grant a security interest in any property or assets in favor of the Trustee for the benefit of the Holders as security for the payment and performance of the Indenture Obligations; provided, however, that the Company has delivered to the Trustee an Opinion of Counsel stating that such change, agreement or waiver does not materially adversely affect the interests or legal rights of any Holders. Section 9.02. Supplemental Indentures, Agreements and Waivers with Consent of Holders. With the written consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities delivered to the Company, each Guarantor and the Trustee, the Company, and each Guarantor (if a party thereto) when authorized by a Board Resolution, and the Trustee may -82- enter into an indenture or indentures supplemental hereto or agreements or other instruments with respect to any Guarantee satisfactory to the Trustee for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture, the Securities or any Guarantee, or of modifying in any manner the rights of the Holders under this Indenture, the Securities or any Guarantee. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may waive compliance by the Company and each Guarantor with any provision of this Indenture or the Securities or any Guarantee. However, no such supplemental indenture, agreement or instrument, including any waiver pursuant to Section 5.13, shall, without the written consent or waiver of the Holder of each Outstanding Security affected thereby: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, alter the redemption provisions of the Securities or this Indenture, or change the coin or currency in which any Security or Guarantee or any premium or the accrued interest thereon is payable, or impair the right to institute suit for the enforcement of any payment after the Stated Maturity thereof (or, in the case of either a redemption or a purchase pursuant to Sections 10.11 or 10.16 of this Indenture, on or after the applicable Redemption Date or purchase date, as the case may be); (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain Defaults hereunder and their consequences) or consent provided for in this Indenture or with respect to any Security or Guarantee; (c) modify any of the provisions of this Section 9.02 or Sections 5.13 and 5.16, except to increase any such percentage, if applicable thereto, or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; -83- (d) consent to the assignment or transfer by the Company or any Guarantor of any of their rights and obligations under this Indenture, the Securities or the Guarantees; (e) modify any of the provisions of this Indenture, the Securities or any Guarantee relating to the subordination of the Securities or any Guarantee in a manner adverse to the Holders thereof or otherwise affect the ranking of the Securities or the Guarantees in a manner adverse to the Holders; (f) following (i) either (x) the mailing of a notice of a Change of Control Offer or (y) the failure to mail such notice prior to the date set forth in the second paragraph of Section 10.11, in either case, following satisfaction of the condition precedent to the mailing of such notice set forth in the first paragraph of Section 10.11, or (ii) the occurrence of an Asset Sale, alter the Company's obligation to repurchase Securities in accordance with the provisions of Sections 10.11 or 10.16, as the case may be, or waive any default in the performance thereof; (g) adversely affect the ranking of the Securities or any Guarantee in a manner adverse to any Holder; (h) release any Guarantor from any of its obligations under its Guarantee or this Indenture; (i) impair the right to institute suit for the enforcement of any payment on or with respect to the Securities; or (j) amend or modify the provisions of Section 10.08. Upon the written request of the Company and each Guarantor accompanied by a copy of a Board Resolution of the Board of Directors of each of them authorizing the execution of any such supplemental indenture or other agreement, instrument or waiver, and upon the filing with the Trustee of evidence of the consent of Holders as aforesaid, the Trustee shall join with the Company and each Guarantor in the execution of such supplemental indenture or other agreement, instrument or waiver. -84- It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture or other agreement, instrument or waiver, but it shall be sufficient if such Act shall approve the substance thereof. Section 9.03. Execution of Supplemental Indentures, Agreements and Waivers. In executing, or accepting the additional trusts created by, any supplemental indenture, agreement, instrument or waiver permitted by this Article Nine or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.01 hereof) shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate from each obligor under the Securities entering into such supplemental indenture, agreement, instrument or waiver, each stating that the execution of such supplemental indenture, agreement, instrument or waiver (a) is authorized or permitted by this Indenture and (b) does not violate the provisions of any agreement or instrument evidencing any other Indebtedness of the Company, any Guarantor or any Subsidiary of the Company. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture, agreement, instrument or waiver which affects the Trustee's own rights, duties or immunities under this Indenture, the Securities, any Guarantee or otherwise. Section 9.04. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article Nine, this Indenture, the Securities, if applicable, and/or the applicable Guarantee shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture, the Securities, if applicable, and/or the applicable Guarantee, as the case may be, for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.05. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article Nine shall conform to the requirements of the Trust Indenture Act as then in effect. -85- Section 9.06. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors of the Company, to any such supplemental indenture may be prepared and executed by the Company and each Guarantor and authenticated and delivered by the Trustee upon a Company Order in exchange for Outstanding Securities. Section 9.07. Effect on Senior Indebtedness. No supplemental indenture shall adversely affect the rights of any holder of Senior Indebtedness or any holder of Guarantor Senior Indebtedness under Articles Twelve or Fourteen of this Indenture, without the consent of such holder. Section 9.08. Record Date. The Company may, but shall not be obligated to, fix, a record date for the purpose of determining the Holders entitled to consent to any supplemental indenture, agreement or instrument or any waiver, and shall promptly notify the Trustee of any such record date. If a record date is fixed those persons who were Holders at such record date (or their duly designated proxies), and only those persons, shall be entitled to consent to such supplemental indenture, agreement or instrument or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. Section 9.09. Revocation and Effect of Consents. Until an amendment or waiver becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if a notation of the consent is not made on any Security. However, any such Holder, or subsequent Holder, may revoke the consent as to his Security or portion of a Security if the Trustee receives the notice of revocation -86- before the date the amendment or waiver becomes effective. An amendment or waiver shall become effective in accordance with its terms and thereafter bind every Holder. ARTICLE TEN COVENANTS Section 10.01. Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of, premium, if any, and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 10.02. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan in The City of New York, State of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The office of the Trustee at its Corporate Trust Office will be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York, State of New York) where the Securities may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York, State of New York for such purposes. The Company will give prompt written notice to the -87- Trustee of any such designation or rescission and any change in the location of any such other office or agency. Section 10.03. Money for Security Payments To Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of, premium, if any, or interest on any of the Securities, segregate and hold in trust for the benefit of the Holders entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. If the Company is not acting as Paying Agent, the Company will, on or before each due date of the principal of, premium, if any, or interest on, any Securities, deposit with a Paying Agent a sum in same day funds sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held in trust for the benefit of the Holders entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. If the Company is not acting as Paying Agent, the Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent will agree with the Trustee, subject to the provisions of this Section 10.03, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Securities in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders or otherwise disposed of as herein provided; (b) give the Trustee notice of any Default by the Company or any Guarantor (or any other obligor upon the Securities) in the making of any payment of principal of, premium, if any, or interest on the Securities; (c) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and -88- (d) acknowledge, accept and agree to comply in all aspects with the provisions of this Indenture relating to the duties, rights and liabilities of such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent will be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Security and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company upon receipt of a Company Request therefor, or (if then held by the Company) will be discharged from such trust; and the Holder of such Security will thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and the Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. Section 10.04. Corporate Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory), licenses and franchises of the Company and each of the Restricted Subsidiaries; provided, however, that the Company will not be required to preserve any such right, license or franchise if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and the -89- Restricted Subsidiaries as a whole and that the loss thereof is not adverse in any material respect to the Holders; provided, further, that the foregoing will not prohibit a sale, transfer or conveyance of a Subsidiary of the Company or any of its assets in compliance with the terms of this Indenture. Section 10.05. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed (i) upon the Company or any of its Subsidiaries or (ii) upon the income, profits or property of the Company or any of the Restricted Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, could reasonably be expected to become a Lien upon the property of the Company or any of the Restricted Subsidiaries; provided, however, that the Company will not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicable or validity is being contested in good faith by appropriate proceedings properly instituted and diligently conducted. Section 10.06. Maintenance of Properties. The Company will cause all material properties owned by the Company or any of the Restricted Subsidiaries or used or held for use in the conduct of their respective businesses to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 10.06 will prevent the Company from discontinuing the maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any of the Restricted Subsidiaries and is not disadvantageous in any material respect to the Holders. Section 10.07. Insurance. The Company will at all times keep all of its and the Restricted Subsidiaries' properties which are of an insurable nature insured with insurers, believed by the Company in good -90- faith to be financially sound and responsible, against loss or damage to the extent that property of similar character is usually and customarily so insured by corporations similarly situated and owning like properties. Section 10.08. Books and Records. The Company will, and will cause each of the Restricted Subsidiaries to, keep proper books of record and account, in which full and correct entries will be made of all financial transactions and the assets and business of the Company and each Restricted Subsidiary of the Company in accordance with GAAP. Section 10.09. Guarantees. Each of the Guarantors and the Company will, and the Company will cause each of the Restricted Subsidiaries to, ensure at all times that each Guarantee will remain in full force and effect and shall not be subordinated in right of payment to any Indebtedness of the Guarantors other than Guarantor Senior Indebtedness. Section 10.10. Provision of Financial Statements. Whether or not the Company has a class of securities registered under the Exchange Act, the Company and each Guarantor will supply, at their own expense, to each Holder of the Securities and file with the Trustee within fifteen days after the Company is required to file the same with the Commission, copies of the annual reports and quarterly reports and of the information, documents and other reports which the Company may be required to file with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act. The Company will also comply with the other provisions of Section 314(a) of the Trust Indenture Act. Section 10.11. Change of Control Triggering Event. In the event of a Change of Control Triggering Event (the date of such occurrence, the "Change of Control Date"), the Company will notify the Holders of Securities in writing of such occurrence and will make an offer to purchase (the "Change of Control Offer") on a Business Day (the "Change of Control Purchase Date") not more than 40 nor less than 20 Business Days following the Change of Control Date all Securities then Outstanding at a purchase price equal to 101% of the principal -91- amount thereof plus accrued and unpaid interest, if any, to the Change of Control Purchase Date. Prior to the mailing of the notice of a Change of Control Offer provided for below, the Company shall have (x) repaid in full all Indebtedness under the New Credit Agreement, or offered to repay and have repaid the lenders under the New Credit Agreement to the extent such offer has been accepted under the New Credit Agreement, or (y) obtained the requisite consents under the New Credit Agreement to permit the repurchase of the Securities as provided for under this Section 10.11. Failure to mail the notice of a Change of Control Offer on the date specified below or to have satisfied the foregoing condition precedent by the date that such notice is required to be mailed will constitute a covenant Default under Section 5.01(c); provided, however, the Company will have no obligation to effect a repurchase of Securities under this Section 10.11 if a notice of a Change of Control Offer has been mailed notwithstanding that the foregoing condition precedent has not been satisfied on or prior to the date specified below. Notice of a Change of Control Offer shall be mailed by the Company not more than 20 Business Days after the Change of Control Date to the Holders of Securities at their last registered addresses with a copy to the Trustee and the Paying Agent. The Change of Control Offer shall remain open from the time of mailing for at least 20 Business Days and until 5:00 p.m., New York City time, on the Change of Control Purchase Date. The notice, which shall govern the terms of the Change of Control Offer, shall include such disclosures as are required by law and shall state: (a) that the Change of Control Offer is being made pursuant to this Section 10.11 and that all Securities tendered into the Change of Control Offer will be accepted for payment; (b) the purchase price (including the amount of accrued interest, if any) for each Security, the Change of Control Purchase Date and the date on which the Change of Control Offer expires; (c) that any Security not tendered for payment will continue to accrue interest in accordance with the terms thereof; (d) that, unless the Company shall default in the payment of the purchase price, any Security accepted for -92- payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date; (e) that Holders electing to have Securities purchased pursuant to a Change of Control Offer will be required to surrender their Securities to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the Change of Control Purchase Date and must complete any form letter of transmittal proposed by the Company and acceptable to the Trustee and the Paying Agent; (f) that Holders of Securities will be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the Change of Control Purchase Date, a facsimile transmission or letter setting forth the name of the Holders, the principal amount of Securities the Holders delivered for purchase, the Security certificate number (if any) and a statement that such Holder is withdrawing his election to have such Securities purchased; (g) that Holders whose Securities are purchased only in part will be issued Securities of like tenor equal in principal amount to the unpurchased portion of the Securities surrendered; (h) the instructions that Holders must follow in order to tender their Securities; and (i) information concerning the business of the Company, the most recent annual and quarterly reports of the Company filed with the Commission pursuant to the Exchange Act (or, if the Company is not required to file any such reports with the Commission, the comparable reports prepared pursuant to Section 10.10(a)), a description of material developments in the Company's business, information with respect to pro forma historical financial information after giving effect to such Change of Control and such other information concerning the circumstances and relevant facts regarding such Change of Control and Change of Control Offer as would, in the good faith judgment of the Company, be material to a Holder of Securities in connection with the decision of such Holder as to whether or not it should tender Securities pursuant to the Change of Control Offer. -93- On the Change of Control Purchase Date, the Company will (i) accept for payment Securities or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money, in immediately available funds, sufficient to pay the purchase price of all Securities or portions thereof so tendered and accepted and (iii) deliver to the Trustee the Securities so accepted together with an Officers' Certificate setting forth the Securities or portions thereof tendered to and accepted for payment by the Company. The Paying Agent will promptly mail or deliver to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security of like tenor equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Change of Control Offer not later than the first Business Day following the Change of Control Purchase Date. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other securities laws or regulations in connection with the repurchase of Securities pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 10.11, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 10.11 by virtue thereof. Section 10.12. Limitation on Indebtedness. The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or in any manner become liable, contingently or otherwise (in each case, to "incur"), for the payment of any Indebtedness (including any Acquired Indebtedness); provided that (i) the Company and any Subsidiary Guarantor will be permitted to incur Indebtedness (including Acquired Indebtedness) and (ii) a Restricted Subsidiary will be permitted to incur Acquired Indebtedness, if immediately after giving pro forma effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to 2.00:1.00. Notwithstanding the foregoing, the Company and, to the extent specifically set forth below, the Restricted Subsidiaries may incur each and all of the following: -94- (i) Indebtedness of the Company or any Subsidiary Guarantor under the New Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the sum of (a) $175,000,000 with respect to Indebtedness under the Term Facilities, less principal payments made by the Company in respect of the Term Facilities, (b) $80,000,000 in the aggregate with respect to Indebtedness under the Revolving Credit Facility and the letter of credit facility, less the amount by which the aggregate commitment under the Revolving Credit Facility has been permanently reduced to the extent that any repayments required to be made in connection with effecting such permanent reduction have been made and (c) any Indebtedness incurred under the New Credit Agreement pursuant to and in compliance with the provisions described under either (1) the proviso of the first paragraph of this Section 10.12 or (2) clause (xii) below; (ii) Indebtedness of the Company or any Subsidiary Guarantor under this Indenture, the Securities and any Guarantees; (iii) Indebtedness of the Company or any Restricted Subsidiary not otherwise referred to in this paragraph that is outstanding on the Issue Date, except Indebtedness to be repaid as described under "Use of Proceeds" in the Offering Memorandum; (iv) Indebtedness of the Company or any Restricted Subsidiary in respect of performance bonds, bankers' acceptances, letters of credit of the Company or any Restricted Subsidiary and surety bonds provided by the Company or any Restricted Subsidiary in the ordinary course of business, not to exceed at any given time $10,000,000 in the aggregate; (v) subject to the covenant described in Section 10.14 hereof, Indebtedness of any Restricted Subsidiary to the Company or any Restricted Subsidiary which is not subordinated in right of payment of any Indebtedness of such Restricted Subsidiary; (vi) Indebtedness of the Company to any Restricted Subsidiary which is unsecured and subordinated in right of payment from and after such time as the Securities shall become due and payable (whether at Stated Maturity, by acceleration or otherwise) to the payment and performance -95- of the Company's obligations under this Indenture or the Securities; (vii) any guarantees of Indebtedness by a Restricted Subsidiary entered in compliance with the covenant under this Indenture described in Section 10.19 hereof; (viii) Interest Rate Protection Obligations of the Company or any Restricted Subsidiary covering Indebtedness of the Company or any Restricted Subsidiary (which Indebtedness (a) bears interest at fluctuating interest rates and (b) is otherwise permitted to be incurred under this covenant) to the extent the notional principal amount of such Interest Rate Protection Obligations does not exceed the principal amount of the Indebtedness to which such Interest Rate Protection Obligations relate; (ix) Indebtedness of the Company or any Restricted Subsidiary under Currency Agreements relating to (a) Indebtedness of the Company or a Restricted Subsidiary and/or (b) obligations to purchase or sell assets or properties or, in each case, incurred in the ordinary course of business of the Company or any Restricted Subsidiary; provided that such Currency Agreements do not increase the Indebtedness or other obligations of the Company and the Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (x) Capitalized Lease Obligations of the Company or any Restricted Subsidiary in an aggregate amount not exceeding $7,500,000 outstanding at any time; (xi) (a) Indebtedness of the Company or any Subsidiary Guarantor to the extent the proceeds thereof are used to Refinance Indebtedness of the Company or any Subsidiary Guarantor (including all or a portion of the Securities) or any Restricted Subsidiary and (b) Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor to the extent the proceeds thereof are used to Refinance Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor, in each case other than the Indebtedness to be Refinanced as described under "Use of Proceeds" in the Offering Memorandum and Indebtedness incurred under clauses (i), (ii) or (v) above; provided that, in the case of either clause (a) or (b), (1) the -96- principal amount of Indebtedness incurred pursuant to this clause (xi) (or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof, the original issue price of such Indebtedness) shall not exceed the sum of the principal amount of Indebtedness so Refinanced (or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof, the original issue price of such Indebtedness plus any accreted value attributable thereto since the original issuance of such Indebtedness) plus the amount of any premium required to be paid in connection with such Refinancing pursuant to the terms of such Indebtedness or the amount of any premium reasonably determined by the Company or a Restricted Subsidiary, as applicable, as necessary to accomplish such Refinancing by means of a tender offer or privately negotiated purchase, plus the amount of expenses in connection therewith; and (2) except in the case of Refinancing or replacement of Senior Indebtedness or Guarantor Senior Indebtedness or of any Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor, does not reduce the Average Life to Stated Maturity of such Indebtedness; and (xii) additional Indebtedness of the Company or any Restricted Subsidiary not described by any other clause of this definition, not to exceed an aggregate principal amount at any time outstanding of $25,000,000 (less the aggregate principal amount of Indebtedness incurred under the New Credit Agreement under subclause (i)(c)(1) above). Section 10.13. Statement by Officers as to Default. (a) The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, a written statement signed by the chairman or a chief executive officer, the principal financial officer or principal accounting officer of the Company, stating (i) that a review of the activities of the Company during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and (ii) that, to the knowledge of each officer signing such certificate, the Company has kept, observed, performed and fulfilled each and every covenant and condition contained in this Indenture and is not in default in -97- the performance or observance of any of the terms, provisions, conditions and covenants hereof (or, if a Default shall have occurred, describing all such Defaults of which such officers may have knowledge, their status and what action the Company is taking or proposes to take with respect thereto). (b) When any Default has occurred and is continuing, or if the Trustee or any Holder or the trustee for or the holder of any other evidence of Indebtedness of the Company or any Restricted Subsidiary gives any notice or takes any other action with respect to a claimed default (other than with respect to Indebtedness (other than Indebtedness evidenced by the Securities) in the principal amount of less than $5,000,000), the Company will promptly notify the Trustee of such Default, notice or action and will deliver to the Trustee by registered or certified mail or by telegram, or facsimile transmission followed by hard copy by registered or certified mail an Officers' Certificate specifying such event, notice or other action within five Business Days after the Company becomes aware of such occurrence and what action the Company is taking or proposes to take with respect thereto. Section 10.14. Limitation on Restricted Payments. (a) The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other distribution or payment on or in respect of Capital Stock of the Company or any payment made to the direct or indirect holders (in their capacities as such) of Capital Stock of the Company (other than dividends or distributions payable solely in rights to purchase Capital Stock of the Company (other than Redeemable Capital Stock)); or (ii) purchase, redeem, defease or otherwise acquire or retire for value any Capital Stock of the Company (other than any such Capital Stock owned by a Restricted Subsidiary); or (iii) make any principal payment on, or purchase, defease, repurchase, redeem or otherwise acquire or retire for value, prior to any scheduled maturity, scheduled repayment, scheduled sinking fund payment or other Stated Maturity, any Subordinated Indebtedness (other than any such Subordinated Indebtedness owed to a Restricted Subsidiary); or -98- (iv) make any Investment (other than a Permitted Investment) in any person; (such payments or Investments described in the preceding clauses (i), (ii), (iii) and (iv) are collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than in cash, shall be the Fair Market Value of the asset(s) proposed to be transferred by the Company or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment), (a) no Default shall have occurred and be continuing, (b) the aggregate amount of all Restricted Payments declared or made from and after the Issue Date would not exceed the sum of (1) 50% of the aggregate Consolidated Net Income of the Company accrued on a cumulative basis during the period (treated as one accounting period) beginning on September 29, 1996 and ending on the last day of the fiscal quarter of the Company immediately preceding the date of such proposed Restricted Payment (or, if such aggregate cumulative Consolidated Net Income of the Company for such period shall be a deficit, minus 100% of such deficit) plus (2) the aggregate net cash proceeds received by the Company either (x) as capital contributions in the form of common equity to the Company after the Issue Date or (y) from the issuance or sale of Capital Stock (excluding Redeemable Capital Stock but including Capital Stock issued upon the conversion of convertible Indebtedness, in exchange for outstanding Indebtedness or from the exercise of options, warrants or rights to purchase Capital Stock (other than Redeemable Capital Stock)) of the Company to any person (other than to a Restricted Subsidiary of the Company) after the Issue Date plus (3) in the case of the disposition or repayment of any Investment constituting a Restricted Payment made after the Issue Date, an amount equal to the lesser of the return of capital with respect to such Investment and the initial amount of such Investment, in either case, less the cost of the disposition of such Investment and (iii) the Company could incur $1.00 of additional Indebtedness under the proviso of the first paragraph of Section 10.12 hereof. For purposes of the preceding clause (b)(2), upon the issuance of Capital Stock either from the conversion of convertible Indebtedness or exchange for outstanding Indebtedness or upon the exercise of options, warrants or rights, the amount counted as net cash proceeds received will be the cash -99- amount received by the Company at the original issuance of the Indebtedness that is so converted or exchanged or from the issuance of options, warrants or rights, as the case may be, plus the incremental amount of cash received by the Company, if any, upon the conversion, exchange or exercise thereof. (b) None of the foregoing provisions of Section 10.14(a) will prohibit (i) the payment of any dividend within 60 days after the date of its declaration, if at the date of declaration such payment would be permitted by the provisions of this Indenture; (ii) so long as no Default shall have occurred and be continuing, the redemption, repurchase or other acquisition or retirement of any shares of any class of Capital Stock of the Company in exchange for, or out of the net proceeds of, a substantially concurrent issue and sale of other shares of Capital Stock (other than Redeemable Capital Stock) of the Company to any person (other than to a Restricted Subsidiary); provided that such net proceeds are excluded from clause (b)(2) of the preceding paragraph; (iii) so long as no Default shall have occurred and be continuing, any redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness made by exchange for, or out of the net proceeds of, a substantially concurrent issue and sale of (a) Capital Stock (other than Redeemable Capital Stock) of the Company or (b) Indebtedness of the Company or any Guarantor so long as such Indebtedness (1) is subordinated to Senior Indebtedness and the Securities or Guarantor Senior Indebtedness and the Guarantees of such Guarantor, as the case may be, at least to the same extent as the Subordinated Indebtedness so purchased, exchanged, redeemed, repurchased, acquired or retired and (2) has no Stated Maturity earlier than the Stated Maturity for the final scheduled principal payment of the Securities; (iv) dividends paid or intercompany loans made by the Company to BBC for the purpose of paying operating expenses of BBC arising in the ordinary course of business, including, without limitation, for the payment of taxes; (v) Investments constituting Restricted Payments made as a result of the receipt of non-cash consideration from any Asset Sale made pursuant to and in compliance with Section 10.16 hereof; (vi) the making of the Distribution in connection with the Recapitalization or (vii) payment made by the Company under the Income Taxes Agreement. In computing the amount of Restricted Payments previously made for purposes of clause (b) of the preceding paragraph, Restricted Payments under the immediately preceding clauses (i) and (v) shall be included. -100- Section 10.15. Limitation on Transactions with Affiliates. The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, conduct any business or enter into or suffer to exist any transaction or series of related transactions with, or for the benefit of, any Affiliate of the Company (other than a Restricted Subsidiary so long as no Affiliate of the Company or beneficial holder of 5% or more of any class or series of Capital Stock of the Company shall beneficially own any Capital Stock in such Restricted Subsidiary) or any beneficial holder of 10% or more of any class of Capital Stock of the Company except (i) on terms that are no less favorable to the Company or the Restricted Subsidiary, as the case may be, than those which could have been obtained in a comparable transaction at such time from persons who do not have such a relationship with the Company, and (ii) with respect to any transaction or series of related transactions involving aggregate payments or value equal to or greater than $1,000,000, the Company shall have delivered an Officer's Certificate to the Trustee certifying that such transaction or series of related transactions comply with the preceding clause (i) and, with respect to any transaction or series of related transactions involving aggregate payments or value equal to or greater than $5,000,000, further certifying that such transaction or series of transactions have been approved by a majority of the Board of Directors of the Company, including a majority of the disinterested directors of the Board of Directors of the Company. For the purposes of the foregoing, a director of the Company shall not be considered "interested" with respect to a transaction solely by virtue of being a director of the other party to such transaction. The Company shall be deemed to have complied with the foregoing provisions if it has obtained a written opinion from an Independent Financial Advisor stating that the terms of such transaction or series of transactions are fair to the Company or such Restricted Subsidiary, as the case may be, from a financial point of view. This Section 10.15 shall not apply to (i) the payment of reasonable and customary fees to directors of the Company, (ii) any customary provision for the indemnification of officers or directors of the Company, (iii) any transactions with a Wholly-Owned Unrestricted Subsidiary in connection with a Lease Financing Transaction (including pursuant to the Income Taxes Agreement) and (d) transactions related to the Recapitalization. -101- Section 10.16. Disposition of Proceeds of Asset Sales. (a) The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Sale unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the shares and/or assets subject to such Asset Sale and (ii) at least 75% of the consideration for any such Asset Sale is cash and/or Cash Equivalents (provided that the following shall be deemed cash for purposes of this provision and be treated as Net Cash Proceeds, subject to application as hereinafter provided: the amount of any liabilities (as shown on the balance sheet or in the notes thereto of the Company or such Restricted Subsidiary) of the Company or such Restricted Subsidiary that are assumed (and from which the Company or such Restricted Subsidiary is unconditionally released) in connection with such Asset Sale by the transferee or purchaser of such assets or on behalf of such transferee or purchaser by a third party). To the extent the Net Cash Proceeds of any Asset Sale are not required to be applied to repay, and permanently reduce the commitments under, any outstanding Indebtedness under the New Credit Agreement as required by the terms thereof or are not so applied, then the Company may, within 12 months of the Asset Sale, invest Net Cash Proceeds in properties and assets which replace the properties and assets that were the subject of the Asset Sale or in properties and assets (including inventory) that will be used in the business of the Company and the Restricted Subsidiaries existing on the Issue Date or in businesses reasonably related thereto. The amount of such Net Cash Proceeds in excess of the amount (i) used to repay Indebtedness under the New Credit Agreement and (ii) permitted to be invested and so invested as set forth above is referred to herein as "Excess Proceeds." (b) When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000, the Company will be obligated to make an offer (an "Asset Sale Offer") to purchase from all holders of the Securities, on a day not more than 40 Business Days thereafter (the "Asset Sale Purchase Date"), the maximum principal amount (expressed as a multiple of $1,000) of Securities that may be purchased with the aggregate Excess Proceeds at a price, payable in cash, equal to 100% of the principal amount of the Securities plus accrued and unpaid interest, if any, to the date of purchase (the "Asset Sale Offer Price"). An Asset Sale Offer will be required to be kept open for a period of at least 20 Business Days. To the extent that an -102- Asset Sale Offer is not fully subscribed to, the Company will be entitled to retain the unutilized portion of the Excess Proceeds. (c) Whenever Excess Proceeds received by the Company exceed $10,000,000, such Excess Proceeds will, prior to the purchase of Securities, be set aside by the Company in a separate account pending (i) deposit with the depositary of the amount required to purchase the Securities tendered in an Asset Sale Offer or (ii) delivery by the Company of the Asset Sale Offer Price to the Holders of the Securities validly tendered and not withdrawn pursuant to an Asset Sale Offer. Such Excess Proceeds may be invested in Cash Equivalents, as directed by the Company, having a maturity date which is not later than the earliest possible date for purchase or redemption of Securities pursuant to the Asset Sale Offer. The Company will be entitled to any interest or dividends accrued, earned or paid on such Cash Equivalents. (d) Notice of an Asset Sale Offer will be mailed by the Company to all Holders of Securities not less than 20 Business Days nor more than 40 Business Days before the Asset Sale Purchase Date at their last registered address with a copy to the Trustee and any Paying Agents. The Asset Sale Offer will remain open from the time of mailing for at least 20 Business Days or such longer period as required by law and until at least 5:00 p.m., New York City time, on the Asset Sale Purchase Date. The notice, which will govern the terms of the Asset Sale Offer, will include such disclosures as are required by law and will state: (i) that the Asset Sale Offer is being made pursuant to this Section 10.16; (ii) the Asset Sale Offer Price (including the amount of accrued interest, if any) for each Security, the Asset Sale Purchase Date and the date on which the Asset Sale Offer expires; (iii) that any Security not tendered or accepted for payment shall continue to accrue interest in accordance with the terms thereof; (iv) that, unless the Company shall default in the payment of the Asset Sale Offer Price, any Security accepted for payment pursuant to the Asset Sale Offer -103- shall cease to accrue interest after the Asset Sale Purchase Date; (v) that Holders electing to have Securities purchased pursuant to an Asset Sale Offer shall be required to surrender their Securities to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the Asset Sale Purchase Date with the "Option of Holder to Elect Purchase" on the reverse thereof completed; (vi) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the Asset Sale Purchase Date, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Securities the Holder delivered for purchase, the Security certificate number (if any) and a statement that such Holder is withdrawing his election to have such Securities purchased; (vii) that if Securities in a principal amount in excess of the Holder's pro rata share of the amount of Excess Proceeds are tendered pursuant to the Asset Sale Offer, the Company shall purchase Securities on a pro rata basis among the Securities tendered (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000 or integral multiples of $1,000 shall be acquired); (viii) that Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered; (ix) the instructions that Holders must follow in order to tender their Securities; and (x) information concerning the business of the Company, the most recent annual and quarterly reports of the Company filed with the Commission pursuant to the Exchange Act (or, if the Company is not required to file any such reports with the Commission, the comparable reports prepared pursuant to Section 10.10(a)), a description of material developments in the Company's business, information with respect to pro forma historical financial information after giving effect to such Asset Sale and Asset Sale Offer and such other information as would be material -104- to a Holder of Securities in connection with the decision of such Holder as to whether or not it should tender Securities pursuant to the Asset Sale Offer. (e) On the Asset Sale Purchase Date, the Company will (i) accept for payment, on a pro rata basis, Securities or portions thereof tendered pursuant to the Asset Sale Offer, (ii) deposit with the Paying Agent money, in immediately available funds, in an amount sufficient to pay the Asset Sale Offer Price of all Securities or portions thereof so tendered and accepted and (iii) deliver to the Trustee the Securities so accepted together with an Officers' Certificate setting forth the Securities or portions thereof tendered to and accepted for payment by the Company. The Paying Agent will promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the Asset Sale Offer Price, and the Trustee will promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted will be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer not later than the first Business Day following the Asset Sale Purchase Date. To the extent an Asset Sale Offer is not fully subscribed to by such Holders, the Company may retain such unutilized portion of the Excess Proceeds. The Paying Agent will promptly deliver to the Company the balance of any such Excess Proceeds held by the Paying Agent after payment to the Holders of Securities as aforesaid. For purposes of this Section 10.16, the Trustee will act as Paying Agent. (f) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to the Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 10.16, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 10.16 by virtue thereof. Section 10.17. Limitation on Liens. The Company will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien of any kind, upon any of its property or assets, -105- whether now owned or acquired after the Issue Date, or any proceeds therefrom, which secures either (x) Subordinated Indebtedness unless the Securities and the Guarantee, as applicable, are secured by a Lien on such property, assets or proceeds that is senior in priority to the Liens securing such Subordinated Indebtedness or (y) Pari Passu Indebtedness unless the Securities and the Guarantees, as applicable, are equally and ratably secured with the Liens securing such Pari Passu Indebtedness. Section 10.18. Limitation on Other Senior Subordinated Indebtedness. Neither the Company nor any Guarantor will create, incur, assume, guarantee or in any other manner become liable with respect to any Indebtedness (other than the Securities and the Guarantees) that is subordinate in right of payment to any Indebtedness of the Company or of such Guarantor, as the case may be, unless such Indebtedness is either (i) pari passu in right of payment with the Securities or such Guarantee, as the case may be, or (ii) subordinate in right of payment to the Securities or such Guarantee, as the case may be, in the same manner and at least to the same extent as the Securities are subordinated to Senior Indebtedness or as such Guarantee is subordinated to Guarantor Senior Indebtedness, as the case may be. Section 10.19. Limitation on Guarantees by Restricted Subsidiaries. The Company will not permit any of the Domestic Subsidiaries, directly or indirectly, to guarantee the payment of any Indebtedness of BBC, the Company or any Restricted Subsidiary unless such Domestic Subsidiary (i) is a Subsidiary Guarantor or (ii) simultaneously executes and delivers a supplemental indenture to this Indenture pursuant to which it will become a Subsidiary Guarantor under this Indenture. Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary will provide by its terms (and on the basis set forth in Section 14.07 hereof) that it will be automatically and unconditionally released and discharged upon any sale, exchange or transfer, to any person not an Affiliate of the Company, of all of the Capital Stock of such Restricted Subsidiary, or all or substantially all the assets of such Restricted Subsidiary, pursuant to a transaction which is in compliance with this Indenture. The Company may, at any time, cause a Restricted Subsidiary to become a Subsidiary Guarantor by executing and delivering a supplemental indenture providing for the guarantee -106- of payment of the Securities by such Restricted Subsidiary on the basis provided in Section 14.03. Section 10.20. Limitation on Preferred Stock of Restricted Subsidiaries. The Company will not permit any of the Restricted Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly-Owned Restricted Subsidiary) or permit any person (other than the Company or a Wholly-Owned Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary. Section 10.21. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist, or enter into any agreement with any person that would cause to become effective, any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock or any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make loans or advances to the Company or any other Restricted Subsidiary or (d) transfer any of its property or assets to the Company or to any other Restricted Subsidiary, except (i) any encumbrance or restriction existing under the security documentation for the New Credit Agreement as in effect on the Issue Date relating to assets subject to a Lien created thereby, (ii) any encumbrance or restriction, with respect to a Restricted Subsidiary that is not a Restricted Subsidiary on the Issue Date, in existence at the time such person becomes a Restricted Subsidiary (but not created in contemplation thereof), and (iii) any encumbrance or restriction existing under any agreement that refinances or replaces the agreements containing the restrictions in the foregoing clauses (i) and (ii), provided that the terms and conditions of any such restrictions permitted under this clause (iii) are not materially less favorable to the Holders of Securities than those under or pursuant to the agreement evidencing the indebtedness being refinanced. Section 10.22. Limitation on Designations of Unrestricted Subsidiaries. -107- The Company may designate any Subsidiary of the Company (other than a Subsidiary Guarantor) as an "Unrestricted Subsidiary" under this Indenture (a "Designation") only if: (i) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (ii) the Company would be permitted under this Indenture to make an Investment at the time of Designation (assuming the effectiveness of such Designation) in an amount (the "Designation Amount") equal to the Fair Market Value of the Capital Stock of such Subsidiary on such date; and (iii) the Company would be permitted under this Indenture to incur $1.00 of additional Indebtedness pursuant to the proviso of the first paragraph of Section 10.12 hereof at the time of Designation (assuming the effectiveness of such Designation). In the event of any such Designation, the Company shall be deemed to have made an Investment constituting a Restricted Payment pursuant to the covenant described in Section 10.14 hereof for all purposes of this Indenture in the Designation Amount. The Company shall not, and shall not permit any Restricted Subsidiary to, at any time, (a) provide credit support for, or a guarantee of, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), (b) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (c) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary), except in the case of clause (a) or (b) to the extent permitted under the covenant described in Section 10.14 hereof and to the extent set forth in the first parenthetical in the definition of "Lease Financing Transaction." The Company will not permit any Unrestricted Subsidiary to at any time guarantee or otherwise provide credit support for any obligation of the Company or any Restricted Subsidiary. The Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if: -108- (i) no Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred for all purposes of this Indenture. All Designations and Revocations must be evidenced by Board Resolutions of the Company delivered to the Trustee certifying compliance with the foregoing provisions. Blue Bird Capital will be treated as an Unrestricted Subsidiary under this Indenture as of the Issue Date. Section 10.23. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company, BBC and any other obligor on the Securities will furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenants compliance with which constitutes a condition precedent) relating to the proposed action have been complied with, and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents, certificates and/or opinions is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture will include: (i) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; -109- (iii) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 11.01. Right of Redemption. The Securities may be redeemed at the option of the Company, in whole or in part, on the bases and at the Redemption Prices specified in the forms of Security, together with accrued but unpaid interest to the Redemption Date. Section 11.02. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 11.03. Election To Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 11.01 shall be evidenced by a Board Resolution and an Officers' Certificate. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of Securities to be redeemed. Section 11.04. Selection by Trustee of Securities To Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities or portions thereof to be redeemed shall be selected not more than 60 days prior to the Redemption -110- Date by the Trustee, from the Outstanding Securities not previously called for redemption in compliance with the requirements of the principal national securities exchange, if any, on which the Securities being redeemed are listed, or, if the Securities are not listed on a national exchange, by such method as the Trustee shall deem fair and appropriate; provided that no Securities of a principal amount of $1,000 or less will be redeemed in part; provided, further, that any such redemption pursuant to the provisions relating to a Public Equity Offering shall be made on a pro rata basis or on as nearly a pro rata basis as practicable (subject to the procedures of the Depository or any other depository). The Trustee shall promptly notify the Company and each Security Registrar in writing of the Securities selected for partial redemption and the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section 11.05. Notice of Redemption. Notice of redemption will be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder appearing in the Security Register. All notices of redemption will state: (i) the Redemption Date; (ii) the Redemption Price; (iii) if less than all Outstanding Securities are to be redeemed, the identification of the particular Securities to be redeemed; (iv) in the case of a Security to be redeemed in part, the principal amount of such Security to be redeemed and that after the Redemption Date upon surrender of such Security, a new Security or Securities in the aggregate -111- principal amount equal to the unredeemed portion thereof shall be issued; (v) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (vi) that on the Redemption Date the Redemption Price shall become due and payable upon each such Security or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) interest thereon shall cease to accrue on and after said date; (vii) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (viii) the CUSIP number, relating to such Securities; and (ix) the paragraph of the Securities pursuant to which the Securities are being redeemed. Notice of redemption of Securities to be redeemed at the election of the Company will be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of the Company. The notice if mailed in the manner herein provided will be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part will not affect the validity of the proceedings for the redemption of any other Security. Section 11.06. Deposit of Redemption Price. On or prior to any Redemption Date, the Company will deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an amount of money in same day funds sufficient to pay the Redemption Price of, and accrued interest on, all the Securities or portions thereof which are to be redeemed on that date. -112- Section 11.07. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed will, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price) such Securities will cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security will be paid by the Company at the Redemption Price; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 3.07. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and premium, if any, shall, until paid, bear interest from the Redemption Date at the rate then borne by such Security. Section 11.08. Securities Redeemed or Purchased in Part. Any Security which is to be redeemed or purchased only in part shall be surrendered to the Paying Agent at the office or agency maintained for such purpose pursuant to Section 10.02 (with, if the Company, the Security Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to, the Company, the Security Registrar or the Trustee duly executed by the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the unredeemed portion of the principal of the Security so surrendered that is not redeemed or purchased. -113- ARTICLE TWELVE SUBORDINATION OF SECURITIES Section 12.01. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article Twelve, the Indebtedness represented by the Securities and the payment of the principal of, premium, if any, and interest on the Securities are hereby expressly made subordinate and subject in right of payment as provided in this Article to the prior payment in full in cash or Cash Equivalents or, as acceptable to the holders of Senior Indebtedness, in any other manner, of all Senior Indebtedness. Without limiting the generality of the definition of Senior Indebtedness, "Senior Indebtedness" shall include the payment of interest, including interest that would accrue but for the filing of a petition initiating any proceeding under any Bankruptcy Law, whether or not such claim is allowable in such proceeding. This Article Twelve shall constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of or continue to hold Senior Indebtedness; and such provisions are made for the benefit of the holders of Senior Indebtedness; and such holders are made obligees hereunder and they or each of them may enforce such provisions. Section 12.02. Payment Over of Proceeds upon Dissolution, etc. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding-up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets or liabilities of the Company, then and in any such event: (1) the holders of Senior Indebtedness shall be entitled to receive payment in full in cash or Cash Equivalents or, as acceptable to the holders of Senior Indebtedness, in any other manner, of all amounts due on or in -114- respect of all Senior Indebtedness, or provision shall be made for such payment, before the Holders of the Securities are entitled to receive any payment or distribution of any kind or character (excluding securities of the Company or any other person that are equity securities or are otherwise subordinated in right of payment to all Senior Indebtedness that may at the time be outstanding, to substantially the same extent as, or to a greater extent than, the Securities as provided in this Article; such securities are hereinafter collectively referred to as "Permitted Junior Securities")) on account of principal of, premium, if any, or interest on the Securities; (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (excluding Permitted Junior Securities), by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash, Cash Equivalents or, as acceptable to the holders of Senior Indebtedness, in any other manner, of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section 12.02, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, in respect of principal, premium, if any, and interest on the Securities before all Senior Indebtedness is paid in full or payment thereof provided for, then and in such event such payment or distribution (excluding Permitted Junior Securities) shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other person making payment or -115- distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full in cash, Cash Equivalents or, as acceptable to the holders of Senior Indebtedness, any other manner, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company with or into, another person or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another person upon the terms and conditions set forth in Article Eight hereof shall not be deemed a dissolution, winding-up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Article if the person formed by such consolidation or the Surviving Entity of such merger or the person which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in such Article Eight. Section 12.03. Suspension of Payment When Senior Indebtedness in Default. (a) Unless Section 12.02 shall be applicable, upon (1) the occurrence of a Payment Default and (2) receipt by the Trustee and the Company from the Senior Representatives of written notice of such occurrence, then no payment or distribution of any assets of the Company of any kind or character (excluding Permitted Junior Securities) shall be made by the Company on account of principal of, premium, if any, or interest on the Securities or on account of the purchase or redemption or other acquisition of Securities unless and until such Payment Default shall have been cured or waived or shall have ceased to exist or such Senior Indebtedness shall have been discharged or paid in full, after which the Company shall resume making any and all required payments in respect of the Securities, including any missed payments. (b) Unless Section 12.02 shall be applicable, upon (1) the occurrence of a Non-payment Default and (2) receipt by the Trustee and the Company from the Senior Representatives of written notice of such occurrence, no payment or distribution of any assets of the Company of any kind or character -116- (excluding Permitted Junior Securities) shall be made by the Company on account of any principal of, premium, if any, or interest on the Securities or on account of the purchase or redemption or other acquisition of Securities for a period ("Payment Blockage Period") commencing on the date of receipt by the Trustee of such notice unless and until the earliest to occur of the following events (subject to any blockage of payments that may then be in effect under subsection (a) of this Section 12.03) (w) 179 days will have elapsed since receipt of such written notice by the Trustee (provided such Designated Senior Indebtedness will not theretofore have been accelerated), (x) such Non-payment Default is cured or waived or shall have ceased to exist, (y) such Designated Senior Indebtedness is discharged or paid in full or (z) such Payment Blockage Period will have been terminated by written notice to the Company and the Trustee from the Senior Representatives of holders of Designated Senior Indebtedness initiating such Payment Blockage Period, or the holders of at least a majority in principal amount of such issue of Designated Senior Indebtedness, after which, in the case of clause (w), (x), (y) or (z), the Company shall resume making any and all required payments in respect of the Securities, including any missed payments. Notwithstanding any other provision of this Indenture, only one Payment Blockage Period may be commenced within any consecutive 365-day period and no Non-payment Default with respect to Designated Senior Indebtedness which existed or was continuing on the date of the commencement of any Payment Blockage Period shall be, or be made, the basis for the commencement of a second Payment Blockage Period unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. In no event shall a Payment Blockage Period extend beyond 179 days from the date of the receipt of the notice referred to in clause (2) hereof and there must be a 186 consecutive day period in any 365 consecutive day period during which no Payment Blockage Period is in effect. (c) In the event that, notwithstanding the foregoing, the Trustee or the Holder of any Security shall have received any payment prohibited by the foregoing provisions of this Section 12.03, then and in such event such payment shall be paid over and delivered forthwith to the holders (or their Senior Representatives) or as a court of competent jurisdiction shall otherwise direct. -117- Section 12.04. Trustee's Relation to Senior Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Twelve, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall not be liable to any holder of Senior Indebtedness if it shall mistakenly pay over or deliver to Holders, the Company or any other person moneys or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article Twelve or otherwise. Section 12.05. Subrogation to Rights of Holders of Senior Indebtedness. Upon the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of, premium, if any, and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article Twelve, and no payments over pursuant to the provisions of this Article Twelve to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article Twelve shall have been applied, pursuant to the provisions of this Article Twelve, to the payment of all amounts payable under the Senior Indebtedness of the Company, then and in such case the Holders shall be entitled to receive from the holders of such Senior Indebtedness at the time outstanding any payments or distributions received by such holders of such Senior Indebtedness in excess of the amount sufficient -118- to pay all amounts payable under or in respect of such Senior Indebtedness in full in cash or Cash Equivalents. Section 12.06. Provisions Solely To Define Relative Rights. The provisions of this Article Twelve are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article Twelve or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of, premium, if any, and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture, subject to the rights, if any, under this Article Twelve of the holders of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or other winding-up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 12.02, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 12.03, to prevent any payment prohibited by such Section or enforce their rights pursuant to Section 12.03(c). The failure to make a payment on account of principal of, premium, if any, or interest on the Securities by reason of any provision of this Article Twelve shall not be construed as preventing the occurrence of a Default or an Event of Default hereunder. Section 12.07. Trustee To Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Twelve and appoints the -119- Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company whether in bankruptcy, insolvency, receivership proceedings, or otherwise, the timely filing of a claim for the unpaid balance of the indebtedness of the Company owing to such Holder in the form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file such a claim prior to 30 days before the expiration of the time to file such a claim, the holders of Senior Indebtedness, or any Senior Representative, may file such a claim on behalf of Holders of the Securities. Section 12.08. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section 12.08, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article Twelve or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (1) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any person liable in any manner for the collection or payment of Senior Indebtedness; and (4) exercise or refrain from exercising any rights against the Company and any other person; provided, however, that in no event shall any such actions limit the right of the Holders of the Securities to take any action to accelerate the maturity of the Securities pursuant to Article Five hereof or to pursue any rights or remedies hereunder or under applicable laws if the -120- taking of such action does not otherwise violate the terms of this Indenture. Section 12.09. Notice to Trustee. (a) The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article Twelve or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 12.09, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 12.09 at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose under this Indenture (including, without limitation, the payment of the principal of, premium, if any, or interest on any Security), then, anything herein contained to the contrary notwithstanding but without limiting the rights and remedies of the holders of Senior Indebtedness or any trustee, fiduciary or agent thereof, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date; nor shall the Trustee be charged with knowledge of the curing of any such default or the elimination of the act or condition preventing any such payment unless and until the Trustee shall have received an Officers' Certificate to such effect. (b) Subject to the provisions of Section 6.01, the Trustee shall be entitled to rely on the delivery to it of a written notice to the Trustee and the Company by a person representing himself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor); provided, however, that failure to give such notice to the Company shall not affect in any way the ability of the Trustee to rely on such notice. In the event that the Trustee determines in good faith that -121- further evidence is required with respect to the right of any person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article Twelve, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article Twelve, and if such evidence is not furnished, the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. Section 12.10. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article Twelve, the Trustee, subject to the provisions of Section 6.01,and the Holders, shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article; provided that the foregoing shall apply only if such court has been fully apprised of the provisions of this Article Twelve. Section 12.11. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Twelve with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article Twelve shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.07. -122- Section 12.12. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article Twelve shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article Twelve in addition to or in place of the Trustee; provided, however, that Section 12.11 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 12.13. No Suspension of Remedies. Nothing contained in this Article Twelve shall limit the right of the Trustee or the Holders of Securities to take any action to accelerate the maturity of the Securities pursuant to Article Five or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article Twelve of the holders, from time to time, of Senior Indebtedness. ARTICLE THIRTEEN SATISFACTION AND DISCHARGE Section 13.01. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to surviving rights or registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, on written demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when either (a) all Securities theretofore authenticated and delivered (other than (A) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.06 hereof and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in -123- Section 10.03) have been delivered to the Trustee for cancellation; or (b) (i) all such Securities not theretofore delivered to the Trustee for cancellation have become due and payable and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee in trust an amount of money in dollars sufficient to pay and discharge the entire Indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for the principal of, premium, if any, and interest to the date of such deposit; (ii) the Company or any Guarantor has paid or caused to be paid all other sums payable hereunder by the Company and the Guarantor; and (iii) the Company and each of the Guarantors have delivered to the Trustee (i) irrevocable instructions to apply the deposited money toward payment of the Securities at the Stated Maturities and the Redemption Dates thereof, and (ii) an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.07 and, if money shall have been deposited with the Trustee pursuant to subclause (a)(ii) of this Section 13.01, the obligations of the Trustee under Section 13.02 and the last paragraph of Section 10.03 shall survive. Section 13.02. Application of Trust Money. Subject to the provisions of the last paragraph of Section 10.03, all money deposited with the Trustee pursuant to Section 13.01 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the persons entitled thereto, of the principal of, premium, if any, and interest on the Securities for whose payment such money has been deposited with the Trustee. -124- ARTICLE FOURTEEN GUARANTEE OF SECURITIES Section 14.01. Unconditional Guarantee. Subject to the provisions of this Article Fourteen, each Guarantor hereby jointly and severally unconditionally guarantees (such guarantee to be referred to herein as a "Guarantee") to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Securities or the obligations of the Company or any other Guarantor to the Holders or the Trustee hereunder or thereunder, that: (a) the principal of, premium, if any, and interest on the Securities will be duly and punctually paid in full when due, whether at maturity, upon redemption at the option of the Company pursuant to the provisions of the Securities relating thereto, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Securities and all other obligations of the Company or the Guarantor to the Holders or the Trustee hereunder or thereunder (including fees, expenses or other) and all other Indenture Obligations will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Securities or any of such other Indenture Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the Holders, for whatever reason, each Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture or the Securities shall constitute an event of default under this Guarantee, and shall entitle the Holders of Securities to accelerate the obligations of the Guarantor hereunder in the same manner and to the same extent as the obligations of the Company. Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a -125- Guarantee is affixed to any particular Security, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Guarantee shall not be discharged except by complete performance of the obligations contained in the Securities, this Indenture and this Guarantee. This Guarantee is a guarantee of payment and not of collection. If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Securities and the Trustee, on the other hand, (a) subject to this Article Fourteen, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Five hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article Five hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purpose of this Guarantee. Section 14.02. Execution and Delivery of Guarantee. To further evidence the Guarantee set forth in Section 14.01, each Guarantor hereby agrees that a notation of such Guarantee shall be endorsed on each Security authenticated and delivered by the Trustee and executed by either manual or facsimile signature of an Officer of each Guarantor. Each of the Guarantors hereby agrees that its Guarantee set forth in Section 14.01 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guarantee. If an Officer of a Guarantor whose signature is on this Indenture or a Guarantee no longer holds that office at the time the Trustee authenticates such Security or at any time -126- thereafter, such Guarantor's Guarantee of such Security shall be valid nevertheless. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of each Guarantor. Section 14.03. Additional Guarantor. Any person that was not a Guarantor on the date of this Indenture may become a Guarantor by executing and delivering to the Trustee (a) a supplemental indenture in form and substance satisfactory to the Trustee, which subjects such person to the provisions (including the representations and warranties) of this Indenture as a Guarantor, (b) in the event that as of the date of such supplemental indenture any Registrable Securities are outstanding, an instrument in form and substance satisfactory to the Trustee which subjects such person to the provisions of the Registration Rights Agreement with respect to such outstanding Registrable Securities, and (c) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such person and constitutes the legal, valid, binding and enforceable obligation of such person (subject to such customary exceptions concerning creditors' rights and equitable principles as may be acceptable to the Trustee in its discretion). Section 14.04. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness. Each Guarantor covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that all payments pursuant to the Guarantee by such Guarantor are hereby expressly made subordinate and subject in right of payment as provided in this Article Fourteen to the prior payment in full in cash or Cash Equivalents or, as acceptable to the holders of Guarantor Senior Indebtedness of such Guarantor, in any other manner, of all Guarantor Senior Indebtedness of such Guarantor. Without limiting the generality of the definition of Guarantor Senior Indebtedness, "Guarantor Senior Indebtedness" shall include the payment of interest, including interest that would accrue but for the filing of a petition initiating any proceeding under any Bankruptcy Law, whether or not such claim is allowable in such proceeding. -127- The following Sections 14.04 through 14.17 of this Article Fourteen shall constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of, or continue to hold Guarantor Senior Indebtedness of any Guarantor; and such provisions are made for the benefit of the holders of Guarantor Senior Indebtedness of each Guarantor; and such holders are made obligees hereunder and they or each of them may enforce such provisions. Section 14.05. Payment over of Proceeds upon Dissolution, etc. of a Guarantor. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to any Guarantor or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding-up of any Guarantor, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshaling of assets or liabilities of any Guarantor, then and in any such event: (1) the holders of all Guarantor Senior Indebtedness of such Guarantor shall be entitled to receive payment in full in cash or Cash Equivalents or, as acceptable to the holders of such Guarantor Senior Indebtedness, in any other manner, of all amounts due on or in respect of all such Guarantor Senior Indebtedness, or provision shall be made for such payment, before the Holders of the Securities are entitled to receive, pursuant to this Guarantee, any payment or distribution of any kind or character by or on behalf of such Guarantor (excluding Permitted Junior Securities) on account of principal of, premium, if any, or interest on the Securities; and (2) any payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities (excluding Permitted Junior Securities), by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article Fourteen shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Guarantor Senior Indebtedness of such Guarantor or their representative or representatives or to the trustee -128- or trustees under any indenture under which any instruments evidencing any of such Guarantor Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of such Guarantor Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash, Cash Equivalents or, as acceptable to the holders of such Guarantor Senior Indebtedness, in any other manner, of all such Guarantor Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Guarantor Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section 14.05, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, in respect of any of the obligations of such Guarantor under this Guarantee before all Guarantor Senior Indebtedness of such Guarantor is paid in full or payment thereof provided for, then and in such event such payment or distribution (excluding Permitted Junior Securities) shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other person making payment or distribution of assets of such Guarantor for application to the payment of all such Guarantor Senior Indebtedness remaining unpaid, to the extent necessary to pay all of such Guarantor Senior Indebtedness in full in cash, Cash Equivalents or, as acceptable to the holders of such Guarantor Senior Indebtedness, any other manner, after giving effect to any concurrent payment or distribution to or for the holders of such Guarantor Senior Indebtedness. The consolidation of a Guarantor with, or the merger of a Guarantor with or into, another person or the liquidation or dissolution of a Guarantor following the conveyance, transfer or lease of its properties and assets substantially as an entirety to another person upon the terms and conditions set forth in Article Eight hereof shall not be deemed a dissolution, winding-up, liquidation, reorganization, assignment for the benefit of creditors or marshaling of assets and liabilities of such Guarantor for the purposes of this Article Fourteen if the person formed by such consolidation or the surviving entity of such merger or the person which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of -129- such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight hereof. Section 14.06. Suspension of Guarantee Obligations When Guarantor Senior Indebtedness in Default. (a) Unless Section 14.05 shall be applicable, upon (1) the occurrence of a Payment Default with respect to any Senior Indebtedness guaranteed by a Guarantor and (2) receipt by the Trustee, the Company and such Guarantor from the Senior Representatives of written notice of such occurrence, then no payment or distribution of any assets of such Guarantor of any kind or character (excluding Permitted Junior Securities) shall be made by such Guarantor on account of principal of, premium, if any, or interest on the Securities or on account of the purchase, redemption or other acquisition of Securities or any of the obligations of such Guarantor under this Guarantee unless and until such Payment Default shall have been cured or waived or shall have ceased to exist or such Guarantor Senior Indebtedness shall have been discharged or paid in full, after which such Guarantor shall resume making any and all required payments in respect of its obligations under this Guarantee. (b) Unless Section 14.05 shall be applicable, upon (1) the occurrence of a Non-payment Default with respect to any Senior Indebtedness guaranteed by a Guarantor and (2) receipt by the Trustee, the Company and such Guarantor from the Senior Representatives of written notice of such occurrence, no payment or distribution of any assets of such Guarantor of any kind or character (excluding Permitted Junior Securities) shall be made by such Guarantor on account of principal, premium, if any, or interest on the Securities or on account of the purchase, redemption or other acquisition of Securities or on account of any of the other obligations of such Guarantor under this Guarantee for a period ("Guarantor Payment Blockage Period") commencing on the date of receipt by the Trustee of such notice unless and until the earlier to occur of the following events (subject to any blockage of payments that may then be in effect under subsection (a) of this Section 14.06) (w) 179 days shall have elapsed since receipt of such written notice by the Trustee (provided such Guarantor Senior Indebtedness shall theretofore not have been accelerated), (x) such Non-payment Default shall have been cured or waived or shall have ceased to exist, (y) such Guarantor Senior Indebtedness shall have been discharged or paid in full or (z) such Guarantor Payment Blockage Period shall have been terminated by written notice to the Guarantor and the Trustee from the Senior -130- Representative initiating such Guarantor Payment Blockage Period, or the holders of at least a majority in principal amount of such issue of such Guarantor Senior Indebtedness, after which, in the case of clause (w), (x), (y) or (z), the Guarantor shall resume making any and all required payments in respect of its obligations under this Guarantee. Notwithstanding any other provision of this Indenture, only one Guarantor Payment Blockage Period may be commenced within any consecutive 365-day period and no Non-payment Default with respect to Guarantor Senior Indebtedness of any Guarantor which existed or was continuing on the date of the commencement of any Guarantor Payment Blockage Period shall be, or be made, the basis for the commencement of a second Guarantor Payment Blockage Period unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days. In no event shall a Guarantor Payment Blockage Period extend beyond 179 days from the date of the receipt of the notice referred to in clause (2) hereof and there must be a 186 consecutive day period in any 365 consecutive day period during which no Guarantor Payment Blockage Period is in effect. (c) In the event that, notwithstanding the foregoing, the Trustee or the Holder of any Security shall have received any payment prohibited by the foregoing provisions of this Section 14.06, then and in such event such payment shall be paid over and delivered forthwith to the Senior Representatives or as a court of competent jurisdiction shall otherwise direct. Section 14.07. Release of a Guarantor. Upon the sale or other disposition (by merger or otherwise), other than a lease, of a Subsidiary of the Company that is a Guarantor of all of the Capital Stock of such Subsidiary or all, or substantially all, the assets of such Subsidiary, to any person that is not an Affiliate of the Company, and which sale or other disposition is otherwise in compliance with the terms of this Indenture, such Guarantor shall be deemed automatically and unconditionally released and discharged from all obligations under this Article Fourteen without any further action required on the part of the Trustee or any Holder; provided, however, that any such termination shall occur if and only to the extent that all obligations of such Guarantor under all of its Guarantor Senior Indebtedness shall also terminate upon such sale or other disposition. The Trustee shall deliver an appropriate instrument evidencing such -131- release upon receipt of a request of the Company accompanied by an Officers' Certificate certifying as to the compliance with this Section and the Company's rights of redemption in accordance with the terms of the Securities in this Section 14.07. Any Guarantor not so released will remain liable for the full amount of principal of, premium, if any, and interest on the Securities as provided in this Article Fourteen. Section 14.08. Waiver of Subrogation. Until this Indenture is discharged and all of the Securities are discharged and paid in full, each Guarantor hereby irrevocably waives and agrees not to exercise any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of the Company's obligations under the Securities or this Indenture and such Guarantor's obligations under this Guarantee and this Indenture, in any such instance including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and any amounts owing to the Trustee or the Holders of Securities under the Securities, this Indenture, or any other document or instrument delivered under or in connection with such agreements or instruments, shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Securities, and shall, subject to the provisions of this Article Fourteen and Article Twelve hereof, forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied to the Securities, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 14.08 is knowingly made in contemplation of such benefits. Section 14.09. Guarantee Provisions Solely To Define Relative Rights. -132- The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Guarantor Senior Indebtedness of each Guarantor on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among each Guarantor, its creditors other than holders of its Guarantor Senior Indebtedness and the Holders of the Securities, the obligation of such Guarantor, which is absolute and unconditional, to make payments to the Holders in respect of its obligations under this Guarantee as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against such Guarantor of the Holders of the Securities and creditors of such Guarantor other than the holders of the Guarantor Senior Indebtedness of such Guarantor; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture, subject to the rights, if any, under this Article of the holders of Guarantor Senior Indebtedness of the Guarantors hereunder (1) in any case, proceeding, dissolution, liquidation or other winding-up, assignment for the benefit of creditors or other marshaling of assets and liabilities of the Company referred to in Section 14.05, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 14.06, to prevent any payment prohibited by such Section or enforce their rights pursuant to Section 14.06(c). The failure by any Guarantor to make payment in respect of its obligations under this Guarantee by reason of any provision of this Article shall not be construed as preventing the occurrence of a Default or an Event of Default hereunder. Section 14.10. Trustee To Effectuate Subordination of Guarantee Obligations. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of any Guarantor whether in bankruptcy, insolvency, receivership proceedings, or otherwise, the timely -133- filing of a claim for the unpaid balance of the indebtedness of such Guarantor owing to such Holder in the form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file such a claim prior to 30 days before the expiration of the time to file such a claim, the holders of Senior Indebtedness, or any Senior Representative, may file such a claim on behalf of Holders of the Securities. Section 14.11. No Waiver of Guarantee Subordination Provisions. (a) No right of any present or future holder of any Guarantor Senior Indebtedness of any Guarantor to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of such Guarantor or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by such Guarantor with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section 14.11, the holders of Guarantor Senior Indebtedness of any Guarantor may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article Fourteen or the obligations hereunder of the Holders of the Securities to the holders of such Guarantor Senior Indebtedness, do any one or more of the following: (1) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Guarantor Senior Indebtedness or any instrument evidencing the same or any agreement under which such Guarantor Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Guarantor Senior Indebtedness; (3) release any person liable in any manner for the collection or payment of such Guarantor Senior Indebtedness; and (4) exercise or refrain from exercising any rights against such Guarantor and any other person; provided, however, that in no event shall any such actions limit the right of the Holders of the Securities to take any action to accelerate the maturity of the Securities pursuant to Article Five hereof or to pursue any rights or remedies hereunder or under applicable laws if the taking of such action does not otherwise violate the terms of this Indenture. -134- Section 14.12. Guarantors To Give Notice to Trustee. (a) Each Guarantor shall give prompt written notice to the Trustee of any fact known to such Guarantor which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article Fourteen or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from such Guarantor or a holder of its Guarantor Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of this Section 14.12, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 14.12 at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose under this Indenture (including, without limitation, the payment of the principal of, premium, if any, or interest on any Security), then, anything herein contained to the contrary notwithstanding but without limiting the rights and remedies of the holders of such Guarantor Senior Indebtedness or any trustee, fiduciary or agent thereof, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date; nor shall the Trustee be charged with knowledge of the curing of any such default or the elimination of the act or condition preventing any such payment unless and until the Trustee shall have received an Officers' Certificate from such Guarantor to such effect. (b) Subject to the provisions of Section 6.01, the Trustee shall be entitled to rely on the delivery to it of a written notice to the Trustee and the Company, by a person representing himself to be a holder of Guarantor Senior Indebtedness of any Guarantor (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of such Guarantor Senior Indebtedness (or a trustee, fiduciary or agent therefor); provided, however, that a failure to give such notice to the Company shall not affect in any way the ability of the Trustee to rely on such notice. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as a holder -135- of Guarantor Senior Indebtedness of any Guarantor to participate in any payment or distribution pursuant to this Article Fourteen, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Guarantor Senior Indebtedness of each Guarantor held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article Fourteen, and if such evidence is not furnished, the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. Section 14.13. Reliance on Judicial Order or Certificate of Liquidating Agent Regarding Dissolution, etc. of Guarantors. Upon any payment or distribution of assets of any Guarantor referred to in this Article Fourteen, the Trustee, subject to the provisions of Section 6.01, and the Holders, shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of Guarantor Senior Indebtedness of such Guarantor and other Indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Fourteen; provided that the foregoing shall apply only if such court has been fully apprised of the provisions of this Article Fourteen. Section 14.14. Rights of Trustee as a Holder of Guarantor Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Fourteen with respect to any Guarantor Senior Indebtedness of any Guarantor which may at any time be held by the Trustee, to the same extent as any other holder of such Guarantor Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article -136- Fourteen shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.07. Section 14.15. Article Fourteen Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article Fourteen in addition to or in place of the Trustee; provided, however, that Section 14.14 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 14.16. No Suspension of Remedies. Nothing contained in this Article Fourteen shall limit the right of the Trustee or the Holders of Securities to take any action to accelerate the maturity of the Securities pursuant to Article Five or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article Fourteen of the holders, from time to time, of Guarantor Senior Indebtedness of the Guarantors. Section 14.17. Trustee's Relation to Guarantor Senior Indebtedness. With respect to the holders of Guarantor Senior Indebtedness of any Guarantor, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Fourteen, and no implied covenants or obligations with respect to the holders of Guarantor Senior Indebtedness of any Guarantor shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior Indebtedness of any Guarantor and the Trustee shall not be liable to any holder of Guarantor Senior Indebtedness of any Guarantor if it shall mistakenly pay over or deliver to Holders, the Company or any other person moneys or assets to which any holder of Guarantor Senior Indebtedness of any Guarantor shall be entitled by virtue of this Article Fourteen or otherwise. -137- Section 14.18. Limitation of Subsidiary Guarantor's Liability. Each Guarantor that is a Subsidiary of the Company, and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that the Guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the foregoing intention, the Holders and such Guarantor hereby irrevocably agree that the obligations of such Guarantor under this Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, but not limited to, the Guarantor Senior Indebtedness of such Guarantor) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee, result in the obligations of such Guarantor under the Guarantee not constituting such fraudulent transfer or conveyance. [signatures on following pages] -138- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. BLUE BIRD BODY COMPANY By: /s/ Paul E. Glaske ---------------------------- Name: Paul E. Glaske Title: President By: /s/ Bobby G. Wallace ---------------------------- Name: Bobby G. Wallace Title: Vice President -- Finance and Admin- istration, Treasurer and Secretary BLUE BIRD CORPORATION By: /s/ Paul E. Glaske ---------------------------- Name: Paul E. Glaske Title: President By: /s/ Bobby G. Wallace ---------------------------- Name: Bobby G. Wallace Title: Vice President, Treasurer and Secretary THE CHASE MANHATTAN BANK, as Trustee By: /s/ Anne G. Brenner ---------------------------- Name: Anne G. Brenner Title: Vice President EXHIBIT A-1 [Form of Series A Security]. THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY OR ANY GUARANTOR WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY OR (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, (E) TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO A-1 ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. A-2 BLUE BIRD BODY COMPANY ----------- 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006 CUSIP No. __________ No. ___________ $ BLUE BIRD BODY COMPANY, a corporation incorporated under the laws of the State of Georgia (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to _______________ or registered assigns, the principal sum of _______________ Dollars on November 15, 2006, at the office or agency of the Company referred to below, and to pay interest thereon on May 15 and November 15 (each an "Interest Payment Date"), of each year, commencing on May 15, 1997, accruing from the Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 10 3/4% per annum, until the principal hereof is paid or duly provided for. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture referred to on the reverse hereof, be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the May 1 or November 1 (each a "Regular Record Date"), whether or not a Business Day, as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid, or duly provided for, and interest on such defaulted interest at the then applicable interest rate borne by the Securities, to the extent lawful, shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice of which shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in such Indenture. A-3 Payment of the principal of, premium, if any, and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan in The City of New York, State of New York, or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the person entitled thereto as such address shall appear on the Security Register. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated: , BLUE BIRD BODY COMPANY By:______________________________ Name: Title: By:______________________________ Name: Title: A-4 TRUSTEE'S CERTIFICATE OF AUTHENTICATION. This is one of the Securities referred to in the within-mentioned Indenture. The Chase Manhattan Bank, as Trustee By:______________________________ Authorized Officer A-5 [REVERSE OF SERIES A SECURITY] 1. Indenture. This Security is one of a duly authorized issue of Securities of the Company designated as its 10 3/4% Senior Subordinated Notes due 2006 (herein called the "Series A Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $100,000,000, which may be issued under an indenture (herein called the "Indenture") dated as of November 15, 1996, among the Company, Blue Bird Corporation ("BBC" or the "Guarantor") and The Chase Manhattan Bank, as trustee (herein called the "Trustee," which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Trustee, the Guarantor and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All capitalized terms used in this Series A Security which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. No reference herein to the Indenture and no provisions of this Series A Security or of the Indenture shall alter or impair the obligation of the Company or any Guarantor, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Security at the times, place, and rate, and in the coin or currency, herein prescribed. 2. Guarantees. This Security is initially entitled to the benefits of the certain senior subordinated Guarantee of BBC and may thereafter be entitled to certain other senior subordinated Guarantees made for the benefit of the Holders. Reference is hereby made to Article Fourteen of the Indenture and to the Guarantees endorsed on this Security for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders. 3. Registration Rights. Pursuant to the Registration Rights Agreement among the Company, BBC and the Holders of the Series A Securities, the Company, BBC and any other Guarantor will be obligated to consummate an exchange offer pursuant A-6 to which the Holder of this Security shall have the right to exchange this Security together with the Guarantees hereof endorsed hereon for 10 3/4% Senior Subordinated Notes due 2006, Series B, of the Company (herein called the "Series B Securities") and the Guarantees endorsed thereon, which have been registered under the Securities Act, in like principal amount and having identical terms as the Series A Securities (other than as set forth in this paragraph) and the Guarantees endorsed hereon, respectively. The Holders of Series A Securities shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. The Series A Securities and the Series B Securities are together referred to herein as the "Securities." 4. Subordination. The Indebtedness evidenced by the Securities is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness (including, without limitation, interest on such Senior Indebtedness that would accrue but for the filing of a petition initiating any proceeding under any Bankruptcy Law, whether or not such claim is allowable in such proceeding) as defined in the Indenture, and this Series A Security is issued subject to such provisions. Each Holder of this Series A Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Series A Security shall cease to be so subordinate and subject in right of payment upon any defeasance of this Series A Security referred to below. 5. Redemption. (a) Optional Redemption. The Securities are subject to redemption, at the option of the Company, in whole or in part, in principal amounts of $1,000 or any integral multiple of $1,000, at any time on or after November 15, 2001 upon not less than 30 nor more than 60 days prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued interest to the redemption date, if redeemed during the 12-month period beginning November 15 of the years indicated below: A-7 Year Redemption Price ---- ---------------- 2001 105.375% 2002 103.583% 2003 101.792% 2004 and thereafter 100.000% (b) Optional Redemption Upon Public Equity Offering. On or prior to November 15, 1999, the Company may, at its option, use the net proceeds of a Public Equity Offering to redeem up to an aggregate of 25% of the principal amount of the Securities originally issued from Holders on a pro rata basis (or as nearly pro rata as practicable), at a redemption price of 110.75 % of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than $75,000,000 in aggregate principal amount of Securities would remain outstanding immediately after such redemption. The Company must mail a notice of redemption complying with Section 11.05 of the Indenture not later than 60 days after the consummation of the Public Equity Offering. As used above, "Public Equity Offering" means an underwritten public offering of Capital Stock (other than Redeemable Capital Stock) of the Company or BBC made on a primary basis by the Company or BBC pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act; provided that, in the event of an offering by BBC, BBC shall contribute as equity to the Company proceeds from the Public Equity Offering of not less than the amount necessary to redeem the Securities under the provisions described in the Indenture. (c) Interest Payments. In the case of any redemption of Series A Securities, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Date referred to on the face hereof. Securities (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. (d) Partial Redemption. In the event of redemption of this Series A Security in part only, a new Series A Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. 6. Offers to Purchase. Sections 10.11 and 10.16 of the Indenture provide that upon the occurrence of a Change of A-8 Control Triggering Event and following certain Asset Sales, and subject to certain conditions and limitations contained therein, the Company shall make an offer to purchase certain amounts of the Securities in accordance with the procedures set forth in the Indenture. 7. Defaults and Remedies. If an Event of Default occurs and is continuing, the principal of all of the Outstanding Securities, plus all accrued and unpaid interest, if any, to and including the date the Securities are paid, may be declared due and payable in the manner and with the effect provided in the Indenture. 8. Defeasance. The Indenture contains provisions (which provisions apply to this Series A Security) for defeasance at any time of (a) the entire indebtedness of the Company and the Guarantors on this Series A Security and (b) certain restrictive covenants and related Defaults and Events of Default, in each case upon compliance by the Company with certain conditions set forth therein. 9. Amendments and Waivers. The Indenture permits, with certain exceptions as provided therein, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past Defaults under the Indenture and this Series A Security and their consequences. Any such consent or waiver by or on behalf of the Holder of this Series A Security shall be conclusive and binding upon such Holder and upon all future Holders of this Series A Security and of any Series A Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Series A Security. 10. Denominations, Transfer and Exchange. The Series A Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Series A Securities are exchangeable for a like aggregate principal amount of A-9 Series A Securities of a different authorized denomination, as requested by the Holder surrendering the same. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Series A Security is registrable on the Security Register of the Company, upon surrender of this Series A Security for registration of transfer at the office or agency of the Company maintained for such purpose in the Borough of Manhattan in The City of New York, State of New York, or at such other office or agency of the Company as may be maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Series A Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any registration of transfer or exchange or redemption of Series A Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 11. Persons Deemed Owners. Prior to and at the time of due presentment of this Series A Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name this Series A Security is registered as the owner hereof for all purposes, whether or not this Series A Security shall be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. 12. GOVERNING LAW. THE INDENTURE, THIS SECURITY AND EACH GUARANTEE SET FORTH BELOW SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. A-10 ASSIGNMENT FORM If you the holder want to assign this Security, fill in the form below and have your signature guaranteed: I or we assign and transfer this Security to ________________________________________________________________________________ (Insert assignee's social security or tax ID number) ___________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for such agent. In connection with any transfer of this Security occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering resales of this Security (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) the date three years (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) after the later of the original issuance date appearing on the face of this Security (or any Predecessor Security) or the last date on which the Company or any Affiliate of the Company or any Guarantor was the owner of this Security (or any Predecessor Security), the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that: A-11 [Check One] [ ] (a) this Security is being transferred in compliance with the exemption from registration under the Securities Act provided by Rule 144A thereunder. or [ ] (b) this Security is being transferred other than in accordance with (a) above and documents, including a transferee certificate substantially in the form attached hereto, are being furnished which comply with the conditions of transfer set forth in this Security and the Indenture. If none of the foregoing boxes is checked and, in the case of (b) above, if the appropriate document is not attached or otherwise furnished to the Trustee, the Trustee or Registrar shall not be obligated to register this Security in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 3.17 of the Indenture shall have been satisfied. ________________________________________________________________________________ Date:______________ Your signature:_____________________________________________ (Sign exactly as your name appears on the other side of this Security) By:______________________________________ NOTICE: To be executed by an executive officer Signature Guarantee:____________________ TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on A-12 Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A (including the information specified in Rule 144A(d)(4)) or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: __________________ ___________________________________ NOTICE: To be executed by an executive officer [The Transferee Certificates (Exhibits C and D to the Indenture) will be attached to the Series A Security] A-13 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Security purchased by the Company pursuant to Section 10.11 or 10.16 of the Indenture, check the box: [ ] If you wish to have a portion of this Security purchased by the Company pursuant to Section 10.11 or 10.16 of the Indenture, state the amount: $_______________ Date: _____________ Your Signature:_____________________________________________ (Sign exactly as your name appears on the other side of this Security) By: ___________________________________________ NOTICE: To be executed by an executive officer Signature Guarantee: ______________________ A-14 EXHIBIT A-2 [FORM OF SERIES B SECURITY] BLUE BIRD BODY COMPANY ---------------- 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B CUSIP No.________ No. _____________ $ BLUE BIRD BODY COMPANY, a corporation incorporated under the laws of the State of Georgia (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ___________________ or registered assigns, the principal sum of _________________ Dollars on November 15, 2006, at the office or agency of the Company referred to below, and to pay interest thereon on May 15 and November 15 (each an "Interest Payment Date"), of each year, commencing on May 15, 1997, accruing from the Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 10 3/4% per annum, until the principal hereof is paid or duly provided for. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture referred to on the reverse hereof, be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the May 1 and November 1 (each a "Regular Record Date"), whether or not a Business Day, as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid, or duly provided for, and interest on such defaulted interest at the then applicable interest rate borne by the Securities, to the extent lawful, shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice of which shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful B-1 manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in such Indenture. Payment of the principal of, premium, if any, and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan in The City of New York, State of New York, or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the person entitled thereto as such address shall appear on the Security Register. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated: , BLUE BIRD BODY COMPANY By:________________________ Name: Title: By:________________________ Name: Title: B-2 TRUSTEE'S CERTIFICATE OF AUTHENTICATION. This is one of the Securities referred to in the within-mentioned Indenture. The Chase Manhattan Bank, as Trustee By:__________________________________ Authorized Officer B-3 [REVERSE OF SERIES B SECURITY] 1. Indenture. This Security is one of a duly authorized issue of Securities of the Company designated as its 10 3/4% Senior Subordinated Notes due 2006, Series B (herein called the "Series B Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $100,000,000, which may be issued under an indenture (herein called the "Indenture") dated as of November 15, 1996, among the Company, Blue Bird Corporation ("BBC" or the "Guarantor") and The Chase Manhattan Bank, as trustee (herein called the "Trustee," which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitation of rights, duties, obligations and immunities thereunder of the Company, the Trustee, certain Guarantors thereunder and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All capitalized terms used in this Series B Security which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. No reference herein to the Indenture and no provision of this Series B Security or of the Indenture shall alter or impair the obligation of the Company or any Guarantor, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Security at the times, place, and rate, and in the coin or currency, herein prescribed. The Series B Securities were issued pursuant to an exchange offer pursuant to which 10 3/4% Senior Subordinated Securities due 2006 of the Company (herein called the "Series A Securities"), in like principal amount and having substantially identical terms as the Series B Securities, were exchanged for the Series B Securities. The Series A Securities and the Series B Securities are together referred to herein as the "Securities." 2. Guarantees. This Security is initially entitled to the benefits of the senior subordinated Guarantees of BBC and may thereafter be entitled to other senior subordinated Guarantees made for the benefit of the Holders. Reference is hereby made to Article Fourteen and Section 10.09 of the Indenture and to the Guarantees endorsed on this Security for a statement of the respective rights, limitations of rights, B-4 duties and obligations thereunder of the Guarantors, the Trustee and the Holders. 3. Subordination. The Indebtedness evidenced by the Securities is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness (including, without limitation, interest on such Senior Indebtedness that would accrue but for the filing of a petition initiating any proceeding under any Bankruptcy Law, whether or not such claim is allowable in such proceeding) as defined in the Indenture, and this Series B Security is issued subject to such provisions. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Series B Security shall cease to be so subordinate and subject in right of payment upon any defeasance of this Series B Security referred to below. 4. Redemption. (a) Optional Redemption. The Securities are subject to redemption, at the option of the Company, in whole or in part, in principal amounts of $1,000 or any integral multiple of $1,000, at any time on or after November 15, 2001 upon not less than 30 nor more than 60 days prior notice at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued interest to the redemption date, if redeemed during the 12 month period beginning November 15 of the years indicated below: Year Redemption Price ---- ---------------- 2001 105.374% 2002 103.583% 2003 101.792% 2004 and thereafter 100.000% (b) Optional Redemption upon Public Equity Offering. On or prior to November 15, 1999, the Company may, at its option, use the net proceeds of a Public Equity Offering to redeem up to an aggregate of 25% of the principal amount of the Securities originally issued from Holders on a pro rata basis (or as nearly pro rata as practicable), at a redemption price B-5 equal to 110.75% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that not less than $75,000,000 in aggregate principal amount of Securities would remain outstanding immediately after such redemption. The Company must mail a notice of redemption complying with Section 11.05 of the Indenture not later than 60 days after the consummation of the Public Equity Offering. As used above, "Public Equity Offering" means an underwritten public offering of Capital Stock (other than Redeemable Capital Stock) of the Company or BBC made on a primary basis by the Company or BBC pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act; provided that, in the event of an offering by BBC, BBC shall contribute as equity to the Company proceeds from the Public Equity Offering of not less than that amount necessary to redeem the Securities under the provisions described in the Indenture. (c) Interest Payments. In the case of any redemption of Series B Securities, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Date referred to on the face hereof. Securities (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. (d) Partial Redemption. In the event of redemption of this Series B Security in part only, a new Series B Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. 5. Offers to Purchase. Sections 10.11 and 10.16 of the Indenture provide that upon the occurrence of a Change of Control Triggering Event and following any Asset Sale, and subject to further limitations contained therein, the Company shall make an offer to purchase certain amounts of the Securities in accordance with the procedures set forth in the Indenture. 6. Defaults and Remedies. If an Event of Default occurs and is continuing, the principal of all of the Outstanding Securities, plus all accrued and unpaid interest, if any, to and including the date the Securities are paid, may be declared due and in the manner and with the effect provided in the Indenture. B-6 7. Defeasance. The Indenture contains provisions (which provisions apply to this Series B Security) for defeasance at any time of (a) the entire indebtedness of the Company and the Guarantors on this Series B Security and (b) certain restrictive covenants and related Defaults and Events of Default, in each case upon compliance by the Company with certain conditions set forth therein. 8. Amendments and Waivers. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indentures and certain past Defaults under the Indenture and this Series B Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and their consequences. Any such consent or waiver by or on behalf of the Holder of this Series B Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Series B Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Series B Security. 9. Denominations, Transfer and Exchange. The Series B Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Series B Securities are exchangeable for a like aggregate principal amount of Series B Securities of a different authorized denomination, as requested by the Holder surrendering the same. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Series B Security is registrable on the Security Register of the Company, upon surrender of this Series B Security for registration of transfer at the office or agency of the Company maintained for such purpose in the Borough of Manhattan in The City of New York, State of New York, or at such other office or agency of the Company as may be maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar B-7 duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Series B Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any registration of transfer or exchange or redemption of Series B Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 10. Persons Deemed Owners. Prior to and at the time of due presentment of this Series B Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name this Series B Security is registered as the owner hereof for all purposes, whether or not this Series B Security shall be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. 11. GOVERNING LAW. THE INDENTURE, THIS SECURITY AND EACH GUARANTEE SET FORTH BELOW SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. B-8 ASSIGNMENT FORM If you the holder want to assign this Security, fill in the form below and have your signature guaranteed: I or we assign and transfer this Security to ________________________________________________________________________________ (Insert assignee's social security or tax ID number) ___________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for such agent. Date:______________ Your signature:_____________________________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee:____________________________________________________________ OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Security purchased by the Company pursuant to Section 10.11 or 10.16 of the Indenture, check the box: [ ] B-9 If you wish to have a portion of this Security purchased by the Company, state the amount: $_______________ Date: __________________ Your Signature:_______________________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: _________________ B-10 EXHIBIT B FORM OF LEGEND FOR BOOK-ENTRY SECURITIES Any Global Security authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Security) in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. C-1 EXHIBIT C Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ___________, ____ THE CHASE MANHATTAN BANK Attention: Corporate Trustee Administration Re: Blue Bird Body Company (the "Company") Senior Subordinated Notes due 2006 (the "Securities") and the related Indenture (the "Indenture") --------------------------------------- Dear Sirs: In connection with our proposed purchase of the Securities, we confirm that: 1. We have received such information as we deem necessary to make our investment decisions. 2. We understand that any subsequent transfer of the Securities is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 3. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as permitted in the following sentence. We agree, on our own behalf and on behalf of each account for which we acquire any Securities, that, prior to (x) the date which is three years after the later of the date of original issuance of the Securities (or such shorter period as may be prescribed by Rule 144(k) under the Securities Act or any successor provision) and (y) such later date, if any, may be required by applicable laws, the Securities may be offered, resold, D-1 pledged or otherwise transferred only (a) to the Company or any of its subsidiaries, (b) inside the United States to a person whom we reasonably believe to be a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in compliance with Rule 144A under the Securities Act, (c) inside the United States to a person we reasonably believe to be an institutional "accredited investor" (as defined below) that, prior to such transfer, furnished to the Trustee a signed letter substantially in the form hereof, (d) outside the United States to persons other than U.S. persons in offshore transactions meeting the requirements of Rule 904 under Regulation S under the Securities Act, (e) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), (f) pursuant to an effective registration statement under the Securities Act or (g) pursuant to another available exemption from the registration requirements of the Securities Act, and, in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction, and we further agree to provide to any person purchasing Securities from us a notice advising such purchaser that resales of the Securities are restricted as stated herein. 4. We understand that, on any proposed resale of any Securities, we will be required to furnish to you and the Company such certification, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment, as the case may be. 6. We are acquiring the Securities purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. D-2 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By:___________________________________ Authorized Signature D-3 EXHIBIT D Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S ___________, ____ THE CHASE MANHATTAN BANK Attention: Corporate Trustee Administration Re: Blue Bird Body Company (the "Company") Senior Subordinated Notes due 2006 (the "Securities") -------------------------------------- Dear Sirs: In connection with our proposed sale of $ aggregate principal amount at maturity of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; E-1 (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; (5) we have advised the transferee of the transfer restrictions applicable to the Securities; and (6) if the circumstances set forth in Rule 904(c) under the Securities Act are applicable, we have complied with the additional conditions therein, including (if applicable) sending a confirmation or other notice stating that the Securities may be offered and sold during the restricted period specified in Rule 903(c)(2) or (3), as applicable; in accordance with the provisions of Regulation S; pursuant to registration of the Securities under the Securities Act; or pursuant to an available exemption from the registration requirements under the Securities Act. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By:_________________________________ Authorized Signature E-2 EXHIBIT E FORM OF GUARANTEE For value received, the undersigned hereby unconditionally guarantees to the Holder of this Security the cash payments in United States dollars of principal of, premium, if any, and interest on this Security in the amounts and at the time when due and interest on the overdue principal, premium, if any, and interest, if any, of this Security, if lawful, and the payment or performance of all other obligations of the Company under the Indenture or the Securities, to the Holder of this Security and the Trustee, all in accordance with and subject to the terms and limitations of this Security, Article Fourteen of the Indenture and this Guarantee. This Guarantee will become effective in accordance with Article Fourteen of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Security. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of November 15, 1996, among Blue Bird Body Company, the undersigned and The Chase Manhattan Bank, as Trustee, as amended or supplemented (the "Indenture"). The obligations of the undersigned to the Holders of Securities and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article Fourteen of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee and all of the other provisions of the Indenture to which this Guarantee relates. THIS GUARANTEE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE SUBSIDIARY GUARANTOR HEREUNDER AGREES TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE, THE SECURITIES OR THIS GUARANTEE. F-1 This Guarantee is subject to release upon the terms set forth in the Indenture. Date: [NAME OF GUARANTOR], as Guarantor By:_________________________________ Name: Title: F-2 EX-4.3 3 EXHIBIT 4.3 ================================================================================ BLUE BIRD BODY COMPANY $100,000,000 10 3/4% Senior Subordinated Notes due 2006 PURCHASE AGREEMENT Dated: November 13, 1996 ================================================================================ $100,000,000 BLUE BIRD BODY COMPANY (a Georgia corporation) 10 3/4% Senior Subordinated Notes due 2006 PURCHASE AGREEMENT November 13, 1996 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated BT SECURITIES CORPORATION c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower World Financial Center New York, New York 10281-1305 Ladies and Gentlemen: Blue Bird Body Company, a Georgia corporation (the "Company") confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and BT Securities Corporation (collectively with Merrill Lynch, the "Initial Purchasers") with respect to the issue and sale by the Company (the "Offering") and the purchase by the Initial Purchasers, acting severally and not jointly, of the respective principal amounts set forth in Schedule A of $100,000,000 aggregate principal amount of the Company's 10 3/4% Senior Subordinated Notes due 2006 (the "Notes"). The Notes are to be issued pursuant to an indenture to be dated as of November 15, 1996 (the "Indenture") among the Company, as issuer of the Notes, and guaranteed (the "Guarantee" and, collectively with the Notes, the "Securities"), on a senior subordinated basis by Blue Bird Corporation, a Delaware Corporation, which owns all of the capital stock of the Company (the -2- "Guarantor" or "BBC"), and Chase Manhattan Bank, as trustee (the "Trustee"). The Company and the Guarantor are hereinafter referred to collectively as the "Issuers" and this agreement (this "Agreement" or the "Purchase Agreement"), the Indenture, the Securities, the Exchange Securities (as defined below), the Private Exchange Securities (as defined below) and the Registration Rights Agreement (as defined below) are referred to collectively as the "Operative Documents." As described in the Offering Memorandum (as defined below), the Offering is part of an overall recapitalization of the Company, pursuant to which (i) the Company's existing bank credit agreement will be replaced and refinanced by an amended and restated credit agreement (the "New Credit Agreement"), (ii) the Company will pay a special cash dividend to BBC (the "Blue Bird Dividend") on all shares of its common stock, par value $ .01 per share, and BBC will pay a special cash dividend on all shares of its common stock (the "BBC Common Shares") and make payments to holders of options to purchase BBC Common Shares (the "BBC Distribution" and, together with the Blue Bird Dividend, the "Distribution") and (iii) all of the Company's outstanding 11 3/4% Senior Subordinated Notes due 2002, Series B (the "Old Notes") will be retired pursuant to the terms of letters providing for the sale of the Old Notes to the Company executed by the holders of the Old Notes (the "Note Repurchase Letters"). The Offering, the replacement of the Company's existing credit agreement with the New Credit Agreement, the Distribution and the retirement of the Old Notes and , if required, the execution of a supplemental indenture in respect of the Old Notes are collectively referred to herein as the "Recapitalization." Capitalized terms used herein without definition have the respective meanings specified in the Offering Memorandum referred to below. The Securities will be offered and sold to the Initial Purchasers without registration under the Securities Act of 1933, as amended (the "Act"), in reliance upon an exemption from the registration requirements of the Act. The Company has prepared and delivered to each Initial Purchaser copies of a preliminary offering memorandum dated October 29, 1996 (the "Preliminary Offering Memorandum") and has prepared and will deliver to each Initial Purchaser, on the date hereof, copies of a final offering memorandum dated November 13, 1996 (the "Final Offering Memorandum"), each to be used by such Initial Purchaser in connection with its solicitation of purchases of, -3- or offering of, the Securities. "Offering Memorandum" means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, together with any amendment or supplement to either such document), including exhibits thereto which have been prepared and delivered by the Company to the Initial Purchasers in connection with their solicitation of purchases of, or offering of, the Securities. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offer and resale of the Securities by the Initial Purchasers. The Company understands that the Initial Purchasers propose to make an offering of the Securities only on the terms and in the manner set forth in the Offering Memorandum and Section 4 hereof, as soon as the Initial Purchasers deem advisable after this Agreement has been executed and delivered, (i) to persons in the United States whom the Initial Purchasers reasonably believe to be qualified institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the Act, as such rule may be amended from time to time ("Rule 144A"), in transactions under Rule 144A, (ii) to a limited number of other institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D of the Act ("Accredited Investors")) in private sales exempt from registration under the Act or (iii) pursuant to offers and sales to non-U.S. persons that occur outside the United States within the meaning of Regulation S under the Act ("Regulation S"), pursuant to Rule 904 of Regulation S. The Initial Purchasers and other holders of Securities (including subsequent transferees) will be entitled to the benefits of the registration rights agreement, to be dated as of November 19, 1996 (the "Registration Rights Agreement"), between the Issuers and the Initial Purchasers, in the form attached hereto as Exhibit A. Pursuant to the Registration Rights Agreement, the Company will agree to file with the Securities and Exchange Commission (the "Commission") under the circumstances set forth therein either (i) a registration statement under the Act registering the Exchange Securities (as defined in the Registration Rights Agreement) to be offered in exchange for the Securities and to use its best efforts to cause such registration statement to be declared effective or (ii) under certain circumstances set forth therein, to file with the Commission a shelf registration statement pursuant to Rule 415 under the Act relating to the resale of the Securities -4- by holders thereof or, if applicable, relating to the resale of Private Exchange Securities (as defined in the Registration Rights Agreement) by the Initial Purchasers pursuant to an exchange of the Securities for Private Exchange Securities, and to use its best efforts to cause such shelf registration statement to be declared effective. SECTION 1. Representations and Warranties. (a) The Issuers, jointly and severally, represent and warrant to each of the Initial Purchasers as of the date hereof and as of the Closing Time (as defined in Section 3 hereof) that: (i) As of their respective dates, none of the Offering Memorandum or any amendment or supplement thereto, and at all times subsequent thereto up to and as of the Closing Time, the Offering Memorandum, as amended or supplemented to such time, contained or will contain an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation and warranty does not apply to statements or omissions made in reliance upon and in conformity with information furnished in writing by the Initial Purchasers to the Company expressly for use in the Offering Memorandum or any amendment or supplement thereto. (ii) When the Securities are issued and delivered pursuant to this Agreement, such securities will not be of the same class (within the meaning of Rule 144A) as securities of any of the Issuers which are listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or quoted in a U.S. automated inter-dealer quotation system. The Company has been advised that the Securities have been designated PORTAL eligible securities in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. (the "NASD"). (iii) Neither of the Issuers, nor any of their affiliates (as defined in Rule 501(b) under the Act) has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Act) which is or will be integrated with the sale of the Securities in a manner -5- that would require the registration of the Securities under the Act. (iv) None of the Issuers or any of their respective affiliates (as such term is defined in Rule 501(b) under the Act) or any person (other than the Initial Purchasers, as to which the Issuers make no representation) acting at the request of the Issuers has engaged, in connection with the offering of the Securities, (A) in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Act, (B) in any directed selling efforts within the meaning of Rule 902 under the Act in the United States in connection with the Securities being offered and sold pursuant to Regulation S under the Act, (C) in any manner involving a public offering within the meaning of Section 4(2) of the Act or (D) in any action which would require the registration of the offering and sale of the Securities pursuant to this Agreement or which would violate applicable state securities or "blue sky" laws. (v) Assuming that the representations and warranties of the Initial Purchasers contained in Section 4 are true, correct and complete, and assuming compliance by the Initial Purchasers with their covenants in Section 4, and assuming that the representations and warranties contained in the Transferee Letters of Representation (the "Transferee Letters") (substantially in the form of Appendix A to the Offering Memorandum) completed by Accredited Investors or non-U.S. persons purchasing Securities are true and correct as of the Closing Time, and assuming compliance by such Accredited Investors or non-U.S. persons, as the case may be, with the agreements in the Transferee Letters, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers in the manner contemplated by, or in connection with the initial resale of such Securities by the Initial Purchasers in accordance with, this Agreement to register the Securities under the Act or to qualify any indenture in respect of the Securities under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (vi) The only subsidiaries of the Company as of the date hereof are those listed on Schedule B hereto (also referred to herein as the "Subsidiaries"). Each of the Issuers and the Subsidiaries has been duly organized or incorporated, as the case may be, and validly existing in -6- good standing under the laws of its respective jurisdictions of organization, with all requisite power and authority (corporate or otherwise) under such laws, and all necessary authorizations, approvals, orders, licenses, certificates and permits of and from regulatory or governmental officials, bodies and tribunals, (a) to own, lease and operate their respective properties and to conduct their respective businesses as now conducted and as described in the Offering Memorandum and (b) to enter into, deliver, incur and perform their respective obligations under the Operative Documents and (c) to consummate each element of the Recapitalization, except, in the case of the foregoing subclause (a) for authorizations, approvals, orders, leases, certificates and permits, the failure of which to possess could not reasonably be expected to have a Material Adverse Effect (as defined below); and are all duly qualified to do business as foreign corporations in good standing in all other jurisdictions where the ownership or leasing of their respective properties or the conduct of their respective businesses requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a material adverse effect (i) on the business, condition (financial or otherwise), results of operations, or business prospects of the Issuers and the Subsidiaries taken as a whole or (ii) on the ability of either of the Issuers to perform any of their respective obligations under the Operative Documents or to consummate any of the transactions contemplated hereby or thereby (a "Material Adverse Effect"). (vii) The Securities, the Exchange Securities and the Private Exchange Securities have been duly authorized by each of the Issuers and the Issuers have all requisite corporate power and authority to execute, issue and deliver the Securities, the Exchange Securities and the Private Exchange Securities and to incur and perform their respective obligations provided for therein. The Notes, when executed, authenticated and issued in accordance with the terms of the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee) and when delivered against payment of the purchase price therefor as provided in this Agreement, will constitute the valid and binding obligations of the Company, entitled to the benefits of the Indenture, enforceable against the Company in accordance with the terms thereof; and the Guarantee, upon endorsement on the Notes by the Guarantor and upon execution of the Notes by the -7- Company and authentication thereof by the Trustee (assuming the due authorization, execution and delivery of the Indenture by the Trustee), and upon delivery of the Notes, and payment therefor in accordance with the terms of this Agreement, will constitute a valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with the terms of the Guarantee; and the Exchange Securities and the Private Exchange Securities, if any, when executed, authenticated, issued and delivered by the Issuers in exchange for the Securities, will constitute valid and binding obligations of each of the Issuers, entitled to the benefits of the Indenture, enforceable against each of the Issuers in accordance with the terms thereof to the extent each is a party; subject, in the case of each of the foregoing, to (a) applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and (b) general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) (clauses (a) and (b) being referred to herein as the "Enforceability Limitations"). (viii) This Agreement has been, and, as of the Closing Time, the Registration Rights Agreement and the Indenture will have been, duly authorized, executed and delivered by the Issuers, and upon such execution by the Issuers (assuming the due authorization, execution and delivery by parties thereto other than the Issuers) this Agreement constitutes, and, as of the Closing Time, the Registration Rights Agreement and the Indenture will constitute, the valid and binding obligations of each of the Issuers, enforceable against the Issuers in accordance with the terms hereof or thereof, subject only to the Enforceability Limitations. (ix) Each element of the Recapitalization has been or, as of the Closing Date, will have been, duly authorized by the Issuers, and, as of the Closing Date, the New Credit Agreement and the Supplemental Indenture, upon execution and delivery by the Issuers (assuming due authorization, execution and delivery by the parties thereto other than the Issuers) will constitute the valid and binding obligations of each of the Issuers, enforceable against the Issuers in accordance with the terms hereof or thereof, subject only to the Enforceability Limitations. -8- (x) No consent, authorization, approval, license or order of, or filing, registration or qualification with, any court or governmental or regulatory agency or body, domestic or foreign, is required for the performance by the Issuers of their obligations under the Operative Documents, or for the consummation of the transactions contemplated hereby (including the other elements of the Recapitalization) or thereby except such as may be required (A) in connection with the registration under the Act of the Securities, the Exchange Securities or the Private Exchange Securities pursuant to the Registration Rights Agreement (including any filing with the NASD), (B) the qualification of the Indenture under the Trust Indenture Act or (C) by state securities or "blue sky" laws in connection with the offer and sale of the Securities or the registration thereof or of the Private Exchange Securities or the Exchange Securities pursuant to the Registration Rights Agreement. (xi) The issuance, sale and delivery of the Securities, the Exchange Securities and the Private Exchange Securities, if any, the execution, delivery and performance by the Issuers of this Agreement, the Registration Rights Agreement and the Indenture, the consummation by the Issuers of the transactions contemplated hereby, thereby, by the Recapitalization, and in the Offering Memorandum and the compliance by the Issuers with the terms of the foregoing do not, and, at the Closing Time, will not conflict with or constitute or result in a breach or violation by any of the Issuers or the Subsidiaries of (A) any of the terms or provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) by any of the Company or the Subsidiaries or give rise to any right to accelerate the maturity or require the prepayment of any indebtedness under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Issuers or the Subsidiaries under any contract, indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, authorization, permit, certificate or other agreement or document to which any of the Issuers or the Subsidiaries is a party or by which any of them may be bound, or to which any of them or any of their respective assets or businesses is subject (collectively, "Contracts") (and the Issuers have no knowledge of any conflict, breach or violation of such terms or provisions or of any such default, in any such -9- case, which has occurred or will so result), (B) the articles or by-laws (each, an "Organizational Document") of each of the Issuers and the Subsidiaries or (C) any law, statute, rule or regulation, or any judgment, decree or order, in any such case, of any domestic or foreign court or governmental or regulatory agency or other body having jurisdiction over the Issuers or any of the Subsidiaries or any of their respective properties or assets. (xii) The Securities, the Exchange Securities, the Registration Rights Agreement and the Indenture will each conform in all material respects to the descriptions thereof in the Offering Memorandum. (xiii) The audited consolidated financial statements included in the Offering Memorandum, including the notes thereto, present fairly the financial position of BBC and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders' equity and cash flows of BBC and its consolidated subsidiaries for the periods have been prepared in conformity with United States generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The selected financial data and the summary financial information included in the Offering Memorandum present fairly the information shown therein and have been compiled on a basis consistent with that of the financial statements included in the Offering Memorandum. Arthur Andersen LLP, which has examined certain of such financial statements as set forth in its report included in the Offering Memorandum, is an independent public accounting firm with respect to the Issuers within the meaning of Regulation S-X under the Act. The pro forma financial information relating to BBC and its subsidiaries and the related notes thereto included in the Offering Memorandum present fairly the information shown therein, have been prepared in all material respects in accordance with the Commission's rules and guidelines with respect to pro forma financial adjustments and have been properly computed on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (xiv) Since the respective dates as of which information is given in the Offering Memorandum, except as otherwise specifically stated therein, there has been no -10- (A) material adverse change in the business, condition (financial or otherwise), results of operations or business prospects of any of the Issuers or the Subsidiaries taken as a whole, whether or not arising in the ordinary course of business (a "Material Adverse Change"), (B) transaction entered into by any of the Issuers or the Subsidiaries, other than in the ordinary course of business, that is material to the Issuers and the Subsidiaries, taken as a whole or (C) dividend or distribution of any kind declared, paid or made by BBC or the Company on its capital stock. (xv) BBC has the authorized, issued and outstanding capitalization set forth in the Offering Memorandum under the subheading "Historical" under the caption "Capitalization"; all of the outstanding capital stock of BBC has been duly authorized and validly issued, is fully paid and nonassessable and was not issued in violation of any preemptive or similar rights (whether provided contractually or pursuant to any Organizational Document). None of the Issuers own, directly or indirectly, any material amount of shares, or any other material amount of equity or long-term debt securities or have any material equity interest in any firm, partnership, joint venture or other entity other than the Subsidiaries, as set forth on Schedule 1 hereto. No holder of any securities of BBC is entitled to have such securities (other than the Securities, the Exchange Securities and the Private Exchange Securities, if any) registered under any registration statement contemplated by the Registration Rights Agreement. All of the outstanding capital stock of each of the Subsidiaries has been duly authorized and, to the knowledge of the Issuers, validly issued, is fully paid and nonassessable and was not issued in violation of any preemptive or similar rights (whether provided contractually or pursuant to any Organizational Document) and the outstanding shares of the capital stock owned by BBC of the Company are owned beneficially and of record by BBC free and clear of all liens, encumbrances, equities and claims or restrictions on transferability or voting of, or the payment to BBC of dividends or distributions on such capital stock, except as set forth in the Offering Memorandum. (xvi) None of the Issuers or the Subsidiaries is (A) in violation of its respective Organizational Documents, (B) in default (or, with notice or lapse of time or both, would be in default) in the performance or -11- observance of any obligation, agreement, covenant or condition contained in any Contract, or (C) in violation of any law, statute, judgment, decree, order, rule or regulation of any domestic or foreign court with jurisdiction over the Issuers or the Subsidiaries or any of their respective assets or properties, or other governmental or regulatory authority, agency or other body, other than, in the case of clause (B) or (C), such defaults or violations which, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect; and any real property and buildings held under lease by either Issuer or the Subsidiaries which are material (individually or in the aggregate) to the Issuers and the Subsidiaries, are held by such Issuer or such Subsidiary, as the case may be, under valid, subsisting and enforceable leases with such exceptions that would not, individually or in the aggregate, have or result in a Material Adverse Effect. (xvii) The Issuers and the Subsidiaries own or possess, or can acquire on reasonable terms, adequate licenses, trademarks, service marks, trade names, copyrights and know-how (including trade secrets and other proprietary or confidential information, systems or procedures) (collectively, "intellectual property") necessary to conduct the business now or proposed to be operated by each of them as described in the Offering Memorandum, except where the failure to own, possess or have the ability to acquire any such intellectual property could not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect; and none of the Issuers or the Subsidiaries has received any notice of infringement of or conflict with (and none of them knows of any such infringement of or conflict with) asserted rights of others with respect to any of such intellectual property. (xviii) The Issuers and the Subsidiaries have obtained all material consents, approvals, orders, certificates, licenses, permits, franchises and other authorizations of and from, and has made all material declarations and filings with, all governmental and regulatory authorities, all self-regulatory organizations and all courts and other tribunals necessary to own, lease, license and use their respective properties and assets and to conduct their respective businesses in the manner described in the Offering Memorandum. -12- (xix) There is no legal action, suit, proceeding inquiry or investigation before or by any court or governmental body or agency, domestic or foreign, now pending or, to the knowledge of the Issuers, threatened against any of the Issuers or the Subsidiaries or affecting the Issuers or the Subsidiaries or any of their respective properties which would be required to be disclosed in a registration statement filed under the Act which would, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in the Offering Memorandum, none of the Issuers or the Subsidiaries has received any notice or claim of any material default (or event, condition or omission which with notice or lapse of time or both would result in a default) under any of its respective Contracts or has knowledge of any material breach of any of such Contracts by the other party or parties thereto. (xx) Each of the Issuers and the Subsidiaries has filed all necessary federal, state and foreign income and franchise tax returns, and has paid all taxes shown as due thereon; and there is no tax deficiency that has been asserted against any of the Issuers or the Subsidiaries. (xxi) Each of the Company and the Subsidiaries has good and marketable title to all real and personal property described in the Offering Memorandum as being owned by it and good and marketable title to a leasehold estate in the real and personal property described in the Offering Memorandum as being leased by it, free and clear of all liens, charges, encumbrances or restrictions, except to the extent the failure to have such title or the existence of such liens, charges, encumbrances or restrictions does not result in a Material Adverse Effect. (xxii) Neither the Company nor any of the Subsidiaries is an "investment company" or a company "controlled by" an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. (xxiii) Neither the Company nor any of the Subsidiaries nor any of their respective directors, officers or controlling persons has taken, directly or indirectly, any action designed, or which might reasonably be expected, to cause or result, under the Act or otherwise, in, or which has constituted, stabilization or manipulation of the -13- price of any security of the Company to facilitate the sale or resale of the Securities, the Exchange Securities or the Private Exchange Securities. (xxiv) No labor problem, dispute or disturbance with the employees of the Company or any of the Subsidiaries exists or, to the knowledge of the Issuers, is threatened which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (xxv) The Company has insurance in such amounts and covering such risks and liabilities as are in accordance with normal industry practice. (xxvi) None of the Company nor any Subsidiary has any material profit sharing, deferred compensation, stock option, stock purchase, phantom stock or similar plans, including agreements evidencing rights to purchase securities or to share in the profits of the Company or any Subsidiary. (xxvii) A true and correct copy of the executed New Credit Agreement has been delivered to the Initial Purchasers and counsel to the Initial Purchasers on or prior to the Closing Time. There have been no amendments, alterations, modifications or waivers of the provisions of the New Credit Agreement. The New Credit Agreement conforms in all material respects to the description thereof in the Offering Memorandum. (xxviii) The Note Repurchase Letters received from holders of 100% of the Old Notes have been received by the Company and the Note Repurchase Letters do not conflict with or constitute or result in a breach or violation of any of the terms of the Old Notes Indenture. The Note Repurchase Letters were obtained by the Company in compliance with the Act and the Exchange Act. (xxix) The statistical and market-related data included in the Offering Memorandum are based on or derived from sources which the Company believes to be reliable and accurate in all material respects or represent the Company's good faith estimates that are made on the basis of data derived from such sources. (xxx) Each of the Company and BBC are, and immediately after the Closing Time will be, Solvent. As used herein, -14- the term "Solvent" means, with respect to the Issuers on a particular date, that on such date (A) the fair market value of the assets of each of the Issuers exceeds its respective liabilities (including without limitation, stated liabilities and identified contingent liabilities), (B) the present fair salable value of the assets of each of the Issuers will exceed its respective probable liabilities on its debts (including without limitation, stated liabilities and identified contingent liabilities), (C) the fair market value of each of the Issuers' total assets exceeds its total liabilities, including identified contingent liabilities, by an amount at least equal to the total par value of its common stock, both immediately prior to and after the Distribution, (D) each of the Issuers is and will be able to pay its debts (including without limitation, stated liabilities and identified contingent liabilities) as such debts mature and (E) each of the Issuers will not have unreasonably small capital with which to conduct its present and anticipated business. (b) Any certificate signed by any officer of any of the Issuers and delivered to the Initial Purchasers or to counsel for the Initial Purchasers pursuant to the terms of this Agreement shall be deemed a representation and warranty by the Issuers to the Initial Purchasers as to the matters covered thereby. SECTION 2. Purchase and Sale of the Securities. The Company agrees to sell to the Initial Purchasers and, subject to the terms and conditions and in reliance upon the representations and warranties of the Issuers herein set forth, each of the Initial Purchasers agrees severally to purchase from the Company, at a purchase price of 97% of the principal amount thereof, the respective principal amount of Notes set forth in Schedule A attached hereto opposite the name of such Initial Purchaser. SECTION 3. Delivery and Payment. Delivery of and payment for the Securities shall be made at 9:00 A.M., New York City time, on November 19, 1996, or such later date and time not more than two (2) business days thereafter as the Initial Purchasers and the Company shall agree (such date and time of delivery and payment for the Securities being herein called the "Closing Time"). Delivery of the Securities shall be made to the Initial Purchasers against payment by the Initial Purchasers of the purchase price thereof by wire transfer of immediately available funds to the order of the Company or as the -15- Company may direct. Delivery of the Securities in definitive form shall be made at such location as the Initial Purchasers shall reasonably designate at least two business days in advance of the Closing Time and payment for the Securities shall be made at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019. Certificates for the Securities shall be registered in such names and in such denominations as the Initial Purchasers may request not less than two full business days in advance of the Closing Time. The Company agrees to have the Securities available for inspection, checking and packaging by the Initial Purchasers in New York, New York, not later than 10:00 A.M. on the business day prior to the Closing Time. SECTION 4. Resale of the Securities. The Initial Purchasers have advised the Issuers that they propose to offer the Securities for resale upon the terms and conditions set forth in this Agreement and in the Offering Memorandum. Each Initial Purchaser hereby represents and warrants (as to itself only) to, and agrees with, the Issuers that (i) it is purchasing the Securities for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is (a) a "qualified institutional buyer" (a "QIB") within the meaning of Rule 144A under the Act and is aware that the sale to it is being made in reliance on Rule 144A under the Act, (b) an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Act (an "Accredited Investor"), or (c) a person other than a U.S. person (a "foreign purchaser"), which term shall include dealers or other professional fiduciaries in the U.S. acting on a discretionary basis for foreign beneficial owners in offshore transactions meeting the requirements of Rule 903 of Regulation S under the Act; (ii) it acknowledges that the Securities have not been registered under the Act and that none of the Securities may be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as set forth below; (iii) it shall not resell or otherwise transfer any of such Securities prior to (a) the date which is three years (or such shorter period of time as permitted by Rule 144(k) under the Act or any successor provision thereunder) after the later of the date of original issuance of the Securities and (b) such later date, if any, as may be required by applicable laws except (a) to the Company or its Subsidiaries, (b) inside the United States to an Accredited Investor that, prior to such transfer, furnishes to the Trustee -16- a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee), (d) outside the United States to foreign purchasers in offshore transactions meeting the requirements of Rule 904 of Regulation S, (e) pursuant to the exemption from registration provided by Rule 144 under the Act (if available), (f) pursuant to an effective registration statement under the Act or (g) pursuant to another available exemption from the registration requirements of the Act; (iv) it agrees that it will give to each person to whom it transfers the Securities notice of any restrictions on transfer of such Securities; (v) it understands that all of the Securities will bear a legend substantially similar to that in Section 5(j) hereof, unless otherwise agreed by the Company and the Trustee; (vi) it acknowledges that the Trustee will not be required to accept for registration of transfer any Securities acquired by it, except upon presentation of evidence satisfactory to the Company and the Trustee that the restrictions set forth herein have been complied with; and (vii) it acknowledges that the Issuers, the Trustee, the Initial Purchasers and others will rely upon the truth and accuracy of the the foregoing acknowledgments, representations and agreements and agrees that if any of the acknowledgments, representations or agreements deemed to have been made by its purchase of the Securities are no longer accurate, it shall promptly notify the Issuers, the Trustee and the Initial Purchasers. If it is acquiring the Securities as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgments, representations and agreements on behalf of each account. SECTION 5. Covenants of the Issuers. Each of the Issuers covenant with the Initial Purchasers as follows: (a) The Issuers will furnish to the Initial Purchasers and counsel for the Initial Purchasers, without charge, such number of copies of the Preliminary Offering Memorandum and the Offering Memorandum and any amendments or supplements thereto as the Initial Purchasers and their counsel may reasonably request. (b) The Issuers will not at any time make any amendment or supplement to the Preliminary Offering Memorandum or the Offering Memorandum without the prior written consent of the Initial Purchasers. -17- (c) If at any time prior to completion of the distribution of the Securities by the Initial Purchasers to purchasers who are not its affiliates (as determined by the Initial Purchasers) any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of the Initial Purchasers or counsel for the Initial Purchasers, to amend or supplement the Offering Memorandum in order that the Offering Memorandum, as then amended or supplemented, will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading or if in the opinion of the Initial Purchasers or counsel to the Initial Purchasers, such amendment or supplement is necessary to comply with applicable law, the Issuers will, subject to paragraph (b) of this Section 5, promptly prepare, at their own expense, such amendment or supplement as may be necessary to correct such untrue statement or omission or to effect such compliance (in form and substance agreed upon by the Initial Purchasers and counsel to the Initial Purchasers), so that as so amended or supplemented, the statements in the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading or so that such Offering Memorandum as so amended or supplemented will comply with applicable law, as the case may be, and furnish to the Initial Purchasers such number of copies of such amendment or supplement as the Initial Purchasers may reasonably request. Each of the Issuers agrees to notify the Initial Purchasers in writing to suspend use of the Offering Memorandum as promptly as practicable after the occurrence of an event specified in this paragraph (c), and the Initial Purchasers hereby agree upon receipt of such notice from the Issuers to suspend use of the Offering Memorandum until the Issuers have amended or supplemented the Offering Memorandum to correct such misstatement or omission or to effect such compliance. (d) Notwithstanding any provision of paragraph (b) or (c) to the contrary, however, the Issuers' obligations under paragraphs (b) and (c) and the Initial Purchasers' obligations under paragraph (c) shall terminate on the earliest to occur of (i) expiration of the Exchange Offer -18- (as defined in the Registration Rights Agreement) pursuant to the Registration Rights Agreement, (ii) the effective date of a shelf registration statement with respect to the Securities filed pursuant to the Registration Rights Agreement, (iii) the date upon which no Initial Purchaser nor any of their respective affiliates continues to hold Securities acquired as part of their initial distribution and (iv) the date upon which no Initial Purchaser nor any of their respective affiliates continues to hold Private Exchange Securities, if any. (e) None of the Issuers nor any of their affiliates (as defined in Rule 501(b) under the Act) will solicit any offer to buy or offer or sell the Securities, the Exchange Securities or the Private Exchange Securities, if any, by means of any form of general solicitation or general advertising (as such terms are used in Regulation D under the Act), or by means of any directed selling efforts (as defined in Rule 902 under the Act) in the United States in connection with the Securities being offered and sold pursuant to Regulation S or in any manner involving a public offering within the meaning of Section 4(2) of the Act prior to the effectiveness of a registration statement with respect to the Securities, the Exchange Securities or the Private Exchange Securities, as applicable. (f) None of the Issuers nor any of their affiliates (as defined in Rule 501(b) under the Act) will offer, sell or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) which could be integrated with the sale of the Securities in a manner that would require the registration of the Securities under the Act. (g) The Company will, so long as the Securities are outstanding, furnish to the Trustee on a timely basis, pursuant to the Indenture, whether or not the Company has a class of securities registered under the Exchange Act (i) audited year-end consolidated financial statements of BBC (including a balance sheet, income statement and statement of changes of cash flow) prepared in accordance with GAAP and substantially in the form required under Regulation S-X under the Act and the information described in Item 303 of Regulation S-K under the Act with respect to such period and (ii) unaudited quarterly consolidated financial statements of BBC (including a balance sheet, income statement and statement of changes of cash flow) -19- prepared in accordance with GAAP and substantially in the form required by Regulation S-X under the Act and the information described in Item 303 of Regulation S-K under the Act with respect to such period and will furnish to the Initial Purchasers copies of all such reports and information, together with such other documents, reports and information as shall be furnished by the Company to the holders of the Securities or to the Trustee. In the event the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company will furnish to holders of Securities and prospective purchasers of Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Act to permit compliance with Rule 144A in connection with resales of the Securities. (h) Each of the Issuers will use its reasonable best efforts in cooperation with the Initial Purchasers to (i) permit the Securities to be eligible for clearance and settlement through The Depository Trust Company and (ii) permit the Securities to be designated as PORTAL securities in accordance with the rules and regulations of the NASD. (i) Prior to the Closing Time, the Company, will furnish to the Initial Purchasers, if and as soon as they have been prepared, a copy of any unaudited interim consolidated financial statements of BBC for any period subsequent to the period covered by the most recent financial statements of BBC appearing in the Offering Memorandum which have been prepared in the ordinary course of business. (j) Each Security and Private Exchange Security, if any, will bear the following legend until such legend shall no longer be necessary or advisable because the Securities are no longer subject to the restrictions on transfer described herein: THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE -20- DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OF REGULATION S, (2) AGREES THAT IT WILL NOT, PRIOR TO (X) THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF OR ANY PREDECESSOR OF THIS SECURITY OR THE LAST DATE ON WHICH BLUE BIRD BODY COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) OR (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS, (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-US PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, (E) TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH -21- ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "US PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. (k) The Issuers will arrange for the registration and qualification of the Securities for offering and sale under the applicable securities or "blue sky" laws of such states and other jurisdictions as the Initial Purchasers may designate in connection with the resale of the Securities as contemplated by this Agreement and the Offering Memorandum and will continue such qualifications in effect for as long as may be necessary to complete the distribution of the Securities; provided that in no event shall any of the Issuers be obligated to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Section 5(k), (ii) file any general consent to service of process in any jurisdiction where it is not at the Closing Time then so subject or (iii) subject itself to taxation in any such jurisdiction if it is not so subject. The Issuers will file such statements and reports as may be required by the laws of each jurisdiction in which the Securities have been qualified as above provided. The Issuers shall promptly advise the Initial Purchasers of the receipt by any of the Issuers of any notification with respect to the suspension of the qualification or exemption from qualification of the Securities for offering or sale in any jurisdiction or the institution, threatening or contemplation of any proceeding for such purpose. (l) From the date hereof to the Closing Time, none of the Issuers will issue any press release or other public communication directly or indirectly or hold any press -22- conference with respect to the Issuers or any of the Subsidiaries or the business, financial condition, assets, liabilities (contingent or otherwise), results of operations or prospects of the Issuers or any of the Subsidiaries, without the prior consent of the Initial Purchasers (which consent shall not be unreasonably withheld), unless in the judgment of the Issuers and their counsel, and after notification to the Initial Purchasers, such press release, communication or conference is required by law. (m) The Company will use the proceeds received from the sale of the Securities in the manner specified in the Offering Memorandum under the heading "Use of Proceeds." (n) The Issuers shall not, for a period of 180 days from the date of the Offering Memorandum, without the prior written consent the Initial Purchasers, directly or indirectly, offer, sell, grant any option to purchase or otherwise dispose of any debt securities of the Company or any of the Subsidiaries (other than the Exchange Securities and the Private Exchange Securities, if any). (o) The Company agrees, at its expense, (i) as soon as practicable after the Closing Time and concurrent with the filing of a registration statement with respect to the Exchange Securities or the Securities, as the case may be, under the Registration Rights Agreement, it will prepare a registration statement under the Act in connection with the market-making activities of Merrill Lynch with respect to the Exchange Securities or the Securities, as the case may be, containing such disclosures as are customary and appropriate for such a document and file such registration statement and use its best efforts to cause such registration statement to become effective under the Act as soon as practicable thereafter or (ii) in lieu of the registration statement in clause (i) hereof, the Company will cause the registration statement in respect of the Exchange Securities or the Securities, as the case may be, to contain alternative pages in connection with the market-making activities of Merrill Lynch with respect to the Exchange Securities or the Securities, as the case may be, and that, in the case of either clause (i) or (ii) hereof, it will keep such registration statement in effect as long as is required by the Act in the reasonable judgement of Merrill Lynch to engage in market-making activities. The Company agrees to obtain from its independent accountants, at its expense, on each effective date of -23- such registration statement, a letter addressed to Merrill Lynch dated such date covering matters described in Section 5(g) hereof, modified as appropriate to reflect the registered nature of the Exchange Securities or the Securities, as the case may be, in each case, in form and substance satisfactory to Merrill Lynch. The Company agrees to furnish Merrill Lynch as many copies of the registration statement and each report of the Company filed with the Commission pursuant to Section 13 or 15 of the Exchange Act as Merrill Lynch shall reasonably request in connection with its market-making activities. If a "qualified independent underwriter" is required by the National Association of Securities Dealers, Inc. (the "NASD") in connection with such market-making activities, the Company shall pay such underwriter's fee (in a customary amount for transactions of this type and amount) and expenses and to indemnify such underwriter on customary terms. Such qualified independent underwriter shall be a firm selected by Merrill Lynch and reasonably agreed upon by the Company. SECTION 6. Payment of Expenses. (a) Whether or not any sale of the Securities is consummated, the Issuers agree jointly and severally to pay and bear all costs and expenses incident to the performance of all of their obligations under this Agreement, including (i) the preparation and printing of the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto and the cost of furnishing copies thereof to the Initial Purchasers, (ii) the preparation, issuance, printing and distribution of the Securities, the Exchange Securities, the Private Exchange Securities, if any, and any survey of state securities or "blue sky" laws or legal investment memoranda, (iii) the delivery to the Initial Purchasers of the Securities, the Exchange Securities or the Private Exchange Securities, (iv) the fees and disbursements of the Issuers' counsel and accountants, (v) the qualification of the Securities under the applicable state securities or "blue sky" laws in accordance with the provisions of Section 5(k) hereof and any filing for review of the offering with the NASD, if required, including filing fees and reasonable fees and disbursements of counsel to the Initial Purchasers in connection therewith and in connection with the preparation of any survey of state securities or "blue sky" laws or legal investment memoranda, (vi) any fees charged by rating agencies for rating the Securities, the Exchange Securities and the Private Exchange Securities, if any, (vii) the fees and -24- expenses of the Trustee, including the fees and disbursements of counsel for the Trustee, (viii) all expenses (including travel expenses) of the Issuers and the Initial Purchasers in connection with any meetings with prospective investors in the Securities, (ix) all expenses in connection with the letter prepared by Valuation Research Corporation, and (x) all expenses and listing fees in connection with the application for designation of the Securities as PORTAL securities and to permit the Securities, the Exchange Securities and the Private Exchange Securities, as applicable, to be eligible for clearance through The Depository Trust Company. (b) If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 7 hereof is not satisfied, because this Agreement is terminated pursuant to Section 11 hereof or because of any failure, refusal or inability on the part of any of the Issuers to perform all obligations and satisfy all conditions on their part to be performed or satisfied hereunder other than by reason of a default by an Initial Purchaser in payment for the Securities at the Closing Time, the Issuers agree jointly and severally to reimburse the Initial Purchasers promptly upon demand for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of their counsel) that shall have been incurred by it in connection with the proposed purchase and sale of the Securities. SECTION 7. Conditions of the Initial Purchasers' Obligations. The obligations of the Initial Purchasers to purchase and pay for the Securities are subject to the continued accuracy, as of the Closing Time, of the representations and warranties of the Issuers herein contained, to the accuracy of the statements of the Issuers and officers of the Issuers made in any certificate pursuant to the provisions hereof, to the performance by the Issuers of their respective obligations hereunder, and to the following further conditions: (a) At the Closing Time, the Initial Purchasers shall have received the opinion of Wachtell, Lipton, Rosen & Katz, counsel to the Issuers, dated as of the Closing Time, in the form set forth below and otherwise reasonably satisfactory to the Initial Purchasers and counsel for the Initial Purchasers, to the effect that: (1) BBC has been duly incorporated and is validly existing under the laws of the State of -25- Delaware, with corporate power and authority to own, lease and operate its assets and properties and conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under this Agreement and the other Operative Documents; BBC is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; (2) BBC has all requisite corporate power and authority to issue the Guarantee; (3) the authorized, issued and outstanding capital stock of BBC is as set forth in the Offering Memorandum under the caption "Capitalization"; (4) BBC has the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Registration Rights Agreement, the Securities, the Exchange Securities, the Private Exchange Securities and the Indenture and to consummate each other element of the Recapitalization to which it is a party; and each of this Agreement, the Registration Rights Agreement, the Securities, the Exchange Securities, the Private Exchange Securities and the Indenture has been duly authorized by BBC and each other element of the Recapitalization to which BBC is a party has been duly authorized by BBC. (5) no consent, approval, authorization, license, qualification or order of or filing or registration with, any court or governmental or regulatory agency or body of the United States or the State of New York or the General Corporation Law of the State of Delaware is required for the execution and delivery by the Issuers of this Agreement, the Registration Rights Agreement or the Indenture or for the issue and sale of the Securities, the Exchange Securities or the Private Exchange Securities, if any, or the issuance of the Guarantee by BBC or the consummation by the Issuers of any of the transactions contemplated herein (including the other elements of the -26- Recapitalization) or therein, except such as may be required (A) in connection with the registration under the Act of the Securities, the Exchange Securities or the Private Exchange Securities, if any, pursuant to the Registration Rights Agreement, (B) the qualification of the Indenture under the Trust Indenture Act in connection with the registration of the Securities, the Exchange Securities or the Private Exchange Securities, if any, pursuant to the Registration Rights Agreement and (C) under the "blue sky" laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Initial Purchasers (as to which such counsel need express no opinion); (6) the issuance, sale and delivery of the Securities, the Exchange Securities and the Private Exchange Securities, if any, the execution, delivery and performance by the Issuers of this Agreement, the Registration Rights Agreement and the Indenture (in each case assuming due authorization and execution by each party other than BBC), the declaration and payment of the BBC Distribution and the consummation by the Issuers of the transactions contemplated hereby (including each element of the Recapitalization) and thereby and the compliance by the Issuers with the terms of the foregoing do not, and, at the Closing Time, will not, conflict with or constitute or result in a breach or violation by the Issuers or any of the Subsidiaries of (A) any provision of the Certificate of Incorporation or By-laws of BBC, (B) any of the terms or provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) by the Issuers, or give rise to any right to accelerate the maturity or require the prepayment of any indebtedness under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Issuers under any material agreements or instruments known to such counsel or (C) any law, statute, rule, or regulation of the United States or the State of New York or under the General Corporation Law of the State of Delaware or any order, decree or judgment known to such counsel to be applicable to the Issuers, of any court or governmental or regulatory agency or body or arbitrator in the United States or the States of New York or Delaware. -27- (7) the statements in the Offering Memorandum under the headings "Summary - The Offering," "Description of the Notes" and "Exchange Offer; Registration Rights," insofar as such statements purport to summarize certain provisions of the Securities, the Exchange Securities, the Registration Rights Agreement and the Indenture provide a fair summary of such provisions of such agreements and instruments and are complete in all material respects; (8) all descriptions in the Offering Memorandum of Contracts and other documents to which the Company or the Subsidiaries are a party are accurate and complete in all material respects; (9) each of the Indenture and the Registration Rights Agreement (assuming due authorization and execution by each party thereto other than BBC) constitutes a valid and binding agreement of the Issuers, enforceable against the Issuers in accordance with its terms, except (a) with respect to the Indenture and the Registration Rights Agreement, the Enforceability Limitations, and (b) with respect to the Registration Rights Agreement, that such counsel expresses no opinion regarding the enforceability of the indemnification provisions contained in Section 4 thereof; (10) each of the Securities, when executed and authenticated in accordance with the provisions of the Indenture and delivered and paid for in accordance with the terms of this Agreement, and the Exchange Securities and the Private Exchange Securities, if any, when executed, authenticated and delivered in exchange for the Securities in accordance with the terms of the Registration Rights Agreement, will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Issuers, enforceable in accordance with its terms except as the enforceability thereof may be limited by the Enforceability Limitations; (11) the Guarantee, when authenticated, executed and delivered by BBC in accordance with the provisions of the Indenture (assuming the due authentication of the Notes by the Trustee) will be entitled to the benefits of the Indenture and will be a legal, -28- valid and binding obligation of BBC enforceable against BBC in accordance with its terms except as the enforceability thereof may be limited by the Enforceability Limitations; (12) The Note Repurchase Letters do not conflict with or constitute or result in a breach or violation of any of the terms of the Old Notes Indenture. (13) to the knowledge of such counsel, other than as described in the Offering Memorandum, no legal, regulatory or governmental proceedings are pending to which any of the Issuers or the Subsidiaries is a party or to which the assets of the Issuers or the Subsidiaries are subject which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or which, individually or in the aggregate, would have a material adverse effect on the power or ability of the Issuers to perform their respective obligations under the Operative Documents or to consummate the transactions contemplated thereby (including the other elements of the Recapitalization) or by the Offering Memorandum and no such material proceedings have been threatened against any of the Issuers or with respect to any of their respective assets or properties; (14) assuming that the representations and warranties of the Initial Purchasers contained in Section 4 of this Agreement are true, correct and complete, and assuming compliance by the Initial Purchasers with their covenants in Section 4 hereof, and assuming that the representations and warranties contained in the Transferee Letters (substantially in the form of Appendix A to the Offering Memorandum) completed by Accredited Investors and non-U.S. persons purchasing Securities from the Initial Purchasers are true and correct as of the Closing Time, and assuming compliance by such Accredited Investors and non-U.S. persons with the agreements in the Transferee Letters, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers under, or in connection with the initial resale of such Securities by the Initial Purchasers in accordance with, this Agreement that would require the Issuers to register the Securities under the Act -29- or to qualify the Indenture under the Trust Indenture Act; (15) neither Issuer nor any of the Subsidiaries is an "investment company" or a company "controlled by" or required to register as an investment company as such terms are defined in the Investment Company Act of 1940, as amended, and the rules and regulations thereunder; and (16) when the Securities are issued and delivered pursuant to this Agreement, such Securities will not be of the same class (within the meaning of Rule 144A) as securities of any of the Issuers which are listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system. In addition such counsel shall state that such counsel has participated in conferences with representatives of the Initial Purchasers, officers and other representatives of the Issuers and representatives of the independent certified accountants of the Issuers, at which conferences the contents of the Offering Memorandum and related matters were discussed, and although such counsel has not verified and does not pass upon or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum (except and only to the extent set forth in subclauses (7) and (8) above), on the basis of the foregoing (relying as to materiality to a large extent upon representations and opinions of officers and other representatives of the Issuers), no facts have come to the attention of such counsel which lead such counsel to believe that the Offering Memorandum at the date thereof or as of the Closing Time, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that such counsel need not express any comment with respect to the financial statements, including the notes thereto and supporting schedules, or any other financial or statistical data set forth or referred to in the Offering Memorandum. In rendering such opinions, such counsel (A) need not express any opinion with regard to the application of laws -30- of any jurisdiction other than the Federal law of the United States and the laws of the States of Delaware and New York, (B) may rely, as to matters of fact, to the extent they deem proper on representations or certificates of responsible officers of the Issuers and certificates of public officials and (C) may rely to the extent they deem proper upon the opinion of Rogers & Hardin contemplated by subsection (b). References to the Offering Memorandum in this subsection (a) include any supplements thereto at or prior to the Closing Time. (b) At the Closing Time, the Initial Purchasers shall have received the opinion of Rogers & Hardin, special counsel to the Company, dated as of the Closing Time, in the form set forth below and otherwise reasonably satisfactory to the Initial Purchasers and counsel for the Initial Purchasers, to the effect that: (1) the Company has been duly incorporated and is validly existing under the laws of the State of Georgia, with corporate power and authority to own, lease and operate its assets and properties and conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under this Agreement and the other Operative Documents; the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; (2) all of the authorized, issued and outstanding capital stock of the Company is owned by BBC as set forth in the Offering Memorandum under the caption "Capitalization"; (3) the Company has the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Registration Rights Agreement, the Securities, the Exchange Securities, the Private Exchange Securities and the Indenture and to consummate each other element of the -31- Recapitalization to which it is a party; and each of this Agreement, the Registration Rights Agreement, the Securities, the Exchange Securities, the Private Exchange Securities and the Indenture has been duly authorized by the Company; the Company has the requisite corporate power and authority to issue and deliver the Securities, the Exchange Securities and the Private Exchange Securities; and the Securities, the Exchange Securities and the Private Exchange Securities have been duly authorized by the Company for issuance; and each other element of the Recapitalization to which the Company is a party has been duly authorized by the Company; (4) no consent, approval, authorization, license, qualification or order of or filing or registration with, any court or governmental or regulatory agency or body of the State of Georgia is required for the execution and delivery by the Company of this Agreement, the Registration Rights Agreement or the Indenture or for the issue and sale of the Securities, the Exchange Securities or the Private Exchange Securities, if any, or the consummation by the Company of any of the transactions contemplated herein (including the other elements of the Recapitalization) or therein, except such as may be required under the "blue sky" laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Initial Purchasers (as to which such counsel need express no opinion); (5) the issuance, sale and delivery of the Securities, the Exchange Securities and the Private Exchange Securities, if any, the execution, delivery and performance by the Company of this Agreement, the Registration Rights Agreement and the Indenture (in each case assuming due authorization and execution by each party other than the Company), the declaration and payment of the Blue Bird Dividend and the consummation by the Issuers of the transactions contemplated hereby (including the other elements of the Recapitalization) and thereby and the compliance by the Issuers with the terms of the foregoing do not, and, at the Closing Time, will not, conflict with or constitute or result in a breach or violation by the Issuers or any of the Subsidiaries of (A) any provision of the Certificate of Incorporation or By-laws -32- of the Company, (B) any law, statute, rule, or regulation of the State of Georgia or any order, decree or judgment known to such counsel to be applicable to the Issuers, of any court or governmental or regulatory agency or body or arbitrator in the State of Georgia or (C) any of the terms or provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) by any of the Issuers or the Subsidiaries or give rise to any right to accelerate the maturity or require the prepayment of any indebtedness under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Issuers or the Subsidiaries under any Contracts. In rendering such opinions, such counsel (A) need not express any opinion with regard to the application of laws of any jurisdiction other than the laws of the State of Georgia and (B) may rely, as to matters of fact, to the extent they deem proper on representations or certificates of responsible officers of the Issuers and certificates of public officials. References to the Offering Memorandum in this subsection (b) include any supplements thereto at or prior to the Closing Time. (c) The Initial Purchasers shall have received the favorable opinion, dated as of the Closing Time, of Cahill Gordon & Reindel, counsel for the Initial Purchasers, with respect to certain matters set forth in clauses (4), (7), (9), (10), (11) and (14) of subsection (a) of this Section 7. In rendering such opinion, such counsel (A) need not express any opinion with regard to the application of laws of any jurisdiction other than the Federal laws of the United States and the laws of the State of New York and (B) may rely, as to matters of fact, to the extent they deem proper on representations or certificates of responsible officers of the Company and certificates of public officials. In addition, such counsel shall additionally state that such counsel has participated in conferences with officers and other representatives of the Issuers and representatives of the independent accountants for the -33- Issuers at which conferences the contents of the Offering Memorandum and related matters were discussed, and although such counsel has not verified and does not pass upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum, on the basis of the foregoing (relying as to materiality to a large extent upon the representations and opinions of officers and other representatives of the Issuers), no facts have come to the attention of such counsel which lead such counsel to believe that the Offering Memorandum, at the date thereof, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no comment with respect to the financial statements, including the notes thereto, or any other financial or statistical data found in or derived from the internal accounting and other records of BBC and its subsidiaries set forth or referred to in the Offering Memorandum). (d) The following conditions contained in clauses (i) and (ii) of this subsection (d) shall have been satisfied at and as of the Closing Time and each of the Issuers shall have furnished to the Initial Purchasers a certificate, signed by the Chairman of the Board or the President and the principal financial or accounting officer of each of the Issuers, dated as of the Closing Time, to the effect that the signers of such certificate have carefully examined the Offering Memorandum, any amendment or supplement to the Offering Memorandum, and this Agreement and that: (i) the representations and warranties of the Issuers in this Agreement are true and correct in all material respects on and as of the Closing Time with the same effect as if made at the Closing Time and the Issuers have complied with all the agreements and satisfied all the conditions under this Agreement on its part to be performed or satisfied in all material respects at or prior to the Closing Time; and (ii) since the date of the most recent financial statements included in the Offering Memorandum (exclusive of any amendment or supplement thereto), there has been no Material Adverse Change, whether or -34- not arising in the ordinary course of business. As used in this subparagraph, the term "Offering Memorandum" means the Offering Memorandum in the form first used to confirm sales of the Securities. (e) At the time that this Agreement is signed and at the Closing Time, Arthur Andersen LLP shall have furnished to the Initial Purchasers a letter or letters, dated respectively as of the date of this Agreement and as of the Closing Time, in form and substance satisfactory to the Initial Purchasers, confirming that they are independent certified public accountants within the meaning of the Act and the applicable published rules and regulations thereunder and stating in effect that: (i) in their opinion the audited financial statements included in the Offering Memorandum comply as to form in all material respects with the applicable accounting requirements of the Act and the rules and regulations promulgated thereunder; (ii) on the basis of a reading of the latest unaudited financial statements made available by the Issuers; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the shareholders, the board of directors and committees thereof of each of the Issuers; and inquiries of certain officials of each of the Issuers who have responsibility for financial and accounting matters of BBC and the Company as to transactions and events subsequent to July 27, 1996, and such other inquiries and procedures as may be specified in such letter, nothing came to their attention which caused them to believe that: (A) the unaudited financial statements included in the Offering Memorandum do not comply as to form in all material respects with applicable accounting requirements of the Act and with the published rules and regulations of the Commission; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the -35- audited financial statements included in the Offering Memorandum; or (B) with respect to the period subsequent to July 27, 1996, that at a specified date not more than three business days prior to the date of the letter, there were any changes in the capital stock or there were any increases in the long-term debt or any decreases in the net current assets, or shareholders' equity of BBC, as compared with the amounts shown on the unaudited balance sheet at July 27, 1996 included in the Offering Memorandum, or for the period from July 28, 1996 to such specified date there were any decreases, as compared with the corresponding period in the preceding year, in net sales, income before extraordinary items or net income of BBC (on a consolidated basis), except in all instances for increases or decreases that the Offering Memorandum discloses have occurred or may occur; and (iii) they have performed certain other specified procedures, not constituting an audit, with respect to certain amounts, percentages and financial information that are derived from the general accounting records or other unaudited schedules of the Issuers and are included in the Offering Memorandum, and have compared such amounts, percentages and financial information with such records of the Issuers and with information derived from such records and have found them to be in agreement, excluding any questions of legal interpretation. References to the Offering Memorandum in this subsection (e) include any supplement thereto at the date of the applicable letter. (f) Subsequent to the date hereof or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any change, or any development involving a prospective change, in or affecting the business or properties of the Issuers the effect of which is, in the sole judgment of the Initial Purchasers, so material and adverse as to make it impractical or inadvisable to proceed with the purchase and the delivery of the Securities as contemplated by the Offering Memorandum (exclusive of any amendment or supplement thereto). -36- (g) At the Closing Time, counsel for the Initial Purchasers shall have been furnished with such information, certificates and documents as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as contemplated herein and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all opinions and certificates mentioned above or elsewhere in this Agreement shall be reasonably satisfactory in form and substance to the Initial Purchasers and counsel for the Initial Purchasers. (h) The Issuers and the Trustee shall have entered into the Indenture. (i) The Issuers and the Initial Purchasers shall have entered into the Registration Rights Agreement. (j) On or prior to the Closing Time, the Company shall have amended and restated its Existing Credit Agreement (as defined in the Offering Memorandum) on the terms described in the Offering Memorandum; all conditions to the availability and the initial borrowing under the New Credit Agreement (as defined in the Offering Memorandum) shall have been satisfied; and the funding under the New Credit Agreement shall occur on or prior to the Closing Time. (k) On or prior to the Closing Time, the Initial Purchasers shall have received a letter from Valuation Research Corporation with respect to the Issuers in form and substance reasonably satisfactory to the Initial Purchasers and counsel to the Initial Purchasers. (l) On or prior to the Closing Time, the Board of Directors of the Company shall have declared the Blue Bird Dividend and the Board of Directors of BBC shall have declared the BBC Dividend as described in the Offering Memorandum. (m) All of the conditions to the sale to the Company by the holders of 90% or more of the Company's Old Notes shall have been satisfied on or prior to the Closing Time and, on or prior to the Closing Time, the Company shall have received 90% or more of the outstanding Old Notes from the holders of the Old Notes who are parties to the -37- Note Repurchase Letters. In the event that less than all of the Old Notes are received by the Company from the holders of the Old Notes, the Company will (i) cause a supplemental indenture in respect of the Old Notes to be executed by the Company and the trustee under the indenture governing the Old Notes as contemplated by the Note Repurchase Letters and (ii) deliver to the Initial Purchasers and to counsel for the Initial Purchasers legal opinions and other documents reasonably required by, and acceptable in form and substance to, the Initial Purchasers and counsel for the Initial Purchasers. If any condition specified in this Section 7 shall not have been fulfilled in all material respects when and as required to be fulfilled, this Agreement may be terminated by the Initial Purchasers by notice to the Issuers, and such termination shall be without liability of any party to any other party except as provided in Section 6. Notwithstanding any such termination, the provisions of Sections 8 and 9 shall remain in effect. Notice of such cancellation shall be given to the Issuers in writing or by telephone, facsimile transmission or telegraph confirmed in writing. The Issuers shall furnish to the Initial Purchasers such conformed copies of such opinions, certificates, letters and documents in such quantities as the Initial Purchasers and counsel for the Initial Purchasers shall reasonably request. SECTION 8. Indemnification. (a) The Issuers agree, jointly and severally, to indemnify and hold harmless the Initial Purchasers, their respective affiliates, and each person, if any, who controls any Initial Purchaser or their respective affiliates within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and their respective directors, officers, employees and agents, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum, the Final Offering Memorandum or "market-making prospectus" (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; -38- (ii) against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expenses whatsoever, as incurred (including reasonable fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser expressly for use in the Preliminary Offering Memorandum, the Final Offering Memorandum or "market-making prospectus" (or any amendment or supplement thereto). (b) Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Issuers, their respective directors and each person, if any, who controls the Issuers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section 8, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Preliminary Offering Memorandum, Final Offering Memorandum or "market-making prospectus" (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Issuers by such Initial Purchaser expressly for use in the Preliminary Offering Memorandum, Final Offering Memorandum or "market-making prospectus" (or any amendment or supplement thereto). -39- (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, enclosing a copy of all papers properly served on such indemnified party, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 8(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 8(b) above, counsel to the indemnified parties shall be selected by the Issuers. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. Notwithstanding the foregoing, if it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it and approved by the indemnified parties defendant in such action (which approval shall not be unreasonably withheld), unless such indemnified parties reasonably object to such assumption on the ground that there may be legal defenses available to them which are different from or in addition to those available to such indemnifying party. If an indemnifying party assumes the defense of such action, the indemnifying parties shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action. In no event shall the indemnifying parties be liable for the fees and expenses of more than one counsel (in addition to local counsel) for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental -40- agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 8 or Section 9 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as to which such indemnified party is liable pursuant to Section 8(a) or (b), as the case may be, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 8(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. SECTION 9. Contribution. If the indemnification provided for in Section 8 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuers on the one hand and the Initial Purchasers on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuers on the one hand and of the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. -41- The relative benefits received by the Issuers on the one hand and the Initial Purchasers on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total underwriting discount received by the Initial Purchasers, bear to the aggregate initial offering price of the Securities. The relative fault of the Issuers on the one hand and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Issuers or by the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuers and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 9. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 9 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be -42- entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9, each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director of any of the Issuers, each officer of any of the Issuers and each person, if any, who controls any of the Issuers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Issuers. The Initial Purchasers' respective obligations to contribute pursuant to this Section 9 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A hereto and not joint. SECTION 10. Representations, Warranties and Agreements To Survive Delivery. All representations, warranties, indemnities, agreements and other statements of the Issuers and their respective officers and of the Initial Purchasers contained in or made pursuant to this Agreement shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or controlling person, or by or on behalf of the Issuers, and shall survive delivery and payment for the Securities to the Initial Purchasers. SECTION 11. Termination of Agreement. (a) Termination: General. (a) The Initial Purchasers may terminate this Agreement, by notice to any of the Issuers, at any time at or prior to the Closing Time if (i) there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Offering Memorandum and on or prior to the Closing Time, any Material Adverse Change with respect to the Issuers and the Subsidiaries, taken as a whole whether or not arising in the ordinary course of business, or (iii) since the date of this Agreement and on or prior to the Closing Time, (A) there has occurred any outbreak of hostilities or escalation of existing hostilities or other national or international calamity or crisis, the effect of which on the financial securities markets of the United States is such as to make it, in the judgment of any Initial Purchaser, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (B) trading generally on the New York Stock Exchange, the American -43- Stock Exchange or the over-the-counter market has been suspended, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities generally have been required, by any such exchange or by order of the Commission, the NASD or any other governmental authority or (C) a general banking moratorium has been declared by either Federal or New York authorities. As used in this Section 11(a), the term "Offering Memorandum" means the Offering Memorandum in the form first used to confirm sales of the Securities. (b) If this Agreement is terminated pursuant to this Section 11, such termination shall be without liability of any party to any other party except as provided in Section 6 hereof, and provided further that Sections 1, 8, 9 and 16 shall survive such termination and remain in full force and effect. (c) This Agreement may also terminate pursuant to the provisions of Section 7, with the effect stated in such Section. SECTION 12. Default By One of the Initial Purchasers. If one of the Initial Purchasers shall fail at the Closing Time to purchase the Securities which it is obligated to purchase under this Agreement (the "Defaulted Securities"), the other Initial Purchaser shall have the right, but not the obligation, within 24 hours thereafter, to make arrangements for the nondefaulting Initial Purchaser, or any other Initial Purchasers, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the other Initial Purchaser shall not have completed such arrangements within such 24-hour period, then this Agreement shall terminate without liability on the part of any nondefaulting Initial Purchaser. No action pursuant to this Section shall relieve any defaulting Initial Purchaser from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either the non-defaulting Initial Purchaser or an Issuer shall have the right to postpone the Closing Time for a period not exceeding seven days in order to effect any required changes in the Offering Memorandum or in any other documents or arrangement. -44- SECTION 13. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchasers shall be directed to the Initial Purchasers c/o Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Merrill Lynch World Headquarters, North Tower, World Financial Center, New York, New York 10281-1305, attention: Bennett Rosenthal, Managing Director; and notices to the Issuers shall be directed to Blue Bird Body Company, 3920 Arkwright Road, Macon, Georgia, 31210, attention: Paul Glaske, with a copy to Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019, attention: David A. Katz. SECTION 14. Information Supplied by the Initial Purchasers. The statements set forth in the last paragraph on the front cover page and under the heading "Plan of Distribution" in the Preliminary Offering Memorandum or the Offering Memorandum (to the extent such statements relate to the Initial Purchasers) constitute the only information furnished by the Initial Purchasers to the Company for the purposes of Sections 1 and 8 hereof. SECTION 15. Parties. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers and the Issuers and their respective successors and legal representatives. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers, their respective affiliates and the Issuers and their respective successors and legal representatives and the controlling persons and officers, directors, employees and agents referred to in Sections 8 and 9 and their heirs and legal representatives, any legal or equitable right, remedy or claim under, by virtue of or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchasers their respective affiliates and the Issuers and their respective successors and legal representatives, and said controlling persons and officers, directors, employees and agents and their heirs and legal representatives, and said controlling persons and officers, directors, employees and agents and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase. -45- SECTION 16. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified times of day refer to New York City time. SECTION 17. Counterparts. This Agreement may be executed in one or more counterparts and, when each party has executed a counterpart, all such counterparts taken together shall constitute one and the same agreement. If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement by and among the Initial Purchasers, the Company and the Guarantor in accordance with its terms. Very truly yours, BLUE BIRD BODY COMPANY By: /s/ Paul E. Glaske -------------------------------- Name: Paul E. Glaske Title: President BLUE BIRD CORPORATION By: /s/ Paul E. Glaske -------------------------------- Name: Paul E. Glaske Title: President Confirmed and accepted as of the date first above written: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: /s/ Bennett Rosenthal ----------------------------------- Name: Bennett Rosenthal Title: Director BT SECURITIES CORPORATION By: /s/ Patrice M. Daniels ----------------------------------- Name: Patrice M. Daniels Title: Managing Director EX-10.1 4 EXHIBIT 10.1 ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of November 19, 1996 by and among BLUE BIRD BODY COMPANY and BLUE BIRD CORPORATION and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and BT SECURITIES CORPORATION ================================================================================ REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of November 19, 1996 by and among BLUE BIRD BODY COMPANY, a Georgia corporation (the "Company") BLUE BIRD CORPORATION, a Delaware corporation, (the "Guarantor" and, together with the Company, the "Issuers"), and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("Merrill Lynch") and BT SECURITIES CORPORATION ("BT" and, together with Merrill Lynch, the "Initial Purchasers"). This Agreement is made pursuant to the Purchase Agreement dated November 13, 1996 by and among the Company, the Guarantor and the Initial Purchasers (the "Purchase Agreement"), which provides for, among other things, the sale by the Company to the Initial Purchasers of an aggregate of $100,000,000 principal amount of the Company's 10 3/4% Senior Subordinated Notes due 2006 (the "Notes") and the Guarantee thereof by the Guarantor (the "Guarantee" and, together with the Notes, the "Securities"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Additional Interest" shall have the meaning set forth in Section 2(e) hereof. "Advice" shall have the meaning set forth in the last paragraph of Section 3 hereof. "Applicable Period" shall have the meaning set forth in Section 3(t) hereof. "Business Day" shall mean a day that is not a Saturday, a Sunday, or a day on which banking institutions in New York, New York or Macon, Georgia are required to be closed. -2- "Closing Time" shall mean the Closing Time as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble to this Agreement and also includes the Company's successors and permitted assigns. "Depositary" shall mean The Depository Trust Company, or any other depositary appointed by the Issuers; provided, however, that such depositary must have an address in the Borough of Manhattan, in The City of New York. "Effectiveness Period" shall have the meaning set forth in Section 2(b) hereof. "Event Date" shall have the meaning set forth in Section 2(e) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exchange Offer" shall mean the exchange offer by the Company of Exchange Securities for Securities pursuant to Section 2(a) hereof. "Exchange Offer Registration" shall mean a registration under the Securities Act effected pursuant to Section 2(a) hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-1 or S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchange Period" shall have the meaning set forth in Section 2(a) hereof. "Exchange Securities" shall mean the 10 3/4% Senior Subordinated Notes due 2006, issued by the Company under the Indenture containing terms identical to the Securities (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Securities or, if no such interest has been paid, from November 15, 1996 and (ii) the transfer restrictions thereon shall be -3- eliminated) to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer. "Guarantee" shall have the meaning set forth in the preamble to this Agreement. "Guarantor" shall have the meaning set forth in the preamble of this Agreement. "Holder" shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture. "Indenture" shall mean the Indenture relating to the Securities dated as of November 15, 1996 between the Issuers, and Chase Manhattan Bank, as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Purchasers" shall have the meaning set forth in the preamble to this Agreement. "Inspectors" shall have the meaning set forth in Section 3(n) hereof. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities. "Market-Making Prospectus" shall mean the market-making prospectus required to be delivered in connection with offers and sales in the Exchange Notes if and when Merrill Lynch conducts any market making activities in respect of the Exchange Notes. "Notes" shall have the meaning set forth in the preamble of this Agreement. "Participating Broker-Dealer" shall have the meaning set forth in Section 3(t) hereof. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. -4- "Private Exchange" shall have the meaning set forth in Section 2(a) hereof. "Private Exchange Securities" shall have the meaning set forth in Section 2(a) hereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble to this Agreement. "Records" shall have the meaning set forth in Section 3(n) hereof. "Registrable Securities" shall mean the Securities and, if issued, the Private Exchange Securities; provided, however, that Securities or Private Exchange Securities, as the case may be, shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Securities or Private Exchange Securities for the resale thereof, as the case may be, shall have been declared effective under the Securities Act and such Securities or Private Exchange Securities, as the case may be, shall have been disposed of pursuant to such Registration Statement, (ii) such Securities or Private Exchange Securities, as the case may be, shall have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Securities Act, (iii) such Securities or Private Exchange Securities, as the case may be, shall have ceased to be outstanding or (iv) with respect to the Securities, such Securities have been exchanged for Exchange Securities upon consummation of the Exchange Offer and are thereafter freely tradeable by the holder thereof that is not an affiliate of the Issuers. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the -5- Issuers with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained by any Initial Purchaser holding Registrable Securities in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters or any Holder that was an Initial Purchaser in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities) and compliance with the rules of the NASD, (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, and in preparing or assisting in preparing, printing and distributing any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) the fees and disbursements of counsel for the Issuers and of the independent certified public accountants of the Issuers, including the expenses of any "cold comfort" letters required by or incident to such performance and compliance, (vi) the fees and expenses of the Trustee, and any exchange agent or custodian, (vii) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, and (viii) any fees and disbursements of any underwriter customarily required to be paid by issuers or sellers of securities and the reasonable fees and expenses of any special experts retained by the Issuers in connection with any Registration Statement, but excluding fees of counsel to the underwriters or Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder. "Registration Statement" shall mean any registration statement of the Issuers which covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the -6- Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Securities" shall have the meaning set forth in the preamble to this Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Issuers pursuant to the provisions of Section 2(b) hereof which covers all of the Registrable Securities or all of the Private Exchange Securities, as the case may be, on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "TIA" shall have the meaning set forth in Section 3(l) hereof. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. 2. Registration Under the Securities Act. (a) Exchange Offer. To the extent not prohibited by any applicable law or applicable interpretation of the staff of the SEC, the Issuers shall, for the benefit of the Holders, at the Issuers' cost, use their best efforts to (i) cause to be filed with the SEC within 60 days after the Closing Time an Exchange Offer Registration Statement on an appropriate form under the Securities Act covering the offer by the Issuers to the Holders to exchange all of the Registrable Securities (other than Private Exchange Securities) for a like principal amount of Exchange Securities, (ii) have such Exchange Offer Registration Statement declared effective under the Securities Act by the SEC not later than the date which is 120 days after -7- the Closing Time, (iii) have such Registration Statement remain effective until the closing of the Exchange Offer and (iv) cause the Exchange Offer to be consummated not later than 150 days after the Closing Time. The Exchange Securities will be issued under the Indenture. Upon the effectiveness of the Exchange Offer Registration Statement, the Issuers shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer is to enable each Holder eligible and electing to exchange Registrable Securities for Exchange Securities (assuming that such Holder is not an affiliate of the Issuers within the meaning of Rule 405 under the Securities Act and is not a broker-dealer tendering Registrable Securities acquired directly from the Issuers for its own account, acquires the Exchange Securities in the ordinary course of such Holder's business and has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing (within the meaning of the Securities Act) the Exchange Securities) and to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and under state securities or blue sky laws. In connection with the Exchange Offer, the Issuers shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Exchange Offer open for acceptance for a period of not less than 30 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the "Exchange Period"); (iii) utilize the services of the Depositary for the Exchange Offer; (iv) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day of the Exchange Period, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for exchange, and a statement that -8- such Holder is withdrawing his election to have such Securities exchanged; (v) notify each Holder that any Security not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and (vi) otherwise comply in all respects with all applicable laws relating to the Exchange Offer. If, prior to consummation of the Exchange Offer the Initial Purchasers hold any Securities acquired by them and having the status of an unsold allotment in the initial distribution, the Issuers upon the request of any Initial Purchaser shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the "Private Exchange") for the Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company, guaranteed by the Guarantor on a senior subordinated basis, that are identical (except that such securities shall bear appropriate transfer restrictions) to the Exchange Securities (the "Private Exchange Securities") and which are issued pursuant to the Indenture (which will provide that the Exchange Securities will not be subject to the transfer restrictions set forth in the Indenture and that the Exchange Securities, the Private Exchange Securities and the Securities will vote and consent together on all matters as one class and that neither the Exchange Securities, the Private Exchange Securities nor the Securities will have the right to vote or consent as a separate class on any matter). The Private Exchange Securities shall be of the same series as and shall bear the same CUSIP number as the Exchange Securities. As soon as practicable after the close of the Exchange Offer and/or the Private Exchange, as the case may be, the Issuers shall: (i) accept for exchange all Securities or portions thereof tendered and not validly withdrawn pursuant to the Exchange Offer; (ii) accept for exchange all Securities duly tendered pursuant to the Private Exchange; and -9- (iii) deliver, or cause to be delivered, to the Trustee for cancellation all Securities or portions thereof so accepted for exchange by the Issuers, and issue, and cause the Trustee under the Indenture to promptly authenticate and deliver to each Holder, a new Exchange Security or Private Exchange Security, as the case may be, equal in principal amount to the principal amount of the Securities surrendered by such Holder. To the extent not prohibited by any law or applicable interpretation of the staff of the SEC, the Issuers shall use their best efforts to complete the Exchange Offer as provided above, and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the staff of the SEC. Each Holder of Registrable Securities who wishes to exchange such Registrable Securities for Exchange Securities in the Exchange Offer will be required to make certain customary representations in connection therewith, including representations that such Holder is not an affiliate of the Issuers within the meaning of Rule 405 under the Securities Act, that any Exchange Securities to be received by it will be acquired in the ordinary course of business and that at the time of the commencement of the Exchange Offer it has no arrangement with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities. The Issuers shall inform the Initial Purchasers, after consultation with the Trustee and the Initial Purchasers, of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer. Upon consummation of the Exchange Offer in accordance with this Section 2(a), the provisions of this Agreement shall continue to apply, mutatis mutandis, solely with respect to Registrable Securities that are Private Exchange Securities and Exchange Securities held by Participating Broker-Dealers, and the Issuers shall have no further obligation to register Registrable Securities (other than Private Exchange Securities) pursuant to Section 2(b) hereof. (b) Shelf Registration. In the event that (i) the Issuers or the Majority Holders reasonably determine, after conferring with counsel, that the Exchange Offer Registration -10- provided in Section 2(a) hereof is not available or may not be consummated as soon as practicable after the last day of the Exchange Period because it would violate applicable securities laws or because the applicable interpretations of the staff of the SEC would not permit the Issuers to effect the Exchange Offer, or (ii) the Exchange Offer is not for any other reason consummated within 150 days of the Closing Time, or (iii) the Issuers or the Majority Holders reasonably determine, after conferring with counsel, that the Exchange Securities would not, upon receipt, be freely tradeable by such Holders which are not affiliates of the Issuers without restriction under the Securities Act and without restrictions under applicable blue sky or state securities laws, or a Holder is not permitted by applicable law to participate in the Exchange Offer or (iv) upon the request of any Initial Purchaser with respect to any Registrable Securities which it acquired directly from the Company and, with respect to other Registrable Securities held by it, if such Initial Purchaser is not permitted, in the opinion of counsel to such Initial Purchaser, pursuant to applicable law or applicable interpretations of the Staff of the SEC, to participate in the Exchange Offer and thereby receive securities that are freely tradeable without restriction under the Securities Act and applicable blue sky or state securities laws, the Issuers shall, at their cost, use their best efforts to cause to be filed as promptly as practicable after such determination or date, as the case may be, and, in any event, within 30 days thereafter, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities, and shall use their best efforts to have such Shelf Registration Statement declared effective by the SEC as soon as practicable. No Holder of Registrable Securities may include any of its Registrable Securities in any Shelf Registration pursuant to this Agreement unless and until such Holder furnishes to the Issuers in writing, within 15 days after receipt of a request therefor, such information as the Issuers may, after conferring with counsel with regard to information relating to Holders that would be required by the SEC to be included in such Shelf Registration Statement or Prospectus included therein, reasonably request for inclusion in any Shelf Registration Statement or Prospectus included therein. Each Holder as to which any Shelf Registration is being effected agrees to furnish to the Issuers all information with respect to such Holder necessary to make the information previously furnished to the Issuers by such Holder not materially misleading. The Issuers agree to use their best efforts to keep the Shelf Registration Statement continuously effective for a -11- period of three years from the date of issuance of the Securities (subject to extension pursuant to the last paragraph of Section 3 hereof) (the "Effectiveness Period"); provided; however, that if such Shelf Registration Statement has been filed solely at the request of any Initial Purchaser pursuant to clause (iv) above, the Issuers shall only be required to use their best efforts to keep such Shelf Registration Statement continuously effective for a period of one year from the date of issuance of the Securities (subject to extension pursuant to the last paragraph of Section 3 hereof) or for such shorter period which will terminate when all of the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding. The Issuers shall not permit any securities other than Registrable Securities to be included in the Shelf Registration. The Issuers further agree, if necessary, to supplement or amend the Shelf Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Issuers for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder for shelf registrations, and the Issuers agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) Expenses. The Issuers shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) or 2(b) hereof and any one counsel designated in writing by the Majority Holders to act as counsel for the Holders of the Registrable Securities in connection with a Shelf Registration Statement. Except as provided herein, each Holder shall pay all expenses of its counsel, underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement. (d) Effective Registration Statement. An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have been effective during the period of such interference, until -12- the offering of Registrable Securities may legally resume. The Issuers will be deemed not to have used their best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if they voluntarily take any action that would result in any such Registration Statement not being declared effective or in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period unless such action is required by applicable law. (e) Additional Interest. In the event that (i) the Exchange Offer Registration Statement is not filed with the SEC on or prior to the 60th calendar day following the Closing Time, (ii) the Exchange Offer Registration Statement is not declared effective on or prior to the 120th calendar day following the Closing Time, (iii) the Exchange Offer is not consummated on or prior to the 150th calendar day following the Closing Time or (iv) if the law or applicable interpretations of the SEC thereof prohibit a Holder from participating in the Exchange Offer or if such Holder does not receive freely tradeable Exchange Securities pursuant to the Exchange Offer or if for any reason the Exchange Offer is not consummated within 150 days of the Closing Time, and if by 180 days after the Closing Time a Shelf Registration Statement is not declared effective, the interest rate borne by the Securities shall be increased (the "Additional Interest") by one-quarter of one percent (0.25%) per annum from and including the 61st day following the Closing Time in the case of (i) above, from and including the 121st day following the Closing Time in the case of clause (ii) above, from and including the 151st day following the Closing Time in the case of (iii) above or, solely with respect to Securities which could not be exchanged as set forth above, Exchange Securities that are not freely tradeable and Private Exchange Securities, from and including the 181st day after the Closing Time in the case of clause (iv) above. Upon (w) the filing of the Exchange Offer Registration Statement in the case of clause (i) above, (x) the effectiveness of the Exchange Offer Registration Statement in the case of clause (ii) above, (y) the date of the consummation of the Exchange Offer in the case of clause (iii) above or (z) the effectiveness of a Shelf Registration Statement in the case of clause (iv) above, and provided, however, that none of the conditions set forth in clauses (i), (ii), (iii) and (iv) above continues to exist, the interest rate borne by the Securities from the date of such filing, effectiveness or consummation, as the case may be, will be reduced to the original interest rate. In addition, such -13- interest rate shall be increased by an additional one-quarter of one percent (0.25%) per annum for each 90-day period that any Additional Interest continues to accrue pursuant to this Section 2(e); provided, however, that the aggregate increase in such interest rate pursuant to this Section 2(e) will in no event exceed one percent (1.00%) per annum. In the event that the Shelf Registration Statement has been declared effective and subsequently ceases to be effective prior to the end of the Effectiveness Period or if such a Shelf Registration Statement was filed solely at the request of either Initial Purchaser pursuant to Section 2(b)(iv) hereof, one year after the date of issuance of the Securities (in each instance, to extension pursuant to the last paragraph of Section 3 hereof), for a period in excess of 30 days, whether or not consecutive, in any given year, then, the interest rate borne by the Securities, or the Private Exchange Securities, as the case may be, shall be increased by an additional one-quarter of one percent (0.25%) per annum on the 16th day in the applicable year such Shelf Registration Statement ceases to be effective. Such interest rate shall be increased by an additional one-quarter of one percent (0.25%) per annum for each additional 90 days that such Shelf Registration Statement is not effective, subject to the same aggregate maximum increase in the interest rate per annum of one percent (1.00%) per annum referred to above. Upon the effectiveness of a Shelf Registration Statement, the interest rate borne by the Securities, or the Private Exchange Securities, as the case may be, shall be reduced to their original interest rate unless and until increased as described in this paragraph. The Issuers shall notify the Trustee within three Business Days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). Additional Interest shall be paid by depositing with the Trustee, in trust, for the benefit of the Holders of Securities or of Private Exchange Securities, as the case may be, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Additional Interest then due. The Additional Interest due shall be payable on each interest payment date to the record Holder of Securities entitled to receive the interest payment to be paid on such date as set forth in the Indenture. Each obligation to pay Additional Interest shall be deemed to accrue from and including the day following the applicable Event Date. -14- (f) Specific Enforcement. Without limiting the remedies available to the Initial Purchasers and the Holders, the Issuers acknowledge that any failure by the Issuers to comply with their obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuers' obligations under Section 2(a) and Section 2(b) hereof. 3. Registration Procedures. In connection with the obligations of the Issuers with respect to the Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Issuers shall: (a) prepare and file with the SEC a Registration Statement or Registration Statements as prescribed by Sections 2(a) and 2(b) hereof within the relevant time period specified in Section 2 hereof on the appropriate form under the Securities Act, which form (i) shall be selected by the Issuers, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof and (iii) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; and use their best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; provided, however, that if (1) such filing is pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Securities and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (at least 10 Business Days prior to such filing). The Issuers shall not file any Registration Statement or -15- Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportunity to review prior to the filing of such document if the Majority Holders or such Participating Broker-Dealer, as the case may be, their counsel or the managing underwriters, if any, shall reasonably object; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the Effectiveness Period or the Applicable Period, as the case may be; and cause each Prospectus to be supplemented by any required prospectus supplement and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the Securities Act, and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder applicable to it with respect to the disposition of all securities covered by each Registration Statement during the Effectiveness Period or the Applicable Period, as the case may be, in accordance with the intended method or methods of distribution by the selling Holders thereof described in this Agreement (including sales by any Participating Broker-Dealer); (c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Securities, at least three Business Days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holder that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders; and (ii) furnish to each Holder of Registrable Securities and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; and (iii) subject to the last paragraph of Section 3 hereof, hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; -16- (d) in the case of a Shelf Registration, use their best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions by the time the applicable Registration Statement is declared effective by the SEC as any Holder of Registrable Securities covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request in advance of such date of effectiveness, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that neither of the Issuers shall be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process or (iii) subject itself to taxation in any such jurisdiction if it is not so subject; (e) in the case of (1) a Shelf Registration or (2) Participating Broker-Dealers who have notified the Issuers that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in Section 3(t) hereof, notify each Holder of Registrable Securities, or such Participating Broker-Dealers, as the case may be, their counsel and the managing underwriters, if any, promptly and confirm such notice in writing (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement or Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Issuers contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects, (v) if the Issuers receive any notification with -17- respect to the suspension of the qualification of the Registrable Securities or the Exchange Securities to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction or the initiation of any proceeding for such purpose, (vi) of the happening of any event or the failure of any event to occur or the discovery of any facts or otherwise, during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which causes such Registration Statement or Prospectus to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (vi) the Issuers' reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; (f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as soon as practicable; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement relating to such Shelf Registration and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and cause such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the underwriters may reasonably request at least two Business Days prior to the closing of any sale of Registrable Securities; (i) in the case of a Shelf Registration or an Exchange Offer Registration, upon the occurrence of any circumstance contemplated by Section 3(e)(ii), 3(e)(iii), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, use their best efforts to prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter -18- delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and to notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and each Holder hereby agrees to suspend use of the Prospectus until the Issuers have amended or supplemented the Prospectus to correct such misstatement or omission; (j) in the case of a Shelf Registration, upon the filing of any document which is to be incorporated by reference into a Registration Statement or a Prospectus after the initial filing of a Registration Statement, provide a reasonable number of copies of such document to the Holders; (k) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with certificates for the Exchange Securities or the Registrable Securities, as the case may be, in a form eligible for deposit with the Depositary; (l) cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, (the "TIA") in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use their best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; (m) in the case of a Shelf Registration, enter into such agreements (including underwriting agreements) as are customary in underwritten offerings and take all such other appropriate actions as are reasonably requested in order to expedite or facilitate the registration or the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (i) make such representations -19- and warranties to Holders of such Registrable Securities and the underwriters (if any), with respect to the business of the Issuers and their subsidiaries as then conducted or proposed to be conducted and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if and when requested; (ii) obtain opinions of counsel to the Issuers and updates thereof in form and substance reasonably satisfactory to the managing underwriters (if any) and the Holders of a majority in principal amount of the Registrable Securities being sold, addressed to each selling Holder and the underwriters (if any) covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters (if any) from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Issuers or of any business acquired by the Issuers for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to the selling Holders of Registrable Securities and to each of the underwriters (if any), such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings and such other matters as reasonably requested by such selling Holders and underwriters; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 4 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the managing underwriters or agents) with respect to all parties to be indemnified pursuant to said Section (including, without limitation, such underwriters and selling Holders). The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder; (n) if (1) a Shelf Registration is filed pursuant to Section 2(b) or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section -20- 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the applicable period, make available for inspection by any selling Holder of such Registrable Securities being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Issuers and their subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Issuers and their subsidiaries to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement. Records which the Issuers determine, in good faith, to be confidential and any Records which they notify the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records has been made generally available to the public. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Issuers unless and until such is made generally available to the public. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Issuers and allow the Issuers at their expense to undertake appropriate action to prevent disclosure of the Records deemed confidential; (o) comply with all applicable rules and regulations of the SEC and make generally available to their security-holders earnings statements satisfying the provisions of -21- Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Issuers after the effective date of a Registration Statement, which statements shall cover said 12-month periods; (p) upon consummation of an Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Issuers addressed to the Trustee for the benefit of all Holders of Registrable Securities participating in the Exchange Offer or the Private Exchange, as the case may be, and which includes an opinion that (i) the Issuers have duly authorized, executed and delivered the Exchange Securities and Private Exchange Securities and the Indenture, and (ii) each of the Exchange Securities or the Private Exchange Securities, as the case may be, and the Indenture constitute a legal, valid and binding obligation of the Issuers, enforceable against the Issuers in accordance with its respective terms (in each case, with customary exceptions); (q) if an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Securities by Holders to the Issuers (or to such other Person as directed by the Issuers) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Issuers shall mark, or cause to be marked, on such Registrable Securities delivered by such Holders that such Registrable Securities are being cancelled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall such Registrable Securities be marked as paid or otherwise satisfied; (r) cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; -22- (s) use their best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby; (t) (A) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," which section shall be reasonably acceptable to the Initial Purchasers or another representative of the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer (a "Participating Broker-Dealer") that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of the Initial Purchasers or such other representative, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has delivered to the Issuers the notice referred to in Section 3(e), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request (iii) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, (iv) use their best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein in order to permit such Prospectus to be -23- lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such Persons must comply with such requirements in order to resell the Exchange Securities; provided, however, that such period shall not be required to exceed 180 days (or such longer period if extended pursuant to the last sentence of Section 3 hereof) (the "Applicable Period"), and (iv) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision: "If the exchange offeree is a broker-dealer holding Registrable Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Securities received in respect of such Registrable Securities pursuant to the Exchange Offer"; and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Registrable Securities, such broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act; and (B) in the case of any Exchange Offer Registration Statement, the Issuers agree to deliver to the Initial Purchasers or to Participating Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of counsel substantially in the form attached hereto as Exhibit A, and (ii) an officers' certificate containing certifications substantially similar to those set forth in Section 7(c) of the Purchase Agreement and such additional certifications as are customarily delivered in a public offering of debt securities. The Issuers may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Issuers such information regarding such seller and the proposed distribution of such Registrable Securities, as the Issuers may from time to time reasonably request in writing. The Issuers may exclude from such registration the Registrable Securities of any seller who unreasonably fails to -24- furnish such information within a reasonable time after receiving such request and shall be under no obligation to compensate any such seller for any lost income, interest or other opportunity forgone, or any liability incurred, as a result of the Issuers' decision to exclude such seller. In the case of (1) a Shelf Registration Statement or (2) Participating Broker-Dealers who have notified the Issuers that they will be utilizing the Prospectus contained in the Exchange Offer Registration Statement as provided in Section 3(t) hereof, that are seeking to sell Exchange Securities and are required to deliver Prospectuses, each Holder agrees that, upon receipt of any notice from the Issuers of the happening of any event of the kind described in Section 3(e)(ii), 3(e)(iii), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof or until it is advised in writing (the "Advice") by the Issuers that the use of the applicable Prospectus may be resumed, and, if so directed by the Issuers, such Holder will deliver to the Issuers (at the Issuers' expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities or Exchange Securities, as the case may be, current at the time of receipt of such notice. If the Issuers shall give any such notice to suspend the disposition of Registrable Securities or Exchange Securities, as the case may be, pursuant to a Registration Statement, the Issuers shall use their best efforts to file and have declared effective (if an amendment) as soon as practicable an amendment or supplement to the Registration Statement and, in the case of an amendment, have such amendment declared effective as soon as practicable and shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days in the period from and including the date of the giving of such notice to and including the date when the Issuers shall have made available to the Holders (x) copies of the supplemented or amended Prospectus necessary to resume such dispositions or (y) the Advice. 4. Indemnification and Contribution. (a) The Issuers shall indemnify and hold harmless each Initial Purchaser, each Holder, each Participating Broker-Dealer, each underwriter who participates in an offering of Registrable Securities, their respective affiliates, each Person, if any, -25- who controls any of such parties within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each of their respective directors, officers, employees and agents, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto), covering Registrable Securities or Exchange Securities, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any court or governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the prior written consent of the Issuers; and (iii) against any and all expenses whatsoever, as incurred (including reasonable fees and disbursements of counsel chosen by the Initial Purchasers, such Holder, such Participating Broker-Dealer or any underwriter (except to the extent otherwise expressly provided in Section 4(c) hereof)), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any court or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) of this Section 4(a); -26- provided, however, that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission (i) made in reliance upon and in conformity with written information furnished in writing to the Issuers by such Initial Purchaser, such Holder, such Participating Broker-Dealer or any underwriter with respect to such Initial Purchaser, Holder, Participating Broker-Dealer or underwriter, as the case may be, expressly for use in the Registration Statement (or any amendment or supplement thereto) or any Prospectus (or any amendment or supplement thereto) or (ii) contained in any preliminary prospectus if such Initial Purchaser, such Holder, such Participating Broker-Dealer or such underwriter failed to send or deliver a copy of the Prospectus (in the form it was first provided to such parties for confirmation of sales) to the Person asserting such losses, claims, damages or liabilities on or prior to the delivery of written confirmation of any sale of securities covered thereby to such Person in any case where such delivery is required by the Securities Act and a court of competent jurisdiction in a judgment not subject to appeal or final review shall have determined that such Prospectus would have corrected such untrue statement or omission. Any amounts advanced by the Issuers to an indemnified party pursuant to this Section 4 as a result of such losses shall be returned to the Issuers if it shall be finally determined by such a court in a judgment not subject to appeal or final review that such indemnified party was not entitled to indemnification by the Issuers. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Issuers, each Initial Purchaser, each underwriter who participates in an offering of registrable Securities and the other selling Holders and each of their respective directors, officers (including each officer of each of the Issuers who signed the Registration Statement), employees and agents and each Person, if any, who controls either of the Issuers, any Initial Purchaser, ay underwriter or any other selling Holder within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment thereto) in reliance upon and in conformity with written information furnished to the Issuers by such selling Holder with respect to such Holder expressly for use in the -27- Registration Statement (or any supplement thereto), or any such Prospectus (or any amendment thereto); provided, however, that, in the case of the Shelf Registration Statement, no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to the Shelf Registration Statement. (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 4(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 4(b) above, counsel to the indemnified parties shall be selected by the Issuers. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. -28- (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of counsel pursuant to Section 4(a)(iii) above, such indemnifying party agrees that it shall liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (e) In order to provide for just and equitable contribution in circumstances under which any of the indemnity provisions set forth in this Section 4 is for any reason held to be unavailable to the indemnified parties although applicable in accordance with its terms, the Issuers, the Initial Purchasers and the Holders shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Issuers, the Initial Purchasers and the Holders, as incurred; provided, however, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person that was not guilty of such fraudulent misrepresentation. As between the Issuers and the Initial Purchasers and the Holders, such parties shall contribute to such aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement in such proportion as shall be appropriate to reflect the relative fault of the Issuers on the one hand and of the Holder of Registrable Securities, the Participating Broker-Dealer or Initial Purchaser, as the case may be, on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative fault of the Issuers on the one hand and the Holder of Registrable Securities, the Participating Broker-Dealer or the Initial Purchasers, as the case may be, on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers, or by the Holder of Registrable Securities, the Participating -29- Broker-Dealer or the Initial Purchasers, as the case may be, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuers and the Holders of the Registrable Securities and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4. For purposes of this Section 4, each affiliate of any Initial Purchaser or Holder, and each director, officer, employee, agent and Person, if any, who controls a Holder of Registrable Securities, a Initial Purchaser or a Participating Broker-Dealer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such other Person, and each director of the Issuers, each officer of the Issuers who signed the Registration Statement, and each Person, if any, who controls either of the Issuers within the meaning of Section 15 of the Securities act or Section 20 of the Exchange Act shall have the same rights to contribution as the Issuers. 5. Participation in Underwritten Registrations. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. The Issuers shall be under no obligation to compensate any Holder for lost income, interest or other opportunity foregone, or other liability incurred, as a result of the Issuers' decision to exclude such Holder from any underwritten registration if such Holder has not complied with the provisions of this Section 5 in all material respects following 10 business days' written notice of non-compliance and the Issuers' decision to exclude such Holder. 6. Selection of Underwriters. The Holders of Registrable Securities covered by the Shelf Registration Statement who desire to do so may sell the securities covered by such Shelf Registration in an underwritten offering. In any such -30- underwritten offering, the underwriter or underwriters and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Registrable Securities included in such offering; provided, however, that such underwriters and managers must be reasonably satisfactory to the Issuers. 7. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as the Issuers are subject to the reporting requirements of Section 13 or 15 of the Exchange Act and any Registrable Securities remain outstanding, the Issuers covenant that they will file the reports required to be filed by them under the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the SEC thereunder, that if they ceases to be so required to file such reports, they will upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the Securities Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the Securities Act and they will take such further action as any Holder of Registrable Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time, (ii) Rule 144A under the Securities Act, as such rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC. Upon the reasonable request of any Holder of Registrable Securities, the Issuers will deliver to such Holder a written statement as to whether they have complied with such requirements. (b) No Inconsistent Agreements. The Issuers have not entered into nor will the Issuers on or after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuers' other issued and outstanding securities under any such agreements. -31- (c) Amendments and Waivers. The provisions of this Agreement, including provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Issuers and Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Securities; provided, however, that no amendment, modification, or supplement or waiver or consent to the departure with respect to the provisions of Section 4 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Issuers by means of a notice given in accordance with the provisions of this Section 7(d), which address initially is, with respect to the Initial Purchasers, the address set forth in the Purchase Agreement; and (ii) if to the Issuers, initially at the Issuers' address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(d). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of the Initial Purchasers, including, without limitation and without the need for an express assignment, subsequent Holders; provided, however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any -32- transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. (f) Third Party Beneficiary. Each of the Initial Purchasers shall be a third party beneficiary of the agreements made hereunder between the Issuers, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified times of day refer to New York City time. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Securities Held by the Issuers or any of their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Issuers or any of their affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether -33- such consent or approval was given by the Holders of such required percentage. -34- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. BLUE BIRD BODY COMPANY By: /s/ Paul E. Glaske --------------------------------- Name: Paul E. Glaske Title: President BLUE BIRD CORPORATION By: /s/ Paul E. Glaske --------------------------------- Name: Paul E. Glaske Title: President Confirmed and accepted as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Bennett Rosenthal ---------------------------------- Name: Bennett Rosenthal Title: Director BT SECURITIES CORPORATION By: /s/ Patrice M. Daniels ---------------------------------- Name: Patrice M. Daniels Title: Managing Director Exhibit A Form of Opinion of Counsel 1. Each of the Exchange Offer Registration Statement and the Prospectus (other than the financial statements, notes or schedules thereto and other financial and statistical information and supplemental schedules included or referred to therein or omitted therefrom and the Form T-1, as to which such counsel need express no opinion), complies as to form in all material respects with the applicable requirements of the Securities Act and the applicable rules and regulations promulgated under the Securities Act. 2. In the course of such counsel's review and discussion of the contents of the Exchange Offer Registration Statement and the Prospectus with certain officers and other representatives of the Issuers and representatives of the independent certified public accountants of the Issuers, but without independent check or verification or responsibility for the accuracy, completeness or fairness of the statements contained therein, on the basis of the foregoing (relying as to materiality to a large extent upon representations and opinions of officers and other representatives of the Issuers), no facts have come to such counsel's attention which cause such counsel to believe that the Exchange Offer Registration Statement (other than the financial statements, notes and schedules thereto and other financial and statistical information contained or referred to therein and the Form T-1, as to which such counsel need express no belief), at the time the Exchange Offer Registration Statement became effective and at the time of the consummation of the Exchange Offer, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading, or that the Prospectus (other than the financial statements, notes and schedules thereto and other financial and statistical information contained or referred to therein, as to which such counsel need express no belief) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. EX-10.2 5 EX 10.2 FIRST AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF NOVEMBER 15, 1996 by and among BLUE BIRD CORPORATION, as a Guarantor, BLUE BIRD BODY COMPANY, as Borrower, THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF, BANKERS TRUST COMPANY, as Administrative Agent and MERRILL LYNCH & CO., as Syndication Agent FIRST AMENDED AND RESTATED CREDIT AGREEMENT Dated as of November 15, 1996 TABLE OF CONTENTS Page ---- RECITALS............................................................ 1 SECTION 1. DEFINITIONS.......................................... 2 1.1 Certain Defined Terms................................ 2 1.2 Accounting Terms; Utilization of GAAP................ 35 1.3 References; Interpretation........................... 35 SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.............................. 36 2.1 Term Loans........................................... 36 2.2 Working Capital Loans and Swing Line Loans........... 39 2.3 Interest on the Loans................................ 45 2.4 Fees................................................. 50 2.5 Prepayments and Payments; Reductions in Commitments.. 51 2.6 Use of Proceeds...................................... 58 2.7 Special Provisions Governing Eurodollar Rate Loans... 58 2.8 Capital Adequacy Adjustment.......................... 63 2.9 Letters of Credit.................................... 64 2.10 Taxes................................................ 72 SECTION 3. CONDITIONS TO LOANS AND LETTERS OF CREDIT................................ 73 3.1 Conditions to Loans on the Restatement Effective Date ................................................ 73 3.2 Conditions to Initial Working Capital Loans and Swing Line Loans..................................... 80 3.3 Conditions to All Loans.............................. 80 3.4 Conditions to Letters of Credit...................... 81 SECTION 4. REPRESENTATIONS AND WARRANTIES....................... 82 4.1 Organization, Powers, Good Standing, Business and Subsidiaries......................................... 82 4.2 Authorization of Borrowing, etc...................... 83 4.3 Financial Condition.................................. 84 i Page ---- 4.4 No Material Adverse Change; No Stock Payments........ 85 4.5 Title to Properties; Liens........................... 85 4.6 Litigation; Adverse Facts............................ 85 4.7 Payment of Taxes..................................... 86 4.8 Materially Adverse Agreements; Performance of Agreements........................................... 86 4.9 Governmental Regulation.............................. 86 4.10 Securities Activities................................ 86 4.11 Employee Benefit Plans............................... 87 4.12 Representations and Warranties Incorporated From Subordinated Debt Documents.......................... 87 4.13 Disclosure........................................... 87 4.14 Licenses, Permits and Authorizations................. 88 4.15 Intangible Property.................................. 88 4.16 Certain Fees......................................... 88 4.17 Environmental Matters................................ 89 SECTION 5. AFFIRMATIVE COVENANTS................................ 91 5.1 Financial Statements and Other Reports............... 91 5.2 Corporate Existence, etc............................. 96 5.3 Payment of Taxes and Claims; Tax Consolidation....... 96 5.4 Maintenance of Properties; Insurance................. 97 5.5 Inspection; Lender Meeting........................... 97 5.6 Equal Security for Obligations; No Further Negative Pledges..................................... 98 5.7 Compliance with Laws, etc............................ 98 5.8 Real Property Security............................... 98 5.9 Environmental Disclosure and Inspection.............. 98 5.10 Hazardous Materials; Remedial Action................. 99 5.11 Further Assurances; New Subsidiaries; Intellectual Property............................................. 100 5.12 Payment of Obligations............................... 101 5.13 Interest Rate Agreements............................. 101 5.14 Post-Closing Covenants............................... 101 SECTION 6. NEGATIVE COVENANTS................................... 101 6.1 Indebtedness......................................... 101 6.2 Liens................................................ 103 6.3 Investments.......................................... 104 6.4 Contingent Obligations............................... 105 6.5 Restricted Junior Payments........................... 106 6.6 Financial Covenants ................................. 108 6.7 Restriction on Fundamental Changes................... 112 ii Page ---- 6.8 Sales and Leasebacks................................. 114 6.9 Sale or Discount of Receivables...................... 114 6.10 Transactions with Shareholders and Affiliates........ 114 6.11 Disposal of Subsidiary Stock......................... 115 6.12 Conduct of Business; Limitations on Subsidiaries..... 115 6.13 Amendments or Waivers of Certain Documents; Changes Relating to Subordinated Debt................ 116 6.14 Designation of Senior Indebtedness................... 117 SECTION 7. GUARANTY OF HOLDING.................................. 117 7.1 Guaranty by Holding.................................. 117 7.2 Terms of Guaranty.................................... 117 SECTION 8. EVENTS OF DEFAULT.................................... 120 8.1 Failure to Make Payments When Due.................... 120 8.2 Default in Other Agreements.......................... 121 8.3 Breach of Certain Covenants.......................... 121 8.4 Breach of Warranty................................... 121 8.5 Other Defaults Under Agreement or Loan Documents..... 121 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. ................................................ 122 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc... 122 8.8 Judgments and Attachments............................ 123 8.9 Dissolution.......................................... 123 8.10 Employee Benefit Plans............................... 123 8.11 Invalidity of Guaranties............................. 124 8.12 Change in Control.................................... 124 8.13 Impairment of Collateral............................. 124 8.14 Default Under Subordinated Debt Documents............ 125 SECTION 9. ADMINISTRATIVE AGENT; SYNDICATION AGENT.............. 126 9.1 Appointment.......................................... 126 9.2 Powers; General Immunity............................. 127 9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness.................... 128 9.4 Right to Indemnity................................... 129 9.5 Registered Persons Treated as Owner.................. 129 9.6 Collateral Documents and Intercreditor Agreements; Appointment of Collateral Agent...................... 129 9.7 Successor Administrative Agents...................... 130 SECTION 10. MISCELLANEOUS........................................ 131 10.1 Representation of Lenders............................ 131 iii Page ---- 10.2 Assignments and Participations in Loans and Letters of Credit.................................... 131 10.3 Expenses............................................. 133 10.4 Indemnity............................................ 134 10.5 Set Off.............................................. 135 10.6 Ratable Sharing...................................... 135 10.7 Amendments and Waivers............................... 136 10.8 Independence of Covenants............................ 138 10.9 Notices.............................................. 138 10.10 Survival of Warranties and Certain Agreements........ 139 10.11 Failure or Indulgence Not Waiver; Remedies Cumulative .......................................... 139 10.12 Severability......................................... 139 10.13 Obligations Several; Independent Nature of Lenders' Rights............................................... 139 10.14 Headings; Table of Contents.......................... 140 10.15 Applicable Law....................................... 140 10.16 Successors and Assigns; Subsequent Holders of Notes.. 140 10.17 Consent to Jurisdiction and Service of Process....... 140 10.18 Waiver of Jury Trial................................. 141 10.19 Counterparts; Effectiveness.......................... 142 iv EXHIBITS I Form of Notice of Borrowing II Form of Notice of Issuance of Letter of Credit III Form of Notice of Conversion/Continuation IV Form of Tranche A Term Note V Form of Tranche B Term Note VI Form of Working Capital Note VII Form of Swing Line Note VIII Form of Borrowing Base Certificate IX Form of Financial Condition Certificate X Form of Borrower Security Agreement XI Form of Borrower Pledge Agreement XII Form of Holding Security Agreement XIII Form of Holding Pledge Agreement XIV Form of Environmental Indemnity XV Form of Assignment Agreement XVI Form of Opinion of Loan Parties' Counsel XVII Form of Compliance Certificate XVIII Form of Mortgage XIX Form of Acknowledgement and Confirmation v SCHEDULES BLUE BIRD CORPORATION BLUE BIRD BODY COMPANY FIRST AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDED AND RESTATED CREDIT AGREEMENT is dated as of November 15, 1996 and entered into by and among BLUE BIRD CORPORATION, a Delaware corporation ("Holding"), BLUE BIRD BODY COMPANY, a Georgia corporation ("Borrower"), the LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (together with each lender that may become a party to this Credit Agreement as herein provided, referred to herein individually as a "Lender" and collectively as "Lenders"), and BANKERS TRUST COMPANY, as administrative agent for Lenders (in such capacity, together with any successors thereto in such capacity, "Administrative Agent"), and MERRILL LYNCH & CO., as syndication agent (in such capacity, "Syndication Agent"). RECITALS WHEREAS, Borrower and Holding desire to amend and restate that certain Credit Agreement dated as of April 15, 1992 among Borrower (as successor to B B Acquisition Corporation), Holding, the lenders party thereto and Bankers Trust Company, as agent (as amended, supplemented and otherwise modified to the date hereof, the "Existing Credit Agreement") in order to, among other things (i) convert certain term loans outstanding under the Existing Credit Agreement to term loans outstanding under this Agreement (capitalized terms used in these Recitals without definition shall have the respective meanings assigned in subsection 1.1 hereof) and to increase the aggregate principal amount of term loans outstanding under this Agreement to $100,000,000 under the Tranche A Term Loan Commitment and $75,000,000 under the Tranche B Term Loan Commitment, (ii) to convert certain Existing Working Capital Loans outstanding under the Existing Credit Agreement to Working Capital Loans under this Agreement and increase the aggregate amount of the Working Capital Loan Commitments to $80,000,000, (iii) extend the scheduled maturity of the Loans and (iv) otherwise amend and modify the Existing Credit Agreement as provided herein; WHEREAS, Holding desires to affirm its guaranty of the Obligations pursuant to the Holding Guaranty; WHEREAS, Holding and Borrower desire to secure their respective Obligations by confirming the pledges and security interests granted pursuant to the Collateral Documents in substantially all of their real and personal property, including without 1 limitation, (i) the pledge by Holding of 100% of the capital stock of Borrower and (ii) the pledge by Borrower of 66% of the capital stock of Canadian Blue Bird. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Holding, Borrower, Lenders, Administrative Agent and Syndication Agent agree as follows: SECTION 1. DEFINITIONS 1.1 Certain Defined Terms The following terms used in this Agreement shall have the following meanings: "Accounts Receivable" means, as at any date of determination thereof, the unpaid portion of the obligations as stated on the respective invoice issued to a customer of Borrower with respect to Inventory sold and shipped or services performed in the ordinary course of business, net of any credits, rebates or offsets owed by Borrower to the respective customer and net of any commissions payable by Borrower to third parties; provided, however, that this definition shall not include any receivables related to the Lease Portfolio. "Acknowledgement and Confirmation" means that certain Acknowledgement and Confirmation dated as of the date hereof and executed by Borrower and Holding in substantially the form attached as Exhibit XIX hereto. "Adjusted Eurodollar Rate" means, for any Interest Rate Determination Date, the rate (rounded upward to the next highest one hundredth of one percent) obtained by dividing (i) the Eurodollar Rate for that date by (ii) a percentage equal to 100% minus the stated maximum rate of all reserves required to be maintained against "Eurocurrency liabilities" as specified in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Loans is determined or any category of extensions of credit or other assets that includes loans by a non-United States office of a Lender to United States residents). "Administrative Agent" has the meaning assigned to that term in the introductory paragraph to this Agreement. "Affected Lender" means any Lender affected by any of the events described in subsections 2.7B or 2.7C. "Affiliate", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including with correlative meanings, the terms 2 "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "Agents" means, collectively, Administrative Agent, Collateral Agent and Syndication Agent. "Aggregate Amounts Due" has the meaning assigned to that term in subsection 10.6. "Agreement" means this First Amended and Restated Credit Agreement, as it may be amended, amended and restated, supplemented or otherwise modified from time to time. "Applicable Base Rate Margin" means (i) with respect to any Working Capital Loan or Tranche A Term Loan, a per annum rate equal to 1.50% and (ii) with respect to any Tranche B Term Loan, a per annum rate equal to 2.00%; provided that the rates set forth in this definition may be reduced from time to time pursuant to subsection 2.3A. "Applicable Eurodollar Rate Margin" means (i) with respect to any Working Capital Loan or Tranche A Term Loan, a per annum rate equal to 2.50% and (ii) with respect to any Tranche B Term Loan, a per annum rate equal to 3.00%; provided that the rates set forth in this definition may be reduced from time to time pursuant to subsection 2.3A. "Asset Sale" means the sale, lease, assignment or other transfer for value by Holding or any of its Subsidiaries to any Person, whether in a single transaction or a series of related transactions, of (i) any of the stock of Borrower or any of its Subsidiaries, (ii) all or substantially all of the assets of any division or line of business of Holding or any of its Subsidiaries, or (iii) any other assets or rights, or related group of assets or rights, of Holding or any of its Subsidiaries (x) having a book value or market value in excess of $250,000 (it being understood that if the book value or sales price thereof exceeds $250,000, the entire value and not just the portion thereof in excess of $250,000 shall be subject to subsection 2.5A(ii)(a)) or (y) having an aggregate book value or market value in excess of $500,000 during any Fiscal Year (aggregating for purposes of this clause (y) only sales, leases, assignments or other transfers of assets or rights having a book or market value in excess of $25,000 and not included in clause (x)), other than the sale in the ordinary course of business of Inventory of Holding or any of its Subsidiaries; provided that the term "Asset Sale" shall not include (a) the sale of the Lease Portfolio pursuant to the Lease Portfolio Documents, (b) the sale of lease portfolio assets permitted to be held by Borrower pursuant to subsection 6.3(viii), and (c) Asset Sales with respect to equipment that Holding or the applicable Subsidiary reasonably expects to be replaced within one hundred and eighty (180) days; 3 provided, that the Net Cash Proceeds of any Asset Sale excluded pursuant to this clause (c) shall be applied in accordance with subsection 2.5A(ii)(a). "Bankers" means Bankers Trust Company, a New York banking corporation. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy" from time to time in effect, or any successor statute. "Base Rate" means at any time, the higher of (i) the Prime Rate and (ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. "Base Rate Loans" means Loans made by Lenders bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.3A. "BB Capital" means Blue Bird Capital Corporation, a Delaware corporation. "BBCC" means Blue Bird Credit Company, a division of Borrower. "Blue Bird Central America" means Blue Bird Centro Americana, SA, a corporation organized under the federal laws of Guatemala. "Blue Bird Mexico" means Blue Bird de Mexico, S.A. de C.V., a Mexican corporation. "Borrower" has the meaning assigned to that term in the introductory paragraph of this Agreement. "Borrower Pledge Agreement" means that certain Pledge Agreement dated as of April 15, 1992 by and between Borrower and Collateral Agent, a copy of which is attached as Exhibit XI hereto, as amended by that certain Fourth Amendment to Credit Agreement and First Amendment to Borrower Pledge Agreement dated as of October 20, 1995 and as such agreement may be further amended, amended and restated, supplemented or otherwise modified from time to time. "Borrower Security Agreement" means the Security Agreement dated as of April 15, 1992 by and between Borrower and Collateral Agent, a copy of which is attached as Exhibit X hereto, as amended by that certain First Amendment to Borrower Security Agreement dated as of November 15, 1996 and as such agreement may be further amended, amended and restated, supplemented or otherwise modified from time to time. "Borrower Security Agreements" means any or all of the Borrower Security Agreement, the Borrower Pledge Agreement and the Mortgages. 4 "Borrowing Base" means, as at any date of determination, the sum of (i) 60% of Eligible Inventory and (ii) 85% of Eligible Accounts Receivable. "Borrowing Base Certificate" means a certificate substantially in the form of Exhibit VIII annexed hereto delivered to Administrative Agent and Lenders by Borrower pursuant to subsection 5.1(iv). "Business Day" means (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which either is a legal holiday under the laws of the State of New York, the State of Georgia or the State of California or is a day on which banking institutions located in any such state are authorized or required by law or other governmental action to close, and (ii) with respect to all notices, determinations, fundings and payments in connection with the Eurodollar Rate, any day that is a Business Day described in clause (i) and that is also a day for trading by and between banks in Dollar deposits in the applicable interbank Eurodollar market. "CAGUASA" means Carrocerias Assemblajadores Guatemalteca, SA, a corporation organized under the federal laws of Guatemala. "Canadian Blue Bird" means Canadian Blue Bird Coach, Ltd., a corporation organized under the laws of Ontario, Canada. "Capital Lease", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Capital Stock" means, with respect to any Person, any capital stock, partnership, limited liability company or joint venture interests of such Person and shares, interests, participations or other ownership interests (however designated) of any Person and any rights, warrants or options to purchase any of the foregoing. "Cash Equivalents" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor's or Moody's Investors Service, Inc.; and (iii) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia having combined capital and surplus of not less than $500,000,000 or by any Lender. 5 "Cash Proceeds" means, with respect to any Asset Sale or any issuance or sale of equity or debt securities, cash payments (including cash received by way of deferred payment pursuant to, or monetization of, a note receivable or otherwise, but only as and when so received) received from such Asset Sale or such issuance or sale of equity or debt securities. "Certificate of Exemption" has the meaning assigned to that term in subsection 2.10B. "Class" means, as applied to Lenders, each of the following three classes of Lenders: (i) Lenders having Tranche A Term Loan Exposure, (ii) Lenders having Tranche B Term Loan Exposure and (iii) Lenders having Working Capital Loan Commitments. "Closing Date" means the Closing Date under and as defined in the Existing Credit Agreement. "Collateral" means all the real, personal and mixed property made subject to a Lien pursuant to the Collateral Documents. "Collateral Agent" means Bankers, in its capacity as collateral agent under subsection 9.6, the Intercreditor Agreements and the Collateral Documents or any successor collateral agent. "Collateral Documents" means the Borrower Security Agreements, the Holding Pledge Agreement, the Holding Security Agreement, the Acknowledgement and Confirmation and all other instruments or documents now or hereafter granting Liens on property of Holding or any of its Subsidiaries to Collateral Agent, for the benefit of Administrative Agent and Lenders. "Commercial Letter of Credit" means any letter of credit or similar instrument issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by Borrower in the ordinary course of business. "Commitment Letter" means that certain letter executed by Borrower, Holding, Bankers, MLCC and Merrill Lynch dated October 8, 1996 regarding the commitments to lend set forth in this Agreement. "Commitments" means the commitments of Lenders as set forth in subsections 2.1A, 2.2A, 2.2B and 2.9C. 6 "Compliance Certificate" means a certificate substantially in the form annexed hereto as Exhibit XVII delivered to Administrative Agent and Lenders by Holding and Borrower pursuant to subsection 5.1(v). "Consolidated Capital Expenditures" means, for any period, the aggregate of all expenditures (whether in cash or accrued as liabilities) by Holding and its Subsidiaries during such period that, in conformity with GAAP, are included or required to be included in the property, plant or equipment reflected in the consolidated balance sheet of Holding and its Subsidiaries. "Consolidated Cash Interest Expense" means, for any period, Consolidated Interest Expense minus any amounts which are not payable in cash (including amortization of discount). "Consolidated EBITDA" means, for any period, the sum (without duplication) of (i) Consolidated Net Income, (ii) provisions for taxes based on income, (iii) Consolidated Interest Expense, (iv) to the extent Consolidated Net Income has been reduced thereby, amortization expense, depreciation expense and other non-cash expenses, (v) losses on Asset Sales, (vi) other non-cash items reducing Consolidated Net Income (excluding write-offs of inventory and accounts receivable), and (vii) to the extent Consolidated Net Income has been reduced thereby, all transaction costs and other items (whether Cash or non-cash and including all compensation to members of the Management Group) related to the Refinancing less the sum (without duplication) of (x) gains on Asset Sales, (y) other non-cash items increasing Consolidated Net Income, and (z) to the extent Consolidated Net Income has been increased thereby, all transaction costs and other items (whether Cash or non-cash and including all compensation to members of the Management Group) related to the Refinancing, all as determined on a consolidated basis for Holding and its Subsidiaries in conformity with GAAP; provided further that, for purposes of determining compliance with the provisions of subsections 6.6A, 6.6B and 6.6C, the Indebtedness and interest income of BB Capital shall be excluded. "Consolidated Excess Cash Flow" means, for any period, an amount equal to Consolidated EBITDA plus the sum of (a) decreases in Consolidated Working Capital during such period and (b) to the extent not otherwise reflected in Consolidated Working Capital, decreases in Investments in lease receivables permitted pursuant to subsection 6.3(viii) hereof minus the sum of (i) Consolidated Cash Interest Expense, (ii) Consolidated Capital Expenditures actually made in cash (net of any proceeds of any related financing with respect to such capital expenditures or of proceeds of Asset Sales which proceeds are used to acquire other productive assets in accordance with subsection 2.5A(ii)(a)), (iii) voluntary and scheduled repayments and purchases of Funded Debt of Borrower (excluding repayments of Working Capital Loans, except to the extent the Working Capital Loan Commitment is permanently reduced concurrently with such repayments) actually paid, (iv) taxes based on income actually paid by Holding and its Subsidiaries, (v) increases in Consolidated Working 7 Capital during such period and (vi) to the extent not otherwise reflected in Consolidated Working Capital, increases in Investments in lease receivables permitted pursuant to subsection 6.3(viii); provided, however, that, to the extent included above, cash flow from Canadian operations in an aggregate amount not to exceed $5,000,000 shall be excluded from the calculation of Consolidated Excess Cash Flow. "Consolidated Interest Expense" means, for any period, interest expense with respect to all outstanding Indebtedness (including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit) of Holding and its Subsidiaries (other than BB Capital) for such period determined on a consolidated basis in conformity with GAAP; provided that Consolidated Interest Expense shall not include any Transaction Costs and amortization thereof. "Consolidated Liabilities" means, as at any date of determination, the total liabilities of Holding and its Subsidiaries on a consolidated basis determined in accordance with GAAP (including, without limitation, (i) any balance sheet liability with respect to a Pension Plan recognized pursuant to Financial Accounting Standards Board Statements 87 or 88, and (ii) any withdrawal liability under Section 4201 of ERISA with respect to a withdrawal from a Multiemployer Plan, as such liability may be set forth in a notice of withdrawal liability under Section 4219 of ERISA, and as adjusted from time to time subsequent to the date of such notice). "Consolidated Net Income" means, for any period, the net income (or loss) of Holding and its Subsidiaries, after provisions for taxes, on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of Holding), except to the extent of the amount of dividends or other distributions actually paid to Holding or any of its Subsidiaries by such Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Holding or is merged into or consolidated with Holding or any of its Subsidiaries or that Person's assets are acquired by Holding or any of its Subsidiaries, and (iii) the income of any Subsidiary of Holding (other than Borrower) to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary. "Consolidated Net Worth" means, as at any date of determination, the sum of (i) the capital stock (including without limitation all redeemable common stock held by members of the Management Group) plus (ii) additional paid-in capital plus (iii) retained earnings (or minus accumulated deficit). "Consolidated Working Capital" means, as of any date of determination, on a consolidated basis, the average for the preceding thirty (30) days of current assets (net of 8 any related reserves) of Holding and its Subsidiaries, after excluding therefrom cash and Cash Equivalents, minus the average for the preceding thirty (30) days of current liabilities of Holding and its Subsidiaries, after excluding therefrom the current portion of Funded Debt. "Contingent Obligation", as applied to any Person, means, without duplication, any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof or (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings. Contingent Obligations shall include, without limitation, (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) any Interest Rate Agreement, (c) any Currency Agreement and (d) any liability of such Person for the obligations of another through any agreement (contingent or otherwise) (x) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), (y) to maintain the solvency or any balance sheet item, level of income or financial condition of another, or (z) to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, if in the case of any agreement described under subclauses (x) or (y) of this sentence the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation to the extent so guaranteed or otherwise supported. "Contractual Obligation", as applied to any Person, means any provision of any security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any material amount of its properties is bound or to which it or any material amount of its properties is subject. "Currency Agreement" means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement designed to protect Holding or any of its Subsidiaries against fluctuations in currency values. "Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. 9 "Distribution" means, collectively, the dividend by Borrower to Holding in the aggregate amount of not to exceed $202,000,000 and the dividend by Holding to the holders of Holding Common Stock and related payments to holders of options to purchase Holding Common Stock on the Restatement Effective Date in the aggregate amount not to exceed $202,000,000. "Dollars" and the sign "$" means the lawful money of the United States of America. "Eligible Accounts Receivable" means, as at any date of determination, the aggregate dollar value of all Accounts Receivable; provided, however, that unless otherwise agreed by Administrative Agent, the following Accounts Receivable are not Eligible Accounts Receivable: (i) Accounts Receivable which, at the date of issuance of the respective invoice therefor, were payable more than sixty (60) days after the date of issuance of such invoice; (ii) Accounts Receivable which remain unpaid for more than sixty (60) days after the due date specified in the original invoice or for more than one hundred and twenty (120) days after invoice date if no due date was specified; (iii) Accounts Receivable due from a customer whose principal place of business is located outside the United States of America unless such Account Receivable is backed by a letter of credit issued or confirmed by a bank that is organized under the laws of the United States of America or a State thereof and has capital and surplus in excess of $250,000,000; provided that such letter of credit has been delivered to Collateral Agent as additional collateral under the Collateral Documents; provided, further, that upon the receipt by Collateral Agent, Administrative Agent and Lenders of a legal opinion satisfactory in form and substance to Collateral Agent from Borrower's Canadian counsel regarding the perfection under Canadian law of the security interest granted in favor of Collateral Agent pursuant to the Borrower Security Agreement and such other related matters as Collateral Agent may request, Accounts Receivable due from a customer whose principal place of business is located in the province of Ontario, Canada shall not be excluded pursuant to this clause (iii); (iv) Accounts Receivable with respect to which the customer is the United States of America or any department, agency or instrumentality thereof unless, with respect to such Accounts Receivable, the Federal Assignment of Claims Act (31 U.S.C. Section 3727) has been complied with; 10 (v) Accounts Receivable with respect to which the customer is an Affiliate of Borrower or a director, officer, agent, stockholder or employee of Borrower or any of its Affiliates, other than Accounts Receivable resulting from arms-length transactions in the ordinary course of business with other companies managed by MLCP which satisfy the requirements set forth in subsection 6.10 and, during the months of July, August and September, accounts receivable (net of all related credits, rebates, offsets and commissions) resulting from arms-length transactions with BB Capital in the ordinary course of Borrower's business; provided that such Accounts Receivable are not subject to the LaSalle Subordination Agreement; (vi) Accounts Receivable due from a customer if more than twenty-five percent (25%) of the aggregate amount of Accounts of such customer have at the time remained unpaid for more than ninety (90) days after invoice date or sixty (60) days after the due date specified in the original invoice; (vii) Accounts Receivable evidenced by an instrument (as defined in Article 9 of the UCC) not in the possession of Collateral Agent; (viii) Accounts Receivable with respect to which Collateral Agent does not have a valid, first priority and fully perfected security interest and Accounts subject to any Lien except those in favor of Collateral Agent and Permitted Encumbrances junior to the Liens in favor of Collateral Agent; (ix) Accounts Receivable with respect to which the customer is the subject of any bankruptcy or other insolvency proceeding; (x) Accounts Receivable due from a customer to the extent that such Accounts Receivable exceed in the aggregate an amount equal to twenty-five percent (25%) of the aggregate of all Accounts Receivable at said date; (xi) Accounts Receivable with respect to which the customer's obligation to pay is conditional or subject to a repurchase obligation or contractual right to return, including bill and hold sales, guaranteed sales, sale or return transactions, sales on approvals or consignment sales; (xii) Accounts Receivable with respect to which there is any unresolved dispute with the respective customer (but only to the extent of such dispute); (xiii) Accounts Receivable with respect to which the customer is located in New Jersey, Minnesota or any other state denying creditors access to its courts in the absence of a Notice of Business Activities Report or other similar filing, unless Borrower has either qualified as a foreign corporation authorized to transact business 11 in such state or has filed a Notice of Business Activities Report or similar filing with the applicable state agency for the then current year; and (xiv) Accounts Receivable which Administrative Agent determines in its reasonable discretion to be unacceptable for borrowing purposes. "Eligible Assignee" means (A) (i) a commercial bank organized under the laws of the United States or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (iv) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses including, but not limited to, insurance companies, mutual funds and lease financing companies; and (B) any Lender and any Affiliate of any Lender; provided that no Affiliate of Holding or Borrower shall be an Eligible Assignee. "Eligible Inventory" means as at any date of determination, the value (determined at the lower of cost or market on a first-in, first-out basis) of all Inventory (including work-in-process Inventory) owned by and in the possession of Borrower and located in the United States of America or the province of Ontario, Canada; provided, however that unless otherwise agreed by Administrative Agent, the following Inventory is not Eligible Inventory: (i) finished goods which do not meet specifications of the purchase order for such goods in any material respect; (ii) Inventory with respect to which Collateral Agent does not have a valid, first priority and fully perfected security interest; (iii) Inventory with respect to which there exists any Lien in favor of any Person other than Collateral Agent, except Permitted Encumbrances junior to the Liens in favor of Collateral Agent; (iv) Inventory produced in violation of the Fair Labor Standards Act or subject to the so-called "hot goods" provisions contained in Title 29 U.S.C. 215(a)(i); and (v) Inventory which Administrative Agent determines, in the exercise of reasonable discretion, to be unacceptable for borrowing purposes; 12 provided, further, that no Inventory located in the province of Ontario, Canada shall be included in Eligible Inventory until after the receipt by Collateral Agent, Administrative Agent and Lenders of a legal opinion satisfactory in form and substance to Collateral Agent from Borrower's Canadian counsel regarding the perfection under Canadian law of the security interest granted in favor of Collateral Agent pursuant to the Borrower Security Agreement and such other related matters as Collateral Agent may request. "Employee Benefit Plan" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is or was maintained or contributed to Holding or any of its ERISA Affiliates other than a Multiemployer Plan. "Environmental Claim" means any written notice of violation, claim, demand or other order or direction (conditional or otherwise) by any governmental authority or any Person for personal injury (including sickness, disease or death), tangible or intangible property damage, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restrictions, resulting from or based upon (i) the existence, or the continuation of the existence, of a Release (whether sudden or non-sudden or accidental or non-accidental), of, or exposure to, any Hazardous Material, in, into or onto the environment at, in, by, from or related to any Facility, (ii) the transportation, storage, treatment or disposal of Hazardous Materials in connection with the operation of any Facility, or (iii) the violation, or alleged violation, of any statutes, ordinances, orders, rules, regulations, permits or licenses of or from any governmental authority, agency or court relating to Hazardous Materials with respect to the Facilities. "Environmental Indemnity" means that certain Environmental Indemnity dated as of April 15, 1992 executed and delivered by Borrower and Holding, a copy of which is attached as Exhibit XIV hereto, as it may be amended, amended and restated, supplemented or otherwise modified from time to time. "Environmental Laws" means all laws relating to fines, orders, injunctions, penalties, damages, contribution, cost recovery compensation, losses or injuries resulting from the Release or threatened Release of Hazardous Materials and to the generation, storage, transportation, or disposal of Hazardous Materials, in any manner applicable to Holding or any of its Subsidiaries or any or their respective properties, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. ss. 11001 et seq.), each as amended or supplemented, and any analogous future or present local, state and federal statutes and regulations promulgated pursuant thereto, each as in effect as the date of determination. 13 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. "ERISA Affiliate", as applied to any Person, means (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trade or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. "ERISA Event" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan which is not subject to the provision for waiver of the 30-day notice requirement to the PBGC; (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make on its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan which would result in the imposition of a Lien under Section 412(n) of the Code if "$750,000" were substituted for "$1,000,000" in Section 412(n) of the Code or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Holding or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Sections 4063 or 4064 or ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Holding or any of its ERISA Affiliates pursuant to Sections 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Holding or any of its ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Holding or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Sections 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Sections 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on Holding or any of its ERISA Affiliates of any material fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Sections 409, 502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a 14 Multiemployer Plan or the assets thereof, or against Holding or any of its ERISA Affiliates in connection with any such plan which could reasonably be expected to be successful; or (x) receipt from the IRS of notice of the failure of any Pension Plan to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to fail to qualify for exemption from taxation under Section 401(a) of the Internal Revenue Code if the resulting fines, penalties and related charges could reasonably be expected to be material; or (xi) the imposition of a Lien pursuant to Sections 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA; provided that any event described in the foregoing clauses shall not be an ERISA Event if Holding and/or its Subsidiaries are (or would be) liable for any potential liability resulting from such event solely because of their affiliation with an ERISA Affiliate (excluding Holding and all Subsidiaries) and (i) such events, individually or in the aggregate, result in or could reasonably be expected to result in liability (including joint and several liability) of Holding and its Subsidiaries of less than $1,000,000, or (ii) neither Holding nor any Subsidiary could reasonably be expected to be liable (either individually or on a joint and several basis) for any potential liability resulting from such event, provided further that any event described in the foregoing proviso shall be an ERISA Event if the PBGC or any other governmental authority notifies Holding or one of its Subsidiaries that Holding or one of its Subsidiaries is liable for any potential liability resulting from such event. "Estimated Net Cash Proceeds" means, with respect to any Asset Sale, an amount equal to the amount estimated in good faith by Borrower to be the Net Cash Proceeds of Asset Sale (excluding any deferred payment to be received pursuant to a note receivable or otherwise). "Eurodollar Rate" means, for any Interest Rate Determination Date, the arithmetic average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the offered quotation, if any, to first class banks in the Eurodollar market by each Reference Bank for Dollar deposits of amounts in immediately available funds comparable to the principal amount of the Eurodollar Rate Loan of such Reference Bank for which the Eurodollar Rate is being determined with maturities comparable to the Interest Period for which such Eurodollar Rate will apply as of approximately 10:00 A.M. (New York time) two (2) Business Days prior to the commencement of such Interest Period. "Eurodollar Rate Loans" means Loans bearing interest at rates determined by reference to the Eurodollar Rate as provided in subsection 2.3A. "Eurodollar Rate Taxes" has the meaning assigned to that term in subsection 2.7H(i). "Event of Default" means each of the events set forth in Section 8. 15 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "Existing Credit Agreement" has the meaning assigned to that term in the Recitals to this Agreement. "Existing Letters of Credit" means Letters of Credit issued under and as defined in the Existing Credit Agreement. "Existing Subordinated Debt Intercreditor Agreement" means that certain Intercreditor Agreement dated as of April 15, 1992 by and among Collateral Agent, Administrative Agent and The Chase Manhattan Bank (as successor to Manufacturers Hanover Trust Company), as trustee under the Existing Subordinated Indenture, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein and therein. "Existing Subordinated Indenture" means that certain Indenture dated as of April 15, 1992 by and between Blue Bird Body Company (as successor to BB Acquisition Corp.), as issuer, Holding, as guarantor, and The Chase Manhattan Bank (as successor to Manufacturers Hanover Trust Company), as trustee, as such Indenture has been amended, supplemented or otherwise modified to the date hereof. "Existing Subordinated Notes" means the senior subordinated notes issued pursuant to the Existing Subordinated Indenture. "Existing Term Loans" means Term Loans under and as defined in the Existing Credit Agreement. "Existing Working Capital Loans" means Working Capital Loans under and as defined in the Existing Credit Agreement. "Expiry Date" means the earlier of (i) November 19, 2002 and (ii) the date on which the Term Loans are paid in full. "Facilities" means, as at any date of determination, any and all real property (including all buildings, fixtures or other improvements located thereon) owned, leased or operated by Holding or any of its Subsidiaries as at such date. "Federal Funds Effective Rate" means, for any period, a fluctuating 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 16 so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent. "Fee Collateral" means the real property owned in fee by Holding and any of its Subsidiaries (other than Blue Bird Mexico) designated as "Fee Collateral" on Schedule 1.1A annexed hereto. "Fee Title Policies" has the meaning assigned thereto in subsection 3.1H. "Final Maturity Date" means November 19, 2003. "Financial Condition Certificate" means the certificate delivered by Borrower pursuant to subsection 3.1J and substantially in the form annexed hereto as Exhibit X. "First Adjustment Requirements" shall mean the requirements that (i) the aggregate principal amount of Funded Debt of Holding and its Subsidiaries on a consolidated basis outstanding is less than $255,000,000 and (ii) the ratio of Funded Debt of Holding and its Subsidiaries on a consolidated basis to Consolidated EBITDA for the four consecutive Fiscal Quarter period ending on or immediately preceding the applicable date of determination is less than 4.0 to 1.0. "Fiscal Month" means a fiscal month of Holding and its Subsidiaries as set forth in Schedule 1.1B. "Fiscal Quarter" means a fiscal quarter of Holding and its Subsidiaries as set forth in Schedule 1.1B annexed hereto. "Fiscal Year" means the fiscal year of Holding and its Subsidiaries, as set forth in Schedule 1.1B annexed hereto. "Foreign Lender" shall have the meaning assigned that term in subsection 2.10B. "Funded Debt", as applied to any Person, means all Indebtedness of that Person which by its terms or by the terms of any instrument or agreement related thereto matures more than one year from, or is directly renewable or extendable at the option of the debtor to a date more than one year from (including an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more from), the date of the creation thereof; provided however, that, for purposes of calculating the applicable Interest Rate Adjustment (if any) and determining compliance with the provisions of subsection 6.6B, the term "Funded Debt" shall not include any Working Capital Loans or any Indebtedness of BB Capital. 17 "Funding Date" means the date of the funding of a Loan. "GAAP" means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination. "GM Intercreditor Agreement" means that certain Intercreditor Agreement dated as of April 15, 1992, by and between General Motors Acceptance Corporation and Administrative Agent, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "Government Acts" has the meaning assigned thereto in subsection 2.9H. "Guatemalan Subsidiaries" means Blue Bird Central America and CAGUASA. "Hazardous Materials" means (i) any oil, petroleum or petroleum derived substance, any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any hazardous wastes or substances, any toxic wastes or substances or any other materials or pollutants which (a) pose a hazard to any property of Holding or any of its Subsidiaries or to Persons on or about such property or (b) cause such property to be in violation of any Environmental Laws, (ii) asbestos in any form which is or could become friable, urea formaldehyde foam insulation, electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty parts per million; (iii) any chemical, material or substance defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," or "toxic substances" or words of similar import under any applicable local, state or federal law or under the regulations adopted or publications promulgated pursuant thereto, including, without limitation, Environmental Laws, and (iv) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority having jurisdiction over Holding or any of its Subsidiaries or any of their respective properties. "Holding" has the meaning set forth in the introductory paragraph to this Agreement. "Holding Common Stock" means the common stock of Holding, par value $.01 per share. 18 "Holding Guaranty" means the guaranty of Holding set forth in Section 7 of this Agreement. "Holding Pledge Agreement" means that certain Pledge Agreement dated as of April 15, 1992 between Holding and Collateral Agent, a copy of which is attached as Exhibit XIII hereto, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "Holding Security Agreement" means that certain Security Agreement dated as of April 15, 1992 between Holding and Collateral Agent, a copy of which is attached as Exhibit XII hereto, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "Indebtedness", as applied to any Person, means, without duplication, (i) all indebtedness for borrowed money whether or not evidenced by a promissory note, draft or similar instrument, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit, (iv) any obligation owed for all or any part of the deferred purchase price of property or services, which purchase price is due more than six months from the date of incurrence of the obligation in respect thereof, and (v) all indebtedness to the extent secured by any Lien on any property or asset owned or held by that Person regardless of whether such indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; provided, however, that all indebtedness owed to General Motors Acceptance Corporation for purchases of inventory from General Motors Acceptance Corporation in the ordinary course of Borrower's business consistent with past practices shall be excluded from this definition. "Independent Financial Advisor" means a firm (i) which does not, and whose directors, officers and employees or Affiliates do not have, a direct or indirect financial interest in Borrower and (ii) which, in the judgment of the board of directors of Borrower, is otherwise independent and qualified to perform the task for which it is to be engaged. "Intercreditor Agreements" means, collectively, the Existing Subordinated Debt Intercreditor Agreement, the GM Intercreditor Agreement and the LaSalle Intercreditor Agreement. "Interest Payment Date" means with respect to any Eurodollar Rate Loan the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period in excess of three months, "Interest Payment Date" shall also mean each Interest Period Anniversary Date for such Interest Period. "Interest Period" means any interest period applicable to a Loan as determined pursuant to subsection 2.3B. 19 "Interest Period Anniversary Date" means for each Interest Period which is in excess of three months, each three-month anniversary of the commencement of that Interest Period. "Interest Rate Adjustment" shall mean, as of any date of determination, (i) 0.25% per annum if the First Adjustment Requirements are satisfied but the Second Adjustment Requirements are not, (ii) 0.50% per annum if the Second Adjustment Requirements are satisfied but the Third Adjustment Requirements are not and (iii) 1.00% if the Third Adjustment Requirements are satisfied. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect Holding or any of its Subsidiaries against fluctuations in interest rates with respect to the Obligations; provided that the calculation of payments for early termination shall be made on a commercially reasonable basis in accordance with industry practice. "Interest Rate Determination Date" means each date for calculating the Eurodollar Rate for purposes of determining the interest rate in respect of an Interest Period. The Interest Rate Determination Date shall be the second Business Day prior to the first day of the related Interest Period for a Eurodollar Rate Loan. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter and any successor statute. "Inventory" means, on a consolidated basis, all goods, merchandise and other personal property which are held for sale or lease by Holding and its Subsidiaries, including those held for display or demonstration or out on lease or consignment or to be furnished under a contract of service, or are raw materials, components, work in process or materials used or consumed, or to be used or consumed in the business of Holding or any of its Subsidiaries. "Investment", as applied to any Person, means any direct or indirect purchase or other acquisition by that Person of, or of a beneficial interest in, stock or other Securities of any other Person, or any direct or indirect loan, advance (other than advances to employees for moving and travel expenses, drawing accounts and similar expenditures made in the ordinary course of business) or capital contribution by that Person to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales of goods or services to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto and minus the amount of any portion of such Investment repaid to such Person in cash as a return of capital, but without any other adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. 20 "Issuing Lender" means, with respect to any Letter of Credit, Administrative Agent or any Lender that issues such Letter of Credit, determined as provided in subsection 2.9; provided that, notwithstanding anything to the contrary contained herein, any Letter of Credit may be issued by an Affiliate of Administrative Agent or any Lender; provided, further, that to the extent that a Letter of Credit is issued by an Affiliate of Administrative Agent or any Lender, such Person shall, for all purposes under this Agreement, the Loan Documents and all other instruments and documents referred to herein and therein be deemed to be the "Issuing Lender" with respect to such Letter of Credit. "Junior Subordinated Notes" means the junior subordinated notes issued to members of the Management Group in payment, in whole or in part, for the repurchase of Holding Common Stock, which form of note shall be satisfactory in form and substance to Administrative Agent. "LaSalle Documents" means the LaSalle Loan Agreement, the LaSalle Note, the LaSalle Pledge Agreement, the LaSalle Subordination Agreement and the other documents executed in connection therewith. "LaSalle Loan Agreement" means that certain Loan Agreement dated on or about October 27, 1995 by and between BB Capital and LaSalle National Bank, as amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted under this Agreement. "LaSalle Note" means that certain revolving credit note dated on or about October 27, 1995 executed by BB Capital in favor of LaSalle National Bank, as amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted under this Agreement. "LaSalle Pledge Agreement" means that certain Pledge Agreement dated on or about October 27, 1995 by and between BB Borrower and LaSalle National Bank, as amended, supplemented or otherwise modified from time to time to the extent permitted under this Agreement. "LaSalle Subordination Agreement" means that certain Subordination Agreement dated on or about October 27, 1995 by and between LaSalle National Bank and Blue Bird Body Company, as amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted under this Agreement. "Lease Portfolio" means the tax-exempt and taxable lease finance assets of Borrower in existence from time to time on or after the Restatement Effective Date. "Lease Portfolio Documents" means that certain Business Agreement, those certain Sale and Assignment Agreements and those certain Servicing Agreements each dated 21 as of April 15, 1992, and those certain Sale and Assignment Agreements and Servicing Agreements executed from time to time pursuant to such Business Agreement by and between Borrower and LaSalle National Bank pursuant to which Borrower (i) has sold on a nonrecourse basis the Lease Portfolio in existence on the Closing Date for cash in an amount which is not less than the par value of such Lease Portfolio, (ii) will sell to LaSalle National Bank from time to time some or all of the Lease Portfolio in existence after the Closing Date, and (iii) has obtained a commitment from LaSalle National Bank to purchase, in accordance with the terms of the Lease Portfolio Documents, lease receivables generated by Borrower in connection with the sale of Inventory by Blue Bird, as such Lease Portfolio Documents may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, to the extent permitted under this Agreement. "Lender" and "Lenders" have the meanings assigned to such terms in the introduction to this Agreement; provided that "Lender" and "Lenders" shall also include the successors and permitted assignees of Lenders pursuant to subsections 2.9 and 10.2. "Letter of Credit" means any of the letters of credit issued or to be issued by Issuing Lenders for the account of Borrower pursuant to subsection 2.9 and for the purposes described in subsection 2.6C. "Letter of Credit Usage" means, with respect to any Letter of Credit, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for drawing under such Letter of Credit then outstanding plus (ii) the aggregate amount of all drawings under such Letter of Credit honored by any Issuing Lender and not theretofore reimbursed by Borrower. "Letter of Non-Exemption" has the meaning assigned to that term in subsection 2.10B. "Lien" means any lien, mortgage, deed of trust, deed to secure debt, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "Loan" or "Loans" means one or more of the Term Loans, the Working Capital Loans or Swing Line Loans, or any combination thereof. "Loan Documents" means this Agreement, the Letters of Credit, the Holding Guaranty, the Collateral Documents, any Notes issued by Borrower, the Intercreditor Agreements and the Subsidiary Documents. "Loan Party" means any of Holding or Borrower and any other Subsidiary of a Loan Party which is or becomes a party to a Loan Document. 22 "Management Documents" means the Subscription Agreement, Management Stock Option Plan, Performance Option Agreements, Vested Option Agreements, ML Stock Subscription Agreement and Stockholders' Agreement. "Management Group" means the members of the management of Holding and its Subsidiaries set forth on Schedule 3.10D annexed hereto, as such schedule may be amended or supplemented from time to time. "Management Stock Option Plan" means that certain Management Stock Option Plan of Holding dated as of April 15, 1992, as such plan may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein. "Margin Stock" has the meaning assigned to that term in Regulations G and U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Material Adverse Effect" means (i) a material adverse effect upon the business, operations, properties, assets, prospects or condition (financial or otherwise) of Holding and its Subsidiaries taken as a whole or (ii) the material impairment of the ability of any Loan Party to perform its obligations under any Loan Document or of Administrative Agent or any Lender to enforce or collect the Obligations, including the obligation of any Loan Party to perform its guaranty of the Obligations. "Merrill Lynch" means Merrill Lynch & Co., a Delaware corporation. "MLCC" means Merrill Lynch Capital Corporation, a Delaware corporation. "MLCP" means Merrill Lynch Capital Partners, Inc., a Delaware corporation. "ML Stock Subscription Agreement" means that certain Stock Subscription Agreement dated as of April 15, 1992 between Holding and the ML Investors listed in Schedule I thereto, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein. "Mortgage" means any or all of the mortgages, deeds of trust, deed to secure debt, or other security instruments now or hereafter granting Liens on the real property described in Schedule 1.1A annexed hereto or on any other real property of Holding or its Subsidiaries to Collateral Agent for the benefit of Administrative Agent and Lenders, substantially in the form of Exhibit XVIII annexed hereto, as any such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 3(37) of ERISA to which Holding or any of its ERISA Affiliates is contributing or ever has 23 contributed or to which Holding or any of its ERISA Affiliates has, or ever has had, an obligation to contribute. "Net Cash Proceeds of Asset Sale" means Cash Proceeds received from any Asset Sale net of the direct costs relating to such Asset Sale (including, without limitation, (i) amounts provided as a reserve in accordance with GAAP against any liabilities associated with such Asset Sale and retained after such Asset Sale including, without limitation, pension and other post-employment benefit liabilities, liabilities related to Environmental Laws and liabilities under any indemnification obligations associated with such Asset Sale; provided, however, that to the extent any such amount set aside as a reserve is subsequently decreased or discontinued as a reserve, other than by reason of the payment of the liability represented thereby, such amounts shall constitute Net Cash Proceeds of Asset Sale and (ii) legal, accounting and investment banking fees and sales commissions), taxes actually paid or income taxes reasonably estimated to be actually payable as a result of such Asset Sale within two years of the date of the Asset Sale, amounts required to be applied to the repayment of Indebtedness (other than the Obligations) secured by a Lien on the asset or assets which are the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets. "Notes" means, as the context requires, a Term Note or Notes, a Working Capital Note or Notes and/or a Swing Line Note. "Notice of Borrowing" means a notice substantially in the form of Exhibit I annexed hereto with respect to a proposed borrowing. "Notice of Conversion/Continuation" means a notice substantially in the form of Exhibit III annexed hereto with respect to a proposed conversion or continuation. "Notice of Issuance of Letter of Credit" means a notice substantially in the form of Exhibit II annexed hereto with respect to a proposed issuance of a Letter of Credit. "Obligations" means all obligations of every nature of Holding and/or Borrower and their respective Subsidiaries from time to time owed to Agents, Lenders, Issuing Lenders or any of them under this Agreement, the Notes or any of the other Loan Documents or reimbursement obligations with respect to the Letters of Credit or obligations owed to Administrative Agent or any Lender under Interest Rate Agreements for principal and interest on the Loans or reimbursement obligations owed to Administrative Agent or Lenders with respect to the Letters of Credit and all interest thereon or obligations owed to Wachovia Bank of Georgia, N.A., under the Reimbursement and Security Agreement dated as of March 1, 1991, with respect to a standby letter of credit in the stated amount of $2,942,500, issued with respect to the Development Authority of Lafayette Tax-Exempt Industrial Revenue Bonds (Blue Bird Body Company Project) Series 1991 or for fees or expenses, reimbursements and indemnifications and other amounts due or to become due 24 hereunder or thereunder. Time is of the essence in the performance of all Obligations, except as otherwise expressly provided in this Agreement. "Officers' Certificate" means, as applied to any corporation, a certificate executed on behalf of such corporation by its Chairman of the Board (if an officer) or its President or one of its Vice Presidents and by its Chief Financial Officer or its Treasurer or its Controller; provided that any Officers' Certificate required to be delivered by any Loan Party on the Restatement Effective Date may be executed on behalf of such Loan Party by any one of the foregoing officers; and provided, further, that every Officers' Certificate with respect to the compliance with a condition precedent to the making of any Loans hereunder shall include (i) a statement that the officer or officers making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Agreement and the other Loan Documents relating thereto, (ii) a statement that, in the opinion of the signers, they have made or have caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signers, such condition has been complied with. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor thereto). "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "Performance Option Agreements" means those certain Performance Option Agreements between Holding and members of the Management Group, issued pursuant to the Management Stock Option Plan, as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein. "Permitted Encumbrances" means the following types of Liens (other than any Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Code or by ERISA): (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not at the time required by subsection 5.3; (ii) Statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of 25 social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) any attachment or judgment Lien not in excess (either individually or together with all other attachment or judgment Liens) of $2,000,000 unless the judgment it secures shall, within 30 days after the entry thereof, not have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 30 days after the expiration of any such stay, unless such judgment is fully and adequately covered by insurance and with respect to which the insurer has acknowledged coverage in writing; (v) easements, rights-of-way, restrictions, encroachments, covenants, conditions, licenses, zoning requirements, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of Holding or any of its Subsidiaries; (vi) any interest or title of a lessor or lessee under any lease permitted by this Agreement (including any Lien granted by such lessor or lessee); (vii) unperfected purchase-money Liens on Inventory incurred in the ordinary course of business and unperfected Liens on goods for sale on consignment or a similar basis; and (viii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods. "Person" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability corporations, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, vehicle trusts, business trusts, or other organizations, whether or not legal entities, and agencies and governments and political subdivisions thereof. "Potential Event of Default" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participation or other equivalents (however designated) of such Person's preferred or preference stock whether now outstanding, or issued after the Restatement Effective Date, and including, without limitation, all classes and series of preferred or preference stock. 26 "Prime Rate" means the rate that Bankers announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bankers may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "Pro Rata Share" means, (i) with respect to matters relating to a particular Commitment (including the making or payments of Loans pursuant to that Commitment) of a Lender, the percentage obtained by dividing (y) such Commitment of that Lender by (z) all such Commitments of all Lenders and (ii) with respect to all other matters, the percentage designated as such Lender's Pro Rata Share set forth opposite the name of such Lender on Schedule 1.1C annexed hereto; provided that Schedule 1.1C shall be amended and Lenders' Pro Rata Shares shall be adjusted from time to time to give effect to the addition of any new Lenders pursuant to the proviso set forth in the definition of "Lender". The sum of the Pro Rata Shares of all Lenders at any date of determination shall equal 100%. "Purchase" means the purchase by Borrower pursuant to the Purchase Documents of a portion of the Existing Subordinated Notes. "Purchase Documents" means, collectively, the Tender and Consent Letters, each dated on or prior to the Restatement Effective Date between Borrower and the respective holder named therein, and each of the documents and instruments executed pursuant thereto. "Reference Banks" means Bankers and Wachovia Bank of Georgia, N.A. "Refinancing" means the refinancing of the Indebtedness of Borrower and the consummation of the transactions contemplated hereby, including the purchase and retirement of certain Existing Subordinated Notes, the issuance of the Subordinated Notes, the amendment and restatement of the Existing Credit Agreement pursuant to this Agreement and the Distribution. "Register" has the meaning assigned to that term in subsection 2.3G. "Registration Rights Agreement" means that certain Registration Rights Agreement dated as of November 15, 1996 by and among Holding, Borrower, Merrill, Lynch, Pierce, Fenner & Smith Incorporated and BT Securities Corporation, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as in effect from time to time. 27 "Related Agreements" means the Lease Portfolio Documents, Subordinated Debt Documents, the LaSalle Documents, the Tax Allocation Agreement, the Securitization Documents, Purchase Documents, and Management Documents. "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration in, by, from or related to any Facility into the indoor or outdoor environment, including the movement of any Hazardous Material through the air, soil, surface water, groundwater or property. "Requisite Class Lenders" means, at any time of determination (i) for the Class of Lenders having Tranche A Term Loan Exposure, Lenders having or holding 51% or more of the aggregate Tranche A Term Loan Exposure of all Lenders, (ii) for the Class of Lenders having Tranche B Term Loan Exposure, Lenders having or holding 51% or more of the aggregate Tranche B Term Loan Exposure of all Lenders and (iii) for the Class of Lenders having Working Capital Loan Commitments, Lenders having or holding 51% or more of the aggregate Working Capital Loan Commitments of all Lenders. "Requisite Lenders" means Lenders holding 51% or more of the sum of (i) the aggregate Working Capital Loan Commitments (or, if such Commitments have terminated or expired, the Total Utilization of Working Capital Loan Commitments) plus (ii) the aggregate Tranche A Term Loan Exposure and (iii) the aggregate Tranche B Term Loan Exposure. "Restatement Effective Date" means the date on or before December 31, 1996 on which the conditions set forth in subsection 3.1 are satisfied. "Restricted Junior Payment" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of Capital Stock of Holding or Borrower now or hereafter outstanding, except a dividend payable solely in rights to purchase that class of Capital Stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Holding or Borrower now or hereafter outstanding, (iii) any payment or prepayment of principal of, premium, if any, or interest on, redemption, purchase, repurchase, retirement, defeasance, sinking fund or similar payment or deposit for payment with respect to, the Subordinated Debt, and (iv) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Holding, Borrower or any of their Subsidiaries now or hereafter outstanding. "Scheduled Tranche A Term Loan Repayment Amount" means, for the last date of each Fiscal Quarter set forth below, the correlative amount set forth opposite thereto as adjusted by the operation of the succeeding sentence: 28 Scheduled Tranche A Date Term Loan Repayment Amount ---- -------------------------- Third Fiscal Quarter 1997 $ 3,000,000 Fourth Fiscal Quarter 1997 5,000,000 First Fiscal Quarter 1998 2,000,000 Second Fiscal Quarter 1998 3,000,000 Third Fiscal Quarter 1998 3,000,000 Fourth Fiscal Quarter 1998 4,000,000 First Fiscal Quarter 1999 3,000,000 Second Fiscal Quarter 1999 3,000,000 Third Fiscal Quarter 1999 4,000,000 Fourth Fiscal Quarter 1999 6,000,000 First Fiscal Quarter 2000 4,000,000 Second Fiscal Quarter 2000 4,000,000 Third Fiscal Quarter 2000 5,000,000 Fourth Fiscal Quarter 2000 7,000,000 First Fiscal Quarter 2001 4,000,000 Second Fiscal Quarter 2001 5,000,000 Third Fiscal Quarter 2001 5,000,000 Fourth Fiscal Quarter 2001 8,000,000 First Fiscal Quarter 2002 4,000,000 Second Fiscal Quarter 2002 5,000,000 Third Fiscal Quarter 2002 5,000,000 Fourth Fiscal Quarter 2002 8,000,000 On the date the Tranche A Term Loans are required to be prepaid pursuant to subsections 2.5A(ii)(a)-(e), the amount required to be prepaid shall be applied to reduce the amounts of the Scheduled Tranche A Term Loan Repayment Amounts set forth above (as previously adjusted) for dates occurring after the date of such prepayment as provided in subsection 2.5A(iii). "Scheduled Tranche B Term Loan Repayment Amount" means, for the last date of each Fiscal Quarter set forth below, the correlative amount set forth opposite thereto as adjusted by the operation of the succeeding sentence: 29 Scheduled Tranche B Date Term Loan Repayment Amount ---- -------------------------- Third Fiscal Quarter 1997 $ 375,000 Fourth Fiscal Quarter 1997 375,000 First Fiscal Quarter 1998 187,500 Second Fiscal Quarter 1998 187,500 Third Fiscal Quarter 1998 187,500 Fourth Fiscal Quarter 1998 187,500 First Fiscal Quarter 1999 187,500 Second Fiscal Quarter 1999 187,500 Third Fiscal Quarter 1999 187,500 Fourth Fiscal Quarter 1999 187,500 First Fiscal Quarter 2000 187,500 Second Fiscal Quarter 2000 187,500 Third Fiscal Quarter 2000 187,500 Fourth Fiscal Quarter 2000 187,500 First Fiscal Quarter 2001 187,500 Second Fiscal Quarter 2001 187,500 Third Fiscal Quarter 2001 187,500 Fourth Fiscal Quarter 2001 187,500 First Fiscal Quarter 2002 187,500 Second Fiscal Quarter 2002 187,500 Third Fiscal Quarter 2002 187,500 Fourth Fiscal Quarter 2002 187,500 First Fiscal Quarter 2003 17,625,000 Second Fiscal Quarter 2003 17,625,000 Third Fiscal Quarter 2003 17,625,000 Fourth Fiscal Quarter 2003 17,625,000 On the date the Tranche B Term Loans are required to be prepaid pursuant to subsections 2.5A(ii)(a)-(e), the amount required to be prepaid shall be applied to reduce the amounts of the Scheduled Tranche B Term Loan Repayment Amounts set forth above (as previously adjusted) for dates occurring after the date of such prepayment as provided in subsection 2.5A(iii). 30 "Second Adjustment Requirements" shall mean the requirements that (i) the aggregate principal amount of Funded Debt of Holding and its Subsidiaries on a consolidated basis outstanding is less than $240,000,000 and (ii) the ratio of Funded Debt of Holding and its Subsidiaries on a consolidated basis to Consolidated EBITDA for the four consecutive Fiscal Quarter period ending on or immediately preceding the applicable date of determination is less than 3.5 to 1.0. "Securities" means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness (other than accounts receivable), secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Securitization Documents" has the meaning assigned to that term in subsection 6.1(xii). "Standby Letter of Credit" means any standby letter of credit or similar instrument issued for the purpose of supporting (i) workers' compensation liabilities of Borrower, (ii) the obligations of Borrower to third party insurers arising by virtue of the laws of any jurisdiction requiring third party insurers, (iii) Indebtedness in respect of industrial revenue bonds set forth on Schedule 6.1 annexed hereto or development bonds or financings, (iv) obligations with respect to leases, (v) performance, payment, deposit or surety obligations of Borrower, in any case if required by law or government rule or regulation or in accordance with custom or practice in the industry, (vi) the payment of insurance premiums or (vii) reserve or hold back obligations in respect of lease receivables incurred pursuant to the Lease Portfolio Documents. "Stockholders' Agreement" means that certain Stockholders' Agreement dated as of April 15, 1992, among the common stockholders of Holding as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein. "Subordinated Debt" means collectively, the Existing Subordinated Notes and the Subordinated Notes. "Subordinated Debt Documents" means collectively, the Existing Subordinated Notes, the Existing Subordinated Indenture, the Subordinated Indenture, the Subordinated Notes, the Registration Rights Agreement and all other documents and agreements, in form and substance satisfactory to Administrative Agent and Requisite Lenders, pursuant to which the Subordinated Debt is issued, as such Subordinated Debt Documents may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, to the extent permitted under this Agreement. 31 "Subordinated Indenture" means that certain Indenture dated as of November 15, 1996 by and among Borrower, as issuer, Holding, as guarantor and The Chase Manhattan Bank, as the trustee, and/or other agreements or documents pursuant to which the Subordinated Notes are issued, in form and substance reasonably satisfactory to Agents and Requisite Lenders. "Subordinated Notes" means the senior subordinated notes of each series issued by Borrower pursuant to the Subordinated Indenture. "Subscription Agreement" means that certain Management Stock Subscription Agreement dated the Closing Date between Holding and any or all of the management investors party thereto, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time, to the extent permitted herein. "Subsidiary" means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. "Subsidiary Documents" means the Subsidiary Note, Subsidiary Mortgage and Subsidiary Security Agreement. "Subsidiary Mortgage" means any or all of the mortgages, deeds of trust or other security instruments now or hereafter granting Liens on any real property of Canadian Blue Bird in favor of Borrower, in form and substance satisfactory to Collateral Agent, as any such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein. "Subsidiary Note" means that certain promissory note dated April 15, 1992 executed by Canadian Blue Bird in favor of Borrower, in form and substance satisfactory to Collateral Agent, as such promissory note may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein. "Subsidiary Security Agreement" means that certain security agreement dated April 15, 1992 by and between Canadian Blue Bird and Borrower, in form and substance satisfactory to Collateral Agent, as such security agreement may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein. "Swing Line Commitment" means the commitment of Administrative Agent to make Swing Line Loans as set forth in subsection 2.2B. 32 "Swing Line Loan" or "Swing Line Loans" means one or more of the loans (other than Working Capital Loans) made by Administrative Agent to Borrower pursuant to subsection 2.2B. "Swing Line Note" means the amended and restated promissory note of Borrower issued to Administrative Agent pursuant to subsection 2.3H and substantially in the form of Exhibit VII annexed hereto. "Syndication Agent" has the meaning assigned to that term in the introductory paragraph of this Agreement. "Tax Allocation Agreement" means that certain Income Taxes Agreement dated on or about October 27, 1995 by and between Borrower and BB Capital, as amended, supplemented or otherwise modified from time to time to the extent permitted under this Agreement. "Term Loan Commitment" or "Term Loan Commitments" means collectively, the Tranche A Term Loan Commitment and Tranche B Term Loan Commitment. "Term Loans" means, collectively, the Tranche A Term Loans and the Tranche B Term Loans. "Term Note" means an amended and restated promissory note of Borrower issued pursuant to subsection 2.3H and substantially in the form of Exhibit IV annexed hereto. "Third Adjustment Requirements" shall mean the requirements that (i) the aggregate principal amount of Funded Debt of Holding and its Subsidiaries on a consolidated basis outstanding is less than $220,000,000 and (ii) the ratio of Funded Debt of Holding and its Subsidiaries on a consolidated basis to Consolidated EBITDA for the four consecutive Fiscal Quarter period ending on or immediately preceding the applicable date of determination is less than 3.0 to 1.0. "Total Utilization of Working Capital Loan Commitments" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Working Capital Loans, (ii) the aggregate principal amount of all outstanding Swing Line Loans and (iii) the Letter of Credit Usage. "Tranche A Term Loan Commitment" means the commitment of a Lender to convert its Pro Rata Share of Existing Term Loans to a Tranche A Term Loan and to make a Tranche A Term Loan to Borrower pursuant to subsection 2.1A(i), and "Tranche A Term Loan Commitments" means such commitments of all Lenders in the aggregate. 33 "Tranche A Term Loan Exposure" means, with respect to any Lender as of any date of determination, the outstanding principal amount of the Tranche A Term Loan of that Lender. "Tranche A Term Loans" means the Loans converted and made by Lenders, as applicable, to Borrower pursuant to subsection 2.1A(i). "Tranche A Term Notes" means (i) the amended and restated promissory notes of Borrower issued pursuant to subsection 2.1D(i)(a) on the Restatement Effective Date and (ii) any promissory notes issued by Borrower pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Tranche A Term Loan Commitments or Tranche A Term Loans of any Lenders, in each case substantially in the form of Exhibit IV annexed hereto, as they may be amended, amended and restated, supplemented or otherwise modified from time to time. "Tranche B Term Loan Commitment" means the commitment of a Lender to make a Tranche B Term Loan to Borrower pursuant to subsection 2.1A(ii), and "Tranche B Term Loan Commitments" means such commitments of all Lenders in the aggregate. "Tranche B Term Loan Exposure" means, with respect to any Lender as of any date of determination, the outstanding principal amount of the Tranche B Term Loan of that Lender. "Tranche B Term Loans" means the Loans made by Lenders to Borrower pursuant to subsection 2.1A(ii). "Tranche B Term Notes" means (i) the promissory notes of Borrower issued pursuant to subsection 2.1D(i)(b) on the Restatement Effective Date and (ii) any promissory notes issued by Borrower pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Tranche B Term Loan Commitments or Tranche B Term Loans of any Lenders, in each case substantially in the form of Exhibit V annexed hereto, as they may be amended, amended and restated, supplemented or otherwise modified from time to time. "Transaction Costs" means the fees, costs and expenses payable by Holding or Borrower pursuant hereto and other fees, costs and expenses payable by Holding or any of its Subsidiaries in connection with the Refinancing. "Vested Option Agreements" means those certain Vested Option Agreements between Holding and members of the Management Group, issued pursuant to the Management Stock Option Plan, as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time to the extent permitted herein. 34 "Working Capital Loan Commitment" or means the commitment of a Lender to make Working Capital Loans as set forth in subsection 2.2A, 2.2B and 2.9C, and "Work Capital Loan Commitments" means such commitments of all Lenders in the aggregate. "Working Capital Loans" means the Loans converted or made by Lenders to Borrower pursuant to subsection 2.2A, the fourth paragraph of subsection 2.2B and subsection 2.9C. "Working Capital Notes" means the promissory notes of Borrower issued pursuant to subsection 2.3H on the Restatement Effective Date and (ii) any promissory notes issued by Borrower pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Working Capital Loan Commitments or Working Capital Loans of any Lenders, in each case in substantially in the form of Exhibit VI annexed hereto, as the case may be amended, amended and restated, supplemented or otherwise modified from time to time. 1.2 Accounting Terms; Utilization of GAAP For purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered pursuant to subsection 5.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation; provided, that, compliance with covenants shall be tested in accordance with GAAP as in effect on the Restatement Effective Date; provided further, that for the purpose of testing compliance with the provisions of subsection 6.6, BB Capital shall be excluded from all calculations prepared on a consolidated basis for Holding and its Subsidiaries. 1.3 References; Interpretation Any reference in this Agreement (i) to a Section, a Schedule or an Exhibit is a reference to a section hereof, a schedule hereto or an exhibit hereto, respectively; and (ii) to a subsection or a clause is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears. In this Agreement the singular includes the plural and the plural the singular; "hereof," "herein," "hereto," "hereunder" and the like means and refer to this Agreement as a whole and not merely to the specific section, paragraph or clause in which the respective word appears. Words importing any gender include the other genders; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing such statute. References to "writing" include printing, typing, lithography and other means of reproducing words in a tangible visible form. The words "including," "includes," and "include" shall be deemed to be followed by the words "without limitation." References to agreements and other contractual instruments shall be deemed to include all subsequent amendments, restatements, supplements, assignments and other modifications thereto, but only to the extent such amendments, 35 restatements, supplements, assignments, and other modifications are not prohibited by the terms of this Agreement. References to Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 2.1 Term Loans A. Term Loan Commitments. (i) Tranche A Term Loans. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties herein set forth, each Lender hereby severally agrees to (i) convert the Existing Term Loans, if any, of such Lender, outstanding on the Restatement Effective Date to Tranche A Term Loans and to maintain such converted Existing Term Loans as Tranche A Term Loans under this Agreement and (ii) lend to Borrower on the Restatement Effective Date an amount equal to the remainder of (a) such Lender's Pro Rata Share of the aggregate Tranche A Term Loan Commitments minus (b) the aggregate amount of Existing Term Loans of such Lender converted into Tranche A Term Loans pursuant to clause (i) above. The original amount of each Lender's Tranche A Term Loan Commitment is set forth on Schedule 1.1C annexed hereto and the aggregate original amount of the Tranche A Term Loan Commitments is $100,000,000. Borrower may make only one borrowing under the Tranche A Term Loan Commitments and such borrowing shall be on the Restatement Effective Date. Amounts borrowed under this subsection 2.1A(i) and repaid may not be reborrowed. (ii) Tranche B Term Loans. Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties herein set forth, each Lender hereby severally agrees to lend to Borrower on the Restatement Effective Date an amount equal to such Lender's Pro Rata Share of the aggregate Tranche B Term Loan Commitments. The original amount of each Lender's Tranche B Term Loan Commitment is set forth on Schedule 1.1C annexed hereto and the aggregate original amount of the Tranche B Term Loan Commitments is $75,000,000. Borrower may make only one borrowing under the Tranche B Term Loan Commitments and such borrowing shall be on the Restatement Effective Date. Amounts borrowed under this subsection 2.1A(ii) and repaid may not be reborrowed. B. Notice of Borrowing. Borrower shall deliver to Administrative Agent a Notice of Borrowing with respect to borrowings under this subsection 2.1 no later than 11:00 A.M. (New York time) one (1) Business Day in advance of the proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be the Restatement Effective Date), (ii) the amount and type of Loans requested, (iii) whether 36 the Loans shall be Base Rate Loan or Eurodollar Rate Loan and (iv) the Interest Periods requested; provided, however that with respect to Loans to be made on the Restatement Effective Date, all such Loans shall be made and continued as Base Rate Loans for at least thirty (30) days after the Restatement Effective Date unless Administrative Agent otherwise consents in writing. Term Loans may be continued as Base Rate Loans or converted into Eurodollar Rate Loans in the manner provided in subsection 2.3D on and after the date thirty (30) days after the Restatement Effective Date unless Administrative Agent otherwise consents in writing to the earlier conversion date. In lieu of delivering the above described Notice of Borrowing, Borrower may give Administrative Agent telephonic notice by the required time of the proposed borrowing under this subsection 2.1; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Administrative Agent on or prior to the Restatement Effective Date. Neither Administrative Agent nor any Lender shall incur any liability to Borrower in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Borrower or for otherwise acting in good faith under this subsection 2.1B, and upon funding of Loans by Lenders in accordance with this Agreement pursuant to any telephonic notice, Borrower shall have effected Loans hereunder. Except as provided in subsection 2.7D, a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrower shall be bound to make a borrowing in accordance therewith. C. Disbursement of Funds. Except to the extent necessary to give effect to the conversion of Existing Term Loans and Existing Working Capital Loans, all Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their Pro Rata Shares of the Commitments for the particular type of Loan requested, it being understood that no Lender shall be responsible for any default by any other Lender in that Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender to make the particular type of Loan requested be increased or decreased as a result of the default by any other Lender in that other Lender's obligation to make a Loan requested hereunder. Promptly after receipt of the Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof), Administrative Agent shall notify each Lender of the proposed borrowing. Each Lender shall make the amount of its Loans available to Administrative Agent, in same day funds, at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York (or at any other location designated in writing by Administrative Agent to Lenders) not later than 11:00 A.M. (New York time) on the Restatement Effective Date. Upon satisfaction or waiver of the conditions precedent specified in subsections 3.1 and 3.3, Administrative Agent shall make the proceeds of such Loans available to Borrower on the Restatement Effective Date by causing an amount of same day funds equal to the proceeds of all such Loans received by Administrative Agent at its office 37 located at One Bankers Trust Plaza, New York, New York (or at any other location designated in writing by Administrative Agent to Lenders) to be credited to the account of Borrower at such office of Administrative Agent. Unless Administrative Agent shall have been notified by any Lender prior to the Restatement Effective Date that such Lender does not intend to make available to Administrative Agent such Lender's Loan requested on the Restatement Effective Date (which such notice, if so received by Administrative Agent, shall promptly be communicated to Borrower), Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on the Restatement Effective Date and Administrative Agent in its sole discretion may, but shall not be obligated to, make available to Borrower a corresponding amount on the Restatement Effective Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender and Administrative Agent makes such corresponding amount available to Borrower, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the Restatement Effective Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three (3) Business Days and thereafter at the Prime Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Borrower, and Borrower shall immediately pay such corresponding amount to Administrative Agent. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Tranche A Term Loan Commitment or its Tranche B Term Loan Commitment hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by such Lender hereunder. D. Scheduled Payments of Term Loans. Borrower shall make a principal payment (i) in the amount of the applicable Scheduled Tranche A Term Loan Repayment Amount upon the dates and in the amounts set forth in the definition of Scheduled Tranche A Term Loan Repayment Amount and (ii) in the amount of the applicable Scheduled Tranche B Term Loan Repayment Amount upon the dates and in the amounts set forth in the definition of Scheduled Tranche B Term Loan Repayment Amount; provided that the Tranche A Term Loans and all other amounts owed hereunder with respect to the Tranche A Term Loans shall be paid in full no later than the Expiry Date and the Tranche B Term Loans and all other amounts owed hereunder with respect to the Tranche B Term Loans shall be paid in full no later than the Final Maturity Date; provided, further, that if any payment under this subsection is stated to be due on a day that is not a Business Day, Borrower may, at Borrower's option and without limiting the provisions contained in subsection 2.5D, elect to make such payment on the immediately preceding Business Day. 38 2.2 Working Capital Loans and Swing Line Loans A. Working Capital Loan Commitments. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrower herein set forth, each Lender hereby severally agrees to (i) convert the Existing Working Capital Loans, if any, made by such Lender and outstanding on the Restatement Effective Date and to maintain such Existing Working Capital Loans as Working Capital Loans under this Agreement and (ii) lend to Borrower from time to time during the period from the Restatement Effective Date to but excluding the Expiry Date Working Capital Loans in an aggregate amount equal to (a) such Lender's Pro Rata Share of the aggregate Working Capital Loan Commitments minus (b) the aggregate amount of converted Existing Working Capital Loans of such Lender converted pursuant to clause (i) above then outstanding. Each Lender's commitment to convert and make Working Capital Loans to Borrower pursuant to this subsection 2.2A is herein called its "Working Capital Loan Commitment" and such commitments of all Lenders in the aggregate are herein called the "Working Capital Loan Commitments". The original amount of each Lender's Working Capital Loan Commitment is set forth on Schedule 1.1C annexed hereto and the aggregate initial amount of the Working Capital Loan Commitments is $80,000,000. Each Lender's Working Capital Loan Commitment shall expire on the Expiry Date and all Working Capital Loans and all other amounts owed hereunder with respect to the Working Capital Loans shall be paid in full no later than that date; provided that each Lender's Working Capital Loan Commitment shall expire immediately and without further action on the Restatement Effective Date if the Tranche A Term Loans and Tranche B Term Loans are not made in the full amount of the Tranche A Term Loan Commitments and Tranche B Term Loan Commitments, respectively on that date. The amount of the Working Capital Loan Commitments shall be reduced by the amount of all reductions thereof made pursuant to subsections 2.5A, 2.5F and 2.5G through the date of determination. In no event shall the aggregate outstanding principal amount of the Working Capital Loans from any Lender (whether converted or made hereunder) at any time exceed its Working Capital Loan Commitment then in effect. Subject to subsection 2.7D and except to the extent necessary to give effect to the conversion of Existing Working Capital Loans, all Working Capital Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make Working Capital Loans hereunder nor shall the Working Capital Loan Commitment of any Lender be increased or decreased as a result of the default by any other Lender in that other Lender's obligation to make Working Capital Loans hereunder. Notwithstanding the foregoing provisions of this subsection 2.2A and the provisions of subsection 2.2B, the extensions of credit under the Working Capital Loan Commitments shall be subject to the following limitations in the amounts and during the periods indicated: 39 (i) For thirty (30) consecutive days, at any time, during each twelve (12) consecutive month period after the Restatement Effective Date the aggregate principal amount of outstanding Working Capital Loans and Swing Line Loans shall not exceed $15,000,000; (ii) The amount otherwise available for borrowing under the Working Capital Loan Commitments as of any time of determination (other than to reimburse Issuing Lender for the amount of any drawings under any Letters of Credit honored by Issuing Lender and not theretofore reimbursed by Borrower) shall be reduced by (a) Letter of Credit Usage as of such time of determination plus (b) the aggregate principal amount of all outstanding Swing Line Loans (other than Swing Line Loans being repaid with the proceeds of the Working Capital Loans being made) as of such time of determination; (iii) At no time shall the Total Utilization of Working Capital Loan Commitments exceed the aggregate Working Capital Loan Commitments then in effect; (iv) In no event shall any Lender's Pro Rata Share of the Total Utilization of Working Capital Loan Commitments as of any date of determination exceed its Working Capital Loan Commitment then in effect; (v) At no time shall the Total Utilization of Working Capital Loan Commitments exceed the then applicable Borrowing Base. Working Capital Loans borrowed by Borrower may be repaid and, to but excluding the Expiry Date, reborrowed. Each Working Capital Loan shall be repaid not later than thirty-five months after the date such advance was made. Working Capital Loans made on any Funding Date shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in excess of that amount; provided, that the amount of Eurodollar Rate Loans made on any Funding Date shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. B. Swing Line Commitment. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrower set forth herein, Administrative Agent hereby agrees to make a portion of the Working Capital Loan Commitments available to Borrower from time to time during the period after the Restatement Effective Date through but excluding the Expiry Date, in an aggregate principal amount of up to $10,000,000 by making Swing Line Loans to Borrower, notwithstanding the fact that such Swing Line Loans, together with Administrative Agent's Pro Rata Share of the Total Utilization of Working Capital Loan Commitments, may exceed Administrative Agent's Working Capital Loan Commitment. Administrative Agent's commitment to make Swing Line Loans to Borrower pursuant to this subsection 2.2B is hereby called its "Swing Line 40 Commitment." In no event shall the aggregate principal amount of Swing Line Loans outstanding at any time exceed the Swing Line Commitment. In no event shall the Swing Line Commitment exceed the Working Capital Loan Commitments and any reduction of the Working Capital Loan Commitments made pursuant to subsections 2.5A, 2.5F or 2.5G which reduces the Working Capital Loan Commitments below the then current amount of the Swing Line Commitment shall result in an automatic corresponding reduction of the Swing Line Commitment to the amount of the Working Capital Loan Commitments, as so reduced, without any further action on the part of Administrative Agent. Administrative Agent's Swing Line Commitment shall expire on the Expiry Date and all Swing Line Loans shall be paid in full no later than that date. Swing Line Loans borrowed by Borrower under this subsection 2.2B may be repaid and, to but excluding the Expiry Date, reborrowed. Each Swing Line Loan shall be repaid not later than thirty-five months after the date such advance was made. All Swing Line Loans shall be Base Rate Loans and bear interest as provided in subsection 2.3A. Swing Line Loans made on any Funding Date may be made in any amount, subject to the terms and conditions of this Agreement. Administrative Agent, at any time in its sole and absolute discretion may, on one (1) Business Day's notice, require each Lender, and each Lender hereby agrees, subject to subsection 2.2A(iv) and this subsection 2.2B, to make a Working Capital Loan (which shall initially be funded as a Base Rate Loan) in an amount equal to such Lender's Pro Rata Share of the amount of the outstanding Swing Line Loans ("Refunded Swing Line Loans") with respect to which notice is given by Administrative Agent; provided, however, the obligation of each Lender to make any such Working Capital Loan is subject to the condition that (i) Administrative Agent believed in good faith that all conditions under Section 3 to the making of such Swing Line Loan were satisfied at the time such Swing Line Loan was made, or (ii) such Lender shall have actual knowledge, by receipt of the statements required pursuant to subsection 5.1 of this Agreement or otherwise, that any such condition has not been satisfied but shall have failed to notify Administrative Agent in writing that it has no obligation to make Working Capital Loans until such condition has been satisfied (any such notice shall be effective as of the date of receipt by Administrative Agent), or (iii) the satisfaction of any such condition not satisfied had been waived by Requisite Lenders prior to or at the time such Swing Line Loan was made. In the event that Working Capital Loans are made by Lenders under the immediately preceding sentence, each such Lender shall make the amount of its Working Capital Loan available to Administrative Agent, in same day funds, at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York (or at any other location designated in writing by Administrative Agent to Lenders), not later than 12:00 Noon (New York time) on the Business Day next succeeding the date such notice is given. The proceeds of such Working Capital Loans shall be immediately delivered to Administrative Agent (and not to Borrower) and applied to repay the Refunded Swing Line Loans. Borrower authorizes Administrative Agent to charge 41 Borrower's accounts with Administrative Agent (up to the amount available in each such account) in order to immediately pay Administrative Agent the amount of such Refunded Swing Line Loans to the extent amounts received from the Lenders are not sufficient to repay in full such Refunded Swing Line Loans; provided, however, that such action shall not prejudice any rights which Borrower may have against any Lender as a result of any default by that Lender hereunder. If any portion of any such amount paid to Administrative Agent should be recovered by or on behalf of Borrower from Administrative Agent in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by subsection 10.6. Subject to the proviso contained in the first sentence of this paragraph, each Lender's obligation to make the Working Capital Loans referred to in this paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Administrative Agent, Borrower or anyone else for any reason whatsoever; (ii) the occurrence or continuance of an Event of Default or a Potential Event of Default; (iii) any adverse change in the condition (financial or otherwise) or prospects of Borrower; (iv) any breach of this Agreement by Borrower or any other Lender; (v) the acceleration or maturity of any Loans or the termination of the Working Capital Loan Commitments after the making of any Swing Line Loan; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. A copy of each notice given by Administrative Agent to Lenders pursuant to this paragraph shall be promptly delivered by Administrative Agent to Borrower. In the event that Holding or any of its Subsidiaries has filed for protection under the Bankruptcy Code or otherwise if Administrative Agent requests and, in any event subject to satisfaction of the conditions set forth in the proviso to the first sentence of the preceding paragraph, each Lender shall acquire without recourse or warranty an undivided participation interest equal to such Lender's Pro Rata Share of any Swing Line Loan otherwise required to be repaid by such Lender pursuant to the preceding paragraph by paying to Administrative Agent on the date on which such Lender would otherwise have been required to make a Working Capital Loan in respect of such Swing Line Loan pursuant to the preceding paragraph, in immediately available funds, an amount equal to such Lender's Pro Rata Share of such Swing Line Loan, and no Working Capital Loans shall be made by such Lender pursuant to the preceding paragraph. If such amount is not in fact made available to Administrative Agent by a Lender on the date when Working Capital Loans would otherwise be required to be made pursuant to the preceding paragraph, Administrative Agent shall be entitled to recover such amount on demand from that Lender together with interest accrued from such date at the customary rate set by Administrative Agent for the correction of errors among banks for three (3) Business Days and thereafter at the rate of interest then applicable to Base Rate Loans. From and after the date on which any Lender purchases an undivided participation interest in a Swing Line Loan pursuant to this paragraph, Administrative Agent shall promptly distribute to such Lender such Lender's Pro Rata Share of all payments of principal and interest in respect of such Swing Line Loan. 42 Upon the making of a Working Capital Loan by a Lender pursuant to this subsection 2.2B, Administrative Agent shall make such entries in the Register and Lenders shall make entries in their respective internal records as appropriate in accordance with subsection 2.3G to reflect the funding of such Working Capital Loan and the associated repayment of any Refunded Swing Line Loan. Notwithstanding anything herein to the contrary, Administrative Agent shall not be obligated to make any Swing Line Loans if it has elected in its sole discretion not to make Swing Line Loans and has notified Borrower in writing or by telephone of such election. C. Notice of Borrowing. Subject to subsection 2.2A and 2.2B, whenever Borrower desires to borrow under this subsection 2.2, it shall deliver to Administrative Agent a Notice of Borrowing no later than 11:00 A.M. (New York time) (i) one (1) Business Day in advance of the proposed Funding Date, in the case of a requested Base Rate Loan, (ii) three (3) Business Days in advance in the case of a requested Eurodollar Rate Loan, of the proposed Funding Date and (iii) on the proposed Funding Date, in the case of a Swing Line Loan. The Notice of Borrowing shall specify (a) the proposed Funding Date (which shall be a Business Day), (b) the amount of the proposed Working Capital Loans and the amount of the proposed Swing Line Loans, (c) in the case of any Working Capital Loans requested to be made on or within thirty (30) days after the Restatement Effective Date, that such Working Capital Loans shall initially be Base Rate Loans, (d) in the case of Working Capital Loans requested to be made after the date thirty (30) days after the Restatement Effective Date, whether such Working Capital Loans are initially to consist of Base Rate Loans or Eurodollar Rate Loans or a combination thereof, (e) if such Working Capital Loans, or any portion thereof, are initially to be Eurodollar Rate Loans, the amounts thereof and the initial Interest Periods therefor, (f) that after giving effect to the proposed borrowing, the Total Utilization of Working Capital Loan Commitments will not exceed the aggregate Working Capital Loan Commitments in effect on the proposed Funding Date, (g) if a Swing Line Loan is requested, that the aggregate principal amount of outstanding Swing Line Loans will not exceed the Swing Line Commitment then in effect, and (h) after giving effect to the proposed borrowing, the Total Utilization of Working Capital Loan Commitments will not exceed the then applicable Borrowing Base. Working Capital Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.3D; provided that unless Administrative Agent otherwise consents in writing, the Working Capital Loans made during the period from and including the Restatement Effective Date until the date thirty (30) days after the Restatement Effective Date may not be converted until thirty (30) days after the Restatement Effective Date. In lieu of delivering the above-described Notice of Borrowing, Borrower may give Administrative Agent telephonic notice by the required time of any proposed borrowing of Working Capital Loans under this subsection 2.2; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to 43 Administrative Agent on or prior to the Funding Date of the requested Working Capital Loans. Neither Administrative Agent nor any Lender shall incur any liability to Borrower in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Borrower or for otherwise acting in good faith under this subsection 2.2C and upon funding of Loans by Lenders in accordance with this Agreement pursuant to any such telephonic notice, Borrower shall have effected Loans hereunder. Except as provided in subsection 2.7D, a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrower shall be bound to make a borrowing in accordance therewith. D. Disbursement of Funds. Promptly after receipt of a Notice of Borrowing (or telephonic notice thereof), Administrative Agent shall notify Bankers of the proposed borrowing if the Loan to be made pursuant to such proposed borrowing will be a Swing Line Loan and, if the proposed borrowing will be a Working Capital Loan, Administrative Agent shall notify each Lender of the proposed borrowing. Each Lender shall make the amount of its Working Capital Loan available to Administrative Agent, in same day funds, at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York (or at any other location designated in writing by Administrative Agent to Lenders) not later than 12:00 Noon (New York time) on the Funding Date. Upon satisfaction or waiver of the conditions precedent specified in subsections 3.2 (in the case of Working Capital Loans made on the Restatement Effective Date) and 3.3 (in the case of all Working Capital Loans), Administrative Agent shall make the proceeds of such Loans available to Borrower on such Funding Date by causing an amount of same day funds equal to the proceeds of all such Loans received by Administrative Agent to be credited to the account of Borrower at such office of Administrative Agent. Unless Administrative Agent shall have been notified by any Lender prior to any Funding Date in respect of any Working Capital Loans that such Lender does not intend to make available to Administrative Agent such Lender's Working Capital Loan on such Funding Date (which such notice, if so received by Administrative Agent, shall promptly be communicated to Borrower), Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Funding Date and Administrative Agent in its sole discretion may, but shall not be obligated to, make available to Borrower a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender and Administrative Agent makes such corresponding amount available to Borrower, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to 44 Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three (3) Business Days and thereafter at the Prime Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Borrower, and Borrower shall immediately pay such corresponding amount to Administrative Agent. Nothing in this subsection 2.2D shall be deemed to relieve any Lender from its obligation to fulfill its Working Capital Loan Commitment hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by such Lender hereunder. 2.3 Interest on the Loans A. Rate of Interest. Subject to the provisions of subsections 2.1B, 2.2C, 2.3E and 2.7H, each Tranche A Term Loan, Tranche B Term Loan and Working Capital Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Prime Rate or the Adjusted Eurodollar Rate. The applicable basis for determining the rate of interest shall be selected by Borrower initially at the time a Notice of Borrowing is given pursuant to subsection 2.1B or 2.2B, as applicable. The basis for determining the interest rate with respect to any Tranche A Term Loan, Tranche B Term Loan or Working Capital Loan may be changed from time to time pursuant to subsection 2.3D. If on any day a Tranche A Term Loan, Tranche B Term Loan or a Working Capital Loan is outstanding with respect to which notice has not been delivered to Administrative Agent in accordance with the terms of this Agreement specifying the basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Prime Rate. The Loans shall bear interest through maturity as follows: (i) if a Base Rate Loan, then at a per annum rate equal to the sum of the Base Rate plus the Applicable Base Rate Margin; (ii) if a Eurodollar Rate Loan, then at a per annum rate equal to the sum of the Adjusted Eurodollar Rate plus the Applicable Eurodollar Rate Margin; and (iii) if a Swing Line Loan, then at a per annum rate equal to the sum of the Base Rate plus the Applicable Base Rate Margin minus the applicable rate payable with respect to commission fees pursuant to subsection 2.4A; provided that, with respect to Working Capital Loans, Swing Line Loans and Tranche A Term Loans, the Applicable Eurodollar Rate Margin and the Applicable Base Rate Margin shall be decreased by the applicable Interest Rate Adjustment (if any) for the period commencing on the first day after which Borrower delivers a Compliance Certificate pursuant to subsection 5.1(v) with respect to financial statements delivered pursuant to subsection 5.1(ii) demonstrating that the applicable conditions for an Interest Rate Adjustment have been 45 satisfied and ending on the day on which Borrower delivers a Compliance Certificate demonstrating that such conditions are no longer satisfied or on which Borrower is required to deliver a Compliance Certificate but fails to deliver such Compliance Certificate; provided further, notwithstanding anything to the contrary contained herein, in no event shall a Base Rate Loan bear interest at a per annum rate less than the Prime Rate or shall a Swing Line Loan bear interest at a per annum rate less than the Base Rate minus the then current rate of the commitment fee (as determined in accordance with subsection 2.4A). B. Interest Periods. In connection with each Eurodollar Rate Loan, Borrower shall elect an interest period (each an "Interest Period") to be applicable to such Loan, which Interest Period shall be either a one, two, three, six or, if available in the sole discretion of Lenders, a nine month period; provided that: (i) the initial Interest Period for any Loan shall commence on the Funding Date of such Loan; (ii) in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) any Interest Period that begins on the last Business Day of a 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, subject to part (v) below, end on the last Business Day of a calendar month; (v) no Interest Period with respect to any Term Loan or any Working Capital Loan shall extend beyond the scheduled maturity of such Loan; (vi) no Interest Period may extend beyond a date on which Borrower is required to make a scheduled payment of principal of the Loans unless the aggregate principal amount of Loans that are Base Rate Loans or that have Interest Periods expiring on or before such date equals or exceeds the principal amount required to be paid on the Loans on such date; (vii) the Interest Period for a Loan that is converted pursuant to subsection 2.7D shall commence on the date of such conversion and shall expire on the date on 46 which the Interest Period for the Loans of the other Lenders that were not converted expires; and (viii) there shall be no more than ten (10) Interest Periods relating to Eurodollar Rate Loans outstanding at any time; and (ix) no Eurodollar Rate Loan shall have an Interest Period of nine months unless each Lender shall agree to permit such Interest Period; provided that a Lender's funding a Eurodollar Rate Loan subsequent to receipt by such Lender of a Notice of Borrowing indicating that the applicable Eurodollar Rate Loan shall have an Interest Period of nine months shall be conclusive evidence of such Lender's agreement. C. Interest Payments. Subject to subsection 2.3E, interest shall be payable on the Loans as follows: (i) interest on each Base Rate Loan shall be payable in arrears on and to (but not including) each January 31, April 30, July 31 and October 31, commencing with January 31, 1997, upon any prepayment of any such Loan other than pursuant to subsection 2.5A(i) (to the extent accrued on the amount being prepaid) and at maturity; provided that in the event any Swing Line Loans or any Working Capital Loans that are Base Rate Loans are prepaid pursuant to subsection 2.5A(i), interest accrued on such Swing Line Loans or Working Capital Loans through the date of such prepayment shall be payable on the next succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity); and (ii) interest on each Eurodollar Rate Loan shall be payable in arrears on and to (but not including) each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity. D. Conversion or Continuation. Subject to the provisions of subsection 2.7, Borrower shall have the option to (i) convert at any time all or any part of (a) outstanding Loans which are Base Rate Loans equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount and (b) outstanding Eurodollar Rate Loans equal to $1,000,000 and integral multiples of $500,000 in excess thereof, from Loans bearing interest at a rate determined by reference to one basis to Loans bearing interest at a rate determined by reference to an alternative basis, or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate Loan and the succeeding Interest Period(s) of such continued Loan shall commence on the last day of the Interest Period of the Loan to be continued; provided, however, Eurodollar Rate Loans may only be converted into Loans bearing interest determined by reference to an 47 alternative basis on the expiration date of an Interest Period applicable thereto; and provided, further, that no outstanding Loan may be continued as, or be converted into, a Eurodollar Rate Loan when any Event of Default or Potential Event of Default has occurred and is continuing; provided further that the Loans made on the Restatement Effective Date may not be converted prior to thirty (30) days after the Restatement Effective Date, unless Administrative Agent otherwise consents in writing and; provided further that, subject to the provisions of subsection 2.7, no outstanding Loan may be converted into a Base Rate Loan during the period from December 15 of any year to, and including, January 15 of the immediately succeeding year except any Base Rate Loan made pursuant to subsections 2.2B and 2.9C. Borrower shall deliver a Notice of Conversion/Continuation to Administrative Agent no later than 12:00 Noon (New York time) at least one (1) Business Day in advance of the proposed conversion/continuation date (in the case of a conversion to a Base Rate Loan), and at least three (3) Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall certify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount of the Loan to be converted/continued, (iii) the nature of the proposed conversion/continuation, (iv) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, the requested Interest Period, and (v) that no Potential Event of Default or Event of Default has occurred and is continuing or would result from the proposed conversion/continuation. In lieu of delivering the above-described Notice of Conversion/Continuation, Borrower may give Administrative Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.3D; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/Continuation to Administrative Agent on or before the proposed conversion/continuation date. Neither Administrative Agent nor any Lender shall incur any liability to Borrower in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of Borrower or for otherwise acting in good faith under this subsection 2.3D and upon conversion/continuation by Administrative Agent in accordance with this Agreement, pursuant to any telephonic notice Borrower shall have effected such conversion or continuation as the case may be, hereunder. Except as provided in subsection 2.7D, a Notice of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Borrower shall be bound to convert or continue in accordance therewith. E. Default Rate; Post Maturity Interest. Upon the occurrence of an Event of Default, the interest rate payable by Borrower with respect to principal of Loans 48 and, to the extent permitted by law, interest payments thereon not paid when due, shall be increased, effective from and after the date of occurrence of such Event of Default, to a rate that is two percent (2%) per annum in excess of the rate otherwise payable under this Agreement (or, in the case of fees and other amounts due hereunder, at the Prime Rate plus 3.50%); provided that, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective, such Eurodollar Rate Loans shall thereupon become Base Rate Loans and thereafter bear interest payable upon demand at a rate which is two percent (2%) per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. The rate provided in this subsection 2.3E shall be reduced by two percent (2%) per annum to the rate otherwise payable under this Agreement effective upon the cure pursuant to the terms of this Agreement of all Events of Default giving rise to the increase provided herein. No waiver of any Event of Default and no amendment to this Agreement shall operate as a cure of any Event of Default unless expressly stated in writing in such waiver or amendment. The payment or acceptance of the increased rate provided by this subsection 2.3E shall not constitute a waiver of any Event of Default or an amendment to this Agreement or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender. F. Computation of Interest. Interest on the Loans shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, shall be included; and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan, or with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. G. Register. (i) Administrative Agent shall maintain a register (the "Register") on which it will record the Commitments from time to time of each of the Lenders (including the Working Capital Loan Commitments), the Loans made by each of the Lenders (including the Working Capital Loans) and each repayment in respect of the principal amount of the Loans of each Lender. Any such recordation shall be conclusive and binding, absent manifest error. (ii) Each Lender will record on its internal records the amount of each Loan made by it and each payment in respect thereof. Failure to make any such recordation, or any error in such recordation, shall not affect the Obligations of Borrower in respect of such Loans. Any such recordation shall be conclusive and binding, absent manifest 49 error; provided, that in the event of any discrepancy between the Register and a Lender's internal records, the Register shall be conclusive and binding absent manifest error. H. Note Option. Any Lender or Administrative Agent may, by notice to Administrative Agent and Borrower, request that all or part of the principal amount of the Borrower's Obligations to such Lender or Administrative Agent in respect of Term Loans and/or Working Capital Loan Commitments and/or Swing Line Commitment hereunder be evidenced by a Term Note and/or a Working Capital Note and/or a Swing Line Note, as applicable. Within three (3) Business Days of Borrower's receipt of such notice, Borrower shall execute and deliver to Administrative Agent for delivery to the appropriate Lender or Administrative Agent a Note or Notes in the principal amount(s) specified in such notice, payable to the notifying Lender or Administrative Agent or, if so specified in such notice, any Person who is an assignee of such Lender or Administrative Agent pursuant to subsection 10.2 hereof. 2.4 Fees A. Commitment Fee. Borrower agrees to pay to Administrative Agent, for distribution to each Lender in proportion to that Lender's Pro Rata Share of the Working Capital Loan Commitments, commitment fees for the period from and including the Restatement Effective Date to but excluding the Expiry Date equal to the average of the daily unused portion of the Commitments multiplied by .50% per annum, such commitment fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable in arrears on and to (but not including) each January 31, April 30, July 31 and October 31, commencing on the first such date to occur after the Restatement Effective Date, and upon the termination of the Commitments; provided that the applicable rate set forth above shall be decreased by .125% per annum for the period commencing on the day after Borrower delivers a Compliance Certificate pursuant to subsection 5.1(v) with respect to financial statements delivered pursuant to subsection 5.1(ii) demonstrating that the Second Adjustment Requirements are satisfied and ending on the day on which Borrower delivers a Compliance Certificate demonstrating that such conditions are no longer satisfied or on which Borrower is required to deliver a Compliance Certificate but fails to deliver such Compliance Certificate. Anything contained in this Agreement to the contrary notwithstanding, for purposes of calculating the commitment fees payable by Borrower pursuant to this subsection 2.4A, the "unused portion of the Commitments", as of any date of determination, shall be an amount equal to the aggregate amount of Commitments as of such date minus the aggregate principal amount of all outstanding Loans (excluding Swing Line Loans) on such date, and the unused portion of the Commitments shall not be reduced by reason of outstanding Swing Line Loans, the issuance of Letters of Credit or by any limitation of the amount available for borrowing thereunder set forth in the numbered paragraphs of subsection 2.2A. B. Other Fees. Borrower agrees to pay to Bankers, MLCC and Merrill Lynch, for their respective accounts, the fees set forth, and upon the terms set forth, in the 50 letter regarding fees dated October 8, 1996 among Borrower, Holding, Bankers, MLCC and Merrill Lynch. 2.5 Prepayments and Payments; Reductions in Commitments A. Prepayments. (i) Voluntary Prepayments of Loans. Borrower may, upon not less than three (3) Business Days' prior written or telephonic notice confirmed in writing to Administrative Agent (which notice Administrative Agent will promptly transmit by telegram, telex or telephone to each Lender, any such telephonic notice to be promptly confirmed by Administrative Agent in writing) specifying the Loan or Loans to which such prepayment is to be applied, at any time and from time to time prepay Term Loans in whole or in part in an aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess of that amount or, if such amount is less than $1,000,000, in the then remaining amount of the Term Loans, and prepay Working Capital Loans in an aggregate minimum amount of $500,000 and integral multiples of $500,000 in excess of that amount or, if such amount is less than $500,000, in the then remaining amount of the Working Capital Loans; provided, however, that a Eurodollar Rate Loan may only be prepaid on the expiration date of the Interest Period applicable thereto. If the notice of prepayment does not specify how such prepayment shall be applied, it shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, as determined by Administrative Agent. Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date. Voluntary prepayments of Term Loans shall be applied as provided in subsection 2.5A(iii). (ii) Mandatory Prepayments. Borrower shall make the following prepayments, as applicable: (a) Prepayments from Asset Sales. Upon receipt by Holding or any of its Subsidiaries of Cash Proceeds from Asset Sales in excess of $1,000,000 in the aggregate, measured on a cumulative basis from the Restatement Effective Date, Borrower shall prepay the Loans in an amount equal to Estimated Net Cash Proceeds of such Asset Sales on the date of the receipt of Cash Proceeds of Asset Sale which causes the aggregate Cash Proceeds from Asset Sales to equal or exceed $1,000,000 in the manner specified in subsection 2.5A(iii) and, on the 30th day after receipt of such Cash Proceeds, Borrower shall make an additional prepayment of the Loans in the manner specified in subsection 2.5A(iii) in an amount equal to the excess, if any, of Net Cash Proceeds of Asset Sale over Estimated Net Cash Proceeds of such Asset Sale; and, within one (1) Business Day of the receipt of any cash 51 payment on any note constituting Net Cash Proceeds of Asset Sale, Borrower shall prepay the Loans in the manner specified in subsection 2.5A(iii) in an amount equal to such additional Net Cash Proceeds of Asset Sale; provided that, nothing in this subsection 2.5A(ii)(a) shall be construed to permit any such sale, financing or other disposition other than as otherwise expressly permitted by this Agreement unless otherwise approved by Requisite Lenders in writing; provided further that, concurrently with the making of any prepayment pursuant to this subsection 2.5A(ii)(a), Borrower shall deliver an Officers' Certificate demonstrating the derivation of Net Cash Proceeds of Asset Sale from the gross sales price of any correlative Asset Sale. Notwithstanding anything to the contrary contained in this subsection 2.5A(ii)(a), but provided that no Event of Default or Potential Event of Default has occurred and is continuing, in the event any prepayment pursuant to this subsection, which is applied in accordance with the provisions of subsection 2.5A(iii), would result in the incurrence by Borrower of liability pursuant to subsection 2.7E(ii), Borrower shall be permitted to retain and shall not be required to make a prepayment in respect of that portion of the Cash Proceeds from Asset Sales which would result in the incurrence of such liability; provided, however, that Borrower shall, on the last day of each subsequent Interest Period, make prepayments, in an aggregate amount not to exceed the aggregate amount of Cash Proceeds from Asset Sales retained by Borrower pursuant to this sentence, to the extent such prepayments do not result in the incurrence of liability pursuant to subsection 2.7E(ii). In the event that Holding or the applicable Subsidiary reasonably expects the proceeds of a sale of equipment of Holding or such Subsidiary to be reinvested within 180 days from the receipt of Cash Proceeds in similar productive assets used or useable in the business of Holding or such Subsidiary, then Borrower shall either (y) deliver cash in an amount equal to the Estimated Net Cash Proceeds of such sale or the portion thereof expected to be reinvested to Administrative Agent to be held by Administrative Agent as collateral in accordance with the terms of this paragraph or (z) prepay Working Capital Loans and reduce the Working Capital Loan Commitments in accordance with the terms of the immediately succeeding paragraph. Upon Borrower's request and provided that no Event of Default has occurred and is continuing, Administrative Agent shall release such proceeds or a portion thereof to Borrower for reinvestment as described above. In the event Borrower fails to reinvest such Cash Proceeds on or prior to the end of the applicable 180-day period, Administrative Agent shall apply such amount as a prepayment pursuant to this subsection 2.5A(ii)(a) and it shall be applied in the order set forth in subsection 2.5A(iii). 52 In the event that Borrower elects to prepay Working Capital Loans in accordance with clause (z) of the immediately preceding paragraph, Borrower shall prepay Working Capital Loans and reduce the Working Capital Loan Commitments by the amount of the Estimated Net Cash Proceeds of such sale or the portion thereof expected to be reinvested; provided, that upon reinvestment in accordance with the terms of the immediately preceding paragraph, the reduction in the Working Capital Loan Commitment shall be decreased by the amount of such reinvestment. In the event Borrower fails to reinvest all of such Cash Proceeds in accordance with the terms of the immediately preceding paragraph on or prior to the end of the applicable 180-day period, the reduction in Working Capital Loan Commitments in the aggregate amount of such Cash Proceeds not reinvested shall automatically be permanent and final. (b) Prepayments from Issuance or Sale of Equity or Debt Securities. Upon the receipt by Holding or any of its Subsidiaries of Cash Proceeds of any issuance or sale of equity or debt securities (other than the Subordinated Notes issued on the Restatement Effective Date or debt securities issued in connection with purchase money Indebtedness permitted under subsection 6.1(iii)(z) or sales of Holding Common Stock in the ordinary course of business to members of management of Borrower) of Holding or any of its Subsidiaries, Borrower shall make prepayments of the Loans, in the manner specified in subsection 2.5A(iii), in an aggregate amount equal to Borrower's reasonable estimate of the aggregate amount of such Cash Proceeds, net of customary costs of sale and issuance actually incurred by Holding or the applicable Subsidiary, consisting of legal, accounting and investment banking fees, underwriters discount and commissions, registration expenses and similar expenses and, on the 60th day after the receipt of such Cash Proceeds shall make an additional prepayment in an amount equal to the excess, if any, of such Cash Proceeds over the amount of such estimated Cash Proceeds; provided, that concurrently with the making of any prepayment pursuant to this subsection, Borrower shall deliver an Officers' Certificate demonstrating the derivation of the net Cash Proceeds from the gross Cash Proceeds of any such issuance or sale; provided, further, that nothing in this subsection shall be construed to permit any such issuance or sale of debt or equity securities other than as expressly permitted by this Agreement unless otherwise approved by Administrative Agent and Requisite Lenders in writing. (c) Prepayments from Consolidated Excess Cash Flow. No later than sixty-five (65) days after the end of each Fiscal Year, Borrower shall prepay the Loans in an amount equal to 75% of the Consolidated Excess Cash Flow for such Fiscal Year in the manner specified in subsection 2.5A(iii). 53 (d) Prepayments due to Pension Plan Reversion. Upon the return to Holding or any of its Subsidiaries of any surplus assets of any Pension Plan, Borrower shall prepay the Loans in an amount equal to the value of such returned surplus assets net of transaction costs (including taxes payable thereon) incurred in obtaining such return in the manner specified in subsection 2.5A(iii); provided, however, that Borrower shall have no obligation to seek the return of any such surplus assets. (e) Prepayments due to Limitation on Working Capital Loan Commitments. Borrower shall make prepayments of Working Capital Loans necessary to give effect to the limitations set forth in subsection 2.2A. (iii) Application of Prepayments. (a) Application by Type of Loans. All prepayments shall include payment of accrued interest on the principal amount so prepaid and shall be applied to the payment of interest before application to principal. With respect to different Loans being prepaid separately, any prepayment shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans. Voluntary prepayments pursuant to subsection 2.5A(i) shall be applied (i) first, to the next scheduled principal payment of the tranche A Term Loans and Tranche B Term Loans, pro rata based on the applicable Scheduled Tranche A Term Loan Repayment Amount and Scheduled Tranche B Term Loan Repayment Amount, and (ii) to the extent of any amount in excess of the amount applied pursuant to clause (i), to the Tranche A Term Loans and Tranche B Term Loans (pro rata based on the respective aggregate principal amounts of the Tranche A Term Loans and Tranche B Term Loans) in order to reduce the then remaining Scheduled Tranche A Term Loan Repayment Amounts and Scheduled Tranche B Term Loan Repayment Amounts, as applicable, in inverse order of maturity. Mandatory prepayments required pursuant to subsections 2.5A(ii)(a), (b), (c), and (d) shall be applied first against the Term Loans in accordance with subsection 2.5A(iii)(b) and second to permanently prepay and reduce the Working Capital Commitments; provided, however, that, with respect to prepayments pursuant to subsection 2.5A(ii)(a), if the Borrowing Base is reduced by the applicable Asset Sale, Borrower may, at its option, permanently reduce the Working Capital Loan Commitment in any amount up to the amount of the reduction in the Borrowing Base (and make any prepayments required pursuant to subsection 2.5A(ii)(e) in connection therewith) and shall not be required to prepay the Term Loans to the amount of such Working Capital Loan Commitment reduction. 54 (b) Application of Prepayments of Term Loans to Tranche A Term Loans and Tranche B Term Loans. Any mandatory prepayments of the Term Loans pursuant to subsection 2.5A(ii) shall be applied to prepay the Tranche A Term Loans and the Tranche B Term Loans on a pro rata basis in accordance with the respective outstanding principal amounts thereof; provided that, in the case of any such mandatory prepayment of the Tranche B Term Loans with respect to which Borrower has given Administrative Agent written notification, at least one Business Day prior to Administrative Agent's receipt of such mandatory prepayment, that Borrower has elected to give Lenders with Tranche B Term Loans the option to waive their rights to receive such prepayment (a "Waivable Mandatory Prepayment"), Administrative Agent shall, upon receipt of such Waivable Mandatory Prepayment, notify each Lender of such receipt and of the amount of such Waivable Mandatory Prepayment to be applied to such Lender's Tranche B Term Loan and of the designation of such Waivable Mandatory Prepayment as such by Borrower; provided, further that Borrower shall use its reasonable efforts to notify Lenders of such Waivable Mandatory Prepayment three Business Days prior to the payment to Administrative Agent of such Waivable Mandatory Prepayment (it being understood that Borrower shall have no liability for failing to so notify Lenders). In the event any Lender desires to waive such Lender's right to receive such Waivable Mandatory Prepayment in whole or in part, (A) such Lender shall so advise Administrative Agent in writing no later than the close of business on the Business Day immediately following the date such notice is delivered and such Lender shall specify in writing the amount of such Waivable Mandatory Prepayment waived by such Lender and (B) upon receipt of such written advice from such Lender, Administrative Agent shall (I) apply 75% of the amount so waived by such Lender to prepay the Tranche A Term Loans and to reduce the unpaid Scheduled Tranche A Term Loan Repayment Amounts on a pro rata basis and (II) return the remainder of the amount so waived by such Lender to Borrower. If any Lender does not reply to Administrative Agent by the close of business on the Business Day immediately following delivery of such notice, such Lender will be deemed not to have waived any part of such repayment and if any Lender does not specify the amount to be waived, it will be deemed to have accepted 100% of its Waivable Mandatory Prepayment. Any mandatory prepayments applied to the Tranche A Term Loans or the Tranche B Term Loans in accordance with the provisions of this subsection 2.4A(iii)(b) shall be applied to reduce the then remaining Scheduled Tranche A Term Loan Repayment Amounts or Scheduled Tranche B Term Loan Repayment Amounts, as the case may be, in inverse order. B. Manner and Time of Payment. All payments of principal, interest and fees hereunder and under the Notes by Borrower shall be made without defense, set-off 55 or counterclaim and in same day funds and delivered to Administrative Agent not later than 12:00 Noon (New York time) on the date due at its office located at One Bankers Trust Plaza, New York, New York for the account of Lenders; funds received by Administrative Agent after that time shall be deemed to have been paid by Borrower on the next succeeding Business Day. Borrower hereby authorizes Administrative Agent to charge its account with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest and fees due hereunder (subject to sufficient funds being available in its account for that purpose). C. Apportionment of Payments. Aggregate principal and interest payments shall be apportioned among all outstanding Loans to which such payments relate, and such payments shall be apportioned ratably to Lenders, proportionately to Lenders' respective Pro Rata Shares. Administrative Agent shall promptly distribute to each Lender at its primary address set forth below its name on the appropriate signature page hereof or such other address as any Lender may request its share of all such payments received by Administrative Agent and the commitment fees of such Lender when received by Administrative Agent pursuant to subsection 2.4A. Any payments received by Administrative Agent by 12:00 Noon (New York time) on the applicable payment date and not distributed to Lenders on such payment date shall bear interest, payable by Administrative Agent, at the federal funds effecive rate, until such payment is distributed to Lenders as provided in this subsection. Notwithstanding the foregoing provisions of this subsection 2.5C if, pursuant to the provisions of subsection 2.7D, any Notice of Borrowing or Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter. D. Payments on Non-Business Days. Subject to the provisions of subsection 2.1D, whenever any payment to be made hereunder or under the Notes shall be stated to be due on a day that is not a Business Day, the payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or under the Notes or of the commitment and other fees hereunder, as the case may be; provided, however, that if the day on which payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in that month, then the due date thereof shall be the next preceding Business Day. E. Notation of Payment. Each Lender agrees that before disposing of any Note held by it, or any part thereof (other than by granting participations therein), that Lender will make a notation thereon of all Loans and principal payments previously made thereon and of the date to which interest thereon has been paid and will notify Borrower and Administrative Agent of the name and address of the transferee of that Note; provided that the failure to make (or any error in the making of) a notation of any Loan made under such Notes or to notify Borrower and Administrative Agent of the name and address of such 56 transferee shall not limit or otherwise affect the obligation of any Loan Party hereunder or under such Notes with respect to any Loan and payments of principal or interest on any such Note. F. Voluntary Reductions of Working Capital Loan Commitments. Borrower shall have the right, at any time and from time to time, to terminate in whole or permanently reduce in part, without premium or penalty, the Working Capital Loan Commitments in an amount up to the amount by which the Working Capital Loan Commitments exceed the Total Utilization of Working Capital Loan Commitments. Borrower shall give not less than three (3) Business Days' prior written notice to Administrative Agent designating the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction. Promptly after receipt of a notice of such termination or partial reduction, Administrative Agent shall notify each Lender of the proposed termination or reduction. Such termination or partial reduction of the Working Capital Loan Commitments, as the case may be, shall be effective on the date specified in Borrower's notice and shall reduce the relevant Working Capital Loan Commitment of each Lender proportionately to its Pro Rata Share. Any such partial reduction of the Working Capital Loan Commitments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess of that amount unless the remaining amount of such Commitments is less than $1,000,000 in which case such reduction shall be in the amount of the then remaining Commitments. G. Mandatory Reductions of Working Capital Loan Commitments. The Working Capital Loan Commitments shall be automatically and permanently reduced on the date of any prepayment of the Working Capital Loans pursuant to subsections 2.5(A)(ii)(a), (b), (c) or (d) by an amount equal to the amount of such prepayment. In the event that Borrower has received proceeds or earned income which is not required to be used to prepay Working Capital Loans pursuant to subsections 2.5A(ii)(a), (b), (c) or (d) because none or an insufficient amount of Working Capital Loans are then outstanding, then the Working Capital Loan Commitments shall be reduced by an amount equal to the amount of Working Capital Loans which would have been required to be prepaid if the Working Capital Loans outstanding at such time were equal to the Working Capital Loan Commitments; provided, that if, pursuant to the terms of this subsection, Borrower is required to reduce the Working Capital Loan Commitments to a level below the aggregate amount which is or may become available for drawing under all Letters of Credit then outstanding, Borrower shall instead deposit an amount equal to the amount by which the amount available for drawing would exceed the Working Capital Loan Commitments, if it were so reduced, as collateral for obligations that may become due with respect to the outstanding Letters of Credit. 57 2.6 Use of Proceeds A. Term Loans. The proceeds of the Term Loans shall be applied by Borrower, together with other funds, to consummate the Purchase, to fund the Distribution and to pay Transaction Costs. B. Working Capital Loans. The proceeds of the Working Capital Loans shall be applied by Borrower for the general corporate purposes of Borrower, which may include the reimbursement of Issuing Lender of any amounts drawn under any Letter of Credit as provided in subsection 2.9C and payment of certain Transaction Costs. C. Letters of Credit. The Letters of Credit shall be issued for the purposes set forth in the definitions of Commercial Letter of Credit and Standby Letter of Credit and such other general corporate purposes as may, in any instance, be approved by Administrative Agent and Requisite Lenders. D. Margin Regulations. No portion of the proceeds of any borrowing under this Agreement shall be used by Borrower to purchase or carry any Margin Stock in any manner that might cause the borrowing or the application of such proceeds to violate Regulation G, Regulation U, Regulation T, or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of the Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.7 Special Provisions Governing Eurodollar Rate Loans Notwithstanding any other provision of this Agreement, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: A. Determination of Interest Rate. As soon as practicable after 10:00 A.M. (New York time) on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrower and each Lender. B. Substituted Rate of Borrowing. If on any Interest Rate Determination Date any Lender (including Administrative Agent) shall have determined (which determination shall be final and conclusive and binding upon all parties but, with respect to the following clauses (i) and (ii)(b), shall be made only after consultation with Borrower and Administrative Agent) that: 58 (i) by reason of any changes arising after the date of this Agreement affecting the Eurodollar market or affecting the position of that Lender in such market, adequate and fair means do not exist for ascertaining the applicable interest rate by reference to the Eurodollar Rate with respect to the Eurodollar Rate Loans as to which an interest rate determination is then being made; or (ii) by reason of (a) any change after the date hereof in any applicable law or governmental rule, regulation or order (or any interpretation thereof and including the introduction of any new law or governmental rule, regulation or order) or (b) other circumstances affecting that Lender or the Eurodollar market or the position of that Lender in such market (such as for example, but not limited to, official reserve requirements required by Regulation D to the extent not given effect in the Eurodollar Rate), the Eurodollar Rate shall not represent the effective pricing to that Lender for Dollar deposits of comparable amounts for the relevant period; then, and in any such event, that Lender shall be an Affected Lender and it shall promptly (and in any event as soon as possible after being notified of a borrowing, conversion or continuation) give notice (by telephone confirmed in writing) to Borrower and Administrative Agent (which notice Administrative Agent shall promptly transmit to each other Lender) of such determination. Thereafter, Borrower shall pay to the Affected Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as the Affected Lender in its sole discretion shall determine) as shall be required to cause the Affected Lender to receive interest with respect to its Eurodollar Rate Loans for the Interest Period following that Interest Rate Determination Date at a rate per annum equal to the Applicable Eurodollar Rate Margin in excess of the effective pricing to the Affected Lender for Dollar deposits to make or maintain its Eurodollar Rate Loans. A certificate as to additional amounts owed the Affected Lender, showing in reasonable detail the basis for the calculation thereof, submitted in good faith to Borrower and Administrative Agent by the Affected Lender shall, absent manifest error, be final and conclusive and binding upon all of the parties hereto. C. Required Termination and Prepayment. If on any date any Lender shall have reasonably determined (which determination shall be final and conclusive and binding upon all parties) that the making or continuation of its Eurodollar Rate Loans has become unlawful or impossible by compliance by that Lender in good faith with any law, governmental rule, regulation or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), then, and in any such event, that Lender shall be an Affected Lender and it shall promptly give notice (by telephone confirmed in writing) to Borrower and Administrative Agent (which notice Administrative Agent shall promptly transmit to each Lender) of that determination. Subject to the prior withdrawal of a Notice of Borrowing or a Notice of Conversion/Continuation or prepayment of the Eurodollar Rate Loans of the Affected Lender as contemplated by the following subsection 2.7D, the obligation of the Affected Lender to make or maintain its Eurodollar Rate Loans 59 during any such period shall be terminated at the earlier of the termination of the Interest Period then in effect or when required by law and Borrower shall no later than the termination of the Interest Period in effect at the time any such determination pursuant to this subsection 2.7C is made or, earlier, when required by law, repay or prepay the Eurodollar Rate Loans of the Affected Lender, together with all interest accrued thereon. D. Options of Borrower. In lieu of paying an Affected Lender such additional moneys as are required by subsection 2.7B or the prepayment of an Affected Lender required by subsection 2.7C, Borrower may exercise any one of the following options: (i) If the determination by an Affected Lender relates only to Eurodollar Rate Loans then being requested by Borrower pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Borrower may by giving notice (by telephone confirmed in writing) to Administrative Agent (who shall promptly give similar notice to each Lender) no later than the date immediately prior to the date on which such Eurodollar Rate Loans are to be made, withdraw that Notice of Borrowing or Notice of Conversion/Continuation and the Eurodollar Rate Loans then being requested shall be made by Lenders as Base Rate Loans; or (ii) Upon written notice to Administrative Agent and each Lender, Borrower may terminate the obligations of Lenders to make or maintain Loans as, and to convert Loans into, Eurodollar Rate Loans and in such event, Borrower shall, prior to the time any payment pursuant to subsection 2.7C is required to be made or, if the provisions of subsection 2.7B are applicable, at the end of the then current Interest Period, convert all of the Eurodollar Rate Loans into Base Rate Loans in the manner contemplated by subsection 2.3D but without satisfying the advance notice requirements therein; or (iii) Borrower may give notice (by telephone confirmed in writing) to the Affected Lender and Administrative Agent (who shall promptly give similar notice to each Lender) and require the Affected Lender to make the Eurodollar Rate Loan then being requested as a Base Rate Loan or to continue to maintain its outstanding Base Rate Loan then the subject of a Notice of Conversion/Continuation as a Base Rate Loan or to convert its Eurodollar Rate Loans then outstanding that are so affected into Base Rate Loans at the end of the then current Interest Period (or at such earlier time as prepayment is otherwise required to be made pursuant to subsection 2.7C) in the manner contemplated by subsection 2.3D but without satisfying the advance notice requirements therein, that notice to pertain only to the Loans of the Affected Lender and to have no effect on the obligations of the other Lenders to make or maintain Eurodollar Rate Loans or to convert Base Rate Loans into Eurodollar Rate Loans. 60 E. Compensation. Borrower shall compensate each Lender, upon written request by that Lender (which request shall set forth in reasonable detail the basis for requesting such amounts and which shall, absent manifest error, be conclusive and binding upon all parties hereto), for all reasonable losses, expenses and liabilities (including, without limitation, any loss (including interest paid) sustained by that Lender in connection with the re-employment of such funds), that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Borrowing, a Notice of Conversion/Continuation or a telephonic request for borrowing or conversion/continuation or a successive Interest Period does not commence after notice therefor is given pursuant to subsection 2.3D, (ii) if any prepayment of any of its Eurodollar Rate Loans occurs on a date that is not the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Borrower, or (iv) as a consequence of any other default by Borrower to repay its Eurodollar Rate Loans when required by the terms of this Agreement. F. Quotation of Eurodollar Rate. Anything herein to the contrary notwithstanding, if on any Interest Rate Determination Date Administrative Agent is as a matter of general practice not quoting rates to first class banks in the Eurodollar market for the offering of Dollars for deposit with maturities comparable to the Interest Period and in amounts comparable to the Eurodollar Rate Loans requested, Administrative Agent shall give Borrower and each Lender prompt notice thereof and the Loans requested shall be made as Base Rate Loans. G. Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of its branch offices or the office of an Affiliate of that Lender. H. Increased Costs. Except as provided in subsection 2.7B with respect to certain determinations on Interest Rate Determination Dates, if, after the date hereof by reason of, (x) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any treaty, law, rule, or regulation, or (y) the compliance with any guideline or request from any central bank or other governmental authority or quasigovernmental authority exercising control over banks or financial institutions generally (whether or not having the force of law): (i) any Lender (or its applicable lending office) shall be subject to any tax, duty, levy, cost or other charge (except for taxes on the overall net income or alternative minimum taxable income of such Lender or its applicable lending office imposed by the jurisdiction in which such Lender's principal executive office or applicable lending office is organized, located or is doing business) with respect to its Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans, or the recording, registration, notarization or other formalization of the Eurodollar Rate 61 Loans or the basis of taxation of payments to any Lender of the principal of or interest or commitment fees or any amount payable on its Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans shall change; or (ii) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender's applicable lending office shall be imposed or deemed applicable or any other condition affecting its Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans shall be imposed on any Lender or its applicable lending office or the interbank Eurodollar market, and as a result thereof there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Loans, or there shall be a reduction in the amount received or receivable by that Lender or its applicable lending office, then Borrower shall from time to time, upon written notice from and demand by that Lender (with a copy of such notice and demand to Administrative Agent), pay to Administrative Agent for the account of that Lender, within five (5) Business Days after receipt of such notice, demand and appropriate proof of such cost, additional amounts sufficient to indemnify that Lender against such increased cost or reduced amount. A certificate as to the amount of such increased cost or reduced amount, submitted to Borrower and Administrative Agent by that Lender, shall, except for manifest error, be final, conclusive and binding for all purposes. Any payments to be made by Borrower under subsections 2.7B or 2.7H are to be without duplication. I. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this subsection 2.7 shall be made as though that Lender had actually funded its relevant Eurodollar Rate Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection 2.7. J. Eurodollar Rate Loans After Default. Unless Administrative Agent and Requisite Lenders shall otherwise agree, after the occurrence of and during the continuance of a Potential Event of Default or Event of Default, Borrower may not elect to have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan. 62 K. Affected Lenders' Obligation to Mitigate. Each Lender agrees that, as promptly as practicable after it becomes aware of the occurrence of an event or the existence of a condition that would cause it to be an Affected Lender under subsection 2.7B or 2.7C or that would entitle such Lender to receive payments under subsection 2.7H, it will, to the extent not inconsistent with such Lender's internal policies, use reasonable efforts to make, fund or maintain the affected Eurodollar Rate Loans of such Lender through another lending office of such Lender if as a result thereof the additional moneys which would otherwise be required to be paid to such Lender pursuant to subsection 2.7B or 2.7H would be materially reduced or the illegality or other adverse circumstances which would otherwise require prepayment of such Loans pursuant to subsection 2.7C would cease to exist, and if, as determined by such Lender in its sole discretion, the making, funding or maintaining of such Loans through such other lending office would not otherwise materially adversely affect such Loans or such Lender. Borrower hereby agrees to pay all reasonable expenses incurred by any Lender in utilizing another lending office of such Lender pursuant to this subsection 2.7K. 2.8 Capital Adequacy Adjustment In the event that any Lender shall have determined that the adoption or implementation after the date hereof of any law, treaty, governmental (or quasigovernmental) rule, regulation, guideline or order regarding capital adequacy, including, without limitation, the regulations set forth at 12 C.F.R. Part 208 (Appendix A) and 12 C.F.R. Part 225 (Appendix A), or any change therein or in the interpretation or application thereof, or compliance by any Lender with any request or directive regarding capital adequacy (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from any central bank or governmental agency or body having jurisdiction, does or shall have the effect of increasing the amount of capital required to be maintained by such Lender and thereby reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder, then Borrower shall from time to time, within five (5) days of written notice and demand from such Lender (with a copy to Administrative Agent) including a certificate setting forth in reasonable detail the manner of calculation of the reduction in the rate of return on such Lender's capital and claiming compensation pursuant to this subsection 2.8, pay to Administrative Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of such compensation, submitted to Borrower and Administrative Agent by such Lender, shall, absent manifest error, be final, conclusive and binding for all purposes. In determining such amount, a Lender may use any reasonable averaging and attribution method. Notwithstanding the foregoing, nothing in this subsection 2.8 is intended to provide and this subsection 2.8 shall not provide to any Loan Party the right to inspect the records, files or books of any Lender. 63 2.9 Letters of Credit A. Letters of Credit. In addition to Borrower requesting that Lenders make Working Capital Loans pursuant to subsection 2.2, Borrower may request, in accordance with the provisions of this subsection, on and after the Restatement Effective Date to and excluding the Expiry Date, that Administrative Agent or one or more Lenders issue Letters of Credit for the account of Borrower; provided that, if no Lender is willing to provide any Letter of Credit, Administrative Agent shall, if each of the conditions to issuance of such Letter of Credit in this Agreement is met, issue such Letter of Credit; provided further, that (i) Borrower shall not request that Administrative Agent or any Lender issue (and neither Administrative Agent nor any Lender shall issue) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Working Capital Loan Commitments would exceed the aggregate of all Working Capital Loan Commitments; (ii) Borrower shall not request that Administrative Agent or any Lender issue any Letter of Credit if, after giving effect to such issuance, the Letter of Credit Usage with respect to Standby Letters of Credit would exceed $10,000,000 or the Letter of Credit Usage with respect to Commercial Letters of Credit would exceed $10,000,000; (iii) Borrower shall not request that Administrative Agent or any Lender issue (and neither Administrative Agent nor any Lender shall issue) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Working Capital Loan Commitments would exceed the Borrowing Base; (iv) in no event shall Administrative Agent or any Lender issue any Commercial Letter of Credit having an expiration date which is (a) not acceptable to such Issuing Lender in its reasonable discretion, (b) more than one hundred eighty (180) days after its date of issuance or (c) later than 30 days prior to the Expiry Date; (v) in no event shall Administrative Agent or any Lender issue any Standby Letter of Credit having an expiration date later than the earlier of (y) the Expiry Date, or (z) the date which is one year from the date of issuance of such Standby Letter of Credit; provided that this clause (z) shall not prevent any Issuing Lender from agreeing (subject to clause (y) of this subsection 2.9A(v)) that a Standby Letter of Credit will automatically be extended annually for a period not to exceed one year unless such Issuing Lender elects not to extend for such additional period; and (vi) in no event shall Administrative Agent or any Lender issue any Letter of Credit denominated in any currency other than Dollars. 64 The issuance or extension of any Letter of Credit in accordance with the provisions of this subsection shall require the satisfaction of each condition set forth in subsection 3.4; provided, however, the obligation of each Issuing Lender to issue or extend any Letter of Credit is subject to the condition that (a) such Issuing Lender believed in good faith that all conditions under subsections 2.9A and 3.4 to the issuance or extension of such Letter of Credit were satisfied at the time such Letter of Credit was issued or extended or (b) the satisfaction of any such condition not satisfied had been waived by Requisite Lenders prior to or at the time such Letter of Credit was issued or extended; provided further that Issuing Lender shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, including, without limitation, an Officers' Certificate from Borrower as to the satisfaction of the conditions under subsection 3.4, in determining the satisfaction of any conditions to the issuance or extension of any Letter of Credit or the Total Utilization of Working Capital Loan Commitments or Letter of Credit Usage then in effect. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and drawings thereunder in an amount equal to such Lender's Pro Rata Share of the maximum amount which is or at any time may become available to be drawn thereunder. Each Letter of Credit supporting the payment of Indebtedness may provide that the Issuing Lender may (but shall not be required to) pay the beneficiary thereof upon the occurrence of an Event of Default and the acceleration of the maturity of the Loans or, if payment is not then due to the beneficiary, provide for the deposit of funds in an account to secure payment to the beneficiary and that any funds so deposited shall be paid to the beneficiary of the Letter of Credit if conditions to such payment are satisfied or returned to the Issuing Lender for distribution to Lenders (or, if all Obligations shall have been indefeasibly paid in full, to Borrower) if no payment to the beneficiary has been made and the final date available for drawings under the Letter of Credit has passed. Each payment or deposit of funds by the Issuing Lender as provided in this paragraph shall be treated for all purposes of this Agreement as a drawing duly honored by the Issuing Lender under the related Letter of Credit. B. Request for Issuance. Whenever Borrower desires to cause Administrative Agent or any Lender to issue a Letter of Credit, it shall deliver to Administrative Agent and that Lender a Notice of Issuance of Letter of Credit substantially in the form of Exhibit II annexed hereto no later than 1:00 P.M. (New York time) at least ten (10) Business Days in advance of the proposed date of issuance or such shorter time as may be acceptable to the Issuing Lender. The Notice of Issuance of Letter of Credit shall specify (i) the proposed Issuing Lender, (ii) the proposed date of issuance (which shall be a Business Day), (iii) the face amount of the Letter of Credit, (iv) the expiration date of the Letter of 65 Credit, (v) the name and address of the beneficiary, (vi) such other documents or materials as such Issuing Lender may reasonably request, and (vii) a precise description of the documents and the verbatim text of any certificate to be presented by the beneficiary which, if presented by the beneficiary prior to the expiration date of the Letter of Credit, would require the Issuing Lender to make payment under the Letter of Credit; provided that the Issuing Lender, in its sole judgment, may require changes in any such documents and certificates; provided further that the Issuing Lender shall not be required to issue any Letter of Credit that on its terms requires payment thereunder prior to the third Business Day following receipt by the Issuing Lender of such documents and certificates. In determining whether to pay any Letter of Credit, the Issuing Lender shall be responsible only to use reasonable care to determine that the documents and certificates required to be delivered under that Letter of Credit have been delivered and that they substantially comply on their face with the requirements of that Letter of Credit. In the case of Standby Letters of Credit, promptly upon the issuance of a Letter of Credit, the Issuing Lender shall notify Administrative Agent and each Lender of the issuance and the amount of each such Lender's respective participation therein determined in accordance with subsection 2.9D. In the case of Commercial Letters of Credit, each Issuing Lender (other than Administrative Agent) will send by facsimile transmission to Administrative Agent, promptly on the first Business Day of each week, the aggregate face amount of outstanding Commercial Letters of Credit issued by such Issuing Lender for each day of the immediately preceding week. C. Payment of Amounts Drawn Under Letters of Credit. In the event of any request for drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall immediately notify Borrower and Administrative Agent and Borrower shall reimburse the Issuing Lender on the day on which such drawing is honored in an amount in same day funds equal to the amount of such drawing; provided that, anything contained in this Agreement to the contrary notwithstanding, (i) unless prior to 10:00 A.M. (New York time) on the date of such drawing (a) Borrower shall have notified the Issuing Lender and Administrative Agent that Borrower intends to reimburse the Issuing Lender for the amount of such drawing with funds other than the proceeds of Working Capital Loans or (b) Borrower shall have delivered a Notice of Borrowing requesting Working Capital Loans which are Base Rate Loans in an amount equal to the amount of such drawing, Borrower shall be deemed to have given a Notice of Borrowing to Administrative Agent requesting Lenders to make Working Capital Loans which are Base Rate Loans on the date on which such drawing is honored in an amount equal to the amount of such drawing, and (ii) if so requested by Administrative Agent, Lenders shall, on the date of such drawing, make Working Capital Loans which are Base Rate Loans in the amount of such drawing, the proceeds of which shall be applied directly by Administrative Agent to reimburse the Issuing Lender for the amount of such drawing; and provided further that, if for any reason proceeds of Working Capital Loans are not received by the Issuing Lender on such date in an amount equal to the amount of such drawing, Borrower shall reimburse the Issuing Lender, on the Business Day immediately following the date of such drawing, in an amount in same day funds equal to the excess of the amount of such drawing over the amount of such Working Capital Loans, if 66 any, which are so received, plus accrued interest on such amount at the rate set forth in subsection 2.9E(iii). D. Payment by Lenders. If Borrower shall fail to reimburse the Issuing Lender, for any reason, as provided in subsection 2.9C (including, without limitation, the making of Working Capital Loans by Lenders pursuant to the terms of subsection 2.9C) in an amount equal to the amount of any drawing honored by the Issuing Lender under a Letter of Credit issued by it, the Issuing Lender shall promptly notify each Lender of the unreimbursed amount of such drawing and of such Lender's respective participation therein based on such Lender's Pro Rata Share. Each Lender shall make available to the Issuing Lender an amount equal to its respective participation, in same day funds, at the office of the Issuing Lender specified in such notice, not later than 1:00 P.M. (New York time) on the Business Day after the date notified by the Issuing Lender. If any Lender fails to make available to the Issuing Lender the amount of such Lender's participation in such Letter of Credit as provided in this subsection 2.9D, the Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest at the customary rate set by the Issuing Lender for the correction of errors among banks for one (1) Business Day and thereafter at the Prime Rate. Nothing in this subsection shall be deemed to prejudice the right of any Lender to recover from the Issuing Lender any amounts made available by such Lender to the Issuing Lender pursuant to this subsection if it is determined in a final judgment by a court of competent jurisdiction that the payment with respect to a Letter of Credit by the Issuing Lender in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of the Issuing Lender. The Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under this subsection with respect to any Letter of Credit issued by the Issuing Lender such other Lender's Pro Rata Share of all payments received by the Issuing Lender from Borrower or pursuant to the last paragraph of subsection 2.9A in reimbursement of drawings honored by the Issuing Lender under such Letter of Credit when such payments are received. E. Compensation. Borrower agrees to pay the following amounts with respect to each Letter of Credit issued on its behalf: (i) with respect to each Letter of Credit, a commission equal to the maximum amount available from time to time to be drawn under such Letter of Credit multiplied by a per annum rate equal to the remainder of the Applicable Eurodollar Rate Margin minus the applicable rate payable with respect to commitment fees pursuant to subsection 2.4A, payable in arrears on and to (but not including) the last Business Day of each Fiscal Quarter, commencing with the first Fiscal Quarter of 1997; (ii) with respect to each Letter of Credit, an administrative fee equal to .25% per annum of the maximum amount available from time to time to be drawn 67 under such Letter of Credit, payable in arrears on and to (but not including) the last Business Day of each Fiscal Quarter, commencing with the first Fiscal Quarter of 1997; (iii) with respect to drawings made under any Letter of Credit, interest, payable on demand, on the amount paid by the Issuing Lender in respect of each such drawing from the date of the drawing through the date such amount is reimbursed by Borrower (including any such reimbursement out of the proceeds of Working Capital Loans pursuant to subsection 2.9C) at a rate which is equal to the rate then applicable to Base Rate Loans; provided that if such amount is not paid on demand, the Obligations shall bear interest thereafter in accordance with the provisions of subsection 2.3E; (iv) with respect to the amendment or transfer of each Letter of Credit and each drawing made thereunder, documentary and processing charges in accordance with the Issuing Lender's standard schedule for such charges in effect at the time of such amendment, transfer or drawing, as the case may be, or as otherwise agreed to by the Issuing Lender. The Borrower shall pay promptly to Administrative Agent all amounts described in clauses (i) or (iii) of this subsection 2.9E with respect to a Letter of Credit, and Administrative Agent shall distribute to each Lender its Pro Rata Share (based on the respective Working Capital Loan Commitments). Borrower also shall pay promptly to the applicable Issuing Lender for its own account all amounts described pursuant to clauses (ii) and (iv) of this subsection 2.9E with respect to a Letter of Credit. F. Obligations Absolute. The obligation of Borrower to reimburse the Issuing Lender for drawings made under the Letters of Credit issued by it and to repay any Working Capital Loans made by Lenders pursuant to subsection 2.9C and the obligations by Lenders under subsection 2.9D shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Borrower may have at any time against a beneficiary or any transferee of any Letter of Credit (or any persons or entities for whom any such transferee may be acting), Administrative Agent, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Borrower and the beneficiary for which the Letter of Credit was procured); 68 (iii) any draft, demand, certificate or any other document presented under any 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; (iv) payment by the Issuing Lender under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; provided that such payment does not constitute gross negligence or willful misconduct of such Issuing Lender; (v) any adverse change in the condition (financial or otherwise) of Holding or any of its Subsidiaries; (vi) any breach of this Agreement or any other Loan Document by Holding or any of its Subsidiaries, Administrative Agent, or any Lender (other than the Issuing Lender); (vii) any other circumstance or happening whatsoever, which is similar to any of the foregoing; or (viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing. G. Additional Payments. If by reason of (i) any change in any applicable law, regulation, rule, decree or regulatory requirement or any change in the interpretation or application by any judicial or regulatory authority of any law, regulation, rule, decree or regulatory requirement applicable to financial institutions generally or (ii) compliance by the Issuing Lender or any Lender with any direction, request or requirement (whether or not having the force of law) of any governmental or monetary authority including, without limitation, Regulation D: (a) the Issuing Lender or any Lender shall be subject to any tax, levy, charge or withholding of any nature or to any variation thereof or to any penalty with respect to the maintenance or fulfillment of its obligations under this subsection 2.9, whether directly or by such being imposed on or suffered by the Issuing Lender or any Lender; (b) any reserve, special deposit, premium, FDIC assessment, capital adequacy or similar requirement is or shall be applicable, imposed or modified in respect of any Letters of Credit issued by the Issuing Lender or participations therein purchased by any Lender; or 69 (c) there shall be imposed on the Issuing Lender or any Lender any other condition regarding this subsection 2.9, any Letter of Credit or any participation therein; and the result of the foregoing is to directly or indirectly increase the cost to the Issuing Lender or any Lender of issuing, making or maintaining any Letter of Credit or of purchasing or maintaining any participation therein, or to reduce the amount receivable in respect thereof by the Issuing Lender or any Lender, then and in any such case the Issuing Lender or such Lender may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Borrower and Administrative Agent and provide appropriate proof of such cost, and Borrower shall pay within five (5) Business Days of the date of such notice such amounts as the Issuing Lender or such Lender may specify to be necessary to compensate the Issuing Lender or such Lender for such additional cost or reduced receipt, together with interest on such amount from the date demanded until payment in full thereof at a rate equal at all times to the Prime Rate plus the Applicable Base Rate Margin minus .50% per annum. The determination by the Issuing Lender or any Lender, as the case may be, of any amount due pursuant to this subsection 2.9G as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of error, be final and conclusive and binding on all of the parties hereto. H. Indemnification; Nature of Issuing Lender's Duties. In addition to amounts payable as elsewhere provided in this subsection, Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees and allocated costs of internal counsel) which the Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit, including, without limitation, the payment of draws thereunder, other than as a result of gross negligence or willful misconduct of the Issuing Lender as determined by a court of competent jurisdiction or (ii) the failure of the Issuing Lender to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "Government Acts"). Each Lender, proportionately to its Pro Rata Share of the Working Capital Loan Commitments, severally agrees to indemnify Issuing Lender to the extent Issuing Lender shall not have been reimbursed by Holding or its Subsidiaries, for and against any of the foregoing claims, demands, liabilities, damages, losses, costs, charges and expenses to which Issuing Lender is entitled to reimbursement from Holding or its Subsidiaries. As between Borrower and the Issuing Lender, Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by the Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender shall not be responsible (absent gross negligence or willful misconduct (as determined by a court of competent jurisdiction)): (i) for the form, validity, 70 sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of such Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of any such Letter of Credit to comply fully with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; (viii) for any consequences arising from causes beyond the control of the Issuing Lender, including, without limitation, any Government Acts and (ix) any special, consequential, indirect or incidental damages, including, but not limited to, lost profits arising out of or in connection with the issuance of any Letter of Credit or any action taken or not taken by the Issuing Lender in connection with any Letter of Credit, or any document or property referred to in or related to any Letter of Credit. None of the above shall affect, impair, or prevent the vesting of any of the Issuing Lender's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Lender under or in connection with the Letters of Credit issued by it or the related certificates, if taken or omitted in good faith and absent gross negligence or willful misconduct of the Issuing Lender (as determined by a court of competent jurisdiction), shall not put the Issuing Lender under any resulting liability to Borrower. Notwithstanding anything to the contrary contained in this subsection, Borrower shall have no obligation to indemnify the Issuing Lender in respect of any liability incurred by the Issuing Lender arising solely out of the gross negligence or willful misconduct of the Issuing Lender as determined by a court of competent jurisdiction, or out of the wrongful dishonor by the Issuing Lender of a proper demand for payment made under the Letters of Credit. For purposes of this subsection 2.9H, the term "Issuing Lender" means the Issuing Lender and any Lender purchasing a participation in any Letter of Credit pursuant to subsection 2.9D. I. Computation of Interest and Fees. Interest and fees payable pursuant to this subsection 2.9 shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which it accrues. 71 J. Existing Letters of Credit. Holding, Borrower, Administrative Agent and each Lender agree that all Existing Letters of Credit shall, for all purposes of this Agreement and the other Loan Documents, be deemed to have been issued by Bankers under and pursuant to the terms of this Agreement. 2.10 Taxes A. Taxes. Any and all payments or reimbursements made under this Agreement or under the Notes shall be made free and clear of and without deduction for any and all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto excluding (i) taxes imposed on the overall income (whether gross or net) or capital of a Lender or Administrative Agent by the jurisdiction in which the Lender or Administrative Agent is organized, resident or doing business and (ii) taxes, levies, imposts, deductions, charges or withholdings which are imposed by laws, treaties or regulations in effect as of the Restatement Effective Date; provided, however, that any changes in laws, treaties or regulations or the interpretation thereof applicable to financial institutions generally after the Restatement Effective Date shall not be excluded pursuant to this clause (ii) (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If Borrower shall be required by law to deduct any Taxes from or with respect to any sum payable hereunder to any Lender or Administrative Agent, then the sum payable shall be increased as may be necessary so that, after making all required deductions, such Lender or Administrative Agent receives an amount equal to the sum it would have received had no such deductions been made. B. Foreign Lenders. Each Lender organized under the laws of a jurisdiction outside the United States (referred to in this subsection 2.10B as a "Foreign Lender") as to which payments to be made under this Agreement or under the Notes are exempt from United States withholding tax under an applicable statute or tax treaty shall provide to Borrower and Administrative Agent (i) a properly completed and executed Internal Revenue Service Form 4224 or Form 1001 or other applicable form, certificate or document prescribed by the Internal Revenue Service of the United States certifying as to such Foreign Lender's entitlement to such exemption with respect to payments to be made to such Foreign Lender under this Agreement and under the Notes (referred to in this subsection 2.10B as a "Certificate of Exemption") or (ii) a letter from any such Foreign Lender stating that it is not entitled to any such exemption (referred to in this subsection 2.10B as "Letter of Non-Exemption"). Prior to becoming a Lender under this Agreement and within 15 days after a reasonable written request of Borrower or Administrative Agent from time to time thereafter, each Foreign Lender that becomes a Lender under this Agreement shall provide a Certificate of Exemption or a Letter of Non-Exemption to Borrower and Administrative Agent. 72 If a Foreign Lender is entitled to an exemption with respect to payments to be made to such Foreign Bank under this Agreement and does not provide a Certificate of Exemption to Borrower and Administrative Agent within the time periods set forth in the preceding paragraph, Borrower shall withhold taxes from payments to such Foreign Lender at the applicable statutory rates and Borrower shall not be required to pay any additional amounts as a result of such withholding as provided in subsection 2.10A; provided, however, that all such withholding and associated limitations in payment under subsection 2.10A shall cease upon delivery by such Foreign Lender of a Certificate of Exemption to Borrower and Administrative Agent. SECTION 3. CONDITIONS TO LOANS AND LETTERS OF CREDIT The obligations of Lenders to convert and make Loans and the other extensions of credit hereunder are subject to the satisfaction of all of the following conditions: 3.1 Conditions to Loans on the Restatement Effective Date The obligations of Lenders to convert and make the Loans on the Restatement Effective Date are, in addition to the conditions precedent specified in subsection 3.3, subject to prior or concurrent satisfaction of the following conditions: A. Holding Documents. On or before the Restatement Effective Date, Holding shall deliver to Administrative Agent and Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies for each Lender) each, unless otherwise noted, dated the Restatement Effective Date: 1. Copies of its Certificate of Incorporation, certified by the Secretary of State of the State of Delaware as of a recent date prior to the Restatement Effective Date and by its corporate secretary or an assistant secretary as of the Restatement Effective Date; 2. Copies of its Bylaws, certified as of the Restatement Effective Date by its corporate secretary or an assistant secretary; 3. Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents and Related Agreements to which it is a party, and approving and authorizing any documents, instruments or certificates to be executed by it in connection with this Agreement and the other Loan Documents and Related Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby, all in form and substance satisfactory to Administrative Agent and its counsel, each 73 certified as of the Restatement Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; 4. Signature and incumbency certificates of its officers executing this Agreement, the other Loan Documents and Related Agreements to which it is a party and any documents, instruments or certificates to be executed by it in connection therewith; 5. Executed copies of this Agreement and the other Loan Documents and Related Agreements to which it is a party; 6. Good standing certificates, including certification of tax status, certified by the Secretary of State of Delaware and each of its principal places of business, each dated a recent date prior to the Restatement Effective Date; and 7. Such other documents as any Agent or Lender may reasonably request. B. Borrower Documents. On or before the Restatement Effective Date, Borrower shall deliver to Administrative Agent and Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies for each Lender) each, unless otherwise noted, dated the Restatement Effective Date: 1. Copies of its Articles of Incorporation, certified by the Secretary of State of the State of Georgia as of a recent date prior to the Restatement Effective Date and by its corporate secretary or an assistant secretary as of the Restatement Effective Date; 2. Copies of its Bylaws, certified as of the Restatement Effective Date by its corporate secretary or an assistant secretary; 3. Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents and Related Agreements to which it is a party, the execution, delivery and payment of the Notes and approving and authorizing any documents, instruments or certificates required to be executed by it in connection with this Agreement and the other Loan Documents and Related Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby, all in form and substance satisfactory to Agents and their counsel, all certified as of the Restatement Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment; 4. Signature and incumbency certificates of its officers executing this Agreement and the other Loan Documents to which it is a party, the Term Notes, the 74 Working Capital Notes and the Swing Line Note, the Related Agreements and any documents, instruments or certificates to be delivered in connection therewith; 5. Executed copies of this Agreement, the First Amendment to Borrower Security Agreement dated as of November 15, 1996 and the other Loan Documents and Related Agreements to which it is a party; 6. Good standing certificates, including certification of tax status, certified by the Secretary of State of Georgia, each dated a recent date prior to the Restatement Effective Date; and 7. Such other documents as Administrative Agent or any Lender may reasonably request. C. Canadian Blue Bird Documents. On or before the Restatement Effective Date, Borrower shall deliver to Administrative Agent and Lenders (or to Administrative Agent for Lenders with sufficiently originally executed copies for each Lender) a certificate from the corporate secretary or an assistant secretary of Canadian Blue Bird certifying that the Certificate of Incorporation and bylaws of Canadian Blue Bird have not been amended, amended and restated, supplemented or otherwise modified since the Closing Date under and as defined in the Existing Credit Agreement. D. Perfection of Security Interests. Holding and Borrower shall have taken or caused to be taken such actions in such a manner so that Collateral Agent has a valid and perfected first priority security interest in the entire Collateral (subject to Liens consented to by Collateral Agent and Requisite Lenders with respect to such Collateral, junior Permitted Encumbrances and other Liens permitted by subsection 6.2) granted by the Collateral Documents. Such actions shall include, without limitation: (i) the delivery pursuant to the applicable Collateral Documents by Holding and Borrower of such certificates (which certificates shall be registered in the name of Collateral Agent or properly endorsed in blank for transfer or accompanied by irrevocable undated stock powers duly endorsed in blank, all in form and substance satisfactory to Collateral Agent) and promissory notes representing all of the capital stock and other instruments required to be pledged pursuant to the Collateral Documents, (ii) the delivery to Collateral Agent of Uniform Commercial Code financing statements, executed by Holding and Borrower as to the Collateral granted by Holding and Borrower for all jurisdictions as may be necessary or desirable to perfect Collateral Agent's security interest in such collateral, (iii) the filing with the United States Patent and Trademark Office with respect to the trademarks and patents of the Loan Parties; and (iv) evidence reasonably satisfactory to Collateral Agent that all other filings, recordings and other actions Collateral Agent deems necessary or advisable to establish, preserve and perfect the first priority Liens (subject to Liens permitted consented to by Agent and Requisite Lenders with respect to such Collateral) granted to Collateral Agent in real, personal and mixed property shall have been made. 75 E. Fee Collateral. On or before the Restatement Effective Date, Borrower shall have delivered to Administrative Agent, for the benefit of Agents and Lenders the following items, each in form and substance satisfactory to Agents: (a) executed Mortgages (or, if applicable amendments thereto) and financing statements encumbering the interest of Holding and its Subsidiaries in the Fee Collateral and (b) ALTA lender's extended coverage policies of title insurance (or, if applicable bring-down endorsements) on such Fee Collateral encumbered by the Mortgages in liability and form and issued by a title company satisfactory to Agents and in an amount satisfactory to Agents, showing the Mortgage as a first lien upon the respective fee properties described therein, subject only to Permitted Encumbrances of the type described in clauses (i) and (v) of the definition of Permitted Encumbrances and such other exceptions as may be approved by Agents in writing, together with any endorsements reasonably required by any Agent, and affirmative assurance that the improvements are wholly located within the boundaries of the insured land (the "Fee Title Policies"). F. Consummation of Purchase. On or before the Restatement Effective Date, the Purchase shall have been consummated pursuant to the Purchase Documents and Borrower shall have delivered to Administrative Agent complete, correct and conformed copies of each Purchase Document, all in form and substance satisfactory to Agents and Requisite Lenders. In addition, all opinions by counsel to Holding or any of its Subsidiaries (and, if requested by Administrative Agent, any certificates and letters) delivered in connection with the Purchase and the Purchase Documents shall be addressed to Agents and Lenders or accompanied by a written authorization from the Person delivering such document stating that Agents and Lenders may rely on such document as though it were addressed to them. Existing Subordinated Notes representing at least 51% of the outstanding principal amount of the Existing Subordinated Notes shall have been purchased pursuant to the Purchase and the aggregate premium paid in connection therewith shall not exceed an aggregate amount satisfactory to the Agents. If less than all of the Existing Subordinated Notes have been tendered pursuant to the Purchase, the Existing Subordinated Indenture shall have been amended pursuant to a supplemental indenture satisfactory in form and substance to Agents. G. Issuance of Subordinated Notes. On or before the Restatement Effective Date, Borrower shall have issued and sold the Subordinated Notes in an aggregate principal amount of $100,000,000 and Borrower shall have delivered to Administrative Agent complete, correct and conformed copies of all documents actually delivered in connection with the issuance of the Subordinated Notes and the execution of the Subordinated Indenture, all in form and substance satisfactory to Agents and Requisite Lenders. In addition, all opinions by counsel to Holding, or any of its Subsidiaries (and, if requested by Administrative Agent, any certificates and letters) delivered in connection with the Subordinated Notes and the Subordinated Note Indenture shall be addressed to Agents and Lenders or accompanied by a written authorization from the Person delivering such document 76 stating that Administrative Agent and Lenders may rely on such document as though it were addressed to them. H. Financial Statements; Pro Forma Balance Sheet. On or before the Restatement Effective Date, Lenders shall have received from Holding and Borrower (i) audited financial statements of Holding and its Subsidiaries for Fiscal Year 1995, consisting of a balance sheet and the related consolidated statements of income, stockholders' equity and cash flows for such Fiscal Year, (ii) unaudited financial statements of Holding and its Subsidiaries as at July 27, 1996, consisting of a balance sheet and the related consolidated statements of income, stockholders' equity and cash flows for the nine-month period ending on such date, all in reasonable detail and certified by the chief financial officer of Holding that they fairly present the financial condition of Holding and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, and (iii) pro forma consolidated balance sheets of Holding and its Subsidiaries as at September 28, 1996, prepared in accordance with GAAP and reflecting the consummation of and the transactions contemplated by the Loan Documents and the Related Agreements, which pro forma financial statements shall be in form and substance satisfactory to Agents. I. Projected Financial Statements. On or before the Restatement Effective Date, Holding and Borrower shall have delivered to Agents projected financial statements for Holding and its Subsidiaries for the seven-year period after the Restatement Effective Date and such projected financial statements shall be satisfactory in form and substance to Agents. J. Financial Condition and Valuation Certificates. Borrower shall have delivered to Administrative Agent and Lenders a Financial Condition Certificate dated the Restatement Effective Date, substantially in the form annexed hereto as Exhibit IX, with appropriate attachments demonstrating that, after giving effect to the consummation of the transactions contemplated by the Loan Documents and the Related Agreements the fair salable value of the assets of Borrower will not be less than the probable liability of its debts, that Borrower will be able to pay its debts as they mature and that Borrower will not have unreasonably small capital to conduct its business, and Administrative Agent and Lenders shall have received a solvency opinion of Valuation Research Corporation addressed to Agents and Lenders and such other opinions of value and other appropriate factual information and expert advice supporting the conclusions reached in such Financial Condition Certificate as any Agent may reasonably request, all in form and substance reasonably satisfactory to Agents. K. Distribution. Borrower shall have declared a dividend, payable on the Restatement Effective Date, in the aggregate amount not to exceed $202,000,000. Holding shall have declared a dividend and agreed to make related payments to holders of options to purchase Holding Common Stock in an aggregate amount not to exceed $202,000,000. 77 L. FIRREA Appraisals. To the extent applicable, on or before the Restatement Effective Date, Administrative Agent and Lenders shall have received, at Borrower's expense, appraisals with respect to the Fee Collateral, in form and substance and performed by appraisers satisfactory to Agents, which satisfy all of the applicable regulations adopted by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Thrift Supervision, and the Office of the Comptroller of the Currency pursuant to Title XI - Real Estate Appraisal Reform, Amendments of the Financial Institution Reform, Recovery and Enforcement Act of 1989. M. Necessary Consents. On or before the Restatement Effective Date, each Loan Party shall have obtained all consents to the transactions contemplated under this Agreement and the other Loan Documents of any Person required under any Contractual Obligation (including, without limitation, any consents required from LaSalle National Bank) of any Loan Party or any Subsidiary of a Loan Party, all of the foregoing in form and substance reasonably satisfactory to Agents. N. Intercreditor Agreements. Administrative Agent shall have entered into the GM Intercreditor Agreement and such Intercreditor Agreement shall be in full force and effect and satisfactory in form and substance to Agents. O. Hazardous Materials. On or before the Restatement Effective Date, Administrative Agent shall have received such evidence as Agents and their counsel deem appropriate in the circumstances, to establish that (w) there are no Hazardous Materials stored or otherwise present on, in or about any of the properties of Holding or its Subsidiaries, other than: (i) inventory; (ii) janitorial or housekeeping supplies; and (iii) those which would not have, either individually or in the aggregate, a Material Adverse Effect; (x) there are no underground tanks located on, in or about any of such properties of Holding or its Subsidiaries except as set forth on Schedule 4.17; (y) there is no other environmental risk, problem or hazard affecting any of such properties of Holding or its Subsidiaries, which risk, problem or hazard (1) would have, individually or in the aggregate, a Material Adverse Effect or (2) would, in the reasonable determination of Agents, materially adversely affect the syndication or participation of the Commitments customary for transactions of this type (clauses (1) or (2) being a "Material Event"); and (z) all activities conducted by Holding and its Subsidiaries on any of such properties have been conducted in compliance with all governmental laws or regulations pertaining to Hazardous Materials except for any non-compliance which would not, individually or in the aggregate, result in a Material Event. P. Representations of Holding and Borrower. Holding and Borrower shall have delivered to Administrative Agent an Officers' Certificate in form and substance satisfactory to Agents to the effect that (i) the representations and warranties in Section 4 hereof pertaining to such Person are true, correct and complete in all material respects on and as of the Restatement Effective Date to the same extent as though made on and as of that date, 78 (ii) since November 4, 1995 through the Restatement Effective Date there has been no Material Adverse Effect. Q. Performance of Agreements. Each of the Loan Parties shall have performed all agreements which this Agreement or the Related Agreements provide shall be performed on or before the Restatement Effective Date except as otherwise disclosed to and agreed to in writing by Agents. R. Payment of Fees. On or before the Restatement Effective Date, Holding shall have paid or cause to have been paid to Administrative Agent for distribution (as appropriate) to Lenders and Administrative Agent, the fees payable on the Restatement Effective Date referred to in subsection 2.4. S. Evidence of Insurance. On or before the Restatement Effective Date, Borrower shall have delivered to Administrative Agent certificates of insurance naming Collateral Agent on behalf of Administrative Agent and Lenders as loss payee under the casualty insurance policies required pursuant to subsection 5.4 hereof. All such certificates of insurance shall contain such endorsements as are reasonably required by Agents. T. Opinions from Counsel to Loan Parties. Agents, Lenders and their respective counsel shall have received originally executed copies of one or more favorable written opinions of special counsel for Holding and Borrower, in form and substance reasonably satisfactory to Agents and their counsel, dated as of the Restatement Effective Date, and setting forth substantially the matters in the opinion designated in Exhibit XVI annexed hereto and as to such other matters as any Agent may reasonably request. U. Opinions from Counsel to Agents. Lenders shall have received an originally executed copy of one or more favorable written opinions of (i) O'Melveny & Myers LLP, counsel to the Agents, dated as of the Restatement Effective Date, addressed to the Agents and Lenders and (ii) local counsel to Administrative Agent, dated as of the Restatement Effective Date, with respect to the Fee Collateral and as to such other matters as Administrative Agent may reasonably request. V. Borrowing Base Certificate. On or before the Restatement Effective Date, Administrative Agent shall have received a Borrowing Base Certificate dated as of November 2, 1996. W. Securities Regulations. The Subordinated Notes shall have been registered as qualified under the applicable federal or state securities laws or shall be exempt therefrom. X. Transaction Costs. Not less than three (3) days prior to the Restatement Effective Date, Borrower shall have delivered to Administrative Agent and 79 Lenders a schedule setting forth its reasonable best estimate of the Transaction Costs (which shall not exceed $16,000,000), and such schedule shall be in form and substance satisfactory to Agents. Y. Other Corporate Actions. On or before the Restatement Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agents, acting on behalf of Lenders, and their counsel shall be reasonably satisfactory in form and substance to Agents and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as any Agent or Lender may reasonably request. 3.2 Conditions to Initial Working Capital Loans and Swing Line Loans The obligation of Lenders to make the initial Working Capital Loans and of Administrative Agent to make the initial Swing Line Loans hereunder are, in addition to the conditions precedent specified in subsection 3.3, subject to prior or concurrent satisfaction of the conditions that the Tranche A Term Loans and Tranche B Term Loans have been made on the Restatement Effective Date. 3.3 Conditions to All Loans The obligations of Administrative Agent and Lenders to make any and all Loans on each Funding Date are subject to the following further conditions precedent: A. Notice of Borrowing. Administrative Agent shall have received, in accordance with the provisions of subsections 2.1C or 2.2C, as the case may be, before that Funding Date, an originally executed Notice of Borrowing in each case signed by the Chief Executive Officer, the Chief Financial Officer, the Treasurer or the Vice President and Controller of Borrower or by any executive officer of Borrower designated by any of the above-described officers on behalf of Borrower in writing delivered to Administrative Agent. B. Conditions to Funding. As of that Funding Date: (i) The representations and warranties contained herein shall be true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date; 80 (ii) No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute (a) an Event of Default or (b) a Potential Event of Default; (iii) Holding and its Subsidiaries shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed by them on or before that Funding Date; (iv) No order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain any Lender from making that Loan; and (v) There shall not be pending or, to the knowledge of Holding or Borrower, threatened, any action, suit, proceeding, governmental investigation or arbitration against or affecting Holding or any of its Subsidiaries or any property of Holding or any of its Subsidiaries, that could reasonably be expected to result in a Material Adverse Effect that has not been disclosed by Holding or Borrower in writing pursuant to subsection 4.6 or 5.1(viii) prior to the making of the last preceding Loans (or, in the case of the initial Loans hereunder, prior to the execution of this Agreement) and there shall not have occurred any development in any action, suit, proceeding, governmental investigation or arbitration that could reasonably be expected to result in a Material Adverse Effect that has not been so disclosed prior to the making of the last preceding Loans. No injunction or other restraining order shall have been issued and no hearing to cause an injunction or other restraining order to be issued shall be pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the Stock Acquisition, this Agreement or the making of Loans hereunder. 3.4 Conditions to Letters of Credit The obligation of any Issuing Lender to issue or extend any Letter of Credit hereunder is subject to prior or concurrent satisfaction of all of the following conditions: A. On or before the date of issuance of such Letter of Credit, the Tranche A Term Loans and Tranche B Term Loans shall have been made. B. On or before the date of issuance of such Letter of Credit, the Issuing Lender with respect thereto shall have received, in accordance with the provisions of subsection 2.9B, a notice requesting the issuance of such Letter of Credit and all other information specified in subsection 2.9B, and such other documents as such Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. 81 C. On the date of issuance or extension of such Letter of Credit, all conditions precedent described in subsection 3.3B shall be satisfied to the same extent as though the issuance or extension of such Letter of Credit were the making of a Loan and the date of issuance or extension of such Letter of Credit were a Funding Date. SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce Agents and Lenders to enter into this Agreement, Holding and its Subsidiaries severally represent and warrant to each Agent and Lender that the following statements are true, correct and complete: 4.1 Organization, Powers, Good Standing, Business and Subsidiaries A. Organization and Powers. Each of Holding and its Subsidiaries is a corporation duly organized and validly existing under the laws of the state of its jurisdiction of incorporation and has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, to enter into this Agreement, and each Loan Document and Related Agreement to which it is a party, to issue the Notes (in the case of Borrower) and to consummate the Refinancing and to carry out the transactions contemplated hereby and thereby. B. Good Standing. Each of Holding and its Subsidiaries is duly qualified to transact business and is in good standing as a foreign corporation in each jurisdiction where the character of its activities requires such qualification, except where the failure to so qualify has not had and could not reasonably be expected to have a Material Adverse Effect. C. Conduct of Business. Borrower is engaged only in the manufacture and sale of school buses, commercial buses and recreational vehicles and operations substantially similar or incidental to such business (including engaging in transactions with respect to the Lease Portfolio). D. Subsidiaries. All of the direct and indirect Subsidiaries of Holding, as of the date of this Agreement, are identified in Schedule 4.1D annexed hereto. The capital stock of each of the Subsidiaries identified in Schedule 4.1D is duly authorized, validly issued, fully paid and nonassessable. The capital stock of each such Person identified on Schedule 4.1D is not Margin Stock. Schedule 4.1D correctly sets forth the ownership interest as of the date hereof of Holding in each of its direct and indirect Subsidiaries. E. Ownership. All of the common stock of Borrower is and will be owned by Holding. As of the Restatement Effective Date, MLCP and its Affiliates shall own beneficially at least 51% of the common stock of Holding. 82 4.2 Authorization of Borrowing, etc. A. Authorization of Borrowing. The execution, delivery and performance of this Agreement and the other Loan Documents and Related Agreements and the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action by each Loan Party. On or before the Restatement Effective Date, the execution, issuance and payment of the Subordinated Debt and the transactions contemplated thereby will be duly authorized by all necessary corporate action by each Loan Party. B. No Conflict. The execution, delivery and performance by Holding and its Subsidiaries of the Loan Documents and the Related Agreements and the issuance, delivery and payment by Borrower of the Notes and the Subordinated Debt and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate any provision of law applicable to Holding or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Holding or any of its Subsidiaries, or any order, judgment or decree of any court or other agency of government binding on Holding or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Holding or any of its Subsidiaries, except Contractual Obligations for which approvals or consents will be obtained on or before the Restatement Effective Date and except breaches, conflicts and defaults which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Holding or any of its Subsidiaries (other than Liens in favor of the Collateral Agent for the benefit of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Holding or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Restatement Effective Date. C. Governmental Consents. The execution, delivery and performance by Holding and its Subsidiaries of this Agreement, the other Loan Documents and the Related Agreements to which each is a party and application of the proceeds of the Loans and the Subordinated Debt and the consummation of the Refinancing and the other transactions contemplated hereby and thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Federal, state or other governmental, including Canadian, authority or regulatory body, except for filings required by Federal or state securities laws, filings required in connection with the perfection of security interests granted pursuant to the Loan Documents, consents, approvals, notices and actions that have been or will be obtained or taken on or before the Restatement Effective Date or which the failure to so obtain or take could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Neither the Refinancing nor the transactions contemplated thereby violate any applicable law or regulation in any material respect. 83 D. Binding Obligation. This Agreement, the other Loan Documents, and the Related Agreements are the legally valid and binding obligations of Holding and its Subsidiaries party thereto, enforceable against Holding and its Subsidiaries party thereto in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. E. Valid Issuance of Subordinated Debt. On the Restatement Effective Date, Borrower will have the corporate power and authority to issue the Subordinated Debt. The Subordinated Debt, when issued and paid for, will be the legally valid and binding obligation of Borrower, enforceable in accordance with its terms (including, without limitation, those pertaining to subordination) except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. The subordination provisions of the Subordinated Debt will be enforceable against the holders thereof, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles, and the Notes and all other monetary obligations hereunder are or will be within the definition of "Senior Indebtedness" included in the Subordinated Debt Documents. The issuance and sale of the Subordinated Debt, upon such issuance and sale, will be exempt from registration or qualification under applicable Federal and state securities laws. 4.3 Financial Condition Holding has heretofore delivered to Lenders the following materials: (i) audited consolidated balance sheet of Holding and its Subsidiaries as at November 4, 1995 and the related audited consolidated statements of income, shareholders' equity and cash flow of Holding and its Subsidiaries for the fiscal year of Holding ending on such date (including any comment letter submitted by the accountants in connection therewith) and (ii) unaudited consolidated balance sheets of Holding and its Subsidiaries as at the last day of the Fiscal Quarter ending July 27, 1996 and the related consolidated statements of income, shareholder's equity and cash flow of Holding and its Subsidiaries for the year-to-date period ended on such date. Such statements, except as otherwise stated in such statements, fairly present the consolidated financial position of Holding and its Subsidiaries as at such dates and the consolidated results of operations and the cash flow of Holding and its Subsidiaries for the periods then ended, subject, in the case of any unaudited interim financial statements, to changes resulting from normal year-end adjustments. Neither Holding nor any of its Subsidiaries has any material (a) Contingent Obligation, (b) contingent liability or liability for taxes, (c) long-term lease or (d) unusual forward or long-term commitment that is not reflected in the most recent financial statements (including the notes thereto) delivered pursuant to subsection 4.3 or 5.1 of this Agreement other than Contingent Obligations, contingent liabilities or liabilities for taxes, long-term leases or forward or long-term commitments incurred in the ordinary course of business. 84 4.4 No Material Adverse Change; No Stock Payments Since November 4, 1995, no event or change has occurred that has caused, either in any case or in the aggregate, a Material Adverse Effect other than the events or changes required by or disclosed in this Agreement or the Related Agreements. Neither Holding nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made or set aside any sum or property for any Restricted Junior Payment or agreed to do so except as permitted by subsection 6.5. 4.5 Title to Properties; Liens Each of the Loan Parties and their respective Subsidiaries has good, sufficient and legal title, subject only to Permitted Encumbrances and Liens consented to by Administrative Agent and Requisite Lenders, to all their respective properties and assets reflected in the most recent consolidated balance sheet referred to in subsection 4.3 or in the most recent financial statements delivered pursuant to subsection 5.1 of this Agreement, except for (i) assets acquired or disposed of in the ordinary course of business since the date of such consolidated balance sheet and (ii) the sale of the Lease Portfolio pursuant to the Lease Portfolio Documents. Except for Permitted Encumbrances or Liens consented to by Administrative Agent and Requisite Lenders, all such properties and assets are free and clear of Liens. 4.6 Litigation; Adverse Facts Except as set forth on Schedule 4.6 annexed hereto, there is no action, suit, proceeding, governmental investigation or arbitration (whether or not purportedly on behalf of Holding or any of its Subsidiaries) at law or in equity or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, pending or, to the knowledge of Holding or any of its Subsidiaries, threatened against or affecting Holding or any of its Subsidiaries or any property of Holding or any of its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect. As of the Restatement Effective Date, none of Holding or any of its Subsidiaries has received any notice of termination of any material contract, lease or other agreement or suffered any material damage, destruction or loss (whether or not covered by insurance) or had any employee strike, work-stoppage, slow-down or lock-out or any substantial, nonfrivolous threat directed to it of any imminent strike, work-stoppage, slow-down or lock-out, any of which remain pending, that could reasonably be expected to result in a Material Adverse Effect. 4.7 Payment of Taxes Except to the extent permitted by subsection 5.3, all material tax returns and reports of Holding and each of its Subsidiaries required to be filed by any of them have been 85 timely filed, and all material taxes, assessments, fees and other governmental charges upon such Persons and upon their respective properties, assets, income and franchises which are due and payable have been paid when due and payable, except to the extent permitted by subsection 5.3. Neither Holding nor any of its Subsidiaries knows of any proposed tax assessment against any such Person that could reasonably be expected to result in a Material Adverse Effect, which is not being actively contested by such Person to the extent affected thereby, in good faith and by appropriate proceedings; provided that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 4.8 Materially Adverse Agreements; Performance of Agreements A. Neither Holding nor any of its Subsidiaries is a party to or is subject to any material agreement or instrument materially and adversely affecting the financial condition of Holding and its Subsidiaries taken as a whole, except as otherwise disclosed in writing to Administrative Agent and Lenders. B. Neither Holding nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults or the consequences of actions curing such default or defaults, if any, could not reasonably be expected to result in a Material Adverse Effect. 4.9 Governmental Regulation Neither Holding nor any of its Subsidiaries is subject to regulation under the Public Utility Holdings Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or to any Federal or state statute or regulation limiting its ability to incur Indebtedness for money borrowed or to create Liens on any of its properties or assets to secure such Indebtedness. 4.10 Securities Activities Neither any Loan Party nor any of their respective Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. 4.11 Employee Benefit Plans A. Except as set forth in Schedule 4.11 annexed hereto, Holding and each of its Subsidiaries is in material compliance with all applicable provisions and requirements 86 of Title I, II and IV of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan. B. No ERISA Event has occurred or is reasonably expected to occur. C. Except to the extent required under Section 4980B of the Internal Revenue Code or except as described on Schedule 4.11 annexed hereto, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Holding or any of its Subsidiaries. D. As of the most recent valuation date for any Pension Plan (excluding Pension Plans in which no employees of Holding or any of its Subsidiaries have ever participated as an employee of Holding or one of its Subsidiaries), the excess of the aggregated accumulated benefit obligations, as defined in Statement of Financial Accounting Standards No. 87 (the "ABO"), over the aggregate total fair market value for all such Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which the fair market value of the assets exceeds the ABO), does not exceed $2,500,000. 4.12 Representations and Warranties Incorporated From Subordinated Debt Documents Each of the representations and warranties given by Borrower in the Subordinated Debt Documents is true and correct in all material respects as of the Restatement Effective Date, except for those specifically relating to another time or times which were or will be true and correct in all material respects at such time or times. 4.13 Disclosure No representation or warranty of Holding or any of its Subsidiaries contained in this Agreement or any other document, certificate or written statement furnished to Lenders by or on behalf of Borrower for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to either Holding or any of its Subsidiaries in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made as of the time the same were made. The projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Holding and its Subsidiaries to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There is no fact known to Holding or any of its Subsidiaries (other than matters of a general economic nature) that could reasonably be expected to result in a Material Adverse Effect that has not been 87 disclosed herein or in such other documents (including the Merger Agreement), certificates and statements furnished to Administrative Agent or Lenders for use in connection with the transactions contemplated hereby. 4.14 Licenses, Permits and Authorizations Holding and each of its Subsidiaries has all approvals, licenses or other permits of all governmental or regulatory agencies, whether Federal, state or local, the absence of which could reasonably be expected to result in a Material Adverse Effect. 4.15 Intangible Property Except as set forth on Schedule 4.15 annexed hereto, Holding and each of its Subsidiaries is the sole and exclusive owner or licensee of all trade names, unregistered trademarks and service marks, brand names, patents, registered and unregistered copyrights, registered trademarks and service marks, and all applications for any of the foregoing, and all permits, grants and licenses or other rights with respect thereto used in or necessary for the conduct of their respective businesses as currently conducted, the absence of which could reasonably be expected to result in a Material Adverse Effect. Schedule 4.15 annexed hereto sets forth a true and complete list of all service marks and registered trademarks and patents (or trademarks or patents for which registration is pending) of Holding and its Subsidiaries. Neither Holding or any of its Subsidiaries has been charged with any material infringement of any intangible property of the character described above or been notified or advised of any material claim of any other Person relating to any of the intangible property, other than as set forth in Schedule 4.15 annexed hereto. 4.16 Certain Fees Except for fees set forth in the schedule delivered pursuant to subsection 3.1X and except as otherwise disclosed in writing to Agents and Lenders prior to the date hereof, no fee or commission will be payable by Holding or any of its Subsidiaries with respect to the offer, issue and sale of the Subordinated Debt or the Refinancing. Holding and each of its Subsidiaries, jointly and severally, hereby indemnify Agents and Lenders against, and agree that they will hold Agents and Lenders harmless from, any claim, demand or liability for broker's or finder's fees alleged to have been incurred in connection with any such offer, issue and sale, the Refinancing or any of the other transactions contemplated hereby or thereby and any expenses, including reasonable legal fees, arising in connection with any such claim, demand or liability. No other similar fees or commissions will be payable by Holding or any of its Subsidiaries for any other services rendered to Holding or such Subsidiary ancillary to the transactions contemplated hereby or thereby, including the Refinancing. 88 4.17 Environmental Matters A. Disclosure. Except as set forth in Schedule 4.17: (i) the operations of Holding and each of its Subsidiaries (including, without limitation, all operations and conditions at or in the Facilities) comply in all material respects with all Environmental Laws; (ii) Holding and each of its Subsidiaries have obtained all environmental, health and safety permits necessary to their respective operations, and all such permits are in good standing, and Holding and each of its Subsidiaries are in compliance with all material terms and conditions of such permits; (iii) neither Holding nor any of its Subsidiaries has received (A) any written notice or claim to the effect that it is or may be liable in any material respect to any Person as a result of the Release or threatened Release of any Hazardous Materials or (B) any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9604) or comparable state laws, and to the best of Holding's or Borrower's knowledge, none of the operations of Holding or any of its Subsidiaries is the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a Release or threatened Release of any Hazardous Material at any Facility or at any other location; (iv) none of the operations of Holding or any of its Subsidiaries is the subject of any pending judicial or administrative proceeding alleging the violation of or liability under any Environmental Laws; (v) Holding and each of its Subsidiaries and all of their present Facilities or operations, as well as their past Facilities or operations, are not subject to any outstanding written order or agreement with any governmental authority or private party respecting (A) any Environmental Laws or (B) any Environmental Claims; (vi) neither Holding nor any of its Subsidiaries has any Contingent Obligation in connection with any Release of any Hazardous Materials by Holding or any of its Subsidiaries; (vii) neither Holding nor any of its Subsidiaries or any predecessor of Holding or of any Subsidiary has filed any notice under any Environmental Law indicating past or present treatment, storage, or disposal of Hazardous Materials at any Facility (other than hazardous waste manifests in the ordinary course of business), none of Holding's or any of its Subsidiary's operations involves the generation, transportation, treatment or disposal of hazardous waste, as defined under 40 C.F.R. 89 Parts 260-270 or any state equivalent and neither Holding nor any Subsidiaries nor, to the best of Holding's and Borrower's knowledge, any predecessor in title to any of them nor, any third party at any time occupying any Facility has at any time used, generated, disposed of, stored, transported to or from, released or threatened the release of any Hazardous Materials, in any form, quantity or concentration on, from, under or affecting such Facility in a manner that could reasonably expect to result in material liability of or material claim against Holding or any of its Subsidiaries; (viii) no underground storage tanks or surface impoundments are on or at the Facilities; and (ix) no Lien in favor of any governmental authority for (A) any liability under Environmental Laws, or (B) damages arising from or costs incurred by such governmental authority in response to a Release has been filed or attached to the Facilities. B. No Material Adverse Effect. No Hazardous Materials exist on, under or about any Facility in a manner that could reasonably be expected to give rise to an Environmental Claim having a Material Adverse Effect and neither Holding nor any of its Subsidiaries has filed any notice or report of a Release of any Hazardous Materials that could reasonably be expected to give rise to an Environmental Claim having a Material Adverse Effect and no matter disclosed on Schedule 4.17 could reasonably be expected to give rise to an Environmental Claim having a Material Adverse Effect. 4.18 Survival of Rights Created Under Existing Credit Agreement. Notwithstanding the modification effected by this Agreement of the representations, warranties and covenants of Holding and Borrower contained in the Existing Credit Agreement, each of Holding and Borrower acknowledges and agrees that any choses in action or other rights created in favor of any Agent or Lender and their respective successors arising out of the representations and warranties of Holding and Borrower contained in or delivered (including representations and warranties delivered in connection with the making of Loans or other extensions of credit thereunder) in connection with the Existing Credit Agreement, shall survive the execution and delivery of this Agreement; provided that it is understood and agreed that Borrower's monetary obligations under the Existing Credit Agreement in respect of the loans thereunder are evidenced by this Agreement as provided in Section 2 hereof. SECTION 5. AFFIRMATIVE COVENANTS Holding and each of its Subsidiaries severally covenant and agree that, so long as any of the Commitments hereunder shall be in effect or any Letter of Credit remain 90 outstanding and until payment in full of all of the Loans and all other amounts owing hereunder unless Requisite Lenders shall otherwise give prior written consent, such Person shall perform all covenants in this Section 5. 5.1 Financial Statements and Other Reports Holding will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Holding will deliver to Administrative Agent and Lenders: (i) as soon as practicable and in any event within thirty (30) days after the end of each Fiscal Month (other than (1) the first Fiscal Month of each Fiscal Year, with respect to which the following information shall be combined and delivered with the information delivered within thirty (30) days of the second Fiscal Month of each Fiscal Year and (2) the last Fiscal Month of each Fiscal Quarter, with respect to which the following information shall be delivered with the information delivered pursuant to subsection 5.1(ii) below for such Fiscal Quarter) (a) a detailed consolidated balance sheet as of the end of such Fiscal Month and a consolidated and income statement and consolidated statement of cash flow for Holding and its Subsidiaries (and for Holding and its Subsidiaries other than BB Capital) for such Fiscal Month and for the period from the beginning of the current Fiscal Year to the end of such Fiscal Month, (b) a schedule, in reasonable detail, of all Indebtedness of Holding and its Subsidiaries including letters of credit, and (c) a written discussion of the financial and operating performance for such Fiscal Month from a profit and loss, cash flow and balance sheet standpoint and discussions of the major factors affecting such performance, in each case (other than clause (c)) setting forth in comparative form the consolidated figures or the corresponding information for the corresponding periods of the previous Fiscal Year and for the corresponding periods for the financial budget for that Fiscal Year delivered pursuant to subsection 5.1(xi), all in reasonable detail and certified by the Chief Financial Officer of Holding that they fairly present the financial condition of Holding and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustment; (ii) as soon as practicable and in any event within sixty (60) days after the end of each Fiscal Quarter (other than the last Fiscal Quarter of each Fiscal Year, with respect to which the following information shall be delivered with the information delivered pursuant to subsection 5.1(iii) below for such Fiscal Year) (a) a written discussion of the financial and operating performance for such Fiscal Quarter from a profit and loss, cash flow and balance sheet standpoint and discussions of the major factors affecting such performance, (b) a revised schedule of all actions, suits, proceedings, governmental investigations or arbitrations pending, or to the knowledge 91 of Holding and its Subsidiaries, threatened against Holding or any of its Subsidiaries or any of their respective property and (c) a consolidated balance sheet of Holding and its Subsidiaries (and for Holding and its Subsidiaries other than BB Capital) as at the end of such period and the related consolidated statement of income, stockholders' equity and cash flow of Holding and its Subsidiaries (and for Holding and its Subsidiaries other than BB Capital) for such Fiscal Quarter and for the period from the beginning of the current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the consolidated figures for the corresponding periods of the previous Fiscal Year and the corresponding figures from the financial budget for such periods delivered pursuant to subsection 5.1(xi), all in reasonable detail and certified by the Chief Financial Officer of Holding that they fairly present the financial condition of Holding and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustment; (iii) as soon as practicable and in any event within ninety (90) days after the end of each Fiscal Year, a written discussion of the financial and operating performance for the Fiscal Year from a profit and loss, cash flow and balance sheet standpoint and discussions of the major factors affecting such performance and setting the number and names of Borrower's distributors added or lost during such Fiscal Year and a consolidated balance sheet of Holding and its Subsidiaries (and for Holding and its Subsidiaries other than BB Capital) as at the end of such Fiscal Year and the related consolidated statement of income, stockholders' equity and cash flow of Holding and its Subsidiaries (and for Holding and its Subsidiaries other than BB Capital) for such Fiscal Year, setting forth in each case, in comparative form the consolidated figures for the previous year, and the corresponding figures from the financial budget for such periods delivered pursuant to subsection 5.1(xi), all in reasonable detail and accompanied by a report thereon of Arthur Andersen, LLP or other independent certified public accountants of recognized national standing selected by Holding as shall be satisfactory to Administrative Agent which report shall not be qualified as to any matter and shall state that such consolidated financial statements present fairly the financial position of Holding and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise stated therein) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (iv) within fifteen (15) days after the end of each Fiscal Month, from time to time upon the request of Administrative Agent and at any other date Borrower may choose, a Borrowing Base Certificate as of the last date of such period or the date so requested, as the case may be; 92 (v) together with each delivery of financial statements of Holding and its Subsidiaries pursuant to subdivisions (i), (ii) and (iii) above, (a) an Officers' Certificate of Holding stating that the signers have reviewed the terms of this Agreement and the other Loan Documents and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of Holding and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as of the date of the Officers' Certificate, of any condition or event that constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action Holding has taken, is taking and proposes to take with respect thereto; and (b) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the applicable Fiscal Quarter with the restrictions contained in this Agreement in the manner set forth in such Compliance Certificate; (vi) together with each delivery of financial statements of Holding and its Subsidiaries pursuant to subdivision (iii) above, a written statement by the independent public accountants giving the report thereon (a) stating that their audit examination has included a review of the terms of this Agreement and the other Loan Documents as they relate to accounting matters, (b) stating whether, in connection with their audit examination, which audit was conducted in accordance with generally accepted auditing standards, any condition or event that constitutes an Event of Default or Potential Event of Default has come to their attention, and if such a condition or event has come to their attention, specifying the nature and period of existence thereof; provided that such accountants shall not be liable by reason of any failure to obtain knowledge of any such Event of Default or Potential Event of Default with respect to accounting matters that would not be disclosed in the course of their audit examination, and (c) stating that based on their audit examination nothing has come to their attention that causes them to believe that the information contained in either or both the certificates delivered therewith pursuant to subdivision (v) above is not correct or that the matters set forth in the Compliance Certificate delivered therewith pursuant to clause (b) of such subdivision (v) above for that portion of the applicable Fiscal Year are not stated in accordance with the terms of this Agreement; (vii) promptly upon any officer of Holding or any of its Subsidiaries obtaining knowledge (a) that a condition or event has occurred and is continuing that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender or Administrative Agent has given any notice or taken any other action with respect to a claimed Event of Default or Potential Event of Default under this Agreement, (b) that any Person has given any notice to Holding, Borrower or any of their respective Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 8.2, (c) of any condition or 93 event that would be required to be disclosed in a current report filed by Borrower with the Securities and Exchange Commission on Form 8-K pursuant to Items 1, 2, 4 or 5 of such Form as in effect on the date hereof if Borrower were required to file such reports under the Exchange Act, or (d) of a Material Adverse Effect or of an event or condition that could reasonably be expected to result in a Material Adverse Effect (other than matters affecting the economy in general), an Officers' Certificate specifying the nature and period of existence of such condition or event, or specifying the notice given or action taken by such holder or Person and the nature of such claimed default, Event of Default, Potential Event of Default, event or condition, and what action Holding or Borrower has taken, is taking and proposes to take with respect thereto; (viii) promptly upon any officer of Holding or any of its Subsidiaries obtaining knowledge of (a) the institution of, or non-frivolous, written threat of, any action, suit, proceeding, governmental investigation or arbitration against or affecting Holding or any of its Subsidiaries or any property of Holding or any of its Subsidiaries not previously disclosed by Holding to Administrative Agent and Lenders or (b) any material development in any such action, suit, proceeding, governmental investigation or arbitration, that, in either case (y) could reasonably be expected to result in a Material Adverse Effect; or (z) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the Refinancing; Holding shall promptly give notice thereof to Agents and Lenders and provide such other information as may be reasonably available to it to enable Agents and Lenders and their counsel to evaluate such matters; (ix) promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action Holding or any of its ERISA Affiliates has taken, is taking or proposes to take with respect thereto, and, when known, any action taken or threatened in writing by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (x) with reasonable promptness copies of (a) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by Holding or any of its ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan (in which any employees of Holding or any of its Subsidiaries have ever participated as employees of Holding or one of its Subsidiaries) for which a Schedule B is required to be filed; (b) all notices received by Holding or any of its ERISA Affiliates from a 94 Multiemployer Plan sponsor concerning an ERISA Event; and (c) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent or any Lender shall reasonably request; (xi) as soon as available, but in any event not less than eighty-five (85) days after the commencement of the Fiscal Year to which such projections relate, a budget by Fiscal Month on a consolidated basis for such Fiscal Year as customarily prepared by Borrower including, without limitation, a forecasted consolidated balance sheet and statement of income of Holding and its Subsidiaries (and for Holding and its Subsidiaries other than BB Capital), statement of sales, including unit sales, forecasted capital expenditures for each Fiscal Month in such Fiscal Year and the consolidated statement of stockholders' equity and cash flow of Holding and its Subsidiaries (and for Holding and its Subsidiaries other than BB Capital) for such Fiscal Year; (xii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by Holding to its security holders or by any Subsidiary of Holding to its security holders other than Holding or another Subsidiary, of all regular and periodic reports and all registration statements and prospectuses, if any, filed by Holding or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental authority succeeding to any of its functions, and of all press releases and other statements made available generally by Holding or any Subsidiary to the public concerning material developments in the business of Holding and its Subsidiaries; (xiii) promptly upon receipt thereof, copies of all reports submitted to Holding or any of its Subsidiaries by independent public accountants in connection with each annual, interim or special audit of the financial statements of Holding made by such accountants, including, without limitation, the comment letter submitted by such accountants to management in connection with their annual audit; (xiv) immediately prior to the release thereof, a copy of all material press releases; (xv) as soon as practicable and in any event within 30 days after the end of each fiscal quarter of BB Capital and 90 days after the end of each fiscal year of BB Capital, financial statements of BB Capital consisting of at least a balance sheet at the close of the applicable fiscal quarter or fiscal year and a statement of income and cash flow for the applicable fiscal quarter or fiscal year, together with (in the case of the financial statements for the fiscal year only) an unqualified opinion and report of independent public accountants of recognized standing selected by BB Capital and reasonably satisfactory to Agents; 95 (xvi) promptly upon any officer of Holding or any of its Subsidiaries obtaining knowledge of any material development in any proceeding with or by any governmental or regulatory entity relating to a recall of any goods sold by Holding or any of its Subsidiaries or other regulatory action, Holding shall give notice thereof to Agents and provide such other information as may be reasonably available to it to enable Agents and their counsel to evaluate such matters; and (xvii) with reasonable promptness, such other information and data with respect to Holding or any of its Subsidiaries as from time to time may be reasonably requested by Administrative Agent or any Lender. 5.2 Corporate Existence, etc. Subject to subsection 6.7, Holding and Borrower will at all times preserve and keep in full force and effect their respective corporate existence and rights and franchises material to its respective business and those of each of its respective Subsidiaries. 5.3 Payment of Taxes and Claims; Tax Consolidation A. Each Loan Party will, and will cause each of its Subsidiaries to, pay or cause to be paid all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income or property before any material penalty accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a material Lien upon any of its properties or assets, prior to the time when any material penalty or fine shall be incurred with respect thereto; provided that so long as no property or assets (other than money for such charge or claim and the interest or penalty accruing thereon) of Holding or Borrower or any of their respective Subsidiaries is in danger of being lost or forfeited as a result thereof, no such charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. B. Each Loan Party will not, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated federal income tax return with any Person other than Holding or any of its Subsidiaries. 5.4 Maintenance of Properties; Insurance Each Loan Party will maintain or cause to be maintained in good repair, working order and condition (ordinary wear and tear excepted) all material properties used in the business of such Loan Party and its Subsidiaries and from time to time will make or 96 cause to be made all appropriate repairs, renewals and replacements thereof. Holding and its Subsidiaries will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business and the properties and business of its Subsidiaries against loss or damage of the kinds customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such types (including, without limitation, product liability, bodily injury and business interruption insurance) and in such amounts as are customarily carried under similar circumstances by such other corporations. Each such policy of insurance shall provide for at least thirty (30) days prior written notice to Administrative Agent of any modification or cancellation of such policies. Upon the Restatement Effective Date and each anniversary thereof, Holding and its Subsidiaries shall submit to Administrative Agent an Officers' Certificate setting forth in detail the type and amount of insurance maintained pursuant to this subsection which shall not be less than the type and amount maintained on the Restatement Effective Date. 5.5 Inspection; Lender Meeting Holding and its Subsidiaries shall permit any authorized representatives designated by any Agent or Lender to visit and inspect any of the properties of Holding and its Subsidiaries, including its and their financial and accounting records, and to make copies and take extracts therefrom, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants, all upon reasonable notice and at reasonable times during normal business hours and as often as may be reasonably requested. Without in any way limiting the foregoing, Borrower will participate in an annual meeting of Agents and Lenders to be held at such place and time as may be agreed to by Borrower and Agents; provided that there shall be no such annual meeting during Fiscal Year 1997. Agents and Lenders shall hold all non-public information obtained pursuant to this subsection 5.5 and identified by Borrower as confidential in accordance with its and their customary procedures for handling confidential information of this nature. In addition to, and not in limitation of, the immediately preceding paragraph, a representative designated by Agents shall, at Borrower's expense, and after reasonable notice and during normal business hours, be permitted to audit and monitor Borrower's Inventory, Accounts Receivable and other assets and liabilities in order to, among other things, verify the calculation of the Borrowing Base. 5.6 Equal Security for Obligations; No Further Negative Pledges A. If Holding or any of its Subsidiaries shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 6.2, unless Agents and Requisite Lenders shall otherwise consent in writing, it shall make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally and ratably with any and all other 97 Indebtedness thereby secured as long as any such Indebtedness shall be secured; provided that notwithstanding the foregoing, this covenant shall not be construed as a consent by any Lender to any creation or assumption of any such Lien not permitted by the provisions of subsection 6.2. B. Except with respect to specific property encumbered to secure payment of particular Indebtedness, neither Holding nor any of its Subsidiaries shall enter into any agreement (other than the Subordinated Debt Documents and, with respect to lease receivables, the Lease Portfolio Documents, the LaSalle Documents and the documents pursuant to which Indebtedness permitted under subsection 6.1(xii) is incurred) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired. 5.7 Compliance with Laws, etc. Holding and its Subsidiaries shall comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority (including, without limitation, all Environmental Laws), noncompliance with which could reasonably be expected to result in a Material Adverse Effect. 5.8 Real Property Security If Holding or any of its Subsidiaries shall after the Restatement Effective Date acquire a fee or leasehold interest in any real property such Person shall promptly cause such fee interest, and use its reasonable best efforts to cause such leasehold interest to be subjected to a Mortgage in favor of Collateral Agent for the benefit of Administrative Agent and Lenders pursuant to documentation of the type described in subsection 3.1H for the Fee Collateral. 5.9 Environmental Disclosure and Inspection (i) Holding shall, and shall cause each of its Subsidiaries and their Facilities to comply and shall use its reasonable efforts to cause (a) their respective employees, agents, contractors and subcontractors, (b) all tenants under any lease or occupancy agreement affecting any portion of the Facilities and (c) all other Persons on or occupying such property, to comply with all Environmental Laws. (ii) Holding and Borrower shall promptly advise Administrative Agent and Lenders in writing and in reasonable detail of (a) any Release of any Hazardous Material required to be reported to any federal, state or local governmental or regulatory agency under all applicable Environmental Laws, (b) any and all written communications with respect to Environmental Claims or any Release of Hazardous Material required to be reported to any federal, state or local governmental or 98 regulatory agency, (c) any remedial action taken by Holding, Borrower or, to the extent Holding or any of its Subsidiaries has any such knowledge, any other Person in response to (1) any Hazardous Material on, under or about any Facility, the existence of which could reasonably be expected to result in a Material Adverse Effect or (2) any Environmental Claim that could reasonably be expected to result in a Material Adverse Effect, (d) Holding's or any of its Subsidiaries' discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be classified as "border-zone property" or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws, and (e) any request for information from any governmental agency that indicates such agency is investigating whether Holding or its Subsidiaries may be potentially responsible for a Release of Hazardous Materials. (iii) Holding and Borrower shall promptly notify Administrative Agent and Lenders of any proposed acquisition of stock, assets, or property by Holding or its Subsidiaries, that could reasonably be expected to expose Holding or its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to result in a Material Adverse Effect and any proposed action to be taken by Holding or its Subsidiaries to commence operations that could reasonably be expected to subject Holding or its Subsidiaries to additional laws, rules or regulations related to Hazardous Materials or environmental matters covered by Environmental Laws, including, without limitation, laws, rules and regulations requiring additional environmental permits or licenses. (iv) Holding and Borrower shall, at their own expense, provide copies to Administrative Agent and Lenders of such documents or information to which Holding or any of its Subsidiaries has access as Administrative Agent or Requisite Lenders may reasonably request in relation to any matters disclosed pursuant to this subsection 5.9. 5.10 Hazardous Materials; Remedial Action A. Holding and Borrower shall, and shall cause its Subsidiaries, (i) to store, use, dispose and transport any Hazardous Materials in compliance with all applicable Environmental Laws and (ii) promptly to take any and all necessary remedial action in response to the Release of any Hazardous Materials on, under or about any Facility. In the event Holding or any of its Subsidiaries undertakes any remedial action with respect to any Hazardous Material on, under or about any Facility, Holding or such Subsidiary shall conduct and complete such remedial action in compliance with all applicable Environmental Laws, and in accordance with the policies, orders and directives of all federal, state and local governmental authorities except when Holding's or such Subsidiary's liability for such 99 presence, storage, use, disposal, transportation or discharge of any Hazardous Material is being contested in good faith by Holding or such Subsidiary. B. Holding shall not and shall not permit its Subsidiaries to install or permit to be installed any asbestos in any property owned or leased by any of them. With respect to any asbestos currently present in such property, Holding shall and shall cause its Subsidiaries to promptly and in accordance with all applicable Environmental Laws and prudent industry practices, maintain such asbestos in good and safe condition. 5.11 Further Assurances; New Subsidiaries; Intellectual Property At any time or from time to time upon the request of any Agent, Holding or Borrower, or both, shall and shall cause each of their respective Subsidiaries to execute and deliver such further documents (including without limitation, such financing statements, continuation statements or amendments thereto and such other documents and certificates as may be necessary or desirable or as any Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted under any of the Collateral Documents) and do such other acts and things as any Agent may reasonably request in order to effect fully the purposes of this Agreement and the other Loan Documents and to provide for payment of the Obligations in accordance with the terms of this Agreement and the other Loan Documents. Without limiting any of the foregoing, in the event (i) a Person becomes a Subsidiary of Holding or Borrower, after the Restatement Effective Date (provided that, as long as the LaSalle Documents or any documents approved by Requisite Lenders pursuant to which BB Capital has entered into a securitization transaction with respect to its receivables are in full force and effect, then BB Capital shall be excluded from the provisions of this Section 5.11) or (ii) Holding or any of its Subsidiaries registers any trademark, copyright or patent with any governmental authority, then, Holding and Borrower, upon the request of any Agent shall or shall cause their Subsidiaries to execute and deliver such guaranties, Collateral Documents and such other agreements, pledges, assignments in a mutually satisfactory fashion, documents and certificates (including, without limitation, any amendments to the Loan Documents) as may be necessary or desirable or as any Agent may reasonably request and do such other acts and things as any Agent may reasonably request in order to have such Subsidiary guaranty and/or secure the Obligations or have such trademark, copyright or patent secure the Obligations, as the case may be, and effect fully the purposes of this Agreement and the other Loan Documents and to provide for payment of the Obligations in accordance with the terms of this Agreement and the other Loan Documents. Borrower agrees to promptly notify Agents at such time as Borrower's pending patent applications are approved and of the patent numbers issued therefor. 5.12 Payment of Obligations Holding, Borrower and each of their respective Subsidiaries shall pay their respective Obligations when the same shall become due. 100 5.13 Interest Rate Agreements At all times during the period from the Restatement Effective Date to the date that is two years after the Restatement Effective Date, Borrower shall maintain in effect one or more Interest Rate Agreements with respect to the Loans, in an aggregate notional principal amount of not less than $75,000,000 which Interest Rate Agreements shall have the effect of establishing a maximum interest rate of not more than 11% per annum with respect to such notional principal amount, each such Interest Rate Agreement to be in form and substance satisfactory to Agents. 5.14 Post-Closing Covenants Within 90 days after the Restatement Effective Date, Borrower shall take all steps necessary or that Collateral Agent may reasonably request in order to grant in favor of Collateral Agent, for the benefit of Agents and Lenders, a first priority, perfected security interest in 66% of the Capital Stock of Blue Bird Mexico and shall deliver to Collateral Agent a legal opinion, from counsel reasonably satisfactory to Collateral Agent and in form and substance reasonably satisfactory to Collateral Agent regarding such perfected security interest. SECTION 6. NEGATIVE COVENANTS Holding and its Subsidiaries severally covenant and agree that, so long as any of the Commitments shall be in effect or any Letter of Credit is outstanding and until payment in full of all of the Loans and all other amounts owing hereunder, unless Requisite Lenders shall otherwise give prior written consent, such Person will perform all covenants in this Section 6. 6.1 Indebtedness Holding and its Subsidiaries will not, and will not permit any of their respective Subsidiaries to, directly or indirectly, create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (i) Holding and Borrower may become and remain liable with respect to the Obligations; (ii) Borrower may become and remain liable with respect to the Indebtedness pursuant to the Existing Subordinated Notes (subject to the reduction in such notes pursuant to the satisfaction of subsection 3.1F) and the Subordinated Notes in an aggregate outstanding principal amount not to exceed $105,000,000 at any time or refinancings of the Subordinated Notes permitted pursuant to subsection 6.13; 101 (iii) Borrower and its Subsidiaries may become and remain liable with respect to Indebtedness in respect of (y) Capital Leases, in an aggregate amount not to exceed $3,000,000 outstanding at anytime, provided that such Capital Leases are permitted under subsection 6.6D and (z) Indebtedness incurred to purchase, or to finance or refinance the purchase price of, personal property (excluding Inventory) used in the conduct of Holding's and any of its Subsidiaries' business, in an aggregate amount not to exceed $3,000,000 outstanding at anytime; provided that in each case the amount of the Indebtedness incurred is not greater than the fair market value plus the reasonable delivered and installed cost and related expenses of any property so financed at the time of such acquisition; (iv) Holding and its Subsidiaries may become and remain liable with respect to Contingent Obligations permitted by subsection 6.4; (v) Holding may remain liable with respect to loans permitted by subsection 6.3(iii) and Borrower may make and maintain, and Canadian Blue Bird may become and remain liable with respect to, intercompany loans permitted by subsection 6.3(iv); (vi) Borrower may remain liable with respect to the existing Indebtedness listed on Schedule 6.1 annexed hereto; (vii) Holding may become and remain liable with respect to unsecured and unguaranteed Indebtedness evidenced by the Junior Subordinated Notes; (viii) Borrower may become and remain liable with respect to repurchase and indemnity obligations to LaSalle National Bank as set forth in the Lease Portfolio Documents; (ix) In addition to the Indebtedness permitted by clauses (i)-(viii), Holding and Borrower may become and remain liable with respect to unsecured Indebtedness not exceeding at any one time $15,000,000 in aggregate outstanding principal amount; (x) BB Capital may become and remain liable with respect to Indebtedness to LaSalle National Bank incurred pursuant to the LaSalle Loan Agreement in an aggregate principal amount not to exceed $125,000,000 outstanding at any time; and (xi) BB Capital may become and remain liable with respect to Indebtedness related to securitization transactions incurred pursuant to documents approved by Requisite Lenders (the "Securitization Documents"); provided that the aggregate outstanding amount of any such Indebtedness does not at any time exceed $25,000,000 with respect to any individual securitization transaction and the aggregate outstanding 102 amount of any such Indebtedness and sold receivables shall not exceed $125,000,000 at any time. 6.2 Liens Holding will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset (including any document or instrument in respect of goods or accounts receivable) of Holding or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except: (i) Permitted Encumbrances; (ii) Liens granted pursuant to the Collateral Documents; (iii) Liens created to secure the Indebtedness permitted pursuant to subsection 6.1(iii); provided such Liens relate solely to the property financed with such Indebtedness; (iv) Liens existing on the Restatement Effective Date which are listed on Schedule 6.2 annexed hereto and which relate solely to the property identified on such Schedule which secure the Indebtedness permitted pursuant to subsection 6.1(vi); (v) Liens in favor of Borrower created by Canadian Blue Bird pursuant to the Subsidiary Documents to secure Canadian Blue Bird's Indebtedness to Blue Bird permitted pursuant to subsection 6.3(iv)(b); (vi) Liens in favor of General Motors Acceptance Corporation in inventory consisting of Chevrolet and General Motors Corporation vehicles and chassis, and all additions or accessions thereto and proceeds thereof, to secure the purchase price of such inventory; (vii) Liens granted by Borrower pursuant to the Lease Portfolio Documents in favor of LaSalle National Bank (the "Purchaser") with respect to the buses, vehicles and other equipment subject to leases sold to the Purchaser pursuant to such Lease Portfolio Documents and with respect to funds held by Borrower as servicer under the Lease Portfolio Documents or constituting purchase price payments to be made to Borrower and retained by the Purchaser in any holdback account to secure the performance of Borrower's obligations under the Lease Portfolio Documents, in each case pursuant to and in accordance with the Lease Portfolio Documents, and any Liens in favor of the Purchaser arising as a result of any precautionary filings made by the Purchaser with respect to the Lease Portfolio sold to such Purchaser; 103 (viii) Liens granted by Borrower on the capital stock of BB Capital to LaSalle National Bank pursuant to the LaSalle Pledge Agreement to secure Indebtedness under the LaSalle Loan Agreement permitted pursuant to subsection 6.1 (xi); and (ix) Liens granted by BB Capital pursuant to documents approved by Requisite Lenders to secure Indebtedness permitted pursuant to subsection 6.1(xii). 6.3 Investments Holding will not, and will not permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, except: (i) Borrower may make and own Investments in Cash Equivalents; (ii) Borrower may own the existing Investments set forth on Schedule 6.3 annexed hereto; (iii) Borrower may make and maintain intercompany loans to Holding to the extent permitted by subsection 6.5; (iv) Borrower may make and maintain Investments in intercompany loans to Canadian Blue Bird in a principal amount not to exceed $5,000,000, to the extent required for working capital purposes necessary to the operation of Canadian Blue Bird; provided that Borrower shall obtain and pledge to Collateral Agent for the benefit of Lenders promissory notes with respect to such loans which promissory notes shall be secured by a duly perfected first priority security interest in all of the real and personal property of Canadian Blue Bird and all such security interests shall be assigned and pledged to Collateral Agent for the benefit of Administrative Agent and Lenders pursuant to the Subsidiary Documents; (v) Holding may make and maintain loans to members of the Management Group in an aggregate principal amount not to exceed $3,200,000; (vi) Borrower may make and maintain Investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers, in each case arising in the ordinary course of business; (vii) Borrower may make and maintain Investments in non-cash proceeds of Asset Sales received in accordance with the provisions of subsection 6.7 B(iii); 104 (viii) Borrower may make and maintain Investments in lease receivables, with respect to leases originated on terms consistent with Borrower's prior practices and made the ordinary course of Borrower's business, in an aggregate amount not to exceed $40,000,000 at any one time; (ix) Borrower may make and maintain other Investments in an aggregate principal amount not in excess of $250,000 at any time; (x) Borrower may make Investments in BB Capital provided that the aggregate amounts of all such Investments, including without limitation all stock purchases, capital contributions, loans or advances, Contingent Obligations, amounts owing to Borrower which are subordinated pursuant to the terms of the LaSalle Subordination Agreement (including, to the extent applicable and without limitation, all payments for buses, other assets or services) and all advances or other credit extended by way of payment terms not granted to other non-affiliated purchasers (including without limitation discounts, holdbacks, recourse or reserves) does not exceed $12,500,000 outstanding at any time; (xi) Borrower may make Investments in wholly owned Subsidiaries pursuant to subsection 6.7B(i); and (xii) Borrower may maintain Investments in Blue Bird Mexico existing on the Restatement Effective Date and may make additional Investments in Blue Bird Mexico in an aggregate amount not to exceed $5,000,000. 6.4 Contingent Obligations Holding will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or become or be liable with respect to any Contingent Obligation except: (i) Contingent Obligations in respect of the Obligations; (ii) guaranties resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (iii) obligations of Holding under the Holding Guaranty; (iv) Interest Rate Agreements entered into by Borrower; provided that the aggregate notional amount with respect to such Interest Rate Agreements shall not exceed the aggregate amount of the Commitments then in effect subject to a floating rate of interest; 105 (v) guaranties by Holding or Borrower in the ordinary course of business of Capital Leases of Borrower and its Subsidiaries; (vi) Contingent Obligations of Borrower described on Schedule 6.4 annexed hereto; (vii) guaranties by Holding of Interest Rate Agreements entered into by Borrower that are permitted by subsection 6.4(iv); (viii) the guaranty by Holding of Indebtedness in respect of the Existing Subordinated Notes (subject to the reduction in such notes pursuant to the satisfaction of subsection 3.1F) and the Subordinated Notes or refinancings thereof permitted pursuant to subsection 6.13; and (ix) in addition to the Contingent Obligations permitted by clauses (i)-(viii), Borrower may become and remain liable with respect to other Contingent Obligations; provided, that the maximum aggregate liability of Borrower in respect of all such Contingent Obligations shall not at any one time exceed $2,000,000. 6.5 Restricted Junior Payments Holding and Borrower will not, and will not permit any of their respective Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment except: (i) Borrower may make interest payments in respect of Existing Subordinated Notes (subject to the reduction in such notes pursuant to the satisfaction of subsection 3.1F) in accordance with the terms of the Existing Subordinated Indenture and Subordinated Notes in accordance with the terms of the Subordinated Indenture, as such documents have been approved by Agents and Requisite Lenders, and Borrower may make principal payments, including premium (if any), in respect of the redemption or repurchase of Existing Subordinated Notes and Subordinated Notes in an aggregate amount (measured on a cumulative basis from the Restatement Effective Date) not to exceed $15,000,000 plus accrued interest thereon; provided that the aggregate amount of such principal payments, including premium, if any, shall not exceed $5,000,000 in any Fiscal Year; provided further, that if the aggregate amount of such principal payments, including premium, if any, actually made in any Fiscal Year is less than $5,000,000, the difference between (a) the amount of such principal payments, including premium, if any, actually made in such Fiscal Year and (b) $5,000,000 may be carried over and made in any subsequent Fiscal Year; (ii) Holding may repurchase Holding Common Stock held by members of the Management Group in accordance with the terms of the Subscription Agreements 106 and Borrower may declare and pay dividends or make loans to Holding for such purpose; provided that the aggregate amount (measured on a cumulative basis from the Restatement Effective Date) of payments for such repurchases (and dividends or loans therefor) plus the amount of principal and interest paid on the Junior Subordinated Notes shall not exceed the sum of (a) $6,000,000 plus (b) the net Cash Proceeds of any Holding Common Stock sold to members of the Management Group after the Restatement Effective Date; provided, further, that the amount of payments for such repurchases, principal and interest shall not exceed $2,000,000 in the aggregate during the period from the Restatement Effective Date to the first anniversary thereof, inclusive; and (iii) Borrower may declare and pay dividends or make intercompany loans to Holding for the purpose of paying operating expenses of Holding arising in the ordinary course of business including, without limitation, taxes, provided that such dividends and loans shall not exceed $300,000 in the aggregate per Fiscal Year; and (iv) Borrower may make payments on or about the Restatement Effective Date to holders of Existing Subordinated Notes in connection with the Refinancing on the terms and in the amounts disclosed in writing to Agents and the Lenders prior to the Restatement Effective Date; and (v) Borrower may exchange the Subordinated Notes for registered subordinated notes with substantially identical terms and in accordance with the terms of the Registration Rights Agreement. provided that immediately prior to and immediately after giving effect to any Restricted Junior Payment permitted by this subsection 6.5, no Event of Default or Potential Event of Default exists or will exist. Holding and Borrower will not, nor will they permit any of their respective Subsidiaries to, deposit any funds for the purpose of making any Restricted Junior Payment with a trustee, paying agent or registrar or other payment intermediary more than three Business Days prior to the date such payment is due or 30 days prior to the date such payment is due in respect of the refinancing of the Subordinated Debt. 6.6 Financial Covenants A. Minimum Consolidated EBITDA Holding and its Subsidiaries shall not permit Consolidated EBITDA as of the last day of each of the Fiscal Quarters shown below for the four consecutive Fiscal Quarter period ended on such date to be less than the correlative amount indicated: 107 Minimum Fiscal Quarter Consolidated EBITDA -------------- ------------------- Fiscal Year 1997 First Fiscal Quarter $53,000,000 Second Fiscal Quarter 54,000,000 Third Fiscal Quarter 54,000,000 Fourth Fiscal Quarter 56,000,000 Fiscal Year 1998 First Fiscal Quarter 57,000,000 Second Fiscal Quarter 57,000,000 Third Fiscal Quarter 58,000,000 Fourth Fiscal Quarter 60,000,000 Fiscal Year 1999 First Fiscal Quarter 61,000,000 Second Fiscal Quarter 61,000,000 Third Fiscal Quarter 62,000,000 Fourth Fiscal Quarter 65,000,000 Fiscal Year 2000 First Fiscal Quarter 65,000,000 Second Fiscal Quarter 66,000,000 Third Fiscal Quarter 68,000,000 Fourth Fiscal Quarter 70,000,000 Fiscal Year 2001 First Fiscal Quarter 71,000,000 Second Fiscal Quarter 72,000,000 Third Fiscal Quarter 74,000,000 Fourth Fiscal Quarter 77,000,000 108 Fiscal Year 2002 First Fiscal Quarter 77,000,000 Second Fiscal Quarter 77,000,000 Third Fiscal Quarter 77,000,000 Fourth Fiscal Quarter 77,000,000 Fiscal Year 2003 First Fiscal Quarter 77,000,000 Second Fiscal Quarter 77,000,000 Third Fiscal Quarter 77,000,000 Fourth Fiscal Quarter 77,000,000 B. Maximum Leverage Ratio Holding and its Subsidiaries shall not permit the ratio of (i) Consolidated Funded Debt of Holding and its Subsidiaries on a consolidated basis, to (ii) Consolidated EBITDA for the four consecutive Fiscal Quarter period ended on the last day of each of the Fiscal Quarters shown below to exceed the correlative ratios indicated: Fiscal Quarter Maximum Leverage Ratio -------------- ---------------------- Fiscal Year 1997 First Fiscal Quarter 5.10 to 1.00 Second Fiscal Quarter 5.10 to 1.00 Third Fiscal Quarter 5.00 to 1.00 Fourth Fiscal Quarter 4.80 to 1.00 Fiscal Year 1998 First Fiscal Quarter 4.75 to 1.00 Second Fiscal Quarter 4.65 to 1.00 Third Fiscal Quarter 4.50 to 1.00 Fourth Fiscal Quarter 4.30 to 1.00 Fiscal Year 1999 First Fiscal Quarter 4.25 to 1.00 Second Fiscal Quarter 4.10 to 1.00 Third Fiscal Quarter 3.95 to 1.00 Fourth Fiscal Quarter 3.70 to 1.00 109 Fiscal Year 2000 First Fiscal Quarter 3.60 to 1.00 Second Fiscal Quarter 3.50 to 1.00 Third Fiscal Quarter 3.35 to 1.00 Fourth Fiscal Quarter 3.15 to 1.00 Fiscal Year 2001 First Fiscal Quarter 3.00 to 1.00 Second Fiscal Quarter 2.85 to 1.00 Third Fiscal Quarter 2.70 to 1.00 Fourth Fiscal Quarter 2.55 to 1.00 Fiscal Year 2002 First Fiscal Quarter 2.55 to 1.00 Second Fiscal Quarter 2.55 to 1.00 Third Fiscal Quarter 2.55 to 1.00 Fourth Fiscal Quarter 2.55 to 1.00 Fiscal Year 2003 First Fiscal Quarter 2.55 to 1.00 Second Fiscal Quarter 2.55 to 1.00 Third Fiscal Quarter 2.55 to 1.00 Fourth Fiscal Quarter 2.55 to 1.00 C. Minimum Interest Coverage Ratio Holding and its Subsidiaries shall not permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Cash Interest Expense as of the last day of each of the Fiscal Quarters shown below for the four consecutive Fiscal Quarter period ended on the last day of each of the Fiscal Quarters set forth below to be less than the correlative ratio indicated: 110 Minimum Interest Fiscal Quarter Coverage Ratio -------------- -------------- Fiscal Year 1997 First Fiscal Quarter 1.85 to 1.00 Second Fiscal Quarter 1.85 to 1.00 Third Fiscal Quarter 1.85 to 1.00 Fourth Fiscal Quarter 1.85 to 1.00 Fiscal Year 1998 First Fiscal Quarter 1.90 to 1.00 Second Fiscal Quarter 1.90 to 1.00 Third Fiscal Quarter 1.90 to 1.00 Fourth Fiscal Quarter 1.95 to 1.00 Fiscal Year 1999 First Fiscal Quarter 2.00 to 1.00 Second Fiscal Quarter 2.05 to 1.00 Third Fiscal Quarter 2.10 to 1.00 Fourth Fiscal Quarter 2.20 to 1.00 Fiscal Year 2000 First Fiscal Quarter 2.25 to 1.00 Second Fiscal Quarter 2.30 to 1.00 Third Fiscal Quarter 2.40 to 1.00 Fourth Fiscal Quarter 2.50 to 1.00 Fiscal Year 2001 First Fiscal Quarter 2.60 to 1.00 Second Fiscal Quarter 2.65 to 1.00 Third Fiscal Quarter 2.75 to 1.00 Fourth Fiscal Quarter 2.90 to 1.00 111 Fiscal Year 2002 First Fiscal Quarter 2.90 to 1.00 Second Fiscal Quarter 2.90 to 1.00 Third Fiscal Quarter 2.90 to 1.00 Fourth Fiscal Quarter 2.90 to 1.00 Fiscal Year 2003 First Fiscal Quarter 2.90 to 1.00 Second Fiscal Quarter 2.90 to 1.00 Third Fiscal Quarter 2.90 to 1.00 Fourth Fiscal Quarter 2.90 to 1.00 D. Maximum Consolidated Capital Expenditures Holding and its Subsidiaries shall not permit Consolidated Capital Expenditures to exceed in any Fiscal Year the amount set forth below for such Fiscal Year (the "Capital Expenditure Amount"): Capital Expenditure Fiscal Year Amount ----------- ----------- 1997 $6,500,000 1998 6,750,000 1999 7,000,000 2000 7,250,000 2001 7,700,000 2002 8,000,000 2003 9,000,000 ; provided that if any portion of the Capital Expenditure Amount permitted to be incurred in any Fiscal Year (the "Reference Period") has not been incurred within such Reference Period (the amount of unutilized Consolidated Capital Expenditures being referred to as the "Unutilized Amount"), Holding and its Subsidiaries may, in the Fiscal Year immediately following the Reference Period, make additional Consolidated Capital Expenditures in an amount not to exceed the lesser of (i) the Unutilized Amount and (ii) 10% of the Capital Expenditure Amount in respect of the Reference Period. 112 6.7 Restriction on Fundamental Changes A. Other than as permitted by subsection 6.7B, neither Holding nor any of its Subsidiaries may, without the consent of Requisite Lenders, acquire or create any Subsidiaries or convey, sell, lease, sublease or transfer any of its assets to any Subsidiaries. B. Neither Holding, nor any of its Subsidiaries will enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), issue any Preferred Stock or convey, sell, exchange, lease, sub-lease, transfer or otherwise dispose of, in one transaction or a series of related transactions, all or any substantial part of its business, property or fixed assets or all or any portion of the stock or beneficial ownership, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person except: (i) subject to the provisions of subsection 6.12, Borrower may acquire assets or 100% of the Capital Stock of one or more other Persons; provided that amounts paid for an acquisition pursuant to this subsection 6.7B(i) shall not count as Consolidated Capital Expenditures for purposes of determining compliance with subsection 6.6D; provided further that (a) the aggregate consideration (whether Cash or non-cash and including all assumption of Indebtedness) for such acquisitions (measured on a cumulative basis from the Restatement Effective Date) shall not exceed $15,000,000, (b) in the case of the acquisition of Capital Stock of another Person, (i) such Person shall become a Subsidiary of Borrower and execute all documents and take all actions required pursuant to subsection 5.11, (2) Borrower may not make any additional Investments in such Subsidiary, unless permitted by subsection 6.3 and (c) all liabilities of such Subsidiary shall be non-recourse to Borrower; (ii) Borrower may sell, exchange or otherwise dispose of assets in Asset Sale transactions; provided that (a) any Asset Sale is made for the fair market value of such assets and for at least eighty-five percent (85%) cash, (b) the Net Cash Proceeds of Asset Sale of each such Asset Sale are applied in conformity with subsection 2.5 and (c) the balance of the sale price not received in cash is pledged to Collateral Agent pursuant to the Borrower Security Agreement; and, provided, further, that in any Fiscal Year, Borrower and its Subsidiaries may not sell, exchange or otherwise dispose of assets in Asset Sale transactions having a fair market or book value in excess of $500,000 in any one or more related transactions without the prior written consent of Requisite Lenders; 113 (iii) a Subsidiary of Borrower acquired pursuant to subsection 6.7B(i) may be merged or consolidated with or into Borrower, or be liquidated, wound up or dissolved; provided, that in the case of such a merger or consolidation, Borrower shall be the continuing or surviving corporation; and (iv) Borrower may sell buses and leases to BB Capital (x) on terms and conditions that are no more favorable to BB Capital than those which BB Capital could obtain from a non-affiliated third party seller in an arms-length transaction for similar buses and related equipment or leases or (y) pursuant to documents and on terms approved by Requisite Lenders. 6.8 Sales and Leasebacks Holding and its Subsidiaries will not directly or indirectly, become or remain liable as lessee or as guarantor or other surety with respect to any lease, of any property (whether real or personal or mixed) whether now owned or hereafter acquired, (i) that Holding or its Subsidiaries has sold or transferred or is to sell or transfer to any other Person, or (ii) that Holding or its Subsidiaries intends to use for substantially the same purpose as any other property that has been or is to be sold or transferred by Holding or any such Subsidiary to any Person in connection with such lease. 6.9 Sale or Discount of Receivables Holding and its Subsidiaries will not, directly or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, notes or accounts receivable; provided, that notwithstanding this subsection 6.9, Borrower may sell, transfer or assign its lease receivables (x) pursuant to, and in accordance with the terms of, the Lease Portfolio Documents, (y) in transactions the terms and conditions of which are substantially similar to, and which are no less favorable to Borrower than, those of the Lease Portfolio Documents or (z) to BB Capital pursuant to a transaction permitted under subsection 6.7B; provided further, that BB Capital may sell, transfer or assign its lease receivables pursuant to securitization documents approved by Requisite Lenders. 6.10 Transactions with Shareholders and Affiliates Holding and its Subsidiaries will not, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity securities of Holding or Borrower or with any Affiliate of Holding or Borrower or of any such holder, as the case may be, on terms that are less favorable to Holding or that Subsidiary, as the case may be, than those that might be 114 obtained at the time from Persons who are not such a holder or Affiliate; provided that with respect to any transaction or series of related transactions involving aggregate payments or value equal to or greater than $1,000,000, Borrower shall have delivered an officer's certificate to Administrative Agent certifying that such transaction or series of related transactions comply with the provisions of this subsection 6.10 and, with respect to any transaction or series of transactions involving aggregate payments or value equal to or greater than $5,000,000, further certifying that such transaction or series of transactions have been approved by a majority of the Board of Directors of Borrower, including a majority of the disinterested directors of the Board of Directors of Borrower. For the purposes of the foregoing, a director of the Borrower shall not be considered "interested" with respect to a transaction solely by virtue of being a director of the other party to such transaction. Borrower shall be deemed to have complied with the foregoing provisions if it has obtained a written opinion from an Independent Financial Advisor stating that the terms of such transaction or series of transactions are fair to Holding or Subsidiary, as the case may be, from a financial point of view. The foregoing restrictions shall not apply to (i) payment of Transaction Costs and payments permitted under subsection 6.5, (ii) any transaction between Borrower and any of its wholly-owned Subsidiaries (other than BB Capital) or between any of its wholly-owned Subsidiaries (other than BB Capital), (iii) customary fees paid to members of the Boards of Directors of Borrower and its Subsidiaries, (iv) reasonable financial advisory arrangements for services rendered by Merrill Lynch or any of its Affiliates to Borrower or any of its Subsidiaries, (v) arms-length transactions in the ordinary course of business with other companies managed by MLCP or Stonington Partners, Inc., (vi) transactions between Borrower and BB Capital expressly permitted by this Agreement or (vii) allocation of tax benefits in accordance with the terms of the Tax Allocation Agreement. 6.11 Disposal of Subsidiary Stock Except as permitted by subsection 6.7 or as required by the Collateral Documents, a Loan Party will not, (i) directly or indirectly sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity securities of (or warrants, rights or options to acquire shares or other equity securities of) any of its Subsidiaries, except to qualify directors if required by applicable law; or (ii) permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other securities of (or warrants, rights or options to acquire shares or other securities of) such Subsidiary, except to Borrower or to qualify directors if required by applicable law. 115 6.12 Conduct of Business; Limitations on Subsidiaries A. Neither Borrower nor any of its Subsidiaries (other than the Guatemalan Subsidiaries) will engage in any business other than the manufacture and sale of school buses, commercial buses, recreational vehicles and chassis and operations substantially similar or incidental to such business, including transactions with respect to lease receivables pursuant to the Lease Portfolio Documents; provided that BB Capital may purchase buses and leases from Borrower to the extent permitted by subsection 6.7B(v), may originate lease receivables in accordance with Borrower's past practices and procedures (including, without limitation, Borrower's credit standards), and may finance such lease receivables to the extent permitted by Section 6.9. Borrower will continue to originate any lease receivables in accordance with practices and procedures, including, without limitation, credit standards, consistent with its past practices and procedures. Holding shall engage only in the business of holding the shares of stock of Borrower. B. The Guatemalan Subsidiaries shall not engage in any business, own or hold any assets, or incur any Indebtedness, Contingent Obligations or other obligations or liabilities whatsoever. Neither Holding nor any of its Subsidiaries shall incur any Indebtedness, Contingent Obligations or other obligations or liabilities whatsoever on behalf of, or with respect to, the Guatemalan Subsidiaries. Holding's and its Subsidiaries' aggregate Investments in the Guatemalan Subsidiaries shall not exceed $15,000. 6.13 Amendments or Waivers of Certain Documents; Changes Relating to Subordinated Debt A. Neither Holding nor any of its Subsidiaries will agree to any amendment, amendment and restatement, supplement or other modification to, or waive any of its rights under, the Related Agreements without the consent of Requisite Lenders; provided, that this subsection 6.13A shall not govern any amendments, amendment and restatements, supplements, modifications, waivers or other matters relating to any Subordinated Debt or to any Subordinated Debt Documents that are governed by subsection 6.13B. B. Neither Holding nor any of its Subsidiaries will agree to any amendment, modification or supplement to, or waive any of its rights under, the terms of any Subordinated Debt or of any Subordinated Debt Document, or (except as permitted pursuant to subsection 6.5) make any payment the effect of which is to amend or change the terms of any Subordinated Debt or Subordinated Debt Document without the consent of Requisite Lenders; provided, that, notwithstanding the foregoing, Holding and its Subsidiaries may agree to amend any provisions of the Subordinated Debt or Subordinated Debt Documents (i) to cure any ambiguity, to 116 correct or supplement any provision therein which may be defective or inconsistent with any other provision of such Subordinated Debt or Subordinated Debt Documents, (ii) to comply with the Trust Indenture Act of 1939, (iii) to make modifications of a technical or clarifying nature which are no less favorable to the Lenders than the provisions of the Subordinated Debt and Subordinated Debt Documents in effect on the Restatement Effective Date or (iv) to eliminate or make less restrictive any covenant contained in the Subordinated Debt Documents; provided that no amendment pursuant to this clause (iv) shall result in any provisions which are less favorable to the Lenders than the provisions contained in the Subordinated Debt Documents on the Restatement Effective Date. C. Neither Holding nor any of its Subsidiaries will defease, or make any payments the effect of which is to defease (whether pursuant to the defeasance provisions of the Subordinated Debt or otherwise and including without limitation any covenant defeasance), the Subordinated Debt in whole or in part, without in each case obtaining the written consent of Requisite Lenders. 6.14 Designation of Senior Indebtedness. Neither Holding nor any of its Subsidiaries will, without obtaining the prior written consent of Requisite Lenders, enter into any agreements or instruments creating or evidencing Indebtedness if such agreements or instruments specifically designate such Indebtedness to be "Designated Senior Indebtedness" under any of the Subordinated Debt Documents (or any comparable provision of any refinancing agreement entered into in respect thereof). SECTION 7. GUARANTY OF HOLDING 7.1 Guaranty by Holding As consideration for Lenders agreeing to enter into this Agreement and extend the Commitments hereunder, Holding hereby unconditionally and irrevocably guaranties the due and punctual payment when due (whether by required prepayment, declaration, demand or otherwise) (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)) of all Obligations of Borrower (including, without limitation, interest which, but for the filing of a petition in bankruptcy with respect to Borrower, would accrue on such Obligations whether or not such interest would be an allowable claim in such proceeding). For purposes of this Section 7, Holding is referred to as a "Guarantor" and the obligations of Holding under this subsection 7.1 are referred to as the "Guaranty." 117 7.2 Terms of Guaranty The Guarantor agrees that the Obligations of the Borrower may be extended or renewed, and the Loans repaid and reborrowed in whole or in part, without notice or further assent from it, and that it will remain bound upon this Guaranty notwithstanding any extension, renewal or other alteration of any such Obligation or repayment and reborrowing of the Loans. The Guarantor waives presentation of, demand of, payment from and protest of any Obligation of Borrower and also waives notice of protest for nonpayment. The obligations of the Guarantor under this Guaranty shall not be affected by, and the Guarantor hereby waives its rights (to the extent permitted by law) in connection with: (a) the failure of any Agent or any Lender to assert any claim or demand or to enforce any right or remedy against the Borrower under the provisions of this Agreement or any other agreement or otherwise, (b) any extension or renewal of any provision thereof, (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement or any instrument executed pursuant hereto, (d) the release of any of the security held by any Agent or any Lender for the Obligations of the Borrower, (e) the failure of any Agent or any Lender to exercise any right or remedy against any other guarantor of the Obligations of Borrower, (f) any Agent or any Lender taking and holding security or collateral for the payment of this Guaranty, any other guaranties of the Obligations or other liabilities of Borrower and the Obligations guarantied hereby, and exchanging, enforcing, waiving and releasing any such security or collateral, (g) any Agent or any Lender applying any such security or collateral and directing the order or manner of sale thereof as Collateral Agent in its discretion may determine, or (h) any Agent or any Lender settling, releasing, compromising, collecting or otherwise liquidating the Obligations and any security or collateral therefor in any manner determined by such Agent or such Lender. 118 The Guarantor further agrees that this Guaranty constitutes a guaranty of payment when due and not of collection and waives any right to require that any resort be had by any Agent or any other Person to any of the security held for payment of the Obligations of Borrower or to any balance of any deposit account or credit on the books of Collateral Agent, Administrative Agent or any other Person in favor of Borrower or any other Person. The obligations of the Guarantor under this Guaranty shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations, discharge of Borrower from the Obligations in a bankruptcy or similar proceeding or otherwise. Without limiting the generality of the foregoing, the obligations of the Guarantor under this Guaranty shall not be discharged or impaired or otherwise affected by the failure of Collateral Agent, Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations of Borrower, or by any other act or thing or omission or delay to do any other act or thing that may or might in any manner or to any extent vary the risk of the Guarantor or would otherwise operate as a discharge of the Guarantor as a matter of law or equity. The Guarantor acknowledges that all or a portion of the Obligations may in the future be secured by deeds of trust, deeds to secure debt or mortgages covering certain interests in real property and authorizes Collateral Agent, at its sole option, without notice or demand and without affecting the liability of the Guarantor under this Guaranty, to foreclose the deeds of trust and mortgages and the interests in real property secured thereby by non-judicial or other sale, and the Guarantor hereby waives any defense to the recovery by Collateral Agent, Administrative Agent or any Lender against the Guarantor of any deficiency after such sale, and the Guarantor expressly waives any defense or benefits that may be derived from statutes and laws relating thereto. Collateral Agent may, at its election, foreclose on any security held by Collateral Agent by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, or exercise any other right or remedy Collateral Agent may have against Borrower or any security without affecting or impairing in any way the liability of the Guarantor hereunder except to the extent the Obligations have been paid. The Guarantor waives any defense arising out of such election by Collateral Agent, even though such election operates to impair or extinguish 119 any right of reimbursement or subrogation or other right or remedy of the Guarantor against Borrower or any security. The Guarantor further agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation of Borrower is rescinded or must otherwise be restored by Administrative Agent, Collateral Agent or any Lender upon the bankruptcy or reorganization of Borrower or otherwise. The Guarantor further agrees, in furtherance of the foregoing and not in limitation of any other right that Administrative Agent, Collateral Agent or any Lender may have at law or in equity against the Guarantor by virtue hereof, upon the failure of Borrower to pay any of its Obligations when and as the same shall become due (whether by required prepayment, declaration, demand or otherwise), the Guarantor will forthwith pay, or cause to be paid, in cash, to Administrative Agent an amount equal to the sum of the unpaid principal amount of such Obligations, accrued and unpaid interest on such Obligations and all other Obligations of Borrower to Administrative Agent, Collateral Agent or such Lender. Guarantor hereby irrevocably waives any rights which it may acquire against Borrower by way of right of subrogation. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon any failure of Borrower to pay its Obligations when due (whether by required prepayment, declaration, demand or otherwise), each Lender, or Administrative Agent with respect to any Obligation owed under the Letters of Credit, and any Affiliate of any of them, is hereby authorized by Guarantor at any time or from time to time, without notice to Guarantor or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, not limited to, Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time owing by any Lender or any subsequent holder of any Note, or Administrative Agent with respect to any Obligation owed under the Letters of Credit, or any Affiliate of any of them, to or for the credit or the account of Guarantor against and on account of the obligations and liabilities of Guarantor to any Lender, or Administrative Agent with respect to any Obligation owed under the Letters of Credit, or any Affiliate of any of them, under this Agreement, this Guaranty or the Letters of Credit including but not limited to, all claims of any nature or description arising out of or connected with this Agreement, this Guaranty or the Letters of Credit or any of the other Loan Documents irrespective of whether or not (a) Lenders, or Administrative Agent with respect to any Obligation owed under the Letters of Credit, or any Affiliate of any of them, shall have made any demand hereunder or (b) Lenders, or Administrative Agent with respect to any 120 Obligation owed under the Letters of Credit, or any Affiliate of any of them, shall have declared the principal of and interest on the Loans or the Letters of Credit and other amounts due hereunder or under the other Loan Documents to be due and payable as permitted by Section 8. SECTION 8. EVENTS OF DEFAULT IF any of the following conditions or events ("Events of Default") shall occur and be continuing: 8.1 Failure to Make Payments When Due Failure to pay any installment of principal of any Loan when due, whether at stated maturity, by declaration or acceleration, by notice of prepayment, by required prepayment or otherwise; or failure to pay any interest on any Loan or any other amount due under this Agreement (including, without limitation, any payment with respect to reimbursement of amounts drawn under Letters of Credit) within five (5) days after the date due; or 8.2 Default in Other Agreements Failure of Holding or Borrower or any of their respective Subsidiaries to pay when due (i) any principal or interest on any item or items of Indebtedness (other than Indebtedness referred to in subsection 8.1) in an individual or aggregate principal amount of $2,500,000 or more, or (ii) any one or more Contingent Obligations in an individual or aggregate principal amount of $2,500,000 or more, in each case beyond the end of any period prior to which the obligee is prohibited from accelerating payment thereunder; or Breach or default of Holding or Borrower or any of their respective Subsidiaries with respect to any other term of (i) any evidence of any item or items of Indebtedness in an individual or aggregate principal amount of $2,500,000 or more or any one or more Contingent Obligations in an individual or aggregate principal amount of $2,500,000 or more, or (ii) any loan agreement, mortgage, indenture or other agreement relating thereto, with respect to Indebtedness with an aggregate principal amount of $2,500,000 or more, if, in the case of either clause (i) or clause (ii) of this paragraph, the effect of such failure, default or breach is then to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation (or a trustee on behalf of such holder or holders) then to cause, that Indebtedness or Contingent Obligation to become or be declared due prior to its stated maturity (or the stated maturity of any underlying obligation, as the case may be); or 121 8.3 Breach of Certain Covenants Failure of Holding or Borrower to perform or comply with any term or condition contained in subsections 2.5A(ii), 2.6, 5.2, 5.6, 5.8, or Section 6; or 8.4 Breach of Warranty Any representation, warranty, certification or other statement made by any Loan Party in any Loan Document or in any statement or certificate at any time given by such Loan Party in writing pursuant hereto or in connection herewith shall be false in any material respect on the date as of which made; or 8.5 Other Defaults Under Agreement or Loan Documents Holding or Borrower shall default in the performance of or compliance with any term contained in this Agreement or the other Loan Documents other than those referred to above in subsections 8.1, 8.3 or 8.4 and such default shall not have been remedied or waived within thirty (30) days after receipt by Holding or Borrower, as the case may be, of notice from Administrative Agent of any such default; or 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries in an involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable Federal or state law; or (ii) an involuntary case is commenced against Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries, or over all or a substantial part of its property, shall have been entered; or the involuntary appointment of an interim receiver, trustee or other custodian of Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries for all or a substantial part of its property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries, and the continuance of any such event in clause (ii) for sixty (60) days unless dismissed, bonded or discharged; or 122 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. (i) Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries shall make any assignment for the benefit of creditors; or (ii) the inability or failure of Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries, or the admission by Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries in writing of its inability, to pay its debts as such debts become due; or the Board of Directors of Holding, Borrower, Canadian Blue Bird, BB Capital or any of their respective material Subsidiaries (or any committee thereof) adopts any resolution to approve or otherwise authorizes any of the actions referred to in clause (i) or this clause (ii); or 8.8 Judgments and Attachments (i) Any money judgment, writ or warrant of attachment, or similar process involving in any individual case an amount in excess of $3,000,000 (exclusive of any amount which is fully and adequately covered by insurance and with respect to which the insurer has acknowledged in writing its coverage) shall be entered or filed against Holding or Borrower or any of their respective Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or (ii) Holding or any of its Subsidiaries shall enter into any voluntary settlement of litigation or claim in an amount, in any individual case, in excess of $3,000,000 (exclusive of any amount which is fully and adequately covered by insurance and with respect to which the insurer has acknowledged its coverage in writing); or 8.9 Dissolution 123 Any order, judgment or decree shall be entered against Holding or Borrower or any of their respective Subsidiaries decreeing the dissolution or split up of Holding or Borrower or that of their respective Subsidiaries and such order shall remain undischarged or unstayed for a period in excess of sixty (60) days; or 8.10 Employee Benefit Plans There occurs one or more ERISA Events which individually or in the aggregate results in or is reasonably expected to result in liability of Holding or any of its Subsidiaries in excess of $1,000,000 during the term of this Agreement; or there exists an excess of aggregated accumulated benefit obligations, as defined in Statement of Financial Accounting Standards No. 87 (the "ABO"), over the aggregate total fair market value for all Pension Plans (excluding for purposes of such computation each Pension Plan with respect to which the fair market value of the assets exceeds the ABO and each Pension Plan in which no employees of Holding or any of its Subsidiaries have ever participated as an employee of Holding or any of its Subsidiaries) which exceeds the greater of (a) ten percent (10%) of the aggregated ABO and (b) $5,000,000 for a period of thirty (30) consecutive days; or 8.11 Invalidity of Guaranties Any guaranty of the Obligations, including the Holding Guaranty, for any reason, other than the satisfaction in full of all Obligations and termination of this Agreement, ceases to be in full force and effect or is declared to be null and void, or any guarantor, including Holding, denies that it has any further liability, including, without limitation, with respect to future advances by Lenders, under any guaranty or gives notice to such effect; or 8.12 Change in Control (i) Any Person or related group of Persons (including a "group" as such term is used in Section 13(d)(3) of the Exchange Act but excluding MLCP and its Affiliates) owns or controls more than 30% of the common stock or 30% of the voting power of Holding entitled to vote for the election of members of the board of directors of Holding or (ii) any Person or related group of Persons (including a "group" as such term is used in Section 13(d)(3) of the Exchange Act) owns or controls a greater percentage of the common stock or of the voting power of Holding entitled to vote for the election of members of the board of directors of Holding than MLCP and its Affiliates or (iii) Holding shall cease to own and control at least 100% of the common stock and 100% of the voting power of Borrower entitled to vote for the election of members of the board of directors of Borrower or (iv) a change shall occur in the Board of Directors of Holding so that a majority of the Board of Directors of Holding ceases to consist of the individuals who constituted the Board of Directors of Holding 124 on the Restatement Effective Date (or individuals whose election or nomination for election was approved by a vote of at least 66-2/3% of the directors then in office who either were directors on the Restatement Effective Date or whose election or nomination for election was previously so approved); or 8.13 Impairment of Collateral (i) A judgment creditor of Holding or Borrower or any of their respective Subsidiaries shall obtain possession of any substantial portion of the collateral under the Collateral Documents by any means, including, without limitation, levy, distraint, replevin or self-help, (ii) any substantial portion of the Collateral shall be taken by eminent domain or condemnation, (iii) any of the Collateral Documents shall cease for any reason to be in full force and effect, or any party thereto shall purport to disavow its obligations thereunder or shall declare that it does not have any further obligations thereunder or shall contest the validity or enforceability thereof or Lenders shall cease to have a valid and perfected first priority security interest in any Collateral therein, or (iv) Lenders' security interests or Liens on the Collateral under the Collateral Documents shall become otherwise impaired or unenforceable; or 8.14 Default Under Subordinated Debt Documents Failure of Borrower or any obligee of the Subordinated Debt to comply with the subordination provisions contained in the Subordinated Debt Documents; THEN (i) upon the occurrence of any Event of Default described in the foregoing subsections 8.6 or 8.7(i), each of (a) the unpaid principal amount of and accrued interest on the Loans, (b) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any Letter of Credit shall have presented or be entitled to present, the drafts and other documents required to draw under the Letter of Credit), and (c) all other Obligations, shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Holding and its Subsidiaries and the obligation of Administrative Agent to make any Swing Line Loan, the obligation of each Lender to make any Loan, and the obligation of each Issuing Lender to issue any Letter of Credit shall thereupon terminate and (ii) upon the occurrence and during the continuance of any other Event of Default, Requisite Lenders may, by written notice to Borrower, declare all or any portion of the amounts described in clause (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, together with accrued interest thereon, and the obligation of Administrative Agent to make any Swing Line Loan, the obligation of each Lender to make any Loan and the obligation of each Issuing Lender to issue any Letter of Credit shall thereupon terminate; provided, that the foregoing shall not affect in any way the obligations of Lenders to make Working 125 Capital Loans to reimburse drawings under Letters of Credit as provided in subsection 2.9C or the right of Administrative Agent to cause Lenders to make Working Capital Loans in order to repay Swing Line Loans as provided in subsection 2.2B. So long as any Letter of Credit shall remain outstanding, any amounts described in clause (b) above with respect to Letters of Credit, when received by the Issuing Lender, shall be held by the Issuing Lender, pursuant to such documentation as the Issuing Lender shall request, as cash collateral for the obligation of Borrower to reimburse the Issuing Lender in the event of any drawing under such Letters of Credit, and so much of such funds shall at all times remain on deposit as cash collateral as aforesaid as shall equal the maximum amount available at any time for drawing under all Letters of Credit (the "Maximum Available Amount"); provided that in the event of cancellation or expiration of any Letter of Credit or any reduction in the Maximum Available Amount, the Issuing Lender shall apply the difference between the cash collateral held by the Issuing Lender immediately prior to such cancellation, expiration or reduction and the Maximum Available Amount immediately after such cancellation, expiration or reduction first to the payment of any outstanding Obligations, and second to the payment to whomsoever shall be lawfully entitled to receive such funds. Notwithstanding anything contained in the foregoing paragraph, if at any time within 30 days after acceleration of the maturity of any Loan, Holding or Borrower shall pay all arrears of interest and all payments on account of the principal which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement or the Notes) and all Events of Default and Potential Events of Default (other than non-payment of principal of and accrued interest on the Loans and the Notes and payments of amounts referred to clauses (a), (b) and (c) above, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 10.7, then Requisite Lenders, by written notice to Administrative Agent and Borrower, may at their option rescind and annul the acceleration and its consequences and return to Borrower any amounts held pursuant to the cash collateral arrangement referred to above as cash collateral in respect of the amounts described in clause (b) above; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. Administrative Agent agrees to use its reasonable best efforts to promptly notify LaSalle National Bank, as purchaser under the Lease Portfolio Documents, of any Event of Default pursuant to this Section 8; provided, however, that any failure by Administrative Agent to notify LaSalle National Bank shall be of no consequence or effect whatsoever and Administrative Agent shall have no liability whatsoever to LaSalle National Bank or to any other Person whatsoever for any failure to notify LaSalle National Bank. 126 SECTION 9. ADMINISTRATIVE AGENT; SYNDICATION AGENT 9.1 Appointment Bankers is hereby appointed Administrative Agent hereunder by each Lender. Merrill Lynch is hereby appointed Syndication Agent hereunder by each Lender. Each Lender hereby authorizes each Agent to act hereunder and under the other instruments and agreements referred to herein (including, without limitation, the Collateral Documents) as its agents hereunder and thereunder. Each Agent agrees to act as such upon the express conditions contained in this Section 9 and in the Collateral Documents. The provisions of this Section 9 are solely for the benefit of Agents and Lenders, and neither Holding nor any of its Subsidiaries shall have any rights as a third party beneficiary of any of the provisions hereof. In performing their functions and duties under this Agreement, Agents shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Holding or any of its Subsidiaries. 9.2 Powers; General Immunity A. Duties Specified. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers hereunder and under the other instruments and agreements referred to herein (including, without limitation, the Collateral Documents) as are specifically delegated to such Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that are expressly specified with respect to such Agent in this Agreement and the Collateral Documents and it may perform such duties by or through its agents or employees. The duties of Agents shall be mechanical and administrative in nature; no Agent shall have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect of this Agreement or the other instruments and agreements referred to herein except as expressly set forth herein or therein. No Lender designated as a co-agent shall have any fiduciary relationship with any Agent, any other Lender or any Loan Party nor any additional obligations under this Agreement by reason of such designation. B. No Responsibility for Certain Matters. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement, any other Loan Document or the Notes or Letters of Credit, or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement 127 or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by any Agent to Lenders or by or on behalf of Holding or any of its Subsidiaries to Administrative Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans. C. Exculpatory Provisions. No Agent nor any of their respective officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted hereunder or in connection herewith (including, without limitation, any act or omission under the Collateral Documents) unless caused by its or their gross negligence or willful misconduct. If any Agent shall request instructions from Lenders with respect to any act or action (including the failure to take an action) in connection with this Agreement, such Agent shall be entitled to refrain from such act or taking such action unless and until such Agent shall have received instructions from Requisite Lenders or, to the extent such action requires the consent of all Lenders pursuant to the express terms of this Agreement, all Lenders. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Holding or any of its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting under this Agreement or the other instruments and agreements referred to herein in accordance with the instructions of Requisite Lenders. Each Agent shall be entitled to refrain from exercising any power, discretion or authority vested in them under this Agreement or the other instruments and agreements referred to herein unless and until they have obtained the instructions of Requisite Lenders. D. Agents Entitled to Act as Lenders. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans, each Agent shall each have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder and the term "Lender" or any similar term shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Each Agent and their Affiliates may accept deposits 128 from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Holding or any Affiliate of Holding as if it were not performing the duties specified herein, and may accept fees and other consideration from Holding or any of its Subsidiaries for services in connection with this Agreement and otherwise without having to account for the same to Lenders, except as required by subsection 2.4. 9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Holding and its Subsidiaries in connection with the making of the Loans hereunder and has made and shall continue to make its own appraisal of the creditworthiness of Holding and its Subsidiaries. No Agent shall have any duty or responsibility either initially or on a continuing basis to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto whether coming into their possession before the making of the Loans or any time or times thereafter and no Agent shall have any responsibility with respect to the accuracy of or the completeness of the information provided to Lenders. 9.4 Right to Indemnity Each Lender, proportionately to its Pro Rata Share, severally agrees to indemnify each Agent to the extent such Agent shall not have been reimbursed by Holding or its Subsidiaries, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in performing its duties hereunder, in any way relating to or arising out of this Agreement; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 9.5 Registered Persons Treated as Owner Administrative Agent may deem and treat the Persons listed as Lenders in the Register as the owner of the corresponding Loan listed therein for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have 129 been filed with Administrative Agent and recorded in the Register. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, transferee or assignee of the corresponding Loan. 9.6 Collateral Documents and Intercreditor Agreements; Appointment of Collateral Agent Each Lender, Administrative Agent and Syndication Agent hereby appoints Bankers as Collateral Agent and authorizes Collateral Agent, as such agent, to act as such under the Collateral Documents and the Intercreditor Agreements. Each Lender, Administrative Agent and Syndication Agent hereby further authorizes Collateral Agent to enter into the Collateral Documents and the Intercreditor Agreements on behalf of and for the benefit of Lenders, Administrative Agent and Syndication Agent and agrees to be bound by the terms of the Collateral Documents and the Intercreditor Agreements; provided that Collateral Agent shall not enter into or consent to any amendment, modification, termination or waiver of any provision contained in any Collateral Document or any Intercreditor Agreement without the prior written consent of Administrative Agent and Requisite Lenders. Each Lender, Administrative Agent and Syndication Agent agrees that no Lender, Administrative Agent or Syndication Agent shall have any right individually to realize upon the security granted by the Collateral Documents, it being understood and agreed that such rights and remedies may be exercised by Collateral Agent for the benefit of Lenders, Administrative Agent, Syndication Agent and the other parties benefitted by the Intercreditor Agreement in accordance with the terms of such agreements. Each Lender, Administrative Agent and Syndication Agent hereby authorizes Collateral Agent to release Collateral as permitted or required under this Agreement, the Collateral Documents or the Intercreditor Agreements, and agrees that a certificate executed by Collateral Agent evidencing such release of Collateral shall be conclusive evidence of such release as to any third party. 9.7 Successor Administrative Agents Administrative Agent may resign at any time by giving written notice thereof to Lenders and Borrower, and Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Borrower and Administrative Agent and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five (5) days notice to Borrower, to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by Requisite Lenders, and shall have accepted such appointment, within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation or Requisite Lenders' 130 removal of the retiring Administrative Agent then, upon five days' notice to Borrower, the retiring Administrative Agent may, on behalf of Lenders, appoint a successor Administrative Agent, which shall be a Lender, or a commercial bank organized under the laws of the United States of America or of any State thereof, or any Affiliate of such bank, having a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as an Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall be discharged from its duties and obligations as Administrative Agent, under this Agreement. After any retiring or removed Administrative Agent's resignation or removal hereunder as Administrative Agent, as the case may be, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. SECTION 10. MISCELLANEOUS 10.1 Representation of Lenders Each Lender hereby represents that it is a commercial lender, financial institution or entity that would qualify as an Eligible Assignee which makes loans in the ordinary course of its business and that it will make any Loan for its own account in the ordinary course of such business and that, subject to subsection 10.2, the disposition of evidence of Indebtedness held by that Lender shall at all times be within its exclusive control. 10.2 Assignments and Participations in Loans and Letters of Credit (a) General. Subject to subsection 10.2(b), each Lender shall have the right at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii) sell participations to any Person in, all or any part of its Commitments or any Loan or Loans made by it or its Letters of Credit or participations therein or any other interest herein or in any other Obligations owed to if; provided that no such sale, assignment or transfer described in clause (i) above shall be effective unless and until an Assignment Agreement effecting such sale, assignment or transfer shall have been accepted by Administrative Agent and recorded in the Register as provided in subsection 10.2(b)(ii); provided further that no such sale, assignment, transfer or participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the Working Capital Loan Commitment and the Working Capital Loans of the Lender effecting such sale, assignment, transfer or participation. Except as otherwise provided in this subsection 131 10.2, no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Commitments or the Loans, the Letters of Credit or participations therein, or the other Obligations owed to such Lender. (b) Assignment. (i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter of Credit or participation in any Letter of Credit or in any Swing Line Loan, or other Obligation may (a) be assigned in any amount to another Lender, or to an Affiliate of the assigning Lender or another Lender, with the giving of notice to Borrower and Administrative Agent or (b) be assigned in an aggregate amount of not less than $5,000,000 (or such lesser amount as shall constitute the aggregate amount of the Commitments, Loans, Letters of Credit and participations in any amount Letter of Credit or in any Swing Line Loan, and other Obligations of the assigning Lender) to any other Eligible Assignee, with the consent of Borrower and Administrative Agent (which consent of Company and Agent shall not be unreasonably withheld or delayed). To the extent of any such assignment in accordance with either clause (a) or (b) above, the assigning Lender shall be relieved of its obligations with respect to its Commitments, Loans, Letters of Credit or participations therein, or other Obligations of the portion thereof so assigned. The parties to each such assignment shall execute and deliver to Administrative Agent, for its acceptance and recording in the Register, an Assignment Agreement, together with a processing and recordation fee of, $3,500 and such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to subsection 2.10. Upon such execution, delivery, acceptance and recordation, from and after the effective date specified in such Assignment Agreement, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 10.10) and be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto); provided that, anything contained in any of the Loan Documents to the contrary notwithstanding, if such Lender is the Issuing Lender with respect to any outstanding Letters of Credit such Lender shall continue to have all rights and obligations of an Issuing Lender with respect to such Letters of Credit until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder). The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any 132 remaining Commitment of such assigning Lender and, if any such assignment occurs after the issuance of the Notes hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes to Administrative Agent for cancellation, and thereupon new Notes shall be issued to the assignee and to the assigning Lender, substantially in the form of Exhibit IV, Exhibit V, Exhibit VI or Exhibit VII annexed hereto, as the case may be, with appropriate insertions, to reflect the new Commitments and/or outstanding Term Loans, as the case may be, of the assignee and/or the assigning Lender. (ii) Acceptance by Administrative Agent; Recordation in Register. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing and recordation fee referred to in subsection 10.2(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Agent pursuant to subsection 2.10, Administrative Agent shall, if Administrative Agent and Borrower have consented to the assignment evidenced thereby (in each case to the extent such consent is required pursuant to subsection 10.2(b)(i), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), (b) record the information contained therein in the Register, and (c) give prompt notice thereof to Borrower. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 10.2(b)(ii). (c) Participations. The holder of any participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting (i) the extension of the scheduled final maturity date of any portion of the principal amount of or the postponement of the date of payment of interest on any Loan allocated to such participation (it being understood that changes in interim amortization amounts or dates are not extensions of scheduled final maturity dates), or the extension of the stated expiration date beyond the Maturity Date of any Letter of Credit allocated to such participation, or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation (other than any waiver of any increase in the interest rate applicable to the Loans pursuant to subsection 2.3E), and all amounts payable by Borrower (including without limitation amounts payable to such Lender pursuant to subsections 2.7, 2.8 and 2.9) shall be determined as if such Lender had not sold such participation. Borrower and each Lender hereby acknowledge and agree that, solely for purposes of subsections 10.3 and 10.4, (a) any participation will give rise to a direct obligation of Borrower to the Participant and (b) the participant shall be considered to be a "Lender". 133 (d) Assignments to Federal Reserve Banks. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 10.2, any Lender may assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulations A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided that (i) no Lender shall, as between Borrower and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. 10.3 Expenses Whether or not the transactions contemplated hereby shall be consummated, Holding and its Subsidiaries jointly and severally agree to promptly pay (i) all the actual and reasonable costs and expenses of Agents for the preparation of the Loan Documents and all the costs of furnishing all opinions by counsel for Holding and its Subsidiaries (including, without limitation, any opinions reasonably requested by any Agent as to any legal matters arising hereunder), and of Holding's and its Subsidiaries' performance of and compliance with all agreements and conditions contained herein on its part to be performed or complied with, (ii) the reasonable fees, expenses and disbursements of counsel to Agents (including allocated costs of internal counsel) in connection with the negotiation, syndication, preparation, execution and administration of this Agreement, the Loan Documents, the Loans and Letters of Credit hereunder, and any amendments and waivers hereto, (iii) all the actual costs and expenses of creating and perfecting Liens in favor of Lenders contemplated by this Agreement and the other Loan Documents, including filing and recording fees and expenses, mortgage or similar taxes, title insurance, title report and work charges, reasonable fees and expenses of counsel for providing such opinions as any Agent may reasonably request and reasonable fees and expenses of legal counsel to Agents, (iv) all other actual and reasonable out-of-pocket expenses incurred by Agents in connection with the negotiation, preparation, execution and administration of this Agreement, the Loan Documents, the Subordinated Debt Documents and the other Related Agreements, the making and conversion of the Loans hereunder and the issuance of the Letters of Credit and other extensions of credit hereunder and the syndication of such Loans and Letters of Credit, and (v) after the occurrence of an Event of Default, all costs and expenses (including reasonable fees of legal counsel to Agents, including allocated costs of internal counsel and costs of settlement) incurred by Agents and Lenders in enforcing any Obligations of or in collecting any payments due from Holding or any of its Subsidiaries hereunder or the Letters of Credit or of any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceeding. 134 10.4 Indemnity In addition to the payment of expenses pursuant to subsection 10.3, whether or not the transactions contemplated hereby shall be consummated, Holding and its Subsidiaries jointly and severally agree to indemnify, pay and hold Agents and Lenders, and the officers, directors, employees, agents, and affiliates of Agents and Lenders and such holders (collectively called the "Indemnitees") harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees) in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto, that may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of, the Refinancing, this Agreement or the other Loan Documents, the statements contained in the commitment letter, Lenders' agreement to make and convert the Loans and other extensions of credit and Lenders' agreements to purchase participations therein as provided herein, or the use or intended use of the proceeds of any of the Loans or other extensions of credit hereunder or in any way relating to or resulting from the actions of Holding, Borrower, any of their respective Subsidiaries, MLCP (the "Indemnified Liabilities"); provided that neither Holding nor any of its Subsidiaries shall have any obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct, all as determined by a final judgment of a court of competent jurisdiction; provided further that all indemnification obligations of Holding and Borrower pursuant to the Existing Credit Agreement shall survive the amendment and restatement of the Existing Credit Agreement pursuant to this Agreement. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Holding and its Subsidiaries shall each contribute the maximum portion that it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. 10.5 Set Off In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default, each Lender, upon the consent of Administrative Agent and Requisite Lenders, is hereby authorized by Holding and any of its Subsidiaries at any time or from time to time, without notice to Holding or any of its Subsidiaries, or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, Indebtedness evidenced by certificates of deposit, whether matured or unmatured but not including trust accounts) and any other Indebtedness at any time held or owing by 135 that Lender to or for the credit or the account of Holding or any of its Subsidiaries, against and on account of the obligations and liabilities of Holding or any of its Subsidiaries to that Lender under this Agreement or with respect to the Letters of Credit, including, but not limited to, all claims of any nature or description arising out of or connected with this Agreement or with respect to the Letters of Credit or any other Loan Document, irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans, Notes or any Obligations with respect to the Letters of Credit, and other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. 10.6 Ratable Sharing Lenders each agree among themselves that if any of them shall, through the exercise of any right of counterclaim, set-off, banker's lien or otherwise or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal and interest then due with respect to the Loans and the amounts due to that Lender in respect of facility fees or commitment fees hereunder (collectively, the "Aggregate Amounts Due" to such Lender), which is greater than the proportion received by any other Lender in respect to the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify each other Lender and Administrative Agent of such receipt and (ii) purchase participations (which it shall be deemed to have done simultaneously upon the receipt of such payment) in the Aggregate Amounts Due shall be shared by the Lenders in proportion to the Aggregate Amounts Due them; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to that Lender to the extent of such recovery, but without interest. Holding and each of its Subsidiaries expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Holding or any of its Subsidiaries to that holder. 10.7 Amendments and Waivers A. No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, or consent to any departure by Holding or Borrower therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that no such amendment, modification, termination, waiver or consent shall, without the consent of each Lender (with Obligations directly affected in the case of the following clause(i)): (i) extend the scheduled final maturity of any Loan or Note, or extend the stated expiration date of any Letter of Credit 136 beyond the Maturity Date or reduce the rate of interest (other than any waiver of any increase in the interest rate applicable to any of the Loans pursuant to subsection 2.3E) or fees thereon, or extend the time of payment of interest or fees thereon, or reduce the principal amount thereof, (ii) release all or substantially all of the Collateral or from the Holding Guaranty except as expressly provided in the Loan Documents, (iii) amend, modify, terminate or waive any provision of this subsection 10.7, (iv) reduce the percentage specified in the definition of Requisite Lenders (it being understood that, with the consent of the Requisite Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Requisite Lenders on substantially the same basis as the extensions of Term Loans and Working Capital Loan Commitments are included on the Restatement Effective Date) or (v) consent to the assignment or transfer by Borrower or Holding of any of its rights and obligations under this Agreement; provided further that no such amendment, modification, termination or waiver shall (1) increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that amendments, modifications or waivers of conditions precedent, covenants, Potential Events of Default or Events of Default or of a mandatory reduction in the Commitments shall not constitute an increase of the Commitment of any Lender, and that an increase in the available portion of any Commitment of any Lender shall not constitute an increase in the Commitment of such Lender); (2) without the consent of Administrative Agent, amend, modify, terminate or waive any provision of subsection 2.2B or any other provision of this Agreement relating to the Swing Line Commitment or the Swing Line Loans; (3) without the consent of the Requisite Class Lenders of each Class which is being allocated a lesser prepayment, repayment or commitment reduction as a result of the actions described below (or without the consent of the Requisite Class Lenders), amend the definition of Requisite Class Lenders or alter the required application of any prepayments or repayments (or commitment reduction), as between the Classes pursuant to subsection 2.4 (although the Requisite Lenders may waive, in whole or in part, any such prepayment, repayment or commitment reduction so long as the application, as between the Classes, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered); (4) without the consent of Requisite Class Lenders of the respective Class, waive or reduce any scheduled repayment pursuant to subsection 2.1D; (5) no amendment, modification, termination or waiver relating to the obligations of Revolving Lenders relating to the purchase of participations in Letters of Credit shall be effective without the written concurrence of each Issuing Lender having a Letter of Credit then outstanding or which has not been reimbursed for a drawing under a Letter of Credit issued by Administrative Agent and of Administrative Agent; (6) without the consent of Administrative Agent or Collateral Agent, amend, modify, terminate or waive any provision of this Agreement as the same applies to the rights or obligations of Administrative Agent or Collateral Agent, as applicable; or (7) without the consent of Syndication Agent, amend, modify, terminate or waive any provision of this Agreement as the same applies to the rights or obligations of Syndication Agent. 137 B. If, in connection with any proposed amendment, modification, termination or waiver to any of the provisions of this Agreement or the Notes as contemplated by clauses (i) through (v) of the first proviso of subsection 10.7A, the consent of the Requisite Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then Borrower shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clause (i) or (ii) below, to either (i) replace each such non-consenting Lender or Lenders with one or more proposed Lenders satisfactory to Administrative Agent (a "Replacement Lender") so long as at the time of such replacement, each such Replacement Lender consents to the proposed amendment, modification, termination or waiver, or (ii) terminate such non-consenting Lender's Commitments and repay in full in cash its outstanding Loans, accrued and unpaid interest and other amounts due and payable to such Lender; provided that unless the Commitments that are terminated and the Loans that are repaid pursuant to the preceding clause (ii) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to the preceding clause (ii), the Requisite Lenders (determined before giving effect to the proposed actions) shall specifically consent thereto; provided further that Borrower shall not have the right to terminate such Lender's Working Capital Loan Commitment and repay in full in Cash its outstanding Loans pursuant to clause (ii) of this subsection 10.7B if, immediately after the termination of such Lender's Working Capital Loan Commitment, the Working Capital Loan Exposure of all Lenders would exceed the Working Capital Loan Commitments of all Lenders; provided still further, that Borrower shall not have the right to replace a Lender solely as a result of the exercise of such Lender's rights (and the withholding of any required consent by such Lender) pursuant to the second proviso to subsection 10.7A. C. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Holding or Borrower in any case shall entitle Holding or Borrower to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 10.7 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Holding or Borrower, on Holding or Borrower, as the case may be. 10.8 Independence of Covenants All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it 138 would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists. 10.9 Notices Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied or sent by United States mail or courier service and shall be deemed to have been given when delivered in person, receipt of telecopy or four Business Days after depositing it in the United States mail, registered or certified, with postage prepaid and properly addressed; provided that notices to Administrative Agent shall not be effective until received. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this subsection 10.9) shall be as set forth under each party's name on the signature pages hereof. 10.10 Survival of Warranties and Certain Agreements A. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement, and the conversion of Loans on the Restatement Effective Date and the making of the Loans hereunder. B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Borrower set forth in subsections 2.7E, 2.7H, 2.8, 2.9E, 2.9G, 2.9H, 10.3, 10.4 and 10.5 and the agreements of Lenders set forth in subsections 9.2C, 9.4, 10.5 and 10.6 shall survive the payment of the Loans and the reimbursement obligations under the Letters of Credit and the termination of this Agreement. 10.11 Failure or Indulgence Not Waiver; Remedies Cumulative No failure or delay on the part of any Lender or any holder of any Note in the exercise of any power, right or privilege hereunder or under the Notes shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement or the Notes are cumulative to, and not exclusive of, any rights or remedies otherwise available. 139 10.12 Severability In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.13 Obligations Several; Independent Nature of Lenders' Rights The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement and no action taken by Lenders pursuant hereto shall be deemed to constitute Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.14 Headings; Table of Contents Section and subsection headings in this Agreement and the table of contents are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 10.15 Applicable Law THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 10.16 Successors and Assigns; Subsequent Holders of Notes This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders. The terms and provisions of this Agreement shall inure to the benefit of any assignee of the Loans, and in the event of such transfer or assignment, the rights and privileges herein conferred upon Lenders shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. Neither Holding's or any of its Subsidiaries' rights nor 140 any interest therein hereunder may be assigned without the written consent of all Lenders. Lenders' rights of assignment are subject to subsection 10.2. 10.17 Consent to Jurisdiction and Service of Process ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST HOLDING OR ANY OF ITS SUBSIDIARIES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OBLIGATION MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN NEW YORK, NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT HOLDING AND EACH OF ITS SUBSIDIARIES ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR SUCH OBLIGATION. Holding and each of its Subsidiaries designates and appoints C T Corporation System and such other Persons as may hereafter be selected by Holding and each of its Subsidiaries irrevocably agreeing in writing to so serve, as its agent to receive on its behalf service of all process in any such proceedings in any such court, such service being hereby acknowledged by Holding and each of its Subsidiaries to be effective and binding service in every respect. A copy of any such process so served shall be mailed by registered mail to Holding and each of its Subsidiaries at its address provided in the applicable signature page hereto, except that unless otherwise provided by applicable law, any failure to mail such copy shall not affect the validity of service of process. If any agent appointed by Holding and each of its Subsidiaries refuses to accept service, Holding and each of its Subsidiaries hereby agree that service upon it by mail shall constitute sufficient notice. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any Agent or Lender to bring proceedings against Holding and each of its Subsidiaries in the courts of any other jurisdiction. 10.18 Waiver of Jury Trial HOLDING, BORROWER, EACH AGENT AND EACH LENDER HEREBY MUTUALLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court 141 and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Borrower, Administrative Agent and each Lender each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement, and that each will continue to rely on the waiver in their related future dealings. Holding, Borrower, Administrative Agent and each Lender further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS OR THE LETTERS OF CREDIT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 10.19 Counterparts; Effectiveness This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt of written or telephonic notification of such execution and authorization of delivery thereof by Borrower and Administrative Agent. [Remainder of page intentionally left blank] 142 WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. BLUE BIRD BODY COMPANY By: /s/ Paul E. Glaske ---------------------------- Title: President and Chairman Notice Address: Blue Bird Body Company P.O. Box 7839 3920 Arkwright Road Macon, GA 31210 Attention: Paul Glaske BLUE BIRD CORPORATION By: /s/ Paul E. Glaske ---------------------------- Title: President and Chairman Notice Address: Blue Bird Corporation P.O. Box 7839 3920 Arkwright Road Macon, GA 31210 Attention: Paul Glaske With a copy to: Stonington Partners 767 Fifth Avenue New York, New York 10153 Attention: Alexis Michas S-1 BANKERS TRUST COMPANY, individually and as Administrative Agent By: /s/ Mary Jo Jolly ---------------------------- Title: Assistant Vice President Notice Address: Bankers Trust Company 130 Liberty, 14th Fl. New York, New York 10006 Attention: Mary Jo Jolly With a copy to: Bankers Trust Company 300 South Grand Avenue, 41st Floor Los Angeles, California 90071 Attention: Cristie Sheffield S-2 MERRILL LYNCH & CO., as Syndication Agent By: /s/ Edward Crook ________________________________ Title: Managing Director Notice Address: World Financial Center North-7th Floor New York, New York 10281 Attention: Edward Crook MERRILL LYNCH CAPITAL CORPORATION By: /s/ Edward Crook _________________________________ Title: Vice President Notice Address: Merrill Lynch Capital Corporation World Financial Center North-7th Floor New York, New York 10281 Attention: Edward Crook S-3 ABN AMRO BANK NV, Atlanta Agency By: /s/ Steven Hipsman/Larry Kelley -------------------------------------- Title: Vice President/Group Vice President Notice Address: ABN AMRO One Ravinia Drive, Suite 1200 Atlanta, GA 30346 Attention: Patrick Thom ALLSTATE INSURANCE COMPANY By: /s/ Patricia W. Wilson ---------------------------- Title: Authorized Signatory Assistant Vice President By: /s/ Ronald A. Mendel ---------------------------- Title: Authorized Signatory Notice Address: Allstate Insurance Company 3075 Sanders Road, Suite G3A Northbrook, IL 60062 Attention: Tom Napholz AMSOUTH BANK OF ALABAMA By: /s/ Alan D. Lot ---------------------------- Title: Vice President Notice Address: AmSouth Bank of Alabama 1900 5th Avenue North, 7th Fl. Birmingham, AL 35203 Attention: Alan D. Lot S-4 BANK OF AMERICA ILLINOIS By: /s/ John P. Hesselmann ---------------------------- Title: Senior Vice President Notice Address: Bank of America Illinois 231 S. LaSalle Street, 6th Fl. Chicago, IL 60697 Attention: Mark D. Cordes BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: /s/ Victor Bulzacchelli ---------------------------- Title: Vice President Notice Address: Bank of Tokyo - Mitsubishi Trust Company 1251 Avenue of Americas, 12th Fl. New York, NY 10020 Attention: Joel Makowsky CIBC INC. By: /s/ Roger Colden ---------------------------- Title: Director Notice Address: CIBC Inc. 2 Paces West 2727 Paces Ferry Rd. Suite 1200 Atlanta, GA 30339 Attention: Ken Auchter S-5 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By: /s/ Brian O'Leary/Sean Mounier -------------------------------------- Title: Vice President/First Vice President Notice Address: Compagnie Financiere de CIC et de L'Union Europeenne 520 Madison Avenue, 37th Fl. New York, NY 10022 Attention: Brian O'Leary CORESTATES BANK, N.A. By: /s/ S. Scott Gates ---------------------------- Title: Assistant Vice President Notice Address: CoreStates Bank, N.A. 1339 Chestnut Street Widener Building, 11th Fl. P.O. Box 7618 Philadelphia, PA 19107 Attention: Scott Gates S-6 CREDITANSTALT - BANKVEREIN By: /s/ Robert M. Biringer ---------------------------- Title: Executive Vice President By: /s/ Carl G. Drake ---------------------------- Title: Senior Associate Notice Address: Creditanstalt-Bankverein Two Ravinia Drive, Suite 1680 Atlanta, GA 30346 Attention: Carl G. Drake THE FUJI BANK, ATLANTA AGENCY By: /s/ Toshihiro Mitsui ------------------------------ Title: Vice-President and Manager Notice Address: The Fuji Bank, Limited Marquis One Tower 245 Peachtree Center Ave, NE Suite 2100 Atlanta, GA 30303 Attention: David Hart S-7 BANQUE INDOSUEZ NEW YORK By: /s/ Francoise Berthelot ---------------------------- Title: Vice President By: /s/ John Sabre ---------------------------- Title: First Vice President Notice Address: Banque Indosuez Grand Cayman Island Branch 1211 Avenue of the Americas New York, NY 10036-8701 Attention: Francois Berthelot THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By: /s/ John J. Sullivan ---------------------------- Title: Joint General Manager Notice Address: The Long-Term Credit Bank of Japan, Limited 165 Broadway New York, New York 10006 Attention: Edna Astuto S-8 NATIONAL BANK OF CANADA By: /s/ William L. Benning ---------------------------- Title: Vice President Notice Address: National Bank of Canada 200 Galleria Parkway, Suite 800 Atlanta, GA 30339 Attention: William Benning NATIONSBANK, N.A. (SOUTH) By: /s/ Kathryn W. Robinson ---------------------------- Title: Senior Vice President Notice Address: NationsBank 600 Peachtree Street, N.E., 21st Fl. Atlanta, GA 30308 Attention: Kathryn Robinson S-9 OAK HILL SECURITIES FUND, L.P. By: Oak Hill Securities GenPar, L.P., its General Partner By: Oak Hill Securities MGP, Inc., its General Partner By: /s/ Scott Krase ---------------------------- Scott Krase Vice President Notice Address: Oak Hill Securities Fund, L.P. c/o Oak Hill Partners Park Avenue Towers 65 East 55th Street New York, NY 10022 Attention: Scott Krase PPM AMERICA, INC., as attorney in fact, on behalf of Jackson National Life Insurance Company By: /s/ Michael DiRe ---------------------------- Title: Vice President/Head High Yield Bank Loans Notice Address: PPM America, Inc. 225 West Wacker Drive, Ste. 1200 Chicago, IL 60606 Attention: Private Placements Michael DiRe or Guy Petrelli S-10 PROTECTIVE LIFE INSURANCE COMPANY By: /s/ Mark K. Okada ----------------------------------- Title: Executive Vice President Protective Asset Management, L.L.C. Notice Address: Protective Life Insurance Company 1150 Two Galleria Tower 13455 Noel Rd. LB #45 Dallas, TX 75240 Attention: Mark Okada SUNTRUST BANK, ATLANTA By: /s/ Susan Hall ---------------------------- Title: Vice President Notice Address: SunTrust Bank 25 Park Place (MC075) Atlanta, GA 30303 Attention: Susan Hall VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By: /s/ Brian Good ---------------------------- Title: Vice President Notice Address: Van Kampen American Capital One Parkview Plaza Oak Brook Terrace, IL 60181 Attention: Jeffrey Maillet S-11 WACHOVIABANK OF GEORGIA, N.A. By: /s/ Kevin B. Harrison _________________________________ Title: Vice President Notice Address: Wachovia Bank 191 Peachtree Street, N.E. 30th Floor Atlanta, GA 30303 Attention: Kevin Harrison YASUDA TRUST BANKING COMPANY By: /s/ Makoto Tagawa _________________________________ Title: Deputy General Manager Notice Address: 666 Fifth Avenue Suite 801 New York, New York 10103 Attention: Makota Tagawa S-12 EXHIBIT I FORM OF NOTICE OF BORROWING Pursuant to that certain First Amended and Restated Credit Agreement dated as of November 15, 1996 (such agreement, as it may be amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement) by and among Blue Bird Corporation, a Delaware corporation ("HOLDING"), Blue Bird Body Company, a Georgia corporation ("BORROWER"), the lenders party thereto ("LENDERS"), Bankers Trust Company, as administrative agent for Lenders ("ADMINISTRATIVE AGENT"), and Merrill Lynch & Co., as syndication agent (in such capacity as "SYNDICATION AGENT") this represents Borrower's request to borrow on ___________, ____ $__________ from [Lenders on a pro rata basis as [Base Rate/Eurodollar Rate] [Term/Working Capital] Loans] [Administrative Agent as Base Rate Swing Line Loans]. [The Interest Period for such Eurodollar Rate Loans is requested to be a [one/two/three/six/nine] month period]. The proceeds of such Loans are to be deposited in Borrower's account at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York. The undersigned officer, to the best of such officer's knowledge, and Borrower certify that (i) the representations and warranties of Borrower and Holding contained in the Credit Agreement and the other Loan Documents are true, correct and complete in all material respects on and as of the Funding Date to the same extent as though made on and as of the Funding Date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true, correct and complete in all material respects on and as of such earlier date; (ii) no Event of Default or Potential Event of Default has occurred and is continuing or will result from the proposed borrowing; (iii) Borrower and Holding have performed in all material respects all agreements and satisfied all conditions under the Credit Agreement provided to be performed by either or both of them on or before the Funding Date; (iv) after giving effect to the proposed borrowing, the Total Utilization of Working Capital Loan Commitments will not exceed the aggregate Working Capital Loan Commitments in effect on the proposed Funding Date [and the aggregate principal amount of outstanding Swing Line Loans I-1 will not exceed the Swing Line Commitment then in effect]; (v) after giving effect to the proposed borrowing, the Total Utilization of Working Capital Loan Commitments will not exceed the then applicable Borrowing Base and (vi) each of the other conditions to funding set forth in subsection 3.3B of the Credit Agreement will be satisfied on the proposed Funding Date. DATED: _______________ BLUE BIRD BODY COMPANY By ____________________________ Title: I-2 EXHIBIT II FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT Pursuant to that certain First Amended and Restated Credit Agreement dated as of November 15, 1996 (such agreement, as it may be amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement), by and among Blue Bird Corporation, a Delaware corporation ("HOLDING"), Blue Bird Body Company, a Georgia corporation ("BORROWER"), the lenders party thereto ("LENDERS"), Bankers Trust Company, as administrative agent for Lenders ("ADMINISTRATIVE AGENT"), and Merrill Lynch & Co., as syndication agent (in such capacity as "SYNDICATION AGENT"), this represents Borrower's request to have [1] issue a Letter of Credit for the account of Borrower on [2] in the face amount of $[3] with an expiration date of [4] for the benefit of [5]. [6] The undersigned officer, to the best of such officer's knowledge, and Borrower certify that (i) the representations and warranties contained in the Credit Agreement and the other Loan Documents are true, correct and complete in all material respects on and as of the date hereof to the same extent as though made on and as of the date hereof, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date; (ii) no Event of Default or Potential Event of Default has occurred and is continuing under the Credit Agreement or will result from the proposed issuance of the Letter of Credit for the account of Borrower; (iii) Borrower and Holding have performed in all material respects all agreements and satisfied all conditions under the Credit ________________________ [1] Insert name of Issuing Lender. [2] Insert proposed date of issuance of the Letter of Credit. [3] Insert face amount of the Letter of Credit in numbers. [4] Insert expiration date for the Letter of Credit. [5] Insert name and address of the beneficiary of the Letter of Credit. [6] Insert precise description of the documents and the verbatim text of the certificate to be presented by the beneficiary which, if presented prior to the expiration date of the Letter of Credit, would require the Issuing Lender to make payment under the Letter of Credit. II-1 Agreement provided to be performed by either or both of them on or before the date hereof; (iv) after giving effect to the proposed issuance, the Total Utilization of Working Capital Loan Commitments will not exceed either the aggregate Working Capital Loan Commitments in effect on the proposed Funding Date; (v) after giving effect to the proposed issuance, the Total Utilization of Working Capital Loan Commitments will not exceed the then applicable Borrowing Base; (vi) after giving effect to the proposed issuance, the Letter of Credit Usage with respect to Standby Letters of Credit will not exceed $10,000,000, the Letter of Credit Usage with respect to Commercial Letters of Credit will not exceed $10,000,000; and (vi) each of the other conditions to the issuance of a Letter of Credit set forth in subsection 3.4 of the Credit Agreement will be satisfied on the proposed Funding Date. DATED: _____________________ BLUE BIRD BODY COMPANY By _________________________ Title: II-2 EXHIBIT III FORM OF NOTICE OF CONVERSION/CONTINUATION Pursuant to that certain First Amended and Restated Credit Agreement dated as of November 15, 1996 (such agreement as it may be amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings assigned to those terms in the Credit Agreement) by and among Blue Bird Corporation, a Delaware corporation, Blue Bird Body Company, a Georgia corporation ("Borrower"), the lenders party thereto, Bankers Trust Company, as administrative agent for Lenders, and Merrill Lynch & Co., as syndication agent for Lenders, this represents Borrower's request to [A: convert $___________ in principal amount of presently outstanding [Base Rate/Eurodollar Rate] [Term/ Working Capital] Loans [with an Interest Period expiration date of _________, ____] to [Base Rate/Eurodollar Rate] Loans on ___________, ____.] [The Interest Period for such Eurodollar Rate Loans is requested to be a [one/two/three/six/nine] month period.] [B: continue as Eurodollar Rate Loans $___________ in principal amount of presently outstanding [Term/Working Capital] Loans with an Interest Period expiration date of ___________, ____.] [The Interest Period for such Eurodollar Rate Loans commencing on such Interest Period expiration date is requested to be a [one/two/three/six/nine] month period.] Borrower certifies that no Event of Default or Potential Event of Default has occurred and is continuing or will result from the proposed [conversion/continuation]. DATED: _______________ BLUE BIRD BODY COMPANY By __________________________ Title: III-1 EXHIBIT IV FORM OF TRANCHE A TERM NOTE BLUE BIRD BODY COMPANY $[1] November 15, 1996 New York, New York FOR VALUE RECEIVED, BLUE BIRD BODY COMPANY, a Georgia corporation ("BORROWER"), promises to pay to the order of [2] ("PAYEE"), on or before the Expiry Date, the lesser of (x) [3] ($[1]) and (y) the unpaid aggregate principal amount of all advances converted or made by Payee to Borrower as Tranche A Term Loans under the Credit Agreement referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof until paid at the rates, at the times and from the dates which shall be determined in accordance with the provisions of that certain First Amended and Restated Credit Agreement dated as of November 15, 1996 (such agreement, as it may be amended, amended and restated, supplemented or otherwise modified from time to time, being herein called the "CREDIT AGREEMENT"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement), by and among Blue Bird Corporation, a Delaware corporation, Borrower, the lenders party thereto ("LENDERS"), Bankers Trust Company, as administrative agent for Lenders ("ADMINISTRATIVE AGENT"), and Merrill Lynch & Co., as syndication agent ("SYNDICATION AGENT"). - ---------------- [1] Insert in numbers the principal amount of Lender's Pro Rata Share of the Tranche A Term Loans. [2] Insert name of Lender in capital letters. [3] Insert in words the principal amount of Lender's Pro Rata Share of the Tranche A Term Loans. IV-1 This Note is one of Borrower's "TRANCHE A TERM NOTES" in the aggregate principal amount of $100,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Loans evidenced hereby were made and are to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Until notified in writing of the transfer of this Note, Borrower and Administrative Agent shall be entitled to deem Payee or such person who has been so identified by the transferor in writing to Borrower and Administrative Agent as the holder of this Note, as the owner and holder of this Note. Each of Payee and any subsequent holder of this Note agrees by its acceptance hereof that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make notation of any payment made on this Note shall not limit or otherwise affect the obligation of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day. Borrower shall make principal payments on this Note on the dates and in the amounts set forth in the definition of "Scheduled Tranche A Term Loan Repayment Amount" in the Credit Agreement, and as otherwise required pursuant to the terms of the Credit Agreement; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all unpaid interest thereon. This Note is subject to mandatory prepayment as provided in subsection 2.5A(ii) of the Credit Agreement and to prepayment at the option of Borrower as provided in subsection 2.5A(i) of the Credit Agreement. This Note is secured by certain assets pursuant to the Collateral Documents. This Note is subject to restriction on transfer or assignment as provided in subsections 10.2 and 10.16 of the Credit Agreement. THE CREDIT AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE IV-2 INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. IN WITNESS WHEREOF, Borrower has caused this Note to be executed and delivered by its duly authorized officer, as of the day and year and the place first above written. BLUE BIRD BODY COMPANY By __________________________ Title: IV-3 TRANSACTIONS ON TRANCHE A TERM NOTE Amount of Outstanding Principal Paid Principal Balance Notation Date This Date This Date Made by - ---- -------------- ----------------- -------- IV-4 EXHIBIT V FORM OF TRANCHE B TERM NOTE BLUE BIRD BODY COMPANY $[1] November 15, 1996 New York, New York FOR VALUE RECEIVED, BLUE BIRD BODY COMPANY, a Georgia corporation ("BORROWER"), promises to pay to the order of [2] ("PAYEE"), on or before the Final Maturity Date, the lesser of (x) [3] ($[1]) and (y) the unpaid aggregate principal amount of all advances made by Payee to Borrower as Tranche B Term Loans under the Credit Agreement referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof until paid at the rates, at the times and from the dates which shall be determined in accordance with the provisions of that certain First Amended and Restated Credit Agreement dated as of November 15, 1996 (such agreement, as it may be amended, amended and restated, supplemented or otherwise modified from time to time, being herein called the "CREDIT AGREEMENT"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement), by and among Blue Bird Corporation, a Delaware corporation, Borrower, the lenders party thereto ("LENDERS"), Bankers Trust Company, as administrative agent for Lenders ("ADMINISTRATIVE AGENT"), and Merrill Lynch & Co., as syndication agent ("SYNDICATION AGENT"). This Note is one of Borrower's "Tranche B Term Notes" in the aggregate principal amount of $75,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Loans evidenced hereby were made and are to be repaid. - ---------------- [1] Insert in numbers the principal amount of Lender's Pro Rata Share of the Tranche B Term Loans. [2] Insert name of Lender in capital letters. [3] Insert in words the principal amount of Lender's Pro Rata Share of the Tranche B Term Loans. V-1 All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Until notified in writing of the transfer of this Note, Borrower and Administrative Agent shall be entitled to deem Payee or such person who has been so identified by the transferor in writing to Borrower and Administrative Agent as the holder of this Note, as the owner and holder of this Note. Each of Payee and any subsequent holder of this Note agrees by its acceptance hereof that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make notation of any payment made on this Note shall not limit or otherwise affect the obligation of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day. Borrower shall make principal payments on this Note on the dates and in the amounts set forth in the definition of "Scheduled Tranche B Term Loan Repayment Amount" in the Credit Agreement, and as otherwise required pursuant to the terms of the Credit Agreement; provided that the last such installment shall be in an amount sufficient to repay the entire unpaid principal balance of this Note, together with all unpaid interest thereon. This Note is subject to mandatory prepayment as provided in subsection 2.5A(ii) of the Credit Agreement and to prepayment at the option of Borrower as provided in subsection 2.5A(i) of the Credit Agreement. This Note is secured by certain assets pursuant to the Collateral Documents. This Note is subject to restriction on transfer or assignment as provided in subsections 10.2 and 10.16 of the Credit Agreement. THE CREDIT AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. V-2 The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. IN WITNESS WHEREOF, Borrower has caused this Note to be executed and delivered by its duly authorized officer, as of the day and year and the place first above written. BLUE BIRD BODY COMPANY By __________________________ Title: V-3 TRANSACTIONS ON TRANCHE B TERM NOTE Amount of Outstanding Principal Paid Principal Balance Notation Date This Date This Date Made by - ---- -------------- ----------------- -------- V-4 11/7/96 EXHIBIT VI FORM OF WORKING CAPITAL NOTE BLUE BIRD BODY COMPANY $[1] November 15, 1996 New York, New York FOR VALUE RECEIVED, BLUE BIRD BODY COMPANY, a Georgia corporation ("BORROWER"), promises to pay to the order of [2] ("PAYEE"), on or before the Expiry Date, the lesser of (x) [3] ($[1]) and (y) the unpaid aggregate principal amount of all advances converted or made by Payee to Borrower as Working Capital Loans under the Credit Agreement referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof until paid at the rates, at the times and from the dates which shall be determined in accordance with the provisions of that certain First Amended and Restated Credit Agreement dated as of November 15, 1996 (such agreement, as it may be amended, amended and restated, supplemented or otherwise modified from time to time, being herein called the "CREDIT AGREEMENT"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement), by and among Blue Bird Corporation, a Delaware corporation, Borrower, the lenders party thereto ("LENDERS"), Bankers Trust Company, as administrative agent for Lenders ("ADMINISTRATIVE AGENT"), Merrill Lynch & Co., as syndication agent ("SYNDICATION AGENT"). This Note is one of Borrower's "WORKING CAPITAL NOTES" in the aggregate principal amount of $80,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Loans evidenced hereby were or are made and are to be repaid. - ---------------- [1] Insert in numbers the principal amount of Lender's Pro Rata Share of the aggregate Working Capital Loan Commitment. [2] Insert name of Lender in capital letters. [3] Insert in words the principal amount of Lender's Pro Rata Share of the aggregate Working Capital Loan Commitment. VI-1 All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Until notified in writing of the transfer of this Note, Borrower and Administrative Agent shall be entitled to deem Payee or such person who has been so identified by the transferor in writing to Borrower and Administrative Agent as the holder of this Note, as the owner and holder of this Note. Each of Payee and any subsequent holder of this Note agrees by its acceptance hereof that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make notation of any payment made on this Note shall not limit or otherwise affect the obligation of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note; provided, however, that if the day on which any payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a day of the month after which no further Business Day occurs in such month, then the due date thereof shall be the next preceding Business Day. This Note is subject to mandatory prepayment as provided in subsection 2.5A(ii) of the Credit Agreement and to prepayment at the option of Borrower as provided in subsection 2.5A(i) of the Credit Agreement. This Note is secured by certain assets pursuant to the Collateral Documents. This Note is subject to restriction on transfer or assignment as provided in subsections 10.2 and 10.16 of the Credit Agreement. THE CREDIT AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. VI-2 Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. IN WITNESS WHEREOF, Borrower has caused this Note to be executed and delivered by its duly authorized officer, as of the day and year and the place first above written. BLUE BIRD BODY COMPANY By __________________________ Title: VI-3 TRANSACTIONS ON WORKING CAPITAL NOTE Outstanding Type of Amount of Amount of Principal Loan Made Loan Made Principal Paid Balance Notation Date This Date This Date This Date This Date Made by - ---- --------- --------- -------------- --------- -------- VI-4 EXHIBIT VII FORM OF SWING LINE NOTE BLUE BIRD BODY COMPANY $10,000,000 November 15, 1996 New York, New York FOR VALUE RECEIVED, BLUE BIRD BODY COMPANY, a Georgia corporation ("BORROWER"), promises to pay to the order of Bankers Trust Company ("PAYEE"), on or before the Expiry Date, the lesser of (x) ten million dollars ($10,000,000), and (y) the unpaid aggregate principal amount of all advances made by Payee to Borrower as Swing Line Loans under the Credit Agreement referred to below. Borrower also promises to pay interest on the unpaid principal amount hereof until paid at the rates, at the times and from the dates which shall be determined in accordance with the provisions of that certain First Amended and Restated Credit Agreement dated as of November 15, 1996 (such agreement, as it may be amended, amended and restated, supplemented or otherwise modified from time to time, being herein called the "CREDIT AGREEMENT"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement), by and among Blue Bird Corporation, a Delaware corporation, Borrower, the lenders party thereto ("LENDERS"), Bankers Trust Company, as administrative agent for Lenders ("ADMINISTRATIVE AGENT"), Merrill Lynch & Co., as syndication agent ("SYNDICATION AGENT"). This Note is Borrower's "SWING LINE NOTE" in the principal amount of $10,000,000 and is issued pursuant to and entitled to the benefits of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the Loans evidenced hereby were or are made and are to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of Administrative Agent located at One Bankers Trust Plaza, New York, New York, or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit VII-1 Agreement. Until notified in writing of the transfer of this Note, Borrower and Administrative Agent shall be entitled to deem Payee or such person who has been so identified by the transferor in writing to Borrower and Administrative Agent as the holder of this Note, as the owner and holder of this Note. Each of Payee and any subsequent holder of this Note agrees by its acceptance hereof that before disposing of this Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid; provided, however, that the failure to make a notation of any payment made on this Note shall not limit or otherwise affect the obligation of Borrower hereunder with respect to payments of principal or interest on this Note. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to mandatory prepayment as provided in subsection 2.5A(ii) of the Credit Agreement and to prepayment at the option of Company as provided in subsection 2.5A(i) of the Credit Agreement. This Note is secured by certain assets pursuant to the Collateral Documents. This Note is subject to restriction on transfer or assignment provided in subsections 10.2 and 10.16 of the Credit Agreement. THE CREDIT AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. VII-2 Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. Borrower and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. IN WITNESS WHEREOF, Borrower has caused this Note to be executed and delivered by its duly authorized officer, as of the day and year and the place first above written. BLUE BIRD BODY COMPANY By _________________________ Title: VII-3 TRANSACTIONS ON SWING LINE NOTE Outstanding Amount of Amount of Principal Loan Made Principal Paid Balance Notation Date This Date This Date This Date Made by - ---- --------- -------------- --------- -------- VII-4 EXHIBIT VIII BORROWING BASE CERTIFICATE NOVEMBER 19, 1996 Reference is made to the First Amended and Restated Credit Agreement dated as of November 15, 1996 (such agreement, as it may be amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement) by and among Blue Bird Corporation, a Delaware corporation ("Holding"), Blue Bird Body Company, a Georgia corporation, the lenders party thereto ("Lenders"), Bankers Trust Company, as administrative agent for Lenders ("Administrative Agent") and Merrill Lynch & Co., as syndication agent ("Syndication Agent"). Pursuant to Section 5.1(iv) of the Credit Agreement, the undersigned Vice President--Finance and Administration of Borrower hereby certifies that attached hereto as Annex A is a true and accurate calculation of the borrowing Base as of November 2, 1996 determined in accordance with the requirements of the Credit Agreement. IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly executed as of November 19, 1996. BLUE BIRD BODY COMPANY By ----------------------------- Name: Bobby G. Wallace Title: Vice President--Finance and Administration Treasurer and Secretary VIII-1 EXHIBIT IX FORM OF FINANCIAL CONDITION CERTIFICATE THIS FINANCIAL CONDITION CERTIFICATE is delivered in connection with the First Amended and Restated Credit Agreement dated as of November 7, 1996 (as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"; capitalized terms used herein without definition shall have the meanings assigned those terms in the Credit Agreement), by and among Blue Bird Corporation, a Delaware corporation ("HOLDING"), Blue Bird Body Company, a Georgia corporation ("BORROWER"), the lenders party thereto, Bankers Trust Company, as administrative agent ("ADMINISTRATIVE AGENT"), and Merrill Lynch & Co., as syndication agent ("SYNDICATION AGENT"). In my capacity as an officer of Borrower, I hereby certify as follows: 1. I am, and at all pertinent times mentioned herein have been, the duly qualified and acting Chief Financial Officer of Borrower and in such capacity am the senior financial officer of Borrower and have responsibility for the management of the financial affairs of Borrower and its Subsidiaries and the preparation of financial statements of Borrower and its Subsidiaries. I have carefully reviewed the Credit Agreement and the exhibits thereto, and I was consulted by officers of Borrower and its Subsidiaries in connection with certain matters concerning the negotiation and consummation of the Credit Agreement and the Refinancing, including the issuance of the Subordinated Debt. 2. I have carefully reviewed the contents of this Certificate, and I have conferred with counsel for Borrower for the purpose of discussing the meaning of its contents. 3. In connection with preparation for consummation of the transactions contemplated by the Credit Agreement, I have caused the preparation of and I have reviewed consolidated income projections for Borrower and its Subsidiaries for Fiscal Years 1997 through 2003, inclusive, and a pro forma forecast of earnings and cash flow (the "Projected Financial Statements"). The Projected Financial Statements attached hereto as Exhibit A give effect to the consummation of the transactions contemplated by the Credit Agreement, including the Refinancing. The Projected Financial Statements were prepared on the basis of information available at _____________, 1996. These projections have been prepared in a manner which is based on reasonable assumptions and with reasonable care. I know of no facts which have occurred since __________, 1996 that would lead me to believe that the Projected Financial Statements are inaccurate in any material respect. 4. I have also caused the preparation of and I have reviewed a pro forma consolidated summary balance sheet of Borrower and its Subsidiaries as of ____________, 1996, the expected Restatement Effective Date (the "FAIR IX-1 VALUE SUMMARY BALANCE SHEET"), giving effect to the making of the Term Loans, the initial Working Capital Loans and any other extensions of credit under the Credit Agreement, the issuance of the Subordinated Debt and the intended application of the proceeds thereof, and the Refinancing. The Fair Value Summary Balance Sheet is attached as Exhibit B and has been prepared using the methodologies described below and not in accordance with GAAP. 5. In connection with the preparation of the Projected Financial Statements, I have made such investigation and inquiries as I deem necessary and prudent therefor and specifically have relied on historical information, revenues, expenses and other data supplied by Borrower's supervisory personnel directly responsible for the various operations involved. The assumptions upon which the Projected Financial Statements are based are stated therein, which assumptions I believe are reasonable, although any assumption and any forecast by necessity involves uncertainty and approximation. Based thereon, I believe that the projections for Borrower and its Subsidiaries, taken as a whole, provide reasonable estimations of future performance, subject, as stated above, to the uncertainty and approximation inherent in any projections. 6. The Fair Value Summary Balance Sheet has been prepared in a manner which I believe reflects the fair value of the assets of Borrower and its Subsidiaries, and the probable liability on all of their liabilities, contingent or otherwise. I understand "FAIR VALUE" of assets to mean the amount which may be realized within a reasonable time, either through collection or sale of such assets at the regular market value, conceiving of the latter as the amount which could be obtained for the property in question within such period by a capable and diligent businessman from an interested buyer who is willing to purchase under ordinary selling conditions, neither being under any compulsion to act. With respect to the valuation of such assets, my conclusions are supported by the attached letter of Valuation Research Corporation. I have included debts on the Fair Value Summary Balance Sheet at the present value of known probable liabilities. With respect to contingent liabilities (such as litigation, guarantees and pension plan liabilities), such liabilities have been computed at the amount which, in light of all the facts and circumstances existing at this time, represents the amount which can reasonably be expected to become an actual or matured liability. The specific methodology I followed is set forth in the notes and assumptions to the Fair Value Summary Balance Sheet. Based upon the foregoing, I have reached the following conclusions: 1. Borrower and its Subsidiaries are not now nor will the incurrence of the obligations to repay the Loans and other extensions of credit made pursuant to the Credit Agreement and the Subordinated Debt render them "INSOLVENT", as defined below. I understand that in this context "INSOLVENT" means that the present fair value of assets is less than the amount that will be required to pay the probable liability on existing debts as they become absolute and matured. I also understand that the term "debts" includes any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent. IX-2 My conclusion is supported by an analysis of the Fair Value Summary Balance Sheet. A valuation of Borrower and its Subsidiaries on the basis thereof would reflect the value of Borrower and its Subsidiaries as $___________, representing the difference between asset values of $_____________ and liabilities of $_____________. 2. By the consummation of the Refinancing and the incurrence of obligations to repay the Loans and other extensions of credit made pursuant to the Credit Agreement and the Subordinated Debt, Borrower and its Subsidiaries will not incur debts beyond their ability to pay as they mature. I have based my conclusion in part on the Projected Financial Statements which demonstrate that Borrower and its Subsidiaries will have positive cash flow after paying all of their scheduled anticipated indebtedness (including scheduled payments under the Credit Agreement and the Subordinated Debt and other permitted indebtedness). I have concluded that the realization of the current assets in the ordinary course of business will be sufficient to pay recurring current debt, short-term debt and long-term debt service as such debts mature, and that the cash flow (including earnings plus non-cash charges to earnings and the disposition of surplus fixed assets held for sale) will be sufficient to provide cash necessary to repay Loans and other extensions of credit made under the Credit Agreement, the Subordinated Debt and other long-term indebtedness as such debt matures. 3. Consummation of the Refinancing and the incurrence of the obligations to repay the Loans and other extensions of credit made pursuant to the Credit Agreement and the Subordinated Debt will not leave Borrower or any of its Subsidiaries with property remaining in its hands constituting "UNREASONABLY SMALL CAPITAL." In reaching this conclusion, I understand that "UNREASONABLY SMALL CAPITAL" depends upon the nature of the particular business or businesses conducted or to be conducted, and I have reached my conclusion based on the needs and anticipated needs for capital of the businesses conducted or anticipated to be conducted by Borrower and its Subsidiaries in light of the Projected Financial Statements and available credit capacity. 4. To the best of my knowledge, neither Borrower nor any of its Subsidiaries has taken any action with respect to the Credit Agreement, the Loans and other extensions of credit under the Credit Agreement, the Subordinated Debt or any documents mentioned herein or therein, or made any transfer or incurred any obligations thereunder, with actual intent to hinder, delay or defraud either present or future creditors. I understand that you are relying on the truth and accuracy of the foregoing in connection with the extension of credit pursuant to the Credit Agreement. I represent the foregoing information to be, to the best of my knowledge and belief, true and correct and execute this Certificate this ____ day of November 7, 1996. BLUE BIRD BODY COMPANY By _______________________________ Title: Chief Financial Officer IX-3 EXHIBIT X BORROWER SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Agreement") is dated as of April 15, 1992, and entered into by and between BLUE BIRD BODY COMPANY, a Georgia corporation (the "Borrower"), and BANKERS TRUST COMPANY, as collateral agent for and representative of (in such capacity, together with any successor in such capacity, "Collateral Agent") the Lenders (as defined herein). PRELIMINARY STATEMENTS B B Acquisition Corp., a Georgia corporation, Blue Bird Corporation, a Delaware corporation, the lenders party thereto ("Lenders") and Bankers Trust Company, as agent for Lenders ("Agent"), have entered into a credit agreement dated as of April 15, 1992 (said credit agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, is referred to herein as the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement). It is a condition precedent to the making of loans and other extensions of credit by Lenders under the Credit Agreement that Borrower shall have granted the security interest contemplated by this Agreement. NOW, THEREFORE, in consideration of the premises and in order to induce Lenders to make loans and other extensions of credit under the Credit Agreement and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Borrower hereby agrees with Collateral Agent as follows: SECTION 1. GRANT OF SECURITY. Borrower hereby assigns and grants to Collateral Agent, for its benefit and the benefit of Agent and Lenders (collectively, the "Secured Parties"), and hereby grants to Collateral Agent a security interest in, all of Borrower's right, title and interest in and to the following, in each case whether now or hereafter existing or in which Borrower now has or hereafter acquires an interest and wherever the same may be located (the "Collateral") to secure the Secured Obligations (as defined in Section 2): (a) All equipment in all of its forms, and all parts thereof and all accessions thereto and documents therefor (any and all such equipment, parts, accessions and documents being the "Equipment"); (b) All inventory in all of its forms, including, but not limited to, (i) all goods held by Borrower for sale or lease or to be furnished under contracts of service or so leased or furnished, (ii) all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in Borrower's business, (iii) goods in which Borrower has an interest in mass or a joint or other interest or right of any kind, (iv) goods which are returned to or repossessed by Borrower and all additions and accessions thereto and replacements thereof) (all such inventory, accessions and products being the "Inventory"); (c) All accounts, contract rights, chattel paper, instruments, guaranties, letters of credit, documents, drafts, acceptances, tax refunds, rights to performance, judgments, security agreements, leases, permits, licenses, franchises, certificates, other contracts and general intangibles of every nature, including, without limitation, all rights and claims to the payment or receipt of money or other forms of consideration of any kind included in this clause (c) (any and all such rights and claims to the payment or receipt of money or other forms of consideration being the "Payment Rights", and any and all such leases, security agreements and other contracts being the "Related Contracts"); (d) All books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software (owned by Borrower or in which it has an interest) that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; (e) All plant fixtures, business fixtures and other fixtures and storage and office facilities, and all additions and accessions thereto and replacements thereof and products thereof; (f) All Subsidiary Documents (including the mortgages on Schedule VII which charge the lands on Schedule VIII) and Lease Portfolio Documents, as each such agreement, contract and assignment may be amended, amended and restated, supplemented or otherwise modified from time to time (said agreements, contracts and assignments, as so amended, amended and restated, supplemented or otherwise modified, are referred to herein individually as an "Assigned Agreement" and collectively as the "Assigned Agreements") including, without limitation, (i) all rights of Borrower to receive moneys due or to become due under or pursuant to the Assigned Agreements, (ii) all rights of Borrower to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii) all claims of 2 Borrower for damages arising out of breach of or any default under the Assigned Agreements and (iv) the right of Borrower to terminate, amend, supplement or modify the Assigned Agreements, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder; (g) All cash, money, currency and all deposit accounts ("Deposit Accounts"), including, without limitation, all demand, time, savings, passbook or like accounts maintained with a bank, savings and loan association, credit union or other like organization, and all such accounts into which receipts are deposited or which are maintained with Collateral Agent or any other Secured Party (any and all Deposit Accounts, the "Pledged Deposits") but in no event shall Deposit Accounts include moneys in the Hold-Back Account established under the Lease Portfolio Documents or any moneys constituting payments on or with respect to lease receivables sold to LaSalle National Bank received by Borrower as servicer of such lease receivables which moneys are payable to LaSalle National Bank pursuant to the Lease Portfolio Documents; (h) To the extent not otherwise included in the definition of Collateral, (i) all common law and/or statutory copyrights, rights and interests of every kind and nature in copyrights and works protectable by copyright, whether now owned or hereafter created or acquired and renewals and extensions of copyrights (the "Copyrights"), (ii) the right (but not the obligation) to make publication thereof for copyright purposes, to register claim upon copyright and the right (but not the obligation) to renew and extend such copyrights, (iii) all licenses and rights in and any written agreement now or hereafter in existence granting to Borrower any right to use any of the foregoing (the "Copyright Licenses"), (iv) the right (but not the obligation) to sue in the name of Borrower or in the name of Collateral Agent for past, present and future infringements of any such properties, (v) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past, present and future infringements of any such properties and (vi) all goodwill associated with or symbolized by any of the foregoing; (i) To the extent not otherwise included in the definition of Collateral, (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other business identifiers, prints and labels on which any of the foregoing have appeared or appear, all registrations and recordings thereof, and all applications in connection therewith including registrations, recordings and applications in the United States Patent and Trademark 3 Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof (the "Trademarks"); (ii) all reissues, extensions or renewals thereof and the right (but not the obligation) to register claim under trademark and to renew and extend such trademarks; (iii) all licenses and rights in and any written agreement granting Borrower any right to use any of the foregoing (the "Trademark Licenses"); (iv) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including, without limitation, damages or payment for past, present and future infringements of any of the foregoing; (v) the right (but not the obligation) to sue for past, present and future infringements of the foregoing; (vi) all rights corresponding to any of the foregoing throughout the world; and (vii) all goodwill associated with or symbolized by any of the foregoing; (j) To the extent not otherwise included in the definition of Collateral, (i) all patents and patent applications and the inventions and improvements described and claimed therein, and patentable inventions (the "Patents"); (ii) the reissues, divisions, continuations, renewals, extensions and continuations-in-part of any of the foregoing; (iii) all licenses and rights in and all written agreements granting Borrower any right to use any invention on which a patent is in existence ("Patent Licenses") (the Copyrights, Copyright Licenses, Trademarks, Trademark Licenses, Patents and Patent Licenses are collectively referred to herein as the "Intellectual Property"); (iv) all income, royalties, damages or payments now and hereafter due and/or payable under any of the foregoing with respect to any of the foregoing, including, without limitation, damages or payments for past, present and future infringements of any of the foregoing; (v) the right (but not the obligation) to sue for past, present and future infringements of any of the foregoing; (vi) all rights corresponding to any of the foregoing throughout the world; and (vii) all goodwill associated with any of the foregoing; (k) To the extent not otherwise included in the definition of Collateral, all goods, all building materials, equipment, work in progress and all trade secrets and other confidential information relating to the business of Borrower, including, by way of illustration and not limitation, each and every kind of know-how practiced by Borrower and its employees; the names and addresses of, and credit and other business information concerning Borrower's past, present or future customers as they may exist from time to time; the prices which Borrower obtains for its services or at which it sells merchandise; estimating and cost procedures; profit margins; policies and procedures 4 pertaining to the sales and services furnished by Borrower; information concerning suppliers of Borrower and manner of operation, business plans, pledges, projections, and all other information of any kind or character, whether or not reduced in writing, with respect to the conduct by Borrower of its business not generally known by the public, now or hereafter existing; and (l) All proceeds of any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. For purposes of this Agreement, the term "proceeds" includes whatever is receivable or received when Collateral or proceeds are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, all rights to payment, including returned premiums, with respect to any insurance relating thereto. Notwithstanding anything to the contrary hereinabove contained, Collateral shall not include any and all Equipment, Inventory, Payment Rights and Related Contracts, together with any other rights, title or interest of Borrower related thereto, sold, assigned, pledged or transferred, or in which a security interest is granted, to LaSalle National Bank or its assignee, under and in accordance with the terms of the Lease Portfolio Documents as in effect on the Closing Date. SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures and the Collateral is collateral security for the prompt payment or performance in full when due, whether at stated maturity, by acceleration, declaration or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) of all obligations of every nature of Borrower now or hereafter existing under the Credit Agreement (including, without limitation, all Obligations as defined in the Credit Agreement), and any promissory note or other document or instrument delivered pursuant thereto and all amendments, extensions or renewals thereof or hereof, whether for principal, interest (including, without limitation, interest that, but for the filing of a petition in bankruptcy with respect to the Borrower, would accrue on such obligations whether or not a claim is allowed against Borrower in any such bankruptcy proceeding), fees, expenses or otherwise, whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred and all or any portion of such obligations 5 that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Collateral Agent as a preference, fraudulent transfer or otherwise (all such obligations being the "Underlying Debt"), and all obligations of every nature of Borrower now or hereafter existing under this Agreement (all such obligations of Borrower, together with the Underlying Debt, being the "Secured Obligations"). SECTION 3. BORROWER REMAINS LIABLE. Anything herein to the contrary notwithstanding, (a) Borrower shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Collateral Agent of any of the rights hereunder shall not release Borrower from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) Collateral Agent shall not have any obligation or liability under any contracts and agreements included in the Collateral by reason of this Agreement, nor shall Collateral Agent be obligated to perform any of the obligations or duties of Borrower thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as follows: (a) Binding Obligation. This Agreement is the legally valid and binding obligation of Borrower, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws or equitable principles relating to or limiting creditors' rights generally. (b) Location of Equipment and Inventory. All of the Equipment and Inventory is located at the places specified in SCHEDULE I hereto. (c) Delivery of Certain Collateral. Other than chattel paper, notes and other instruments (excluding checks) being held by Borrower pending sale pursuant to the Lease Portfolio Documents which items may be held by Borrower for up to 90 days, all chattel paper and notes and other instruments (excluding checks) comprising any and all items of Collateral have been delivered to Collateral Agent duly endorsed and accompanied by duly executed instruments of transfer or assignment in blank. (d) Payment Rights Valid. Each Payment Right constitutes the legally valid and binding obligation of the party obligated to pay the same (the "Account Debtor"). Each such Payment Right complies with the provisions of all applicable laws and regulations, whether federal, state or 6 local, applicable thereto (including, without limitation, any usury law, the Federal Truth and Lending Act and Regulation C of the Federal Reserve System). None of the Payment Rights is evidenced by a promissory note or other instrument other than a check, that has not been delivered to Collateral Agent. (e) Ownership of Collateral. Except for the interests disclosed in SCHEDULE II hereto and the security interest created by this Agreement, Borrower owns the Collateral free and clear of any Lien. Except with respect to the interests disclosed in SCHEDULE II hereto and such as may have been filed in favor of Collateral Agent relating to this Agreement, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office. (f) Perfection. This Agreement creates a valid, perfected and, except for the interests disclosed in SCHEDULE II hereto, first priority security interest in the Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken. (g) Governmental Authorizations. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the grant by Borrower of the security interest granted hereby or for the execution, delivery or performance of this Agreement by Borrower or (ii) for the perfection of or the exercise by Collateral Agent of its rights and remedies hereunder (except as may have been taken by or at the direction of Borrower). (h) Other Information. All information heretofore, herein or hereafter supplied to Collateral Agent by or on behalf of Borrower with respect to the Collateral is accurate and complete in all material respects. (i) Office Locations; Fictitious Names. The chief place of business, the chief executive office and the office where Borrower keeps its records regarding the Payment Rights and all originals of all chattel paper that evidence Payment Rights is set forth in SCHEDULE III hereto. Borrower does not do business under any trade-name or fictitious business name except as set forth in SCHEDULE III hereto. (j) Intellectual Property. SCHEDULE IV hereto sets forth each of Borrower's registered Copyrights, applications therefor and Copyright Licenses. SCHEDULE V hereto sets forth each of Borrower's registered Trademarks, applications 7 therefor and Trademarks Licenses. SCHEDULE VI hereto sets forth each of Borrowers registered Patents, applications therefor and Patent Licenses. All of the Intellectual Property is valid, subsisting and enforceable and Borrower is not aware of any pending or threatened claim by any Person that any of the Intellectual Property is invalid or unenforceable or that the use of any of the Intellectual Property violates the rights of any Person or of any basis for any such claim. SECTION 5. FURTHER ASSURANCES. (a) Borrower agrees that from time to time, at the expense of Borrower, Borrower will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Collateral Agent may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, Borrower will: (i) at the request of Collateral Agent (which request, in the case of Payment Rights held for sale pursuant to the Lease Portfolio Documents, will not be made prior to the earlier to occur of an Event of Default or 90 days after Borrower's receipt of such Payment Rights), mark conspicuously each chattel paper included in the Payment Rights and each Related Contract, (ii) at the request of Collateral Agent (which request, in the case of Payment Rights held for sale pursuant to the Lease Portfolio Documents, will not be made prior to the earlier to occur of an Event of Default or 90 days after Borrower's receipt of such Payment Rights), mark conspicuously each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to Collateral Agent, indicating that such Collateral is subject to the security interest granted hereby; (iii) if any Payment Right shall be evidenced by a promissory note or other instrument (excluding checks) or chattel paper, deliver and pledge to Collateral Agent hereunder such note or instrument or chattel paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Collateral Agent, which delivery shall be made within 90 days of Borrower's receipt of such Payment Rights in the case of any such chattel paper, notes or other instruments held for sale pursuant to the Lease Portfolio Documents and not so sold within such 90 day period and, in the case of all other such Payment Rights, which delivery shall be made promptly upon Borrower's receipt of such Payment Rights; (iv) at the request of Collateral Agent, deliver and pledge to Collateral Agent all promissory notes and other instruments (including checks) and all original counterparts of chattel paper constituting Collateral duly endorsed and accompanied by duly executed instruments of 8 transfer or assignment, all in form and substance satisfactory to Collateral Agent; (v) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as Collateral Agent may request, in order to perfect and preserve the security interests granted or purported to be granted hereby, (vi) at any reasonable time, upon demand by Collateral Agent, exhibit the Collateral to and allow inspection of the Collateral by Collateral Agent, or persons designated by Collateral Agent and (vii) at Collateral Agent's request, appear in and defend any action or proceeding that may affect Borrower's title to or Collateral Agent's security interest in the Collateral. (b) Borrower hereby authorizes Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of Borrower. A carbon, photographic or other reproduction of this Agreement or a financing statement signed by Borrower shall be sufficient as a financing statement. (c) Borrower will furnish to Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Collateral Agent may reasonably request, all in reasonable detail. SECTION 6. COVENANTS OF BORROWER. Borrower shall: (a) not use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement, or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral; (b) notify Collateral Agent of any change in Borrower's name, identity or corporate structure within 15 days of such change; (c) give Collateral Agent 30 days' prior written notice of any change in Borrower's residence or chief place of business; (d) if Collateral Agent gives value to enable Borrower to acquire rights in or the use of any Collateral, use such value for such purposes; and (e) pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Collateral, except to the extent the validity thereof is being contested in good 9 faith; provided that so long as no property or assets (other than money for such charge or claim and the interest or penalty accruing thereon) of Holding or Borrower or any of their respective Subsidiaries is in danger of being lost or forfeited as a result thereof, no such charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such other reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY. Borrower shall: (a) keep the Equipment and Inventory (other than Inventory sold in the ordinary course of business) at the places therefor specified on SCHEDULE I hereto or, upon 30 days' prior written notice to Collateral Agent, at such other places in jurisdictions where all action that may be necessary or desirable, or that Collateral Agent may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to such Equipment and Inventory shall have been taken; (b) cause the Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and in accordance with Borrower's past practices, and shall forthwith, or in the case of any loss or damage to any of the Equipment as quickly as practicable after the occurrence thereof, make or cause to be made all repairs, replacements, and other improvements in connection therewith that are necessary or desirable to such end. Borrower shall promptly furnish to Collateral Agent a statement respecting any loss or damage to any of the Equipment; (c) keep correct and accurate records of the Inventory, itemizing and describing the kind, type and quantity of Inventory, Borrower's cost therefor and (where applicable) the current price list for such Inventory; and (d) if any Inventory is in possession or control of any of Borrower's agents or processors, if the aggregate book value of all such Inventory exceeds $25,000, and in any event upon the occurrence of an Event of Default, instruct such agent or processor to hold all such Inventory for the account of Collateral Agent and subject to the instructions of Collateral Agent. SECTION 8. INSURANCE. (a) Borrower shall, at its own expense, maintain insurance with respect to the Equipment 10 and Inventory in such amounts, against such risks, in such form and with such insurers, as shall be reasonably satisfactory to Collateral Agent from time to time. Such insurance shall include, without limitation, property damage insurance and liability insurance. Each policy for property damage insurance shall provide for all losses (except for losses of less than $25,000 per occurrence) to be paid directly to Collateral Agent. Each policy shall in addition (i) name Borrower and Collateral Agent as insured parties thereunder (without any representation or warranty by or obligation upon Collateral Agent) as their interests may appear, (ii) unless otherwise agreed by Collateral Agent, contain an agreement by the insurer that any loss thereunder payable to Collateral Agent shall be payable to Collateral Agent notwithstanding any action, inaction or breach of representation or warranty by Borrower, (iii) have attached thereto the Lender's Loss Payable Endorsement or its equivalent, or a Loss Payable clause acceptable to Collateral Agent, (iv) provide that there shall be no recourse against Collateral Agent for payment of premiums or other amounts with respect thereto and (v) provide that at least 30 days' prior written notice of cancellation, material amendment, reduction in scope or limits of coverage or of lapse shall be given to Collateral Agent by the insurer. Borrower shall, if so requested by Collateral Agent, deliver to Collateral Agent original or duplicate policies of such insurance and, as often as Collateral Agent may reasonably request, a report of a reputable insurance broker with respect to such insurance. Further, Borrower shall, at the request of Collateral Agent, duly execute and deliver instruments of assignment of such insurance policies to comply with the requirements of Section 5(a) and cause the respective insurers to acknowledge notice of such assignment. (b) Reimbursement under any liability insurance maintained by Borrower pursuant to this Section 8 may be paid directly to the person who shall have incurred liability covered by such insurance. In case of any loss involving damage to Equipment or Inventory when subsection (c) of this Section 8 is not applicable, Borrower shall make or cause to be made the necessary repairs to or replacements of such Equipment or Inventory, and any proceeds of insurance maintained by Borrower pursuant to this Section 8 shall be paid to Borrower as reimbursement for the costs of such repairs or replacements. (c) Upon (i) the occurrence and during the continuance of any Event of Default, or (ii) the actual or constructive total loss (in excess of $25,000 per occurrence) of any Equipment or Inventory, all insurance payments in respect of such Equipment or Inventory shall be paid to and applied by Collateral Agent as specified in Section 20. 11 SECTION 9. SPECIAL COVENANTS WITH RESPECT TO PAYMENT RIGHTS AND RELATED CONTRACTS. (a) Borrower shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Payment Rights and Related Contracts at the location therefor specified in SCHEDULE III hereto or, upon 30 days' prior written notice to Collateral Agent, at such other locations in a jurisdiction where all action that may be necessary or desirable, or that Collateral Agent may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to such Payment Rights and Related Contracts shall have been taken. Borrower will hold and preserve such records and will permit representatives of Collateral Agent at any time during normal business hours to inspect and make abstracts from such records and Borrower agrees to render to Collateral Agent, at Borrower's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. Promptly upon the request of Collateral Agent, Borrower shall deliver to Collateral Agent complete and correct copies of each Related Contract. (b) Borrower shall, for not less than 5 years from the date on which such Payment Right arose, maintain (i) complete records of each Payment Right, including records of all payments received, credits granted and merchandise returned and (ii) all documentation relating thereto. (c) Borrower shall duly fulfill all obligations on its part to be fulfilled under or in connection with the Payment Rights and the Related Contracts and shall do nothing to impair the rights of Collateral Agent therein. (d) Except as otherwise provided in this subsection (d) of this Section 9, Borrower shall continue to collect, at its own expense, all amounts due or to become due Borrower under the Payment Rights and Related Contracts. In connection with such collections, Borrower may take (and, at Collateral Agent's direction, shall take) such action as Borrower or Collateral Agent may deem necessary or advisable to enforce collection of the Payment Rights; provided, however, that Collateral Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default or a Potential Event of Default and upon written notice to Borrower of its intention to do so, to notify the account debtors or obligors under any Payment Rights of the assignment of such Payment Rights to Collateral Agent and to direct such account debtors or obligors to make payment of all amounts due or to become due 12 to Borrower thereunder directly to Collateral Agent, to notify each Person maintaining a lockbox or similar arrangement to which account debtors or obligors under any Payment Rights have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such lockbox or other arrangement directly to Collateral Agent and, upon such notification and at the expense of Borrower, to enforce collection of any such Payment Rights and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as Borrower might have done. After receipt by Borrower of the notice from Collateral Agent referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including checks and other instruments) received by Borrower in respect of the Payment Rights and the Related Contracts shall be received in trust for the benefit of Collateral Agent hereunder, shall be segregated from other funds of Borrower and shall be forthwith paid over or delivered to Collateral Agent in the same form as so received (with any necessary endorsement) to be held as cash collateral and applied as provided by Section 20, and (ii) Borrower shall not adjust, settle or compromise the amount or payment of any Payment Right, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon. SECTION 10. SPECIAL PROVISIONS WITH RESPECT TO THE ASSIGNED AGREEMENTS. (a) Borrower shall at its expense: (i) Perform and observe all terms and provisions of the Assigned Agreements to be performed or observed by it, maintain the Assigned Agreements in full force and effect, enforce the Assigned Agreements in accordance with their terms, and take all such action to such end as may be from time to time requested by Collateral Agent. (ii) Furnish to Collateral Agent promptly upon receipt thereof copies of all notices, requests and other documents received by Borrower under or pursuant to the Assigned Agreements, and from time to time (A) furnish to Collateral Agent such information and reports regarding the Assigned Agreements as Collateral Agent may reasonably request and (B) upon request of Collateral Agent make to the appropriate Person designated under any Assigned Agreement such demands and requests for information and reports or for action as Borrower is entitled to make under the Assigned Agreements. (b) Borrower shall not: 13 (i) Cancel or terminate any of the Assigned Agreements or consent to or accept any cancellation or termination thereof. (ii) Amend or otherwise modify the Assigned Agreements or give any consent, waiver or approval thereunder. (iii) Waive any default under or breach of the Assigned Agreements. (iv) Take any other action in connection with the Assigned Agreements that would impair the value of the interest or rights of Borrower thereunder or that would impair the interest or rights of Collateral Agent. SECTION 11. SPECIAL PROVISIONS WITH RESPECT TO DEPOSIT ACCOUNTS. Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may exercise dominion and control over, and refuse to permit further withdrawals (whether of money, securities, instruments or other property) from deposit accounts maintained with Collateral Agent constituting part of the Collateral. SECTION 12. SPECIAL PROVISIONS WITH RESPECT TO INTELLECTUAL PROPERTY. (a) If, before the Secured Obligations are indefeasibly paid in full, Borrower obtains any new Intellectual Property or rights thereto or becomes entitled to the benefit of any Intellectual Property not listed on the applicable Schedules to this Agreement, this Agreement shall automatically apply thereto and Borrower shall give to Collateral Agent prompt written notice thereof and shall amend this Agreement to include any such new Intellectual Property. (b) Borrower shall (i) prosecute diligently, through counsel reasonably acceptable to Collateral Agent, any copyright, patent, trademark or license application at any time pending; (ii) make application, through counsel reasonably acceptable to Collateral Agent, on all new copyrights, patents and trademarks as reasonably deemed appropriate by Borrower; (iii) preserve and maintain all rights in the Intellectual Property material to Borrower's business; and (iv) upon and after the occurrence and during the continuance of an Event of Default, use its best efforts to obtain any consents, waivers or agreements from third parties necessary to enable Collateral Agent to exercise its remedies with respect to the Intellectual Property. Borrower shall not abandon any right to file a copyright, patent or trademark application nor shall Borrower abandon any pending copyright, patent or trademark application, or 14 Intellectual Property which is, either individually or in the aggregate, material to Borrower's business without the prior written consent of Collateral Agent. Borrower represents and warrants to Collateral Agent that the execution, delivery and performance of this Agreement by Borrower will not violate or cause a default under any of the Intellectual Property or any agreement in connection therewith. (c) Upon the occurrence of an Event of Default, Collateral Agent shall have the right, but shall have no obligation, to bring suit in the name of Borrower or Collateral Agent to enforce any Intellectual Property, in which event Borrower shall, at the request of Collateral Agent, do any and all lawful acts and execute any and all documents reasonably required by Collateral Agent in aid of such enforcement and Borrower shall promptly, upon demand, reimburse Collateral Agent for its reasonable expenses and indemnify Collateral Agent. To the extent that Collateral Agent shall elect not to bring suit to enforce any Intellectual Property, Borrower agrees to use all reasonable measures, whether by action, suit, proceedings or otherwise, to prevent the infringement of any of the Intellectual Property. SECTION 13. LICENSE OF INTELLECTUAL PROPERTY. Borrower hereby assigns, transfers and conveys to Collateral Agent, effective upon the occurrence of any Event of Default, the nonexclusive right and license to use all Intellectual Property or technical processes owned or used by Borrower that relate to the Collateral and any other collateral granted by Borrower as security for the Secured Obligations, together with any goodwill associated therewith, all to the extent necessary to enable Collateral Agent to use, possess and realize on the Collateral and any successor or assign to enjoy the benefits of the Collateral. This right and license shall inure to the benefit of Collateral Agent and its successors, assigns and transferees, whether by voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is granted free of charge, without requirement that any monetary payment whatsoever be made to Borrower. SECTION 14. REASSIGNMENT. If (a) an Event of Default shall have occurred and, by reason of waiver, modification, amendment or otherwise, no longer be continuing, (b) no other Event of Default shall be continuing, (c) an assignment to Collateral Agent shall have been previously made pursuant to Section 13 hereof, and (d) the Secured Obligations shall not have become immediately due and payable, upon the written request of Borrower and the written consent of Collateral Agent, Collateral Agent shall promptly execute and deliver to Borrower such assignments as may be necessary to reassign to Borrower any rights, title and interests as may have been assigned pursuant to 15 Section 13 hereof, subject to any disposition thereof that may have been made by Collateral Agent pursuant hereto; provided that, after giving effect to such reassignment, Collateral Agent's security interest and conditional assignment granted pursuant hereto as well as all other rights and remedies of Collateral Agent granted hereunder, shall continue to be in full force and effect; and provided, further, that the rights, title and interests so reassigned shall be free and clear of all Liens other than Liens (if any) encumbering such rights, title and interest at the time of their assignment to Collateral Agent and Permitted Encumbrances. SECTION 15. TRANSFERS AND OTHER LIENS. Borrower shall not: (a) Sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except as permitted by the Credit Agreement; provided that notwithstanding the foregoing, Borrower shall be permitted to sell, assign or otherwise dispose of Equipment, Inventory, Related Contracts and Payment Rights and any other right, title or interest of Borrower related thereto, from time to time in connection with sales of lease receivables made by Borrower to LaSalle National Bank pursuant to and in accordance with the Lease Portfolio Documents as in effect on the Closing Date and upon any such sale, assignment or other disposition pursuant to and in accordance with the Lease Portfolio Documents, such Equipment, Inventory, Related Contracts and Payments Rights and any other right, title or interest of Borrower related thereto, shall be automatically released to Borrower free and clear of the Lien and security interest of this Agreement and shall no longer be Collateral hereunder. The Collateral Agent agrees, at the reasonable request of, and upon payment of any cost or expense of Collateral Agent related thereto by, LaSalle National Bank, to execute and deliver UCC financing statements on Form UCC-3 evidencing such release. (b) In the event any Collateral not released pursuant to the proviso in the foregoing clause (a) is sold, transferred or otherwise disposed of in any Asset Sale or other transaction not prohibited by the Credit Agreement, Collateral Agent shall release such Collateral to Borrower free and clear of the Lien and security interest under this Agreement in accordance with the following: (i) so long as any Secured Obligations remain outstanding and if such disposition is an Asset Sale, concurrently upon Collateral Agent's determination that arrangements satisfactory to it have been made for delivery to it of the Estimated Net Cash Proceeds of such Asset Sale to the extent required under the Credit Agreement and (ii) in all other instances, concurrently upon Collateral Agent's determination and 16 delivery of an Officers' Certificate by Borrower certifying that no Cash Proceeds of such disposition are required to be delivered by Pledgor in respect of the Secured Obligations. (c) Except for the interests disclosed in SCHEDULE II hereto, the security interest created by this Agreement and as permitted by Section 6.2 of the Credit Agreement, create or suffer to exist any Lien upon or with respect to any of the Collateral to secure the indebtedness or other obligations of any Person. SECTION 16. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Borrower hereby irrevocably appoints Collateral Agent Borrower's attorney-in-fact, with full authority in the place and stead of Borrower and in the name of Borrower, Collateral Agent or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument that Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to obtain and adjust insurance required to be maintained by Borrower or paid to Collateral Agent pursuant to Section 8, (b) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (c) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clauses (a) and (b) above, (d) to file any claims or take any action or institute any proceedings that Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Collateral Agent with respect to any of the Collateral, (e) to pay or discharge taxes or Liens, levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Collateral Agent in its sole discretion, and such payments made by Collateral Agent to become obligations of Borrower to Collateral Agent, due and payable immediately without demand, (f) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral, 17 (g) generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Collateral Agent were the absolute owner thereof for all purposes, and to do, at Collateral Agent's option and Borrower's expense, at any time, or from time to time, all acts and things that Collateral Agent deems necessary to protect, preserve or realize upon the Collateral and Collateral Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as Borrower might do. SECTION 17. COLLATERAL AGENT MAY PERFORM. If Borrower fails to perform any agreement contained herein, promptly after receipt of a request to do so from Collateral Agent Collateral Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of Collateral Agent incurred in connection therewith shall be payable by Borrower under Section 21. SECTION 18. COLLATERAL AGENT'S AND SECURED PARTIES' DUTIES AND LIABILITIES. (a) The powers conferred on Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Collateral Agent shall be deemed to exercise reasonable care in the custody and preservation of such Collateral if such Collateral is accorded treatment substantially equal to that which Collateral Agent accords its own property. (b) Neither Collateral Agent nor any other Secured Party shall be liable to Borrower (i) for any loss or damage sustained by it, or (ii) for any loss, damage, depreciation or other diminution in the value of any of the Collateral, that may occur as a result of, in connection with or that is in any way related to (x) any exercise by Collateral Agent or any other Secured Party of any right or remedy under this Agreement or (y) any other act of or failure to act by Collateral Agent or any other Secured Party, except to the extent that the same shall be determined by a judgment of a court of competent jurisdiction to be the result of acts or omissions on the part of Collateral Agent or such other Secured Party constituting gross negligence or willful misconduct. 18 (c) NO CLAIM MAY BE MADE BY BORROWER AGAINST COLLATERAL AGENT, ANY OTHER SECURED PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. SECTION 19. REMEDIES. If any Event of Default shall have occurred and be continuing, Collateral Agent may exercise in respect of the Collateral, (a) all the rights and remedies of a secured party on default under the Uniform Commercial Code of the State of New York (the "Code") (whether or not the Code applies to the affected Collateral), (b) all of the rights and remedies provided for in this Agreement, the Credit Agreement and any other agreement between Borrower and Collateral Agent and (c) such other rights and the remedies as may be provided by law or otherwise (such rights and remedies of Collateral Agent to be cumulative and non-exclusive). Collateral Agent also may (i) require Borrower to, and Borrower hereby agrees that it will at its expense and upon request of Collateral Agent forthwith, assemble all or part of the Collateral as directed by Collateral Agent and make it available to Collateral Agent at a place to be designated by Collateral Agent that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent Collateral Agent deems appropriate, (iv) take possession of Borrower's premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of Borrower's equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii) and collecting any Secured Obligation and (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable. Borrower agrees that, at least 10 days' notice to Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed 19 therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Collateral Agent may retain any of Borrower's directors, officers and employees, in each case upon such terms as Collateral Agent and any such person may agree, notwithstanding the provisions of any employment, confidentiality or non-disclosure agreement between any such person and Borrower and Borrower hereby waives its rights under any such agreement and consents to each such retention. SECTION 20. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in this Agreement, all proceeds received by Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral may, in the discretion of Collateral Agent, be held by Collateral Agent as Collateral for, and/or then, or at any other time thereafter applied, in full or in part by Collateral Agent against the Secured Obligations in the following order of priority: (a) To the payment of all costs and expenses of such sale, collection or other realization and all other expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith and all amounts for which Collateral Agent is entitled to indemnification hereunder and all advances made by Collateral Agent hereunder for the account of Borrower and for the payment of all costs and expenses paid or incurred by Collateral Agent in connection with the exercise of any right or remedy hereunder, all in accordance with Section 21; (b) To the payment of the Secured Obligations in such order as Collateral Agent shall elect; and (c) After payment in full of the amounts specified in the preceding subparagraphs, to the payment to or upon the order of Borrower, or whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. SECTION 21. INDEMNITY AND EXPENSES. (a) Borrower agrees to indemnify Collateral Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from Collateral Agent's gross negligence or willful misconduct. (b) Borrower will upon demand pay to Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any 20 experts and agents, that Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Collateral Agent hereunder or (iv) the failure by Borrower to perform or observe any of the provisions hereof. SECTION 22. SECURITY INTEREST ABSOLUTE. (a) All rights of Collateral Agent and security interests hereunder, and all obligations of Borrower hereunder, shall be absolute and unconditional, irrespective of: (i) any lack of validity or enforceability of the Credit Agreement or any Collateral Document, or any agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations or any other amendment or waiver of or consent to any departure from the Credit Agreement or any Collateral Document; (iii) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guaranty, for all or any of the Secured Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of Borrower or a third party grantor of a security interest. Without limiting the generality of the foregoing, Borrower hereby consents to, and hereby agrees that the rights of Collateral Agent and the security interests hereunder, and the obligations of Borrower hereunder, shall not be affected by, any and all releases of any Collateral from the Liens and security interests created by any Collateral Documents, whether for purposes of Asset Sales or other dispositions of assets pursuant to the Credit Agreement or for some other purpose, except to the extent expressly provided in such releases. SECTION 23. WAIVER OF HEARING. Borrower expressly waives any constitutional or other right to a judicial hearing prior to the time Collateral Agent takes possession or disposes of the Collateral as provided in Section 19 hereof. 21 SECTION 24. WAIVER OF JURY TRIAL. BORROWER AND COLLATERAL AGENT HEREBY MUTUALLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Borrower and Collateral Agent each acknowledge that this waiver is a material inducement for Borrower and Collateral Agent to enter into a business relationship, that Borrower and Collateral Agent have already relied on the waiver in entering into this Agreement and that each will continue to rely on the waiver in their related future dealings. Borrower and Collateral Agent further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. SECTION 25. CONTINUING SECURITY INTEREST. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Secured Obligations and termination of Secured Parties' obligations to lend under the Credit Agreement, (b) be binding upon Borrower, its successors and assigns and (c) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), Secured Parties may assign or otherwise transfer the Credit Agreement and any notes issued in connection therewith to any other person or entity, and such other benefits in respect thereof granted to Secured Parties herein or otherwise. Upon the indefeasible payment in full of the Secured Obligations and termination of Secured Parties' obligations to lend under the Credit Agreement, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to Borrower. Upon any such termination, Collateral Agent will, at Borrower's expense, execute and deliver to Borrower such documents as Borrower shall reasonably request to evidence such termination. SECTION 26. AMENDMENTS; ETC. No amendment or waiver of any provision of this Agreement nor consent to any departure by Borrower herefrom, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent, and no amendment or waiver of the last sentence of Section 1 or Section 15(a) of this Agreement nor any consent to any departure by Borrower therefrom which is adverse to LaSalle National Bank, as 22 purchaser under the Lease Portfolio Documents, shall be effective unless the same shall be in writing and signed by Collateral Agent and LaSalle National Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The parties hereto intend that LaSalle National Bank be a third party beneficiary with respect to such last sentence of Section 1 and Section 15(a) to the extent related to the Lease Portfolio or the Lease Portfolio Documents. SECTION 27. ADDRESSES FOR NOTICES. All notices and other communications provided for hereunder shall be in writing (including facsimile communication) and mailed or telecopied or delivered to Borrower or Collateral Agent, as the case may be, addressed to it at the address of such party specified on the signature page hereof, or as to either party at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section. All such notices and other communications shall, when mailed, be effective when deposited in the mails, addressed as aforesaid. SECTION 28. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial proceedings brought against Borrower with respect to this Agreement may be brought in any state or federal court of competent jurisdiction in the State of New York and by execution and delivery of this Agreement Borrower accepts for itself and in connection with the Collateral, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any judgement rendered thereby in connection with this Agreement. Borrower designates and appoints C T Corporation System and such other Person as may be hereafter selected by Borrower irrevocably agreeing in writing to so serve, as its agent to receive on its behalf service of all process in any proceedings in any such court, such service being hereby acknowledged by Borrower to be effective and binding service in every respect. A copy of any such process so served shall be mailed by registered mail to Borrower, at its address specified pursuant to Section 27 hereof, except that unless otherwise provided by applicable law, any failure to mail such copy shall not affect the validity of service of process. If any agent appointed by Borrower refuses to accept service, Borrower hereby agrees that service upon it by mail shall constitute sufficient notice. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Collateral Agent to bring proceedings against Borrower in the courts of any other jurisdiction. SECTION 29. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE 23 INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement, terms used in Article 9 of the Uniform Commercial Code in the State of New York are used herein as therein defined. SECTION 30. COLLATERAL AGENT. Collateral Agent has been appointed as Collateral Agent hereunder pursuant to the Credit Agreement, and shall be entitled to the benefits of the Credit Agreement. Collateral Agent shall be obligated, and shall have the right, hereunder to make demands, to give notices, to exercise or refrain from taking action (including, without limitation, the release or substitution of Collateral) solely in accordance with this Agreement and the Credit Agreement. Collateral Agent may resign and a successor Collateral Agent may be appointed in the manner provided for resignation or removal of Agent and appointment of a successor in the Credit Agreement. Upon the acceptance of any appointment as a Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement and shall deliver any Collateral in its possession to the successor Collateral Agent. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent. SECTION 31. HEADINGS. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement or be given any substantive effect. SECTION 32. SEVERABILITY. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation and in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 33. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Agreement. 24 IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly executed and delivered by its officers thereunto duly authorized as of the date first above written. BLUE BIRD BODY COMPANY By _____________________ Title: Notice Address: Blue Bird Body Company North Camellia Boulevard P.O. Box 937 Fort Valley, GA 31030 Attn: Bob G. Wallace with a copy to: Wachtell, Lipton, Rosen & Katz 299 Park Avenue New York, NY 10171-0149 Attn: Andrew R. Brownstein, Esq. BANKERS TRUST COMPANY, as Collateral Agent By _____________________ Title: Notice Address: Bankers Trust Company 280 Park Avenue 9th Floor West New York, NY 10017 Attn: Mary Zadroga with a copy to: Bankers Trust Company 300 South Grand Avenue 41st Floor Los Angeles, CA 90071 Attn: Patrice M. Daniels S-1 STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) On this ____ day of ________, 1992, before me personally came _________________________________ to me known, who being by me duly sworn, did depose and say that he/she resides at ___________________________________, that he/she is a ____________________________ of _______________ _____________________________, one of the corporations described in and which executed the within instrument, and that he/she signed his/her name thereto by authority of the Board of Directors of said corporation. ______________________________ Notary Public S-2 STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) On this ____ day of ________, 1992, before me personally came _________________________________ to me known, who being by me duly sworn, did depose and say that he/she resides at ___________________________________, that he/she is a ____________________________ of _______________ _____________________________, one of the corporations described in and which executed the within instrument, and that he/she signed his/her name thereto by authority of the Board of Directors of said corporation. ______________________________ Notary Public S-3 4/9/92 EXHIBIT XI FORM OF BORROWER PLEDGE AGREEMENT THIS BORROWER PLEDGE AGREEMENT (this "Agreement") is dated as of April 15, 1992 between BLUE BIRD BODY COMPANY, a Georgia corporation ("Pledgor"), and BANKERS TRUST COMPANY ("Bankers"), as collateral agent for and representative of (in such capacity, together with any successor in such capacity "Collateral Agent") the Secured Parties (as defined herein). PRELIMINARY STATEMENT A. Pledgor is the legal and beneficial owner of (i) the shares (the "Pledged Shares") of stock described in Part A of SCHEDULE I hereto and issued by the corporations named therein and (ii) the indebtedness described in Part B of said SCHEDULE I (the "Pledged Debt") and issued by the obligors named therein. B. Blue Bird Corporation, a Delaware corporation ("Holding"), B B Acquisition Corp., a Georgia corporation ("Acquisition", which corporation has merged with and into Pledgor), the lenders party thereto ("Lenders") and Bankers Trust Company, as agent for Lenders ("Agent") have entered into that certain Credit Agreement dated as of April 15, 1992 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), pursuant to which Lenders make certain commitments, subject to the terms and conditions set forth in the Credit Agreement, to extend credit facilities to Acquisition and Pledgor. C. Acquisition has entered into the Subordinated Indenture pursuant to which Acquisition has issued the Subordinated Notes and Holding has issued its guaranty thereof. D. It is a condition under the Credit Agreement and the Subordinated Indenture that Pledgor shall have made the pledge and undertaken the obligations contemplated by this Agreement. E. Bankers, as agent under the Credit Agreement, and Manufacturers Hanover Trust Company, as trustee under the Subordinated Indenture (the "Subordinated Indenture Trustee") have entered into the Intercreditor Agreement providing for, among other things, the appointment of Collateral Agent to administer and enforce this Agreement and the Pledged Collateral (as hereinafter defined) as provided therein. F. It is contemplated that Pledgor may from time to time enter into Interest Rate Agreements (the "Interest Rate Agreements") with one or more financial institutions, other than Lenders ("Other Banks") (such Other Banks that have acknowledged and delivered to Collateral Agent a counterpart of the Intercreditor Agreement agreeing to be bound by the terms thereof are collectively referred to herein as the "Interest Rate Exchangers" and, such Interest Rate Exchangers, together with Collateral Agent, Agent, Lenders, the Subordinated Indenture Trustee and the holders of the Subordinated Notes, are each individually referred to herein as a "Secured Party" and are collectively referred to herein as the "Secured Parties"). IN CONSIDERATION of the foregoing premises, Pledgor hereby agrees with Collateral Agent, for its benefit and the benefit of the other Secured Parties, as follows: SECTION 1. CERTAIN DEFINED TERMS. Terms used and not otherwise defined herein have the respective meanings assigned to them in the Credit Agreement. The following terms used herein shall have the following meanings: "CREDIT AGREEMENT OBLIGATIONS" means all obligations of every nature of Pledgor, Holding and any other Loan Party now or hereafter existing under or arising out of or in connection with the Credit Agreement and any promissory notes or other documents or instruments delivered pursuant thereto (including, without limitation, the Holding Guaranty and any Interest Rate Agreements by and between Borrower and any Lender and all other Obligations under the Credit Agreement) and all amendments, extensions or renewals thereof, whether for principal, interest (including, without limitation, interest that, but for the filing of a petition in bankruptcy with respect to Pledgor, would accrue on such obligations whether or not a claim is allowed against Pledgor in any such bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit, fees, expenses or otherwise. "INTEREST RATE OBLIGATIONS" means all obligations of every nature of Pledgor to the Interest Rate Exchangers now or hereafter existing in respect of the Interest Rate Agreements (including, without limitation, interest that, but for the filing of a petition in bankruptcy with respect to Pledgor, would accrue on all such obligations whether or not a claim is allowed against Pledgor in any such bankruptcy proceeding). "SUBORDINATED INDENTURE OBLIGATIONS" means all obligations of every nature of Pledgor and Holding now or hereafter existing under or arising out of or in connection with the Subordinated Indenture and the Subordinated Notes (including, without limitation, the guaranty by Holding or any other obligor thereof), and all amendments, extensions or renewals thereof (to the extent such amendments, extensions or renewals are not X1-2 prohibited by the Credit Agreement), whether for principal, interest (including, without limitation, interest that, but for the filing of a petition in bankruptcy with respect to Pledgor, would accrue on such obligations whether or not a claim is allowed against Pledgor in any such bankruptcy proceeding), fees, expenses or otherwise. SECTION 2. PLEDGE OF SECURITY. (a) Pledgor hereby pledges to Collateral Agent, and grants to Collateral Agent on behalf of Agent and Lenders, a Lien on and security interest in, the following (the "Pledged Collateral") to secure the Credit Agreement Obligations: (i) the Pledged Shares and the certificates representing the Pledged Shares and any interest of Pledgor in the entries on the books of any financial intermediary pertaining to the Pledged Shares, and all dividends, cash, warrants, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; (ii) the Pledged Debt and the instruments evidencing the Pledged Debt, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt; (iii) all additional shares of, and all securities convertible into and warrants, options and other rights to purchase, stock of any issuer of the Pledged Shares from time to time acquired by Pledgor in any manner (which shares shall be deemed to be part of the Pledged Shares), the certificates or other instruments representing such additional shares, securities, warrants, options or other rights and any interest of Pledgor in the entries on the books of any financial intermediary pertaining to such additional shares, and all dividends, cash, warrants, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such additional shares, securities, warrants, options or other rights; provided, that Pledgor shall not be required to pledge more than 66% of the shares of stock of any Subsidiary organized in a jurisdiction outside of the United States of America (a "Foreign Entity") otherwise required to be pledged hereunder to the extent that such pledge would constitute an investment of earnings in United States property under Section 956 (or a successor provision) of the Internal Revenue Code which investment would trigger an increase in the gross income of a United States shareholder of such XI-3 Pledgor pursuant to Section 951 (or a successor provision) of the Internal Revenue Code; (iv) all additional indebtedness from time to time owed to Pledgor by any obligor of the Pledged Debt and the instruments evidencing such indebtedness, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness; (v) all shares of, and all securities convertible into and warrants, options and other rights to purchase, stock of any Person that, after the date of this Agreement, becomes, as a result of any occurrence, a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the Pledged Shares) and the certificates or other instruments representing such shares, securities, warrants, options or other rights and any interest of Pledgor in the entries on the books of any financial intermediary pertaining to such shares, and all dividends, cash, warrants, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares, securities, warrants, options or other rights; provided that Pledgor shall not be required to pledge more than 66% of the shares of stock of any Foreign Entity otherwise required to be pledged hereunder to the extent that such pledge would constitute an investment of earnings in United States property under Section 956 (or a successor provision) of the Internal Revenue Code that would trigger an increase in the gross income of a United States shareholder of the Pledgor pursuant to Section 951 (or a successor provision) of the Internal Revenue Code; and (vi) to the extent not covered by clauses (i) through (v) above, all Proceeds of any or all of the foregoing. The term "Proceeds" shall have the meaning assigned that term under the Uniform Commercial Code (the "Code") as in effect in any relevant jurisdiction or under relevant law and, in any event, shall include, but not be limited to, any and all (y) proceeds of any indemnity or guaranty payable to Pledgor or Collateral Agent from time to time with respect to any of the Pledged Collateral and (z) any other amounts from time to time paid or payable under or in connection with any of the Pledged Collateral. (b) Pledgor hereby pledges to Collateral Agent, and grants to Collateral Agent on behalf of Interest Rate Exchangers, a Lien on and security interest in the Pledged Collateral to secure the Interest Rate Obligations. XI-4 (c) Pledgor hereby pledges to Collateral Agent, and grants to Collateral Agent on behalf of the Subordinated Indenture Trustee and the holders of the Subordinated Notes, a Lien on and security interest in the Pledged Collateral to secure the Subordinated Indenture Obligations. (d) Pledgor hereby pledges to Collateral Agent, and grants to Collateral Agent on behalf of Collateral Agent, a Lien on and security interest in the Pledged Collateral to secure the obligations owed to Collateral Agent under this Agreement. (e) Each of the grants of a Lien and security interest in paragraphs (a)-(d) of this Section 2 is, and is intended to be, a separate, independent and distinct grant to the same extent as if each such grant were set forth in a separate document and such grants have been included in one document solely for the administrative convenience of the Secured Parties. SECTION 3. SECURITY FOR OBLIGATIONS. (a) The Lien and security interest granted in Section 2(a) of this Agreement, secures, and the Pledged Collateral is collateral security for, the prompt payment and performance in full when due, whether at stated maturity, by acceleration, declaration or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a), or any successor provision thereto), of the Credit Agreement Obligations, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, XI-5 and whether or not from time to time decreased or extinguished and later increased, created or incurred and all or any portion of such obligations that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Collateral Agent as a preference, fraudulent transfer or otherwise (all such obligations being the "Credit Agreement Indebtedness"), and all obligations or liabilities of every nature of Pledgor to Agent and Lenders now or hereafter existing under this Agreement (all such obligations of Pledgor, together with the Credit Agreement Indebtedness, being the "Credit Agreement Secured Obligations"). (b) The Lien and security interest granted in Section 2(b) of this Agreement secures, and the Pledged Collateral is collateral security for, the prompt payment and performance in full when due, whether at stated maturity, by acceleration, declaration or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a), or any successor provision thereto), of the Interest Rate Obligations, whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred and all or any portion of such obligations that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Collateral Agent as a preference, fraudulent transfer or otherwise (all such obligations being the "Interest Rate Indebtedness"), and all obligations or liabilities of every nature of Pledgor to Interest Rate Exchangers now or hereafter existing under this Agreement (all such obligations of Pledgor, together with the Interest Rate Indebtedness, being the "Interest Rate Secured Obligations"). (c) The Lien and security interest granted in Section 2(c) of this Agreement secures, and the Pledged Collateral is collateral security for, the prompt payment and performance in full when due, whether at stated maturity, by acceleration, declaration or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a), or any successor provision thereto), of the Subordinated Indenture Obligations, whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred and all or any portion of such obligations that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Collateral Agent as a preference, fraudulent transfer or otherwise (all such obligations being the "Subordinated Indenture Indebtedness"), and all obligations or liabilities of every nature of Pledgor to the Subordinated Indenture Trustee and the holders of the Subordinated Notes now or hereafter existing under this Agreement (all such obligations of Pledgor, together with the Indebtedness, being the "Subordinated Indenture Secured Obligations"). (d) The Lien and security interest granted in Section 2(d) of this Agreement secures, and the Pledged Collateral is collateral security for, the prompt payment and performance in full when due, (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a), or any successor provision thereto), of all amounts owed to Collateral Agent under this Agreement, whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred and all or any portion of such obligations that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Collateral Agent as a preference, fraudulent transfer or otherwise (all such obligations, together with the Credit Agreement Indebtedness, Interest XI-6 Rate Indebtedness and the Subordinated Indenture Indebtedness being the "Indebtedness"), and all obligations or liabilities of every nature of Pledgor to Collateral Agent on its own behalf now or hereafter existing under this Agreement (all such obligations of Pledgor, together with the Indebtedness, the Credit Agreement Secured Obligations, the Interest Rate Secured Obligations, and the Subordinated Indenture Secured Obligations being the "Secured Obligations"). SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery, or, as applicable, shall be accompanied by Pledgor's endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Collateral Agent. Collateral Agent shall have the right, at any time upon or after the occurrence of an Event of Default (as defined below) and without notice to Pledgor, to transfer to or to register in the name of Collateral Agent or any of its nominees any or all of the Pledged Collateral, subject only to the revocable rights specified in Section 8(a). In addition, Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations. SECTION 5. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants as follows: (a) All of the Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable. All of the Pledged Debt has been duly authorized, authenticated or issued and delivered, and is the legal, valid and binding obligation of the issuers thereof, and is not in default. (b) Pledgor is the legal, record and beneficial owner of the Pledged Collateral free and clear of any Lien except for the security interest created by this Agreement. (c) Pledgor has full power and lawful authority to enter into this Agreement, to sell, assign, transfer and pledge the Pledged Collateral to Collateral Agent and to grant to Collateral Agent a first priority security interest therein as herein provided, all of which have been duly authorized by all necessary corporate action; the execution, delivery and performance hereof are not in contravention of any charter or by-law provision or of any indenture, agreement or undertaking to which Pledgor is a party or by which Pledgor or its property are bound; this Agreement constitutes the legally valid and binding obligation of Pledgor enforceable against Pledgor in accordance with its terms, subject, as to enforcement, to bankruptcy, XI-7 insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and to equitable principles relating to enforceability; and any officer, agent or representative acting for or on behalf of Pledgor in connection with this Agreement or any aspect hereof, or entering into or executing this Agreement on behalf of Pledgor, has been duly authorized so to do, and is fully empowered to act for and represent Pledgor in connection with this Agreement and all matters relating thereto or in connection therewith. (d) No consent of any other party (including, without limitation, stockholders or creditors of Pledgor) and no consent, authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the pledge by Pledgor of the Pledged Collateral pursuant to this Agreement and the grant by Pledgor of the security interest granted hereby or for the execution, delivery or performance of this Agreement by Pledgor or (ii) for the exercise by Collateral Agent of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement (except as may be required in connection with a disposition of Pledged Collateral by laws affecting the offering and sale of securities generally). (e) The pledge of the Pledged Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral, securing the payment of the Secured Obligations. (f) The Pledged Shares constitute all of the issued and outstanding shares of each issuer thereof, except as otherwise set forth in SCHEDULE II hereto, and there are no outstanding options, warrants, rights to subscribe, stock purchase rights or other agreements outstanding with respect to, or property that is now or hereafter convertible into, or that requires the issuance or sale of, any Pledged Shares. (g) The pledge of the Pledged Collateral pursuant to this Agreement does not violate Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. SECTION 6. CERTAIN COVENANTS. Pledgor hereby covenants that, until the Secured Obligations have been indefeasibly paid in full, Pledgor will: (a) not, except as expressly permitted by the Credit Agreement, (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral, (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral, except for the security interest under this Agreement, (iii) sell, assign (by operation of law or otherwise) or otherwise dispose of, or XI-8 grant any option with respect to, or create or permit to exist any Lien upon or with respect to, any of the capital stock of a Foreign Entity not pledged hereunder, or (iv) permit any issuer of Pledged Shares to merge or consolidate unless all the outstanding capital stock of the surviving or resulting corporation is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation; provided, however, that if an Asset Sale permitted by the Credit Agreement occurs and the assets subject to such Asset Sale are Pledged Collateral, Collateral Agent shall release the Pledged Collateral that is the subject of such Asset Sale to Pledgor free and clear of the lien and security interest under this Agreement (A) so long as any Obligations remain outstanding under the Credit Agreement, concurrently with the receipt of advice from Agent that arrangements satisfactory to it have been made for delivery to it of the Estimated Net Cash Proceeds of such Asset Sale, (B) after such time as all Credit Agreement Obligations have been paid in full and the Commitments under the Credit Agreement have been terminated, if any other Secured Parties are entitled to receive any portion of the Cash Proceeds of such Asset Sale, concurrently with the receipt of advice from the agent or trustee for such Secured Parties that arrangements satisfactory to it have been made for delivery to it of the amounts required to be paid to such Secured Parties out of the Cash Proceeds of such Asset Sale, and (C) in the event no Secured Party is entitled to receive any portion of the Cash Proceeds of such Asset Sale, concurrently upon receipt of advice from Pledgor that no Secured Party is entitled to receive such proceeds; provided, however, that notwithstanding anything herein to the contrary, Collateral Agent shall release such Pledged Collateral from the lien and security interest of this Agreement as may be specified by Agent upon the approval of the release of such Pledged Collateral by Requisite Lenders under the Credit Agreement. (b) (i) cause each issuer of Pledged Shares not to issue any stock or other securities in addition to or in substitution for the Pledged Shares, or any shares of capital stock of a Foreign Entity not pledged hereunder, except to Pledgor, and (ii) subject to any limitations with respect to a pledge of the shares of capital stock of a Foreign Entity under Sections 2(c) and 2(e) hereof, pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities of each issuer of Pledged Shares, and (iii) subject to any limitations with respect to a pledge of the shares of capital stock of a Foreign Entity under Sections 2(c) and 2(e) hereof, pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all shares of stock of any Person which, after the date of this Agreement, becomes, as a result of any occurrence, a direct Subsidiary of Pledgor; XI-9 (c) (i) pledge hereunder, immediately upon their issuance, any and all instruments or other evidences of additional indebtedness from time to time owed (directly or indirectly) to Pledgor by any obligor of the Pledged Debt, and (ii) pledge hereunder, immediately upon their issuance, any and all instruments or other evidences of indebtedness from time to time owed (directly or indirectly) to Pledgor by any Person that after the date of this Agreement becomes, as a result of any occurrence, a direct or indirect Subsidiary of Pledgor; (d) promptly deliver to Collateral Agent all written notices received by it with respect to the Pledged Collateral; and (e) pay or discharge, prior to delinquency, all taxes, charges, fees, expenses, Liens and assessments of every nature levied or imposed upon the Pledged Collateral. SECTION 7. FURTHER ASSURANCES; PLEDGE AMENDMENTS. Pledgor agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further actions, that may be necessary, or that Collateral Agent may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. Pledgor further agrees that it will, upon obtaining any additional shares of stock or other securities required to be pledged hereunder as provided in Section 6(b) or (c), promptly (and in any event within five (5) Business Days) deliver to Collateral Agent a Pledge Amendment, duly executed by Pledgor, in substantially the form of SCHEDULE III hereto (a "Pledge Amendment"), in respect of the additional Pledged Shares or Pledged Debt to be pledged pursuant to this Agreement. Pledgor hereby authorizes Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that all Pledged Shares or Pledged Debt listed on any Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder be considered Pledged Collateral. SECTION 8. VOTING RIGHTS; DIVIDENDS; ETC. (a) So long as no Event of Default shall have occurred and be continuing: (i) Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; provided, however, that Pledgor shall not exercise or refrain from exercising any such right if XI-10 Collateral Agent shall have notified Pledgor that, in Collateral Agent's judgment, such action would have a material adverse effect on the value of the Pledged Collateral or any part thereof; and provided, further, that Pledgor shall give Collateral Agent at least five Business Days' prior written notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right. It is understood, however, that neither (A) the voting by Pledgor of any Pledged Shares for or Pledgor's consent to the election of directors at a regularly scheduled annual or other meeting of stockholders or with respect to incidental matters at any such meeting nor (B) Pledgor's consent to or approval of any action otherwise permitted under this Agreement or the Credit Agreement shall be deemed inconsistent with the terms of this Agreement or the Credit Agreement within the meaning of this Section 8(a)(i), and no notice of any such voting or consent need be given to Collateral Agent. (ii) Pledgor shall be entitled to receive and retain, and to utilize free and clear of the lien of this Agreement, any and all dividends and interest paid in respect of the Pledged Collateral; provided, however, that any and all (A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral, (B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal or in redemption of or in exchange for any Pledged Collateral, shall be, and shall forthwith be delivered to Collateral Agent to hold as, Pledged Collateral and shall, if received by Pledgor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of Pledgor and be forthwith delivered to Collateral Agent as Pledged Collateral in the same form as so received (with all necessary endorsements). (iii) Collateral Agent shall promptly execute and deliver (or cause to be executed and delivered) to Pledgor all such proxies, dividend payment orders and other instruments as Pledgor may from time to time reasonably request for the purpose of enabling Pledgor to exercise the XI-11 voting and other consensual rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends, principal or interest payments which it is authorized to receive and retain pursuant to paragraph (ii) above. (b) Upon the occurrence and during the continuance of an Event of Default: (i) Upon written notice from Collateral Agent to Pledgor, all rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 8(a)(i) shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to exercise such voting and other consensual rights during the continuance of such Event of Default. (ii) All rights of Pledgor to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to Section 8(a)(ii) shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to receive and hold as Pledged Collateral such dividends and interest payments during the continuance of such Event of Default. (iii) All dividends, principal and interest payments which are received by Pledgor contrary to the provisions of paragraph (ii) of this Section 8(b) shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of Pledgor and shall forthwith be paid over to Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsements). (c) In order to permit Collateral Agent to exercise the voting and other consensual rights which it may be entitled to exercise pursuant to Section 8(b)(i) and to receive all dividends and other distributions which it may be entitled to receive under Section 8(a)(ii) or Section 8(b)(ii), Pledgor shall promptly execute and deliver (or cause to be executed and delivered) to Collateral Agent all such proxies, dividend payment orders and other instruments as Collateral Agent may from time to time reasonably request. SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Pledgor hereby irrevocably appoints Collateral Agent as Pledgor's attorney-in-fact, with full authority in the place and stead of Pledgor and in the name of Pledgor or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument, including but not limited to financing and continuation statements, which Collateral Agent may XI-12 deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to Pledgor representing any dividend, principal or interest payment or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same, to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Pledged Collateral, and to file any claims or take any action or institute any proceedings which Collateral Agent may deem necessary or desirable for the collection of any of the Pledged Collateral or to enforce the rights of Collateral Agent with respect to any of the Pledged Collateral. SECTION 10. COLLATERAL AGENT MAY PERFORM. If Pledgor fails to perform any agreement contained herein promptly after receipt of a request to do so from Collateral Agent, Collateral Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of Collateral Agent incurred in connection therewith shall be payable by Pledgor under Section 16(b). SECTION 11. STANDARD OF CARE; SECURED PARTIES' DUTIES AND LIABILITIES. (a) The powers conferred on Collateral Agent hereunder are solely to protect its interest in the Pledged Collateral and shall not impose on it any duty to exercise such powers. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equivalent to that which Collateral Agent in its individual capacity accords its own property consisting of negotiable securities, it being understood that Collateral Agent shall have no responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not Collateral Agent has or is deemed to have knowledge of such matters, (ii) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Pledged Collateral) to preserve rights against any parties with respect to any Pledged Collateral, (iii) taking any necessary steps to collect or realize upon the Secured Obligations or any guarantee therefor, or any part thereof, or any of the Pledged Collateral or (iv) initiating any action to protect the Pledged Collateral against the possibility of a decline in market value. (b) Neither Collateral Agent nor any other Secured Party shall be liable to Pledgor (i) for any loss or damage sustained by it, or (ii) for any loss, damage, depreciation or other diminution in the value of any of the Pledged Collateral that may occur as a result of, in connection with or that is in XI-13 any way related to (x) any exercise by Collateral Agent or any other Secured Party of any right or remedy under this Agreement or (y) any other act of or failure to act by Collateral Agent or any other Secured Party, except to the extent that the same shall be determined by a judgment of a court of competent jurisdiction to be the result of acts or omissions on the part of Collateral Agent or such other Secured Party constituting gross negligence or willful misconduct. (c) NO CLAIM MAY BE MADE BY PLEDGOR AGAINST COLLATERAL AGENT, ANY OTHER SECURED PARTY OR THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND PLEDGOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. SECTION 12. EVENTS OF DEFAULT. The occurrence of any of the following shall be an "Event of Default" under this Agreement: (a) the occurrence of any "Event of Default" as defined in the Credit Agreement, or (b) after such time as the Credit Agreement Obligations have been paid in full and the Commitments under the Credit Agreement have been terminated, so long as any Interest Rate Obligations to Interest Rate Exchangers remain outstanding and provided that the Pledged Collateral then secures such Interest Rate Obligations, the occurrence of any event of default under such Interest Rate Agreements, or (c) after such time as the Credit Agreement Obligations have been paid in full and the Commitments under the Credit Agreement have been terminated, and after such time as the Interest Rate Obligations to Interest Rate Exchangers have been paid in full and such Interest Rate Agreements terminated, so long as any Subordinated Indenture Obligations remain outstanding and provided that the Pledged Collateral then secures such Subordinated Indenture Obligations, the occurrence of any "Event of Default" under and as defined in the Subordinated Indenture. SECTION 13. REMEDIES UPON DEFAULT; DECISIONS RELATING TO EXERCISE OF REMEDIES. (a) If any Event of Default shall have occurred and be continuing: (i) Collateral Agent may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Code as in effect in the State of New York (or any XI-14 other state with jurisdiction over the Pledged Collateral) at that time, and Collateral Agent may also in its sole discretion, without notice (except as specified below), sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. Collateral Agent may be the purchaser of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price of any Pledged Collateral payable by Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Pledgor, and Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Pledgor hereby waives any claims against Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Pledged Collateral are insufficient to pay all the Secured Obligations, Pledgor shall be liable for the deficiency and the fees of any attorneys employed by Collateral Agent to collect such deficiency. (ii) Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as from time to time amended (the "Securities Act"), and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral conducted without prior registration XI-15 or qualification of such Pledged Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to Collateral Agent than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances and the registration rights granted to Collateral Agent by Pledgor pursuant to Section 14, Pledgor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. (iii) If Collateral Agent determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, Pledgor shall and shall cause each issuer of any Pledged Shares to be sold hereunder from time to time to furnish to Collateral Agent all such information as Collateral Agent may request in order to determine the number of shares and other instruments included in the Pledged Collateral which may be sold by Collateral Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. (b) Notwithstanding anything in this Agreement to the contrary, Collateral Agent shall exercise, or shall refrain from exercising, any remedy provided for in subsection 13(a) hereof as Collateral Agent may be directed by instructions given in accordance with the terms and provisions of the Intercreditor Agreement and each Secured Party shall be bound by such instructions and the sole right of each Secured Party under this Agreement shall be to be secured by the Pledged Collateral and to receive the payments provided for in Section 15 hereof. SECTION 14. REGISTRATION RIGHTS. If Collateral Agent shall determine to exercise its right to sell all or any of the Pledged Collateral pursuant to Section 13, Pledgor agrees that, upon request of Collateral Agent (which request may be made by Collateral Agent in its sole discretion), Pledgor will, at its own expense: XI-16 (a) execute and deliver, and cause each issuer of the Pledged Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of Collateral Agent, advisable to register such Pledged Collateral under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (b) use its best efforts to qualify the Pledged Collateral under all applicable state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by Collateral Agent; (c) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act; (d) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law; and (e) bear all costs and expenses, including reasonable attorneys' fees, of carrying out its obligations under this Section 14. Pledgor further agrees that a breach of any of the covenants contained in this Section 14 will cause irreparable injury to Collateral Agent, that Collateral Agent has no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section 14 shall be specifically enforceable against Pledgor, and Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section 14 shall in any way alter the rights of Collateral Agent under Section 13. SECTION 15. APPLICATION OF PROCEEDS. All Cash Proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of Collateral Agent, be held by Collateral Agent as Pledged Collateral for, and/or then or at any time thereafter applied in whole or in part by XI-17 Collateral Agent against the Secured Obligations in the following order of priority: FIRST: To the payment of the costs and expenses of such sale, collection or other realization, and all expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith, including reasonable compensation to Collateral Agent and its agents and counsel, in accordance with Section 16(b); SECOND: To the payment in full of all Secured Obligations in the order set forth in the Intercreditor Agreement; and THIRD: To the payment to or upon the order of Pledgor, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. SECTION 16. INDEMNITY AND EXPENSES. (a) Pledgor agrees to indemnify Collateral Agent from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement, the Intercreditor Agreement and the transactions contemplated hereby and thereby (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from Collateral Agent's gross negligence or willful misconduct. (b) Pledgor will upon demand pay to Collateral Agent the amount of any and all costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of Collateral Agent or any other Secured Party hereunder or (iv) the failure by Pledgor to perform or observe any of the provisions hereof. (c) In the event of any public sale described in Section 14, Pledgor agrees to indemnify and hold harmless Collateral Agent and each of Collateral Agent's directors, officers, employees and agents from and against any loss, fee, cost, expense, damage, liability or claim, joint or several, to which Collateral Agent or such other persons may become subject or for which any of them may be liable, under the Securities Act or otherwise, insofar as such losses, fees, costs, expenses, damages, liabilities or claims (or any litigation commenced or threatened in respect thereof), arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, registration statement, prospectus or other such document published or filed in XI-18 connection with such public sale, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse Collateral Agent and such other persons for any legal or other expenses reasonably incurred by Collateral Agent and such other persons in connection with any litigation, of any nature whatsoever, commenced or threatened in respect thereof (including without limitation any and all fees, costs and expenses whatsoever reasonably incurred by Collateral Agent and such other persons and counsel for Collateral Agent and such other persons in investigating, preparing for, defending against or providing evidence, producing documents or taking any other action in respect of, any such commenced or threatened litigation or any claims asserted). This indemnity shall be in addition to any liability which Pledgor may otherwise have and shall extend upon the same terms and conditions to each person, if any, that controls Collateral Agent or such persons within the meaning of the Securities Act. SECTION 17. WAIVERS OF PLEDGOR. (a) Pledgor waives any right to require Collateral Agent to: (i) proceed against any guarantor of any of the Secured Obligations or any other person or entity; (ii) proceed against or exhaust any other security held from any other person or entity; (iii) give notice to Pledgor of the terms, time and place of any public or private sale of the Pledged Collateral or any other security, or otherwise comply with Section 9504 of the Code; (iv) pursue any other remedy in Collateral Agent's power; or (v) make or give any presentments, demands for performance, notices of nonperformance, protests, notices of protest or notices of dishonor in connection with any obligations or evidences of indebtedness which constitute in whole or in part the Secured Obligations or in connection with the creation of new or additional Secured Obligations; (b) Pledgor waives any defense arising by reason of: (i) any disability or other defense of Pledgor, or any other entity, including, without limitation, any defense based on or arising out of the unenforceability of any of the Secured Obligations, legal or equitable discharge of the Secured Obligations or this Agreement or any statute of limitations affecting Pledgor's liability hereunder or the enforcement thereof or hereof; (ii) the cessation from any cause whatsoever, other than payment in full, of the Secured Obligations or the release or substitution of any sureties or guarantors of the Secured Obligations; (iii) any act or omission by Collateral Agent which directly or indirectly results in or aids the discharge of Pledgor or any of the Secured Obligations by operation of law or otherwise; (iv) the release of any other collateral securing the Secured Obligations or the failure by Collateral Agent to perfect or maintain the perfection of any such other collateral; (v) any XI-19 modification of the Secured Obligations, in any form whatsoever, including, but not limited to the renewal, extension, acceleration or other change in the time for payment of the Secured Obligations, and any change in the terms of the Secured Obligations, including, but not limited to, any increase or decrease of the rate of interest on the Secured Obligations; and (vi) any law limiting the liability of or exonerating guarantors or sureties; and (c) until all the Secured Obligations shall have been paid in full, Pledgor waives any right to enforce any remedy which Collateral Agent now has or may hereafter have against any person or entity guaranteeing or securing the Secured Obligations, and waives any benefit of, or any right to participate in any security whatsoever now or hereafter held by Collateral Agent for the Secured Obligations. SECTION 18. CONTINUING SECURITY INTEREST; TRANSFER OF INDEBTEDNESS. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (a) remain in full force and effect until indefeasible payment in full of all Secured Obligations and the cancellation or termination of any commitments related thereto, (b) be binding upon Pledgor, its successors and assigns, and (c) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and each other Secured Party and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c) and subject to the provisions of the Credit Agreement, Collateral Agent and each other Secured Party may assign or otherwise transfer any Indebtedness held by it to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to Collateral Agent herein or otherwise, subject however to the provisions of the Intercreditor Agreement. Upon the indefeasible payment in full of all Secured Obligations and the cancellation or termination of the commitments related thereto, this Agreement shall terminate and Pledgor shall be entitled to the return, upon its request and at its expense, against receipt and without recourse to Collateral Agent, of such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof. SECTION 19. NO WAIVER BY COLLATERAL AGENT; AUTHORITY OF PLEDGOR. No failure on the part of Collateral Agent to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by Collateral Agent of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are cumulative to the fullest extent permitted by law and are not exclusive of any remedies provided by law. It is not necessary for Collateral Agent to inquire into the powers of Pledgor or the XI-20 officers, directors or agents acting or purporting to act on behalf of any of them. SECTION 20. AMENDMENT, ETC. No amendment or waiver of any provision of this Agreement, nor consent to any departure by Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that solely with respect to any amendment or waiver of Sections 2(c), 3(c) or 15 of this Agreement or this Section 20 or the definitions herein of "Secured Parties," "Subordinated Indenture Obligations," "Subordinated Indenture Indebtedness," "Subordinated Indenture Secured Obligations" or "Secured Obligations," any such amendment or waiver shall also require the written consent of the Subordinated Indenture Trustee; provided, further, that solely with respect to any amendment or waiver of Sections 2(b) or 3(b) of this Agreement or this Section 20 or the definitions herein of "Secured Parties," "Interest Rate Obligations," "Interest Rate Indebtedness," "Interest Rate Secured Obligations" or "Secured Obligations," any such amendment or waiver shall also require the written consent of any Interest Rate Exchanger then secured hereunder. SECTION 21. ADDRESSES FOR NOTICES. All notices and other communications provided for hereunder shall be in writing (including telegraphic or telecopy communication) and, if to either party, mailed, telegraphed, telecopied or delivered to it, addressed to it at the address of such party specified in the Credit Agreement, or as to either party at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section 21. All such notices and other communications shall, when mailed or telegraphed, respectively, be effective when deposited in the mails or delivered to the telegraph company, respectively, addressed as aforesaid, and when delivered or telecopied, be effective when received at the address specified above. SECTION 22. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement, terms defined in Article 9 of the Code are used herein as therein defined. SECTION 23. SEVERABILITY. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdictions, be ineffective to the XI-21 extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 24. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial proceedings brought against Pledgor with respect to this Agreement may be brought in any state or federal court of competent jurisdiction in the State of New York and by execution and delivery of this Agreement, Pledgor accepts for itself and in connection with its properties, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Pledgor designates and appoints C T Corporation and such other Persons as may hereafter be selected by Pledgor irrevocably agreeing in writing to so serve, as its agent to receive on its behalf service of all process in any such proceedings in any such court, such service being hereby acknowledged by Pledgor to be effective and binding service in every respect. A copy of any such process so served shall be mailed by registered mail to Pledgor at its address referred to in Section 22, except that unless otherwise provided by applicable law, any failure to mail such copy shall not affect the validity of service of process. If any agent appointed by Pledgor refuses to accept service, Pledgor hereby agrees that service upon it by mail shall constitute sufficient notice. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Collateral Agent to bring proceedings against Pledgor in the courts of any other jurisdiction. SECTION 25. COLLATERAL AGENT. Collateral Agent has been appointed as Collateral Agent hereunder pursuant to the Intercreditor Agreement, and shall be entitled to the benefits of the Intercreditor Agreement. Collateral Agent shall be obligated, and shall have the right, hereunder to make demands, to give notices, to exercise or refrain from taking action (including, without limitation, the release or substitution of Pledged Collateral) solely in accordance with this Agreement and the Intercreditor Agreement. Collateral Agent may resign and a successor Collateral Agent may be appointed in the manner provided for resignation or removal of Agent and appointment of a successor in the Intercreditor Agreement. Upon the acceptance of any appointment as a Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement and shall deliver any Collateral in its possession to the successor Collateral Agent. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall inure to its benefit as to any XI-22 actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent. SECTION 26. WAIVER OF JURY TRIAL. PLEDGOR AND COLLATERAL AGENT HEREBY MUTUALLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OR ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE TRANSACTION CONTEMPLATED HEREBY AND THE RELATIONSHIP BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Pledgor and Collateral Agent each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement and that each will continue to rely on the waiver in their related future dealings. Pledgor and Collateral Agent further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO EXTENSIONS OF CREDIT PURSUANT TO THE LOAN DOCUMENTS. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. XI-23 IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. BLUE BIRD BODY COMPANY By __________________________ Title: BANKERS TRUST COMPANY, as Collateral Agent By __________________________ Title: XI-24 4/22/92 EXHIBIT XII FORM OF HOLDING SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Agreement") is dated as of April 15, 1992, and entered into by and between BLUE BIRD CORPORATION, a Delaware corporation, ("Holding"), and BANKERS TRUST COMPANY, as collateral agent for and representative of (in such capacity, together with any successor in such capacity, "Collateral Agent") the Lenders (as defined herein). PRELIMINARY STATEMENTS B B Acquisition Corp., a Georgia corporation, Holding, the lenders party thereto ("Lenders") and Bankers Trust Company, as agent for Lenders ("Agent"), have entered into a credit agreement dated as of April 15, 1992 (said credit agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, is referred to herein as the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement). It is a condition precedent to the making of loans and other extensions of credit by Lenders under the Credit Agreement that Holding shall have granted the security interest contemplated by this Agreement. NOW, THEREFORE, in consideration of the premises and in order to induce Lenders to make loans and other extensions of credit under the Credit Agreement and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Holding hereby agrees with Collateral Agent as follows: SECTION 1. GRANT OF SECURITY. Holding hereby assigns and grants to Collateral Agent, for its benefit and the benefit of Agent and Lenders (collectively, the "Secured Parties"), and hereby grants to Collateral Agent a security interest in, all of Holding's right, title and interest in and to the following, in each case whether now or hereafter existing or in which Holding now has or hereafter acquires an interest and wherever the same may be located (the XII-1 "Collateral") to secure the Secured Obligations (as defined in Section 2): (a) All equipment in all of its forms, and all parts thereof and all accessions thereto and documents therefor (any and all such equipment, parts, accessions and documents being the "Equipment"); (b) All inventory in all of its forms, including, but not limited to, (i) all goods held by Holding for sale or lease or to be furnished under contracts of service or so leased or furnished, (ii) all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in Holding's business, (iii) goods in which Holding has an interest in mass or a joint or other interest or right of any kind, (iv) goods which are returned to or repossessed by Holding and all additions and accessions thereto and replacements thereof) (all such inventory, accessions and products being the "Inventory"); (c) All accounts, contract rights, chattel paper, instruments, guaranties, letters of credit, documents, drafts, acceptances, tax refunds, rights to performance, judgments, security agreements, leases, permits, licenses, franchises, certificates, other contracts and general intangibles of every nature, including, without limitation, all rights and claims to the payment or receipt of money or other forms of consideration of any kind included in this clause (c) (any and all such rights and claims to the payment or receipt of money or other forms of consideration being the "Payment Rights", and any and all such leases, security agreements and other contracts being the "Related Contracts"); (d) All books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software (owned by Holding or in which it has an interest) that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon; (e) All plant fixtures, business fixtures and other fixtures and storage and office facilities, and all additions and accessions thereto and replacements thereof and products thereof; (f) All cash, money, currency and all deposit accounts ("Deposit Accounts"), including, without limitation, all demand, time, savings, passbook or like accounts maintained with a bank, savings and loan XII-2 association, credit union or other like organization, and all such accounts into which receipts are deposited or which are maintained with Collateral Agent or any other Secured Party (any and all Deposit Accounts, the "Pledged Deposits"); (g) To the extent not otherwise included in the definition of Collateral, (i) all common law and/or statutory copyrights, rights and interests of every kind and nature in copyrights and works protectable by copyright, whether now owned or hereafter created or acquired and renewals and extensions of copyrights (the "Copyrights"), (ii) the right (but not the obligation) to make publication thereof for copyright purposes, to register claim upon copyright and the right (but not the obligation) to renew and extend such copyrights, (iii) all licenses and rights in and any written agreement now or hereafter in existence granting to Holding any right to use any of the foregoing (the "Copyright Licenses"), (iv) the right (but not the obligation) to sue in the name of Holding or in the name of Collateral Agent for past, present and future infringements of any such properties, (v) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past, present and future infringements of any such properties and (vi) all goodwill associated with or symbolized by any of the foregoing; (h) To the extent not otherwise included in the definition of Collateral, (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other business identifiers, prints and labels on which any of the foregoing have appeared or appear, all registrations and recordings thereof, and all applications in connection therewith including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof (the "Trademarks"); (ii) all reissues, extensions or renewals thereof and the right (but not the obligation) to register claim under trademark and to renew and extend such trademarks; (iii) all licenses and rights in and any written agreement granting Holding any right to use any of the foregoing (the "Trademark Licenses"); (iv) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or with respect to any of the foregoing, including, without limitation, damages or payment for past, present and future infringements of any of the XII-3 foregoing; (v) the right (but not the obligation) to sue for past, present and future infringements of the foregoing; (vi) all rights corresponding to any of the foregoing throughout the world; and (vii) all goodwill associated with or symbolized by any of the foregoing; (i) To the extent not otherwise included in the definition of Collateral, (i) all patents and patent applications and the inventions and improvements described and claimed therein, and patentable inventions (the "Patents"); (ii) the reissues, divisions, continuations, renewals, extensions and continuations-in-part of any of the foregoing; (iii) all licenses and rights in and all written agreements granting Holding any right to use any invention on which a patent is in existence ("Patent Licenses") (the Copyrights, Copyright Licenses, Trademarks, Trademark Licenses, Patents and Patent Licenses are collectively referred to herein as the "Intellectual Property"); (iv) all income, royalties, damages or payments now and hereafter due and/or payable under any of the foregoing with respect to any of the foregoing, including, without limitation, damages or payments for past, present and future infringements of any of the foregoing; (v) the right (but not the obligation) to sue for past, present and future infringements of any of the foregoing; (vi) all rights corresponding to any of the foregoing throughout the world; and (vii) all goodwill associated with any of the foregoing; (j) To the extent not otherwise included in the definition of Collateral, all goods, all building materials, equipment, work in progress and all trade secrets and other confidential information relating to the business of Holding, including, by way of illustration and not limitation, each and every kind of know-how practiced by Holding and its employees; the names and addresses of, and credit and other business information concerning Holding's past, present or future customers as they may exist from time to time; the prices which Holding obtains for its services or at which it sells merchandise; estimating and cost procedures; profit margins; policies and procedures pertaining to the sales and services furnished by Holding; information concerning suppliers of Holding and manner of operation, business plans, pledges, projections, and all other information of any kind or character, whether or not reduced in writing, with respect to the conduct by Holding of its business not generally known by the public, now or hereafter existing; and XII-4 (k) All proceeds of any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance (whether or not Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral. For purposes of this Agreement, the term "proceeds" includes whatever is receivable or received when Collateral or proceeds are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, all rights to payment, including returned premiums, with respect to any insurance relating thereto. SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures and the Collateral is collateral security for the prompt payment or performance in full when due, whether at stated maturity, by acceleration, declaration or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) of all obligations of every nature of Holding now or hereafter existing under the Credit Agreement, including, without limitation, all Obligations under the Credit Agreement and any promissory note or other document or instrument delivered pursuant thereto and all amendments, extensions or renewals thereof or hereof, whether for principal, interest (including, without limitation, interest that, but for the filing of a petition in bankruptcy with respect to the Holding or Borrower, would accrue on such obligations, whether or not a claim is allowed against Holding or Borrower in any such bankruptcy proceeding), fees, expenses or otherwise, whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred and all or any portion of such obligations that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Collateral Agent as a preference, fraudulent transfer or otherwise (all such obligations being the "Underlying Debt"), and all obligations of every nature of Holding now or hereafter existing under this Agreement (all such obligations of Holding, together with the Underlying Debt, being the "Secured Obligations"). SECTION 3. HOLDING REMAINS LIABLE. Anything herein to the contrary notwithstanding, (a) Holding shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same XII-5 extent as if this Agreement had not been executed, (b) the exercise by Collateral Agent of any of the rights hereunder shall not release Holding from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) Collateral Agent shall not have any obligation or liability under any contracts and agreements included in the Collateral by reason of this Agreement, nor shall Collateral Agent be obligated to perform any of the obligations or duties of Holding thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 4. REPRESENTATIONS AND WARRANTIES. Holding represents and warrants as follows: (a) Binding Obligation. This Agreement is the legally valid and binding obligation of Holding, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws or equitable principles relating to or limiting creditors' rights generally. (b) Location of Equipment and Inventory. All of the Equipment and Inventory is located at the places specified in SCHEDULE I hereto. (c) Delivery of Certain Collateral. All chattel paper and notes and other instruments (excluding checks) comprising any and all items of Collateral have been delivered to Collateral Agent duly endorsed and accompanied by duly executed instruments of transfer or assignment in blank. (d) Payment Rights Valid. Each Payment Right constitutes the legally valid and binding obligation of the party obligated to pay the same (the "Account Debtor"). Each such Payment Right complies with the provisions of all applicable laws and regulations, whether federal, state or local, applicable thereto (including, without limitation, any usury law, the Federal Truth and Lending Act and Regulation C of the Federal Reserve System). None of the Payment Rights is evidenced by a promissory note or other instrument other than a check, that has not been delivered to Collateral Agent. (e) Ownership of Collateral. Except for the interests disclosed in SCHEDULE II hereto and the security interest created by this Agreement, Holding owns the Collateral free and clear of any Lien. Except with respect to the interests disclosed in SCHEDULE II hereto and such as may have been filed in favor of XII-6 Collateral Agent relating to this Agreement, no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office. (f) Perfection. This Agreement creates a valid, perfected and, except for the interests disclosed in SCHEDULE II hereto, first priority security interest in the Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken. (g) Governmental Authorizations. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the grant by Holding of the security interest granted hereby or for the execution, delivery or performance of this Agreement by Holding or (ii) for the perfection of or the exercise by Collateral Agent of its rights and remedies hereunder (except as may have been taken by or at the direction of Holding). (h) Other Information. All information heretofore, herein or hereafter supplied to Collateral Agent by or on behalf of Holding with respect to the Collateral is accurate and complete in all material respects. (i) Office Locations; Fictitious Names. The chief place of business, the chief executive office and the office where Holding keeps its records regarding the Payment Rights and all originals of all chattel paper that evidence Payment Rights is set forth in SCHEDULE III hereto. Holding does not do business under any trade-name or fictitious business name except as set forth in SCHEDULE III hereto. (j) Intellectual Property. SCHEDULE IV hereto sets forth each of Holding's registered Copyrights, applications therefor and Copyright Licenses. SCHEDULE V hereto sets forth each of Holding's registered Trademarks, applications therefor and Trademarks Licenses. SCHEDULE VI hereto sets forth each of Holdings registered Patents, applications therefor and Patent Licenses. All of the Intellectual Property is valid, subsisting and enforceable and Holding is not aware of any pending or threatened claim by any Person that any of the Intellectual Property is invalid or unenforceable or that the use of any of the Intellectual Property violates the rights of any Person or of any basis for any such claim. XII-7 SECTION 5. FURTHER ASSURANCES. (a) Holding agrees that from time to time, at the expense of Holding, Holding will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Collateral Agent may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, Holding will: (i) mark conspicuously each chattel paper included in the Payment Rights and each Related Contract, (ii) at the request of Collateral Agent, mark conspicuously each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to Collateral Agent, indicating that such Collateral is subject to the security interest granted hereby; (iii) if any Payment Right shall be evidenced by a promissory note or other instrument (excluding checks) or chattel paper, deliver and pledge to Collateral Agent hereunder such note or instrument or chattel paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Collateral Agent; (iv) at the request of Collateral Agent, deliver and pledge to Collateral Agent all promissory notes and other instruments (including checks) and all original counterparts of chattel paper constituting Collateral duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Collateral Agent; (v) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as Collateral Agent may request, in order to perfect and preserve the security interests granted or purported to be granted hereby, (vi) at any reasonable time, upon demand by Collateral Agent, exhibit the Collateral to and allow inspection of the Collateral by Collateral Agent, or persons designated by Collateral Agent and (vii) at Collateral Agent's request, appear in and defend any action or proceeding that may affect Holding's title to or Collateral Agent's security interest in the Collateral. (b) Holding hereby authorizes Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of Holding. A carbon, photographic or other reproduction of this Agreement or a financing statement signed by Holding shall be sufficient as a financing statement. XII-8 (c) Holding will furnish to Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Collateral Agent may reasonably request, all in reasonable detail. SECTION 6. COVENANTS OF HOLDING. Holding shall: (a) not use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement, or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral; (b) notify Collateral Agent of any change in Holding's name, identity or corporate structure within 15 days of such change; (c) give Collateral Agent 30 days' prior written notice of any change in Holding's residence or chief place of business; (d) if Collateral Agent gives value to enable Holding to acquire rights in or the use of any Collateral, use such value for such purposes; and (e) pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Collateral, except to the extent the validity thereof is being contested in good faith; provided that so long as no property or assets (other than money for such charge or claim and the interest or penalty accruing thereon) of Holding or Borrower or any of their respective Subsidiaries is in danger of being lost or forfeited as a result thereof, no such charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such other reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. SECTION 7. SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY. Holding shall: (a) keep the Equipment and Inventory (other than Inventory sold in the ordinary course of business) at the places therefor specified on SCHEDULE I hereto or, upon 30 days' prior written notice to Collateral Agent, at such other places in jurisdictions where all action that may be necessary or desirable, or that Collateral XII-9 Agent may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to such Equipment and Inventory shall have been taken; (b) cause the Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and in accordance with Holding's past practices, and shall forthwith, or in the case of any loss or damage to any of the Equipment as quickly as practicable after the occurrence thereof, make or cause to be made all repairs, replacements, and other improvements in connection therewith that are necessary or desirable to such end. Holding shall promptly furnish to Collateral Agent a statement respecting any loss or damage to any of the Equipment; (c) keep correct and accurate records of the Inventory, itemizing and describing the kind, type and quantity of Inventory, Holding's cost therefor and (where applicable) the current price list for such Inventory; and (d) if any Inventory is in possession or control of any of Holding's agents or processors, if the aggregate book value of all such Inventory exceeds $25,000, and in any event upon the occurrence of an Event of Default, instruct such agent or processor to hold all such Inventory for the account of Collateral Agent and subject to the instructions of Collateral Agent. SECTION 8. INSURANCE. (a) Holding shall, at its own expense, maintain insurance with respect to the Equipment and Inventory in such amounts, against such risks, in such form and with such insurers, as shall be reasonably satisfactory to Collateral Agent from time to time. Such insurance shall include, without limitation, property damage insurance and liability insurance. Each policy for property damage insurance shall provide for all losses (except for losses of less than $25,000 per occurrence) to be paid directly to Collateral Agent. Each policy shall in addition (i) name Holding and Collateral Agent as insured parties thereunder (without any representation or warranty by or obligation upon Collateral Agent) as their interests may appear, (ii) unless otherwise agreed by Collateral Agent, contain an agreement by the insurer that any loss thereunder payable to Collateral Agent shall be payable to Collateral Agent notwithstanding any action, inaction or breach of XII-10 representation or warranty by Holding, (iii) have attached thereto the Lender's Loss Payable Endorsement or its equivalent, or a Loss Payable clause acceptable to Collateral Agent, (iv) provide that there shall be no recourse against Collateral Agent for payment of premiums or other amounts with respect thereto and (v) provide that at least 30 days' prior written notice of cancellation, material amendment, reduction in scope or limits of coverage or of lapse shall be given to Collateral Agent by the insurer. Holding shall, if so requested by Collateral Agent, deliver to Collateral Agent original or duplicate policies of such insurance and, as often as Collateral Agent may reasonably request, a report of a reputable insurance broker with respect to such insurance. Further, Holding shall, at the request of Collateral Agent, duly execute and deliver instruments of assignment of such insurance policies to comply with the requirements of Section 5(a) and cause the respective insurers to acknowledge notice of such assignment. (b) Reimbursement under any liability insurance maintained by Holding pursuant to this Section 8 may be paid directly to the person who shall have incurred liability covered by such insurance. In case of any loss involving damage to Equipment or Inventory when subsection (c) of this Section 8 is not applicable, Holding shall make or cause to be made the necessary repairs to or replacements of such Equipment or Inventory, and any proceeds of insurance maintained by Holding pursuant to this Section 8 shall be paid to Holding as reimbursement for the costs of such repairs or replacements. (c) Upon (i) the occurrence and during the continuance of any Event of Default, or (ii) the actual or constructive total loss (in excess of $25,000 per occurrence) of any Equipment or Inventory, all insurance payments in respect of such Equipment or Inventory shall be paid to and applied by Collateral Agent as specified in Section 19. SECTION 9. SPECIAL COVENANTS WITH RESPECT TO PAYMENT RIGHTS AND RELATED CONTRACTS. (a) Holding shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Payment Rights and Related Contracts at the location therefor specified in SCHEDULE III hereto or, upon 30 days' prior written notice to Collateral Agent, at such other locations in a jurisdiction where all action that may be necessary or desirable, or that Collateral Agent may XII-11 request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to such Payment Rights and Related Contracts shall have been taken. Holding will hold and preserve such records and will permit representatives of Collateral Agent at any time during normal business hours to inspect and make abstracts from such records and Holding agrees to render to Collateral Agent, at Holding's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. Promptly upon the request of Collateral Agent, Holding shall deliver to Collateral Agent complete and correct copies of each Related Contract. (b) Holding shall, for not less than 5 years from the date on which such Payment Right arose, maintain (i) complete records of each Payment Right, including records of all payments received, credits granted and merchandise returned and (ii) all documentation relating thereto. (c) Holding shall duly fulfill all obligations on its part to be fulfilled under or in connection with the Payment Rights and the Related Contracts and shall do nothing to impair the rights of Collateral Agent therein. (d) Except as otherwise provided in this subsection (d) of this Section 9, Holding shall continue to collect, at its own expense, all amounts due or to become due Holding under the Payment Rights and Related Contracts. In connection with such collections, Holding may take (and, at Collateral Agent's direction, shall take) such action as Holding or Collateral Agent may deem necessary or advisable to enforce collection of the Payment Rights; provided, however, that Collateral Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default or a Potential Event of Default and upon written notice to Holding of its intention to do so, to notify the account debtors or obligors under any Payment Rights of the assignment of such Payment Rights to Collateral Agent and to direct such account debtors or obligors to make payment of all amounts due or to become due to Holding thereunder directly to Collateral Agent, to notify each Person maintaining a lockbox or similar arrangement to which account debtors or obligors under any Payment Rights have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such XII-12 lockbox or other arrangement directly to Collateral Agent and, upon such notification and at the expense of Holding, to enforce collection of any such Payment Rights and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as Holding might have done. After receipt by Holding of the notice from Collateral Agent referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including checks and other instruments) received by Holding in respect of the Payment Rights and the Related Contracts shall be received in trust for the benefit of Collateral Agent hereunder, shall be segregated from other funds of Holding and shall be forthwith paid over or delivered to Collateral Agent in the same form as so received (with any necessary endorsement) to be held as cash collateral and applied as provided by Section 19, and (ii) Holding shall not adjust, settle or compromise the amount or payment of any Payment Right, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon. SECTION 10. SPECIAL PROVISIONS WITH RESPECT TO DEPOSIT ACCOUNTS. Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may exercise dominion and control over, and refuse to permit further withdrawals (whether of money, securities, instruments or other property) from deposit accounts maintained with Collateral Agent constituting part of the Collateral. SECTION 11. SPECIAL PROVISIONS WITH RESPECT TO INTELLECTUAL PROPERTY. (a) If, before the Secured Obligations are indefeasibly paid in full, Holding obtains any new Intellectual Property or rights thereto or becomes entitled to the benefit of any Intellectual Property not listed on the applicable Schedules to this Agreement, this Agreement shall automatically apply thereto and Holding shall give to Collateral Agent prompt written notice thereof and shall amend this Agreement to include any such new Intellectual Property. (b) Holding shall (i) prosecute diligently, through counsel reasonably acceptable to Collateral Agent, any copyright, patent, trademark or license application at any time pending; (ii) make application, through counsel reasonably acceptable to Collateral Agent, on all new copyrights, patents and trademarks as reasonably deemed appropriate by Holding; (iii) preserve and maintain all rights in the Intellectual Property material to Holding's business; XII-13 and (iv) upon and after the occurrence and during the continuance of an Event of Default, use its best efforts to obtain any consents, waivers or agreements from third parties necessary to enable Collateral Agent to exercise its remedies with respect to the Intellectual Property. Holding shall not abandon any right to file a copyright, patent or trademark application nor shall Holding abandon any pending copyright, patent or trademark application, or Intellectual Property which is, either individually or in the aggregate, material to Holding's business without the prior written consent of Collateral Agent. Holding represents and warrants to Collateral Agent that the execution, delivery and performance of this Agreement by Holding will not violate or cause a default under any of the Intellectual Property or any agreement in connection therewith. (c) Upon the occurrence of an Event of Default, Collateral Agent shall have the right, but shall have no obligation, to bring suit in the name of Holding or Collateral Agent to enforce any Intellectual Property, in which event Holding shall, at the request of Collateral Agent, do any and all lawful acts and execute any and all documents reasonably required by Collateral Agent in aid of such enforcement and Holding shall promptly, upon demand, reimburse Collateral Agent for its reasonable expenses and indemnify Collateral Agent. To the extent that Collateral Agent shall elect not to bring suit to enforce any Intellectual Property, Holding agrees to use all reasonable measures, whether by action, suit, proceedings or otherwise, to prevent the infringement of any of the Intellectual Property. SECTION 12. LICENSE OF INTELLECTUAL PROPERTY. Holding hereby assigns, transfers and conveys to Collateral Agent, effective upon the occurrence of any Event of Default, the nonexclusive right and license to use all Intellectual Property or technical processes owned or used by Holding that relate to the Collateral and any other collateral granted by Holding as security for the Secured Obligations, together with any goodwill associated therewith, all to the extent necessary to enable Collateral Agent to use, possess and realize on the Collateral and any successor or assign to enjoy the benefits of the Collateral. This right and license shall inure to the benefit of Collateral Agent and its successors, assigns and transferees, whether by voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is granted free of charge, without requirement that any monetary payment whatsoever be made to Holding. XII-14 SECTION 13. REASSIGNMENT. If (a) an Event of Default shall have occurred and, by reason of waiver, modification, amendment or otherwise, no longer be continuing, (b) no other Event of Default shall be continuing, (c) an assignment to Collateral Agent shall have been previously made pursuant to Section 12 hereof, and (d) the Secured Obligations shall not have become immediately due and payable, upon the written request of Holding and the written consent of Collateral Agent, Collateral Agent shall promptly execute and deliver to Holding such assignments as may be necessary to reassign to Holding any rights, title and interests as may have been assigned pursuant to Section 13 hereof, subject to any disposition thereof that may have been made by Collateral Agent pursuant hereto; provided that, after giving effect to such reassignment, Collateral Agent's security interest and conditional assignment granted pursuant hereto as well as all other rights and remedies of Collateral Agent granted hereunder, shall continue to be in full force and effect; and provided, further, that the rights, title and interests so reassigned shall be free and clear of all Liens other than Liens (if any) encumbering such rights, title and interest at the time of their assignment to Collateral Agent and Permitted Encumbrances. SECTION 14. TRANSFERS AND OTHER LIENS. Holding shall not: (a) Sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except as permitted by the Credit Agreement. (b) In the event any Collateral is sold, transferred or otherwise disposed of in any Asset Sale or other transaction not prohibited by the Credit Agreement, Collateral Agent shall release such Collateral to Holding free and clear of the Lien and security interest under this Agreement in accordance with the following: (i) so long as any Secured Obligations remain outstanding and if such disposition is an Asset Sale, concurrently upon Collateral Agent's determination that arrangements satisfactory to it have been made for delivery to it of the Estimated Net Cash Proceeds of such Asset Sale to the extent required under the Credit Agreement and (ii) in all other instances, concurrently upon Collateral Agent's determination and delivery of an Officers' Certificate by Holding certifying that no Cash Proceeds of such disposition are required to be delivered by Pledgor in respect of the Secured Obligations. (c) Except for the interests disclosed in SCHEDULE II hereto, the security interest created by XII-15 this Agreement and as permitted by Section 6.2 of the Credit Agreement, create or suffer to exist any Lien upon or with respect to any of the Collateral to secure the indebtedness or other obligations of any Person. SECTION 15. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Holding hereby irrevocably appoints Collateral Agent Holding's attorney-in-fact, with full authority in the place and stead of Holding and in the name of Holding, Collateral Agent or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument that Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) to obtain and adjust insurance required to be maintained by Holding or paid to Collateral Agent pursuant to Section 8, (b) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (c) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clauses (a) and (b) above, (d) to file any claims or take any action or institute any proceedings that Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Collateral Agent with respect to any of the Collateral, (e) to pay or discharge taxes or Liens, levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by Collateral Agent in its sole discretion, and such payments made by Collateral Agent to become obligations of Holding to Collateral Agent, due and payable immediately without demand, (f) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts and other documents relating to the Collateral, (g) generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as XII-16 though Collateral Agent were the absolute owner thereof for all purposes, and to do, at Collateral Agent's option and Holding's expense, at any time, or from time to time, all acts and things that Collateral Agent deems necessary to protect, preserve or realize upon the Collateral and Collateral Agent's security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as Holding might do. SECTION 16. COLLATERAL AGENT MAY PERFORM. If Holding fails to perform any agreement contained herein, promptly after receipt of a request to do so from Collateral Agent, Collateral Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of Collateral Agent incurred in connection therewith shall be payable by Holding under Section 20. SECTION 17. COLLATERAL AGENT'S AND SECURED PARTIES' DUTIES AND LIABILITIES. (a) The powers conferred on Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Collateral Agent shall be deemed to exercise reasonable care in the custody and preservation of such Collateral if such Collateral is accorded treatment substantially equal to that which Collateral Agent accords its own property. (b) Neither Collateral Agent nor any other Secured Party shall be liable to Holding (i) for any loss or damage sustained by it, or (ii) for any loss, damage, depreciation or other diminution in the value of any of the Collateral, that may occur as a result of, in connection with or that is in any way related to (x) any exercise by Collateral Agent or any other Secured Party of any right or remedy under this Agreement or (y) any other act of or failure to act by Collateral Agent or any other Secured Party, except to the extent that the same shall be determined by a judgment of a court of competent jurisdiction to be the result of acts or omissions on the part of Collateral Agent or such other Secured Party constituting gross negligence or willful misconduct. XII-17 (c) NO CLAIM MAY BE MADE BY Holding AGAINST COLLATERAL AGENT, ANY OTHER SECURED PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND Holding HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. SECTION 18. REMEDIES. If any Event of Default shall have occurred and be continuing, Collateral Agent may exercise in respect of the Collateral, (a) all the rights and remedies of a secured party on default under the Uniform Commercial Code of the State of New York (the "Code") (whether or not the Code applies to the affected Collateral), (b) all of the rights and remedies provided for in this Agreement, the Credit Agreement and any other agreement between Holding and Collateral Agent and (c) such other rights and the remedies as may be provided by law or otherwise (such rights and remedies of Collateral Agent to be cumulative and non-exclusive). Collateral Agent also may (i) require Holding to, and Holding hereby agrees that it will at its expense and upon request of Collateral Agent forthwith, assemble all or part of the Collateral as directed by Collateral Agent and make it available to Collateral Agent at a place to be designated by Collateral Agent that is reasonably convenient to both parties, (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process, (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent Collateral Agent deems appropriate, (iv) take possession of Holding's premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of Holding's equipment for the purpose of completing any work in process, taking any actions described in the preceding clause (iii) and collecting any Secured Obligation and (v) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable. Holding agrees that, at least 10 days' notice to Holding of the time and place of any public XII-18 sale or the time after which any private sale is to be made shall constitute reasonable notification. Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Collateral Agent may retain any of Holding's directors, officers and employees, in each case upon such terms as Collateral Agent and any such person may agree, notwithstanding the provisions of any employment, confidentiality or non-disclosure agreement between any such person and Holding and Holding hereby waives its rights under any such agreement and consents to each such retention. SECTION 19. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in this Agreement, all proceeds received by Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral may, in the discretion of Collateral Agent, be held by Collateral Agent as Collateral for, and/or then, or at any other time thereafter applied, in full or in part by Collateral Agent against the Secured Obligations in the following order of priority: (a) To the payment of all costs and expenses of such sale, collection or other realization and all other expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith and all amounts for which Collateral Agent is entitled to indemnification hereunder and all advances made by Collateral Agent hereunder for the account of Holding and for the payment of all costs and expenses paid or incurred by Collateral Agent in connection with the exercise of any right or remedy hereunder, all in accordance with Section 20; (b) To the payment of the Secured Obligations in such order as Collateral Agent shall elect; and (c) After payment in full of the amounts specified in the preceding subparagraphs, to the payment to or upon the order of Holding, or whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. XII-19 SECTION 20. INDEMNITY AND EXPENSES. (a) Holding agrees to indemnify Collateral Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from Collateral Agent's gross negligence or willful misconduct. (b) Holding will upon demand pay to Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, that Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Collateral Agent hereunder or (iv) the failure by Holding to perform or observe any of the provisions hereof. SECTION 21. SECURITY INTEREST ABSOLUTE. (a) All rights of Collateral Agent and security interests hereunder, and all obligations of Holding hereunder, shall be absolute and unconditional, irrespective of: (i) any lack of validity or enforceability of the Credit Agreement or any Collateral Document, or any agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations or any other amendment or waiver of or consent to any departure from the Credit Agreement or any Collateral Document; (iii) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guaranty, for all or any of the Secured Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of Holding or a third party grantor of a security interest. XII-20 Without limiting the generality of the foregoing, Holding hereby consents to, and hereby agrees that the rights of Collateral Agent and the security interests hereunder, and the obligations of Holding hereunder, shall not be affected by, any and all releases of any Collateral from the Liens and security interests created by any Collateral Documents, whether for purposes of Asset Sales or other dispositions of assets pursuant to the Credit Agreement or for some other purpose, except to the extent expressly provided in such releases. SECTION 22. WAIVER OF HEARING. Holding expressly waives any constitutional or other right to a judicial hearing prior to the time Collateral Agent takes possession or disposes of the Collateral as provided in Section 19 hereof. SECTION 23. WAIVER OF JURY TRIAL. HOLDING AND COLLATERAL AGENT HEREBY MUTUALLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Holding and Collateral Agent each acknowledge that this waiver is a material inducement for Holding and Collateral Agent to enter into a business relationship, that Holding and Collateral Agent have already relied on the waiver in entering into this Agreement and that each will continue to rely on the waiver in their related future dealings. Holding and Collateral Agent further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. SECTION 24. CONTINUING SECURITY INTEREST. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Secured Obligations and termination of Secured Parties' obligations to lend under the Credit Agreement, (b) be binding upon Holding, its successors and assigns and (c) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and its successors, transferees and assigns. Without limiting the generality of XII-21 the foregoing clause (c), Secured Parties may assign or otherwise transfer the Credit Agreement and any notes issued in connection therewith to any other person or entity, and such other benefits in respect thereof granted to Secured Parties herein or otherwise. Upon the indefeasible payment in full of the Secured Obligations and termination of Secured Parties' obligations to lend under the Credit Agreement, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to Holding. Upon any such termination, Collateral Agent will, at Holding's expense, execute and deliver to Holding such documents as Holding shall reasonably request to evidence such termination. SECTION 25. AMENDMENTS; ETC. No amendment or waiver of any provision of this Agreement nor consent to any departure by Holding herefrom, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 26. ADDRESSES FOR NOTICES. All notices and other communications provided for hereunder shall be in writing (including facsimile communication) and mailed or telecopied or delivered to Holding or Collateral Agent, as the case may be, addressed to it at the address of such party specified on the signature page hereof, or as to either party at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section. All such notices and other communications shall, when mailed, be effective when deposited in the mails, addressed as aforesaid. SECTION 27. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial proceedings brought against Holding with respect to this Agreement may be brought in any state or federal court of competent jurisdiction in the State of New York and by execution and delivery of this Agreement Holding accepts for itself and in connection with the Collateral, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any judgement rendered thereby in connection with this Agreement. Holding designates and appoints C T Corporation System and such other Person as may be hereafter selected by Holding irrevocably agreeing in writing to so serve, as its agent to receive on its behalf service of all process in any proceedings in any such court, such service being hereby acknowledged by Holding to be effective and binding service in every respect. A copy of any such XII-22 process so served shall be mailed by registered mail to Holding, at its address specified pursuant to Section 26 hereof, except that unless otherwise provided by applicable law, any failure to mail such copy shall not affect the validity of service of process. If any agent appointed by Holding refuses to accept service, Holding hereby agrees that service upon it by mail shall constitute sufficient notice. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Collateral Agent to bring proceedings against Holding in the courts of any other jurisdiction. SECTION 28. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement, terms used in Article 9 of the Uniform Commercial Code in the State of New York are used herein as therein defined. SECTION 29. COLLATERAL AGENT. Collateral Agent has been appointed as Collateral Agent hereunder pursuant to the Credit Agreement, and shall be entitled to the benefits of the Credit Agreement. Collateral Agent shall be obligated, and shall have the right, hereunder to make demands, to give notices, to exercise or refrain from taking action (including, without limitation, the release or substitution of Collateral) solely in accordance with this Agreement and the Credit Agreement. Collateral Agent may resign and a successor Collateral Agent may be appointed in the manner provided for resignation or removal of Agent and appointment of a successor in the Credit Agreement. Upon the acceptance of any appointment as a Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement and shall deliver any Collateral in its possession to the successor Collateral Agent. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent. SECTION 30. HEADINGS. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement or be given any substantive effect. XII-23 SECTION 31. SEVERABILITY. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation and in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 32. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Agreement. XII-24 IN WITNESS WHEREOF, Holding has caused this Agreement to be duly executed and delivered by its officers thereunto duly authorized as of the date first above written. BLUE BIRD CORPORATION By _____________________ Title: Notice Address: Blue Bird Corporation c/o Merrill Lynch Capital Partners, Inc. 767 Fifth Avenue New York, NY 10153 Attn: Alexis P. Michas with a copy to: Wachtell, Lipton, Rosen & Katz 299 Park Avenue New York, NY 10171-0149 Attn: Andrew R. Brownstein, Esq. BANKERS TRUST COMPANY, as Collateral Agent By _____________________ Title: Notice Address: Bankers Trust Company 280 Park Avenue, 9 West New York, New York 10017 Attention: Mary Zadroga With a copy to: Bankers Trust Company 300 South Grand Avenue 41st Floor Los Angeles, California 90071 Attention: Patrice Daniels XII-25 STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) On this ____ day of ________, 1992, before me personally came _________________________________ to me known, who being by me duly sworn, did depose and say that he/she resides at ___________________________________, that he/she is a ____________________________ of _______________ _____________________________, one of the corporations described in and which executed the within instrument, and that he/she signed his/her name thereto by authority of the Board of Directors of said corporation. ______________________________ Notary Public XII-26 STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) On this ____ day of ________, 1992, before me personally came _________________________________ to me known, who being by me duly sworn, did depose and say that he/she resides at ___________________________________, that he/she is a ____________________________ of _______________ _____________________________, one of the corporations described in and which executed the within instrument, and that he/she signed his/her name thereto by authority of the Board of Directors of said corporation. ______________________________ Notary Public XII-27 4/9/92 EXHIBIT XIII FORM OF HOLDING PLEDGE AGREEMENT THIS HOLDING PLEDGE AGREEMENT (this "Agreement") is dated as of April 15, 1992 between BLUE BIRD CORPORATION, a Delaware corporation ("Pledgor"), and BANKERS TRUST COMPANY, as collateral agent for and representative of (in such capacity, together with any successor in such capacity "Collateral Agent") the Lenders (as defined herein). PRELIMINARY STATEMENT A. Pledgor is the legal and beneficial owner of (i) the shares (the "Pledged Shares") of stock described in Part A of SCHEDULE I hereto and issued by the corporations named therein and (ii) the indebtedness described in Part B of said SCHEDULE I (the "Pledged Debt") and issued by the obligors named therein. B. Concurrently herewith, Holding, B B Acquisition Corp., a Georgia corporation ("Borrower"), the lenders party thereto ("Lenders") and Bankers Trust Company, as agent for Lenders ("Agent") have entered into that certain Credit Agreement dated as of April 15, 1992 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement") with Pledgor, pursuant to which Lenders make certain commitments, subject to the terms and conditions set forth in the Credit Agreement, to extend credit facilities to Borrower. C. Pledgor owns all of the outstanding capital stock of Borrower. D. Pledgor has guaranteed the Obligations of Borrower pursuant to the Holding Guaranty. E. It is a condition precedent to the initial extension of credit by Lenders under the Credit Agreement that Pledgor shall have made the pledge and undertaken the obligations contemplated by this Agreement. IN CONSIDERATION of the above and in order to induce Lenders to enter into and to extend credit under the Credit Agreement, Pledgor hereby agrees with Collateral Agent, for its benefit and the benefit of Agent and Lenders (collectively, the "Secured Parties"), as follows: XIII-1 SECTION 1. CERTAIN DEFINED TERMS. Terms used and not otherwise defined herein have the respective meanings assigned to them in the Credit Agreement. SECTION 2. PLEDGE OF SECURITY. Pledgor hereby pledges to Collateral Agent, and grants to Collateral Agent on behalf of Secured Parties, a Lien on and security interest in, the following (the "Pledged Collateral") to secure the Secured Obligations (as defined in Section 3): (a) the Pledged Shares and the certificates representing the Pledged Shares and any interest of Pledgor in the entries on the books of any financial intermediary pertaining to the Pledged Shares, and all dividends, cash, warrants, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; (b) the Pledged Debt and the instruments evidencing the Pledged Debt, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt; (c) all additional shares of, and all securities convertible into and warrants, options and other rights to purchase, stock of any issuer of the Pledged Shares from time to time acquired by Pledgor in any manner (which shares shall be deemed to be part of the Pledged Shares), the certificates or other instruments representing such additional shares, securities, warrants, options or other rights and any interest of Pledgor in the entries on the books of any financial intermediary pertaining to such additional shares, and all dividends, cash, warrants, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such additional shares, securities, warrants, options or other rights; (d) all additional indebtedness from time to time owed to Pledgor by any obligor of the Pledged Debt and the instruments evidencing such indebtedness, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness; (e) all shares of, and all securities convertible into and warrants, options and other rights to purchase, stock of any Person that, after the date of this Agreement, becomes, as a result of any occurrence, a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the Pledged Shares) and the certificates or other instruments representing XIII-2 such shares, securities, warrants, options or other rights and any interest of Pledgor in the entries on the books of any financial intermediary pertaining to such shares, and all dividends, cash, warrants, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares, securities, warrants, options or other rights; and (f) to the extent not covered by clauses (a) through (e) above, all Proceeds of any or all of the foregoing. The term "Proceeds" shall have the meaning assigned that term under the Uniform Commercial Code (the "Code") as in effect in any relevant jurisdiction or under relevant law and, in any event, shall include, but not be limited to, any and all (i) proceeds of any indemnity or guaranty payable to Pledgor or Collateral Agent from time to time with respect to any of the Pledged Collateral and (ii) any other amounts from time to time paid or payable under or in connection with any of the Pledged Collateral. SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the Pledged Collateral is collateral security for, the prompt payment and performance in full when due, whether at stated maturity, by acceleration, declaration or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a), or any successor provision thereto), of all obligations or liabilities of every nature of Pledgor and Borrower now or hereafter existing under or arising out of or in connection with the Credit Agreement (including, without limitation, all Obligations under the Credit Agreement) and any promissory notes or other documents or instruments delivered pursuant thereto (including, without limitation, the Holding Guaranty and any Interest Rate Agreements by and between Borrower and any Lender) and all amendments, extensions or renewals thereof, whether for principal, interest (including, without limitation, interest that, but for the filing of a petition in bankruptcy with respect to Pledgor or Borrower, would accrue on such obligations, whether or not a claim is allowed against Pledgor or Borrower in any such bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit, fees, expenses or otherwise, whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred and all or any portion of such obligations that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Collateral Agent as a preference, fraudulent transfer or otherwise (all such obligations being the "Indebtedness"), and all obligations or XIII-3 liabilities of every nature of Pledgor now or hereafter existing under this Agreement (all such obligations of Pledgor, together with the Indebtedness, being the "Secured Obligations"). SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery, or, as applicable, shall be accompanied by Pledgor's endorsement, where necessary, or duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Collateral Agent. Collateral Agent shall have the right, at any time upon or after the occurrence of an Event of Default or Potential Event of Default and without notice to Pledgor, to transfer to or to register in the name of Collateral Agent or any of its nominees any or all of the Pledged Collateral, subject only to the revocable rights specified in Section 8(a). In addition, Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations. SECTION 5. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants as follows: (a) All of the Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable. All of the Pledged Debt has been duly authorized, authenticated or issued and delivered, and is the legal, valid and binding obligation of the issuers thereof, and is not in default. (b) Pledgor is the legal, record and beneficial owner of the Pledged Collateral free and clear of any Lien except for the security interest created by this Agreement. (c) Pledgor has full power and lawful authority to enter into this Agreement, to sell, assign, transfer and pledge the Pledged Collateral to Collateral Agent and to grant to Collateral Agent a first priority security interest therein as herein provided, all of which have been duly authorized by all necessary corporate action; the execution, delivery and performance hereof are not in contravention of any charter or by-law provision or of any indenture, agreement or undertaking to which Pledgor is a party or by which Pledgor or its property are bound; this Agreement constitutes the legally valid and binding obligation of Pledgor enforceable against Pledgor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and to equitable principles XIII-4 relating to enforceability; and any officer, agent or representative acting for or on behalf of Pledgor in connection with this Agreement or any aspect hereof, or entering into or executing this Agreement on behalf of Pledgor, has been duly authorized so to do, and is fully empowered to act for and represent Pledgor in connection with this Agreement and all matters relating thereto or in connection therewith. (d) No consent of any other party (including, without limitation, stockholders or creditors of Pledgor) and no consent, authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the pledge by Pledgor of the Pledged Collateral pursuant to this Agreement and the grant by Pledgor of the security interest granted hereby or for the execution, delivery or performance of this Agreement by Pledgor or (ii) for the exercise by Collateral Agent of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement (except as may be required in connection with a disposition of Pledged Collateral by laws affecting the offering and sale of securities generally). (e) The pledge of the Pledged Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral securing the payment of the Secured Obligations. (f) The Pledged Shares constitute all of the issued and outstanding shares of each issuer thereof, and there are no outstanding options, warrants, rights to subscribe, stock purchase rights or other agreements outstanding with respect to, or property that is now or hereafter convertible into, or that requires the issuance or sale of, any Pledged Shares. The Pledged Debt constitutes all of the issued and outstanding intercompany indebtedness evidenced by a promissory note of the respective issuers thereof owing to Pledgor. (g) The pledge of the Pledged Collateral pursuant to this Agreement does not violate Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. SECTION 6. CERTAIN COVENANTS. Pledgor hereby covenants that, until the Secured Obligations have been indefeasibly paid in full, Pledgor will: (a) not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral, (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral, except for the security interest under this Agreement, or (iii) permit any issuer of Pledged Shares to merge or consolidate unless all the outstanding capital XIII-5 stock of the surviving or resulting corporation is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation; (b) (i) cause each issuer of Pledged Shares not to issue any stock or other securities in addition to or in substitution for the Pledged Shares issued by such issuer, except to Pledgor, and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities of each issuer of Pledged Shares, and (iii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all shares of stock of any Person which, after the date of this Agreement, becomes, as a result of any occurrence, a direct Subsidiary of Pledgor; (c) (i) pledge hereunder, immediately upon their issuance, any and all instruments or other evidences of additional indebtedness from time to time owed (directly or indirectly) to Pledgor by any obligor of the Pledged Debt, and (ii) pledge hereunder, immediately upon their issuance, any and all instruments or other evidences of indebtedness from time to time owed (directly or indirectly) to Pledgor by any Person that after the date of this Agreement becomes, as a result of any occurrence, a direct or indirect Subsidiary of Pledgor; (d) promptly deliver to Collateral Agent all written notices received by it with respect to the Pledged Collateral; and (e) pay or discharge, prior to delinquency, all taxes, charges, fees, expenses, Liens and assessments of every nature levied or imposed upon the Pledged Collateral. SECTION 7. FURTHER ASSURANCES; PLEDGE AMENDMENTS. Pledgor agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further actions, that may be necessary, or that Collateral Agent may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. Pledgor further agrees that it will, upon obtaining any additional shares of stock or other securities required to be pledged hereunder as provided in Section 6(b) or (c), promptly (and in any event within five (5) Business Days) deliver to Collateral Agent a Pledge Amendment, duly executed by Pledgor, in substantially the form of SCHEDULE II hereto (a "Pledge Amendment"), in respect of the additional Pledged XIII-6 Shares or Pledged Debt to be pledged pursuant to this Agreement. Pledgor hereby authorizes Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that all Pledged Shares or Pledged Debt listed on any Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder be considered Pledged Collateral. SECTION 8. VOTING RIGHTS; DIVIDENDS; ETC. (a) So long as no Event of Default (as defined below) shall have occurred and be continuing: (i) Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; provided, however, that Pledgor shall not exercise or refrain from exercising any such right if Collateral Agent shall have notified Pledgor that, in Collateral Agent's judgment, such action would have a material adverse effect on the value of the Pledged Collateral or any part thereof; and provided, further, that Pledgor shall give Collateral Agent at least five Business Days' prior written notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right. It is understood, however, that neither (A) the voting by Pledgor of any Pledged Shares for or Pledgor's consent to the election of directors at a regularly scheduled annual or other meeting of stockholders or with respect to incidental matters at any such meeting nor (B) Pledgor's consent to or approval of any action otherwise permitted under this Agreement and the Credit Agreement shall be deemed inconsistent with the terms of this Agreement or the Credit Agreement within the meaning of this Section 8(a)(i), and no notice of any such voting or consent need be given to Collateral Agent. (ii) Pledgor shall be entitled to receive and retain, and to utilize free and clear of the lien of this Agreement, any and all dividends and interest paid in respect of the Pledged Collateral; provided, however, that any and all (A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral, (B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or XIII-7 dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (C) cash paid, payable or otherwise distributed in respect of principal or in redemption of or in exchange for any Pledged Collateral, shall be, and shall forthwith be delivered to Collateral Agent to hold as, Pledged Collateral and shall, if received by Pledgor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of Pledgor and be forthwith delivered to Collateral Agent as Pledged Collateral in the same form as so received (with all necessary endorsements). (iii) Collateral Agent shall promptly execute and deliver (or cause to be executed and delivered) to Pledgor all such proxies, dividend payment orders and other instruments as Pledgor may from time to time reasonably request for the purpose of enabling Pledgor to exercise the voting and other consensual rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends, principal or interest payments which it is authorized to receive and retain pursuant to paragraph (ii) above. (b) Upon the occurrence and during the continuance of an Event of Default: (i) Upon written notice from Collateral Agent to Pledgor, all rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 8(a)(i) shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to exercise such voting and other consensual rights during the continuance of such Event of Default. (ii) All rights of Pledgor to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to Section 8(a)(ii) shall cease, and all such rights shall thereupon become vested in Collateral Agent who shall thereupon have the sole right to receive and hold as Pledged Collateral such dividends and interest payments during the continuance of such Event of Default. (iii) All dividends, principal and interest payments which are received by Pledgor contrary to the provisions of paragraph (ii) of this Section 8(b) shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of Pledgor and shall forthwith be paid over to Collateral Agent as Pledged XIII-8 Collateral in the same form as so received (with any necessary endorsements). (c) In order to permit Collateral Agent to exercise the voting and other consensual rights which it may be entitled to exercise pursuant to Section 8(b)(i) and to receive all dividends and other distributions which it may be entitled to receive under Section 8(a)(ii) or Section 8(b)(ii), Pledgor shall promptly execute and deliver (or cause to be executed and delivered) to Collateral Agent all such proxies, dividend payment orders and other instruments as Collateral Agent may from time to time reasonably request. SECTION 9. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Pledgor hereby irrevocably appoints Collateral Agent as Pledgor's attorney-in-fact, with full authority in the place and stead of Pledgor and in the name of Pledgor or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument, including but not limited to financing and continuation statements, which Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to Pledgor representing any dividend, principal or interest payment or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same, to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Pledged Collateral, and to file any claims or take any action or institute any proceedings which Collateral Agent may deem necessary or desirable for the collection of any of the Pledged Collateral or to enforce the rights of Collateral Agent with respect to any of the Pledged Collateral. SECTION 10. COLLATERAL AGENT MAY PERFORM. If Pledgor fails to perform any agreement contained herein promptly after receipt of a request to do so from Collateral Agent, Collateral Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of Collateral Agent incurred in connection therewith shall be payable by Pledgor under Section 16(b). SECTION 11. STANDARD OF CARE; SECURED PARTIES' DUTIES AND LIABILITIES. (a) The powers conferred on Collateral Agent hereunder are solely to protect its interest in the Pledged Collateral and shall not impose on it any duty to exercise such powers. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equivalent to XIII-9 that which Collateral Agent in its individual capacity accords its own property consisting of negotiable securities, it being understood that Collateral Agent shall have no responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not Collateral Agent has or is deemed to have knowledge of such matters, (ii) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Pledged Collateral) to preserve rights against any parties with respect to any Pledged Collateral, (iii) taking any necessary steps to collect or realize upon the Secured Obligations or any guarantee therefor, or any part thereof, or any of the Pledged Collateral or (iv) initiating any action to protect the Pledged Collateral against the possibility of a decline in market value. (b) Neither Collateral Agent nor any other Secured Party shall be liable to Pledgor (i) for any loss or damage sustained by it, or (ii) for any loss, damage, depreciation or other diminution in the value of any of the Pledged Collateral, that may occur as a result of, in connection with or that is in any way related to (x) any exercise by Collateral Agent or any other Secured Party of any right or remedy under this Agreement or (y) any other act of or failure to act by Collateral Agent or any other Secured Party, except to the extent that the same shall be determined by a judgment of a court of competent jurisdiction to be the result of acts or omissions on the part of Collateral Agent or such other Secured Party constituting gross negligence or willful misconduct. (c) NO CLAIM MAY BE MADE BY PLEDGOR AGAINST COLLATERAL AGENT, ANY OTHER SECURED PARTY OR THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND PLEDGOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. SECTION 12. EVENTS OF DEFAULT. The occurrence of any of the following shall be an "Event of Default" under this Agreement: (a) failure of Pledgor to pay any obligation secured by this Agreement when due; (b) failure of Pledgor to perform any of the Secured Obligations when such Secured XIII-10 Obligation is required to be performed; or (c) the occurrence of any "Event of Default" as defined in the Credit Agreement. SECTION 13. REMEDIES UPON DEFAULT. If any Event of Default shall have occurred and be continuing: (a) Collateral Agent may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Code as in effect in the State of New York (or any other state with jurisdiction over the Pledged Collateral) at that time, and Collateral Agent may also in its sole discretion, without notice (except as specified below), sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. Collateral Agent may be the purchaser of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price of any Pledged Collateral payable by Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Pledgor, and Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Pledgor hereby waives any claims against Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Pledged Collateral are insufficient to pay all the Secured Obligations, Pledgor shall XIII-11 be liable for the deficiency and the fees of any attorneys employed by Collateral Agent to collect such deficiency. (b) Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as from time to time amended (the "Securities Act"), and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral conducted without prior registration or qualification of such Pledged Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to Collateral Agent than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances and the registration rights granted to Collateral Agent by Pledgor pursuant to Section 14, Pledgor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. (c) If Collateral Agent determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, Pledgor shall and shall cause each issuer of any Pledged Shares to be sold hereunder from time to time to furnish to Collateral Agent all such information as Collateral Agent may request in order to determine the number of shares and other instruments included in the Pledged Collateral which may be sold by Collateral Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. SECTION 14. REGISTRATION RIGHTS. If Collateral Agent shall determine to exercise its right to sell all or any of the Pledged Collateral pursuant to Section 13, Pledgor agrees that, upon request of Collateral Agent (which request may be made by Collateral Agent in its sole discretion), Pledgor will, at its own expense: (a) execute and deliver, and cause each issuer of the Pledged Collateral contemplated to be sold and the directors and officers thereof to execute and deliver, all XIII-12 such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of Collateral Agent, advisable to register such Pledged Collateral under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (b) use its best efforts to qualify the Pledged Collateral under all applicable state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by Collateral Agent; (c) cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act; (d) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law; and (e) bear all costs and expenses, including reasonable attorneys' fees, of carrying out its obligations under this Section 14. Pledgor further agrees that a breach of any of the covenants contained in this Section 14 will cause irreparable injury to Collateral Agent, that Collateral Agent has no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section 14 shall be specifically enforceable against Pledgor, and Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section 14 shall in any way alter the rights of Collateral Agent under Section 13. SECTION 15. APPLICATION OF PROCEEDS. All Proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of Collateral Agent, be held by Collateral Agent as Pledged Collateral for, XIII-13 and/or then or at any time thereafter applied in whole or in part by Collateral Agent against the Secured Obligations in the following order of priority: FIRST: To the payment of the costs and expenses of such sale, collection or other realization, and all expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith, including reasonable compensation to Collateral Agent and its agents and counsel, in accordance with Section 16(b); SECOND: To the payment in full of all Secured Obligations in such order as Collateral Agent shall elect; and THIRD: To the payment to or upon the order of Pledgor, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. SECTION 16. INDEMNITY AND EXPENSES. (a) Pledgor agrees to indemnify Collateral Agent from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from Collateral Agent's gross negligence or willful misconduct. (b) Pledgor will upon demand pay to Collateral Agent the amount of any and all costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of Collateral Agent or any other Secured Party hereunder or (iv) the failure by Pledgor to perform or observe any of the provisions hereof. (c) In the event of any public sale described in Section 14, Pledgor agrees to indemnify and hold harmless Collateral Agent and each of Collateral Agent's directors, officers, employees and agents from and against any loss, fee, cost, expense, damage, liability or claim, joint or several, to which Collateral Agent or such other persons may become subject or for which any of them may be liable, under the Securities Act or otherwise, insofar as such losses, fees, costs, expenses, damages, liabilities or claims (or any litigation commenced or threatened in respect thereof), arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any preliminary XIII-14 prospectus, registration statement, prospectus or other such document published or filed in connection with such public sale, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse Collateral Agent and such other persons for any legal or other expenses reasonably incurred by Collateral Agent and such other persons in connection with any litigation, of any nature whatsoever, commenced or threatened in respect thereof (including without limitation any and all fees, costs and expenses whatsoever reasonably incurred by Collateral Agent and such other persons and counsel for Collateral Agent and such other persons in investigating, preparing for, defending against or providing evidence, producing documents or taking any other action in respect of, any such commenced or threatened litigation or any claims asserted). This indemnity shall be in addition to any liability which Pledgor may otherwise have and shall extend upon the same terms and conditions to each person, if any, that controls Collateral Agent or such persons within the meaning of the Securities Act. SECTION 17. WAIVERS OF PLEDGOR. (a) Pledgor waives any right to require Collateral Agent to: (i) proceed against Borrower, any other guarantor of any of the Secured Obligations or any other person or entity; (ii) proceed against or exhaust any other security held from any other person or entity; (iii) give notice to Pledgor of the terms, time and place of any public or private sale of the Pledged Collateral or any other security, or otherwise comply with Section 9504 of the Code; (iv) pursue any other remedy in Collateral Agent's power; or (v) make or give any presentments, demands for performance, notices of nonperformance, protests, notices of protest or notices of dishonor in connection with any obligations or evidences of indebtedness which constitute in whole or in part the Secured Obligations or in connection with the creation of new or additional Secured Obligations; (b) Pledgor waives any defense arising by reason of: (i) any disability or other defense of Pledgor, Borrower, or any other entity, including, without limitation, any defense based on or arising out of the unenforceability of any of the Secured Obligations, legal or equitable discharge of the Secured Obligations or this Agreement or any statute of limitations affecting Pledgor's liability hereunder or Borrower's liability thereunder, or the enforcement thereof or hereof; (ii) the cessation from any cause whatsoever, other than payment in full, of the Secured Obligations or the release or substitution of any sureties or guarantors of the Secured Obligations; (iii) any act or omission by Collateral XIII-15 Agent which directly or indirectly results in or aids the discharge of Pledgor or Borrower or any of the Secured Obligations by operation of law or otherwise; (iv) the release of any other collateral securing the Secured Obligations or the failure by Collateral Agent to perfect or maintain the perfection of any such other collateral; (v) any modification of the Secured Obligations, in any form whatsoever, including, but not limited to the renewal, extension, acceleration or other change in the time for payment of the Secured Obligations, and any change in the terms of the Secured Obligations, including, but not limited to, any increase or decrease of the rate of interest on the Secured Obligations; and (vi) any law limiting the liability of or exonerating guarantors or sureties; and (c) until all the Secured Obligations shall have been paid in full, Pledgor waives any right to enforce any remedy which Collateral Agent now has or may hereafter have against Borrower or any person or entity guaranteeing or securing the Secured Obligations, and waives any benefit of, or any right to participate in any security whatsoever now or hereafter held by Collateral Agent for the Secured Obligations. SECTION 18. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (a) remain in full force and effect until indefeasible payment in full of all Secured Obligations, the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, (b) be binding upon Pledgor, its successors and assigns, and (c) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (c) and subject to the provisions of subsections 10.2 and 10.16 of the Credit Agreement, Collateral Agent may assign or otherwise transfer any Note held by it to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to Collateral Agent herein or otherwise. Upon the indefeasible payment in full of all Secured Obligations, the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, Pledgor shall be entitled to the return, upon its request and at its expense, against receipt and without recourse to Collateral Agent, of such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof. SECTION 19. NO WAIVER BY COLLATERAL AGENT; AUTHORITY OF PLEDGOR OR BORROWER. No failure on the part of Collateral Agent to exercise, and no course of dealing with XIII-16 respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by Collateral Agent of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are cumulative to the fullest extent permitted by law and are not exclusive of any remedies provided by law. It is not necessary for Collateral Agent to inquire into the powers of Pledgor or the officers, directors or agents acting or purporting to act on behalf of any of them. SECTION 20. TRANSFERS. In the event any Pledged Collateral is sold, transferred or otherwise disposed of in any Asset Sale or other transaction not prohibited by the Credit Agreement, Collateral Agent shall release such Pledged Collateral to Pledgor free and clear of the Lien and security interest under this Agreement in accordance with the following: (a) so long as any Secured Obligations remain outstanding and if such disposition is an Asset Sale, concurrently upon Collateral Agent's determination that arrangements satisfactory to it have been made for delivery to it of the Estimated Net Cash Proceeds of such Asset Sale and (b) in all other instances, concurrently upon Collateral Agent's determination and delivery of an Officer's Certificate by Pledgor certifying that no Cash Proceeds of such disposition are required to be delivered by Pledgor in respect of the Secured Obligations. SECTION 21. AMENDMENT, ETC. No amendment or waiver of any provision of this Agreement, nor consent to any departure by Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 22. ADDRESSES FOR NOTICES. All notices and other communications provided for hereunder shall be in writing (including telegraphic or telecopy communication) and, if to either party, mailed, telegraphed, telecopied or delivered to it, addressed to it at the address of such party specified in the Credit Agreement, or as to either party at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section 22. All such notices and other communications shall, when mailed or telegraphed, respectively, be effective when deposited in the mails or delivered to the telegraph company, respectively, addressed as aforesaid, and when delivered or telecopied, be effective when received at the address specified above. XIII-17 SECTION 23. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement, terms defined in Article 9 of the Code are used herein as therein defined. SECTION 24. SEVERABILITY. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdictions, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 25. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial proceedings brought against Pledgor with respect to this Agreement may be brought in any state or federal court of competent jurisdiction in the State of New York and by execution and delivery of this Agreement, Pledgor accepts for itself and in connection with its properties, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Pledgor designates and appoints C T Corporation System and such other Persons as may hereafter be selected by Pledgor irrevocably agreeing in writing to so serve, as its agent to receive on its behalf service of all process in any such proceedings in any such court, such service being hereby acknowledged by Pledgor to be effective and binding service in every respect. A copy of any such process so served shall be mailed by registered mail to Pledgor at its address referred to in Section 22, except that unless otherwise provided by applicable law, any failure to mail such copy shall not affect the validity of service of process. If any agent appointed by Pledgor refuses to accept service, Pledgor hereby agrees that service upon it by mail shall constitute sufficient notice. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Collateral Agent to bring proceedings against Pledgor in the courts of any other jurisdiction. SECTION 26. COLLATERAL AGENT. Collateral Agent has been appointed as Collateral Agent hereunder pursuant to the Credit Agreement, and shall be entitled to the benefits of the Credit Agreement. Collateral Agent shall be obligated, and shall have the right, hereunder to make demands, to give notices, to exercise or refrain from taking action (including, XIII-18 without limitation, the release or substitution of Pledged Collateral) solely in accordance with this Agreement and the Credit Agreement. Collateral Agent may resign and a successor Collateral Agent may be appointed in the manner provided for resignation or removal of Agent and appointment of a successor in the Credit Agreement. Upon the acceptance of any appointment as a Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement and shall deliver any Collateral in its possession to the successor Collateral Agent. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent. SECTION 27. WAIVER OF JURY TRIAL. PLEDGOR AND COLLATERAL AGENT HEREBY MUTUALLY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OR ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE TRANSACTION CONTEMPLATED HEREBY AND THE RELATIONSHIP BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Pledgor and Collateral Agent each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement and that each will continue to rely on the waiver in their related future dealings. Pledgor and Collateral Agent further warrant and represent that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO EXTENSIONS OF CREDIT PURSUANT TO THE LOAN DOCUMENTS. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. XIII-19 IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. BLUE BIRD CORPORATION By __________________________ Title: BANKERS TRUST COMPANY, as Collateral Agent By __________________________ Title: XIII-20 EXHIBIT XIV ENVIRONMENTAL INDEMNITY THIS ENVIRONMENTAL INDEMNITY (this "INDEMNITY") is entered into as of April 15, 1992 by BLUE BIRD CORPORATION, a Delaware corporation ("Holding"), and BLUE BIRD BODY COMPANY, a Georgia corporation ("Company") (each of which shall be referred to hereinafter individually as an "Indemnitor" and collectively as the "Indemnitors"), to and for the benefit of BANKERS TRUST COMPANY, as Agent (as defined below) on behalf of itself and Lenders (as defined below) and its and their successors, assigns and participants, and its and their respective parent, subsidiary and affiliated corporations, and the respective directors, officers, agents, attorneys, and employees of each of the foregoing (each of which shall be referred to hereinafter individually as an "Indemnitee" and collectively as the "Indemnitees"). W I T N E S S E T H: A. Pursuant to that certain Credit Agreement dated as of April 15, 1992 by and among Holding, B B Acquisition Corp., a Georgia corporation, the lenders party thereto ("Lenders") and Bankers Trust Company, as agent for Lenders ("Agent") (as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement), Lenders have made loans and extended certain credit facilities in the maximum principal amount of $170,000,000 (the "Loan") to Borrower, which Loan is to be secured by, among other things, one or more Mortgages of even date herewith executed by Borrower, as mortgagor, to Collateral Agent, on behalf of Agent and Lenders, as mortgagee, which Mortgages encumber the real property described on EXHIBIT A attached hereto (the "Premises"), and the improvements constructed or to be constructed thereon (which improvements, together with the Premises, shall hereinafter be referred to as the "Projects"). B. Lenders and Agent have therefore made it a condition of Lenders' and Agent's making the Loan that this Indemnity be executed and delivered by the Indemnitors in order to protect the Indemnitees from any such liabilities, costs, and expenses and all other Environmental Losses (as hereinafter defined). C. Company is the wholly-owned Subsidiary of Holding and Holding will benefit from the making of the Loan by Lenders and Agent. NOW, THEREFORE, in consideration of the foregoing and of Lenders and Agent making the Loan, and other valuable consideration, the receipt of which is hereby acknowledged, the Indemnitors agree as follows: 1. As used in this Indemnity, the following terms shall have the following meanings: "AGREED RATE" means a rate per annum equal to the sum of three and one-half percent (3.50%) <*>plus the Prime Rate. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as heretofore or hereafter amended from time to time. "FORECLOSURE TRANSFER" means the transfer of title to all or any part of the Premises or the Projects at a foreclosure sale under a Mortgage, either pursuant to judicial decree or the power of sale contained in a Mortgage, or by deed in lieu of such foreclosure. "HAZARDOUS MATERIAL ACTIVITY" means any actual proposed or threatened storage, holding, existence, release, emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation of any Hazardous Material from, under, into or on the Premises or the Projects or surrounding property. "LOSSES" means any and all losses, liabilities, damages, demands, claims, actions, judgments, causes of action, assessments, penalties, costs and expenses (including, without limitation, the reasonable fees and disbursements of outside legal counsel and accountants and the reasonable charges of in-house legal counsel and accountants), and all foreseeable and unforeseeable consequential damages. "ENVIRONMENTAL LOSSES" means Losses suffered or incurred by any Indemnitee, arising out of or as a result of: (i) the occurrence of any Hazardous Material Activity; (ii) any violation of any applicable Environmental Laws relating to the Premises or the Projects or to the ownership, use, occupancy or operation thereof; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any governmental agency in connection with any XIV-2 Hazardous Material Activity; or (iv) any claim, demand or cause of action, or any action or other proceeding, whether meritorious or not, brought or asserted against any Indemnitee which directly or indirectly relates to, arises from or is based on any of the matters described in clauses (i), (ii), or (iii), or any allegation of any such matters. 2. Each Indemnitor hereby agrees, jointly and severally, to indemnify, defend, and hold harmless Indemnitees, and each of them, from and against any and all Environmental Losses. 3. This Indemnity is given solely to protect Collateral Agent, Agent and Lenders and the other Indemnitees against Environmental Losses, and not as additional security for, or as a means of repayment of, the Loan. The obligations of each of the Indemnitors under this Indemnity are independent of, and shall not be measured or affected by (i) any amounts at any time owing under the Loan or the Credit Agreement, or secured by a Mortgage, (ii) the sufficiency or insufficiency of any collateral (including, without limitation, the Projects) given to Collateral Agent, Agent and Lenders to secure repayment of the Loan, (iii) the consideration given by Agent and Lenders or any other party in order to acquire the Premises or the Projects, or any portion thereof, (iv) the modification, expiration or termination of the Credit Agreement or any other document or instrument relating thereto, or (v) the discharge or repayment in full of the Loan (including, without limitation, by amounts paid or credit bid at a foreclosure sale or by discharge in connection with a deed in lieu of foreclosure). 4. The Indemnitors' obligations hereunder shall survive the sale or other transfer of the Premises or the Projects by Borrower. The rights of each Indemnitee under this Indemnity shall be in addition to any other rights and remedies of such Indemnitee against any Indemnitor under any other document or instrument now or hereafter executed by such Indemnitor, or at law or in equity (including, without limitation, any right of reimbursement or contribution pursuant to CERCLA), and shall not in any way be deemed a waiver of any of such rights. Each Indemnitor agrees that it shall have no right of contribution (including, without limitation, any right of contribution under CERCLA) or subrogation against any other Indemnitor hereunder. Each Indemnitor further agrees that, to the extent that the waiver of its rights of subrogation and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation or contribution such XIV-3 Indemnitor may have shall be junior and subordinate to the rights of each Indemnitee against each Indemnitor hereunder. 5. All obligations of the Indemnitors hereunder shall be payable on demand, and any amount due and payable hereunder to any Indemnitee by any Indemnitor which is not paid within thirty (30) days after written demand therefor from an Indemnitee with an explanation of the amounts demanded shall bear interest from the date of such demand at the Agreed Rate. 6. The Indemnitors shall pay to each Indemnitee all costs and expenses (including, without limitation, the reasonable fees and disbursements of any Indemnitee's outside legal counsel and the reasonable charges of any Indemnitee's in-house legal counsel) incurred by such Indemnitee in connection with this Indemnity or the enforcement hereof. 7. This Indemnity shall be binding upon each Indemnitor, its heirs, representatives, administrators, executors, successors and assigns and shall inure to the benefit of and shall be enforceable by each Indemnitee, its successors, endorsees and assigns (including, without limitation, any entity to which Agent or any Lender assigns or sells all or any portion of its interest in the Loan). As used herein, the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires. If this Indemnity is executed by more than one person or entity, the liability of the undersigned hereunder shall be joint and several. 8. This Indemnity shall be governed and construed in accordance with the internal laws of the State of New York, without regard to its conflicts of laws principles. 9. Every provision of this Indemnity is intended to be severable. If any provision of this Indemnity or the application of any provision hereof to any party or circumstance is declared to be illegal, invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction, such invalidity shall not affect the balance of the terms and provisions hereof or the application of the provision in question to any other party or circumstance, all of which shall continue in full force and effect. 10. No failure or delay on the part of any Indemnitee to exercise any power, right or privilege under this Indemnity shall impair any such power, right or privilege, or be construed to be a waiver of any default or an acquiescence therein, nor shall any single or partial XIV-4 exercise of such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No provision of this Indemnity may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 11. This Indemnity may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same indemnity with the same effect as if all parties had signed the same signature page. Any signature page of this Indemnity may be detached from any counterpart of this Indemnity and reattached to any other counterpart of this Indemnity identical in form hereto but having attached to it one or more additional signature pages. XIV-5 IN WITNESS WHEREOF, this Indemnity is executed as of the day and year first written above. BLUE BIRD CORPORATION By _______________________________ Title: President BLUE BIRD BODY COMPANY By _______________________________ Title: President XIV-6 DRAFT 11/7/96 EXHIBIT XV FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT DATE _________ __, ____ Reference is made to the Agreement described in Item 2 of Annex I annexed hereto (as amended, amended and restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein with [ASSIGNOR] (the "ASSIGNOR") and [ASSIGNEE] (the "ASSIGNEE") agreeing as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof which represents the percentage interest specified in Item 4 of Annex I of all outstanding rights and obligations under the Credit Agreement relating to the facilities listed in Item 4 of Annex I, including, without limitation, such interest in the Assignor's Commitments (if applicable), the Loans owing to the Assignor and participations in outstanding Letters of Credit relating to such facilities. After giving effect to such sale and assignment, the Assignee's Commitments, the amount of the Loans owing to the Assignee and participations in outstanding Letters of Credit will be as set forth in Item 4 of Annex I. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim created by the Assignor; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement regarding the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance or observance by Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to therein, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption; (ii) agrees that it will, independently and without reliance upon Administrative Agent, the Assignor or any XV-1 other Lender 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 the Credit Agreement; (iii) confirms that it is an eligible assignee pursuant to subsection 10.2 of the Credit Agreement; (iv) appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and other Loan Documents as are delegated to such Agent, respectively, by the terms thereof, together with such powers as are reasonably incidental thereto; [and] (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender [; and (v) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement, such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty or a letter certifying that Assignee is not entitled to any such exemption or reduced rate].* 4. Following the execution of this Assignment and Assumption by the Assignor and the Assignee, it will be delivered to Administrative Agent for acceptance and recording by Administrative Agent. The effective date of this Assignment and Assumption shall be the date upon which (i) this Assignment and Assumption has been executed by the Assignor and the Assignee and (ii) the applicable conditions contained in subsection 10.2 of the Credit Agreement have been satisfied (including, without limitation, and only to the extent required by such subsection 10.2, Borrower's consent to such assignment has been obtained) unless another date is specified on Item 6 of Annex I hereto (the "SETTLEMENT DATE"). 5. Upon such acceptance and recording by Administrative Agent, as of the Settlement Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Assumption, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by Administrative Agent, from and after the Settlement Date, Administrative Agent shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees (if applicable) with respect thereto) to the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor the principal amount of any outstanding Loans and obligations in respect of Letters of Credit under the Credit Agreement which are being assigned hereunder, net of any closing costs. The Assignor and the Assignee shall make all appropriate - ---------------------- *If the Assignee is organized under the laws of a jurisdiction outside the United States. XV-2 adjustments in payments under the Credit Agreement for periods prior to the Settlement Date directly between themselves on the Settlement Date. 7. This Assignment and Assumption shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to conflicts of laws principles. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Annex I hereto. Accepted this ______ day of _____________, ______ BANKERS TRUST COMPANY, as Administrative Agent By __________________________ Title: ___________________ [NAME OF ASSIGNOR] as Assignor By __________________________ Title: ___________________ [NAME OF ASSIGNEE] as Assignee By __________________________ Title: ___________________ XV-3 ANNEX I 1. Borrower: Blue Bird Body Company 2. Name and Date of Credit Agreement: First Amended and Restated Credit Agreement dated as of November 15, 1992 by and among Blue Bird Corporation, Blue Bird Body Company, the lenders party thereto, Bankers Trust Company, as administrative agent, and Merrill Lynch & Co., as syndication agent 3. Date of Assignment Agreement: _______________, 19 ____ 4. Amounts (As of Date in Item #3 above): Facility 1 Facility 2 Facility 3 Facility 4 Facility 5 ---------- ---------- ---------- ---------- ---------- (Tranche A (Tranche B (Working (Swing (Letter of Term Loans) Loans) Capital Line Credit Loan Commit- partici- Commit- ment) pations) XV-I-I 11/07/96 EXHIBIT XVII FORM OF COMPLIANCE CERTIFICATE THE UNDERSIGNED HEREBY CERTIFY THAT: (1) We are the duly elected [Title] and [Title] of Blue Bird Corporation, a Delaware corporation ("HOLDING"), and Blue Bird Body Company, a Georgia corporation ("BORROWER"); (2) We have reviewed the terms of the First Amended and Restated Credit Agreement dated as of November 15, 1996 by and among Holding, Blue Bird Body Company, a Georgia corporation, the lenders party thereto ("LENDERS"), Bankers Trust Company, as administrative agent for Lenders, and Merrill Lynch & Co., as syndication agent (as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"; capitalized terms used herein without definition shall have the meanings assigned to those terms in the Credit Agreement), and we have reviewed the terms of the Credit Agreement, the Notes and the other Loan Documents and we have made, or have caused to be made under our supervision, a review in reasonable detail of the transactions and conditions of Holding and its Subsidiaries during the accounting period covered by the attached financial statements; (3) The examinations described in paragraph (2) did not disclose, and we have no knowledge of, the existence of any condition or event that constitutes an Event of Default or Potential Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below; and (4) As of the date of this Certificate, Holding and its Subsidiaries are not in default under any negative covenant set forth in Section 6 of the Credit Agreement, except as set forth below. Describe below (or in a separate attachment to this Certificate) the exceptions, if any, to paragraphs (3) and (4) by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Holding or Borrower has taken, is taking, or proposes to take with respect to each such condition or event: XVII-1 _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ The foregoing certifications, together with the computations set forth in Attachment No. 1 hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this ______ day of _______, 19__ pursuant to subsection 5.1(v) of the Credit Agreement. BLUE BIRD CORPORATION By ____________________________ Title: By ____________________________ Title: BLUE BIRD BODY COMPANY By ____________________________ Title: By ____________________________ Title: XVII-2 ATTACHMENT NO. 1 TO COMPLIANCE CERTIFICATE (The Certificate attached hereto is as of _________ and pertains to the period from __________________________ to _______________________.) Capitalized terms used herein shall have the meanings set forth in the First Amended and Restated Credit Agreement dated as of November 15, 1996 by and among Blue Bird Corporation, a Delaware corporation, Blue Bird Body Company, a Georgia corporation, the lenders party thereto ("LENDERS"), Bankers Trust Company, as administrative agent for Lenders, and Merrill Lynch & Co., as syndication agent. Subsection references herein relate to the subsections of the Credit Agreement. A. MINIMUM CONSOLIDATED EBITDA 1. Consolidated EBITDA for the current Fiscal Quarter $__________ 2. Consolidated EBITDA for the prior Fiscal Quarter $__________ 3. Consolidated EBITDA for the next prior Fiscal Quarter $__________ 4. Consolidated EBITDA for the next to the next prior Fiscal Quarter $__________ 5. Consolidated EBITDA for the current and 3 prior Fiscal Quarters (the sum of lines A1 through A4) $__________ 6. Minimum Consolidated EBITDA required by subsection 6.6A $__________ B. MAXIMUM LEVERAGE RATIO 1. Aggregate Indebtedness of Holding and its Subsidiaries with maturity in excess of one year (or which is renewable to a date more than one year from date of determination) $__________ 2. Aggregate principal amount of Working Capital Loans $__________ XVII- ATTACHMENT 1-1 3. Aggregate principal amount of Indebtedness of BB Capital with maturity in excess of one year (or which is renewable to a date more than one year from date of determination) $__________ 4. Funded Debt (Line B1 minus Line B2 minus Line B3) $__________ 5. Consolidated EBITDA for the current and 3 prior Fiscal Quarters (Line A5) $__________ 6. Leverage Ratio (Line B4 divided by Line B5) ____ to 1.00 7. Maximum Leverage Ratio permitted pursuant to subsection 6.6B ____ to 1:00 C. MINIMUM INTEREST COVERAGE RATIO 1. Consolidated EBITDA for the current and 3 prior Fiscal Quarters (Line A5) $__________ 2. Consolidated Cash Interest Expense for the current and 3 prior Fiscal Quarters (Line C6) $__________ 3. Interest Coverage Ratio (Line D1 divided by Line D2) ____:1.00 4. Minimum Interest Coverage Ratio required by subsection 6.6D ____:1.00 D. MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES 1. Consolidated Capital Expenditures amount set forth in subsection 6.6F for the current Fiscal Year $__________ 2. Consolidated Capital Expenditures amount set forth in subsection 6.6F for prior Fiscal Year $__________ 3. Consolidated Capital Expenditures for prior Fiscal Year $__________ XVII - ATTACHMENT 1-2 4. Unutilized Consolidated Capital Expenditures for prior Fiscal Year (Line F2 minus F3) $__________ 5. Carryover Amount (the lesser of [10% multiplied by Line D2] and Line D4) $__________ 6. Consolidated Capital Expenditures for current Fiscal Year $__________ 7. Maximum Consolidated Capital Expenditures permitted for current Fiscal Year by subsection 6.6F (Line F1 plus Line F5) $__________ E. MAXIMUM OTHER INDEBTEDNESS 1. Indebtedness outstanding pursuant to subsection 6.1(ix) $__________ 2. Maximum Indebtedness permitted by subsection 6.1(ix) $__________ F. MAXIMUM INTERCOMPANY LOANS 1. Intercompany loans outstanding pursuant to subsection 6.3(iv) $__________ 2. Maximum intercompany loans permitted by subsection 6.3(iv) $__________ G. MAXIMUM RESTRICTED JUNIOR PAYMENTS 1. Restricted Junior Payments made pursuant to subsection 6.5(ii) during current Fiscal Year $__________ 2. Maximum Restricted Junior Payments permitted by subsection 6.5(ii) for current Fiscal Year $__________ 3. Restricted Junior Payments made pursuant to subsection 6.5(iii) during current Fiscal Year $__________ 4. Maximum Restricted Junior Payments permitted by subsection 6.5(iii) for current Fiscal Year $__________ XVII - ATTACHMENT 1-3 EXHIBIT XVIII Form of Mortgage Recording requested by ___________________________ and when recorded mail to: O'MELVENY & MYERS 400 South Hope Street Los Angeles, California 90071-2899 Attn: Mitchell B. Menzer, Esq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ection 48-6-69(b). DEED TO SECURE DEBT, SECURITY AGREEMENT ASSIGNMENT OF RENTS, FINANCING STATEMENT, AND FIXTURE FILING (STATE OF GEORGIA) THIS DEED TO SECURE DEBT, SECURITY AGREEMENT, ASSIGNMENT OF RENTS, FINANCING STATEMENT, AND FIXTURE FILING (this "Security Deed") is made as of ______________, 1992, by and among BLUE BIRD BODY COMPANY, a Georgia corporation ("GRANTOR") whose address is North Camellia Boulevard, P.O. Box 937, Fort Valley, GA 31030, and BANKERS TRUST COMPANY, a New York banking corporation ("GRANTEE"), whose address is 300 South Grand Avenue, 41st Floor, Los Angeles, California 90071, in its capacity as Collateral Agent for the Lenders (the "LENDERS") listed on the signature pages of the Credit Agreement of even date herewith (as the same may hereafter be amended, supplemented or restated from time to time, the "CREDIT AGREEMENT"), among the Lenders, Grantee, as Agent for the Lenders, BB Acquisition Corp., a Georgia corporation ("ACQUISITION") and Blue Bird Corporation, a Delaware corporation ("HOLDING"). 1 R E C I T A L S A. Holding, Acquisition, the Lenders and Grantee, as Agent for the Lenders, have or will enter into the Credit Agreement pursuant to, upon the terms and subject to the conditions of which, the Lenders have agreed to extend certain credit facilities to Acquisition in an aggregate principal amount of One Hundred Seventy Million Dollars ($170,000,000), which together with the proceeds of the Subordinated Debt (as defined in the Credit Agreement) and certain other funds, will be used to make payments to the existing holders of Blue Bird Body Company stock, to pay certain transaction expenses and to provide certain working capital facilities to Borrower (as that term is defined in Section 1.1 of the Credit Agreement). B. Acquisition will merge with and into Grantor with Grantor as the surviving corporation. C. Additionally, pursuant to and subject to the terms of Section 7 of the Credit Agreement, Holding has guaranteed the obligations of Grantor under the Credit Agreement. D. After the merger of Acquisition into Grantor, Grantor is the Borrower as defined in the Credit Agreement. FOR GOOD AND VALUABLE CONSIDERATION, including the Indebtedness (as hereinafter defined) herein recited the receipt of which is hereby acknowledged, Grantor hereby irrevocably grants, sells, bargains, transfers, conveys and assigns to Grantee, as Collateral Agent, under and subject to the terms and conditions hereinafter set forth, that certain real property more particularly described in EXHIBIT A attached hereto and by this reference incorporated herein (the "PREMISES"); TOGETHER WITH all of Grantor's right, title and interest, whether as owner, lessee or otherwise, in and to any and all buildings and improvements now or hereafter erected on the Premises, including the fixtures, attachments, appliances, equipment, machinery, and other articles attached to said buildings and improvements (the "IMPROVEMENTS"), all of which shall be deemed and construed to be a part of the realty; TOGETHER WITH all rents, issues, profits, royalties, income and other benefits derived from the Premises or the Improvements (collectively, the "RENTS"), subject to the right, power and authority hereinafter given to Grantor to collect and apply such Rents; TOGETHER WITH all personal property now or hereafter owned by Grantor, whether as owner, lessee or otherwise, and 2 located on or used in connection with the Premises, including without limitation the personal property described in EXHIBIT B attached hereto and by this reference incorporated herein, and all property of similar type or kind hereafter acquired by Grantor and all insurance proceeds from any policy of insurance covering any of the foregoing property now or hereafter acquired by Grantor; TOGETHER WITH all interests, estates or other claims, both in law and in equity, which Grantor now has or may hereafter acquire in the Premises or the Improvements; TOGETHER WITH all easements, rights-of-way and rights now owned or hereafter acquired by Grantor used in connection with the Premises or the Improvements or as a means of access thereto, including, without limiting the generality of the foregoing, all rights pursuant to any trackage agreement and all rights to the nonexclusive use of common drive entries, and all tenements, hereditaments and appurtenances thereof and thereto, and all water and water rights and shares of water stock evidencing the same; TOGETHER WITH all other leasehold estate, right, title and interest of Grantor in and to all leases or subleases covering the Premises, the Improvements or any portion thereof now or hereafter existing or entered into, and all right, title and interest of Grantor thereunder including, without limitation, all cash or security deposits, advance rentals, and deposits or payments of similar nature; TOGETHER WITH all right, title and interest now owned or hereafter acquired by Grantor in and to any greater estate in the Premises or the Improvements, including without limitation any options to purchase real property; TOGETHER WITH all right, title and interest of Grantor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Premises, and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Premises; TOGETHER WITH all the estate, interest, right, title, other claim or demand, both in law and in equity, including claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Grantor now has or may hereafter acquire in the Premises or the Improvements, and any and all awards made for the taking by eminent domain, or by any proceeding of purchase in lieu thereof, of the whole or any part of the Collateral (as hereinafter defined), including, without limitation, any awards resulting from a change of grade of streets and awards for severance damages; 3 TOGETHER WITH any and all rights of Grantor under any contracts or agreements related to the foregoing. The entire estate, property and interest hereby conveyed to Grantee may hereafter be collectively referred to as the "COLLATERAL." FOR THE PURPOSE OF SECURING: (a) the payment by Grantor of the "Term Notes" described in the Credit Agreement, the aggregate original principal balance evidenced by the Term Notes being equal to Eighty Million Dollars ($80,000,000) and the Term Notes being due and payable in full not later than October 1, 1998; (b) the payment by Grantor of the "Working Capital Notes" and the "Swing Line Note" described in the Credit Agreement, the Working Capital Notes and the Swing Line Note evidencing a revolving line of credit having a maximum principal amount at any time outstanding of Ninety Million Dollars ($90,000,000) and requiring that each advance and readvance thereunder must be repaid within not more than twelve (12) months; (c) the payment by Grantor of the reimbursement obligations of Grantor in regard to letters of credit issued pursuant to the Credit Agreement; (d) the payment and performance by Grantor of all obligations of Grantor under the Credit Agreement, this Instrument and under all other documents or instruments delivered pursuant to the Credit Agreement, as the Credit Agreement, this Instrument and such other documents or instruments may from time to time be amended, extended, renewed or modified; (e) the payment and performance by Grantor of any and all other indebtednesses and obligations now owing or which may hereafter be owing by Grantor to Grantee, including, without limitation, all Obligations (as defined in the Credit Agreement) whether now existing or hereafter coming into existence, however and whenever incurred or evidenced, whether express or implied, direct or indirect, absolute or contingent, or due or to become due, and all renewals, modifications, consolidations and extensions thereof; (f) payment of all sums advanced by Grantee or any Lender to protect the Collateral or the priority or enforceability of this Security Deed, with interest thereon at a rate equal to two percent (2%) per annum in excess of the interest rate established in SECTION 2.3.A. 4 of the Credit Agreement (which rate of interest is hereinafter referred to as the "AGREED RATE"); (g) performance of every obligation, covenant and agreement of Grantor (including, without limitation, by virtue of the Merger of Acquisition into Grantor) contained in any agreement now or hereafter executed by Grantor, the Lenders and Grantee, as Collateral Agent for the Lenders, which recites that the obligations thereunder are secured by this Security Deed. All of the foregoing secured obligations are hereinafter referred to collectively as the "Indebtedness". TO HAVE AND TO HOLD THE COLLATERAL AND ALL PARTS, RIGHTS, MEMBERS AND APPURTENANCES THEREOF, TO THE USE, BENEFIT AND BEHOOF OF GRANTEE, ITS SUCCESSORS AND ASSIGNS, FOREVER, FOR THE FULL ESTATE HEREBY CONVEYED. THIS SECURITY DEED IS INTENDED TO OPERATE AND IS TO BE CONSTRUED AS A DEED PASSING THE TITLE TO THE PREMISES TO GRANTEE AND IS MADE UNDER THOSE PROVISIONS OF THE EXISTING LAWS OF THE STATE OF GEORGIA RELATING TO DEEDS TO SECURE DEBT, AND NOT AS A MORTGAGE, AND IS GIVEN TO SECURE THE INDEBTEDNESS. SHOULD THE INDEBTEDNESS BE PAID WHEN THE SAME SHALL BECOME DUE AND PAYABLE, THEN THIS SECURITY DEED SHALL BE CANCELLED AND SURRENDERED, SUBJECT TO THE FOLLOWING. THE INDEBTEDNESS EVIDENCED BY THE WORKING CAPITAL NOTES AND THE SWING LINE NOTES IS A REVOLVING INDEBTEDNESS. THE CREDIT AGREEMENT PROVIDES THAT THE AGGREGATE PRINCIPAL SUM EVIDENCED BY THE WORKING CAPITAL NOTES AND THE SWING LINE NOTES, SUCH AGGREGATE PRINCIPAL SUM BEING NINETY MILLION AND NO/100 DOLLARS ($90,000,000.00), MAY BE ADVANCED, REPAID AND READVANCED FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT. ACCORDINGLY, THE AGGREGATE PRINCIPAL ADVANCES DURING THE TERM OF THE CREDIT AGREEMENT MAY EXCEED ONE HUNDRED SEVENTY MILLION AND NO/100 DOLLARS ($170,000,000.00); PROVIDED, HOWEVER, AT NO TIME SHALL THE OUTSTANDING PRINCIPAL BALANCE EXCEED ONE HUNDRED SEVENTY MILLION AND NO/100 DOLLARS ($170,000,000.00) EXCEPT FOR ADVANCES MADE TO PROTECT THE PRIORITY OR ENFORCEABILITY OF THIS SECURITY DEED OR TO PROTECT THE COLLATERAL. GRANTOR AGREES THAT IF THE OUTSTANDING BALANCE OF THE INDEBTEDNESS IS EVER REPAID TO ZERO, THIS SECURITY DEED SHALL NOT BE RELEASED OR EXTINGUISHED, AND THE PRIORITY AND ENFORCEABILITY HEREOF SHALL IN NO WAY BE AFFECTED, WHETHER BY OPERATION OF LAW, AN IMPLIED INTENT OF THE PARTIES OR OTHERWISE. THIS SECURITY DEED SHALL REMAIN IN FULL FORCE AND EFFECT AS TO ANY FURTHER ADVANCES UNDER OR PURSUANT TO THE CREDIT AGREEMENT MADE AFTER ANY SUCH ZERO BALANCE UNTIL THE INDEBTEDNESS IS PAID AND PERFORMED IN FULL, ALL AGREEMENTS TO MAKE FURTHER ADVANCES HAVE BEEN TERMINATED AND THIS SECURITY DEED HAS BEEN CANCELLED 5 OF RECORD. GRANTOR WAIVES THE OPERATION OF ANY APPLICABLE STATUTE, CASE LAW OR REGULATION HAVING A CONTRARY EFFECT. IN FURTHERANCE OF THE FOREGOING GRANTS (INCLUDING GRANTS OF SECURITY INTERESTS), BARGAINS, SALES, ASSIGNMENTS, TRANSFERS, PLEDGES AND CONVEYANCES, AND TO PROTECT THE PREMISES AND THE SECURITY GRANTED BY THIS SECURITY DEED, GRANTOR HEREBY WARRANTS, REPRESENTS, COVENANTS AND AGREES AS FOLLOWS: ARTICLE I COVENANTS AND AGREEMENTS OF GRANTOR 1.01. PAYMENT OF SECURED OBLIGATIONS. Grantor shall pay when due the principal of and the interest on the Indebtedness; all charges, fees and other sums as provided in the Loan Documents (as that term is defined in Section 1.1 of the Credit Agreement); the principal of and interest on any future advances secured by this Security Deed; and the principal of and interest on any other indebtedness secured by this Security Deed. 1.02. MAINTENANCE, REPAIR, ALTERATIONS. Grantor shall keep the Collateral in good condition and repair; Grantor shall not remove, demolish or substantially alter any of the Improvements except upon Grantee's prior written consent; provided, however, that no such consent shall be required where such removal, demolition or substantial alteration either does not materially diminish the value of the affected Improvements or is followed by prompt construction or delivery of replacement Improvements of equal or greater value to the Improvements removed, demolished or substantially altered. Grantor shall complete promptly and in a good and workmanlike manner any Improvements which may be now or hereafter constructed on the Premises and promptly restore in like manner any portion of the Improvements which may be damaged or destroyed thereon from any cause whatsoever, and pay when due all claims for labor performed and materials furnished therefor; Grantor shall comply in all material respects with all laws, ordinances, regulations, covenants, conditions and restrictions now or hereafter affecting the Collateral or any part thereof or requiring any alterations or improvements, PROVIDED, HOWEVER, that Grantor shall be entitled to contest in good faith such laws, ordinances, regulations, covenants, conditions and restrictions so long as the Premises are not subject to forfeiture and there is no risk of criminal liability to Grantor or Grantee; Grantor shall not commit or permit any waste of the Collateral; Grantor shall comply with the provisions of any lease, if this Security Deed is on a leasehold; and Grantor shall not commit, suffer or permit any act to be done in or upon the Premises in violation of any law, ordinance or regulation. 6 1.03. REQUIRED INSURANCE. Grantor shall at all times provide, maintain and keep in force or cause to be provided, maintained and kept in force, at no expense to Grantee or any Lender, policies of insurance in form and amounts and issued by financially sound and reputable insurance companies, associations or organizations, covering such casualties, risks, perils, liabilities and other hazards as required under the terms of the Credit Agreement. All such policies of insurance required by the terms of the Credit Agreement shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding any act or negligence of Grantor or any party holding under Grantor which might otherwise result in forfeiture of said insurance and the further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against Grantor. 1.04. DELIVERY OF POLICIES, PAYMENT OF PREMIUMS. (A) At Grantee's option all policies of insurance shall either have attached thereto a lender's loss payable endorsement for the benefit of Grantee, on behalf of and as Collateral Agent for the Lenders, in form satisfactory to Grantee or shall name Grantee, on behalf of and as Collateral Agent for the Lenders, as an additional insured. Grantor shall furnish Grantee, on behalf of and as Collateral Agent for the Lenders, with an original of all policies of insurance required under SECTION 1.03 above or a certificate of insurance for each required policy setting forth the coverage, the limits of liability, the name of the carrier, the policy number and the period of coverage. Until such time as Grantee otherwise requests, Grantor may provide any of the required insurance through blanket policies carried by Grantor and covering more than one location, or by policies procured by a tenant or other party holding under Grantor; provided, however, all such policies shall be in form and substance and issued by companies reasonably satisfactory to Grantee. At least thirty (30) days prior to the expiration of each required policy, Grantor shall deliver to Grantee, on behalf of and as Collateral Agent for the Lenders, evidence reasonably satisfactory to Grantee of the payment of premium and the renewal or replacement of such policy continuing insurance in form as required by this Security Deed. All such policies shall contain a provision that, notwithstanding any contrary agreement between Grantor and insurance company, such policies will not be cancelled, allowed to lapse without renewal, surrendered or materially amended, which term shall include any reduction in the scope or limits of coverage, without at least thirty (30) days' prior written notice to Grantee. (B) In the event Grantor fails to provide, maintain, keep in force or deliver to Grantee, on behalf of and as 7 Collateral Agent for the Lenders, the policies of insurance required by this Security Deed or by any Loan Document, Grantee may, upon written notice to Grantor, procure such insurance or single-interest insurance for such risks covering the interest of Grantee, on behalf of and as Collateral Agent for the Lenders, and Grantor will pay all premiums thereon promptly upon demand by Grantee, and until such payment is made by Grantor, the amount of all such premiums shall bear interest at the Agreed Rate. In the event Grantee, in its reasonable discretion, deems the Lenders insecure or under-collateralized, then upon Grantee's request, Grantor shall deposit with Grantee, in monthly installments, an amount equal to one-twelfth (1/12th) of the reasonably estimated aggregate annual insurance premiums for the current policy year on all policies of insurance required by this Security Deed (funds deposited for such purpose shall hereinafter be referred to as "INSURANCE IMPOUNDS"). In such event, Grantor further agrees to cause all bills, statements or other documents relating to the foregoing insurance premiums to be sent or mailed directly to Grantee. Upon receipt of such bills, statements or other documents evidencing that a premium for a required policy is then payable, and providing Grantor has deposited sufficient Insurance Impounds with Grantee pursuant to this SECTION 1.04, Grantee shall timely pay such amounts as may be due thereunder out of the Insurance Impounds so deposited with Grantee. If at any time and for any reason (other than the application by Grantee of Insurance Impounds against the Indebtedness as may be permitted hereby) the Insurance Impounds deposited with Grantee are or will be insufficient to pay such amounts as may be then or subsequently due during the current policy year, Grantee shall notify Grantor and Grantor shall promptly deposit an amount equal to such deficiency with Grantee. Notwithstanding the foregoing, nothing contained herein shall cause Grantee to be deemed a trustee of said funds for Grantor or to be obligated to pay any amounts in excess of the amount of the Insurance Impounds deposited with Grantee pursuant to this SECTION 1.04, nor shall anything contained herein modify the obligation of Grantor set forth in SECTION 1.03 hereof to maintain and keep such insurance in force at all times. Grantee shall establish a separate account for the Insurance Impounds and may not commingle Insurance Impounds with its own funds, but Grantor shall be entitled to no interest thereon. Upon an Event of Default under any of the Loan Documents or this Security Deed, Grantee may apply the balance of the Insurance Impounds upon any Indebtedness or obligation secured hereby in such order as Grantee may determine, notwithstanding that said Indebtedness or the performance of said obligation may not yet be due according to the terms thereof. Should Grantor fail to deposit with Grantee (exclusive of that portion of said payments which has been applied by Grantee upon any Indebtedness or obligations secured hereby) sums sufficient to pay fully such insurance premiums at least fifteen (15) days before delinquency thereof, Grantee may, 8 without any obligation to do so, advance any amounts required to make up the deficiency, which advances, if any, shall be secured hereby, together with interest at the Agreed Rate, and shall be repayable to Grantee with interest thereon at the Agreed Rate, as Collateral Agent for the benefit and account of the Lenders, as herein elsewhere provided, or Grantee may, without making any advance whatever, apply any Insurance Impounds held by it upon any Indebtedness or obligation secured hereby in such order as Grantee may determine, notwithstanding that said Indebtedness or the performance of said obligation may not yet be due according to the terms thereof. Should any Event of Default (as defined in Sections 1.1 and 8 of the Credit Agreement) occur or exist on the part of the Grantor in the payment or performance of any of Grantor's or any guarantor's obligations under the terms of the Loan Documents, Grantee may apply any sums or amounts in its hands received pursuant to Section 1.04(B) or 1.08(E) hereof, or as Rents or otherwise, to any Indebtedness or obligation of the Grantor secured hereby in such manner and order as Grantee may determine, notwithstanding that such Indebtedness or the performance of such obligations may not yet be due according to the terms thereof. Except as expressly set forth herein, the receipt, use or application of any such Insurance Impounds paid by Grantor hereunder to Grantee, on behalf of and as Collateral Agent for the Lenders, shall not be construed to affect the maturity of any Indebtedness secured by this Security Deed or any of the rights or powers of Grantee or the Lenders under the terms of the Loan Documents or any of the obligations of Grantor or any guarantor under the Loan Documents. Should the indebtedness be paid and performed in full, all agreements to make further advances be terminated, and this security deed be cancelled and surrendered, then any remaining Insurance Impounds shall be repaid to Debtor without interest thereon. 1.05. CASUALTIES; INSURANCE PROCEEDS. Grantor shall give prompt written notice thereof to Grantee after the happening of any casualty to or in connection with the Collateral or any part thereof, whether or not covered by insurance where the reasonably estimated loss or cost to repair equals or exceeds $50,000. In the event of such casualty, all proceeds of insurance equal to or exceeding $50,000 shall be payable to Grantee, on behalf of and as Collateral Agent for the Lenders, and Grantor hereby authorizes and directs any affected insurance company to make payment of such proceeds directly to Grantee. If Grantor receives any proceeds of insurance resulting from such casualty equal to or exceeding $50,000, Grantor shall promptly pay over such proceeds to Grantee, subject to the provisions contained in any lease superior to this Security Deed and covering the portion of the Collateral which is damaged or destroyed by the casualty, which provisions require payment of such proceeds to a person other than Grantee. Grantee is 9 hereby authorized to pay out such proceeds with interest as provided in this SECTION 1.05, all such interest to be the income of Grantor to be held by Grantee, on behalf of and as Collateral Agent for the Lenders, subject to the terms of this Security Deed. Grantor shall pay all taxes upon such income and agrees to indemnify and hold harmless Grantee and the Lenders against such liability. If an Event of Default then exists under the terms of the Loan Documents or this Security Deed, Grantee shall not be obligated to make any further disbursements pursuant to the Credit Agreement and Grantee shall apply all loss proceeds remaining after deduction of all reasonable expenses and collection and settlement thereof, including without limitation, reasonable attorneys' and adjustors' fees and charges, to the repayment of the outstanding balance of the Indebtedness together with accrued interest, notwithstanding that the outstanding balance may not be due and payable. Otherwise, Grantee shall disburse such proceeds to Grantor in periodic intervals, upon delivery by Grantor of bills and invoices for repair or replacement work, if Grantor submits a plan to Grantee for repair or replacement of the Collateral or Improvements thereon which were damaged, lost, stolen or destroyed within ninety (90) days after said casualty, and Grantee approves such plan, which approval shall not be unreasonably withheld or delayed. In the event Grantee disburses insurance proceeds to Grantor, Grantor shall use such funds solely in the manner and for the purposes set forth in the plan for repair or replacement of the Collateral or Improvements thereon. Any portion of such funds not used for such repair or replacement shall be delivered to Grantee. If, however, Grantee does not receive such plan from Grantor within ninety (90) days, Grantee shall apply such insurance proceeds to the indebtedness. Nothing herein contained shall be deemed to excuse Grantor from repairing or maintaining the Collateral as provided in SECTION 1.02 hereof or restoring all damage or destruction to the Collateral, regardless of whether or not there are insurance proceeds available to Grantor or whether any such proceeds are sufficient in amount, and the application or release by Grantee of any insurance proceeds shall not cure or waive any Potential Event of Default or Event of Default under this Security Deed or invalidate any act done pursuant to such notice. 1.06. ASSIGNMENT OF POLICIES UPON FORECLOSURE. In the event of foreclosure of this Security Deed or other transfer of title or assignment of the Collateral in extinguishment, in whole or in part, of the Indebtedness secured hereby, all right, title and interest of Grantor in and to all policies of insurance required by SECTION 1.03 shall inure to the benefit of and pass to the successor in interest to Grantor or the purchaser or grantee of the Collateral. 10 1.07. INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET. (A) If Grantee or any Lender is made a party to any litigation instituted by a third party unaffiliated with Grantor concerning this Security Deed, any of the other Loan Documents, the Collateral or any part thereof or interest therein, or the occupancy of the Collateral by Grantor (other than litigation arising from the negligence or willful misconduct of Grantee, any Lender or their respective employees, agents and contractors), then Grantor shall indemnify, defend and hold Grantee, each such Lender harmless from all liability by reason of said litigation, including reasonable attorneys' fees and expenses (including the allocated cost of staff counsel) incurred by Grantee or any Lender as a result of any such litigation, whether or not any such litigation is prosecuted to judgment. Grantee may employ an attorney or attorneys to protect its rights and the rights of the Lenders hereunder, and in the event of such employment following any breach by Grantor, Grantor shall pay Grantee reasonable attorneys' fees and expenses incurred by Grantee, whether or not an action is actually commenced against Grantor by reason of its breach. (B) Grantor waives any and all right to claim or recover against Grantee, each Lender, the officers, employees, agents and representatives of each of them, for loss of or damage to Grantor, the Collateral, Grantor's property or the property of others under Grantor's control from any cause insured against or required to be insured against by the provisions of this Security Deed including, without limitation, if caused by negligence. (C) All sums payable by Grantor pursuant to this Security Deed shall be paid without notice, demand, counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the Indebtedness, obligations and liabilities of Grantor hereunder shall in no way be released, discharged or otherwise affected (except as expressly provided herein or required by law) by reason of: (i) any damage to or destruction of or any condemnation or similar taking of the Collateral or any part thereof; (ii) any restriction or prevention of or interference by any third party with any use of the Collateral or any part thereof; (iii) any title defect or encumbrance or any eviction from the Premises or the Improvements or any part thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to Grantee, or any action taken with respect to this Security Deed by any trustee or receiver of Grantee, or by any court, in any such proceeding; (v) any claim which Grantor has or might have against Grantee or any Lender; (vi) any default or failure on 11 the part of Grantee or any Lender to perform or comply with any of the terms hereof; or (vii) any default or failure on the part of Grantee or any Lender to perform or comply with any of the terms of any other agreement with Grantor; or (viii) any other occurrence whatsoever, whether similar or dissimilar to the foregoing; whether or not Grantor shall have notice or knowledge of any of the foregoing. Except as expressly provided herein, Grantor waives all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any sum secured hereby and payable by Grantor. 1.08. TAXES AND IMPOSITIONS. (A) Except to the extent that any of the following payments are required to be made and are made by Grantor in accordance with the terms and provisions of any lease covering any Leasehold Property (as defined in SECTION 4.01 hereof) which constitutes a portion of the Collateral, Grantor shall pay, or cause to be paid prior to delinquency, all real property taxes and assessments, general and special, and all other taxes and assessments of any kind or nature whatsoever, including, without limitation, nongovernmental levies or assessments such as maintenance charges, levies or charges resulting from covenants, conditions and restrictions affecting the Collateral, which are assessed or imposed upon the Collateral, or become due and payable, and which create or may create a lien upon the Collateral, or any part thereof, or upon any person, property, equipment or other facility used in the operation or maintenance thereof (all the above collectively hereinafter referred to as "IMPOSITIONS"); provided, however, that if, by law any such Impositions is payable, or may at the option of the taxpayer be paid, in installments, Grantor may pay the same or cause it to be paid, together with any accrued interest on the unpaid balance of such Impositions, in installments before any fine, penalty, interest or cost may be added thereto for the nonpayment of any such installment and interest. (B) If at any time after the date hereof there shall be assessed or imposed (i) a tax or assessment on the Collateral or any part thereof in lieu of or in addition to the Impositions payable by Grantor pursuant to SECTION 1.08(A), or (ii) a license fee, tax or assessment imposed on Grantee and measured by or based in whole or in part upon the amount of the outstanding Indebtedness secured hereby, then all such taxes, assessments or fees shall be deemed to be included within the term "IMPOSITIONS" as defined in SECTION 1.08(A) and Grantor shall pay and discharge the same as herein provided with respect to the payment of Impositions, except as otherwise provided in the immediately following sentence. If Grantor fails to pay such Impositions prior to delinquency or if Grantor is prohibited by law from paying 12 such Impositions, Grantee may at its option, after written notice to Grantor and Grantor's failure to pay such Imposition within thirty (30) days after receipt of such notice, declare all Indebtedness secured hereby, together with all accrued interest thereon, immediately due and payable. Anything to the contrary herein notwithstanding, Grantor shall have no obligation to pay any franchise, estate, inheritance, income, excess profits or similar tax levied on Grantee or on the Indebtedness secured hereby. (C) Subject to the provisions of SECTION 1.08(D) and upon request by Grantee, Grantor shall deliver to Grantee within thirty (30) days after the date upon which any such Impositions would become delinquent, official receipts of the appropriate taxing authority, or other proof satisfactory to Grantee, evidencing the payment thereof. (D) Grantor shall have the right before any delinquency occurs to contest or object to the amount or validity of any such Impositions by appropriate proceedings, but this shall not be deemed or construed in any way as relieving, modifying or extending Grantor's covenant to pay any such Impositions at the time and in the manner provided in this SECTION 1.08, unless Grantor has given prior written notice to Grantee of Grantor's intent to so contest or object to an Imposition, and unless (i) Grantor shall demonstrate to the satisfaction of Grantee that the proceedings to be initiated by Grantor shall conclusively operate to prevent the sale of the Collateral, or any part thereof, to satisfy such Imposition prior to final determination of such proceedings; or (ii) Grantor shall furnish a good and sufficient bond or surety as requested by and satisfactory to Grantee; or (iii) Grantor shall demonstrate to the satisfaction of Grantee that Grantor has provided a good and sufficient undertaking as may be required or permitted by law to accomplish a stay of any such sale. (E) In the event Grantee, in its reasonable discretion, deems the Lenders to be insecure or under-collateralized, then upon request by Grantee, Grantor shall pay to Grantee, on behalf of and as Collateral Agent for the Lenders, an initial cash reserve in an amount adequate to pay all Impositions for the ensuing tax fiscal year and shall thereafter continue to deposit with Grantee, on behalf of and as Collateral Agent for the Lenders, in monthly installments, an amount equal to one-twelfth (1/12th) of the sum of the annual Impositions reasonably estimated by Grantee, for the purpose of paying the installment of Impositions next due on the Collateral (funds deposited for this purpose shall hereinafter be referred to as "IMPOUNDS"). In such event Grantor further agrees to cause all bills, statements or other documents relating to Impositions to be sent or mailed directly to Grantee. Upon receipt of such bills, statements or other 13 documents, and providing Grantor has deposited sufficient Impounds with Grantee, on behalf of and as Collateral Agent for the Lenders, pursuant to this SECTION 1.08(E), Grantee shall timely pay such amounts as may be due thereunder out of the Impounds so deposited with Grantee. If at any time and for any reason (other than the application by Grantee of Impounds against the Indebtedness as permitted hereunder) the Impounds deposited with Grantee, on behalf of and as Collateral Agent for the Lenders, are or will be insufficient to pay such amounts as may then or subsequently be due during the then current tax year, Grantee may notify Grantor and upon such notice Grantor shall deposit promptly an amount equal to such deficiency with Grantee. Notwithstanding the foregoing, nothing contained herein shall cause Grantee to be deemed a trustee of said funds for the benefit of Grantor or to be obligated to pay any amounts in excess of the amount of funds deposited with Grantee pursuant to this SECTION 1.08(E). Grantee shall establish a separate account for the Impounds and may not commingle Impounds with its own funds, but Grantor shall not be entitled to any interest on any Impounds held by Grantee pending disbursement or application hereunder. Grantee may reserve for future payment of Impositions such portion of the Impounds as Grantee may determine necessary. Upon an Event of Default under any of the Loan Documents or this Security Deed, Grantee may apply the balance of the Impounds upon any Indebtedness or obligation secured hereby in such order as Grantee may determine, notwithstanding that said Indebtedness or the performance of said obligation may not yet be due according to the terms thereof. Should Grantor fail to deposit with Grantee (exclusive of that portion of said payments which has been applied by Grantee upon any Indebtedness or obligation secured hereby) sums sufficient to pay fully such Impositions at least fifteen (15) days before delinquency thereof, Grantee may, without any obligation to do so, advance any amounts required to make up the deficiency, which advances, if any, shall be secured hereby, together with interest at the Agreed Rate, and shall be repayable to Grantee for the benefit and account of the Lenders as herein elsewhere provided, or, Grantee may, without making any advance whatever, apply any Impounds held by it upon any Indebtedness or obligation secured hereby in such order as Grantee may determine, notwithstanding that such Indebtedness or the performance of said obligation may not yet be due according to the terms thereof. Should any Event of Default occur or exist on the part of the Grantor in the payment or performance of any of Grantor's or any guarantor's obligations under the terms of the Loan Documents, Grantee may apply any sums or amounts in its hands received pursuant to SECTION 1.04(B) or SECTION 1.08(E) hereof, or as Rents or otherwise, to any Indebtedness or obligation of the Grantor secured hereby in such manner and order as Grantee may determine, notwithstanding such Indebtedness or the performance of such obligation may not yet be due according to the terms thereof. Except as 14 expressly provided herein, the receipt, use or application of any such Impounds paid by Grantor hereunder to Grantee, on behalf of and as Collateral Agent for the Lenders, shall not be construed to affect the maturity of any Indebtedness secured by this Security Deed or any of the rights or powers of Grantee or the Lenders under the terms of the Loan Documents or any of the obligations of Grantor or any guarantor under the Loan Documents. (F) Other than with respect to any leasehold estate constituting a portion of the Collateral, Grantor shall not initiate the joint assessment of any real and personal property which may constitute all or a portion of the Collateral or initiate any other procedure whereby the lien of the real property taxes and the lien of the personal property taxes shall be assessed, levied or charged to the Collateral as a single lien. (G) If requested by Grantee, Grantor shall cause to be furnished to Grantee a tax reporting service covering the Collateral of the type, duration and with a company satisfactory to Grantee. 1.09. UTILITIES. Grantor shall pay or shall cause to be paid when due all utility charges which are incurred by Grantor for the benefit of the Collateral or which may become a charge or lien against the Collateral for gas, electricity, water or sewer services furnished to the Collateral and all other assessments or charges of a similar nature, whether public or private (including, without limitation, common area maintenance assessments under any lease covering a leasehold estate which constitutes a portion of the Collateral), affecting or related to the Collateral or any portion thereof, whether or not such taxes, assessments or charges are or may become liens thereon. 1.10. ACTIONS AFFECTING COLLATERAL. Grantor shall and, at the option of Grantee, Grantee may appear in and contest any action or proceeding purporting to affect the security hereof or the rights or powers of Grantee or any Lender; and shall pay all reasonable costs and expenses, including cost of evidence of title and attorneys' fees, in any such action or proceeding in which Grantee may appear. 1.11. ACTIONS BY GRANTEE TO PRESERVE COLLATERAL. If Grantor fails to make any payment or to do any act as and in the manner provided in any of the Loan Documents, Grantee, in its own discretion, without obligation so to do, without releasing Grantor from any obligation, and upon notice to Grantor, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof. In connection therewith (without limiting its general powers, whether conferred herein, in another Loan Document or 15 by law), Grantee shall have and is hereby given the right, but not the obligation, (i) to enter upon and take possession of the Collateral; (ii) to make additions, alterations, repairs and improvements to the Collateral which Grantee may consider necessary or proper to keep the Collateral in good condition and repair; (iii) to appear and participate in any action or proceeding affecting or which may affect the security hereof or the rights or powers of Grantee or any Lender; (iv) to pay, purchase, contest or compromise any encumbrance, claim, charge, lien or debt which in the judgment of Grantee may affect or appears to affect the security of this Security Deed or be prior or superior hereto; and (v) in exercising such powers, to pay necessary expenses, including employment of counsel (including the allocated cost of staff counsel) or other necessary or desirable consultants. Grantor shall, promptly upon demand therefor by Grantee, pay to Grantee an amount equal to all reasonable costs and expenses incurred by Grantee in connection with the exercise by Grantee of the foregoing rights, including, without limitation, costs of evidence of title, court costs, appraisals, surveys and receiver's, trustee's and attorneys' fees, together with interest thereon from the date of such expenditures at the Agreed Rate. 1.12. TRANSFER OF COLLATERAL BY GRANTOR. Grantor agrees that, in the event of any transfer of the Collateral or any portion thereof or interest therein without the prior written consent of Grantee, Grantee shall have the absolute right, without prior demand or notice, to declare all sums secured hereby allocable to the Collateral immediately due and payable. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Any such transfer shall be subject to this Security Deed, and any such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein. Such assumption shall not, however, release Grantor or any maker or guarantor of the Indebtedness from any liability thereunder without the prior written consent of Grantee. If Grantee does not deliver its written approval, disapproval or confirmation, as requested by Grantor, within ten (10) Business Days (as defined in the Credit Agreement) after receipt of same, such failure shall be deemed to be disapproval by Grantee of the proposed transfer. As used herein, "TRANSFER" includes any sale, agreement to sell, transfer, conveyance, encumbrance, lease or sublease or other disposition of the entire Collateral, or any material portion thereof or interest therein, whether voluntary, involuntary, by operation of law or otherwise, except as expressly permitted under the Credit Agreement. "TRANSFER" shall also include the transfer, assignment, hypothecation or conveyance of legal or beneficial ownership of any of the voting stock of Grantor, if any such transfer would constitute an Event of Default under the Credit Agreement or the Notes. 16 1.13. FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES. All representations, warranties and covenants of Grantor contained in the Loan Documents, or made to Grantee, or the Lenders in connection with the Indebtedness secured hereby, or incorporated by reference therein, shall survive the execution and delivery of this Security Deed and shall remain continuing obligations, warranties and representations of Grantor so long as any portion of the Indebtedness secured by this Security Deed remains outstanding. 1.14. EMINENT DOMAIN. In the event that any proceeding or action be commenced for the taking of the Collateral, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, condemnation or otherwise, or if the same be taken or damaged by reason of any public improvement or condemnation proceeding, or in any other manner, or should Grantor receive any notice or other information regarding such proceeding, action, taking or damage, Grantor shall give prompt written notice thereof to Grantee and the Lenders. Grantee shall be entitled at its option, without regard to the adequacy of its security, to commence, appear in and prosecute in its own name, on behalf of and as Collateral Agent for the Lenders, any such action or proceeding. Grantee, on behalf of and as Collateral Agent for the Lenders, and in consultation with Grantor, shall also be entitled to make any compromise or settlement in connection with such taking or damage. Subject to the provisions contained in any lease superior to this Security Deed and covering the portion of the Collateral which is so taken or damaged, which provisions require payment of the Condemnation Proceeds (as hereinafter defined) to a person other than Grantee, all compensation, awards, damages, rights of action and proceeds awarded to Grantor by reason of any such taking or damage (the "CONDEMNATION PROCEEDS") are hereby assigned to Grantee, on behalf of and as Collateral Agent for the Lenders, and Grantor agrees to execute such further assignments of the Condemnation Proceeds as Grantee may require. After deducting therefrom all reasonable costs and expenses (regardless of the particular nature thereof and whether incurred with or without suit), including attorneys' fees, incurred by it in connection with any such action or proceeding, Grantee shall apply all such Condemnation Proceeds to the restoration of the Improvements, provided that the taking or damage will not, in Grantee's reasonable judgment, materially affect the contemplated use and operation of the Improvements, and, provided further, in the case of any leasehold estate constituting a portion of the Collateral with respect to which Condemnation Proceeds have been received by Grantee, neither party to the lease covering such leasehold estate has delivered any notice of termination of such lease on account of the taking or damage with respect to which the Condemnation Proceeds have been paid and, in the case of Grantor, such right of termination shall be exercised, if at 17 all, in accordance with the provisions of SECTION 4.01 hereof. If all of the above conditions are met, Grantee shall disburse the Condemnation Proceeds as repairs or replacements are effected and continuing expenses become due and payable. If any one or more of the above conditions are not met, Grantee shall apply all of the Condemnation Proceeds, after deductions as herein provided, to the repayment of the Indebtedness secured hereby. Application or release of the Condemnation Proceeds as provided herein shall not cure or waive any Potential Event of Default or Event of Default hereunder or under any other Loan Document or invalidate any act done pursuant to such notice. 1.15. ADDITIONAL SECURITY. No other security now existing, or hereafter taken, to secure the Indebtedness or the obligations secured hereby shall be impaired or affected by the execution of this Security Deed; and all additional security shall be taken, considered and held as cumulative. The taking of additional security, execution of partial releases of the security, or any extension of the time of payment of any of the Indebtedness shall not diminish the force, effect or lien of this Security Deed and shall not affect or impair the liability of any maker, surety or endorser for the payment of the Indebtedness. In the event Grantee at any time holds additional security for any of the Indebtedness secured hereby, it may enforce the sale thereof or otherwise realize upon the same, at its option, either before, concurrently, or after a sale is made hereunder. 1.16. (Intentionally omitted) 1.17. SUCCESSORS AND ASSIGNS. This Security Deed applies to, inures to the benefit of and binds all parties hereto, the Lenders, and the respective devisees, administrators, successors and assigns of each. The term "GRANTEE" shall mean the Collateral Agent (as such term is defined in the Credit Agreement), including any successor thereto, whether or not named as Grantee herein. 1.18. INSPECTIONS. Upon prior notice to Grantor, Grantee, any Lender, or any of their respective agents, representatives or workers, are authorized to enter at any reasonable time upon or in any part of the Collateral for the purpose of inspecting the same and for the purpose of performing any of the acts authorized to be performed hereunder or under the terms of any of the Loan Documents. 1.19. LIENS. Grantor shall pay and promptly discharge, at Grantor's cost and expense, all liens, encumbrances and charges upon the Collateral, or any part thereof or interest therein other than the Permitted Encumbrances (as defined in SECTION 1.26(A) hereof); provided that such obligation shall not apply to any lien, encumbrance or charge 18 being contested by Grantor in good faith. If Grantor shall fail to remove and discharge any such lien, encumbrance or charge, then, in addition to any other right or remedy of Grantee, Grantee, acting on behalf of and as Collateral Agent for the Lenders, 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, encumbrance or charge by depositing in a court a bond or the amount claimed or otherwise giving security for such claim, or by procuring such discharge in such manner as is or may be prescribed by law. Grantor shall, promptly upon demand therefor by Grantee, pay to Grantee an amount equal to all reasonable costs and expenses incurred by Grantee in connection with the exercise by Grantee of the foregoing right to discharge any such lien, encumbrance or charge, together with interest thereon from the date of such expenditure at the Agreed Rate. 1.20. (Intentionally omitted) 1.21. GRANTEE'S POWERS. Without affecting the liability of any other person liable for the payment of any Indebtedness or obligation herein mentioned, and without affecting the lien or charge of this Security Deed upon any portion of the Collateral not then or theretofore released as security for the full amount of all unpaid Indebtedness and obligations, Grantee may, from time to time and without notice and at the direction of the person to whom such Indebtedness or obligation is owed (i) release any person so liable, (ii) extend the maturity of any such obligation, (iii) grant other indulgences, (iv) release or reconvey, or cause to be released or reconveyed with respect to such Indebtedness or obligation at any time any parcel, portion or all of the Collateral, (v) take or release any other or additional security for any Indebtedness or obligation herein mentioned, or (vi) make compositions or other arrangements with debtors in relation thereto. 1.22. REPORTS. Grantor shall furnish to Grantee and the Lenders from time to time such reports in connection with the Collateral as Grantee and Lenders may reasonably request, all in reasonable detail. 1.23. TRADE NAMES. Grantor shall execute a certificate in form satisfactory to Grantee listing the trade names or fictitious business names under which Grantor intends to operate the Collateral or any business located thereon and representing and warranting that Grantor does business under no other trade names or fictitious business names with respect to the Collateral. Grantor shall promptly notify Grantee in writing of any change in said trade names or fictitious business names, and will, upon request of Grantee, execute any additional financing statements and other certificates necessary to reflect the change in trade names or fictitious business names. 1.24. LEASEHOLD. If a leasehold estate constitutes a portion of the Collateral, Grantor agrees not to amend, change, terminate or modify the lease covering such leasehold estate or any interest therein without the prior written consent of Grantee. If Grantee does not deliver its written approval or disapproval to Grantor's written request within twenty (20) Business Days after receipt of same, such failure shall be deemed to be disapproval by Grantee. Consent to one amendment, change, agreement or modification shall not be deemed to be a waiver of the right to require consent to other, future or successive amendments, changes, agreements or modifications. Grantor agrees to perform all of its obligations and agreements under said leasehold and shall not take, except in accordance with the provisions set forth above in this SECTION 1.24, any action or omit to take any action which would effect or permit the termination of said leasehold. Grantor agrees to notify promptly Grantee in writing with respect to any default or alleged default by any party thereto which would be a basis for any party thereto to terminate the lease and to deliver to Grantee copies of all notices, demands, complaints or other communications received or given by Grantor with respect to any such default or alleged default. Grantee shall have the option to cure any such default and to perform any or all of Grantor's obligations thereunder. All reasonable sums expended by Grantee in curing any such default shall be secured hereby, together with interest at the Agreed Rate, and shall be due and payable promptly after demand or notice and shall bear interest from date of expenditure at the Agreed Rate. 19 1.25 GRANTOR REMAINS LIABLE. Anything herein to the contrary notwithstanding, (a) Grantor shall remain liable under all contracts and agreements relating to the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Security Deed had not been executed, (b) the exercise by Grantee or the Lenders of any of their rights hereunder shall not release Grantor from any of its duties or obligations under any contracts and agreements related to the Collateral, and (c) neither Grantee nor the Lenders shall have any obligations or liability under any of the contracts or agreements related to the Collateral by reason of this Security Deed, and neither Grantee nor the Lenders shall be obligated to perform any of the obligations or duties of Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. 1.26. WARRANTIES AND REPRESENTATIONS OF GRANTOR. Grantor represents and warrants to Grantee and Lenders as follows: 20 (A) Grantor is the owner of good and marketable title to the Collateral free and clear of any lien, security interest, charge or encumbrance except for the lien and charge of this Security Deed and all Liens (as defined in the Credit Agreement) permitted under SECTIONS 4.5 and 6.2 of the Credit Agreement (the "PERMITTED ENCUMBRANCES"). (B) Grantor has good right and lawful authority to encumber the Collateral with and grant the lien and charge created by this Security Deed, and the execution, delivery and performance by Grantor of this Security Deed have been duly authorized by all necessary corporate action of Grantor and do not and will not (i) violate any provision of any law, rule or regulation (including, without limitation, Regulation U or X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Grantor, or the charter or by-laws of Grantor, or (ii) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which Grantor is a party or by which Grantor or its properties may be bound or affected. Grantor will warrant and defend its title to the Collateral against claims of all persons whomsoever, except claimants under any of the Permitted Encumbrances, and Grantor will maintain and preserve the lien and charge of this Security Deed so long as any of the Indebtedness secured hereby is outstanding, subject only to the Permitted Encumbrances. (C) No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body, other than the recordation of this Security Deed in the official records of the County in which the Collateral is located, is required (i) for the grant by Grantor of the lien created hereby or for the execution, delivery and performance by Grantor of this Security Deed, or (ii) for the perfection of or the exercise by Grantee, on behalf of Lenders, of the rights and remedies conferred hereunder (except as may be required by the express terms of this Security Deed). (D) Grantor agrees that from time to time, at the expense of Grantor, Grantor will promptly execute and deliver, in recordable form, all further instruments and documents, and take all further action, that may be reasonably necessary or desirable, or that Grantee may reasonably request, in order to perfect and protect any lien, charge or encumbrance created or purported to be created by this Security Deed upon the Collateral or any portion thereof, or to enable Grantee and Lenders to 21 exercise their rights and remedies hereunder with respect to any portion of the Collateral. ARTICLE II ASSIGNMENT OF RENTS, ISSUES AND PROFITS 2.01. ASSIGNMENT OF RENTS, ISSUES AND PROFITS. Grantor hereby absolutely and unconditionally assigns and transfers to Grantee, on behalf of and as Collateral Agent for the Lenders, all the Rents of the Collateral, and hereby gives to and confers upon Grantee, on behalf of and as Collateral Agent for the Lenders, the right, power and authority to collect such Rents. Grantor irrevocably appoints Grantee, on behalf of and as Collateral Agent for the Lenders, its true and lawful attorney-in-fact, at any time and from time to time, to demand, receive and enforce payment, to give receipts, releases and satisfactions, and to sue, in the name of Grantor or Grantee, for all such Rents and apply the same to the Indebtedness secured hereby as more particularly described in Section 2.02 below; provided, however, that Grantee hereby grants to Grantor a license to collect such Rents (but not more than thirty (30) days in advance unless the written approval of Grantee has first been obtained), and to retain and enjoy same, and to demand, receive and enforce payment and to give receipts, so long as an Event of Default shall not have occurred hereunder and be continuing. Upon request of Grantee, Grantor shall execute and deliver to Grantee, on behalf of and as Collateral Agent for the Lenders, in recordable form, a specific assignment of any lease, sublease, license, concession or other agreement (collectively, the "LEASES") now or hereafter affecting the Collateral or any portion thereof to evidence further the assignment hereby made. The assignment of the rents, of the Collateral in this ARTICLE II is intended to be an absolute and present assignment from Grantor to Grantee and not merely the passing of a security interest. 2.02. COLLECTION UPON DEFAULT. Upon the occurrence of an Event of Default, Grantee may, at any time without notice, either in person, by agent or by a receiver appointed by a court, and without regard to the adequacy of any security for the indebtedness hereby secured and, with or without taking possession of the Premises or any portion thereof in its own name, sue for or otherwise collect such Rents including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including, without limitation, attorneys' fees, upon any Indebtedness secured hereby, and in such order as Grantee may determine. A written demand by Grantee on any tenant for payment directly to Grantee of Rents due or to become due under any of the Leases shall be sufficient to warrant and require such tenant to make payments of such Rents and all future payments thereof 22 directly to Grantee without any further consent of or reference to Grantor. Grantor hereby authorizes each such tenant to rely upon any such written demand by Grantee and after any such demand to pay all Rents to Grantee. Each such tenant shall be fully protected from all claims by Grantor in making such payments to Grantee. Grantor hereby authorizes Grantee to give notice in writing of this assignment at any time to any tenant under any of the Leases. In order to collect such Rents, Grantee shall be entitled to notify any payor of such Rents, including without limitation, any tenant under any lease, to make such payments directly to Grantee. The collection of such Rents or the application thereof as aforesaid shall not cure or waive any Potential Event of Default, Event of Default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default. ARTICLE III REMEDIES UPON DEFAULT 3.01. EVENTS OF DEFAULT. (1) Any of the events specified in the Credit Agreement as an Event of Default, or (2) a breach or default by Grantor of any of its obligations under this Security Deed that remains uncured thirty (30) days after Grantee shall have given Grantor written notice thereof, shall be an Event of Default hereunder (an "EVENT OF DEFAULT"). 3.02. ACCELERATION UPON DEFAULT, ADDITIONAL REMEDIES. Upon the occurrence of an Event of Default, Grantee may declare all Indebtedness secured hereby to be immediately due and payable. Grantee may do any one or more of the following: (A) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court and without regard to the adequacy of its security, enter upon and take possession of the Collateral, or any part thereof, in its own name or in the name of a trustee or receiver, and do any acts which it deems necessary or desirable to preserve the value, marketability or rentability of the Collateral, or any part thereof or interest therein, increase the income therefrom or protect the security hereof and, with or without taking possession of the Collateral, sue for or otherwise collect the Rents, including those past due and unpaid, and apply the same, less reasonable costs and expenses of operation and collection including, without limitation, attorneys' fees, upon any Indebtedness secured hereby, all in such order as Grantee may determine. The entering upon and taking possession of the Collateral, the collection of such Rents and the ap- 23 plication thereof as aforesaid, shall not cure or waive any Potential Event of Default, Event of Default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default and, notwithstanding the continuance in possession of all or any portion of the Collateral or the collection, receipt and application of Rents, Grantee shall be entitled to exercise every right provided for in any of the Loan Documents or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; or (B) Exercise all other rights and remedies provided herein, in any Loan Document or other document or agreement now or hereafter securing all or any portion of the Indebtedness secured hereby, or by law. 3.03. FORECLOSURE BY POWER OF SALE. If an Event of Default shall have occurred, Grantee, at its option, may sell the Premises or any part of the Premises at one or more public sale or sales before the door of the courthouse of the county in which the Premises or any part of the Premises is situated, to the highest bidder for cash, in order to pay the Indebtedness and all expenses of sale and of all proceedings in connection therewith, including reasonable attorneys' fees, after advertising the time, place and terms of sale once a week for four (4) weeks immediately preceding such sale (but without regard to the number of days) in a newspaper in which Sheriff's sales are advertised in said county. At any such public sale, Grantee may execute and deliver to the purchaser a conveyance of the Premises or any part of the Premises with full warranties of title, and to this end Grantor hereby constitutes and appoints Grantee the agent and attorney-in-fact of Grantor to make such sale and conveyance, and thereby to divest Grantor of all right, title and equity that Grantor may have in and to the Premises and to vest the same in the purchaser or purchasers at such sale or sales, and all the acts and doings of said agent and attorney-in-fact are hereby ratified and confirmed and any recitals in said conveyance or conveyances as to facts essential to a valid sale shall be binding upon Grantor. The aforesaid power of sale and agency hereby granted are coupled with an interest and are irrevocable by death or otherwise, are granted as cumulative of the other remedies provided hereby or by law for collection of the Indebtedness and shall not be exhausted by one exercise thereof but may be exercised until full payment of all of the secured obligations. In the event of any sale under this Security Deed by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Premises may be sold as an entirety or in separate parcels and in such manner or order as Grantee in its sole discretion may elect, and if Grantee so elects, Grantee may sell the personal property covered by this Security Deed 24 at one or more separate sales in any manner permitted by the Uniform Commercial Code of the State of Georgia, and one or more exercises of the powers herein granted shall not extinguish nor exhaust such powers, until the entire Collateral are sold or the Indebtedness is paid in full. If the Indebtedness is now or hereafter further secured by any chattel deeds, pledges, contracts of guaranty, assignments of lease or other security instruments, Grantee may at its option exhaust the remedies granted under any of said security instruments either concurrently or independently, and in such order as Grantee may determine. 3.04 PURCHASE BY GRANTEE. Upon any foreclosure sale by exercise of power of sale or otherwise, Grantee may bid for and purchase the Collateral or any portion thereof and shall be entitled to apply all or any part of the Indebtedness secured hereby as a credit to the purchase price. 3.05 APPLICATION OF PROCEEDS OF SALE. In the event of a foreclosure sale of the Collateral, the proceeds of said sale shall be applied, first, to the expenses of such sale and of all proceedings in connection therewith, including attorney's fees, then to insurance premiums, liens, assessments, taxes and charges including utility charges advanced by Grantee, then to payment of the outstanding principal balance of the indebtedness secured hereby, then to the accrued interest on all of the foregoing, and finally the remainder, if any, shall be paid to Grantor or to the person or entity lawfully entitled to same. 3.06 GRANTOR AS TENANT HOLDING OVER. In the event of any such foreclosure sale by Grantee, Grantor shall be deemed a tenant holding over and shall forthwith deliver possession to the purchaser or purchasers at such sale or be summarily dispossessed according to provisions of law applicable to tenants holding over. 3.07 WAIVER OF APPRAISEMENT. VALUATION, STAY, EXTENSION AND REDEMPTION LAWS. Grantor agrees, to the full extent permitted by law, that in case of a default on the part of Grantor hereunder, neither Grantor nor anyone claiming through or under it shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension, homestead, exemption or redemption laws now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this Security Deed, or the absolute sale of the Collateral, or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereat, and Grantor, for itself and all who may at any time claim through or under it, hereby waives to the full extent that it may lawfully so do, the benefit of all such laws, and any and all right to have the assets comprised 25 in the security intended to be created hereby marshalled upon any foreclosure of this Security Deed. 3.08 WAIVER OF HOMESTEAD. Grantor hereby waives and renounces all homestead and exemption rights provided for by the Constitution and the laws of the United States and of any state, in and to the Collateral as against the collection of the secured obligations, or any part hereof. 3.09 LEASES. Grantee, at its option, is authorized to foreclose this Security Deed subject to the rights of any tenants of the Premises, and the failure to make any such tenants parties to any such foreclosure proceedings and to foreclose their rights will not be, nor be asserted to be by Grantor, a defense to any proceedings instituted by Grantee to collect the secured obligations. 3.10 (Intentionally Omitted) 3.11. PERSONAL PROPERTY. The provisions of the Security Agreement of even date herewith, among Grantor, Grantee and the Lenders are made a part hereof by this reference, and an Event of Default thereunder shall be an Event of Default under this Security Deed. It is the express understanding and intent of the parties that as to any personal property interests subject to ARTICLE 9 of the Uniform Commercial Code (the "CODE") as enacted in the State of Georgia, Grantee, upon an Event of Default, may proceed under the Code or may proceed as to both real and personal property interests in accordance with the provisions of this Security Deed and its rights and remedies in respect to real property, as specifically permitted under the Code and treat both real and personal property interests as one parcel or package or security. 3.12. APPOINTMENT OF RECEIVER. Upon the occurrence of an Event of Default hereunder, Grantee, on behalf of and as Collateral Agent for the Lenders, and without regard to the then value of the Collateral or the interest of Grantor therein, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Collateral, and Grantor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Grantee in case of entry as provided herein, and shall continue as such and exercise all such powers until the date of confirmation of sale of the Collateral unless such receivership is sooner terminated. 3.13. REMEDIES NOT EXCLUSIVE. Grantee, on behalf of and as Collateral Agent for the Lenders, and each of them, 26 shall be entitled to enforce payment and performance of any Indebtedness or obligations secured hereby and to exercise all rights and powers under this Security Deed or under any Loan Document or other agreement or any laws now or hereafter in force, notwithstanding some or all of the said Indebtedness and obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this Security Deed nor its enforcement whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manner affect Grantee's right to realize upon or enforce any other security now or hereafter held by Grantee or any Lender, it being agreed that Grantee shall be entitled to enforce this Security Deed and any other security now or hereafter held by Grantee on behalf of the Lenders, in such order and manner as Grantee may determine. No remedy herein conferred upon or reserved to Grantee is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Loan Documents to Grantee or any Lender, or to which any of them may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Grantee and Grantee may pursue inconsistent remedies on behalf of the Lenders. ARTICLE IV MISCELLANEOUS 4.01. AMENDMENTS. No amendment or waiver of any provision of this Security Deed nor consent to any departure by Grantor herefrom shall in any event be effective unless the same shall be in writing and signed by the Requisite Lenders (as that term is defined in Section 1.1 of the Credit Agreement), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 4.02. SUCCESSOR GRANTEE. Upon the resignation of Grantee as Agent (as defined in the Credit Agreement) for the Lenders, Grantee shall have the right to assign all of its right, title and interest under this Security Deed to such Person as may be designated by the Lenders. The assignment of Grantee's right, title and interest hereunder pursuant to this SECTION 4.02 shall become effective upon the execution and recordation of an assignment of this Security Deed by Grantee in the official records of the County in which the Collateral is located in favor of the assignee designated in accordance with the provisions of this SECTION 4.02. 27 4.03. GRANTOR WAIVER OF RIGHTS. Grantor waives to the extent permitted by law, (i) the benefit of all laws now existing or that may hereafter be enacted providing for any appraisement before sale of any portion of the Collateral, and, (ii) all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of the secured Indebtedness and marshaling in the event of foreclosure of the liens hereby created, and (iii) all rights and remedies which Grantor may have or be able to assert by reason of applicable laws pertaining to the rights and remedies of sureties. 4.04. STATEMENTS BY GRANTOR. Grantor and Grantee agree that each shall, within ten (10) days after written notice thereof from the other, deliver to the other a written statement stating the unpaid principal of and interest on the Indebtedness and any other amounts secured by this Security Deed and stating whether any offset or defense exists against such principal and interest. Grantor shall pay any reasonable amount demanded by Grantee or its authorized loan servicing agent for any statement regarding the obligations secured hereby; provided, however, that such amount may not exceed the maximum amount allowed by law at the time request for the statement is made. 4.05. (Intentionally omitted) 4.06. NOTICES. All notices, requests and demands to be made hereunder to the parties hereto shall be in writing and may be personally served, telecopied or sent by United States mail or courier service and shall be deemed to have been given when delivered in person, receipt of telecopy or four Business Days after depositing it in the United States mail, registered or certified, with postage prepaid and properly addressed; PROVIDED that notices to Agent shall not be effective until received. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided herein) shall be as follows: To Grantor: ___________________________ ___________________________ ___________________________ ___________________________ Attention: _______________ To Grantee: Bankers Trust Company 300 South Grand Avenue Los Angeles, California 90071 Attention: Patrice Daniels 4.07. (Intentionally omitted) 28 4.08. CAPTIONS. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Security Deed. 4.09. INVALIDITY OF CERTAIN PROVISIONS. Every provision of this Security Deed is intended to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court of competent jurisdiction, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. If the lien of this Security Deed is invalid or unenforceable as to any part of the Indebtedness, or if the lien is invalid or unenforceable as to any part of the Collateral, the unsecured or partially secured portion of the Indebtedness shall be completely paid prior to the payment of the remaining and secured or partially secured portion of the Indebtedness, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid on and applied to the full payment of that portion of the Indebtedness which is not secured or fully secured by the lien of this Security Deed. 4.10. SUBROGATION. To the extent that proceeds of the Indebtedness are used to pay any outstanding lien, charge or prior encumbrance against the Collateral, such proceeds have been or will be advanced by Grantee at Grantor's request and Grantee shall be subrogated to any and all rights and liens held by any owner or holder of such outstanding liens, charges and prior encumbrances, irrespective of whether said liens, charges or encumbrances are released. 4.11. ATTORNEYS' FEES. If the Indebtedness is not paid when due or if any Event of Default occurs, Grantor promises to pay all reasonable costs of enforcement and collection, including but not limited to, reasonable attorneys' fees, whether or not such enforcement and collection includes the filing of a lawsuit. 4.12. GOVERNING LAW. The enforcement of this Security Deed shall be governed by and construed in accordance with the laws of the state of Georgia. Enforcement of the Credit Agreement and the Notes shall be governed by and construed in accordance with the laws of the state of New York. 4.13. INTERPRETATION AND TERMINOLOGY. In this Security Deed the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires. The terms "lease" and "leasehold" shall mean and include both usufructs and estates for years. 29 4.14. COUNTERPARTS. This Security Deed may be executed and acknowledged in counterparts, all of which executed and acknowledged counterparts shall together constitute a single document. Signature and acknowledgment pages may be detached from the counterparts and attached to a single copy of this Security Deed to form physically one document, which may be recorded. 4.15. FIXTURE FILING. This Security Deed is intended to be and constitutes a financing statement filed as a fixture filing pursuant to the provisions of SECTION 11-9-402(6) of the Uniform Commercial Code of Georgia with respect to those portions of the Collateral consisting of goods which are now or are to become fixtures relating to the Premises. Grantor grants to Grantee on behalf of and as Collateral Agent for the Lenders a security interest in all existing and future goods which are now or in the future become fixtures relating to the Premises and the proceeds thereof, including, without limitation, the goods and proceeds thereof described in EXHIBIT B attached hereto. Grantor covenants and agrees that the filing of this Security Deed in the real estate records of the county where the Premises are located shall also operate from the date of such filing as a fixture filing in accordance with SECTION 11-9-313 of the Uniform Commercial Code of Georgia. Grantor agrees to execute and deliver to Grantee, upon Grantee's request, any financing statements, as well as extensions, renewals and amendments thereof, and any reproductions of this Security Deed in such form as Grantee may require to perfect a security interest with respect to such extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Grantee may require. Without the prior written consent of Grantee, Grantor shall not create or suffer to be created pursuant to the Georgia Uniform Commercial Code any other security interest in such items, including replacements and additions thereto. Upon the occurrence of an Event of Default, Grantee shall have on behalf of Lenders, the remedies of a secured party under the Georgia Uniform Commercial Code and may also invoke the other remedies provided in this Security Deed. The name of the debtor is Blue Bird Body Company, a Georgia corporation. The address of the debtor is ___________________________________________________________________, Attention: _____________. The name of the secured party is Bankers Trust Company, a New York banking corporation. The address of the secured party is 300 South Grand Avenue, Los Angeles, California 90071, Attention: Patrice Daniels. 4.16 TERMINATION OF FIXTURE FILINGS. If Grantor removes any Improvements pursuant to Section 1.02 hereof, then Grantee shall provide to Grantor a UCC-3 termination statement as to such Improvements removed to terminate the effect of any 30 filing with respect to Grantee's security interest in such Improvements. 4.17 LENDERS' CONSENT. In any circumstance hereunder wherein Lender's consent or approval is required, such consent or approval may be granted, withheld or conditioned in Lender's sole discretion, with no express or implied requirement of reasonableness. 4.18 WAIVER OF GRANTOR'S RIGHTS. BY EXECUTION OF THIS SECURITY DEED, GRANTOR EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT TO ACCELERATE THE INDEBTEDNESS SECURED HEREBY AND THE POWER OF ATTORNEY GIVEN HEREIN TO GRANTEE TO SELL THE PREMISES BY NON-JUDICIAL FORECLOSURE UPON DEFAULT BY GRANTOR WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE OTHER THAN SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS SECURITY DEED; (B) TO THE EXTENT PERMITTED BY LAW, WAIVES ANY AND ALL RIGHTS WHICH GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE UNITED STATES (INCLUDING THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW, (1) TO NOTICE AND JUDICIAL HEARING PRIOR TO THE EXERCISE BY GRANTEE OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO GRANTEE EXCEPT SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE PROVIDED IN THIS SECURITY DEED; AND (2) CONCERNING THE APPLICATION, RIGHTS OR BENEFITS OF ANY STATUTE OF LIMITATION OR ANY MORATORIUM, REINSTATEMENT, MARSHALLING, FORBEARANCE, APPRAISEMENT, VALUATION, STAY, EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION LAWS; (C) ACKNOWLEDGES THAT GRANTOR HAS READ THIS SECURITY DEED AND ANY AND ALL QUESTIONS REGARDING THE LEGAL EFFECT OF THIS SECURITY DEED AND ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO GRANTOR AND GRANTOR HAS CONSULTED WITH COUNSEL OF GRANTOR'S CHOICE PRIOR TO EXECUTING THIS SECURITY DEED; AND (D) ACKNOWLEDGES THAT ALL WAIVERS OF THE AFORESAID RIGHTS OF GRANTOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY AND WILLINGLY BY GRANTOR AS PART OF A BARGAINED FOR LOAN TRANSACTION AND THAT THIS SECURITY DEED IS VALID AND ENFORCEABLE BY GRANTEE AGAINST GRANTOR IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS HEREOF. 4.19 Should the Indebtedness be paid and performed in full, and all agreements between Grantor and Grantee to make further advances be terminated, then Grantee shall reconvey this Security Deed to Grantor. [SIGNATURES ON NEXT PAGE] 31 IN WITNESS WHEREOF, Grantor has executed, sealed and delivered this Security Deed as of the day and year first above written. GRANTOR: BLUE BIRD BODY COMPANY, a Georgia corporation By: _________________________ Printed name: _______________ Its: [Vice] President Attest: _____________________ Printed name: _______________ Its: [Assistant] Secretary [Corporate Seal] Signed, sealed and delivered in the presence of: Unofficial witness: _____________________________ Printed name: _______________ Notary Public: _____________________________ Printed name: _______________ Commission expiration Date: ______________________ [Notarial Seal] 32 EXHIBIT XIX FORM OF ACKNOWLEDGEMENT AND CONFIRMATION Reference is made to that certain First Amended and Restated Credit Agreement dated as of November 15, 1996 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT") by and among Blue Bird Body Company, Blue Bird Corporation, the lenders party thereto, Bankers Trust Company, as administrative agent, and Merrill Lynch & Co., as syndication agent. Capitalized terms used herein without definition shall have the meanings assigned in the Credit Agreement. This Acknowledgement and Confirmation (this "ACKNOWLEDGEMENT AND CONFIRMATION") is entered into by the undersigned (each an "ACKNOWLEDGING PARTY") for the benefit of Agents and Lenders pursuant to subsections 3.1A5 and 3.1B5 of the Credit Agreement and the execution and delivery of this Acknowledgement and Confirmation by each Acknowledging Party is a condition to the effectiveness of the Credit Agreement and the extension of credit thereunder. Each Acknowledging Party hereby acknowledges and confirms that, as of the Restatement Effective Date, each Collateral Document will support to the fullest extent possible the payment and performance of the Obligations. Without limiting the generality of the foregoing, each Acknowledging Party hereby acknowledges and confirms that, as of the Restatement Effective Date, the term "SECURED OBLIGATIONS" under and as defined in the Borrower Security Agreement, Borrower Pledge Agreement, Holding Security Agreement and Holding Pledge Agreement shall include all Obligations under and as defined in the Credit Agreement. This Acknowledgement and Confirmation shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, each Acknowledging Party has caused this Acknowledgement and Confirmation to be duly executed by its officer thereunto duly authorized as of the 15th day of November, 1996. BLUE BIRD BODY COMPANY By:_________________________ Title: BLUE BIRD BODY COMPANY By:_________________________ Title: EX-12.1 6 EXHIBIT 12.1 BLUE BIRD CORPORATION AND SUBSIDIARIES BLUE BIRD BODY COMPANY AND SUBSIDIARIES STATEMENTS RE: COMPUTATION OF EARNINGS TO FIXED CHARGES FOR THE NINE MONTHS ENDED JULY 27, 1996 AND JULY 29, 1995, FOR THE YEARS ENDED OCTOBER 28, 1995, OCTOBER 29, 1994, AND OCTOBER 30, 1993, FOR THE SIX MONTHS ENDED OCTOBER 31, 1992 AND APRIL 30, 1992, AND FOR THE YEAR ENDED NOVEMBER 2, 1991 (In Thousands Except Ratios)
BBC Predecessor -------------------------------------------------------------------------------- ----------------------- July 27, July 29, October 28, October 29, October 30, October 31, April 30, November 2, 1996 1995 1995 1994 1993 1992 1992 1991 ------- -------- ----------- ----------- ----------- ----------- --------- ----------- FIXED CHARGES: Interest Expense $11,270 $12,339 $16,282 $15,224 $15,973 $ 8,443 $ 1,745 $ 4,344 Interest element of rentals 348 414 536 521 448 178 198 413 Amortization of debt issuance costs 1,526 1,666 2,245 2,209 2,202 1,104 4 0 ------- ------- ------- ------- ------- ------- ------- ------- $13,144 $14,419 $19,063 $17,954 $18,623 $ 9,725 $ 1,947 $ 4,757 ======= ======= ======= ======= ======= ======= ======= ======= EARNINGS: Net income (loss) $ 9,216 $ 6,704 $16,852 $15,408 $ 9,595 $ 3,686 $(3,466) $26,596 Provision (benefit) for income taxes 5,997 4,929 11,686 10,157 6,930 4,257 (3,026) 12,136 Fixed charges 13,144 14,419 19,063 17,954 18,623 9,725 1,947 4,757 Interest capitalized 0 (208) (208) (145) 0 (4) 0 (82) ------- ------- ------- ------- ------- ------- ------- ------- $28,357 $25,844 $47,393 $43,374 $35,148 $17,664 $(4,545) $43,407 ======= ======= ======= ======= ======= ======= ======= ======= RATIO OF EARNINGS TO FIXED CHARGES 2.2x 1.8x 2.5x 2.4x 1.9x 1.8x * 9.1x ======= ======= ======= ======= ======= ======= ======= =======
* Earnings are inadequate to cover fixed charges by approximately $6,500 EX-21.1 7 EXHIBIT 21.1 Exhibit 21.1 Subsidiaries of BBC and the Company Subsidiaries Shareholder(s) Organized Under and Percentage Name & Address of Entity Laws of Ownership Interest - ------------------------ --------------- ------------------ Blue Bird Body Company Georgia Blue Bird Corporation 3920 Arkwright Road -- #275 100% Macon, GA 31210 Blue Bird Capital Corporation Delaware Blue Bird Body 3920 Arkwright Road -- #275 Company Macon, GA 31210 100% Blue Bird de Mexico, S.A. Mexico Blue Bird Body de C.V. Company Anillo Periserico Km. 37 100% Apodaca, N.L. 66600 A.P. 139 APODACA Mexico Canadian Blue Bird Coach Ltd. Provincial Canada, Blue Bird Body P.O. Box 880 Ontario Company Brantford, Ontario N3T 5R7 100% Blue Bird Centro Americana, SA Federal Charter, Blue Bird Body Apartado Postal 810 Guatemala Company Guatemala City, Guatemala 100% (Inactive) Carrocerias Assemplajadors Federal Charter, Blue Bird Body Guatemala Guatemala Company Guatemalteca, S.A. 100% (CAGUASA) (Inactive) EX-23.1 8 EXHIBIT 23.1 [Letterhead of Arthur Andersen LLP] Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation in this Registration Statement of our report dated December 14, 1995 on the financial statements of Blue Bird Corporation and subsidiaries as of October 28, 1995 and October 29, 1994 and for the three years in the period ended October 28, 1995 and to all references to our firm included in this Registration Statement. Arthur Andersen LLP Atlanta, Georgia December 6, 1996 EX-25.1 9 FORM T-1 ___________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 _________________________ FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ___________________________________________ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ________________________________________ THE CHASE MANHATTAN BANK (Exact name of trustee as specified in its charter) NEW YORK 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 PARK AVENUE NEW YORK, NEW YORK 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) _____________________________________________ BLUE BIRD BODY COMPANY (Exact name of obligor as specified in its charter) GEORGIA 58-0813156 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 3920 ARKWRIGHT ROAD MACON, GEORGIA 31210 (Address of principal executive offices) (Zip Code) ______________________________ BLUE BIRD CORPORATION (Exact name of guarantor as specified in its charter) DELAWARE 13-3638126 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 3920 ARKWRIGHT ROAD MACON, GEORGIA 31210 (Address of principal executive offices) (Zip Code) ___________________________________________ 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B (Title of the indenture securities) _____________________________________________________ GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551 Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. - 2 - Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. (On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, The Chase Manhattan Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 29TH day of NOVEMBER, 1996. THE CHASE MANHATTAN BANK By /s/ Anne G. Brenner ------------------------- Anne G. Brenner Vice President - 3 - Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF The Chase Manhattan Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business September 30, 1996, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. DOLLAR AMOUNTS ASSETS IN MILLIONS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ....................................... $ 11,095 Interest-bearing balances ............................... 4,998 Securities: ............................................... Held to maturity securities................................. 3,231 Available for sale securities............................... 38,078 Federal Funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: Federal funds sold ....................................... 8,018 Securities purchased under agreements to resell .......... 731 Loans and lease financing receivables: Loans and leases, net of unearned income $130,513 Less: Allowance for loan and lease losses 2,938 Less: Allocated transfer risk reserve 27 ------------ Loans and leases, net of unearned income, allowance, and reserve ................................... 127,548 Trading Assets .............................................. 48,576 Premises and fixed assets (including capitalized leases)................................................... 2,850 Other real estate owned ..................................... 300 Investments in unconsolidated subsidiaries and associated companies...................................... 92 Customer's liability to this bank on acceptances outstanding .............................................. 2,777 Intangible assets .......................................... 1,361 Other assets ............................................... 12,204 ------ TOTAL ASSETS ............................................... $261,859 ========= - 4 - LIABILITIES Deposits In domestic offices ..................................... $80,163 Noninterest-bearing ..............................$30,596 Interest-bearing ................................. 49,567 ------ In foreign offices, Edge and Agreement subsidiaries, and IBF's ............................................... 65,173 Noninterest-bearing ..............................$ 3,616 Interest-bearing ................................ 61,557 Federal funds purchased and securities sold under agree- ments to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's Federal funds purchased ................................. 14,594 Securities sold under agreements to repurchase .......... 14,110 Demand notes issued to the U.S. Treasury .................. 2,200 Trading liabilities ....................................... 30,136 Other Borrowed money: With a remaining maturity of one year or less ........... 16,895 With a remaining maturity of more than one year ......... 449 Mortgage indebtedness and obligations under capitalized leases .................................................. 49 Bank's liability on acceptances executed and outstanding 2,764 Subordinated notes and debentures ......................... 5,471 Other liabilities ......................................... 13,997 TOTAL LIABILITIES ......................................... 246,001 ------- Limited-Life Preferred stock and related surplus 550 EQUITY CAPITAL Common stock ............................................ 1,209 Surplus ................................................... 10,176 Undivided profits and capital reserves .................... 4,385 Net unrealized holding gains (Losses) on available-for-sale securities .......................... (481) Cumulative foreign currency translation adjustments ........ 19 TOTAL EQUITY CAPITAL ....................................... 15,308 ______ TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK AND EQUITY CAPITAL ................................. $261,859 ========== I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the in- structions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the in- structions issued by the appropriate Federal regulatory authority and is true and correct. WALTER V. SHIPLEY ) EDWARD D. MILLER )DIRECTORS THOMAS G. LABRECQUE ) - 5 - EX-99.1 10 EXHIBIT 99.1 EXHIBIT 99.1 LETTER OF TRANSMITTAL BLUE BIRD BODY COMPANY OFFER TO EXCHANGE 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B FOR ANY AND ALL OF THE OUTSTANDING 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED The Chase Manhattan Bank (the "Exchange Agent") BY MAIL, HAND OR OVERNIGHT DELIVERY: The Chase Manhattan Bank 55 Water Street Room 234 North Building New York, New York 10041 Attention: Carlos Esteves BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (212) 638-7375 (212) 344-9367 CONFIRM BY TELEPHONE: Carlos Esteves: (212) 638-0828 Delivery of this instrument to an address other than as set forth above or transmission of instructions via a facsimile number other than the ones listed above will not constitute a valid delivery. The instructions accompanying this Letter of Transmittal should be read carefully before this Letter of Transmittal is completed. The undersigned hereby acknowledges receipt of the Prospectus dated December , 1996 (the "Prospectus") of Blue Bird Body Company (the "Company") and this Letter of Transmittal, which together constitute the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 10 3/4% Senior Subordinated Notes due 2006, Series B (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, for each $1,000 principal amount of its outstanding 10 3/4% Senior Subordinated Notes due 2006 (the "144A Notes"), respectively. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1997, unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. List on the next page the 144A Notes to which this Letter of Transmittal relates. If the space indicated is inadequate, the Certificate or Registration Numbers and Principal Amounts should be listed on a separately signed schedule affixed hereto. DESCRIPTION OF SENIOR SUBORDINATED NOTES TENDERED HEREBY
AGGREGATE PRINCIPAL NAME(S) AND ADDRESS(ES) OF CERTIFICATE OR AMOUNT PRINCIPAL REGISTERED OWNER(S) REGISTRATION REPRESENTED AMOUNT (PLEASE FILL IN) NUMBERS* BY 144A NOTES TENDERED** TOTAL
* Need not be completed by Book-entry Holders. ** Unless otherwise indicated, the Holder will be deemed to have tendered the full aggregate principal amount represent by such 144A Notes. All tenders must be in integral multiples of $1,000. This Letter of Transmittal is to be used (i) if certificates of 144A Notes are to be forwarded herewith, (ii) if delivery of 144A Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company (the "Depository" or "DTC"), pursuant to the procedures set forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus or (iii) tender of the 144A Notes is to be made according to the guaranteed delivery procedures described in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2. Delivery of documents to a book-entry transfer facility does not constitute delivery to the Exchange Agent. The term "Holder" with respect to the Exchange Offer means any person in whose name 144A Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their 144A Notes must complete this letter in its entirety. / / CHECK HERE IF TENDERED 144A NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DEPOSITORY AND COMPLETE THE FOLLOWING: Name of Tendering Institution ____________________________________________ / / The Depository Trust Company Account Number ___________________________________________________________ Transaction Code Number __________________________________________________ Holders whose 144A Notes are not immediately available or who cannot deliver their 144A Notes and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date must tender their 144A Notes according to the guaranteed delivery procedure set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2. / / CHECK HERE IF TENDERED 144A NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s) _____________________________________________ Name of Eligible Institution that Guaranteed Delivery ____________________ _________________________________________________________________________ If delivery by book-entry transfer: Account Number __________________________________________________ Transaction Code Number _________________________________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name _________________________________________________________________ Address ______________________________________________________________ 2 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of the 144A Notes indicated above. Subject to, and effective upon, the acceptance for exchange of such 144A Notes tendered hereby, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such 144A Notes as are being tendered hereby, including all rights to accrued and unpaid interest thereon as of the Expiration Date. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent acts as the agent of the Company in connection with the Exchange Offer) to cause the 144A Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the 144A Notes and to acquire Exchange Notes issuable upon the exchange of such tendered 144A Notes, and that when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered 144A Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned represents to the Company that (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned; (ii) neither the undersigned nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes; and (iii) the undersigned and any such other person acknowledge that, if they are participating in the Exchange Offer for the purpose of distributing the Exchange Notes, (a) they cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available April 13, 1989), MORGAN STANLEY & CO., INC. (available June 5, 1991) or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale transaction and (b) failure to comply with such requirements in such instance could result in the undersigned or any such other person incurring liability under the Securities Act for which such persons are not indemnified by the Company. If the undersigned or the person receiving the Exchange Notes covered by this letter is an affiliate (as defined under Rule 405 of the Securities Act) of the Company, the undersigned represents to the Company that the undersigned understands and acknowledges that such Exchange Notes may not be offered for resale, resold or otherwise transferred by the undersigned or such other person without registration under the Securities Act or an exemption therefrom. If the exchange offeree is a broker-dealer holding 144A Notes acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Notes received in respect of such 144A Notes pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered 144A Notes or transfer ownership of such 144A Notes on the account books maintained by a book-entry transfer facility. The undersigned further agrees that acceptance of any tendered 144A Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement and that the Company shall have no further obligations or liabilities thereunder for the registration of the 144A Notes or the Exchange Notes. The Exchange Offer is subject to certain conditions set forth in the Prospectus under the caption "The Exchange Offer--Conditions." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the 144A Notes tendered hereby and, in such event, the 144A Notes not exchanged will be returned to the undersigned at the address shown below the signature of the undersigned. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered 144A Notes may be withdrawn at any time prior to the Expiration Date. 3 Unless otherwise indicated in the box entitled "Special Registration Instructions" or the box entitled "Special Delivery Instruction" in this Letter of Transmittal, certificates for all Exchange Notes delivered in exchange for tendered 144A Notes, and any 144A Notes delivered herewith but not exchanged, will be registered in the name of the undersigned and shall be delivered to the undersigned at the address shown below the signature of the undersigned. If an Exchange Note is to be issued to a person other than the person(s) signing this Letter of Transmittal, or if the Exchange Note is to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address different than the address shown on this Letter of Transmittal, the appropriate boxes of this Letter of Transmittal should be completed. If 144A Notes are surrendered by Holder(s) that have completed either the box entitled "Special Registration Instructions" or the box entitled "Special Delivery Instructions" in this Letter of Transmittal, signature(s) on this Letter of Transmittal must be guaranteed by an Eligible Institution (defined in Instruction 4). SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS To be completed ONLY if the Exchange To be completed ONLY if the Exchange Notes are to be issued in the name of someone Notes are to be sent to someone other offer than the undersigned. than the undersigned, or to the undersigned at an address other than that shown under "Description of Senior Subordinated Notes Tendered Hereby." Name: Name: Address: Address: Book-Entry Transfer Facility Account: Employer Identification or Social Security Number: (PLEASE PRINT OR TYPE) (PLEASE PRINT OR TYPE)
4 REGISTERED HOLDER(S) OF 144A NOTES SIGN HERE (IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW) X ______________________________________________________________________________ X ______________________________________________________________________________ (SIGNATURE(S) OF REGISTERED HOLDER(S)) Must be signed by registered holder(s) exactly as name(s) appear(s) on the 144A Notes or on a security position listing as the owner of the 144A Notes or by person(s) authorized to become registered holder(s) by properly completed bond powers transmitted herewith. If signature is by attorney-in-fact, trustee, executor, administrator, guardian, officer of a corporation or other person acting in a fiduciary capacity, please provide the following information. (PLEASE PRINT OR TYPE): Name and Capacity (full title): ________________________________________________ Address (including zip code): __________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Area Code and Telephone Number: ________________________________________________ Taxpayer Identification or Social Security No.: ________________________________ Dated: _______________________________ SIGNATURE GUARANTEE (IF REQUIRED--SEE INSTRUCTION 4) Authorized Signature: __________________________________________________________ (SIGNATURE OF REPRESENTATIVE OF SIGNATURE GUARANTOR) Name and Title: ________________________________________________________________ Name of Plan: __________________________________________________________________ Area Code and Telephone Number: ________________________________________________ (PLEASE PRINT OR TYPE) Dated: _______________________________ 5 PAYOR'S NAME: BLUE BIRD BODY COMPANY THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION NUMBER ON THE FOLLOWING SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING. SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT <*> FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY DEPARTMENT OF THE PART 2--CHECK THE BOX IF YOU ARE NOT SUBJECT TO NUMBER OR EMPLOYEE TREASURY INTERNAL BACKUP WITHHOLDING UNDER THE PROVISIONS OF SECTION IDENTIFICATION REVENUE SERVICE 3406(A)(1)(C) OF THE INTERNAL REVENUE CODE BECAUSE NUMBER PAYOR'S REQUEST (1) YOU ARE EXEMPT FROM BACKUP WITHHOLDING, (2) PART 3- FOR TAXPAYER YOU HAVE NOT BEEN NOTIFIED THAT YOU ARE SUBJECT TO AWAITING TIN [ ] IDENTIFICATION BACKUP WITHHOLDING AS A RESULT OF FAILURE TO NUMBER ("TIN") REPORT ALL INTEREST OR DIVIDENDS OR (3) THE INTERNAL REVENUE SERVICE HAS NOTIFIED YOU THAT YOU ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING. [ ] CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT, AND COMPLETE. SIGNATURE:<*> DATE:<*> NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY CASH PAYMENTS IN EXCESS OF $10.00 MADE TO YOU. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE, OR (B) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER WITHIN 60 DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD, UNTIL I PROVIDE A NUMBER. <*> <*> SIGNATURE DATE
6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. All physically delivered 144A Notes or confirmation of any book-entry transfer to the Exchange Agent's account at a book-entry transfer facility of 144A Notes tendered by book-entry transfer, as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile thereof, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addresses set forth herein on or prior to the Expiration Date (as defined in the Prospectus). The method of delivery of this Letter of Transmittal, the 144A Notes and all other required documents is at the election and risk of the Holder. Instead of delivery by mail, it is recommended that Holders use an overnight or hand delivery service. Except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the 144A Notes for exchange. Delivery to an address other than as set forth herein, or instructions via a facsimile number other than the ones set forth herein, will not constitute a valid delivery. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their 144A Notes, and (i) whose Notes are not immediately available, or (ii) who cannot deliver their 144A Notes, the Letter of Transmittal or any other required documents to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date, may effect a tender if: (a) the tender is made through a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"); (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder of the 144A Notes, the certificate or registration number(s) of such 144A Notes and the principal amount of 144A Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five (5) business days after the Expiration Date, the Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing the 144A Notes to be tendered in proper form for transfer (or a confirmation of book-entry transfer of such 144A Notes into the Exchange Agent's account at the Depository) and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (or facsimile thereof), as well as all tendered 144A Notes in proper form for transfer (or a confirmation of book-entry transfer of such 144A Notes into the Exchange Agent's account at the Depository) and all other documents required by the Letter of Transmittal, are received by the Exchange Agent within five business days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their 144A Notes according to the guaranteed delivery procedures set forth above. Any Holder who wishes to tender 144A Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such Notes prior to the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by a Holder who attempted to use the guaranteed delivery procedures. 7 3. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of Notes evidenced by a submitted certificate is tendered, the tendering Holder should fill in the principal amount tendered in the column entitled "Principal Amount Tendered" of the box entitled "Description of Senior Subordinated Notes Tendered Hereby." A newly issued 144A Note for the principal amount of 144A Notes submitted but not tendered will be sent to such Holder as soon as practicable after the Expiration Date. All 144A Notes delivered to the Exchange Agent will be deemed to have been tendered in full unless otherwise indicated. Any 144A Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date, after which tenders of 144A Notes are irrevocable. To withdraw a tender of 144A Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent by 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the 144A Notes to be withdrawn (the "Depositor"), (ii) identify the 144A Notes to be withdrawn (including the certificate or registration number(s) and principal amount of such 144A Notes, or, in the case of 144A Notes transferred by book-entry transfer, the name and number of the account at the DTC to be credited), (iii) be signed by the Depositor in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the 144A Notes register the transfer of such 144A Notes into the name of the Depositor withdrawing the tender and (iv) specify the name in which any such notes are to be registered, if different from that of the Depositor and (v) include a statement that such holder is withdrawing his election to have such 144A Notes exchanged. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any 144A Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the 144A Notes so withdrawn are validly retendered. Any 144A Notes which have been tendered but which are not accepted for exchange, will be returned to the Holder thereof without cost to such Holder as soon as practicable after withdrawal, rejection of tender or termination of Exchange Offer. 4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered Holder(s) of the 144A Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration or enlargement or any change whatsoever. If this Letter of Transmittal is signed by a participant in the Depository, the signature must correspond with the name as it appears on the security position listing as the owner of the 144A Notes. If any of the 144A Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of 144A Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of 144A Notes. Signatures on this Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution unless the Notes tendered hereby are tendered (i) by a registered Holder who has not completed the box entitled "Special Registration Instructions or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If this Letter of Transmittal is signed by the registered Holder or Holders of 144A Notes (which term, for the purposes described herein, shall include a participant in the Depository whose name appears on a security listing as the owner of the 144A Notes) listed and tendered hereby, no endorsements of the tendered 144A Notes or separate written instruments of transfer or exchange are required. In any other case, the registered Holder (or acting Holder) must either properly endorse the 144A Notes or transmit properly completed bond powers with this Letter of Transmittal (in either case, executed exactly as the name(s) of the registered Holder(s) appear(s) on the 144A Notes, and, with respect to a participant in the Depository whose name appears on a security position listing as the owner of 144A Notes, exactly as the name of the participant appears on such security position listing), with the signature on the 144A Notes or bond power guaranteed by an Eligible Institution (except where the 144A Notes are tendered for the account of an Eligible Institution). If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or other acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. 8 5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering Holders should indicate, in the applicable box, the name and address (or account at the Depository) in which the Exchange Notes or substitute 144A Notes for principal amounts not tendered or not accepted for exchange are to be issued (or deposited), if different from the names and addresses or accounts of the person signing this Letter of Transmittal. In the case of issuance in a different name, the employer identification number or social security number of the person named must also be indicated and the tendering Holder should complete the applicable box. If no instructions are given, the Exchange Notes (and any 144A Notes not tendered or not accepted) will be issued in the name of and sent to the acting Holder of the 144A Notes or deposited at such Holder's account at the Depository. 6. TRANSFER TAXES. The Company shall pay all transfer taxes, if any, applicable to the exchange of 144A Notes pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes or 144A Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered Holder of the 144A Notes tendered, or if tendered 144A Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of 144A Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer stamps to be affixed to the 144A Notes listed in this Letter of Transmittal. 7. WAIVER OF CONDITIONS. The Company reserves the right, in its reasonable judgment, to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any Holder whose 144A Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number(s) set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to BLUE BIRD BODY COMPANY, 3920 Arkwright Road, Macon, Georgia, 31210, telephone (912) 757-7100. 10. VALIDITY AND FORM. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered 144A Notes and withdrawal of tendered 144A Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all 144A Notes not properly tendered or any 144A Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any irregularities or conditions of tender as to particular 144A Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of 144A Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of 144A Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of 144A Notes will not be deemed to have been made until such irregularities have been cured or waived. Any 144A Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such holder by the Exchange Agent to the tendering Holders of 144A Notes, unless otherwise provided herein, as soon as practicable following the Expiration Date. 9 IMPORTANT TAX INFORMATION Under federal income tax law, a Holder tendering 144A Notes is required to provide the Exchange Agent with such Holder's correct TIN on Substitute Form W-9 above. If such Holder is an individual, the TIN is the Holder's social security number. The Certificate of Awaiting Taxpayer Identification Number should be completed if the tendering Holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the Exchange Agent is not provided with the correct TIN, the Holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such Holder with respect to tendered 144A Notes may be subject to backup withholding. Certain Holders (including, among others, all domestic corporations and certain foreign individuals and foreign entities) are not subject to these backup withholding and reporting requirements. Such a Holder, who satisfies one or more of the conditions set forth in Part 2 of the Substitute Form W-9 should execute the certification following such Part 2. In order for a foreign Holder to qualify as an exempt recipient, that Holder must submit to the Exchange Agent a properly completed Internal Revenue Service Form W-9, signed under penalties of perjury, attesting to that Holder's exempt status. Such forms can be obtained from the Exchange Agent. If backup withholding applies, the Exchange Agent is required to withhold 31% of any amounts otherwise payable to the Holder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a Holder with respect to 144A Notes tendered for exchange, the Holder is required to notify the Exchange Agent of his or her correct TIN by completing the form herein certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (i) each Holder is exempt, (ii) such Holder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of failure to report all interest or dividends or (iii) the Internal Revenue Service has notified such Holder that he or she is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE EXCHANGE AGENT Each Holder is required to give the Exchange Agent the social security number or employer identification number of the record Holder(s) of the 144A Notes. If 144A Notes are in more than one name or are not in the name of the actual Holder, consult the instructions on Internal Revenue Service Form W-9, which may be obtained from the Exchange Agent, for additional guidance on which number to report. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER If the tendering Holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, write "Applied For" in the space for the TIN or Substitute Form W-9, sign and date the form and the Certificate of Awaiting Taxpayer Identification Number and return them to the Exchange Agent. If such certificate is completed and the Exchange Agent is not provided with the TIN within 60 days, the Exchange Agent will withhold 31% of all payments made thereafter until a TIN is provided to the Exchange Agent. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH 144A NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 10 EX-99.2 11 EXHIBIT 99.2 EXHIBIT 99.2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 IRS INSTRUCTIONS (SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.) PURPOSE OF FORM.--A person who is required to file an information return with the Internal Revenue Service (the IRS) must obtain your correct taxpayer identification number (TIN) to report income paid to you, real estate transactions, mortgage interest you paid, the acquisition or abandonment of secured property, or contributions you made to an individual retirement account (IRA). Use Form W-9 to furnish your correct TIN to the requester (the person asking you to furnish your TIN), and, when applicable, (1) to certify that the TIN you are furnishing is correct (or that you are waiting for a number to be issued), (2) to certify that you are not subject to backup withholding, and (3) to claim exemption from backup withholding if you are an exempt payee. Furnishing your correct TIN and making the appropriate certifications will prevent certain payments from being subject to backup withholding. NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN A W-9 TO REQUEST YOUR TIN, YOU MUST USE THE REQUESTER'S FORM. HOW TO OBTAIN A TIN. If you do not have a TIN, apply for one immediately. To apply, get Form SS-5, Application for a Social Security Card (SSN) (for individuals), from your local office of the Social Security Administration, or Form SS-4, Application for Employer Identification Number (EIN) (for businesses and all other entities), from your local IRS office. To complete Form W-9, if you do not have a TIN, check the box in Part 3 of the substitute Form W-9, sign and date the form, and give it to the requester. Generally, you will then have 60 days to obtain a TIN and furnish it to the requester. If the requester does not receive your TIN within 60 days, backup withholding, if applicable, will begin and continue until you furnish your TIN to the requester. For reportable interest or dividend payments, the payer must exercise one of the following options concerning backup withholding during this 60-day period. Under option (1), a payer must backup withhold on any withdrawals you make from your account after 7 business days after the requester receives this form back from you. Under option (2), the payer must backup withhold on any reportable interest or dividend payments made to your account, regardless of whether you make any withdrawals. The backup withholding under option (2) must begin no later than 7 business days after the requester receives this form back. Under option (2), the payer is required to refund the amounts withheld if your certified TIN is received within the 60-day period and you were not subject to backup withholding during the period. NOTE: CHECKING THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9 MEANS THAT YOU HAVE ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE. As soon as you receive your TIN, complete another Form W-9, include your TIN, sign and date this form, and give it to the requester. WHAT IS BACKUP WITHHOLDING? Persons making certain payments to you after 1992 are required to withhold and pay to the IRS 31% of such payments under certain conditions. This is called "backup withholding." Payments that could be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, non-employee compensation, and certain payments from fishing boat operators, but do not include real estate transactions. If you give the requester your correct TIN, make the appropriate certifications, and report all your taxable interest and dividends on your tax return, your payments will not be subject to backup withholding. Payments you receive will be subject to backup withholding if: (1) You do not furnish your TIN to the requester, or (2) The IRS notifies the requester that you furnished an incorrect TIN, or 1 (3) You are notified by the IRS that you are subject to backup withholding because you failed to report all your interest and dividends on your tax return (for reportable interest and dividends only), or (4) You fail to certify to the requester that you are not subject to backup withholding under (3) above (for reportable interest and dividend accounts opened after 1983 only), or (5) You fail to certify your TIN. This applies only to reportable interest, dividend, broker or barter exchange accounts opened after 1983, or broker accounts considered inactive in 1983. Except as explained in (5) above, other reportable payments are subject to backup withholding only if (1) or (2) above applies. Certain payees and payments are exempt from backup withholding and information reporting. See PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING, below, and EXEMPT PAYEES AND PAYMENTS under SPECIFIC INSTRUCTIONS, on page 2, if you are an exempt payee. PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in Items (1) through (7), except that a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under Section 501(a), or an IRA, or a custodial account under section 403(b)(7). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the U.S. or a possession of the U.S. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under Section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporation Secretaries, Inc., Nominee List. (15) A trust exempt from tax under Section 664 or described in Section 4947. Payments of dividends and patronage dividends generally not subject to backup withholding also include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in trade or business in the U.S. and that have at least one nonresident partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. 2 Payments of interest generally not subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT PROVIDED YOUR CORRECT TIN TO THE PAYER. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid by you. Payments that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A, and 6050N, and their regulations. PENALTIES FAILURE TO FURNISH TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. MISUSE OF TINS. If the requester discloses or uses TINs in violation of Federal law, the requester may be subject to civil and criminal penalties. SPECIFIC INSTRUCTIONS NAME. If you are an individual, you must generally provide the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage, without informing the Social Security Administration of the name change, please enter your first name, the last name shown on your social security card and your new last name. If you are a sole proprietor, you must furnish your individual name and either your SSN or EIN. You may also enter your business name. Enter your name(s) as shown on your social security card and/or as it was used to apply for your EIN on Form SS-4. SIGNING THE CERTIFICATION. (1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You are required to furnish your correct TIN, but you are not required to sign the certification. (2) INTEREST, DIVIDEND, BROKER AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item (2) in the certification before signing the form. (3) REAL ESTATE TRANSACTIONS. You must sign the certification. You may cross out item (2) of the certification. (4) OTHER PAYMENTS. You are required to furnish your correct TIN, but you are not required to sign the certification unless you have been notified of an incorrect TIN. Other payments include payments made in the course of the requester's trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services, payments to a nonemployee for services (including attorney and accounting fees), and payments to certain fishing boat crew members. 3 (5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED PROPERTY, OR IRA CONTRIBUTIONS. You are requested to furnish your correct TIN, but you are not required to sign the certification. (6) EXEMPT PAYEES AND PAYMENTS. If you are exempt from backup withholding, you should complete this form to avoid possible erroneous backup withholding. Enter your correct TIN in Part 1, write "EXEMPT" in the block in Part 2, and sign and date the form. If you are a nonresident alien or foreign entity not subject to backup withholding, give the requester a completed Form W-8, Certificate of Foreign Status. (7) "AWAITING TIN". Follow the instructions under HOW TO OBTAIN A TIN, on page 1, check the box in Part 3 of the Substitute Form W-9 and sign and date the form. SIGNATURE. For a joint account, only the person whose TIN is shown in Part 1 should sign the form. PRIVACY ACT NOTICE. Section 6109 requires you to furnish your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a TIN to a payer. Certain penalties may also apply. 4 WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- --------------------------------------------------------------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE THE NAME AND SOCIAL SECURITY NUMBER OF: - --------------------------------------------------------------------------------------------------------- 1. Individual The individual 2. Two or more individuals (joint account) The actual owner of the account or, if combined funds, the first individual on the account (1) 3. Custodian account of a minor (Uniform Gift to The minor (2) Minors Act) 4. a. The usual revocable savings trust (grantor The grantor-trustee (1) is also trustee) b. So-called trust account that is not a legal The actual owner (1) or valid trust under state law 5. Sole proprietorship The owner (3) 6. A valid trust, estate or pension trust Legal entity (4) 7. Corporate The corporation 8. Association, club, religious, charitable, The organization educational, or other tax-exempt organization 9. Partnership The partnership 10. A broker or registered nominee The broker or nominee 11. Account with the Department of Agriculture in The public entity the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - ---------------------------------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Show the individual's name. You may also enter your business name. You may use your SSN or EIN. (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED. 5 EX-99.3 12 EXHIBIT 99.3 EXHIBIT 99.3 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006 (INCLUDING THOSE IN BOOK-ENTRY FORM) OF BLUE BIRD BODY COMPANY This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Blue Bird Body Company (the "Company") made pursuant to the Prospectus, dated , 1996 (the "Prospectus"), if certificates for the outstanding 10 3/4% Senior Subordinated Notes Due 2006 of the Company (the "144A Notes") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Exchange Agent prior to 5:00 p.m., New York time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by telegram, telex, facsimile transmission, mail or hand delivery to The Chase Manhattan Bank (the "Exchange Agent") as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender 144A Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized terms not defined herein are defined in the Prospectus. THE CHASE MANHATTAN BANK, EXCHANGE AGENT BY MAIL, HAND OR OVERNIGHT DELIVERY: The Chase Manhattan Bank 55 Water Street Room 234 North Building New York, New York 10041 Attention: Carlos Esteves BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): (212) 638-7375 (212) 344-9367 CONFIRM BY TELEPHONE: Carlos Esteves: (212) 638-0828 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of 144A Notes set forth below, pursuant to the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Principal Amount of 144A Notes Tendered:* $ - --------------------------------- Certificate Nos. (if available): - ------------------------------------ Total Principal Amount Represented by Certificate(s): $ - --------------------------------- *Must be in denominations of principal amount of $1,000 and any integral multiple thereof. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. PLEASE SIGN HERE X X Signature(s) of Owner(s) Date or Authorized Signatory
Area Code and Telephone Number: - ---------------------------- Must be signed by the holder(s) of 144A Notes as their name(s) appear(s) on certificates for 144A Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. If 144A Notes will be delivered by book-entry transfer to The Depository Trust Company, provide account number. Please print name(s) and address(es) Name(s): Capacity: Address(es): Account Number:
GUARANTEE (Not to be used for signature guarantee) The undersigned, a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program, hereby guarantees that the undersigned will deliver to the Exchange Agent the certificates representing the 144A Notes being tendered hereby or confirmation of book-entry transfer of such 144A Notes into the Exchange Agent's account at The Depository Trust Company, in proper form for transfer, together with any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date. Name of Firm ___________________________________________________________________ Address ________________________________________________________________________ __________________________________________________________________________ Area Code & Telephone No. ______________________________________________________ Authorized Signature ___________________________________________________________ Name ___________________________________________________________________________ (Please Type or Print) Title __________________________________________________________________________ Date ___________________________________________________________________________ NOTE: DO NOT SEND CERTIFICATES OF 144A NOTES WITH THIS FORM. CERTIFICATES OF 144A NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. -----END PRIVACY-ENHANCED MESSAGE-----