<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/x/ JOINT QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the period ended February 1, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission File Number 33-49544-01 Commission File Number 33-49544
Blue Bird Corporation Blue Bird Body Company
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Georgia
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
13-3638126 58-0813156
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
3920 Arkwright Road 3920 Arkwright Road
Macon, Georgia 31210 Macon, Georgia 31210
(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(912) 757-7100 (912) 757-7100
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrants were required to file such reports),
and (2) have been subject to such filing requirements for the past 90
days. Yes /X/ No / /
As of March 1, 1997, 8,424,778 shares of Blue Bird Corporation's
common stock and 10 shares of Blue Bird Body Company's common stock
were outstanding.
BLUE BIRD BODY COMPANY ("BLUE BIRD" OR THE "COMPANY") IS A WHOLLY-
OWNED SUBSIDIARY OF BLUE BIRD CORPORATION ("BBC"). BLUE BIRD MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1) (a) AND (b) OF
FORM 10-Q AND IS THEREFORE FILING CERTAIN PORTIONS OF THIS FORM 10-Q
APPLICABLE TO IT WITH THE REDUCED DISCLOSURE FORMAT PERMITTED BY SUCH
GENERAL INSTRUCTION.
<PAGE>
<PAGE>
BLUE BIRD CORPORATION
BLUE BIRD BODY COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE-MONTH PERIOD
ENDED FEBRUARY 1, 1997
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
as of February 1, 1997 and
November 2, 1996 ..................................... 1
Condensed Consolidated Statements of
Income for the three-month periods
ended February 1, 1997 and
January 27, 1996 ..................................... 2
Condensed Consolidated Statements of
Cash Flows for the three-month
periods ended February 1, 1997
and January 27, 1996 ................................. 3
Notes to Condensed Consolidated
Financial Statements ................................. 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations ........................................... 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................... 7
Item 6. Exhibits and Reports on Form 8-K ....................... 7
Signatures ....................................................... 8
<PAGE>
<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 1, 1997 AND NOVEMBER 2, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 1, NOVEMBER 2,
1997 1996
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,751 $ 46,253
Trade receivables 14,076 13,443
Leases receivable 33,703 32,215
Inventories 88,793 69,776
Prepaid expenses 5,334 2,137
Other current assets 17,483 3,167
-------- --------
Total current assets 161,140 166,991
LEASES RECEIVABLE, NONCURRENT 41,950 41,862
PROPERTY, PLANT, AND EQUIPMENT 65,162 64,599
Less accumulated depreciation (27,176) (25,710)
-------- --------
Property, plant, and equipment, net 37,986 38,849
-------- --------
GOODWILL AND DEBT ISSUE COSTS 162,180 162,849
Less accumulated amortization (18,731) (26,131)
-------- --------
Goodwill & other intangibles, net 143,449 136,718
-------- --------
OTHER ASSETS 6,611 6,571
-------- --------
Total assets $ 391,136 $ 391,031
======== ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Revolving credit facilities $ 9,600 $ 0
Current portion of long-term debt 10,938 16,000
Accounts payable 20,339 27,704
Income taxes payable 0 9,270
Deferred income taxes 8,869 9,080
Other current liabilities 28,997 24,519
-------- --------
Total current liabilities 78,743 86,573
LONG-TERM DEBT 329,911 131,350
DEFERRED INCOME TAXES 5,615 5,306
OTHER LIABILITIES 20,471 20,309
REDEEMABLE COMMON STOCK, NET 12,660 29,305
-------- --------
Total liabilities 447,400 272,843
STOCKHOLDERS' (DEFICIT) 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 (deficit) earnings (131,158) 43,228
Other stockholders'(deficit) equity (2,206) (2,140)
-------- --------
Total stockholders'(deficit) equity (56,264) 118,188
-------- --------
Total liabilities and stockholders'
(deficit) equity $ 391,136 $ 391,031
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
1
<PAGE>
<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS ENDED FEBRUARY 1, 1997 AND JANUARY 27, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FEBRUARY 1, JANUARY 27,
1997 1996
--------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net sales $ 84,107 $ 92,826
Cost of goods sold 69,560 77,185
-------- --------
Gross profit 14,547 15,641
Selling, general and
administrative expenses 10,790 10,115
Amortization of goodwill
and other intangibles 960 940
Nonrecurring charge 16,506 0
-------- -------
Operating (loss) income (13,709) 4,586
Interest income 1,534 1,802
Interest and debt issue
expense (7,554) (4,142)
Other income (expense) 237 196
------- -------
(Loss) income before income
taxes (19,492) 2,442
(Benefit) provision for income
taxes (12,992) 975
------- -------
Net (loss) income before
extraordinary items (6,500) 1,467
Extraordinary item - loss
on early extinguishment of
debt (2,986) (1,416)
------- -------
Net (loss) income $ (9,486) $ 51
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
2
<PAGE>
<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED FEBRUARY 1, 1997 AND JANUARY 27, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FEBRUARY 1, JANUARY 27,
1997 1996
--------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (9,486) $ 51
------- -------
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Extraordinary loss on extinguishment
of debt 4,755 2,254
Depreciation and amortization 2,824 2,827
Increase (decrease) in cash surrender
value of life insurance (9) 20
Deferred income taxes 98 (420)
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables (633) 7,906
(Increase) decrease in inventories (19,017) (18,409)
(Increase) decrease in prepaid expenses (3,197) (1,883)
Increase (decrease) in accounts payable (7,365) (678)
Increase (decrease) in income taxes
payable (9,270) (6,043)
Other (9,474) 4,948
-------- --------
Total adjustments (41,288) (9,478)
-------- --------
Net cash used in operating activities (50,774) (9,427)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant, and equipment acquisitions (855) (731)
Leases receivable (1,576) (5,725)
-------- --------
Net cash used in investing activities (2,431) (6,456)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing on working capital revolvers 14,400 26,788
Borrowing on long-term debt 274,699 0
Repayment of long-term debt (86,000) (27,000)
Dividends Paid (185,345) 0
Debt prepayment premium (3,369) (1,625)
Debt Issuance Costs (9,416) 0
Proceeds from Management Notes 3,800 0
-------- --------
Net cash (used in) provided by
financing activities 8,769 (1,837)
-------- --------
EFFECT OF EXCHANGE RATE FLUCTUATIONS (66) (249)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (44,502) (17,969)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 46,253 21,452
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,751 $ 3,483
======== ========
SUPPLEMENTAL INFORMATION:
Cash interest paid $ 5,142 $ 3,675
======== ========
Cash income taxes paid $ 9,620 $ 2,595
======== ========
The accompanying notes are an integral part of these condensed consolidated
statements.
3
<PAGE>
<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
NOTES TO 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 November 2, 1996.
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 1997 contains
52 weeks and fiscal year 1996 contains 53 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.
4 <PAGE>
<PAGE>
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 $2,400,000
higher at February 1, 1997 and approximately $2,100,000 higher at
November 2, 1996.
The components of inventory consist of the following at February 1, 1997
and November 2, 1996 (dollars in thousands):
1997 1996
-------- --------
Raw materials $ 23,997 $18,848
Work in process 33,201 22,916
Finished goods 31,595 28,012
------- ------
$88,793 $69,776
======= =======
3. CONTINGENCIES
PENDING LITIGATION AND INSURANCE PROGRAM
As of February 1, 1997, 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.
4. RECAPITALIZATION
During November, 1996, Blue Bird was recapitalized, resulting in the repayment
of the existing $86 million of debt, new debt issued in the amount of $275
million and a dividend paid to shareholders in the amount of $185.3 million.
The existing Subordinated Notes were repurchased at a premium of $3.4 million.
Debt issuance costs related to the recapitalization were $9.4 million. A
nonrecurring recapitalization charge was taken in November to recognize the
$3.4 million premium cost, $1.4 million of original debt issue costs written
off and $16.5 million G&A expenses for a total of $21.3 million.
5
<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 1, 1997 COMPARED TO THREE MONTHS ENDED JANUARY
27, 1996
Net sales for the quarter ended February 1, 1997, were $84.1 million, a
decrease of $8.7 million or 9.4% compared to the corresponding period in 1996.
This decrease was due to fewer deliveries and a lower average selling price
due to delivery mix changes during the current reporting period as compared
to the 1996 period.
Gross profit decreased to $14.5 million in the first quarter of 1997
from $15.6 million in the first quarter of 1996, a decrease of $1.1 million
or 7.0% due primarily to lower sales volume. The gross margin increased to
17.3% compared to 16.8% in the 1996 period due to lower delivery of GM
chassis which have low margins.
Selling, general and administrative expenses increased to $10.8 million from
$10.1 million in the 1996 period, an increase of $.7 million or 6.7%. This
increase was related to increased engineering and marketing costs associated
with new product development and introduction. Nonrecurring G&A charges of
$16.5 million were taken in the current year due to the recapitalization
described below. See "Financial Condition - - Liquidity and Capital
Resources."
Interest and debt issue expense increased to $7.6 million in the current
period from $4.1 million in the prior year period due to the increased amount
of debt as a result of the recapitalization.
The benefit for income taxes was $13.0 million in the current period compared
to a provision of $1.0 million in the 1996 period. The 1997 period reflected
a loss. The higher effective tax rate for 1997 was a result of the combined
effect of certain tax benefits, in particular, the tax benefit related to a
portion of the dividend paid to shareholders in the recapitalization being
deductible for tax purposes as well as the tax benefit related to the ordinary
loss and the nonrecurring charge.
The extraordinary loss of $3.0 million, net of a tax benefit of $1.8 million,
occurring in the 1997 period was due to the early extinguishment of $50
million of Subordinated Notes as part of the recapitalization. Similarly,
during the corresponding period in 1996, the early extinguishment of $25
million of Subordinated Notes resulted in an extraordinary loss of $1.4
million, net of a tax benefit of $.8 million.
6
<PAGE>
<PAGE>
FINANCIAL CONDITION
WORKING CAPITAL
The Company' working capital needs are seasonal. Working capital and related
bank borrowings are lowest immediately after heavy school bus deliveries late
in the fourth fiscal quarter. Beginning in December or January, working
capital and related bank borrowings typically start to increase as parts are
purchased or manufactured and distributed to the assembly plants for assembly
into buses. Management tries to build buses as close to expected delivery
time as possible. Inventory is at its highest during May, June and July
prior to heavy seasonal deliveries.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the three month period was
$50.8 million. A significant portion of this amount was the result of the net
loss of the Company attributable to the nonrecurring charges related to the
Company's recapitalization. A nonrecurring recapitalization charge was taken
in November to recognize the $3.4 million premium cost, $1.4 million of
original debt issue costs written off and $16.5 million G&A expenses for a
total of $21.3 million. Other items attributing to the cash use was the
seasonal increase in inventory, the payment of income taxes, the increase in
tax claims receivable, and the decrease in accounts payable, slightly offset by
an extraordinary loss on the extinguishment of debt, depreciation and
amortization.
During November, 1996, Blue Bird was recapitalized resulting in the repayment
of the existing $86 million of debt, new debt issued in the amount of $275
million and a dividend paid to shareholders in the amount of $185.3 million.
The existing Subordinated Notes were repurchased at a premium of $3.4 million.
Debt issuance costs related to the recapitalization were $9.4 million.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to BBC's and the Predecessor's Joint Annual Report on Form
10-K for the fiscal year ended November 2, 1996 for a description of certain
legal proceedings to which BBC or the Predecessor is a party.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27 Financial data schedule
99 Discretionary Option Agreement
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Registrants during the quarter
ended February 1, 1997.
7 <PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BLUE BIRD CORPORATION BLUE BIRD BODY COMPANY
By /s/ Paul E. Glaske By /s/ Paul E. Glaske
- --------------------- ----------------------
Paul E. Glaske Paul E. Glaske
Chairman of the Board and Chairman of the Board and
President and Director President and Director
(Principal Executive (Principal Executive
Officer) Officer)
Date: March 17, 1997 Date: March 17, 1997
By /s/ Bobby G. Wallace By /s/ Bobby G. Wallace
Bobby G. Wallace Bobby G. Wallace
Vice President, Treasurer and Vice President - Finance
Secretary and Director and Administration,
(Principal Financial and Treasurer and Secretary
Accounting Officer) and Director
(Principal Financial
and Accounting Officer)
Date: March 17, 1997 Date: March 17, 1997
8
<PAGE>
<PAGE>
Exhibit Index
-------------
Exhibit
No. Description
------- -----------
27 Financial data schedule
99 Discretionary Option Agreement
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000889468
<NAME> Blue Bird Body Company
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-01-1997
<PERIOD-START> NOV-03-1996
<PERIOD-END> FEB-01-1997
<CASH> 1,751
<SECURITIES> 0
<RECEIVABLES> 47,779
<ALLOWANCES> 0
<INVENTORY> 88,793
<CURRENT-ASSETS> 161,140
<PP&E> 65,162
<DEPRECIATION> (27,176)
<TOTAL-ASSETS> 391,136
<CURRENT-LIABILITIES> 78,743
<BONDS> 329,911
<COMMON> 12,737
0
0
<OTHER-SE> (56,341)
<TOTAL-LIABILITY-AND-EQUITY> 391,136
<SALES> 84,107
<TOTAL-REVENUES> 84,107
<CGS> 69,560
<TOTAL-COSTS> 28,256
<OTHER-EXPENSES> (1,771)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,554
<INCOME-PRETAX> (19,492)
<INCOME-TAX> (12,992)
<INCOME-CONTINUING> (6,500)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,986)
<CHANGES> 0
<NET-INCOME> (9,486)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
DISCRETIONARY OPTION AGREEMENT
DISCRETIONARY OPTION AGREEMENT dated as of this 3rd
day of February, 1997, providing for the granting of certain
options by Blue Bird Corporation, a Delaware corporation (the
"Corporation"), to Bobby G. Wallace, an employee of the
Corporation or of a subsidiary of the Corporation (the
"Employee").
As of April 15, 1992, the Corporation has duly
adopted the Blue Bird Corporation Management Stock Option Plan
(the "Plan"), which is incorporated herein by reference. Un-
less otherwise expressly stated, all defined terms herein
shall have the same meanings ascribed to them in the Plan. In
accordance with Section 7 of the Plan, the Employee is to be
granted options under the Plan to buy shares of common stock,
par value $.01 per share (the "Shares") of the Corporation.
1. NUMBER OF SHARES, DISCRETIONARY OPTION PRICE.
The Corporation hereby irrevocably grants to the Employee
40,000 options (the "Discretionary Options"), which are not
intended to be Incentive Stock Options as defined in Section
422 of the Code, to purchase 40,000 Shares (the "Discretionary
Option Shares") at an exercise price of $9 per Share (the
"Option Price") on the terms and subject to the<PAGE>
<PAGE>
conditions set forth herein. Except as explicitly provided
for in an agreement among the Corporation, the Management
Investors and others, dated as of April 15, 1992 (the
"Stockholders' Agreement"), the holder of the Discretionary
Options shall not have any of the rights of a stockholder with
respect to any Discretionary Option Shares unless and until
the Employee has paid the Option Price with respect thereto in
full.
2. PERIOD OF DISCRETIONARY OPTIONS AND CONDITIONS
OF EXERCISE. (a) The term of the Discretionary Options and
of this Agreement shall commence on the date hereof (the "Date
of Grant") and terminate upon the earlier of (i) April 16,
2002 (the "Expiration Date") and (ii) the time at which any
Discretionary Options are completely terminated pursuant to
Section 3 hereof. Upon the termination of a Discretionary
Option in accordance with the provisions herein, all rights of
the Employee with respect to the Discretionary Options
hereunder and in connection with the Discretionary Options
under the Plan shall cease.
(b) The Discretionary Options shall be fully vested
and exercisable from the Date of Grant.
(c) The Corporation need not issue fractional
Shares upon the exercise of the Discretionary Options but in
lieu thereof shall pay to the holder exercising the <PAGE>
<PAGE>
Discretionary Options the Fair Value Price of such fractional
Shares (determined in accordance with the Stockholders'
Agreement). The right of the holder of the Discretionary
Options to purchase Discretionary Option Shares may be
exercised in whole or in part at any time and from time to
time prior to the earlier of the Expiration Date and, as to
any portion of the Discretionary Options, the time at which
such portion is terminated pursuant to Section 3.
3. TERMINATION UPON TERMINATION OF EMPLOYMENT.
Except in circumstances specified in the following sentence,
the Plan and the Stockholders' Agreement, the Discretionary
Options shall terminate immediately upon the Employee's
ceasing to be a full-time employee of the Corporation or any
of its subsidiaries. The time at which any Discretionary
Option shall terminate shall be the earliest to occur of (x)
the Expiration Date, (y) the close of business on the date on
which the Employee exercises a Put Right with respect to any
Shares owned by him or her pursuant to the Stockholders'
Agreement and (z) the following dates:
(i) the thirtieth day after the date
upon which the Employee ceases to be a full-
time employee of the Corporation or any of its
subsidiaries unless he or she ceases to be an <PAGE>
<PAGE>
employee in a manner described in subsection (ii)
or (iii) below;
(ii) the one hundred and eightieth day
after the date of the death of the Employee if
the Employee dies before the time at which any
Discretionary Option terminates; or
(iii) immediately upon the Employee's vol-
untary termination of employment (without
Cause and not upon the occasion of his or her
Retirement or Disability (as such terms are
defined in the Stockholders' Agreement)) or
termination of employment by the Corporation
or any of its subsidiaries for Cause.
4. NON-TRANSFERABILITY OF DISCRETIONARY OPTIONS;
DEATH OF EMPLOYEE. No Discretionary Option nor this Agreement
may be transferred by the Employee except that the contract
rights under the Stockholders' Agreement with respect to any
Discretionary Option may be transferred to the estate of a
deceased Employee, and, further, during the lifetime of the
Employee, the Discretionary Options may be exercised only by
him or her. More particularly, but without limiting the
generality of the foregoing, the Discretionary Options may not
be assigned, transferred (except as provided above), pledged<PAGE>
<PAGE>
or hypothecated in any way, shall not be assignable by
operation of law and shall not be subject to execution, at-
tachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the
Discretionary Options contrary to the provisions hereof shall
be null and void and without effect.
5. EXERCISE OF DISCRETIONARY OPTIONS. The
Discretionary Options shall be exercised as specified in the
Plan.
6. SPECIFIC RESTRICTIONS UPON DISCRETIONARY OPTION
SHARES. The Employee hereby agrees with the Corporation as
follows:
(a) The Employee shall acquire the Discretionary
Option Shares for investment purposes only and not with a view
to resale or other distribution thereof to the public in vio-
lation of the Securities Act of 1933, as amended (the "Securi-
ties Act"), and shall not dispose of any Discretionary Option
Shares in any transaction which, in the opinion of counsel to
the Corporation, would violate the Securities Act, or the
rules and regulations thereunder, or any applicable state
securities, or "blue sky", laws;
(b) If any Discretionary Option Shares shall be
registered under the Securities Act, no public offering
(otherwise than on a national securities exchange, as defined
<PAGE>
<PAGE>
in the Exchange Act) of any Discretionary Option Shares shall
be made by the Employee (or any other person) under such
circumstances that he or she (or such other person) may be
deemed an underwriter, as defined in the Securities Act; and
(c) The Corporation shall have the authority to
endorse upon the certificate or certificates representing the
Discretionary Option Shares such legends referring to the
foregoing restrictions or any restrictions resulting from the
fact that the Employee is a party to the Stockholders' Agree-
ment.
7. TERMINATION OF EMPLOYMENT. The employment of
the Employee shall not be deemed to have terminated if the
Employee is an employee of the Corporation or one of its sub-
sidiaries who is absent upon a bona fide leave of absence or
who is transferred to and becomes an employee of a subsidiary
corporation or if he or she is an employee of a subsidiary
corporation who is transferred to and becomes an employee of
the Corporation or another subsidiary of the Corporation.
However, if a subsidiary corporation ceases to be a subsidi-
ary, all employees of such subsidiary not theretofore trans-
ferred to and becoming employees of the Corporation or of
another subsidiary of the Corporation shall be deemed to have
ceased to be Employees within the meaning of the Plan on the <PAGE>
<PAGE>
date such subsidiary ceases to be a subsidiary of the Corpora-
tion. The provisions of this paragraph shall, however, be
subject to the provisions of Section 16 of the Plan pertaining
to the consequences of a merger or consolidation of the
Corporation and/or a subsidiary with any other corporation.
8. PAYMENT. Nothing herein contained or done
pursuant hereto shall obligate the recipient of a
Discretionary Option to purchase and/or pay for any
Discretionary Option Shares except those Discretionary Option
Shares in respect of which the holder of the Discretionary
Option shall have exercised such option to purchase hereunder
in the manner hereinabove provided.
9. TIME. Time shall be of the essence for this
Agreement.
10. BINDING EFFECT. This Agreement shall enure to
the benefit of and be binding upon the parties hereto, their
heirs, successors and permitted assigns.
11. THE EMPLOYEE HEREBY REPRESENTS, WARRANTS AND
ACKNOWLEDGES TO THE CORPORATION THAT THE EMPLOYEE IS AN
EMPLOYEE OF THE CORPORATION OR AN AFFILIATE OF THE CORPORATION
AND THAT THE EMPLOYEE WAS NOT AND IS NOT INDUCED TO ENTER INTO
THIS AGREEMENT BY AN EXPECTATION OF EMPLOYMENT OR CONTINUED
EMPLOYMENT.
<PAGE>
<PAGE>
12. NOTICES. Any notice required or permitted un-
der this Agreement shall be deemed given when delivered per-
sonally, or when deposited in a United States Post Office as
registered mail, postage prepaid, addressed, as appropriate,
to the Employee at his or her address set forth below or such
other address as he or she may designate in writing to the
Corporation, or to the Corporation, 3920 Arkwright Road,
Macon, Georgia, 31210, Attention: Corporate Secretary or such
other address(es) as the Corporation may designate in writing
to the Employee.
13. FAILURE TO ENFORCE NOT A WAIVER. The failure
of the Corporation to enforce at any time any provision of
this Agreement shall in no way be construed to be a waiver of
such provision or of any other provision hereof.
14. GOVERNING LAW. This Agreement shall be gov-
erned by and construed according to the laws of the State of
Delaware, without regard to principles of conflict of laws.
15. PROVISIONS OF PLAN. The Discretionary Options
provided for herein are granted pursuant to the Plan, and said
Discretionary Options and this Agreement are in all respects
governed by the Plan and subject to all of the terms and pro-
visions thereof, whether such terms and provisions are incor-<PAGE>
<PAGE>
porated in this Agreement solely by reference or are expressly
cited herein. For greater certainty, without limiting the
generality of the foregoing, the Employee agrees to be bound
by any amendments to the Plan or this Agreement made by the
Compensation Committee of the Board of Directors of the
Corporation in accordance with the provisions of the Plan to
conform the Plan or this Agreement and to the rules and
regulations of any national securities exchange on which the
Corporation proposes to list any of its shares. From and
after the date, if any, on which any shares are listed on any
national securities exchange, the terms and conditions of this
Agreement and the implementation thereof shall be subject to
the rules and regulations of such exchange, and, in the event
of any inconsistency between the terms and conditions of this
Agreement and the rules and regulations of any such exchange,
the rules and regulations of such exchange shall prevail.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Corporation has executed
this Agreement in duplicate on the day and year first above
written.
BLUE BIRD CORPORATION
By: /S/ Paul E. Glaske
----------------------------
Name: Paul E. Glaske
Title: Chairman of the Board
and President
The undersigned hereby accepts, and agrees to, all terms and
provision of the foregoing Agreement.
/S/ Bobby G. Wallace
----------------------------
Bobby G. Wallace
1618 Clarendon
----------------------------
ADDRESS
Longview, Texas 75601
----------------------------
<PAGE>
<PAGE>
BLUE BIRD CORPORATION
CONSENT OF THE MEMBERS OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
IN LIEU OF A MEETING
The undersigned, being all the members of the
Compensation Committee of the Board of Directors of Blue Bird
Corporation, do hereby consent without a meeting of the
Compensation Committee, to the adoption of the resolutions at-
tached hereto.
DATED as of the 27th day of January, 1997.
/S/ Alfred C. Daugherty
-----------------------
Alfred C. Daugherty
/S/ Paul E. Glaske
-----------------------
Paul E. Glaske
/S/ Alexis P. Michas
-----------------------
Alexis P. Michas
<PAGE>
<PAGE>
WHEREAS, the Compensation Committee of the Board of
Directors (the "Committee") of Blue Bird Corporation (the
"Corporation") has determined that it is in the best
interests of the Corporation to grant certain stock options
to Mr. Bobby G. Wallace, an officer of the Corporation,
pursuant to the Corporation's Management Stock Option Plan
(the "Plan").
NOW, THEREFORE, BE IT:
RESOLVED, that, pursuant to the Plan, Mr. Bobby G.
Wallace be, and he hereby is, granted 40,000 options to
purchase 40,000 Shares (as defined in the Plan), upon
execution by Mr. Wallace of an appropriate option agreement;
FURTHER RESOLVED, that such options shall be
Discretionary Options (as defined in the Plan);
FURTHER RESOLVED, that such Discretionary Options
shall be granted as of February 3, 1997, and shall be fully
vested and exercisable on and as of such date; and
FURTHER RESOLVED, that the Option Price (as defined
in the Plan) of such Discretionary Options shall be $9.00,
subject to adjustment as provided in the Plan.
