<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BLUE RHINO CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
BLUE RHINO CORPORATION
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 22, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
(the "Annual Meeting") of Blue Rhino Corporation (the "Company") which will be
held on Tuesday, December 22, 1998 at the Ramada Village Conference Center,
6205 Ramada Drive, Clemmons, North Carolina, at 10:30 a.m.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following matters:
1. Election of 3 Class A Directors to hold office until the Annual Meeting
of Stockholders for the fiscal year ending July 31, 2001;
2. Authorization of an amendment to the Company's 1998 Stock Incentive Plan
to increase the number of shares of Common Stock reserved and available
for distribution by 900,000 shares;
3. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending July
31, 1999; and
4. Any other business that may properly come before the Annual Meeting or
any adjournment or postponement of the meeting.
Only stockholders of record at the close of business on the record date of
November 6, 1998 are entitled to vote their shares at the Annual Meeting. A
list of stockholders entitled to vote will be available for inspection during
regular business hours at the executive offices of the Company at 104
Cambridge Plaza Drive, Winston-Salem, North Carolina for 10 days prior to the
Annual Meeting.
A proxy card is enclosed for the convenience of those stockholders who do
not plan to attend the Annual Meeting in person but desire to have their
shares voted. If you do not plan to attend the Annual Meeting, please complete
and return the proxy card in the envelope provided for that purpose. If you
return your card and later decide to attend the Annual Meeting in person or
for any other reason desire to revoke your proxy, you may do so at any time
before your proxy is voted.
For the Board of Directors
/s/ Billy D. Prim
Billy D. Prim
Chairman of the Board, President
and Chief Executive Officer
Winston-Salem, North Carolina
November 27, 1998
<PAGE>
BLUE RHINO CORPORATION
104 CAMBRIDGE PLAZA DRIVE
WINSTON-SALEM, NORTH CAROLINA 27104
PROXY STATEMENT FOR
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 22, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Blue Rhino Corporation (the "Company" or
"Blue Rhino") for use at the Company's Annual Meeting of Stockholders for the
fiscal year ended July 31, 1998 (the "Annual Meeting") to be held on December
22, 1998 at the Ramada Village Conference Center, 6205 Ramada Drive, Clemmons,
North Carolina, at 10:30 a.m., or any adjournment or postponement thereof.
This Proxy Statement and the accompanying materials are being mailed to the
Company's stockholders beginning on or about November 27, 1998.
GENERAL
CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares of
common stock having a par value of $0.001 per share ("Common Stock") and
20,000,000 shares of preferred stock having a par value of $0.001 per share.
As of October 31, 1998, there were 7,630,873 shares of Common Stock
outstanding and no shares of preferred stock outstanding.
STOCKHOLDERS ENTITLED TO VOTE
Only Common Stock holders of record at the close of business on the record
date of November 6, 1998 are entitled to vote their shares at the Annual
Meeting and at any adjournment or postponement of the meeting. Each
outstanding share of Common Stock is entitled to 1 vote.
VOTING
Holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Annual Meeting who are present in person or represented by proxy
will constitute a quorum to conduct business at the Annual Meeting. The
affirmative vote of holders of a plurality of the shares of Common Stock
present in person or represented by proxy and entitled to vote at the Annual
Meeting will be required for the election of directors. For each other matter
coming before the Annual Meeting, the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or represented by
proxy and entitled to vote will be required for approval of such matter.
Because abstentions with respect to any matter are treated as shares present
in person or represented by proxy and entitled to vote for the purposes of
determining whether that matter has been approved by the stockholders,
abstentions have the same effect as negative votes for Proposals 2 and 3
described in this Proxy Statement. Non-votes by banks, brokerage houses,
custodians, nominees and other fiduciaries and shares as to which proxy
authority has been withheld with respect to any matter are not deemed to be
present in person or by proxy for purposes of determining whether stockholder
approval of that matter has been obtained.
PROXIES
If a stockholder properly completes and returns the accompanying proxy card,
the shares represented by the proxy will be voted as the stockholder directs.
IF THE PROXY CARD IS RETURNED BUT NO INSTRUCTIONS ARE GIVEN BY THE
STOCKHOLDER, THE SHARES WILL BE VOTED BY THE PROXY HOLDERS IN ACCORDANCE WITH
THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
<PAGE>
A stockholder may revoke a proxy at any time before it is voted by filing a
signed notice of revocation with the Secretary of the Company or by returning
a properly completed proxy card bearing a later date. In addition, a
stockholder may revoke a proxy by attending the Annual Meeting and voting in
person.
SOLICITATION OF PROXIES
The Company intends to request that banks, brokerage houses, custodians,
nominees and other fiduciaries forward copies of these proxy materials to
those persons for whom they hold shares. In addition to solicitation by mail,
certain officers and employees of the Company, who will receive no
compensation for their services other than their regular salaries, may solicit
proxies in person or by telephone. The cost of preparing, assembling, mailing
and soliciting proxies and other miscellaneous expenses related thereto will
be borne by the Company.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of 7 members divided into
Classes A, B, and C, comprised of 3, 2 and 2 directors, respectively, serving
staggered terms of 3 years each. Three Class A Directors will be elected at
the Annual Meeting to serve until the annual stockholders meeting for the
fiscal year ending July 31, 2001 or until such time as their successors are
elected and qualified.
Each nominee has consented to being named in this Proxy Statement and to
serve if elected. If any nominee should become unable to serve as a director
prior to the Annual Meeting, the persons authorized by your proxy will vote
for the election of a substitute nominee recommended by the Board of Directors
in place of that nominee.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF THE 3 CLASS A DIRECTOR NOMINEES NAMED BELOW. PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS INSTRUCTIONS ARE
GIVEN TO THE CONTRARY.
INFORMATION CONCERNING NOMINEES FOR ELECTION
Certain information as to each of the 3 nominees for election as a Class A
Director is set forth in the table below. The information appearing in the
table and certain information regarding beneficial ownership of securities by
such nominees contained in this Proxy Statement has been furnished to the
Company by the nominees.
<TABLE>
<CAPTION>
NOMINEE AGE BIOGRAPHICAL INFORMATION
------- --- ------------------------
<C> <C> <S>
Billy D. Prim 42 Mr. Prim co-founded the Company in March 1994 and has served
as its Chief Executive Officer and Chairman of the Board
since its incorporation and as its President since January
1996. Mr. Prim also serves as President and Chief Executive
Officer and is a 51% stockholder of American Oil and Gas,
Inc., a North Carolina based holding company which until
April 1995 was also a distributor of propane gas, home heat-
ing oil, diesel fuel and kerosene. Mr. Prim is a director
and part owner of several privately-held companies, includ-
ing Platinum Propane Holding, L.L.C. ("Platinum Propane"),
Caribou Cylinder Exchange, L.L.C. ("Caribou Propane"),
Javelina Cylinder Exchange, L.L.C. ("Javelina Propane") and
Raven Propane, L.L.C. ("Raven Propane") which act as dis-
tributors for the Company, and Bison Valve, L.L.C. ("Bison
Valve"). Mr. Prim is also a director of Southern Community
Bank & Trust and the National Propane Gas Association.
</TABLE>
2
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<TABLE>
<CAPTION>
NOMINEE AGE BIOGRAPHICAL INFORMATION
------- --- ------------------------
<C> <C> <S>
Andrew J. Filipowski 48 Mr. Filipowski co-founded the Company in March 1994
and has served as Vice Chairman of the Board since
May 1994. Mr. Filipowski is a co-founder of Platinum
Technology, Inc. and has been its Chairman of the
Board, President and Chief Executive Officer since
its formation in April 1987. Mr. Filipowski is also a
director of Platinum Entertainment, Inc., System
Software Associates, Inc. and several privately-held
companies including Platinum Propane, Caribou Pro-
pane, Javelina Propane, Raven Propane and Bison
Valve.
Craig J. Duchossois 54 Mr. Duchossois has served as a director since May
1994. Mr. Duchossois has been the Chief Executive Of-
ficer of Duchossois Industries, Inc., a privately-
held diversified manufacturing and service company
since 1995, and previously served as its President
from 1986 to 1995. Mr. Duchossois has also served as
a director of Platinum Entertainment, Inc. and cur-
rently serves as a director of Bissell, Inc. and
LaSalle National Bank as well as several privately-
held companies, including Bison Valve.
</TABLE>
INFORMATION CONCERNING CONTINUING DIRECTORS
Certain information as to each director who will continue in office is set
forth in the table below. The information appearing in the table and certain
information regarding beneficial ownership of securities by such directors
contained in this Proxy Statement has been furnished to the Company by the
directors.
CONTINUING CLASS B DIRECTORS TO SERVE UNTIL ANNUAL MEETING FOR THE FISCAL YEAR
ENDING JULY 31, 1999
<TABLE>
<CAPTION>
DIRECTOR AGE BIOGRAPHICAL INFORMATION
-------- --- ------------------------
<C> <C> <S>
John H. Muehlstein 43 Mr. Muehlstein has served as a director since September
1995. Since 1986, Mr. Muehlstein has been a partner of
the law firm of Pedersen & Houpt, P.C., legal counsel
to the Company. Mr. Muehlstein also serves as a direc-
tor of Einstein/Noah Bagel Corp., SpinCycle, Inc. and
several privately-held companies.
Richard A. Brenner 35 Mr. Brenner has served as a director since August 1998.
Mr. Brenner has been the President of Amarr Company
since July 1993 and has served on the Board of Advisors
of Wachovia Bank since 1993.
CONTINUING CLASS C DIRECTORS TO SERVE UNTIL ANNUAL MEETING FOR THE FISCAL YEAR
ENDING JULY 31, 2000
<CAPTION>
DIRECTOR AGE BIOGRAPHICAL INFORMATION
-------- --- ------------------------
<C> <C> <S>
Steven D. Devick 46 Mr. Devick has served as a director since May 1994. Mr.
Devick is a co-founder of Platinum Entertainment, Inc.
and has served as its Chairman of the Board and Chief
Executive Officer since January 1992 and as its Presi-
dent since January 1996. Mr. Devick is a director of
Platinum Technology, Inc., as well as serving as an of-
ficer and director of several privately-held companies.
Mark Castaneda 34 Mr. Castaneda has served as Chief Financial Officer of
the Company since October 1997, as Secretary since Feb-
ruary 1998 and as a director since August 1998. Prior
to joining the Company, Mr. Castaneda served as the
Vice President of Finance and the Chief Financial Offi-
cer for All Star Gas Corporation from July 1995 until
October 1997; as a Director of Planning and Controller
of Skelgas Propane, Inc. from May 1991 to July 1995;
and as a certified public accountant with Deloitte &
Touche, LLP from June 1986 to May 1991.
</TABLE>
3
<PAGE>
INFORMATION CONCERNING EXECUTIVE OFFICERS
Certain information as to executive officers of the Company not identified
above is set forth in the table below. The information appearing in the table
and certain information regarding beneficial ownership of securities by such
executive officers contained in this Proxy Statement has been furnished to the
Company by the executive officers.
<TABLE>
<CAPTION>
EXECUTIVE OFFICER AGE BIOGRAPHICAL INFORMATION
----------------- --- ------------------------
<C> <C> <S>
Richard E. Belmont 39 Mr. Belmont has served as Vice President of Marketing
since August 1998 and served as Vice President of Sales
and Marketing from March 1995 to August 1998. Prior to
joining the Company, Mr. Belmont was the product plan-
ning manager and parts and product manager with the
Char-Broil Division of W.C. Bradley Co. from January
1990 to March 1995. Mr. Belmont is currently a director
of the Barbecue Industry Association of America.
Joseph T. Culp 41 Mr. Culp has served as Vice President of Partner Devel-
opment since November 1995. Prior to joining the Compa-
ny, Mr. Culp was the general manager of Skelgas Pro-
pane, Inc. from February 1994 to November 1995 and a
regional manager for Suburban Propane Partners, L.P.
from January 1981 to February 1994.
Kay B. Martin 46 Ms. Martin has served as Vice President and Chief In-
formation Officer since March 1997. Prior to joining
the Company, Ms. Martin was the Director of Information
Resources for R.J. Reynolds Tobacco Company from March
1988 to March 1997.
Jerald D. Shadley 51 Mr. Shadley has served as Vice President of Sales since
August 1998. Prior to joining the Company, Mr. Shadley
served as Vice President of Sales and Marketing for Mc-
Culloch Corp. from January 1996 to August 1998. Mr.
Shadley was also Executive Vice President, Sales and
Marketing from July 1994 to January 1996 and Vice Pres-
ident, Sales and Marketing from April 1991 to July 1994
for Homelite, Inc.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Executive, Compensation and Audit
Committees. The Board does not have a Nominating Committee.
The Executive Committee, consisting of Messrs. Duchossois, Filipowski and
Prim, makes recommendations to the Board of Directors concerning matters of
strategic planning and operational management of the Company and has the power
to address matters on behalf of the Board of Directors which require attention
between meetings of the Board of Directors. The Compensation Committee,
consisting of Messrs. Brenner and Devick, makes recommendations to the Board
of Directors concerning salaries and incentive compensation for the Company's
directors, officers and employees and administers the Company's stock
incentive and option plans. Prior to September 1997, decisions concerning the
compensation of officers were made by the Board of Directors as a whole. The
Audit Committee, consisting of Messrs. Brenner, Devick and Muehlstein, makes
recommendations to the Board of Directors regarding the selection and
retention of independent accountants, reviews the results and scope of the
audit and other accounting-related services, and reviews and evaluates the
Company's internal control functions.
4
<PAGE>
MEETINGS
The Board of Directors held 4 meetings during fiscal 1998. The Executive
Committee held 1 meeting and the Compensation and Audit Committees each held 2
meetings in fiscal 1998. All members of the Board of Directors attended at
least 75% of the aggregate of the 4 Board of Directors meetings and the number
of meetings held by their respective committees during fiscal 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons beneficially owning more than 10% of the Company's outstanding Common
Stock to file periodic reports of stock ownership and stock transactions with
the Securities and Exchange Commission (the "Commission"). Based solely on a
review of copies of these reports, the Company believes that all filing
requirements for fiscal 1998 were satisfied in a timely manner.
DIRECTOR COMPENSATION
In order to enhance its ability to attract, retain and motivate qualified
non-employee directors, the Company adopted the Non-Employee Director Stock
Option Plan (the "Director Option Plan") effective May 18, 1998. Directors
currently receive no cash compensation for their service on the Board of
Directors, although they are reimbursed for all reasonable expenses incurred
in connection with the performance of their duties as directors. The Company's
5 non-employee directors are entitled to participate in the Director Option
Plan. The Company has reserved 100,000 shares of Common Stock for issuance
under the Director Option Plan. The Board of Directors has approved an annual
grant to each non-employee director under the Director Option Plan of options
to purchase up to 4,000 shares of Common Stock at a price per share equal to
the market value per share of the Common Stock as of the grant date. Each
grant to a non-employee director consists of 1,000 shares for each quarterly
board meeting such director attended during the previous year. One third of
these options will vest on each of the first 3 anniversaries of the grant
date. Currently, no options are outstanding under this plan. The first grants
of options under the Director Option Plan are expected to be made on December
21, 1998.
Options granted under the Director Option Plan are not "incentive stock
options," as that term is defined in Section 422(b) of the Internal Revenue
Code of 1986, as amended (the "Code"). The Compensation Committee of the Board
of Directors administers the Director Option Plan and has the power to adjust
the number of shares of Common Stock subject to option grants in case of stock
dividends, stock splits, recapitalizations and other similar events. Each
option granted under the Director Option Plan is exercisable for a period not
to exceed 10 years from the date of grant and shall lapse upon expiration of
such period. Options may not be assigned or transferred except by will or
operation of the laws of descent and distribution and each option is
exercisable during the lifetime of the grantee only by such grantee.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company for the fiscal years ended July 31, 1998 and 1997 to the
Company's Chief Executive Officer and its other executive officers whose total
salary plus bonus exceeded $100,000 for such fiscal year (collectively, the
"Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------- ------------
SHARES
UNDERLYING
NAME AND PRINCIPAL POSITION STOCK
YEAR SALARY OPTIONS
--------------------------- ---- -------- ------------
<S> <C> <C> <C>
Billy D. Prim................................ 1998 $218,538 43,312
Chief Executive Officer 1997 125,250 57,088
Richard E. Belmont........................... 1998 112,708 26,890
Vice President of Marketing 1997 106,727 1,890
Joseph T. Culp............................... 1998 109,710 26,890
Vice President of Partner Development 1997 104,242 1,890
Mark Castaneda............................... 1998 78,846(1) 32,561
Chief Financial Officer 1997 -- --
Kay B. Martin................................ 1998 102,288 26,890
Vice President and Chief Information Officer 1997 38,712(2) 5,671
</TABLE>
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(1) Mr. Castaneda's salary for fiscal 1998 reflects amounts earned from the
commencement of his employment with the Company in October 1997 through
July 1998.
(2) Ms. Martin's salary for fiscal 1997 reflects amounts earned from the
commencement of her employment with the Company in February 1997 through
July 1997.
6
<PAGE>
OPTION GRANTS
The following table sets forth information on grants of stock options to the
Named Officers pursuant to the 1994 Stock Incentive Plan and the 1998 Stock
Incentive Plan during fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
NUMBER OF % OF PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION TERM(2)
OPTIONS EMPLOYEES IN PER EXPIRATION -----------------
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
---- ---------- ------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Billy D. Prim........... 40,000 13.6% $13.00 5/18/08 $327,025 $828,746
3,312(3) 1.1% 6.61 8/1/07 13,759 34,882
Richard E. Belmont...... 25,000 8.5% 13.00 5/18/08 204,391 517,966
1,890(3) 0.6% 6.61 8/1/07 7,852 19,906
Joseph T. Culp.......... 25,000 8.5% 13.00 5/18/08 204,391 517,966
1,890(3) 0.6% 6.61 8/1/07 7,852 19,906
Mark Castaneda.......... 25,000 8.5% 13.00 5/18/08 204,391 517,966
7,561(3) 2.6% 6.61 8/1/07 31,411 79,633
Kay B. Martin........... 25,000 8.5% 13.00 5/18/08 204,391 517,966
1,890(3) 0.6% 6.61 8/1/07 7,852 19,906
</TABLE>
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(1) Except as described in note 3 below, all options were granted pursuant to
the 1998 Stock Incentive Plan. These options are nonqualified stock
options, have a term of 10 years and have an exercise price equal to the
fair value of the Common Stock on the date of grant. Options vest 20% on
each anniversary of the grant date until fully vested (i.e., 5 years from
the grant date) and are exercisable upon vesting. In determining the fair
market value of the Common Stock for options issued prior to the
establishment of a public market for the Common Stock, the Compensation
Committee relied on the estimate of the midpoint of the estimated range of
the offering price for the Common Stock per the initial public offering.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Commission and do not represent the Company's
estimate or projection of the Company's future Common Stock prices.
(3) Options were granted pursuant to the 1994 Stock Incentive Plan. These
options are nonqualified stock options, have a term of 10 years and have
an exercise price equal to the actual or estimated fair value of the
Common Stock on the date of grant. All options issued under the 1994 Stock
Incentive Plan are fully vested and exercisable. In determining the fair
market value of the Common Stock for options issued prior to the
establishment of a public market for the Common Stock, the Board of
Directors considered various factors, including the Company's financial
condition and business prospects, its operating results and the absence of
a market for its Common Stock.
7
<PAGE>
The following table sets forth information with respect to unexercised stock
options granted under the 1994 Stock Incentive Plan and the 1998 Stock
Incentive Plan as of the end of fiscal 1998. The Named Officers did not
exercise any stock options during fiscal 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
HELD AT JULY 31, 1998 JULY 31, 1998(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Billy D. Prim.............. 64,180 40,000 $585,144 $120,000
Richard E. Belmont......... 15,122 25,000 164,901 75,000
Joseph T. Culp............. 15,122 25,000 164,901 75,000
Mark Castaneda............. 7,561 25,000 70,978 75,000
Kay B. Martin.............. 7,561 25,000 70,978 75,000
</TABLE>
- --------
(1) Calculated by determining the difference between the market value of
$16.00 per share for the Common Stock underlying the options at July 31,
1998 and the exercise price of the Named Officer's options.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for the development of the
Company's executive compensation policies and the administration of those
policies. The Compensation Committee evaluates the performance of management
and recommends to the Board of Directors the salaries and incentive
compensation for executive officers and key employees. In determining the
compensation of individual executive officers and employees during fiscal
1998, the Compensation Committee considered published compensation surveys,
the amount of compensation paid to executive officers at comparable companies
in the consumer product and propane industries, market conditions, the
recommendations of management and the attainment of certain performance goals.
Executive Compensation Policy
The Company's general compensation policy is that total compensation should
vary with the performance of the Company and the individual in attaining
certain financial and non-financial objectives. The Compensation Committee's
objectives include:
. Attracting and retaining talented executives and employees critical to
the long-term success of the Company by offering compensation packages
competitive with those provided by other publicly-held high growth
companies.
. Aligning the interests of the Company's management with the interests of
the Company's stockholders by developing compensation programs that link
compensation directly to increases in stockholder value.
. Maintaining an appropriate balance between base salary and performance-
based compensation, with a higher proportion of compensation being
performance-based as an officer or key employee's level of
responsibility increases.
During fiscal 1998, the compensation of an officer or key employee of the
Company was comprised of base salary and options granted under the Company's
stock incentive plans. In addition, all employees of the Company who have been
employed for 1 year or more are eligible to participate in a multi-employer
401(k) plan beginning on the first day of the first fiscal quarter following
the completion of 1,000 hours of service. Subject to limitations imposed by
the Code, participants in the 401(k) plan may contribute up to 10% of their
total base compensation to the plan.
8
<PAGE>
Base Salary
The Company's policy is to pay base salaries that are generally competitive
with the median base salaries paid by comparable companies in the consumer
product and propane industries. The Compensation Committee determines and
recommends to the Board of Directors a base salary for each of the officers
and key employees based upon individual performance, level of responsibility,
experience and competitive factors. The Compensation Committee did not
commission any formal surveys of executive officer compensation at comparable
companies, but relied on published surveys for indications of salary trends
generally and at growth companies in particular. The Compensation Committee
used all of these factors in recommending base salary levels, but did not
assign specific weight to any particular factor.
Stock Incentive Plans
Granting options under the Company's 1998 Stock Incentive Plan is the
primary method by which the Compensation Committee motivates executive
officers and key employees to meet and surpass performance goals. Stock
options are intended to focus executive officers and key employees on managing
the Company from the perspective of owners and to link their long-term
compensation directly with increases in stockholder value. Options granted
under the 1998 Stock Incentive Plan vest 20% on each anniversary of the grant
date and, thus, do not fully vest until 5 years after the grant date. In
addition, because the exercise price of options granted under the 1998 Stock
Incentive Plan may not be less than the market value of the Common Stock on
the grant date, recipients of option grants receive no compensation unless the
price per share of Common Stock increases after the grant date.
In determining the stock option grants to individual executive officers, the
Compensation Committee employs various factors including whether Company
revenue targets and individual performance targets are achieved. The Company's
revenues increased approximately 93% from $14,200,000 in fiscal 1997 to
$27,400,000 in fiscal 1998 and nearly all of the Company's internal revenue
targets were achieved. Individual performance targets are generally
established for each executive officer on a quarterly and annual basis. Each
executive officer's performance targets vary depending upon the officer's
position. In fiscal 1998, individual performance targets included increases in
the Company's revenue and number of retail locations as well as more specific
short-term targets.
The most significant factor influencing the Compensation Committee's
determination of performance compensation in this fiscal year was management's
dedication to the Company's primary objective, a successful initial public
offering. In connection with the consummation of the Company's initial public
offering, the Compensation Committee recommended and the Board of Directors
approved grants of options to all of the Company's employees. Based upon their
position and level of responsibility within the Company, the Named Officers
received options under the 1998 Stock Incentive Plan for a total of 140,000
shares of Common Stock in May 1998.
In November 1997, the Named Officers received options for a total of 16,543
shares of Common Stock pursuant to the 1994 Stock Incentive Plan. These
options were granted based upon the Company's attainment of certain internal
revenue and performance targets. Upon the consummation of its initial public
offering, the Company accelerated the vesting of all options granted under the
1994 Stock Incentive Plan. No additional options will be granted pursuant to
the 1994 Stock Incentive Plan.
Compensation of Chief Executive Officer
The Compensation Committee determines the compensation of Mr. Prim, the
Company's President and Chief Executive Officer, based on the same criteria
applicable to the Company's other executive officers. In November 1997, the
Compensation Committee recommended and the Board of Directors approved
increasing Mr. Prim's salary to $250,000 per year. Previously, Mr. Prim
accepted a salary of $125,000 during the Company's start-up years. The
Compensation Committee believes Mr. Prim's current salary is below the median
salaries of other chief executive officers in the consumer product and propane
industries.
9
<PAGE>
Pursuant to the Committee's recommendations, Mr. Prim was granted options
for 3,312 shares of Common Stock in November 1997 and 40,000 shares of Common
Stock in May 1998. As noted earlier, the Company's grant of Common Stock
options in May 1998 was directly related to the consummation of its initial
public offering. Mr. Prim's leadership was essential to the success of the
Company's initial public offering and the attainment of certain internal
revenue and performance targets. The Compensation Committee also considered
significant Mr. Prim's role in identifying and negotiating the Company's 15
acquisitions during fiscal 1998, as well as his oversight of the integration
of these acquired businesses into the Company's operations.
Section 162(m)
Under Section 162(m) of the Code, federal income tax deductions of publicly-
traded companies may be limited to the extent total compensation (including
base salary, annual bonus, restricted stock awards, stock options exercises
and nonqualified benefits) for certain executive officers exceeds $1,000,000
in any 1 year. Currently, none of the Company's executive officers receive
annual compensation in excess of $1,000,000. However, if an executive officer
were to receive compensation in excess of $1,000,000, the Compensation
Committee expects to structure such compensation to meet the requirements of
Section 162(m) and preserve the Company's federal income tax deduction.
COMPENSATION COMMITTEE
Steven D. Devick
Craig J. Duchossois
Andrew J. Filipowski
Billy D. Prim
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, Messrs. Devick, Duchossois, Filipowski, S.H. Fogleman
III and Prim served on the Compensation Committee of the Board of Directors.
Mr. Fogleman resigned from the Company's Board of Directors in August 1998.
Messrs. Filipowski and Prim resigned from the Compensation Committee in
February 1998 and Mr. Duchossois resigned from the committee in November 1998.
The Compensation Committee is currently comprised of Messrs. Brenner and
Devick.
Mr. Fogleman was previously the Chief Financial Officer and Vice President,
Finance of the Company from May 1994 until December 1995.
Since March 1994, the Company has leased its offices in Winston-Salem, North
Carolina from Platinum Services Corporation, an entity owned 65% by Mr.
Filipowski, 30% by Mr. Prim and 5% by Mr. Fogleman. Pursuant to the terms of
the lease, the Company pays annual rent of $82,000, plus its allocable share
of all taxes, utilities and maintenance. Although the lease terminates on
December 31, 1998, the Company expects to renew the lease on substantially
similar terms for an additional 3 year term.
Since March 1997, Platinum Propane and its subsidiaries have acted as the
Company's distributors for North Carolina, South Carolina, Georgia, Florida,
parts of Virginia and Tennessee, and the Los Angeles, California and Chicago,
Illinois territories. Messrs. Prim and Filipowski own approximately 40% of the
membership interests in Platinum Propane. The terms of the distribution
agreements are substantially the same as those negotiated with other Blue
Rhino distributors. In fiscal 1998, Platinum Propane received approximately
$7,900,000 from the Company on behalf of cylinder distribution services
performed by its subsidiaries. The Company has also entered into display rack
financing leases with Platinum Propane requiring lease payments of $12,116 per
month as of July 31, 1998.
The Company entered into distribution agreements in February 1998 with
Caribou Propane and Javelina Propane to service its Pacific Northwest and
Phoenix markets, respectively, and in May 1998 with Raven Propane to service
its Philadelphia/New Jersey markets. Messrs. Prim and Filipowski own 45% of
the
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membership interests in Caribou Propane, Javelina Propane and Raven Propane.
The terms of the distribution agreements are substantially the same as those
negotiated with other Blue Rhino distributors. In fiscal 1998, Caribou
Propane, Javelina Propane and Raven Propane received approximately $31,000,
$118,000 and $381,000, respectively, from the Company on behalf of cylinder
distribution services performed by them.
In May 1998, the Company granted Caribou Propane, Javelina Propane, Platinum
Propane and Raven Propane options to purchase 4,600, 5,282, 74,461 and 10,051
shares of Common Stock, respectively, pursuant to the Company's Distributor
Incentive Stock Option Plan. These options vest 25% on July 31, 1999 and each
July 31st thereafter until fully vested and may be exercised at a price of
$13.00 per share on or before May 18, 2008.
In October 1998, the Company sold substantially all of its grill cylinders
to USA Leasing, L.L.C. ("USA Leasing") at fair market value for approximately
$6,500,000. Messrs. Duchossois, Filipowski and Prim own approximately 74% of
the membership interests in USA Leasing. Prior to their sale to USA Leasing,
the Company either leased the grill cylinders to its distributors or charged
distributors a fee for their use of the cylinders. USA Leasing has entered or
intends to enter into leases with Blue Rhino's distributors on substantially
the same terms as those on which the Company previously leased cylinders to
its distributors.
The Company believes that the foregoing transactions with directors,
officers, stockholders and other affiliates were completed on terms as
favorable to the Company as could have been obtained from unaffiliated third
parties. The Company has adopted a policy that it will not enter into any
material transaction in which a Company director, officer or stockholder has a
direct or indirect financial interest, unless the transaction is determined by
the Company's Board of Directors to be fair as to the Company or is approved
by a majority of the Company's disinterested directors or by the Company's
stockholders.
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<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock for the period May 19, 1998, the first date on which the Common
Stock was traded, through July 31, 1998 with (1) the cumulative total return
of the Nasdaq Composite Index for The Nasdaq Stock Market for the same period
and (2) the cumulative total return of an index of peer group companies for
the same period. The following emerging consumer product and consumer service
companies have been included in the peer group index: Central Garden and Pet
Company, Glacier Water Services, Inc., Service Experts, Inc., U.S.A. Floral
Products, Inc. and NUCO2, Inc. The graph assumes $100 was invested on May 19,
1998 in the Company's Common Stock and in the stock represented by the 2
indexes and that all dividends paid, if any, were reinvested. The stock price
performance of the Company's Common Stock reflected in the following graph is
not necessarily indicative of future performance.
TOTAL RETURN TO STOCKHOLDERS
<TABLE>
<S> <C> <C>
Total Return Analysis 5/19/98 7/31/98
---------------------------------------------
Blue Rhino Corporation $100 $123
---------------------------------------------
Peer Group Index $100 $ 85
---------------------------------------------
Nasdaq Composite Index $100 $101
</TABLE>
12
<PAGE>
COMMON STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of October 31, 1998 by (1) each
person known by the Company to own beneficially more than 5% of the Common
Stock, (2) each director of the Company, (3) each Named Officer and (4) all
executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OWNERSHIP (1) COMMON STOCK
- ---------------- ----------------- ------------
<S> <C> <C>
Andrew J. Filipowski(2)
1815 South Meyers Road
Oakbrook Terrace, IL 60181..................... 1,861,869 24.2%
Billy D. Prim(3)
104 Cambridge Plaza Drive
Winston-Salem, NC 27104........................ 1,344,497 17.5%
Craig J. Duchossois(4)
845 Larch Avenue
Elmhurst, IL 60126............................. 404,078 5.3%
Richard E. Belmont(5)
104 Cambridge Plaza Drive
Winston-Salem, NC 27104........................ 15,122 *
Richard A. Brenner
464 Sheffield Drive
Winston-Salem, NC 27104........................ 8,665 *
Joseph T. Culp(6)
104 Cambridge Plaza Drive
Winston-Salem, NC 27104........................ 15,422 *
Mark Castaneda(7)
104 Cambridge Plaza Drive
Winston-Salem, NC 27104........................ 8,061 *
John H. Muehlstein(5)
161 North Clark Street, Suite 3100
Chicago, IL 60601.............................. 3,781 *
Steven D. Devick(8)
2001 Butterfield Road, Suite 1400
Downers Grove, IL 60515........................ 332,119 4.4%
Kay B. Martin(9)
104 Cambridge Plaza Drive
Winston-Salem, NC 27104........................ 8,561 *
Directors and executive officers as a group (10
individuals)................................... 3,250,755 41.4%
Gilder, Gagnon, Howe & Co.(10)
1775 Broadway, 26th Floor
New York, NY 10019............................. 1,023,675 13.4%
Feirstein Capital Management(11)
767 Third Avenue, 28th Floor
New York, NY 10017............................. 500,000 6.6%
Zweig-DiMenna Special Opportunities, L.P.(12)
900 Third Avenue
New York, NY 10022............................. 385,000 5.0%
</TABLE>
- --------
* Less than 1%.
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<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options or warrants held by that person that are currently
exercisable or exercisable within 60 days of the date hereof are deemed
outstanding. Except as indicated in the footnotes to this table and as
provided pursuant to applicable community property laws, the stockholders
named in the table have sole voting and investment power with respect to
the shares set forth opposite each stockholder's name.
(2) Includes 1,039,879 shares of Common Stock owned by Mr. Filipowski, 18,903
shares of Common Stock issuable upon the exercise of vested options under
the 1994 Stock Incentive Plan held by Mr. Filipowski, 36,546 shares of
Common Stock to be issued upon exercise of warrants held by Mr.
Filipowski, 216,127 shares of Common Stock owned by American Oil and Gas,
Inc., of which Mr. Filipowski owns 40% of the issued and outstanding
shares, 206,955 shares owned by Platinum Propane, of which Mr. Filipowski
acts as a director and indirectly owns 16% of the membership interests,
328,338 shares of Common Stock owned by Platinum Venture Partners I, L.P.
("PVP"), the general partner of which is Platinum Venture Partners, Inc.
("PVP, Inc."), a corporation of which Mr. Filipowski owns 22.5% of the
shares and serves as a director, 1,890 shares of Common Stock beneficially
owned by Jennifer R. Filipowski, 1,890 shares of Common Stock beneficially
owned by Mr. Filipowski as trustee on behalf of the Andrew E. Filipowski
Trust, 1,890 shares of Common Stock beneficially owned by Veronica
Filipowski as trustee on behalf of the Alexandra Filipowski Trust, 1,890
shares of Common Stock beneficially owned by Veronica Filipowksi as
trustee on behalf of the James Meadows Trust and 7,561 shares of Common
Stock beneficially owned by Veronica Filipowski.
(3) Includes 845,894 shares of Common Stock held by Mr. Prim, 64,180 shares
of Common Stock issuable upon the exercise of vested options under the
1994 Stock Incentive Plan held by Mr. Prim, 216,127 shares of Common
Stock owned by American Oil and Gas, Inc., of which Mr. Prim owns 51% of
the issued and outstanding shares and has voting control, 206,955 shares
owned by Platinum Propane, of which Mr. Prim acts as a director and
indirectly owns 20.4% of the membership interests, 7,561 shares of
Common Stock beneficially owned by Debbie W. Prim, 1,890 shares of
Common Stock beneficially owned by Debbie W. Prim as trustee on behalf
of Sarcanda Westmoreland and 1,890 shares of Common Stock beneficially
owned by Debbie W. Prim as trustee on behalf of Anthony G. Westmoreland.
(4) Includes 285,446 shares of Common Stock beneficially owned by the Craig
Duchossois Revocable Trust of which Mr. Duchossois is the trustee,
36,546 shares of Common Stock to be issued upon exercise of warrants
held by Mr. Duchossois, 2,500 shares of Common Stock beneficially owned
by R. Bruce Duchossois over which Mr. Duchossois has voting and
investment control, 3,781 shares of Common Stock issuable upon the
exercise of vested options held by Mr. Duchossois, and 75,805 shares of
Common Stock beneficially owned by the Kimberly Family Discretionary
Trust over which Mr. Duchossois has voting and investment control.
(5) Represents the number of shares issuable upon the exercise of vested
options.
(6) Includes 300 shares of Common Stock owned by Mr. Culp and 15,122 shares
of Common Stock issuable upon the exercise of vested options held by Mr.
Culp.
(7) Includes 500 shares of Common Stock owned by Mr. Castaneda and 7,561
shares of Common Stock issuable upon the exercise of vested options held
by Mr. Castaneda.
(8) Includes 3,781 shares issuable upon the exercise of vested options held
by Mr. Devick and 328,338 shares owned beneficially by PVP, the general
partner of which is PVP, Inc.
(9) Includes 1,000 shares of Common Stock owned by Ms. Martin and 7,561
shares of Common Stock issuable upon the exercise of vested options held
by Ms. Martin.
(10) Derived from a Schedule 13G dated August 11, 1998 and furnished to the
Company by Gilder, Gagnon, Howe and Co. ("GGH"). The Schedule 13G
indicates that GGH had shared investment control for 1,023,675 shares of
Common Stock and shared voting control for 13,000 of such shares of
Common Stock.
(11) Derived from a Schedule 13G dated November 10, 1998 and jointly furnished
to the Company pursuant to a joint filing agreement by Barry R.
Feirstein, Feirstein Capital Management, L.L.C. ("FCM") and Feirstein
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<PAGE>
Partners, L.P. ("FP"). Information provided to the Company by Mr.
Feirstein, FCM and FP and the Schedule 13G indicate that Mr. Feirstein had
sole voting and investment control over 60,100 shares of Common Stock and
Mr. Feirstein, FCM and FP shared voting and investment control over 439,900
shares of Common Stock.
(12) Derived from a Schedule 13G dated June 4, 1998 and jointly furnished to
the Company pursuant to a joint filing agreement by Zweig-DiMenna Special
Opportunities, L.P. ("ZD Opportunities"), Zweig-DiMenna Partners, L.P.
("ZD Partners"), Zweig-DiMenna International Limited ("ZD Limited"),
Zweig-DiMenna International Managers, Inc. ("ZD Managers") and Gotham
Advisors, Inc. ("Gotham"). The Schedule 13G indicates that these entities
beneficially owned the Company's Common Stock as follows: (i) ZD
Opportunities--49,100 shares, (ii) ZD Partners--82,500 shares, (iii) ZD
Limited--198,700 shares, (iv) ZD Managers--35,200 shares and (v) Gotham--
19,500 shares.
CERTAIN TRANSACTIONS
Mr. Muehlstein, a director of the Company, is also a partner in the firm of
Pedersen & Houpt, P.C., legal counsel to the Company.
PROPOSAL 2
APPROVAL OF AMENDMENT OF 1998 STOCK INCENTIVE PLAN
The Board of Directors, subject to approval of the Company's stockholders,
has adopted resolutions approving an amendment to the 1998 Stock Incentive
Plan to better meet the ongoing needs of the Company by increasing the number
of shares of Common Stock reserved for issuance upon the exercise of options
granted under the 1998 Stock Incentive Plan by 900,000 shares. If this
amendment is approved, 1,200,000 shares of Common Stock will be reserved and
available for distribution under the 1998 Stock Incentive Plan. Approval of
this amendment will in no way alter or amend other provisions or requirements
of the 1998 Stock Incentive Plan.
Certain important features of the 1998 Stock Incentive Plan as proposed to
be amended are summarized below, which summary is qualified in its entirety by
reference to the full text of the 1998 Stock Incentive Plan, as amended and
restated, which is attached to this Proxy Statement as Appendix A. The
proposed amendment is shown in boldface type on page 5 of Appendix A.
DESCRIPTION OF THE 1998 STOCK INCENTIVE PLAN
The purpose of the 1998 Stock Incentive Plan is to encourage key employees,
officers, consultants and advisors of the Company to acquire a proprietary
interest in the Company and to generate an increased incentive to contribute
to the Company's future success and prosperity. The Compensation Committee of
the Board of Directors is the administrator for the 1998 Stock Incentive Plan
and has the power to select officers, employees, consultants and advisors for
participation in the plan, determine the number of shares of Common Stock
subject to each option grant and the terms of exercise for each option granted
under the plan. Currently, all officers and employees, approximately 60
persons, are eligible to participate in the 1998 Stock Incentive Plan. No
options have been granted to consultants or advisors pursuant to the 1998
Stock Incentive Plan.
The Compensation Committee is authorized to determine when options granted
pursuant to the 1998 Stock Incentive Plan will vest and be exercisable,
provided that no option will be exercisable less than 1 year or more than 10
years after it is granted. The exercise price of options granted under the
1998 Stock Incentive Plan is determinable by the Compensation Committee except
that the exercise price may not be less than the closing price of the Common
Stock on the grant date. On November 24, 1998, the closing price of the Common
Stock on the Nasdaq Stock Market was $20 7/8 per share. The Compensation
Committee may also adjust the number of shares of Common Stock subject to
option grants in case of stock dividends, stock splits, recapitalizations and
15
<PAGE>
other similar events. Options may not be assigned or transferred except by
will or operation of the laws of descent and distribution. Subject to vesting
requirements, options granted under the 1998 Stock Incentive Plan may be
exercised only by the participant, with certain exceptions in the event of
death during his or her employment with or engagement by the Company.
Federal Income Tax Consequences of the 1998 Stock Incentive Plan
Options granted under the 1998 Stock Incentive Plan are not "incentive stock
options," as that term is defined in Section 422(b) of the Code. Recipients of
options granted under the 1998 Stock Incentive Plan will not be subject to
federal income tax at the time of grant, and the Company will not be entitled
to a tax deduction by reason of such grant. Upon exercise of an option, the
difference between the exercise price and the fair market value of the stock
on the date of exercise will be taxable as ordinary income to the grantee in
the year in which the exercise occurs. The Company will be entitled to a
corresponding deduction, to the extent permitted by under Section 162(m) of
the Code, at the same time a grantee recognizes income and in an amount equal
to the amount of ordinary income recognized by the grantee.
As described above, the Company is generally entitled to an income tax
deduction for any compensation income taxed to participants in the 1998 Stock
Incentive Plan. Under Section 162(m) of the Code, however, unless compensation
meets the stockholder approval and other requirements of Section 162(m), the
Company would not be entitled to a deduction for compensation paid to certain
covered executives to the extent his or her compensation exceeds $1,000,000.
The 1998 Stock Incentive Plan is designed to meet the stockholder approval and
other requirements of Section 162(m).
PROPOSED AMENDMENTS TO THE 1998 STOCK INCENTIVE PLAN
Upon adoption, the 1998 Stock Incentive Plan had 300,000 shares of Common
Stock available for issuance upon the exercise of options granted under the
plan. As of July 31, 1998, options to purchase 275,300 shares of Common Stock
have been granted under the 1998 Stock Incentive Plan. Because only 24,700
shares remain available under the 1998 Stock Incentive Plan, the Board of
Directors believes an increase in the number of shares of Common Stock
available under the plan is necessary to attract and retain qualified
employees, including executive officers. In addition, an increase in the
number of shares available under the 1998 Stock Incentive Plan is necessary so
that the Compensation Committee may continue crafting incentive compensation
policies for executive officers and other employees based upon both Company-
wide revenue targets and personal performance targets.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR THE
AMENDMENT OF THE 1998 STOCK INCENTIVE PLAN FOR THE ADDITION OF 900,000 SHARES
OF COMMON STOCK RESERVED FOR DISTRIBUTION UNDER THE PLAN. PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE VOTED FOR AMENDMENT OF THE 1998 STOCK INCENTIVE
PLAN UNLESS A VOTE AGAINST THIS PROPOSAL OR ABSTENTION IS SPECIFICALLY
INDICATED.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has approved the engagement of PricewaterhouseCoopers LLP as the
independent auditors of the Company for the fiscal year ending July 31, 1999.
PricewaterhouseCoopers LLP, independent certified public accountants, has
audited the financial statements of the Company since fiscal 1995. A
representative of PricewaterhouseCoopers LLP is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if he or she
chooses to do so. The representative will also be available to respond to
appropriate questions from stockholders.
16
<PAGE>
Although stockholder approval of the engagement is not required by law, the
Board of Directors desires to solicit such approval. If the appointment of
PricewaterhouseCoopers LLP is not approved by a majority of the shares
represented at the Annual Meeting, the Board of Directors will consider the
appointment of other independent auditors for fiscal 1999.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JULY 31, 1999. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT UNLESS A VOTE AGAINST THIS
PROPOSAL OR ABSTENTION IS SPECIFICALLY INDICATED.
STOCKHOLDER PROPOSALS
Under the Company's By-laws, any stockholder who intends to present any
matter of business to be considered and voted upon at the annual meeting of
stockholders for the fiscal year ending July 31, 1999 must provide timely
written notice of the stockholder's intent to the Secretary of the Company. To
be timely, such notice must be delivered to the Secretary at the Company's
executive offices not later than August 18, 1999.
Pursuant to applicable rules under the Exchange Act, some stockholder
proposals may be eligible for inclusion in the Company's Proxy Statement for
the fiscal year ending July 31, 1999. Any such stockholder proposals must be
submitted in writing to the Secretary of the Company not later than July 19,
1999. Stockholders interested in submitting such a proposal are advised to
contact knowledgeable counsel with regards to the detailed requirements of
such rules.
ADDITIONAL INFORMATION
The Company's 1998 Annual Report furnished to all stockholders of record on
November 6, 1998 included a copy of its annual report on Form 10-K as filed
with the Commission for the year ended July 31, 1998. HOWEVER, UPON WRITTEN
REQUEST BY A STOCKHOLDER OF RECORD ON NOVEMBER 6, 1998, THE COMPANY WILL
PROVIDE WITHOUT CHARGE AN ADDITIONAL COPY OF ITS 1998 ANNUAL REPORT ON FORM
10-K. REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF THE COMPANY AT 104
CAMBRIDGE PLAZA DRIVE, WINSTON-SALEM, NORTH CAROLINA 27104.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other business to come before the Annual Meeting for consideration by the
Company's stockholders. If any other business properly comes before the
meeting, the persons named as proxies in the accompanying proxy card will vote
the shares represented by the proxy in accordance with their best judgment.
By Order of the Board of Directors
/s/ Mark Castaneda
Mark Castaneda
Secretary
Winston-Salem, North Carolina
November 27, 1998
17
<PAGE>
APPENDIX A
BLUE RHINO CORPORATION
1998 STOCK INCENTIVE PLAN
ARTICLE I
Establishment
The Blue Rhino Corporation Stock Incentive Plan ("Plan") is hereby
established by Blue Rhino Corporation ("Company"). The purpose of the Plan is
to encourage key employees, officers, consultants and advisors of the Company
and its Affiliates to acquire a proprietary interest in the Company and to
generate an increased incentive to contribute to the Company's future success
and prosperity.
ARTICLE II
Definitions
For purposes of the Plan, the following terms are defined as set forth
below:
"AFFILIATE" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated association or other entity (other
than the Company) that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
the Company including, without limitation, any member of an affiliated group
of which the Company is a common parent corporation as provided in Section
1504 of the Code.
"AGREEMENT" or "OPTION AGREEMENT" means, individually or collectively, any
agreement entered into pursuant to the Plan pursuant to which a Stock Option
is granted to a Participant.
"BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of the Company.
"CAUSE" means, for purposes of whether and when a Participant has incurred a
Termination for Cause, any act or omission which permits the Company to
terminate the written agreement or arrangement between the Participant and the
Company or an Affiliate for Cause as defined in such agreement or arrangement,
or if there is no such agreement or arrangement or the agreement or
arrangement does not define the term "cause", then Cause means, unless
otherwise defined in the Option Agreement with respect to the corresponding
Stock Option, (a) any act or failure to act deemed to constitute cause under
the Company's established practices, policies or guidelines applicable to the
Participant or (b) the Participant's act or act of omission which constitutes
gross misconduct with respect to the Company or an Affiliate in any material
respect, including, without limitation, an act or act of omission of a
criminal nature, the result of which is detrimental to the interests of the
Company or an Affiliate, or conduct or the omission of conduct which
constitutes a material breach of Participant's duty of loyalty to the Company
or an Affiliate.
"CODE" or "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended, final Treasury Regulations thereunder and any subsequent Internal
Revenue Code.
"COMMISSION" means the Securities and Exchange Commission or any successor
agency.
"COMMITTEE" means the Compensation Committee of the Board, or such other
committee of the Board appointed by the Board of Directors to administer the
Plan, as further described in the Plan.
"COMMON STOCK" means the shares of the Common Stock, $0.001 par value, of
the Company whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the
purpose of the Plan.
<PAGE>
"COMPANY" means Blue Rhino Corporation, a Delaware corporation, and includes
any successor or assignee corporation or corporations into which the Company
may be merged, changed or consolidated; any corporation for whose securities
the securities of the Company are exchanged; and any assignee of or successor
to substantially all of the assets of the Company.
"DISABILITY" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan
or the Participant is not an employee of the Company or an Affiliate, a mental
or physical illness that renders a Participant totally and permanently
incapable of performing the Participant's duties for the Company or an
Affiliate. Notwithstanding the foregoing, a Disability will not qualify under
this Plan if it is the result of (i) a willfully self-inflicted injury or
willfully self-induced sickness; or (ii) an injury or disease contracted,
suffered, or incurred, while participating in a criminal offense. The
determination of Disability will be made by the Committee. The determination
of Disability for purposes of this Plan will not be construed to be an
admission of disability for any other purpose.
"EFFECTIVE DATE" means May 18, 1998.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"FAIR MARKET VALUE" means the value determined on the basis of the good
faith determination of the Committee, without regard to whether the Common
Stock is restricted or represents a minority interest, pursuant to the
applicable method described below:
(a) if the Common Stock is listed on a national securities exchange or
quoted on the Nasdaq National Market ("NASDAQ"), the closing price of the
Common Stock on the relevant date, as reported by the principal national
exchange on which such shares are traded (in the case of an exchange) or by
the NASDAQ, as the case may be;
(b) if the Common Stock is not listed on a national securities exchange
or quoted on the NASDAQ, but is actively traded in the over-the-counter
market, the average of the closing bid and asked prices for the Common
Stock on the relevant date, or the most recent preceding date for which
such quotations are reported; and
(c) if, on the relevant date, the Common Stock is not publicly traded or
reported as described in (a) or (b), the value determined in good faith by
the Committee.
"GRANT DATE" means the date that as of which a Stock Option is granted
pursuant to the Plan.
"NON-EMPLOYEE DIRECTORS" has the meaning set forth in Rule 16b-3, or any
successor definition adopted by the Commission, provided the person is also an
"outside director" under Section 162(m) of the Code.
"NON-QUALIFIED STOCK OPTION" means an Option to purchase Common Stock in the
Company granted under the Plan other than an incentive stock option within the
meaning of Section 422 of the Code.
"OPTION PERIOD" means the period during which the Option will be exercisable
in accordance with the Option Agreement and Article VI.
"OPTION PRICE" means the price at which the Common Stock may be purchased
under an Option as provided in Section 6.3.
"PARTICIPANT" means a person who satisfies the eligibility conditions of
Article V and to whom a Stock Option has been granted by the Committee under
the Plan, and if a Representative is appointed for a Participant, then the
term "PARTICIPANT" means such appointed Representative, successor
Representative, or spouse as the case may be. The term also includes a trust
for the benefit of the Participant, the Participant's parents, spouse or
descendants, or a custodian under a uniform gifts to minors act or similar
statute for the benefit of the Participant's descendants, to the extent
permitted by the Committee and not inconsistent with the Rule 16b-3.
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"PLAN" means the Blue Rhino Corporation 1998 Stock Incentive Plan, as herein
set forth and as may be amended from time to time.
"REPRESENTATIVE" means (a) the person or entity acting as the executor or
administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of
the Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; or (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant's death.
"RETIREMENT" means the Participant's Termination after attaining either the
normal retirement age or the early retirement age as defined in the principal
(as determined by the Committee) tax-qualified plan of the Company or an
Affiliate, if the Participant is covered by such plan, and if the Participant
is not covered by such a plan, then age 65, or age 55 with the accrual of 10
years of service.
"RULE 16B-3" means Rule 16b-3, as promulgated under the Exchange Act, as
amended from time to time, or any successor thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"STOCK OPTION" means a Non-Qualified Stock Option granted under this Plan.
"TERMINATION" means the occurrence of any act or event, whether pursuant to
an employment agreement, consulting agreement, advisory agreement or
otherwise, that actually or effectively causes or results in the person's
ceasing, for whatever reason, to be an officer, employee, consultant or
advisor of the Company or of any Affiliate, or to be an officer, employee,
consultant or advisor of any entity that provides services to the Company or
an Affiliate, including, without limitation, death, Disability, dismissal,
removal, resignation, severance at the election of the Participant,
Retirement, or severance as a result of the discontinuance, liquidation, sale
or transfer by the Company or its Affiliates of all businesses owned or
operated by the Company or its Affiliates. With respect to any person who is
not an employee of the Company or an Affiliate, the Option Agreement will
establish what act or event will constitute a Termination for purposes of the
Plan. A Termination will occur for an employee who is employed by an Affiliate
if the Affiliate ceases to be an Affiliate and the Participant does not
immediately thereafter become an employee of the Company or an Affiliate. A
Participant who is an employee on the Grant Date will not be deemed to have
incurred a Termination if, within thirty (30) days after such individual
ceases to be an employee, he or she becomes a consultant or advisor to the
Company. Similarly, a Participant who is a consultant or advisor on the Grant
Date shall not be deemed to have incurred a Termination if, within thirty (30)
days after such individual ceases to be a consultant or advisor, he or she
becomes an employee of the Company.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
Administration
3.1 Committee Structure and Authority. The Plan will be administered by the
Committee. After the Company has an effective registration statement under the
Securities Act for the Common Stock, the Committee, except as provided herein,
will be comprised of such number of Non-Employee Directors (and no other
persons) as is required for application of Section 162(m) of the Code and Rule
16b-3. In the absence of appointment of the Committee or a successor committee
of the Board, the entire Board of Directors will constitute the Committee. A
majority of the Committee will constitute a quorum at any meeting thereof
(including telephone conference) and the acts of a majority of the members
present, or acts approved in writing by a majority of the
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entire Committee without a meeting, will be the acts of the Committee for
purposes of this Plan. The Committee may authorize any one or more of its
members or an officer of the Company to execute and deliver documents on
behalf of the Committee. A member of the Committee will not exercise any
discretion respecting himself or herself under the Plan. The Board will have
the authority to remove, replace or fill any vacancy of any member of the
Committee upon notice to the Committee and the affected member. Any member of
the Committee may resign upon notice to the Board. The Committee may allocate
among one or more of its members, or may delegate to one or more of its
agents, such duties and responsibilities as it determines.
Among other things, the Committee will have the authority, subject to the
terms of the Plan:
(a) to select those persons to whom Stock Options may be granted from
time to time;
(b) to determine the number of shares of Common Stock to be covered by
each Stock Option granted hereunder; provided, however, that the number of
shares of Common Stock which can be awarded in any calendar year to any
Participant shall not exceed twenty percent (20%) of the number of shares
of Common Stock reserved and available for issuance under this Plan as of
the Grant Date, and further provided that the Committee may limit the
aggregate number of shares granted to consultants and advisors if required
in order to make the registration statement described in Section 4.5
effective or cause the registration statement to remain effective;
(c) to determine the terms and conditions of any Stock Option granted
hereunder (including, without limitation, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise
acceleration, forfeiture or waiver regarding any Stock Option and the
shares of Common Stock relating thereto); provided, however, that no Stock
Option may be exercised earlier than one (1) year from the Grant Date;
(d) to adjust the terms and conditions, at any time or from time to time,
of any Stock Option, subject to the limitations of Section 8.1;
(e) to determine to what extent and under what circumstances Common Stock
and other amounts payable with respect to the exercise of a Stock Option
will be deferred;
(f) to provide for the forms of Option Agreement to be utilized in
connection with the Plan;
(g) to determine whether a Participant has a Disability or a Retirement;
(h) to determine what securities law requirements are applicable to the
Plan, Stock Options, and the issuance of shares of Common Stock and to
require of a Participant that appropriate action be taken with respect to
such requirements;
(i) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Option Agreement, outstanding Stock Options;
(j) to require as a condition of the exercise of a Stock Option or the
issuance or transfer of a certificate of Common Stock, the withholding from
a Participant of the amount of any federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a
deduction or as may be otherwise required by law;
(k) to determine whether and with what effect a Participant has incurred
a Termination;
(l) to determine the restrictions or limitations on the transfer of
Common Stock;
(m) to determine under what circumstances a Stock Option may be
transferred during the Participant's lifetime and to impose restrictions on
such transfers;
(n) to determine whether a Stock Option is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms
of an Option Agreement;
(o) to determine the permissible methods of Stock Option exercise and
payment, including cashless exercise arrangements;
(p) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan and to amend or
modify any Option Agreement accordingly; and
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(q) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it may,
from time to time, deem advisable, to interpret the terms and provisions of
the Plan and any Stock Option issued under the Plan (and any Option Agreement)
and to otherwise supervise the administration of the Plan. The Committee's
policies and procedures may differ with respect to Stock Options granted at
different times.
Any determination made by the Committee pursuant to the provisions of the
Plan will be made in its sole discretion, and in the case of any determination
relating to a Stock Option, may be made at the time of the grant of the Stock
Option or, unless in contravention of any express term of the Plan or an
Option Agreement, at any time thereafter. All decisions made by the Committee
pursuant to the provisions of the Plan will be final and binding on all
persons, including the Company and Participants. No determination will be
subject to de novo review if challenged in court.
ARTICLE IV
Stock Subject to Plan
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the total
number of shares of Common Stock reserved and available for distribution
pursuant to Stock Options under the Plan will be 1,200,000 shares of Common
Stock authorized for issuance on the Effective Date. Such shares may consist,
in whole or in part, of authorized and unissued shares or treasury shares.
4.2 Release of Shares. If any shares of Common Stock that have been optioned
cease to be subject to a Stock Option, if any shares of Common Stock that are
subject to any Stock Option are forfeited or if any Stock Option otherwise
terminates without issuance of shares of Common Stock being made to the
Participant, such shares, in the discretion of the Committee, may again be
available for distribution in connection with Stock Options under the Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise of a
Stock Option will be subject to the terms and conditions specified herein and
to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the Option Agreement. The Company will
not be required to issue or deliver any certificates for shares of Common
Stock, cash or other property prior to (i) the listing of such shares on any
stock exchange (or other public market) on which the Common Stock may then be
listed (or regularly traded), (ii) the completion of any registration or
qualification of such shares under federal or state law, or any ruling or
regulation of any government body which the Committee determines to be
necessary or advisable, and (iii) the satisfaction of any applicable
withholding obligation in order for the Company or an Affiliate to obtain a
deduction with respect to the exercise of a Stock Option. The Company may
cause any certificate for any share of Common Stock to be delivered to be
properly marked with a legend or other notation reflecting the limitations on
transfer of such Common Stock as provided in this Plan or as the Committee may
otherwise require. The Committee may require any person exercising a Stock
Option to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
of Common Stock in compliance with applicable law or otherwise. Fractional
shares will not be delivered, but will be rounded to the next lower whole
number of shares.
4.4 Stockholder Rights. No person will have any rights of a stockholder as
to shares of Common Stock subject to a Stock Option until, after proper
exercise of the Stock Option or other action required, such shares have been
recorded on the Company's official stockholder records as having been issued
or transferred. Upon exercise of the Stock Option or any portion thereof, the
Company will have thirty (30) days in which to issue the shares, and the
Participant will not be treated as a stockholder for any purpose whatsoever
prior to such issuance. No adjustment will be made for cash dividends or other
rights for which the record date is prior to the date such shares are recorded
as issued or transferred in the Company's official stockholder records, except
as provided herein or in an Option Agreement.
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4.5 Registration of Common Stock Under This Plan. The Company will register
under the Securities Act the Common Stock delivered or deliverable pursuant to
Stock Options on Commission Form S-8 if and when available to the Company for
this purpose (or any successor or alternate form that is substantially similar
to that form to the extent available to effect such registration), in
accordance with the rules and regulations, and any amendments to such rules
and regulations, governing such forms, as soon as the Committee, in its sole
discretion, deems such registration appropriate. The Company will use its best
efforts to cause the registration statement to become effective and will file
such supplements and amendments to the registration statement as may be
necessary to keep the registration statement in effect until the earliest of
(a) one year following the expiration of the Option Period of the last Option
outstanding, (b) the date the Company is no longer a reporting company under
the Exchange Act and (c) the date all Participants have disposed of all shares
delivered pursuant to any Stock Option.
4.6 Anti-Dilution. In the event of any Company stock dividend, stock split,
combination or exchange of shares, recapitalization or other change in the
capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale
by the Company of all or a substantial portion of its assets (measured on
either a stand-alone or consolidated basis), reorganization, rights offering,
a partial or complete liquidation, or any other corporate transaction or event
involving the Company and having an effect similar to any of the foregoing,
then the Committee will adjust or substitute, as the case may be, the number
of shares of Common Stock available for Stock Options under the Plan, the
number of shares of Common Stock covered by outstanding Stock Options, the
exercise price per share of outstanding Stock Options, and any other
characteristics or terms of the Stock Options as the Committee deems necessary
or appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that any fractional shares resulting from
such adjustment will be eliminated by rounding to the next lower whole number
of shares with appropriate payment for such fractional share as will
reasonably be determined by the Committee.
In the event of a consolidation or merger or sale of all or substantially
all of the assets of the Company in which outstanding shares of Common Stock
are exchanged for securities, cash or other property of any other corporation
or business entity (the "Acquisition"), or in the event of a liquidation of
the Company, the Board or the board of directors of any corporation assuming
the obligations of the Company may, in its discretion, take any one or more of
the following actions as to outstanding Stock Options: (i) provide that such
Stock Options shall be assumed, or substantially equivalent Stock Options
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof) on such terms as the Board determines to be appropriate,
(ii) upon written notice to Participants, provide that all unexercised vested
Stock Options will terminate immediately prior to the consummation of such
transaction unless exercised by the Participant within a specified period
following the date of such notice, (iii) in the event of an Acquisition under
the terms of which holders of the Common Stock of the Company will receive
upon consummation thereof a cash payment for each share surrendered in the
Acquisition (the "Acquisition Price"), make or provide for a cash payment to
Participants equal to the difference between (A) the Acquisition Price times
the number of shares of Common Stock subject to outstanding Stock Options (to
the extent then exercisable at prices not in excess of the Acquisition Price)
and (B) the aggregate exercise price of all such outstanding Stock Options in
exchange for the termination of such Stock Options, and (iv) provide that all
or any outstanding Stock Options shall become exercisable or realizable in
full prior to the effective date of such Acquisition.
ARTICLE V
Eligibility
5.1 Eligibility. Except as herein provided, the persons who will be eligible
to participate in the Plan and be granted Stock Options will be those persons
who are officers, employees, consultants or advisors of the Company or any
Affiliate, who are in a position, in the opinion of the Committee, to make
contributions to the growth, management, protection and success of the Company
and its Affiliates. Distributors of the Company and
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directors of the Company and its affiliates who are not employees of the
Company or its affiliates are not eligible to participate in this Plan.
Notwithstanding the foregoing, a consultant or advisor shall not be eligible
to receive a grant of Stock Options under this Plan with respect to providing
services directly or indirectly which promote or maintain a market for the
Company's or any Affiliate's securities. Of those persons described in the
preceding sentence, the Committee may, from time to time, select persons to be
granted Stock Options and determine the terms and conditions with respect
thereto. In making any such selection and in determining the form of the Stock
Option, the Committee may give consideration to the functions and
responsibilities of the person's contributions to the Company and its
Affiliates, the value of the individual's service to the Company and its
Affiliates and such other factors deemed relevant by the Committee. The
Committee may designate in writing any person who is not eligible to
participate in the Plan if such person would otherwise be eligible to
participate in the Plan.
ARTICLE VI
Grant of Stock Options
6.1 General. The Committee will have authority to grant Options under the
Plan at any time or from time to time. Stock Options granted under this Plan
shall be Non-Qualified Stock Options. An Option will entitle the Participant
to receive shares of Common Stock upon exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Option Agreement (the
terms and provisions of which may differ from other Option Agreements)
including without limitation, payment of the Option Price.
6.2 Grant and Exercise. The grant of a Stock Option will occur as of the
date the Committee determines. Each Option granted under this Plan will be
evidenced by an Option Agreement, in a form approved by the Committee, which
will embody the terms and conditions of such Option and which will be subject
to the express terms and conditions set forth in the Plan. Such Option
Agreement will become effective upon execution by the Participant. No Stock
Options shall be granted under this Plan after the tenth anniversary of the
Effective Date of this Plan.
6.3 Terms and Conditions. Stock Options will be subject to such terms and
conditions as will be determined by the Committee, including the following:
(a) Option Period. The Option Period of each Stock Option will be fixed
by the Committee; provided that no Stock Option will be exercisable more
than 10 years after the Grant Date.
(b) Option Price. The Option Price per share of the Common Stock
purchasable under an Option will not be less than the Fair Market Value per
share on the Grant Date.
(c) Exercisability. Stock Options will vest and be exercisable at such
time or times and subject to such terms and conditions as will be
determined by the Committee. If the Committee provides that any Stock
Option is exercisable only in installments, the Committee may at any time
waive such installment exercise provisions, in whole or in part. In
addition, the Committee may at any time accelerate the exercisability of
any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Article VI, a
Participant may exercise vested Stock Options, in whole or in part, at any
time during the Option Period by the Participant's giving written notice of
exercise on a form provided by the Committee (if available) to the Company
specifying the number of shares of Common Stock subject to the Stock Option
to be purchased. Such notice will be accompanied by payment in full of the
purchase price by cash or check or such other form of payment as the
Company may accept. If approved by the Committee, payment in full or in
part may also be made (i) by delivering Common Stock already owned by the
Participant having a total Fair Market Value on the date of such delivery
equal to the Option Price; (ii) by authorizing the Company to retain shares
of Common Stock which would otherwise be issuable upon exercise of the
Option having a total Fair Market Value on the date of delivery equal to
the Option Price; (iii) by the delivery of cash by a broker-dealer to whom
the Participant has submitted a notice of exercise (in accordance with Part
220, Chapter II, Title 12 of the Code of Federal Regulations, so-called
"cashless" exercise); or (iv) by any combination of the foregoing. No
shares of Common Stock will be issued until full payment therefor has been
made.
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(e) Transferability of Options. The Committee, in its sole discretion,
may permit Stock Options to be transferred during the Participant's
lifetime, subject to such conditions and limitations as the Committee deems
reasonable and proper, including transfers pursuant to a domestic relations
order which would be a "qualified domestic relations order" as defined in
Section 414(p) of the Code.
6.4 Termination by Reason of Death. Unless otherwise provided in an Option
Agreement or determined by the Committee, if a Participant incurs a
Termination due to death, any unexpired and unexercised Stock Option held by
such Participant will thereafter be fully exercisable for a period of 90 days
following the date of the appointment of a Representative (or such other
period or no period as the Committee may specify) or until the expiration of
the Option Period, whichever period is the shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in an
Option Agreement or determined by the Committee, if a Participant incurs a
Termination due to a Disability, any unexpired and unexercised Stock Option
held by such Participant will thereafter be fully exercisable by the
Participant for the period of ninety (90) days (or such other period or no
period as the Committee may specify) immediately following the date of such
Termination or until the expiration of the Option Period, whichever period is
shorter, and the Participant's death at any time following such Termination
due to Disability will not affect the foregoing.
6.6 Other Termination. Unless otherwise provided in an Option Agreement or
determined by the Committee, if a Participant incurs a Termination due to
Retirement, or the Termination is involuntary on the part of the Participant
(but is not due to death or Disability or with Cause), any Stock Option held
by such Participant will thereupon terminate, except that such Stock Option,
to the extent then exercisable, may be exercised for the lesser of (a) the 90-
day period commencing with the date of such Termination, or (b) until the
expiration of the Option Period. If the Participant incurs a Termination which
is either (a) voluntary on the part of the Participant (and is not due to
Retirement) or (b) with Cause, the Option will terminate immediately. The
death or Disability of a Participant after a Termination otherwise provided
herein will not extend the time permitted to exercise an Option.
6.7 Cashing Out of Option. Unless otherwise provided in the Option
Agreement, on receipt of written notice of exercise, the Committee may elect
to cash out all or part of the portion of any Stock Option to be exercised by
paying the Participant an amount, in cash or Common Stock, equal to the excess
of the Fair Market Value of the Common Stock that is subject to the Option
over the Option Price times the number of shares of Common Stock subject to
the Option on the effective date of such cash out.
ARTICLE VII
Provisions Applicable to Stock Acquired Under the Plan
7.1 Transfer of Shares. Subject to the restriction in any Option Agreement
or any other transfer restriction contained in any agreement between a
Participant and the Company, a Participant may at any time make a transfer of
shares of Common Stock received pursuant to the exercise of a Stock Option.
Any transfer of shares received pursuant to the exercise of a Stock Option
will not be permitted or valid unless and until the transferee agrees to be
bound by the provisions of the Plan, and any provision respecting Common Stock
under the Option Agreement.
7.2 Limited Transfer During Offering. If there is an effective registration
statement under the Securities Act pursuant to which shares of Common Stock
are offered for sale in an underwritten offering, a Participant may not,
during the period requested by the underwriters managing the registered public
offering, effect any public sale or distribution of shares received directly
or indirectly pursuant to an exercise of a Stock Option.
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ARTICLE VIII
Miscellaneous
8.1 Amendments and Termination. The Board may amend, alter, or discontinue
the Plan at any time, but no amendment, alteration or discontinuation may be
made which would impair the rights of a Participant under a Stock Option
theretofore granted without the Participant's consent except such an amendment
made to cause the Plan to qualify for an exemption provided by the Exchange
Act, registration provisions of the Securities Act, or the rules promulgated
thereunder. In addition, no such amendment may be made without the approval of
the Company's stockholders to the extent such approval is required by law or
agreement.
The Committee may amend the terms of any Stock Option theretofore granted,
prospectively or retroactively, but no such amendment may impair the rights of
any Participant without the Participant's consent, except such an amendment
made to cause the Plan or Stock Option to qualify for the exemption provided
by Rule 16b-3. The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher Option Prices but no such substitution may be made which would
impair the rights of the Participant under such Stock Options theretofore
granted without the Participant's consent.
Subject to the above provisions, the Board will have authority to amend the
Plan to take into account changes in law and tax, accounting and securities
rules, as well as other developments, and to grant Stock Options which qualify
for beneficial treatment under such rules without stockholder approval.
8.2 General Provisions.
(a) Representation. The Committee may require each person purchasing or
receiving shares pursuant to a Stock Option to represent to and agree with
the Company in writing that such person is acquiring the shares without a
view to the distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(b) No Additional Obligation. Nothing in the Plan will prevent the
Company or an Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
becomes includable in the gross income of the Participant for income tax
purposes with respect to any Stock Option, the Participant will pay to the
Company (or other entity identified by the Committee), or make arrangements
satisfactory to the Company or other entity identified by the Committee
regarding the payment of, any Federal, state, local or foreign taxes of any
kind required by law to be withheld with respect to such Stock Option or
exercise thereof. Unless otherwise determined by the Committee, withholding
obligations may be settled with Common Stock, including Common Stock that
is part of the Stock Option that gives rise to the withholding requirement,
provided that any applicable requirements under Section 16 of the Exchange
Act are satisfied. The obligations of the Company under the Plan, will be
conditional on such payment or arrangements, and the Company and its
Affiliates will, to the extent permitted by law, have the right to deduct
any such taxes from any payment otherwise due to the Participant.
(d) Representation. The Committee will establish such procedures as it
deems appropriate for a Participant to designate a Representative to whom
any amounts payable in the event of the Participant's death are to be paid.
(e) Controlling Law. The Plan and all Stock Options made and actions
taken thereunder will be governed by and construed in accordance with the
laws of the State of Delaware (other than its law respecting choice of law)
except to the extent the General Corporation Law of the State of Delaware
would be mandatorily applicable. The Plan will be construed to comply with
all applicable law and to avoid liability to the Company, an Affiliate or a
Participant, including, without limitation, liability under Section 16(b)
of the Exchange Act.
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(f) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value
of any shares of Common Stock, cash or other thing of value under this Plan
or an Option Agreement to be transferred to the Participant, and no shares
of Common Stock or other thing of value under this Plan or an Option
Agreement will be transferred unless and until all disputes between the
Company and the Participant have been fully and finally resolved and the
Participant has waived all claims to such against the Company or an
Affiliate.
8.3 Rights with Respect to Continuance of Employment. Nothing in this Plan
will be deemed to alter the relationship between the Company or an Affiliate
and a Participant, or the contractual relationship between a Participant and
the Company or an Affiliate if there is a written contract regarding such
relationship. Nothing in this Plan will be construed to constitute a contract
of employment or engagement between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or
an Affiliate will have no obligation to retain the Participant in its employ
or service as a result of this Plan. There will be no inference as to the
length of employment or service hereby, and the Company or an Affiliate
reserves the same rights to terminate the Participant's employment or service
engagement as it existed prior to the individual becoming a Participant in
this Plan.
8.4 Stock Options in Substitution for Stock Options Granted by Other
Corporations. Stock Options may be granted under the Plan from time to time in
substitution for Stock Options held by employees, or service providers of
other corporations who are about to become officers, employees, consultants or
advisors of the Company or an Affiliate as the result of a merger or
consolidation of the employing corporation with the Company or an Affiliate,
or the acquisition by the Company or an Affiliate of the assets of the
employing corporation, or the acquisition by the Company or Affiliate of the
stock of the employing corporation, as the result of which it becomes an
Affiliate. The terms and conditions of the Stock Options so granted may vary
from the terms and conditions set forth in this Plan at the time of such grant
as the majority of the members of the Committee may deem appropriate to
conform, in whole or in part, to the provisions of the Stock Options in
substitution for which they are granted.
8.5 Delay. If at the time a Participant incurs a Termination (other than due
to Cause) or if at the time of a Change in Control, the Participant is subject
to "short-swing" liability under Section 16 of the Exchange Act, any time
period provided for under the Plan or an Option Agreement to the extent
necessary to avoid the imposition of liability will be suspended and delayed
during the period the Participant would be subject to such liability, but not
more than six months and one day and not to exceed the Option Period as
provided in the Option Agreement. The Company will have the right to suspend
or delay any time period described in the Plan or an Option Agreement if the
Committee determines that the action may constitute a violation of any law or
result in liability under any law to the Company, an Affiliate or a
stockholder of the Company until such time as the action required or permitted
will not constitute a violation of law or result in liability to the Company,
an Affiliate or a stockholder of the Company. The Committee will have the
discretion to suspend the application of the provisions of the Plan required
solely to comply with Rule 16b-3 if the Committee determines that Rule 16b-3
does not apply to the Plan.
8.6 Headings. The headings in this Plan are for reference purposes only and
will not affect the meaning or interpretation of this Plan.
8.7 Severability. If any provision of this Plan is for any reason held to be
invalid or unenforceable, such invalidity or unenforceability will not affect
any other provision of this Plan, and this Plan will be construed as if such
invalid or unenforceable provision were omitted.
8.8 Successors and Assigns. This Plan will inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a Participant, and all rights granted to the Company hereunder, will be
binding upon the Participant's heirs, legal representatives and successors.
Adopted by the Board of Directors on November 18, 1997.
Approved by the written consent of the Shareholders of the Company in April,
1998.
10
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
BLUE RHINO CORPORATION
104 Cambridge Plaza Drive
Winston-Salem, NC 27104
The undersigned hereby appoints Mark Castaneda and John H.
Muehlstein as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to
vote, as designated below, all the shares of Common Stock of
Blue Rhino Corporation held on record by the undersigned on
November 6, 1998, at the Annual Meeting of stockholders to
be held on December 22, 1998 or any adjournment thereof.
1. ELECTION OF DIRECTORS:
[_] FOR all nominees listed below (except as indicated
below)
[_] WITHHOLD AUTHORITY to vote for all nominees
listed below
Billy D. Prim Andrew J. Filipowski Craig J. Duchossois
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below)
-----------------------------------------------------------------------------
2. PROPOSAL TO AMEND THE COMPANY'S 1998 STOCK INCENTIVE PLAN to increase the
number of shares of Common Stock available for distribution by 900,000
shares:
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP as the
Company's independent public accountants for the fiscal year ending July 31,
1999:
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE
NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
Dated: ____________________________ , 1998
------------------------------------------
Signature
------------------------------------------
Signature if held jointly
Please sign exactly as your name appears above. If shares are held jointly,
each holder should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
